nep-mac New Economics Papers
on Macroeconomics
Issue of 2019‒03‒25
79 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Using probit models of downturn risk to calibrate GDP Fan charts for New Zealand By Nikki Kergozou; David Turner
  2. Understanding Persistent Stagnation By Pablo Cuba-Borda; Sanjay R. Singh
  3. After the Great Recession; the Laws of Unintended Consequences By De Koning, Kees
  4. Inflation Expectations: Review and Evidence By M. Ayhan Kose; Hideaki Matsuoka; Ugo Panizza; Dana Vorisek
  5. Lending frictions and nominal rigidities: Implications for credit reallocation and TFP By Florian, David; Francis, Johanna
  6. International Business Cycle and Financial Intermediation By Tamas Csabafi; Max Gillman; Ruthira Naraidoo
  7. Digitales Zentralbankgeld als neues Instrument der Geldpolitik By Andreas Hanl; Jochen Michaelis
  8. The Neo-Fisherianism to Escape Zero Lower Bound By Chattopadhyay, Siddhartha
  9. Changing Business Cycles: The Role of Women's Employment By Stefania Albanesi
  10. The Welfare Cost of Ináation with Banking Time By Max Gillman
  11. The effects of conventional and unconventional monetary policy: A new approach By Atsushi Inoue; Barbara Rossi
  12. Short and Long Run Asymmetric Effects of Monetary and Fiscal Policy Uncertainty on Economic Activity in the U.S By Goodness C. Aye
  13. Identifying and estimating the effects of unconventional monetary policy in the data: How to do It and what have we learned? By Barbara Rossi
  14. (Un)conventional Policy and the Effective Lower Bound By De Fiore, Fiorella; Tristani, Oreste
  15. State-Dependent Effects of Monetary Policy: The Central Bank Information Channel By Paul Hubert
  16. Measuring consumer inflation in a digital economy By Marshall Reinsdorf; Paul Schreyer
  17. Three Dimensions of Central Bank Credibility and Inferential Expectations: The Euro Zone By Timo Henckel; Gordon D. Menzies; Peter Moffat; Daniel J. Zizzo
  18. Investment and savings in a dynamic context. By Claudio Sardoni
  19. Money and Central Bank Digital Currency By Shirai, Sayuri
  20. A Theory of Housing Demand Shocks By Zheng Liu; Pengfei Wang; Tao Zha
  21. Who Creates and Destroys Jobs over the Business Cycle? By Andrea Colciago; Volker Lindenthal; Antonella Trigari
  22. On Staggered Prices and Optimal Inflation By Asier Aguilera-Bravo; Miguel Casares Polo
  23. Monthly Payment Targeting and the Demand for Maturity By Bronson Argyle; Taylor D. Nadauld; Christopher Palmer
  24. The Firm Size and Leverage Relationship and Its Implications for Entry and Concentration in a Low Interest Rate World By Chatterjee, Satyajit; Eyigungor, Burcu
  25. Optimal Time-Consistent Monetary, Fiscal and Debt Maturity Policy By Eric M. Leeper; Campbell B. Leith; Ding Liu
  26. The Impact of Technological Change By Bolboaca, Maria
  27. Environmental Policy Instrument Choice and International Trade By J. Scott Holladay; Mohammed Mohsin; Shreekar Pradhan
  28. Shadow Banking and the Great Recession: Evidence from an Estimated DSGE Model By Fève, Patrick; Moura, Alban; Pierrard, Olivier
  29. Debt-driven business cycles in historical perspective: The cases of the USA (1889-2015) and UK (1882-2010) By Engelbert Stockhammer; Giorgos Gouzoulis; Rob Calvert Jump
  30. Fiscal Policy Uncertainty and Economic Activity in South Africa: An Asymmetric Analysis By Goodness C. Aye
  31. What is the Impact of Increased Business Competition? By Sónia Félix; Chiara Maggi
  32. Why Do Fiscal Multipliers Depend on Fiscal Positions? By Raju Huidrom; M. Ayhan Kose; Jamus J. Lim; Franziska L. Ohnsorge
  33. The Collapse and Recovery of the Capital Share in East Germany After 1989 By Simona E. Cociuba
  34. Calibrating GDP fan charts using probit models with a comparison to the approaches of the Bank of England and Riksbank By David Turner; Thomas Chalaux
  35. How Monetary Policy Shaped the Housing Boom By Itamar Drechsler; Alexi Savov; Philipp Schnabl
  36. Estimación del Consumo a partir de sus Componentes Principales en la Tabla Insumo-Producto By Carrera, César
  37. Experimental Economics and the New Commodities Problem By Diewert, Erwin; Fox, Kevin J.; Schreyer, Paul
  39. Hétérogénéité et économie : inégalité et imperfections financières By Xavier Ragot
  40. Granger Predictability of Oil prices after the Great Recession By Szilard Benk; Max Gillman
  41. The Vietnamese financial economy: reforms and development, 1986-2016 By Quan-Hoang Vuong
  42. Quarterly Forecasting Model for India’s Economic Growth: Bayesian Vector Autoregression Approach By Sen Gupta, Abhijit; Iyer, Tara
  43. Expectations and the term premium in New Zealand long-term interest rates By Michael Callaghan
  44. The Macroeconomic Implications of Consumption: State-of-Art and Prospects for the Heterodox Future Research By Brochier, Lidia; Macedo e Silva, Antonio Carlos
  45. Nominal GDP Targeting with Heterogenous Labor Supply By Bullard, James; Singh, Aarti
  46. FIDELIO 3 manual: Equations and data sources By Paola Rocchi; Simone Salotti; Frederic Reynes; Jinxue Hu; Tatyana Bulavskaya; Jose Manuel Rueda-Cantuche; Juan Manuel Valderas Jaramillo; Agustin Velazquez Afonso; Antonio De Amores; Teodora Corsatea
  47. Why the Fuss? - Friedman (1968) After Fifty Years By David Laidler
  48. Measuring the Services of Durables and Owner Occupied Housing By Diewert, Erwin
  49. The Labor Share of Income around the World: Evidence from a Panel Dataset By Guerriero, Marta
  50. Modelling the Demand for Euro Banknotes By António Rua
  51. Bond Flows and Liquidity: Do Foreigners Matter? By Christensen, Jens H. E.; Fischer, Eric; Shultz, Patrick
  52. Misallocation in the Market for Inputs: Enforcement and the Organization of Production By Johannes Boehm; Ezra Oberfield
  53. Comparative analysis of government spending, external debt, domestic credit to private sector, exchange rate and net investment to non-financial companies By Aipoh, Godwin
  54. Endogenous credit constraints: the role of informational non-uniqueness By Gerhard Sorger
  55. On the Real Determinacy and Indeterminacy of Stationary Equilibria in Monetary Models By Kazuya Kamiya
  56. Somalia Economic Update, August 2018 By World Bank Group
  58. Estimating the Benefits of New Products: Some Approximations By Diewert, Erwin; Feenstra, Robert
  59. Exchange rate dynamics, balance sheet effects, and capital flows. A Minskyan model of emerging market boom-bust cycles By Karsten Kohler
  60. The Determinants of Retirement Planning within Couples in Ireland By Doorley, Karina; Nolan, Anne
  61. The Lost Ones: the Opportunities and Outcomes of Non-College Educated Americans Born in the 1960s By Margherita Borella; Mariacristina De Nardi; Fang Yang
  62. Tracking finance flows towards assessing their consistency with climate objectives By Raphaël Jachnik; Mariana Mirabile; Alexander Dobrinevski
  63. Financial Literacy and Preparation for Retirement By Nolan, Anne; Doorley, Karina
  64. Information insensitivity, collateral flows and the logic of financial stability By A. Mantovi
  65. Market Structure and Indeterminacy of Stationary Equilibria in a Decentralized Monetary Economy By Kubota, So
  66. Tracking Financial Fragility By Giordani, Paolo; Kwan, Simon H.
  67. Horizon Europe: The RHOMOLO ex-ante assessment By Martin Christensen; Andrea Conte; Simone Salotti
  68. Who Values Access to College? By Kartik B. Athreya; Felicia Ionescu; Urvi Neelakantan; Ivan Vidangos
  69. Wages and employment: The role of occupational skills By Esther Mirjam Girsberger; Matthias Krapf; Miriam Rinawi
  70. Effect of Foreign Direct Investment and Economic Growth in Nigeria By Victoria S, Kenny
  71. Nonperforming Loans in Asia: Determinants and Macrofinancial Linkages By Rosenkranz, Peter; Lee, Junkyu
  72. Changing Business Cycles: The Role of Women's Employment By Stefania Albanesi
  73. Men without work: Why are they so unhappy in the US compared to other places? By Sergio Pinto; Carol Graham
  74. Myanmar Economic Monitor, December 2018 By World Bank Group
  75. The Total Risk Premium Puzzle By Òscar Jordà; Moritz Schularick; Alan M. Taylor
  76. Une analyse de la nature de l’investissement immatériel par le rapport capital / travail. By Alexis Jeamet
  77. A Model of the Australian Housing Market By Trent Saunders; Peter Tulip
  78. Retos Laborales pendientes tras la Gran Recesión By J. Ignacio Conde-Ruiz; Manu García

  1. By: Nikki Kergozou; David Turner
    Abstract: Macroeconomic forecasters typically forecast fewer recessions than the number experienced, which means economic growth tends to be over-predicted on average. Consequently, forecast errors are not normally distributed, making it difficult to convey the uncertainty and risks based on the historical forecast track record. To characterise this risk, recent OECD work constructed fan charts parameterised on historical forecast errors and the probability of a future downturn estimated from a probit model comprising a range of potential macroeconomic and financial early warning indicators. As the probability of a downturn increases the associated fan chart is wider, reflecting increased uncertainty, and more skewed to the downside, reflecting greater downside risks. This paper applies this methodology to New Zealand; although one important difference compared to other OECD economies is that the time span of macroeconomic data without major structural change is significantly shorter. Forecast errors for GDP by the OECD, Reserve Bank of New Zealand and New Zealand Treasury all appear to be non-normally distributed. Fan charts for GDP forecasts from the mid-year 2018 OECD Economic Outlook are symmetric due to the low probability of a downturn. Fan charts estimated for the period preceding the global financial crisis using currently-available data have a downwards skew. However, those estimated using data only available in the lead up to the crisis have many insignificant coefficients, likely due to the structural changes that have occurred in the New Zealand economy since the 1980s.
