nep-mac New Economics Papers
on Macroeconomics
Issue of 2019‒07‒29
ninety-six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Quantifying the Benefits of Labor Mobility in a Currency Union By Christopher L. House; Christian Proebsting; Linda L. Tesar
  2. Measuring Macroeconomic Uncertainty in Zimbabwe By Bonga, Wellington Garikai
  3. Measuring Euro Area Monetary Policy By Carlo Altavilla; Luca Brugnolini; Refet S. Gürkaynak; Roberto Motto; Giuseppe Ragusa
  4. Bounded Rationality, Monetary Policy, and Macroeconomic Stability By Francisco Ilabaca; Greta Meggiorini; Fabio Milani
  5. Evaluating Central Banks' Tool Kit: Past, Present, and Future By Eric R. Sims; Jing Cynthia Wu
  6. Statistical identification in SVARs - Monte Carlo experiments and a comparative assessment of the role of economic uncertainties for the US business cycle By Herwartz, Helmut; Lange, Alexander; Maxand, Simone
  7. Stock Price Cycles and Business Cycles By Klaus Adam; Sebastian Merkel
  8. Mr Phillips and the medium-run: temporal instability vs. frequency stability By Michele Fratianni; Marco Gallegati; Federico Giri
  10. Bank Assets, Liquidity and Credit Cycles By Lubello, Frederico; Petrella, Ivan; Santoro, Emiliano
  11. Sticky Price versus Sticky Information Price: Empirical Evidence in the New Keynesian Setting By Drissi, Ramzi; Ghassan, Hassan B.
  12. A Model for International Spillovers to Emerging Markets By Romain Houssa; Jolan Mohimont; Chris Otrok
  13. Sovereign Default and Imperfect Tax Enforcement By Francesco Pappadà; Yanos Zylberberg
  14. The Real Interest Rate Channel is Structural in Contemporary New-Keynesian Models By Joshua Brault; Hashmat Khan
  15. Inflation after the Crisis: What’s the Story? By Jeremy Kronick; Farah Omran
  16. Fear of taxes By Leal-Ordoñez Julio C.; Mandujano Javier
  17. The Four Equation New Keynesian Model By Eric R. Sims; Jing Cynthia Wu
  18. Poverty analysis in the macroeconomic perspective By Putra, Adhitya
  19. Multivariate Rational Inattention By Jianjun Miao; Jieran Wu; Eric Young
  20. Housing Choices and Their Implications for Consumption Heterogeneity By Eva De Francisco
  21. Imperfect Risk-Sharing and the Business Cycle By David W. Berger; Luigi Bocola; Alessandro Dovis
  22. The Effect of Exchange Rate Regimes on Business Cycle Synchronization: A Robust Analysis By Hou, Jia; Knaze, Jakub
  23. Online Estimation of DSGE Models By Michael Cai; Marco Del Negro; Edward Herbst; Ethan Matlin; Reca Sarfati; Frank Schorfheide
  24. Going Dutch: The management of monetary policy in the Netherlands during the interwar gold standard By Colvin, Christopher L.; Fliers, Philip