    Keywords: downturn, economic forecasts, fan charts, New Zealand, risk, uncertainty
    JEL: E58 E17 E65 E66 A E62 E63
    Date: 2019–03–08
  2. By: Pablo Cuba-Borda; Sanjay R. Singh
    Abstract: We theoretically explore long-run stagnation at the zero lower bound in a representative agent framework. We analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for changes in government spending, supply shocks and neo-Fisherian policies. On the other hand, a minimum wage policy is expansionary and robust to the source of stagnation. Using Bayesian methods, we estimate a DSGE model that can accommodate two competing hypotheses of long-run stagnation in Japan. We document that equilibrium selection under indeterminacy matters in accounting for model fit.
    Keywords: Expectations-driven trap ; Secular stagnation ; Inflation expectations ; Zero lower bound
    JEL: E31 E32 E52
    Date: 2019–03–07
  3. By: De Koning, Kees
    Abstract: The United States (U.S.) financial crisis of 2008 created a recession: the Great Recession. A recession is technically declared over after two subsequent quarters of economic growth. By Q3 2009 this recession was declared over. However the laws of unintended consequences show a totally different picture. Between May 2007 and October 2009 nearly 7 million U.S. individuals lost their jobs and thereby their incomes. It took just over ten years before the unemployment rate had dropped again to 4.4% -to what it was in December 2006. Equally unintended was the development in the real median household income. In 2007 this income was $59,534. It dropped to $54,569 for 2012 and it only returned back to the levels of 2007, by 2016. Another unintended consequence was the difference between the fix for the banks in trouble and those for individual mortgage borrowers in trouble. Nearly all banks were bailed out in 2008, with the odd one declared bankrupt. For individual households/mortgage borrowers there was no respite in being pursued for outstanding mortgage debt. Over the period 2007-2014 21.228 million U.S. households were confronted with foreclosure proceedings. This number represented 41.4% of all household mortgage holders in the U.S. House prices tumbled after 2007. The S&P/Case-Shiller national home price index seasonally adjusted stood at 184.52 in January 2007 and for the first time only exceeded this level by November 2018 at 184.87. New housing starts also dropped significantly. In January 2006 the number was 2.273 million annualized new starts. The trend line moved from annualized 490,000 new starts in January 2009 to 1.230 million by January 2019. Another main unintended consequence of the financial crisis was the effect on U.S. government borrowings. U.S. Federal debt increased by $4.8 trillion between Q4 2007 and Q4 2010, while real GDP still shrank. In three years the Federal Government’s debt increased by more than 50% and its growth did not stop there. Could it be argued that the government’s debt increase paid the price for the bankers’ follies? Another major change was in interest rates. Fed funds rates have not been so low for over 60 years, until recently. All these factors show that a more streamlined approach to economic thinking is needed. The interactions between the financial markets and the real economy can be better handled. Some suggestions are made in this paper.
    Keywords: Great Recession, Unintended Consequences, Mortgage Backed Securities, Market or Money Based Adjustment Strategies, Median Incomes, Foreclosures, Home Repossessions
    JEL: D12 D7 E3 E32 E6 E61 E65
    Date: 2019–03–19
  4. By: M. Ayhan Kose (World Bank, Development Prospects Group; Brookings Institution; CEPR, and CAMA); Hideaki Matsuoka (World Bank, Development Prospects Group); Ugo Panizza (Graduate Institute, Geneva; CEPR); Dana Vorisek (World Bank, Development Prospects Group)
    Abstract: This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.
    Keywords: inflation, inflation expectations, monetary policy, emerging markets, developing economies.
    JEL: E31 E37 E40 E50
    Date: 2019–03
  5. By: Florian, David (Banco Central de Reserva del Perú); Francis, Johanna (Fordham University)
    Abstract: In most modern recessions there is a sharp increase in job destruction and a mild to moderate decline in job creation, resulting in unemployment. The Great Recession was marked by a significant decline in job creation particularly for young firms in addition to the typical increase in destruction. As a result job reallocation fell. In this paper, we explicitly propose a mechanism for financial shocks to disproportionately affect young (typically) smaller firms via credit contracts. We investigate the particular roles of credit frictions versus nominal rigidities in a New Keynesian model augmented by a banking sector characterized by search and matching frictions with endogenous credit destruction. In response to a financial shock, the model economy produces large and persistent increases in credit destruction, declines in credit creation, and an overall decline in reallocation of credit among banks and firms; total factor productivity declines, even though average firm productivity increases, inducing unemployment to increase and remain high for many quarters. Credit frictions not only amplify the effects of a financial shock by creating variation in the number of firms able to produce they also increase the persistence of the shock for output, employment, and credit spreads. When pricing frictions are removed, however, credit frictions lose some of their ability to amplify shocks, though they continue to induce persistence. These findings suggest that credit frictions combined with nominal rigidities are a plausible transmission mechanism for financial shocks to have strong and persistent effects on the labor market particularly for loan dependent firms. Moreover, they may play an important role in job reallocation across firms.
    Keywords: Unemployment, financial crises, gross credit flows, productivity
    JEL: J64 E32 E44 E52
    Date: 2019–02
  6. By: Tamas Csabafi (Department of Economics, University of Missouri-St. Louis); Max Gillman (Department of Economics, University of Missouri-St. Louis); Ruthira Naraidoo (Department of Economics, University of Pretoria)
    Abstract: The paper extends a standard two-country international real business cycle model to include financial intermediation by banks of loans and government bonds. Taking in household deposits from home and abroad, the loans are produced by the bank in a Cobb-Douglas production approach such that a bank productivity shock can explain financial data moments. The paper contributes an explanation, for both the US relative to the Euro-area, and the US relative to China, of cross-country correlations of loan rates, deposit rates, and the loan premia. It provides a sense in which financial retrenchment resulted in the US following the 2008 bank crisis, and how the Euro-area and China reacted. The paper contributes evidence of how the Euro-area has been more Önancially integrated with the US, and China less financially integrated, with the Euro-area becoming more financially integrated after the 2008 crisis, and China becoming less so integrated.
    Keywords: international real business cycles, financial intermediation, credit spread, bank productivity, 2008 crisis.
    JEL: E13 E32 E44 F41
    Date: 2018–09
  7. By: Andreas Hanl (University of Kassel); Jochen Michaelis (University of Kassel)
    Abstract: Digitalization increasingly replaces the demand for cash and leads to a privatization of payment systems. A recently discussed central bank reaction is central bank digital currency. This article discusses the concept, design options, the implementation into the monetary policy framework, and the macroeconomic consequences of a central bank digital currency.
    Keywords: CBDC, Digitales Zentralbankgeld, Geldpolitik
    JEL: E42 E44 E52 E58
    Date: 2019
  8. By: Chattopadhyay, Siddhartha
    Abstract: Sufficiently persistent rise in nominal interest increases inflation rate in short-run. This short-run comovement of nominal interest rate and inflation rate is known as Neo-Fisherianism. This paper proposes a policy based on Neo-Fisherianism to escape Zero Lower Bound (ZLB) using a textbook forward looking New Keynesian model. I have shown that proposed policy with properly chosen inflation target and persistence can stimulate economy and escape ZLB by raising nominal interest rate. I have also shown that the proposed policy is robust to varying degrees of price stickiness.
    Keywords: New Keynesian Model, Neo-Fisherianism, Zero Lower Bound
    JEL: E31 E4 E43 E5 E52 E6 E63
    Date: 2019–02–20
  9. By: Stefania Albanesi
    Abstract: This paper studies the impact of changing trends in female labor supply on productivity, TFP growth and aggregate business cycles. We find that the growth in women’s labor supply and relative productivity added substantially to TFP growth from the early 1980s, even if it depressed average labor productivity growth, contributing to the 1970s productivity slowdown. We also show that the lower cyclicality of female hours and their growing share can account for a large fraction of the reduced cyclicality of aggregate hours during the great moderation, as well as the decline in the correlation between average labor productivity and hours. Finally, we show that the discontinued growth in female labor supply starting in the 1990s played a substantial role in the jobless recoveries following the 1990-1991, 2001 and 2007-2009 recessions. Moreover, it depressed aggregate hours, output growth and male wages during the late 1990s and mid 2000s expansions. These results suggest that continued growth in female employment since the early 1990s would have significantly improved economic performance in the United States.
    JEL: E17 E27 E32 E37 J21 J3 J82
    Date: 2019–03
  10. By: Max Gillman (Department of Economics, University of Missouri-St. Louis)
    Abstract: The paper presents the welfare cost of inflation in a banking time economy that models exchange credit through a bank production approach. The estimate of welfare cost uses fundamental parameters of utility and production technologies. It is compared to a cash-only economy, and a Lucas (2000) shopping economy without leisure, as special cases. The paper estimates the welfare cost of a 10% inflation rate instead of zero, for comparison to other estimates, as well as the cost of a 2% inflation rate instead of a zero inflation rate. The zero rate is specified as the US inflation rate target in the 1978 Employment Act amendments. The paper provides a conservative welfare cost estimate of 2% inflation instead of zero at $33 billion a year. Estimates of the percent of government expenditure that can be financed through a 2% vs. zero inflation rate are also provided.
    Keywords: Euler equation, interest rates, inflation, banking, money demand, velocity, price-theoretic, marginal cost, productivity shocks, great recession.
    JEL: E13 E31 E43 E52
    Date: 2018–07
  11. By: Atsushi Inoue; Barbara Rossi
    Abstract: We propose a new approach to analuze economic shocks. Our new procedure identifies economic shocks as exogenous shifts in a function; hence, we call the "functional shocks". We show how to identify such shocks and how to trace their effects in the economy via VARs using a procedure that we call "VARs with finctional shocks". Using our new procedire, we address the crucial question of studying the effects or monetary policy by identifying monetary policy shocks as shifts in the shole term structure of government bond yields in a narrow window of time around monetary policy announcements. Our identification sheds new light on the effects of monetary policy shocks, both in conventional and unconventional periods, and shows that traditional identification procedires may miss important effects. We find that, overall, unconventional monetary policy has similar effects to conventional expansionary monetary policy, leading to an increase in both output growth and inflation; the response is hump-shaped; peaking around oneyear to one year and a half after the shock. The new procedire has the advantage of identifying monetary policy shocks during both conventional and unconventional monetary policy periods in a unified manner and can be applied more generally to other economic shocks.
    Keywords: Shock identification, VARs, zero-lower bound, unconventional monetary policy, forward guidance.
    JEL: E4 E52 E21 H31 I3 D1
    Date: 2018–10
  12. By: Goodness C. Aye (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: This paper extends the ongoing literature on the macroeconomic effects of monetary and fiscal policy uncertainty. It examined the asymmetric effects of monetary and fiscal policy uncertainty on economic activity in the short and long run using U.S. monthly data from 1985M1 to 2017M2. The industrial production index is used as a measure of economic activity while the Baker et al (2016) news based monetary and fiscal policy uncertainty were used as measures of uncertainty. To analyse asymmetry, the paper employed the nonlinear autoregressive distributed lag (NARDL) model which allows one not only to capture the effects of positive and negative uncertainty but to do so in both short and long run. Hence this paper provides new evidence of possible existence of a nonlinear and asymmetric relationship between policy uncertainty and economic activity in the short and long run. The results show that monetary and fiscal policy uncertainty share long run relationship with economic activity. Further, the effect of monetary and fiscal policy uncertainties in the long run is asymmetric. Asymmetric effect in the short run was supported only for monetary policy uncertainty. These findings have important practical and policy implications.
    Keywords: Monetary policy, fiscal policy, uncertainty, asymmetry, nonlinearity, short run, long run
    JEL: C32 E52 E62
    Date: 2019–03
  13. By: Barbara Rossi
    Abstract: How should one identify monetary policy shocks in unconventional times? Are unconventional monetary policies as e§ective as conventional ones? And has the transmission mechanism of monetary policy changed in the zerolower bound era? The recent Önancial crisis led Central banks to lower their interest rates in order to stimulate the economy, and interest rates in many advanced economies hit the zero lower bound. As a consequence, the traditional approach to the identiÖcation and the estimation of monetary policy faces new econometric challenges in unconventional times. This article aims at providing a broad overview of the recent literature on the identiÖcation of unconventional monetary policy shocks and the estimation of their e§ects on both Önancial as well as macroeconomic variables. Given that the prospects of slow recoveries and long periods of very low interest rates are becoming the norm, many economists believe that we are likely to face unconventional monetary policy measures often in the future. Hence, these are potentially very important issues in practice.
    Keywords: Shock identification, VARs, zero lower bound, unconventional monetary policy, monetary policy, external instruments, forward guidance.
    JEL: E4 E52 E21 H31 I3 D1
    Date: 2018–01
  14. By: De Fiore, Fiorella; Tristani, Oreste
    Abstract: We study the optimal combination of interest rate policy and unconventional monetary policy in a model where agency costs generate a spread between deposit and lending rates. We show that credit policy can be a powerful substitute for interest rate policy. In the face of shocks that negatively affect bank monitoring efficiency, unconventional measures insulate the real economy from further deterioration in financial conditions and it may be optimal for the central bank not to cut rates to zero. Thus, credit policy lowers the likelihood of hitting the zero bound constraint. Reductions in the policy rates without non-standard measures are sub-optimal as they force savers to inefficiently change their intertemporal consumption patterns.
    Keywords: asymmetric information; Optimal monetary policy; unconventional policies; zero-lower bound
    JEL: E44 E52 E61
    Date: 2019–03
  15. By: Paul Hubert (Observatoire français des conjonctures économiques)
    Abstract: When the central bank and private agents do not share the same information, private agents may not be able to appreciate whether monetary policy responds to changes in the macroeconomic outlook or to changes in policy preferences. In this context, this paper investigates whether the publication of the central bank macroeconomic information set modifies private agents’ interpretation of policy decisions. We find that the sign and magnitude of the effects of monetary policy depend on the publication of policymakers’ macroeconomic views. Contractionary monetary policy has negative effects on inflation expectations and stock prices only if associated with inflationary news
    Keywords: Monetary policy; Information processing; signal extraction; Market based inflation expectations; Central bank projections; Real time forecasts
    JEL: E52 E58
    Date: 2019–02
  16. By: Marshall Reinsdorf (International Monetary Fund); Paul Schreyer (OECD)
    Abstract: The effect on the household consumption price index from possible sources of error in capturing digital products depends on the weight of the affected products. To calculate upper bounds for this effect, we apply weights based on the average structure of household consumption in OECD countries to a maximum plausible overstatement of price change for each affected or potentially affected product. The products account for about 35% of household expenditure in 2005, declining to 32% in 2015. The upper bound simulation effect on the growth rate of the consumption deflator is somewhat less than –0.6 percentage points in 2015 – large enough to improve the picture of GDP and productivity growth in advanced economies. However, this would not overturn the conclusion that productivity growth has slowed substantially compared over the past decades.
    Keywords: cost of living index, digital replacements, digitalised economy, GDP growth, Inflation, productivity
    JEL: C43 D11 D60 E01 E31 O47
    Date: 2019–02–27
  17. By: Timo Henckel (Australian National University & Centre for Applied Macroeconomic Analysis); Gordon D. Menzies (University of Technology Sydney & Centre for Applied Macroeconomic Analysis); Peter Moffat (University of East Anglia); Daniel J. Zizzo (University of Queensland & Centre for Applied Macroeconomic Analysis)
    Abstract: We use the behavior of inflation among Eurozone countries to provide information about the degree of credibility of the European Central Bank (ECB) since 2008. We define credibility along three dimensions-official target credibility, cohesion credibility and anchoring credibility - and show in a new econometric framework that the latter has deteriorated in recent history; that is, price setters are less likely to rely on the ECB target when forming inflation expectations.
    Keywords: credibility; infl?ation; expectations; anchoring; monetary union; inferential expectations
    JEL: C51 D84 E31 E52
    Date: 2019–02–21
  18. By: Claudio Sardoni (Department of Economics and Social Sciences, Sapienza University of Rome (IT).)
    Abstract: In the 1980s Asimakopulos in dealing with the problems of finance, liquidity, investment and saving, criticized both Kalecki and Keynes for the way they dealt with the problem of the investment multiplier. Kalecki's and Keynes's insufficient attention to the time dimension of the multiplier process led them to underestimate the importance of financing investment projects, especially with regard to the problem of the conversion of the firms' short-term loans into long- term loans. When this issue is taken into due consideration, it appears that the economy's propensity to save plays some role in the determination of the conditions under which firms can carry out their investment plans. The paper concentrates on the main point made by Asimakopulos. In a dy- namical analytical context which takes explicit account of the time dimension of processes, the economy's propensity to save can a ect investment, even though this does not imply the rejection of the view that investment `comes first'. A dynamic approach has the merit to emphasize the important role that the financial system plays in the process of economic expansion and it allows to look at expansionary policies and their e ects in a more articulate and thorough way.
    Keywords: Investment, Saving, Multiplier, Finance.
    JEL: E10 E12 E43 E44
    Date: 2019–02
  19. By: Shirai, Sayuri (Asian Development Bank Institute)
    Abstract: Money is a financial instrument that fulfills the basic functions as a medium of exchange, unit of account, store of value, and standard of deferred payment. The function as a medium of exchange allows efficient transactions of goods and services among people without forming an inconvenient barter system. The unit of account enables the value of all goods and services to be expressed in common criteria, thereby smoothening the comparison of goods and services and facilitating their transactions. The store of value refers to any asset whose value can also be used in the future because of the ability to maintain its value, thereby enabling people to save to finance their spending at a later date. In addition to these three basic functions, the function as a standard of deferred payment is regarded as an additional important function of money since it enables it to express the value of a debt so that people can purchase goods and services today by paying back debt in the future. To meet these four functions, money must be durable, portable, divisible, and difficult to counterfeit.
    Keywords: money; central bank digital currency; cash; digital coins; bank deposits
    JEL: E42 E44 E51
    Date: 2019–02–13
  20. By: Zheng Liu; Pengfei Wang; Tao Zha
    Abstract: Aggregate housing demand shocks are an important source of house price fluctuations in the standard macroeconomic models, and through the collateral channel, they drive macroeconomic fluctuations. These reduced-form shocks, however, fail to generate a highly volatile price-to-rent ratio that comoves with the house price observed in the data (the “price-rent puzzle”). We build a tractable heterogeneous-agent model that provides a microeconomic foundation for housing demand shocks. The model predicts that a credit supply shock can generate large comovements between the house price and the price-to-rent ratio. We provide empirical evidence from cross-country and cross-MSA data to support this theoretical prediction.
    JEL: E21 E44 G21
    Date: 2019–03
  21. By: Andrea Colciago; Volker Lindenthal; Antonella Trigari
    Abstract: Using US annual data spanning four decades and several business cycles, we show that that job flow rates of young firms are more cyclical than those of mature firms and detect no difference between the cyclicality of job flow rates of small and large firms. Further, we find that job flow rates due to contractions and expansions of continuing establishments are more cyclical than those due to entry and exit. At the same time the job flow rates of mature firms provide a larger contribution to the overall variability of aggregate job flow rates with respect to those of young firms. The reason is that mature firms employ the vast majority of US workers, and the fraction of aggregate variability of aggregate job flows explained by the job flow of firms belonging to a specific category is proportional to the category's employment share. On the contrary, there is no relevant difference in the contribution to aggregate fluctuations between the job flow rates of firms of different sizes. Our findings hold independently of whether we focus simply on the Great Recession period or on the full sample.
    Keywords: Job Creation; Job Destruction; Business Cycle; Small Firms; Large Firms; Young Firms; Mature Firms
    JEL: D22 E23 E32 J23 L25
    Date: 2019–03
  22. By: Asier Aguilera-Bravo (Departamento de Economía-UPNA); Miguel Casares Polo (Departamento de Economía-UPNA)
    Abstract: This paper computes the steady-state optimal rate of inflation assuming two di erent sticky-price specifications, Calvo (1983) and Taylor (1980), in a model with monopolistic competition. The optimal rate of inflation in steady state is always positive. This result is robust to changes in the degree of price stickiness. In both cases of staggered prices, the optimal rate of inflation is approximately equal to the ratio between the rate of discount and the Dixit-Stiglitz elasticity.