  25. The ECB’s monetary pillar after the financial crisis By T. Philipp Dybowski; Bernd Kempa
  26. Monetary Policy, Housing Rents and Inflation Dynamics By Daniel A. Dias; Joao B. Duarte
  27. Financing economic growth in Greece: lessons from the crisis By Helen Louri; Petros Migiakis
  28. Asymmetric conjugate priors for large Bayesian VARs By Joshua C. C. Chan
  29. ALIENOR, a Macrofinancial Model for Macroprudential Policy By Cyril Couaillier; Thomas Ferrière; Valerio Scalone
  30. History dependence in wages and cyclical selection: Evidence from Germany By Bauer, Anja; Lochner, Benjamin
  31. Central Bank Reforms and Institutions By Oana Peia; Romelli Davide
  32. History Remembered: Optimal Sovereign Default on Domestic and External Debt By D'Erasmo, Pablo; Mendoza, Enrique G.
  33. Longevity, Retirement and Intra-Generational Equity By Svend E. Hougaard Jensen; Thorsteinn Sigurdur Sveinsson; Gylfi Zoega
  34. Identification with External Instruments in Structural VARs under Partial Invertibility By Miranda-Agrippino, Silvia; Ricco, Giovanni
  35. Risk Pooling, Leverage, and the Business Cycle By Pietro Dindo; Andrea Modena; Loriana Pelizzon
  36. Empirical links between housing markets and economic resilience By Boris Cournède; Sahra Sakha; Volker Ziemann
  37. Not all Terms of Trade Shocks are Alike By Juvenal, Luciana; Petrella, Ivan
  38. Growth Fatigue By Mohammed, Mikidadu
  39. A New Look at Historical Monetary Policy and the Great Inflation through the Lens of a Persistence-Dependent Policy Rule By Ashley, Richard; Tsang, Kwok Ping; Verbrugge, Randal
  40. A note on recruiting intensity and hiring practices: Cross-sectional and time-series evidence By Lochner, Ben; Merkl, Christian; Stüber, Heiko; Gürtzgen, Nicole
  41. Do Stock Markets Lead or Lag Macroeconomic Variables? Evidence from Select European Countries By Silvio John, Camilleri; Nicolanne, Scicluna; Ye, Bai
  42. Phillips curves in the euro area By Moretti, Laura; Onorante, Luca; Zakipour Saber, Shayan
  43. Evolution and Characteristics of the Exchange Rate Pass Through to Prices in Mexico By Angeles Galvan Daniel; Cortés Espada Josué Fernando; Sámano Daniel
  44. Another Look at Cryptocurrency Bubbles By Marc Gronwald
  45. The Effect of the Employer Match and Defaults on Federal Workers’ Savings Behavior in the Thrift Savings Plan: Working Paper 2019-06 By Justin Falk; Nadia Karamcheva
  46. On the Heterogeneous Welfare Gains and Losses from Trade By Carroll, Daniel R.; Hur, Sewon
  47. Robots or Workers? A Macro Analysis of Automation and Labor Markets By Leduc, Sylvain; Liu, Zheng
  48. Composition of taxes and growth: Evidence from OECD panel data By Luo, Weijie
  49. Housing wealth, household debt and financial assets: are there implications for consumption? By Konstantina Manou; Panagiotis Palaios; Evangelia Papapetrou
  50. Contracts, Firm Dynamics and Aggregate Productivity By López-Martín Bernabé; Pérez-Reyna David
  51. Austerity in the Aftermath of the Great Recession By Christopher L. House; Christian Proebsting; Linda L. Tesar
  52. 125 Years of Time-Varying Effects of Fiscal Policy on Financial Markets By Hardik A. Marfatia; Rangan Gupta; Stephen M. Miller
  53. Fiscal rules and budget forecast errors of Italian Municipalities By Matteo Picchio; Raffaella Santolini
  54. The Impacts of Domestic and Foreign Direct Investments on Economic Growth: Fresh Evidence from Tunisia By Bouchoucha, Najeh; Bakari, Sayef
  55. Ferndiagnose des RWI-Konjunkturmodells By Quaas, Georg
  56. Biases in fiscal multiplier estimates By Asatryan, Zareh; Havlik, Annika; Heinemann, Friedrich; Nover, Justus
  57. Dynamic Effects of Minimum Wage on Growth and Innovation in a Schumpeterian Economy By Chu, Angus C.; Kou, Zonglai; Wang, Xilin
  58. The Spanish personal income tax: facts and parametric estimates By Esteban García-Miralles; Nezih Guner; Roberto Ramos
  59. Albania; Second Post-Program Monitoring Discussions-Press Release; and Staff Report By International Monetary Fund
  60. Global Capital Flows and the Role of Macroprudential Policy By Sudipto Karmakar; Diogo Lima
  61. Selective Hiring and Welfare Analysis in Labor Market Models By Merkl, Christian; Rens, Thijs van
  62. Do Import Tariffs Generate Stagflationary Tendencies? By Mohammed, Mikidadu
  63. Distributional impacts of low for long interest rates By Kronick, Jeremy M.; Villarreal, Francisco G.
  64. SSP Long Run Scenarios for European NUTS2 Regions By Wolfgang Britz; Roberto Roson; Martina Sartori
  65. Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis By Matthew E. Kahn; Kamiar Mohaddes; Ryan N. C. Ng; M. Hashem Pesaran; Mehdi Raissi; Jui-Chung Yang
  66. Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis By Kahn, M. E.; Mohaddes, K.; Ng, R. N. C.; Pesaran, M. H.; Raissi, M.; Yang, J-C.
  67. Every Cloud has a Silver Lining: Cleansing Effects of the Portuguese Financial Crisis By Daniel A. Dias; Carlos Robalo Marques; Carlos Robalo Marques
  68. Political Economy of Taxation, Debt Ceilings, and Growth By Uchida, Yuki; Ono, Tetsuo
  69. Quality of enforcement and investment decisions. Firm-level evidence from Spain By Daniel Dejuán
  70. Maintaining financial stability in Asia and the Pacific By Zhenqian Huang
  71. Monetary Policy and Sovereign Risk in Emerging Economies (NK-Default)* By Cristina Arellano; Yan Bai
  72. Forecasting in the euro area: The role of the US long rate By Zakipour-Saber, Shayan
  73. Fiscal sustainability vs. fiscal stability: tax and debt under entitlement spending By Floriana Cerniglia - Enzo Dia - Andrew Hughes Hallett
  74. Financing conditions and toxic emissions By Goetz, Martin
  75. Is the financial system sufficiently resilient: a research programme and policy agenda By Paul Tucker
  76. The impact of a higher leverage ratio on the South African economy By Davies Rob; Makrelov Konstantin; Harris Laurence
  77. Behavioural Macroeconomic Policy: New perspectives on time inconsistency By Michelle Baddeley
  78. The benefits and costs of adjusting bank capitalisation: evidence from euro area countries By Katarzyna Budnik; Gaia Barbic; Giulio Nicoletti; Massimiliano Affinito; Fabrizio Venditti; Saiffedine Ben Hadj; Hans Dewachter; Edouard Chretien; Clara Isabel González; Javier Mencía; Jenny Hu; Jairo Rivera-Rozo; Lauri Jantunen; Otso Manninen; Ramona Jimborean; Ricardo Martinho; Ana Regina Pereira; Elena Mousarri; Constantinos Trikoupis; Laurynas Naruševicius; Michael O’Grady; Sofia Velasco; Selcuk Ozsahin
  79. What Do Survey Data Tell Us about US Businesses? By Anmol Bhandari; Serdar Birinci; Ellen McGrattan; Kurt See
  80. National Accounts in the Anthropocene: Hueting’s environmental functions and environmentally Sustainable National Income: translation and relevance for ecosystem services By Colignatus, Thomas
  81. Synchronisation des chocs d'offre et de demande dans la Communauté Economique des Etats de l'Afrique de l'Ouest (CEDEAO) By Zouri, Stéphane