    Keywords: Monopolistic Competition, Sticky Prices, Optimal Inflation
    JEL: E12 E31
    Date: 2019
  23. By: Bronson Argyle; Taylor D. Nadauld; Christopher Palmer
    Abstract: In this paper, we provide evidence of the importance of monthly payments in the market for consumer installment debt. Auto debt in particular has grown rapidly since the Great Recession and has eclipsed credit cards in total debt outstanding. Auto-loan maturities have also increased such that most auto-loan originations now have a term of over 72 months. We document three phenomena we jointly refer to as monthly payment targeting. First, using data from 500,000 used auto loans and discontinuities in contract terms offered by hundreds of lenders, we show that demand is more sensitive to maturity than interest rate, consistent with consumers managing payment size when making debt decisions. Second, many consumers appear to employ segregated mental accounts, spending exogenous payment savings on larger loans. Third, consumers bunch at round-number monthly payment amounts, consistent with the use of budgeting heuristics. These patterns hold in subsamples of constrained and unconstrained borrowers, challenging liquidity constraints as a complete explanation. Our estimates suggest that borrower focus on payment size, combined with credit-supply shocks to maturity, could significantly affect aggregate outstanding debt.
    JEL: D14 D18 D91 E43 E51 G02 G21 H31 L62 M38
    Date: 2019–03
  24. By: Chatterjee, Satyajit (Federal Reserve Bank of Philadelphia); Eyigungor, Burcu (Federal Reserve Bank of Philadelphia)
    Abstract: Larger firms (by sales or employment) have higher leverage. This pattern is explained using a model in which firms produce multiple varieties and borrow with the option to default against their future cash ow. A variety can die with a constant probability, implying that bigger firms (those with more varieties) have lower coefficient of variation of sales and higher leverage. A lower risk-free rate benefits bigger firms more as they are able to lever more and existing firms buy more of the new varieties arriving into the economy. This leads to lower startup rates and greater concentration of sales.
    Keywords: Startup rates; leverage; firm dynamics
    JEL: E22 E43 E44 G32 G33 G34
    Date: 2019–03–14
  25. By: Eric M. Leeper; Campbell B. Leith; Ding Liu
    Abstract: The textbook optimal policy response to an increase in government debt is simple—monetary policy should actively target inflation, and fiscal policy should smooth taxes while ensuring debt sustainability. Such policy prescriptions presuppose an ability to commit. Without that ability, the temptation to use inflation surprises to offset monopoly and tax distortions, as well as to reduce the real value of government debt, creates a state-dependent inflationary bias problem. High debt levels and short-term debt exacerbate the inflation bias. But this produces a debt stabilization bias because the policy maker wishes to deviate from the tax smoothing policies typically pursued under commitment, by returning government debt to steady-state. As a result, the response to shocks in New Keynesian models can be radically different, particularly when government debt levels are high.
    JEL: E62 E63
    Date: 2019–03
  26. By: Bolboaca, Maria
    Abstract: In this paper, I introduce novel measures of technological change, based on counts of books in the field of technology and technological standardization, in an otherwise standard vector autoregressive model, to show the relative importance of unanticipated productivity shocks, technology shocks, and anticipated productivity (news) shocks, in driving macroeconomic fluctuations. The results indicate that news shocks play a more important role than technology shocks at business cycle frequencies, while in the medium- to long-run technology shocks take the lead. Unanticipated productivity shocks do not seem to be a significant source of aggregate fluctuations regardless of the forecast horizon.
    Keywords: productivity shock, technology shock, news shock, business cycle, structural vector autoregressive model
    JEL: C32 E32 O33
    Date: 2019–02
  27. By: J. Scott Holladay (Department of Economics, University of Tennessee); Mohammed Mohsin (Department of Economics, University of Tennessee); Shreekar Pradhan (King Abdullah Petroleum Studies And Research Center)
    Abstract: We develop a dynamic stochastic general equilibrium model to understand how environmental policy instrument choice affects trade. We extend the existing literature by employing an open economy model to evaluate three environmental policy instruments: cap-and-trade, pollution taxes, and an emissions intensity standard in the face of two types of exogenous shocks. We calibrate the model to Canadian data and simulate productivity and import price shocks. We evaluate the evolution of key macroeconomic variables, including the trade balance in response to the shocks under each policy instrument. Our findings for the evolution of output and emissions under a productivity shock are consistent with previous closed economy models. Our open economy framework allows us to find that a cap-and-trade policy dampens the international trade effects of the business cycle relative to an emissions tax or intensity standard. Under an import shock, pollution taxes and intensity targets are as effective as cap-and-trade policies in reducing variance in consumption and employment. The cap-and-trade policy limits the intensity of the import competition shock suggesting that particular policy instrument might serve as a barrier to trade.
    Keywords: Environmental policy, Import competition, Business cycles, Macroeconomic dynamics, Open economy
    JEL: Q54 E32
    Date: 2019–03
  28. By: Fève, Patrick; Moura, Alban; Pierrard, Olivier
    Abstract: We argue that shocks to credit supply by shadow and retail banks were key to understanding the behavior of the US economy during the Great Recession and the Slow Recovery. We base this result on an estimated DSGE model featuring a rich representation of credit flows. Our model selects the two banking shocks as the most important drivers of the crisis because they account simultaneously for the fall in real activity, the decline in credit intermediation, and the rise in lending-borrowing spreads. On the other hand, in contrast with the existing literature,our results assign only a moderate role to productivity and investment efficiency shocks.
    Keywords: Shadow Banking; Great Recession; Slow Recovery; estimated DSGE models.
    JEL: C32 E32
    Date: 2019–03
  29. By: Engelbert Stockhammer; Giorgos Gouzoulis (King’s College London); Rob Calvert Jump
    Abstract: Minsky (1975) proposed a theory of endogenous cycles that results from the interaction of real and financial variables. Minsky’s work has inspired a growing body of literature on theoretical business cycle models, but relatively little work has been done in the empirical field. In particular, while interest in financial cycles has risen significantly after the 2007-8 financial crash, and recent empirical studies have explored the impact of debt on aggregate demand or its effect on the probability of financial crises, the literature does not test for endogenous cycle mechanisms. In contrast, the present paper investigates econometrically whether or not business cycles are driven by corporate debt and/or by mortgage debt. We estimate simple vector autoregressive moving average (VARMA) models, using historical macroeconomic data for the USA (1889-2015) and the UK (1882-2010). We find robust evidence of endogenous corporate debt-driven cycles for the USA, weak evidence of mortgage debt-driven cycles in the USA and no evidence of corporate or mortgage debt-driven cycles for the UK.
    Keywords: Minsky cycles, corporate debt, mortgage debt, business cycles, historical data
    JEL: E22 G01
    Date: 2019–03
  30. By: Goodness C. Aye (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: This paper examined the asymmetric effect of fiscal policy uncertainty on real economic activity in South Africa. Quarterly time series data spanning from 1990:Q1 to 2018:Q2 are used. Fiscal policy uncertainty is defined as the GARCH (1,1) conditional variance in capital tax, consumption tax, labour income tax and government spending. The results based on linear projection models that allow for asymmetry show that in general high fiscal policy uncertainty exhibits a negative effect on real GDP while low fiscal uncertainty exhibits a positive effect on real GDP. High volatility (bad news) has larger effect in general than low volatility (good news).This disparity is significant especially for the response of real GDP to capital tax uncertainty and spending uncertainty. Therefore fiscal policy uncertainty has asymmetric effect on real economic activity in South Africa.
    Keywords: Fiscal policy uncertainty, asymmetry, economic activity, impulse responses
    JEL: C32 E62 O4
    Date: 2019–03
  31. By: Sónia Félix; Chiara Maggi
    Abstract: This paper studies the impact of a structural reform that reduces entry costs for firms. We provide novel empirical evidence on the response of firms’ entry, employment, and exit behavior. To do so, we use as a natural experiment a reform in Portugal that significantly reduced entry time and costs. We find that the reform had an expansionary impact: firm entry and employment increased by 25% and 4% per year, respectively. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the firms that were the most productive before the reform. Standard models of entry, exit, and firm dynamics, which assume a constant elasticity of substitution, are inconsistent with our findings about the heterogeneous response of incumbents to the reform. We show that a model with heterogeneous firms and variable markups accounts for our evidence. In this framework, the most productive firms face a lower demand elasticity and increase their employment in response to the entry of new firms.
    JEL: D22 D40 E24 E64
    Date: 2019
  32. By: Raju Huidrom (International Monetary Fund); M. Ayhan Kose (World Bank, Development Prospects Group; Brookings Institution; CEPR, and CAMA); Jamus J. Lim (Essec Business School); Franziska L. Ohnsorge (World Bank, Development Prospects Group; CAMA)
    Abstract: The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors’ concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. We document empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. We find that fiscal multipliers tend to be smaller when fiscal positions are weak than strong.
    Keywords: Fiscal multipliers, fiscal position, state-dependency, Ricardian channel, interest rate channel, business cycle.
    JEL: E62 H50 H60
    Date: 2019–03
  33. By: Simona E. Cociuba (University of Western Ontario)
    Abstract: After the 1990 unification, East Germany’s capital income share plunged to 15.2 percent in 1991, then increased to 37.4 percent by 2015. To account for these large changes in the capital share, I model an economy that gains access to a higher productivity technology embodied in new plants. As existing low productivity plants decrease production, the capital share varies due to the non-convex production technology: plants require a minimum amount of labor to produce output. Two policies— transfers and government-mandated wage increases—have opposite effects on output growth, but contribute to lowering the capital share early in the transition.
    Keywords: technological change, capital share, labor share, transfers, union markups
    JEL: E20 E25 O11
    Date: 2018
  34. By: David Turner; Thomas Chalaux
    Abstract: Fan charts were pioneered by the Bank of England and Riksbank and provide a visuallyappealing means to convey the uncertainty surrounding a forecast. This paper describes amethod for parameterising fan charts around GDP growth forecasts by which the degree ofuncertainty is based on past forecast errors, but the skew is derived from a probit modelbasedassessment of the probability of a future downturn. The probit-based fan chartsclearly out-perform the Bank of England and Riksbank approaches when applied toforecasts made immediately preceding the Global Financial Crisis. These examples alsohighlight weaknesses with the Bank of England and Riksbank approaches.The Riksbank approach implicitly assumes that forecast errors are normallydistributed, but over a long track record this is unlikely to be the case becauseforecasters are generally poor at predicting downturns, which leads to bias and skewin the pattern of forecast errors. Thus, the Riksbank fan chart is neither an accuraterepresentation of past forecast errors, nor is it a reflection of the risk assessmentunderlying the forecast.The Bank of England approach relies heavily on the judgment of the members ofthe Monetary Policy Committee to assess risks. However, even when they havecorrectly foreseen the nature of future risks, the quantitative translation of theserisks into the fan chart skew has been too timid. Perhaps one reason for this is thatthe fan chart prediction intervals based on historical forecast errors already appearquite wide so that inflating them by adding skew may appear embarrassing (at leastex ante).The approach advocated in this paper addresses these weaknesses by recognising thatforecast errors are not symmetrical: firstly, this leads to more compressed predictionintervals in the upper part of the fan chart (representing the possibility of under-prediction);and secondly, using the large forecast errors from past downturns to calibrate downwardskew clearly supports a more bold approach when there is a risk of a downturn. A weaknessof the probit model-based approach is that it will not predict atypical downturns. Forexample, in the current conjuncture it would not pick up risks associated with a ‘no deal’Brexit or a global trade war. However, a downturn triggered by atypical events may bemore severe if risk factors describing a typical business-financial cycle are also high.
    Keywords: downturn, economic forecasts, fan charts, recession, risk, uncertainty
    JEL: E58 E17 E65 E66 E01
    Date: 2019–03–08
  35. By: Itamar Drechsler; Alexi Savov; Philipp Schnabl
    Abstract: Between 2003 and 2006, the Federal Reserve raised rates by 4.25%. Yet it was precisely during this period that the housing boom accelerated, fueled by rapid growth in mortgage lending. There is deep disagreement about how, or even if, monetary policy impacted the boom. Using heterogeneity in banks' exposures to the deposits channel of monetary policy, we show that Fed tightening induced a large reduction in banks' deposit funding, leading them to contract new on-balance-sheet lending for home purchases by 26%. However, an unprecedented expansion in privately-securitized loans, led by nonbanks, largely offset this contraction. Since privately-securitized loans are neither GSE-insured nor deposit-funded, they are run-prone, which made the mortgage market fragile. Consistent with our theory, the re-emergence of privately-securitized mortgages has closely tracked the recent increase in rates.
    JEL: E43 E52 G21 G23
    Date: 2019–03
  36. By: Carrera, César (Banco Central de Reserva del Perú)
    Abstract: Una forma de entender el consumo privado es subdividir esta variable macroeconómica agregada en sus componentes y estudiar las partes. En este documento se estima el comportamiento de los componentes más importantes del consumo privado al cual se denomina componentes principales. Tomando como punto de inicio la información de la Tabla Insumo Producto para distintos años, se utiliza un conjunto de variables proxi para cada componente a partir de los cuales se obtiene una distribución del consumo por componente para cada año. Los componentes restantes forman parte de una serie denominada Otros, cuyo rol es de disciplinar los resultados mediante el registro de ciertas regularidades en su conducta. Esta metodología permite proyectar el consumo privado con un bajo error de proyección.
    Keywords: Consumo privado, Bottom – Up, Tabla Insumo Producto.
    JEL: C13 C43 E01 E21
    Date: 2019–03
  37. By: Diewert, Erwin; Fox, Kevin J.; Schreyer, Paul
    Abstract: Brynjolfsson, Collis, Diewert, Eggers and Fox (2018) have used experimental economics to measure the welfare benefits of free commodities. In this paper, their methodological approach is adapted to measuring the benefits of new commodities which may or may not be free. Their approach leads to a new method for estimating Hicksian reservation prices. The new methodology in the present paper requires experimental estimates for household willingness to pay for new commodities or estimates for the compensation required for households to give up their use of a new commodity.
    JEL: C43 D11 D60 E01 E31 O31 O47
    Date: 2019–03–13
  38. By: NTITA NTITA, Jean; KAZADI NTITA, François; NTANGA NTITA, Jean de Dieu
    Abstract: This paper examines the determinants of inflation in six countries of Central African Economic and Monetary Community (CAEMC). To achieve this objective, we used a panel model estimated by fixed effects over the period from 1996 to 2016. The econometric analysis shows that the money supply has a positive and very significant effect on inflation while political stability has a negative and very significant effect on inflation in this area. Management of the money supply and the maintenance of political stability are essential for the control of inflation in this area.
    Keywords: Inflation, Politique monétaire, Panel, effets fixes, CEMAC.
    JEL: C23 E31 O55
    Date: 2017–04
  39. By: Xavier Ragot (Observatoire français des conjonctures économiques)
    Abstract: Le paradigme central de la macroéconomie se déplace vers les modèles à agents hétérogènes. Ces derniers répondent à l’évolution du débat économique pour introduire la question des inégalités dans l’analyse économique. Ces modèles permettent aussi d’utiliser les nouvelles données individuelles pour rendre les modèles plus quantitativement rigoureux et donc plus scientifiques. Au sein de ces modèles, où les marchés financiers sont imparfaits, de nouveaux concepts apparaissent naturellement, comme celui de liquidité. Cet article présente les résultats récents dans cette littérature très dynamique, comme l’analyse des inégalités aux États-Unis, le besoin d’une liquidité mondiale, l’effet de la dette publique sur les prix d’actifs financiers ou encore les causes de la chute de la consommation des ménages américains lors de la crise de 2008.
    Keywords: Inégalités; Revenu; Patrimoine; Mondiatlisation; Hétérogénéité; Dette; Empoli
    JEL: E21 E44 D31
    Date: 2017–10
  40. By: Szilard Benk (International Monetary Fund); Max Gillman (Department of Economics, University of Missouri-St. Louis)
    Abstract: Real oil prices surged from 2009 through 2014, comparable to the 1970s oil shock period. Standard explanations based on monopoly markup fall short since ination remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.
    Keywords: Oil Price Shocks, Granger Predictability, Monetary Base, M1 Divisia, Swaps, Ination.
    JEL: Q43 E51 E52
    Date: 2019–03
  41. By: Quan-Hoang Vuong
    Abstract: In an age of reform, Vietnam’s financial systems have come to a critical stage in which the quality of policy-making, independence of the central banking operations and over-risk controls will ultimately be required if the country is set to move forward in a sustainable fashion. Analysts may have different views about Vietnam’s financial economy, but all agree that it has evolved and grown fast over the past three decades. The next course of development will depend on how Vietnamese society views raison d’être of its financial systems and financial health. But the process will much depend on the economic growth of the economy as a whole. Failing to support a sustained growth puts VFS’s existence at risk as economic growth helps mitigate higher risk-taking behavior and contain instability in less competitive markets.
    Keywords: Financial economy; Reforms; Emerging market; Money market; Capital market
    JEL: E44 E58 F36 G00
    Date: 2019–03–21
  42. By: Sen Gupta, Abhijit (Asian Development Bank); Iyer, Tara (Asian Development Bank)
    Abstract: This study develops a framework to forecast India’s gross domestic product growth on a quarterly frequency from 2004 to 2018. The models, which are based on real and monetary sector descriptions of the Indian economy, are estimated using Bayesian vector autoregression (BVAR) techniques. The real sector groups of variables include domestic aggregate demand indicators and foreign variables, while the monetary sector groups specify the underlying inflationary process in terms of the consumer price index (CPI) versus the wholesale price index given India’s recent monetary policy regime switch to CPI inflation targeting. The predictive ability of over 3,000 BVAR models is assessed through a set of forecast evaluation statistics and compared with the forecasting accuracy of alternate econometric models including unrestricted and structural VARs. Key findings include that capital flows to India and CPI inflation have high informational content for India’s GDP growth. The results of this study provide suggestive evidence that quarterly BVAR models of Indian growth have high predictive ability.
    Keywords: Bayesian vector autoregressions; GDP growth; India; time series forecasting
    JEL: C11 C32 C53 F43
    Date: 2019–03–14
  43. By: Michael Callaghan (Reserve Bank of New Zealand)
    Abstract: As a small, indebted economy, it is important to understand how financial market shocks in the rest of the world transmit to New Zealand. A key channel is long-term interest rates, which are highly correlated across countries. A sharp increase in international long-term bond yields would affect a range of New Zealand interest rates, including mortgage rates. I use a term structure model to analyse the drivers of long-term interest rates in New Zealand. Movements in long- term interest rates can be decomposed into a component that reflects expectations about the future path of short-term policy rates, and changes in the term premium. The term premium is the compensation investors require for the risk of holding interest rate securities. The term premium in New Zealand 10-year bond rates has trended down since the 1990s. Stable inflation, a strong domestic economy, and low global bond market volatility are likely to have contributed to a low term premium in recent years. The New Zealand term premium is highly correlated with foreign yields, which may present some challenges for domestic monetary policy. Specifically, an increase in the term premium, even if driven from overseas, would be associated with a fall in domestic inflation and activity over the following year. Monetary policy may sometimes need to offset term premium shocks to achieve domestic macroeconomic objectives. The model presented in this note provides estimates of the drivers of long-term yields that can be monitored at a high frequency, and a framework for thinking about movements in long-term interest rates and their implications for policymakers.
    Date: 2019–03
  44. By: Brochier, Lidia; Macedo e Silva, Antonio Carlos
    Abstract: The recent US economic scenario has motivated a series of heterodox papers concerned with household indebtedness and consumption. Though discussing autonomous consumption, most of the theoretical papers rely on private investmentled growth models. An alternative approach is the so-called Sraffian supermultipler model, which treats long-run investment as induced, allowing for the possibility that other final demand components – including consumption – may lead long-run growth. We suggest that the dialogue between these approaches is not only possible but may prove to be quite fruitful.