  82. Multivariate LQG Control under Rational Inattention in Continuous Time By Jianjun Miao
  83. Trade Liberalization and Unemployment in India: A State Level Analysis By Dhamija, Nidhi
  84. Inflation and the Current Account in the Euro Area By Galstyan, Vahagn
  85. The bond market development in Mongolia among Asian countries By Taguchi, Hiroyuki
  86. Technological Innovation, Diffusion, and Business Cycle Dynamics By David Anolfatto; Glenn M MacDonald
  87. Health Expenditure, Health Outcomes and Economic Growth in Nigeria By Ogunjimi, Joshua; Adebayo, Adedeji
  88. Living Life Near the ZLB By Williams, John C.
  89. Production Network and International Fiscal Spillovers By Michael Devereux; Karine Gente; Changhua Yu
  90. Existence and Uniqueness of Solutions to the Stochastic Bellman Equation with Unbounded Shock By Juan Pablo Rinc\'on-Zapatero
  91. Is inflation driven by survey-based, VAR-based or myopic expectations? By Frédérique Bec; Patrick Kanda
  92. Cryptocurrency, Delivery Lag, and Double Spending History By Kang, Kee-Youn
  93. Do low-skilled workers gain from high-tech employment growth? High-technology multipliers, employment and wages in Britain By Lee, Neil; Clarke, Stephen
  94. L'inversion des courbes des taux est-elle toujours suivie d'un ralentissement économique ? By Christophe Blot; Eric Heyer
  95. An Analysis of the Importance of Both Destruction and Creation to Economic Growth By Gregory Huffman
  96. How does Caste Affect Entrepreneurship? Birth vs Worth By Sampreet Singh Goraya

  1. By: Christopher L. House (University of Michigan & NBER); Christian Proebsting (Ecole Polytechnique Federale de Lausanne); Linda L. Tesar (University of Michigan & NBER)
    Abstract: Unemployment differentials are bigger in Europe than in the United States. Migration responds to unemployment differentials, though the response is smaller in Europe. Mundell (1961) argued that factor mobility is a precondition for a successful currency union. We use a multi-country DSGE model with cross-border migration and search frictions to quantify the benefits of increased labor mobility in Europe and compare this outcome to a case of fully flexible exchange rates. Labor mobility and flexible exchange rates both work to reduce unemployment and per capita GDP differentials across countries provided that monetary policy is sufficiently responsive to national output.
    Keywords: Labor mobility, currency union, unemployment
    JEL: E24 E42 E52 E58 F15 F16 F22 F33
    Date: 2018–12
  2. By: Bonga, Wellington Garikai
    Abstract: What matters to economic decision-making is whether the economy has become more or less predictable. People and businesses use information around them to form judgements about what might happen in the future. The rise in uncertainty might be associated with increased concern about extreme events, skewed towards worries about bad or disastrous events. The study seeks to measure macroeconomic uncertainty in Zimbabwe, using stock market indices - industrial index and mining index - for the period 2010M1 to 2019M3. Prevalence of macroeconomic uncertainty has been traced from the stock market index trend and stock market returns volatility. The squared residuals of the GARCH(1,1) regression model proxied macroeconomic uncertainty levels. The prevalence of significant macroeconomic uncertainty has been observed, with some periods highly uncertain. The study linked periods of uncertainty to some known political, social and economic events to derive meaning. The study found that some political, social and economic events have a contributing effect on the level of macroeconomic uncertainty. Good events and policies are accompanied by low levels of uncertainty while bad events and controversial policies match with high levels of uncertainty. The study recommends that to create a good economic climate, to attract investment and boost confidence in the economy, policymakers should dwell on reducing macroeconomic uncertainty. Reducing macroeconomic uncertainty require policy consistency, policy consultations, less frequent policy changes, avoiding numerous policies, avoiding policy reversals, among other measures. The observed macroeconomic uncertainty affects proper economic decision-making and is not conducive for high levels of investment for local and international investors; companies may struggle to hire labor, and employees and corporates may delay spending and saving pattern distorted.
    Keywords: Economic Development; Employment; Expectations; Expected Volatility; GARCH (1,1); Investment; Investors; Macroeconomic Uncertainty; Savings; Stock Market Indices; Zimbabwe
    JEL: B22 B26 C58 D01 D02 D03 D14 D21 D22 D81 D84 E02 E21 E22 E24 E44 E58 E61 F16 F33 F42 G28 G38 H30 L51 N17 N27 O11 O21 O43 O44
    Date: 2019–06–29
  3. By: Carlo Altavilla; Luca Brugnolini; Refet S. Gürkaynak; Roberto Motto; Giuseppe Ragusa
    Abstract: We study the information flow from the ECB on policy dates since its inception, using tick data. We show that three factors capture about all of the variation in the yield curve but that these are different factors with different variance shares in the window that contains the policy decision announcement and the window that contains the press conference. We also show that the QE-related policy factor has been dominant in the recent period and that Forward Guidance and QE effects have been very persistent on the longer-end of the yield curve. We further show that broad and banking stock indices' responses to monetary policy surprises depended on the perceived nature of the surprises. We find no evidence of asymmetric responses of financial markets to positive and negative surprises, in contrast to the literature on asymmetric real effects of monetary policy. Lastly, we show how to implement our methodology for any policy-related news release, such as policymaker speeches. To carry out the analysis, we construct the Euro Area Monetary Policy Event-Study Database (EA-MPD). This database, which contains intraday asset price changes around the policy decision announcement as well as around the press conference, is a contribution on its own right and we expect it to be the standard in monetary policy research for the euro area.
    Keywords: ECB policy surprise, event-study, intraday, persistence, asymmetry
    JEL: E43 E44 E52 E58 G12 G14
    Date: 2019
  4. By: Francisco Ilabaca; Greta Meggiorini; Fabio Milani
    Abstract: This paper estimates a Behavioral New Keynesian model to revisit the evidence that passive US monetary policy in the pre-1979 sample led to indeterminate equilibria and sunspot-driven fluctuations, while active policy after 1982, by satisfying the Taylor principle, was instrumental in restoring macroeconomic stability. The model assumes “cognitive discounting”, i.e., consumers and firms pay less attention to variables further into the future. We estimate the model allowing for both determinacy and indeterminacy. The empirical results show that determinacy is preferred both before and after 1979. Even if monetary policy is found to react only mildly to inflation pre-Volcker, the substantial degrees of bounded rationality that we estimate prevent the economy from falling into indeterminacy.
    Keywords: Behavioral New Keynesian model, cognitive discounting, estimation under determinacy and indeterminacy, Taylor principle, active vs passive monetary policy
    JEL: E31 E32 E52 E58
    Date: 2019
  5. By: Eric R. Sims; Jing Cynthia Wu
    Abstract: We develop a structural DSGE model to systematically study the principal tools of unconventional monetary policy – quantitative easing (QE), forward guidance, and negative interest rate policy (NIRP) – as well as the interactions between them. To generate the same output response, the requisite NIRP and forward guidance interventions are twice as large as a conventional policy shock, which seems implausible in practice. In contrast, QE via an endogenous feedback rule can alleviate the constraints on conventional policy posed by the zero lower bound. Quantitatively, QE1-QE3 can account for two thirds of the observed decline in the “shadow” Federal Funds rate. In spite of its usefulness, QE does not come without cost. A large balance sheet has consequences for different normalization plans, the efficacy of NIRP, and the effective lower bound on the policy rate.
    JEL: E10 E32 E5 E52 E58
    Date: 2019–07
  6. By: Herwartz, Helmut; Lange, Alexander; Maxand, Simone
    Abstract: Structural vector autoregressive analysis aims to trace the contemporaneous linkages among (macroeconomic) variables back to underlying orthogonal structural shocks. In homoskedastic Gaussian models the identification of these linkages deserves external and typically notdata-based information. Statistical data characteristics (e.g, heteroskedasticity or non-Gaussian independent components) allow for unique identification. Studying distinct covariance changes and distributional frameworks, we compare alternative data-driven identification procedures and identification by means of sign restrictions. The application of sign restrictions results in estimation biases as a reflection of censored sampling from a space of covariance decompositions. Statistical identification schemes are robust under distinct data structures to some extent. The detection of independent components appears most flexible unless the underlying shocks are (close to) Gaussianity. For analyzing linkages among the US business cycle and distinct sources of uncertainty we benefit from simulation-based evidence to point at two most suitable identification schemes. We detect a unidirectional effect of financial uncertainty on real economic activity and mutual causality between macroeconomic uncertainty and business cycles.
    Keywords: independent components,heteroskedasticity,model selection,non-Gaussianity,structural shocks
    JEL: C32 E00 E32 E44 G01
    Date: 2019
  7. By: Klaus Adam; Sebastian Merkel
    Abstract: We present a simple model that quantitatively replicates the behavior of stock prices and business cycles in the United States. The business cycle model is standard, except that it features extrapolative belief formation in the stock market, in line with the available survey evidence. Extrapolation amplifies the price effects of technology shocks and - in response to a series of positive technology surprises - gives rise to a large and persistent boom and bust cycle in stock prices. Boom-bust dynamics are more likely when the risk-free interest rate is low because low rates strengthen belief-based amplification. Stock price cycles transmit into the real economy by generating inefficient price signals for the desirability of new investment. The model thus features a 'financial accelerator', despite the absence of financial frictions. The financial accelerator causes the economy to experience persistent periods of over- and under-accumulation of capital.