    Keywords: Consumption. Household debt. Growth theories. Autonomous expenditures.
    JEL: B59 E12 E21
    Date: 2017–07
  45. By: Bullard, James; Singh, Aarti
    Abstract: We study nominal GDP targeting as optimal monetary policy in a model with a credit market friction following Azariadis, Bullard, Singh and Suda (2018), henceforth ABSS. As in ABSS, the macroeconomy we study has considerable income inequality which gives rise to a large private sector credit market. Households participating in this market use non-state contingent nominal contracts (NSCNC). We extend the ABSS framework to allow for endogenous and heterogeneous household labor supply among credit market participant households. We show that nominal GDP targeting continues to characterize optimal monetary policy in this setting. Optimal monetary policy repairs the distortion caused by the credit market friction and so leaves heterogeneous households supplying their desired amount of labor, a type of “divine coincidence” result. We also analyze the incomplete markets equilibrium that exists when the monetary policymaker pursues a suboptimal policy, and show how an extension to more general preferences can limit the ability of the policymaker to provide full insurance to households in this setting.
    Keywords: Monetary policy transmission; input-output; VAR; intermediate goods.
    Date: 2018–11
  46. By: Paola Rocchi (European Commission - JRC); Simone Salotti (European Commission - JRC); Frederic Reynes (TNO – Innovation for life); Jinxue Hu (TNO – Innovation for life); Tatyana Bulavskaya (TNO – Innovation for life); Jose Manuel Rueda-Cantuche (European Commission - JRC); Juan Manuel Valderas Jaramillo (European Commission - JRC); Agustin Velazquez Afonso (European Commission - JRC); Antonio De Amores (European Commission - JRC); Teodora Corsatea (European Commission - JRC)
    Abstract: FIDELIO (Fully Interregional Dynamic Econometric Long-term Input-Output) is a multi-sectoral model developed by the unit B.5 of the Directorate General Joint Research Centre (JRC) — the circular economy and industrial leadership unit. Compared to neoclassical CGE models — which assume that the perfect flexibility of prices and quantities ensures the full use of the factors of production at all times — FIDELIO integrates some new-Keynesian features: consumption adjusts slowly to its optimal level according to an error correction model and wages do not clear the labour market. The assumptions that prices do not clear the markets and market "imperfections" exist generate the dynamics of the model that is solved sequentially (recursive dynamic). In addition, FIDELIO is an econometric model since the calibration of most of the behavioural parameters of the model (dynamic adjustment lags of prices and quantities, and elasticities) is based on econometric estimations.This technical report illustrates the third version of the FIDELIO model, FIDELIO 3. The changes introduced in the subsequent versions of the model have two main objectives. The first one is to increase the coverage of the model. The second one is to improve the efficiency and the capacity of the model to evaluate sustainable production and consumption policies. The aim of this report is twofold. First, it contains all the equations of the current version of the model; second, it illustrates the characteristics of the data used by FIDELIO 3.
    Keywords: Dynamic econometric model; Input-output; FIDELIO 3
    JEL: C61 C63 C67 C68 D57 D58 E12 E17 F10
    Date: 2019–03
  47. By: David Laidler (University of Western Ontario)
    Abstract: Friedman’s Presidential Address was about “The Role of Monetary Policy†. Its famous discussion of inflation-unemployment inter-relationships was subservient to this broader topic. The program it promoted influenced monetary policy in the ‘70s and early ‘80s with mixed results, but enough of it survived to be a clearly visible influence on today’s inflation-targeting regimes.
    Date: 2018
  48. By: Diewert, Erwin
    Abstract: This paper provides an update to the chapter on the treatment of durables in the Consumer Price Index Manual (2004). The most important durable is housing, which typically accounts for approximately 20% of total consumption services. A large fraction of total housing services consists of the services of Owner Occupied Housing (OOH). The main approaches to measuring the services of OOH are (i) the acquisitions approach; (ii) the rental equivalence approach and (iii) the user cost approach. Two other approaches are sometimes used: (iv) the opportunity cost approach and (v) the payments approach. A main purpose of this paper is to present the main approaches to the treatment of OOH and to discuss the benefits and costs of the alternative approaches. The paper also discusses the problems associated with forming imputations for the services of “ordinary†consumer durable goods.
    Keywords: Durable goods; Consumer Price Index; Owner Occupied Housing; hedonic regression models
    JEL: C23 C43 C81 D12 E31
    Date: 2019–03–21
  49. By: Guerriero, Marta (Asian Development Bank Institute)
    Abstract: There are two fundamental reasons why factor shares have traditionally been overlooked in the economic literature. First, because of their nature, factor shares are conceptually difficult to define and measure. Second, they have for a long time been perceived as constant across time and space. We evaluate five different methodologies of estimation commonly used in the labor share literature and propose a new measurement. We then compile a global dataset of the labor income share across 151 economies—both developing and developed—for all or part of the period 1970–2015. Results show that our suggested indicator is correlated to the other five measures but it also retains unique information. Contrary to the traditional assumption of stable factor shares, we document the existence of considerable heterogeneity across economies and variability over time. Specifically, there has been a general decline in the labor share around the world, in particular from the mid-1980s onward.
    Keywords: factor shares; income distribution; labor
    JEL: E01 E25 J30
    Date: 2019–02–01
  50. By: António Rua
    Abstract: Liquidity management is a key mission of a central bank. In particular, the adequate provision of banknotes requires the understanding of what drives currency demand in a continuously changing environment. The challenge is even bigger in the case of the European monetary union where the euro continues to develop into a well-established currency outside borders. The focus is on modelling euro banknotes demand namely by considering its denominational breakdown. Such an analysis allows to unveil the heterogeneous role played by the several drivers while providing a more in depth modelling of currency demand. The econometric approach pursued allows to take on board the interconnections across denominations both in the long- and short-run dynamics.
    JEL: C32 E41 E50
    Date: 2019
  51. By: Christensen, Jens H. E. (Federal Reserve Bank of San Francisco); Fischer, Eric (Federal Reserve Bank of San Francisco); Shultz, Patrick (Wharton School of the University of Pennsylvania)
    Abstract: In their search for yield in the current low interest rate environment, many investors have turned to sovereign debt in emerging economies, which has raised concerns about risks to financial stability from these capital flows. To assess this risk, we study the effects of changes in the foreign-held share of Mexican sovereign bonds on their liquidity premiums. We find that recent increases in foreign holdings of these securities have played a significant role in driving up their liquidity premiums. Provided the higher compensation for bearing liquidity risk is commensurate with the chance of a major foreign-led sell-off in the Mexican government bond market, this development may not pose a material risk to its financial stability.
    JEL: E43 E44 F36 G12
    Date: 2019–03–01
  52. By: Johannes Boehm (Département d'économie); Ezra Oberfield (Princeton University)
    Abstract: The strength of contract enforcement determines how firms source inputs and organize production. Using microdata on Indian manufacturing plants, we show that production and sourcing decisions appear systematically distorted in states with weaker enforcement. Specifically, we document that in industries that tend to rely more heavily on relationship-specific intermediate inputs, plants in states with more congested courts shift their expenditures away from intermediate inputs and appear to be more vertically integrated. To quantify the impact of these distortions on aggregate productivity, we construct a model in which plants have several ways of producing, each with different bundles of inputs. Weak enforcement exacerbates a holdup problem that arises when using inputs that require customization, distorting both the intensive and extensive margins of input use. The equilibrium organization of production and the network structure of input-output linkages arise endogenously from the producers’ simultaneous cost minimization decisions. We identify the structural parameters that govern enforcement frictions from cross-state variation in the first moments of producers’ cost shares. A set of counterfactuals show that enforcement frictions lower aggregate productivity to an extent that is relevant on the macro scale.
    Keywords: Production networks; Intermediate inputs; Misallocation; Productivity; Contract enforcement; Value chains
    JEL: E23 O11 F12
    Date: 2018–08
  53. By: Aipoh, Godwin
    Abstract: This study examined a comparative analysis of government spending, external debt, domestic credit to private sector, exchange rate and net investment to non-financial companies from 1970 to 2017. The data was secondary sourced from World Development Indicators. The correlation results show a positive association between the variables although a poor connectivity between Government Spending and External debt. External debt doesn’t have a positive relationship with Government spending and it is statistically significant.
    Keywords: External Debt, Credit to Private Sector and Exchange Rate
    JEL: E0
    Date: 2019–03–20
  54. By: Gerhard Sorger
    Abstract: We point out that the equilibrium deinition applied by Miao and Wang [8] in their model of stock price bubbles involves an implicit assumption about the for-mulation of an endogenous credit constraint. By dropping this assumption, one can construct ininitely many additional equilibria for the Miao-Wang economy, all of which exhibit stock price bubbles. The underlying reason for this result is informational non-uniqueness, a phenomenon known from the literature on dynamic games. Neither the original equilibria discussed by Miao and Wang [8] nor the additional ones which exist due to informational non-uniqueness are Markov-perfect. For this reason we propose a recursive equilibrium deinition for the Miao-Wang economy and show how it can be used to construct Markov-perfect equilibria with stock price bubbles.
    JEL: E22 G10
    Date: 2019–02
  55. By: Kazuya Kamiya (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: It is known that stationary equilibria are indeterminate in some monetary models, especially in money search models with divisible money. However, most of the indeterminacy results are limited to the case that money holdings distributions have fi nite supports. In the case of infi nite supports, both determinacy and indeterminacy results are known. In this paper, using the Borsuk-Ulam theorem in Banach Space, I investigate what determines the differences.
    Keywords: Real Determinacy, Real Indeterminacy, Monetary Search Model, All-Pay Auction, Divisible Money, Infi nite Dimensional Space, Borsuk-Ulam Theorem
    JEL: C78 D51 D83 E40
    Date: 2019–03
  56. By: World Bank Group
    Keywords: Finance and Financial Sector Development - Access to Finance Finance and Financial Sector Development - E-Finance and E-Security Finance and Financial Sector Development - Financial Regulation & Supervision Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Inequality
    Date: 2018–08
  57. By: NTANGA NTITA, Jean de Dieu; KAZADI NTITA, François; NTITA NTITA, Jean
    Abstract: The objective of this paper is to analyze the effect of foreign direct investments on economic growth in the Democratic Republic of Congo (DRC) over the period 1980-2016. To achieve this objective, we used the ARDL approach. The results indicate a negative effect of foreign direct investments on the economic growth of the Democratic Republic of Congo in the short and long term.