    JEL: E32 E44 G12
    Date: 2019–07
  8. By: Michele Fratianni (Kelley School of Business, Bloomington, Indiana, USA and Universita' Politecnica delle Marche, Ancona, Italy); Marco Gallegati (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche, Ancona, Italy); Federico Giri (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche, Ancona, Italy)
    Abstract: The paper goes back to the original insight by Phillips and investigates the negative relationship between money wage inflation and the unemployment rate occurring at frequency bands that stretch beyond those of the business cycle. We use UK annual data for the period 1861-2015, and post- WWII quarterly data from 1960 to 2016. The two critical findings are that the wage Phillips Curve is predominantly a medium-run phenomenon, comprised in the 8-to16-year frequency band, and that the curve disappears beyond this range. Similar conclusions are reached using the post-WWII quarterly sample: at the aggregate level and at high frequencies the PC relationship is unstable over time, whereas in the frequency range between 32 to 64 quarters (our medium run timescale), this time dependency disappears.
    Keywords: Phillips Curve, frequency bands, wavelet, medium run
    JEL: E00 E30 E31 E32
    Date: 2019–07
  9. By: John Foster (School of Economics, The University of Queensland)
    Abstract: In the United States, the ratio of consumption to GDP has risen steadily over the past half century. In trying to understand why this ratio has increased so much, it is argued that standard models of the consumption function, built up from the neoclassical theory of constrained optimization, cannot offer a satisfactory answer. An alternative perspective is offered whereby aggregate consumption expenditure is seen as primarily the outcome of the population adopting widely upheld rules (‘meso-rules’) in a complex economic system. Aggregate consumption is viewed as the outcome of two contrasting historical processes: one mainly involving pre-committed, rule-bound choices and the other involving open-ended choices, made knowingly in the face of uncertainty, to adopt new meso-rules concerning the consumption of novel kinds of goods and services. The former process provides the degree of order that must be present in any complex system and the latter facilitates evolutionary change to occur. Using over half a century of data, the US consumption function is modelled successfully on the presumption that the economy is a complex system. The evidence supports the hypothesis that the ratio of consumption to GDP has risen because of the diffusion of a ‘culture of consumerism’ in the post-war era and that the limit of this process is now being approached, with important macroeconomic and social implications.
    JEL: E00 E01 E10 E2 E21 E60
    Date: 2019–07–25
  10. By: Lubello, Frederico (Bank Centrale du Luxembourg); Petrella, Ivan (University of Warwick); Santoro, Emiliano (University of Copenhagen)
    Abstract: We study how bank collateral assets and their pledgeability affect the amplitude of credit cycles. To this end, we develop a tractable model where bankers intermediate funds between savers and borrowers. If bankers default, savers acquire the right to liquidate bankers’assets. However, due to the vertically integrated structure of our credit economy, savers anticipate that liquidating financial assets (i.e., loans) is conditional on borrowers being solvent on their debt obligations. This friction limits the collateralization of bankers’financial assets beyond that of real assets (i.e., capital). In this context, increasing the pledgeability of financial assets eases more credit and reduces the spread between the loan and the deposit rate, thus attenuating capital misallocation as it typically emerges in credit economies à la Kiyotaki and Moore (1997). We uncover a close connection between the collateralization of bank loans, macroeconomic amplification and the degree of procyclicality of bank leverage.
    Keywords: banking ; bank collateral; liquidity ; capital misallocation; macroprudential policy;
    JEL: E32 E44 G21 G28
    Date: 2019
  11. By: Drissi, Ramzi; Ghassan, Hassan B.
    Abstract: In order to model the inflation dynamics, we investigated various combinations of nominal rigidities. For this purpose, we analyze two adjustment-of-prices hypotheses as in the new Keynesian literature, namely the price stickiness and the sticky information, within a Dynamic Stochastic General Equilibrium (DSGE) model. For each model, we compare the responses of inflation and output to shocks. We found that sticky information modeling correctly reproduces some important stylized facts after monetary shocks, but with hump-shaped responses. The sticky price model, considering that some fixed prices lead to that Phillips curve, does not correctly reproduce the dynamic inflation response to monetary shocks. We show that single indexation does not add persistence to the two specifications, and the choice of rigidity structure appears to be more important than the presence or absence of lagged values of inflation in the dynamics.
    Keywords: DSGE model; Phillips curve; Sticky information; Sticky prices; Inflation
    JEL: C11 E31 E32
    Date: 2018–03
  12. By: Romain Houssa; Jolan Mohimont; Chris Otrok
    Abstract: This paper develops a small open economy (SOE) dynamic stochastic general equilibrium (DSGE) model that helps to explain business cycle synchronization between an emerging market and advanced economies. The model captures the specificities of both economies (e.g. primary commodity, manufacturing, intermediate inputs, and credit) that are most relevant for understanding the importance as well as the transmission mechanisms of a wide range of domestic and foreign (supply, demand, monetary policy, credit, primary commodity) shocks facing an emerging economy. We estimate the model with Bayesian methods using quarterly data from South Africa, the US and G7 countries. In contrast to the predictions of standard SOE models, we are able to replicate two stylized facts. First, our model predicts a high degree of business cycle synchronization between South Africa and advanced economies. Second, the model is able to account for the influence of foreign shocks in South Africa. We are also able to demonstrate the specific roles these shocks played during key historical episodes such as the global financial crisis in 2008 and the commodity price slump in 2015. The ability of our framework to capture endogenous responses of commodity and financial sectors to structural shocks is crucial to identify the importance of these shocks in South Africa.
    Keywords: macroeconomic policies, emerging markets, SOE, DSGE, Bayesian, foreign shocks, monetary policy
    JEL: E30 E43 E52 C51 C33
    Date: 2019
  13. By: Francesco Pappadà; Yanos Zylberberg
    Abstract: We show that, in many countries, tax compliance is volatile and markedly responds to fiscal policy. To explore the consequence of this novel stylized fact, we build a model of sovereign debt with limited commitment and imperfect tax enforcement. Fiscal policy persistently affects the size of the informal economy, which impact future fiscal revenues and thus default risk. This mechanism captures one key empirical regularity of economies with imperfect tax enforcement: the low sensitivity of debt price to fiscal consolidations. The interaction of imperfect tax enforcement and limited commitment strongly constrains the dynamics of optimal fiscal policy. During default crises, high tax distortions force the government towards extreme fiscal policies, notably including costly austerity spells.
    Keywords: sovereign default, imperfect tax enforcement, informal economy, fiscal policy
    JEL: E02 E32 E62 F41 H20
    Date: 2019
  14. By: Joshua Brault (Department of Economics, Carleton University); Hashmat Khan (Department of Economics, Carleton University)
    Abstract: The monetary transmission mechanism in a New-Keynesian model with contemporary features is put to scrutiny. In contrast to Rupert and Sustek (2019), we find that the real interest rate channel is structural when the model contains empirically realistic frictions on the flow of investment. A monetary contraction (expansion) is always followed by an increase (decrease) in the real interest rate. The monetary transmission mechanism indeed operates through the real interest rate channel in this class of models.
    Keywords: New-Keynesian models, monetary transmission mechanism, real interest rate
    JEL: E24 E32 E43
    Date: 2019–07–06
  15. By: Jeremy Kronick (C.D. Howe Institute); Farah Omran (C.D. Howe Institute)
    Keywords: Monetary Policy; Central Banking;Inflation and Inflation Control
    JEL: E31 E52 E58
    Date: 2019–07
  16. By: Leal-Ordoñez Julio C.; Mandujano Javier
    Abstract: This paper documents that Mexican households anticipated the fiscal reform of 2014 several months before enacted. This change in expectations is documented using a novel source of information available in Google Trends, among other sources. It then analyzes the economic consequences of this change using a general equilibrium growth model with taxes and uncertainty. The model also considers the presence of generic distortions in the form of wedges in the first order conditions to isolate the effect of taxation. The paper provides an explanation for the unusual trajectories of investment and GDP of the Mexican economy around 2013.
    Keywords: business cycles;expectations;taxes;investment
    JEL: E30 E22 E62
    Date: 2019–06
  17. By: Eric R. Sims; Jing Cynthia Wu
    Abstract: This paper develops a New Keynesian model featuring financial intermediation, short and long term bonds, credit shocks, and scope for unconventional monetary policy. The log-linearized model reduces to four key equations – a Phillips curve, an IS equation, and policy rules for the short term nominal interest rate and the central bank's long bond portfolio (QE). The four equation model collapses to the standard three equation New Keynesian model under a simple parameter restriction. Credit shocks and QE appear in both the IS and Phillips curves. Optimal monetary policy entails adjusting the short term interest rate to offset natural rate shocks, but using QE to offset credit market disruptions. The ability of the central bank to engage in QE significantly mitigates the costs of a binding zero lower bound.
    JEL: E1 E50 E52
    Date: 2019–07
  18. By: Putra, Adhitya
    Abstract: Abstract Poverty is one of the problems in a complex and multi-dimensional economy. Therefore, efforts to alleviate poverty must be carried out comprehensively covering various aspects of people's lives. In the discussion of this journal by focusing the discussion on the relationship between inflation and poverty reduction. Price stabilization and inflation are still considered more general problems and are rarely associated with poverty reduction issues. One of the factors of increasing poverty that occurs is due to higher inflation rates and price volatility. For this reason, a comprehensive and effective macroeconomic policy is needed to reduce poverty. At this writing, the literature study is taken from library data and secondary data as support.
    Keywords: Keywords: Poverty, Macroeconomics, Inflation, prices
    JEL: A10 D70 E31 E60
    Date: 2019–07–02
  19. By: Jianjun Miao (Boston University); Jieran Wu (Zhejiang University); Eric Young (University of Virginia)
    Abstract: We study optimal control problems in the multivariate linear-quadratic-Gaussian framework under rational inattention and show that the multivariate attention allocation problem can be reduced to a dynamic tracking problem in information theory. We propose a general solution method to solve this problem by using rate distortion functions and semidefinite programming and derive the optimal form and dimension of signals without strong prior restrictions. We provide generalized reverse water-filling solutions for some special cases. Applying our method to solve three multivariate economic models, we obtain some results qualitatively different from the literature.