    Keywords: Foreign direct investment, economic growth, ARDL, DRC.
    JEL: C32 E02 F43 O55
    Date: 2019
  58. By: Diewert, Erwin; Feenstra, Robert
    Abstract: A major challenge facing statistical agencies is the problem of adjusting price and quantity indexes for changes in the availability of commodities. This problem arises in the scanner data context as products in a commodity stratum appear and disappear in retail outlets. Hicks suggested a reservation price methodology for dealing with this problem in the context of the economic approach to index number theory. Feenstra and Hausman suggested specific methods for implementing the Hicksian approach. The present paper evaluates these approaches and suggests some alternative approaches to the estimation of reservation prices. The various approaches are implemented using some scanner data on frozen juice products that are available online.
    Keywords: Hicksian reservation prices, virtual prices, Laspeyres, Paasche, Fisher
    JEL: C33 C43 C81 D11 D60 E31
    Date: 2019–03–13
  59. By: Karsten Kohler
    Abstract: The paper provides a dynamic Minskyan open economy model of endogenous boom-bust cycles in emerging market economies, which explains the empirically observed procyclicality of exchange rates and the countercyclicality of the trade balance. It highlights the interaction of exchange rate dynamics and balance sheets. Currency appreciation makes firm balance sheets with foreign currency debt more solid. Throughout the resulting boom phase, the current account position worsens. Pressures on the domestic exchange rate mount until the currency depreciates. Contractionary balance sheet effects then set in as domestic firms face a drop in their nominal net worth. If capital inflows are driven by exogenous risk appetite, these fluctuations can assume the form of shock-independent endogenous cycles. An exogenous increase in risk appetite increases the volatility of the cycle. We find that financial account regulation can help reduce macroeconomic volatility and that the larger the risk appetite, the more financial account regulation is required to achieve this.
    Keywords: Business cycles, boom-bust cycles, emerging market economies, Minsky
    JEL: E11 E12 F36 F41
    Date: 2019–03
  60. By: Doorley, Karina (Economic and Social Research Institute, Dublin); Nolan, Anne (ESRI, Dublin)
    Abstract: Financial literacy is higher for men than for women and high financial literacy has been linked to higher wealth and better retirement planning. However, relatively little is known about the decision making process for retirement savings within couples and about how the gap or interaction between the financial literacy of members of a couple influences their preparation for retirement. This paper investigates the relationship between the financial literacy of members of pre-retirement couples and their level of wealth and financial stress using TILDA data for Ireland. We find that joint financial literacy is more highly correlated with household wealth, particularly real estate, than the financial literacy of individual members of the couple but that, where individual level financial literacy is associated with wealth, it is the financial literacy of the man in the couple which plays the most important role.
    Keywords: retirement, financial literacy, wealth, couples
    JEL: J32 E21 D14
    Date: 2019–02
  61. By: Margherita Borella; Mariacristina De Nardi; Fang Yang
    Abstract: White, non-college-educated Americans born in the 1960s face shorter life expectancies, higher medical expenses, and lower wages per unit of human capital compared with those born in the 1940s, and men's wages declined more than women's. After documenting these changes, we use a life-cycle model of couples and singles to evaluate their effects. The drop in wages depressed the labor supply of men and increased that of women, especially in married couples. Their shorter life expectancy reduced their retirement savings but the increase in out-of-pocket medical expenses increased them by more. Welfare losses, measured a one-time asset compensation are 12.5%, 8%, and 7.2% of the present discounted value of earnings for single men, couples, and single women, respectively. Lower wages explain 47-58% of these losses, shorter life expectancies 25-34%, and higher medical expenses account for the rest.
    JEL: E21 H31
    Date: 2019–03
  62. By: Raphaël Jachnik (OECD); Mariana Mirabile (OECD); Alexander Dobrinevski (OECD)
    Abstract: Achieving a low-greenhouse gas (GHG) development requires making finance flows consistent with this objective. In order to measure progress to date as well as inform future public action in this area, this paper calls for further efforts to track gross primary investments flows in new infrastructure and equipment and the refurbishment of such assets, as well underlying sources of finance. The proposed scope focuses on tangible fixed assets with a direct and significant impact on GHG emissions.
    Keywords: climate change, data, finance flows, investment, low-greenhouse gas development, measurement, tracking
    JEL: E01 E22 G21 G23 H54 Q54 Q56
    Date: 2019–03–19
  63. By: Nolan, Anne (ESRI, Dublin); Doorley, Karina (Economic and Social Research Institute, Dublin)
    Abstract: The economic and financial landscape facing individuals as they move through their life-cycle is becoming increasing complex. Internationally, declines in the coverage and generosity of public programmes mean that individuals now need to assume responsibility for a greater share of their future retirement saving and health and long-term care costs. Financial literacy, defined as knowledge of fundamental financial concepts and the ability to do simple financial calculations, is a key skill required to ensure adequate financial protection in older age. In this paper, we investigate the extent to which financial literacy is an important determinant of financial protection in the older pre-retirement population in Ireland. Using data from the Irish Longitudinal Study on Ageing (TILDA), we find significantly higher levels of financial literacy among men, those with higher levels of education and cognition, and the self-employed. Financial literacy is in turn associated with higher total household wealth, lower financial stress and higher expected retirement income. We find little evidence that those with higher levels of financial literacy are more likely to have various forms of supplementary pension cover however, which may reflect a limited role for financial literacy over and above other important determinants such as income and education.
    Keywords: financial literacy, retirement, Ireland
    JEL: J32 E21
    Date: 2019–02
  64. By: A. Mantovi
    Abstract: The relevance of information dynamics and collateralization is well established for modern financial markets. Still, when it comes to first principles of financial stability, questions of transparency seem to overshadow the relevance of the specificities of networks of counterparties. The paper is meant to deepen the connection between the principle of “no questions asked” on collateralized debt (Holmström, 2015) and the stabilizing properties of collateral flows (Mehrling, 2012). Conceptual and empirical implications are thoroughly discussed, and can be conjectured to represent lines of progress for the theory of money.
    Keywords: Money; Financial Stability; Information Sensitivity; Market Design; Equilibrium Selection; Political Economy
    JEL: E59 G01 G18 G28
    Date: 2019
  65. By: Kubota, So
    Abstract: This study investigates which market structure gives rise to indeterminacy of stationary equilibria in a decentralized economy with non-degenerate distributions of money holdings. I develop a price-posting model with divisible money and then, examine two alternative markets: a pairwise random matching market and a many-to-many exchange. Importantly, the former market balances the number of matched buyers and sellers by definition. As a result, indeterminacy arises under the pairwise matching while a unique equilibrium exists in the many-to-many market. This balancing assumption also leads to the indeterminacy in a Walrasian market.
    Keywords: search theory, money, indeterminacy
    JEL: D31 D51 D83 E41
    Date: 2019–03
  66. By: Giordani, Paolo (Norwegian Business School, Oslo); Kwan, Simon H. (Federal Reserve Bank of San Francisco)
    Abstract: In constructing an indicator of financial fragility, the choice of which filter (or transformation) to apply to the data series that appear to trend in sample is often considered a technicality, but in fact turns out to matter a great deal. The fundamental assumption about the likely nature of observed trends in the data, for example, the ratio of credit to GDP, has direct effects on the measured gap or vulnerability. We discuss shortcomings of the most common filters used in the literature and policy circle, and propose a fairly simple and intuitive alternative - the local level filter. To the extent that validation will always be a challenge when the number of observed financial crises (in the US) is small, we conduct a simulation exercise to make the case. We also conduct a cross country analysis to show how qualitatively different the estimated credit gaps were as of 2017, and hence their policy implications in 29 countries. Finally, we construct an indicator of financial fragility for the US economy based on the view that systemic fragility stems mainly from high level of debts (among households and corporations) associated with high valuations for collateral assets (real estate, stocks). An indicator based on the local level filter signals elevated financial fragility in the US financial system currently, whereas the HP filter and the ten-year moving average provide much more benign readings.
    Date: 2019–02–28
  67. By: Martin Christensen (European Commission - JRC); Andrea Conte (European Commission - JRC); Simone Salotti (European Commission - JRC)
    Abstract: In 2018 the European Commission has published its proposal for its future research and innovation (R&I) programme, Horizon Europe, a €100 billion programme that will succeed Horizon 2020.Horizon Europe is designed around three pillars: support researchers and projects (Open Science), pursue industrial leadership related to societal issues (Global challenges), and boost market-creating innovation (Open Innovation). The RHOMOLO dynamic CGE model has been used for policy simulations to estimate the economic impact of Horizon Europe. The analysis compares three alternative policy designs to a scenario without the policy: Continuation, in which Horizon Europe is implemented similarly to the previous Horizon 2020; Centralisation, in which the programme is reinforced by centralising at the EU level a third of the national competitive-based project funding; and Decentralisation, in which the programme is implemented at the national level. The RHOMOLO simulations suggest that Horizon Europe can contribute to higher aggregate GDP and employment, with considerable potential regional heterogeneity.
    Keywords: rhomolo, region, growth, impact assessment, modelling, R&D, R&I, Horizon Europe, Horizon 2020, investment
    JEL: C68 E61 R12
    Date: 2019–03
  68. By: Kartik B. Athreya; Felicia Ionescu; Urvi Neelakantan; Ivan Vidangos
    Abstract: A first glance at US data suggests that college -- given its mean returns and sharply subsidized cost for all enrollees -- could be of great value to most. Using an empirically-disciplined human capital model that allows for variation in college readiness, we show otherwise. While the top decile of valuations is indeed large (40 percent of consumption), nearly half of high school completers place zero value on access to college. Subsidies to college currently flow to those already best positioned to succeed and least sensitive to them. Even modestly targeted alternatives may therefore improve welfare. As proof of principle, we show that redirecting subsidies away from those who would nonetheless enroll -- towards a stock index retirement fund for those who do not even when college is subsidized -- increases ex-ante welfare by 1 percent of mean consumption, while preserving aggregate enrollment and being budget neutral.