    Keywords: Rational Rational Inattention, Endogenous Information Choice, Rate Distortion Function, Dynamic Tracking Problem, Optimal Control
    JEL: C61 D83 E21 E22 E31
    Date: 2018–12
  20. By: Eva De Francisco
    Keywords: The Great Recession, housing choices, consumption, heterogeneity, wealthy hand-to-mouth consumers
    JEL: E13 E21 E62 C61 R21
    Date: 2019–05–29
  21. By: David W. Berger; Luigi Bocola; Alessandro Dovis
    Abstract: This paper studies the aggregate implications of imperfect risk-sharing implied by a class of New Keynesian models with idiosyncratic income risk and incomplete financial markets. The models in this class can be equivalently represented as an economy with a representative household that has state-dependent preferences. These preference “shocks” are functions of households’ consumption shares and relative wages in the original economy with heterogeneous agents, and they summarize all the information from the cross-section that is relevant for aggregate fluctuations. Our approach is to use this representation as a measurement device: we use the Consumption Expenditure Survey to measure the preference shocks, and feed them into the equivalent representative-agent economy to perform counterfactuals. We find that deviations from perfect risk-sharing were an important determinant of the behavior of aggregate demand during the US Great Recession.
    JEL: E32 E44
    Date: 2019–07
  22. By: Hou, Jia; Knaze, Jakub
    Abstract: In contrast to the widely recognized importance of exchange rate regimes, evidence on their effect on business cycle synchronization focuses almost exclusively on the role of currency unions, thus implicitly ignoring potential effect of other exchange rate regimes. In this paper we use a new dataset on bilateral de-facto exchange rate regimes for the period 1973-2016 to study the effect of seven types of regimes on business cycle synchronization. Using the Extreme Bound Analysis (EBA) methodology, we find that the exchange rate regime is a robust determinant of business cycle synchronization. Compared to country pairs with freely floating arrangements, we find that: (i) the correlation coefficient measuring business cycle synchronization is higher by around 0.12 points in countries with no separate legal tenders; (ii) other hard pegs such as currency board arrangements and de-facto pegs have also significantly more synchronised business cycles, but the size of the correlation coefficient is halved compared to countries with no separate legal tenders; (iii) the effect is not always linearly decreasing with the increasing exchange rate regime flexibility, since crawling pegs and crawling bands turn out to be insignificant, whereas the effect of moving bands as a more flexible type of exchange rate regimes is positive and significant; (iv) the effect is stronger for countries with high degree of financial openness and good institutional quality.
    Keywords: Exchange rate regimes; Currency unions; Business cycles synchronization
    JEL: E32 E52 F33 F42
    Date: 2019–07–17
  23. By: Michael Cai (Northwestern University); Marco Del Negro (FRB New York); Edward Herbst (Federal Reserve Board); Ethan Matlin (FRB New York); Reca Sarfati (FRB New York); Frank Schorfheide (Department of Economics, University of Pennsylvania)
    Abstract: This paper illustrates the usefulness of sequential Monte Carlo (SMC) methods in approximating DSGE model posterior distributions. We show how the tempering schedule can be chosen adaptively, explore the benefits of an SMC variant we call generalized tempering for \online" estimation, and provide examples of multimodal posteriors that are well captured by SMC methods. We then use the online estimation of the DSGE model to compute pseudo-out-of-sample density forecasts of DSGE models with and without financial frictions and document the benefits of conditioning DSGE model forecasts on nowcasts of macroeconomic variables and interest rate expectations. We also study whether the predictive ability of DSGE models changes when we use priors that are substantially looser than those that are commonly adopted in the literature.
    Keywords: Adaptive algorithms, Bayesian inference, density forecasts, online estimation, sequential Monte Carlo methods
    JEL: C11 C32 C53 E32 E37 E52
    Date: 2019–07–22
  24. By: Colvin, Christopher L.; Fliers, Philip
    Abstract: Under what conditions can policymakers make demonstrably poor policy choices? By providing a new account of monetary policy management in the Netherlands during the interwar gold standard, we show how policymakers can fail to escape their long-held beliefs and refuse to consider available policy alternatives. Using high-frequency macroeconomic data, we are the first to document that the Netherlands' policymakers were able to conduct an independent monetary policy in the 1930s. We then show how this independence was squandered on fixing the guilder's exchange rate, a policy which led only to deflation, trade deficits, corporate bankruptcies and mass unemployment. We explain the government's policy stance by documenting the beliefs of politicians and central bankers, and then by investigating how business leaders and public intellectuals attempted to influence these beliefs.
    Keywords: monetary policy,exchange rate policy,gold standard,interwar period,the Netherlands
    JEL: N14 E42 E52 E58
    Date: 2019
  25. By: T. Philipp Dybowski; Bernd Kempa
    Abstract: We apply a structural topic model (STM) to analyze European Central Bank (ECB) communication regarding the monetary pillar of its monetary policy strategy. We do so by quantifying the transcripts of the ECB Presidents introductory statements at the press conferences that accompany the regular meetings of the ECB Governing Council. Our evidence shows that, within its monetary pillar, the ECB has gradually shifted its focus away from a genuine monetary analysis towards monitoring the stability of the European financial system. We go on to augment a standard Taylor rule by quantitative indicators obtained from the STM to assess whether the monetary pillar in general, and the shift in focus in particular, has had a measurable impact on the ECBs monetary policy stance. We find weak evidence that the monetary analysis has had a bearing on the ECBs interest rate setting in the early years of the ECB's existence, but this influence completely disappears in the latter years of the sample. We also find that after the financial crisis, the monetary policy response to its financial sentiment communication has been accommodative rather than "leaning against the wind".