    Keywords: Human capital ; Higher education ; Financial investment
    JEL: E21 G11 I24
    Date: 2019–03–07
  69. By: Esther Mirjam Girsberger (Economics Discipline Group, University of Technology Sydney); Matthias Krapf (University of Basel, Switzerland); Miriam Rinawi (Swiss National Bank, Switzerland)
    Abstract: We study how skills acquired in vocational education and training (VET) affect wages and employment dynamics in Switzerland. We present and estimate a search and matching model for workers with a VET degree who differ in their interpersonal, cognitive and manual skills. Assuming a match productivity which exhibits worker-job complementarity, we estimate how workers’ skills map into job offers, wages and unemployment. Firms value cognitive skills on average almost twice as much as interpersonal and manual skills. Moreover, they prize complementarity in cognitive and interpersonal skills. We estimate average returns to VET skills in hourly wages of 9%. Furthermore, VET improves labour market opportunities through higher job arrival rate and lower job destruction. Workers thus have large benefits from getting a VET degree.
    Keywords: Occupational training; labour market search; multidimensional skills.
    JEL: E23 J23 J24 J64
    Date: 2019–01–29
  70. By: Victoria S, Kenny
    Abstract: This study examined the influence of foreign direct investment and exchange rate on economic growth in Nigeria from 1971 to 2013. The study employed trend lines and percentage to analysis the influence of both FDI and exchange rate on the economic growth of the country. From the analysis, this study found that exchange rate exerts most influence on economic growth than FDI in Nigeria.
    Keywords: Foreign direct investment, exchange rate and growth
    JEL: E00
    Date: 2019–03–20
  71. By: Rosenkranz, Peter (Asian Development Bank); Lee, Junkyu (Asian Development Bank)
    Abstract: The recent rise of nonperforming loans (NPLs) in some Asian economies calls for close analysis of the determinants, the potential macrofinancial feedback effects, and the implications for financial stability in the region. Using a dynamic panel model, we assess the determinants of the evolution of bankspecific NPLs in Asia and find that macroeconomic conditions and bank-specific factors—such as rapid credit growth and excessive bank lending—contribute to the buildup of NPLs. Further, a panel vector autoregression analysis of macrofinancial implications of NPLs in emerging Asia offers significant evidence for the feedback effects of NPLs on the real economy and financial variables. Impulse response functions demonstrate that a rising NPL ratio decreases gross domestic product growth and credit supply and increases unemployment rate. Our findings underline the importance of considering policy options to swiftly and effectively manage and respond to a buildup of NPLs. The national and regional mechanisms underlying NPL resolution are important for safeguarding financial stability in an increasingly interconnected global financial system.
    Keywords: dynamic panel model; emerging Asia; financial stability; macrofinancial feedback effects; nonperforming loans; panel vector autoregression model
    JEL: C32 C33 E44 G21 O16
    Date: 2019–03–14
  72. By: Stefania Albanesi
    Abstract: This paper studies the impact of changing trends in female labor supply on productivity,TFP growth and aggregate business cycles. We find that the growth in women’s labor supplyand relative productivity added substantially to TFP growth from the early 1980s, even if itdepressed average labor productivity growth, contributing to the 1970s productivity slowdown.We also show that the lower cyclicality of female hours and their growing share can account fora large fraction of the reduced cyclicality of aggregate hours during the great moderation, as wellas the decline in the correlation between average labor productivity and hours. Finally, we showthat the discontinued growth in female labor supply starting in the 1990s played a substantialrole in the jobless recoveries following the 1990-1991, 2001 and 2007-2009 recessions. Moreover,it depressed aggregate hours, output growth and male wages during the late 1990s and mid2000s expansions. These results suggest that continued growth in female employment since theearly 1990s would have significantly improved economic performance in the United States.
    Date: 2019–01
  73. By: Sergio Pinto (University of Maryland); Carol Graham (The Brookings Institution)
    Abstract: The global economy is full of paradoxes. Despite progress in technology, reducing poverty, and increasing life expectancy, the poorest states lag behind, and there is increasing inequality and anomie in the wealthiest ones. A key driver of such unhappiness in advanced countries is the decline in the status and wages of low-skilled labor. A related feature is the increase in prime-aged males (and to a lesser extent women) simply dropping out of the labor force, particularly in the U.S. This same group is over-represented in the “deaths of despair.” There is frustration among this same cohort in Europe and it is reflected in voting trends in both contexts. Prime-aged males out of the labor force in the U.S. are the least hopeful and most stressed and angry compared to the same group in other regions, including the Middle East. Our aim is to better understand this cohort as part of a broader need to rethink our growth models and to explore policies that encourage the participation of able workers in the new global economy and can provide incentives for community involvement and other forms of engagement for those who can no longer work.
    Keywords: well-being, happiness, Inequality, gender, unemployment
    JEL: I31 D63 E24 J68 J16
    Date: 2019–03
  74. By: World Bank Group
    Keywords: Education - Education Finance Health, Nutrition and Population - Health Economics & Finance Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Taxation & Subsidies Social Protections and Labor - Skills Development and Labor Force Training
    Date: 2018–12
  75. By: Òscar Jordà; Moritz Schularick; Alan M. Taylor
    Abstract: The risk premium puzzle is worse than you think. Using a new database for the U.S. and 15 other advanced economies from 1870 to the present that includes housing as well as equity returns (to capture the full risky capital portfolio of the representative agent), standard calculations using returns to total wealth and consumption show that: housing returns in the long run are comparable to those of equities, and yet housing returns have lower volatility and lower covariance with consumption growth than equities. The same applies to a weighted total-wealth portfolio, and over a range of horizons. As a result, the implied risk aversion parameters for housing wealth and total wealth are even larger than those for equities, often by a factor of 2 or more. We find that more exotic models cannot resolve these even bigger puzzles, and we see little role for limited participation, idiosyncratic housing risk, transaction costs, or liquidity premiums.
    JEL: E44 G12 G15 N20
    Date: 2019–03
  76. By: Alexis Jeamet (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: Cet article propose de revisiter le concept d’investissement immatériel en posant la question de la nature de celui-ci. Ce travail d’inspiration marxienne analysera la transformation de la nature de l’investissement immatériel en partant des transformations du rapport capital / travail. À partir des modifications de ce rapport identifiées grâce à la notion de subsomption du travail au capital, nous chercherons à appréhender la nature de l’investissement immatériel au travers du rapport actifs / ressources immatérielles. L’identification de ces ressources potentielles poussera nos investigations hors de la sphère de la production. Les notions « d’exploitation de second degré » et de « mobilisation totale » seront alors mobilisées pour comprendre ce qui caractérise aujourd’hui l’investissement immatériel et notamment le fait que les entreprises n’investissent plus seulement dans du capital fixe, mais aussi, et surtout dans les capacités créatives et d’innovations des individus et du corps collectif, plus encore dans le développement d’une nouvelle subjectivité capitaliste. Nous développons donc l’hypothèse que pour analyser le capitalisme contemporain il est nécessaire d’enrichir le concept d’investissement grâce à une redéfinition de l’investissement immatériel et cela en partant des transformations précédemment identifiées.
    Keywords: Investissement immatériel, subsomption du travail, accumulation, connaissance.
    JEL: B51 E22 J24
    Date: 2019–03
  77. By: Trent Saunders (Reserve Bank of Australia); Peter Tulip (Reserve Bank of Australia)
    Abstract: We build an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents and prices. We find that low interest rates (partly reflecting lower world long-term rates) explain much of the rapid growth in housing prices and construction over the past few years. Another demand factor, high immigration, also helps explain the tight housing market and rapid growth in rents in the late 2000s. A large part of the effect of interest rates on dwelling investment, and hence GDP, works through housing prices.
    Keywords: housing; construction; house prices; vacancies; rents
    JEL: E17 R30 R31
    Date: 2019–03
  78. By: J. Ignacio Conde-Ruiz; Manu García
    Abstract: En la primera parte, analizamos las principales disfuncionalidades del mercado laboral antes de la crisis y como estas han podido agudizar los efectos negativos sobre el empleo. España contaba un modelo de crecimiento sesgado hacia actividades inmobiliarias, un mercado laboral disfuncional con altas tasas de temporalidad y una negociación colectiva ineficiente. En la segunda parte, analizamos las principales medidas de la reforma laboral de 2012. Por un lado, redujo los costes ligados al despido para incentivar la moderación salarial. Por otro lado, dio prevalencia a los convenios colectivos a nivel empresa para limitar el ajuste vía destrucción de empleo en las futuras crisis. Posibles medidas para resolver el problema de la dualidad en el mercado laboral quedaron fuera del ámbito de la reforma
    Date: 2019–03
  79. By: Erdal Özmen (Department of Economics, Middle East Technical University, Ankara, Turkey); Fatma Taşdemir (Department of Economics, Sinop University, Sinop, Turkey)
    Abstract: This paper investigates whether the impacts of the main push (global financial conditions, GFC) and pull (growth) factors on capital inflows are invariant to endogenously estimated threshold levels for structural domestic conditions (SDC) represented by governance/institutional quality, trade openness, de facto international financial integration and de jure financial openness in emerging market and developing economies. Our results strongly suggest that, for all the components of capital inflows, the impact of the domestic pull factor is substantially much higher for the episodes of better governance, higher trade and de jure financial openness and de facto international financial integration. The sensitivity of non-FDI and aggregate inflows to GFC is highly significant and tends to be considerably higher for countries with better SDC. FDI inflows are found to be basically determined by the domestic pull factor across all these regimes. The impact of GFC on FDI inflows appears not to considerably change across the SDC.
    Keywords: Capital Inflows, Developing Countries, Emerging Market Economies, International Financial Integration, Financial Openness, Foreign Direct Investments, Global Financial Conditions, Governance, Panel Threshold Model
    JEL: E02 F21 F30 F32 F41
    Date: 2019–03

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