    Keywords: ECB, monetary policy, central bank communication, topic models
    JEL: C11 E52 E58
    Date: 2019–07
  26. By: Daniel A. Dias; Joao B. Duarte
    Keywords: Monetary policy ; Housing rents ; Inflation dynamics ; “Price puzzle” ; Housing tenure
    JEL: E31 E43 R21
    Date: 2019–05–23
  27. By: Helen Louri (Athens University of Economics and Business); Petros Migiakis (Bank of Greece)
    Abstract: We examine the existence of a feedback loop between the resilience of the financial sector and Greek economic activity. A sequence of structural VARs is employed using data for bank credit, liquidity, capital, asset quality and private demand in 2001-2018 in two data sets. One in monthly frequency with which we examine the determinants of credit provision by Greek banks, and another in quarterly frequency with which we examine the finance-growth nexus for the Greek economy. We find that (a) the deterioration in the quality of Greek banks’ balance sheets affected negatively the provision of credit to the economy, (b) central bank liquidity and recapitalizations of Greek banks provided only a partial remedy and (c) the decline in credit significantly weakened economic activity. Also, we find that there is a role for market financing of the economy but this cannot substitute for the predominantly bank-based financing. Therefore, as the Greek economy starts bouncing back Greek banks have an important role to play, first by solving the high NPLs problem and providing the necessary credit and second by improving the efficiency of capital allocation towards a sustainable growth model.
    Keywords: Greek crisis; credit provision; finance-growth nexus; financial stability; NPLs.
    JEL: E22 E44 G01 G21
    Date: 2019–06
  28. By: Joshua C. C. Chan
    Abstract: Large Bayesian VARs are now widely used in empirical macroeconomics. One popular shrinkage prior in this setting is the natural conjugate prior as it facilitates posterior simulation and leads to a range of useful analytical results. This is, however, at the expense of modelling exibility, as it rules out cross-variable shrinkage – i.e. shrinking coefficients on lags of other variables more aggressively than those on own lags. We develop a prior that has the best of both worlds: it can accommodate cross-variable shrinkage, while maintaining many useful analytical results, such as a closed-form expression of the marginal likelihood. This new prior also leads to fast posterior simulation - for a BVAR with 100 variables and 4 lags, obtaining 10,000 posterior draws takes less than half a minute on a standard desktop. In a forecasting exercise, we show that a data-driven asymmetric prior outperforms two useful benchmarks: a data-driven symmetric prior and a subjective asymmetric prior.
    Keywords: shrinkage prior, forecasting, marginal likelihood, optimal hyperparameters, structural VAR
    JEL: C11 C52 E37 E47
    Date: 2019–07
  29. By: Cyril Couaillier; Thomas Ferrière; Valerio Scalone
    Abstract: ALIENOR is an econometric model built to provide macroeconomic scenarios and conduct macroprudential analysis, in particular for larger stress-test exercises. In the model design, we pay particular attention to the link between financial variables and the real economy, to estimate the potential impact of the materialization of financial systemic risk, and to perform policy exercises. In addition, we quantify the impact of the macroeconomy on financial variables, with a focus on households’ credit, Non-Financial Corporates’ credit, and real estate prices, given the key role played by those variables during the crisis. Finally, we analyse the consequences on the economy of an exogenous increase in the long-term interest rates and a decrease in real estate prices.
    Keywords: macroprudential policy, macrofinancial stress-test.
    JEL: E17 E47
    Date: 2019
  30. By: Bauer, Anja; Lochner, Benjamin
    Abstract: Using administrative employer-employee data from Germany, we investigate the relationship between wages and past and present labor market conditions. Furthermore, we revisit recent findings of greater wage cyclicality of new hires. Overall, we find strong evidence for history dependent wages, manifested in both hiring and retention premiums - which is consistent with a variety of contract models. Taking into account composition effects as well as cyclical variation in unobserved match quality, we find that wages of new hires from unemployment are no more cyclical, but those of job changers are more cyclical than those of existing workers. We argue that much of the excess wage cyclicality of new hires discussed by the literature can be explained by cyclical job ladder movements in match quality of new hires from employment. In a novel empirical approach, where we further take into account occupational selection, we show that if job ladder movements accompany a simultaneous change of employers and occupations, the resulting wages are particularly cyclical sensitive.
    Keywords: Business Cycle,Wage,Wage Rigidity,Implicit Contracts,Match Quality
    JEL: E24 E32 J31 J41
    Date: 2019
  31. By: Oana Peia; Romelli Davide
    Abstract: “Monetary policy independence remains of the highest importance, and it is important that we preserve monetary policy independence to help foster desirable macroeconomic outcomes and financial stability.” Stanley Fisher (November 2015) “The only problem our economy has is the Fed. They don’t have a feel for the market.” Donald Trump (December 2018) Prior to the global financial crisis, there had been much agreement about the optimal institutional design of monetary policy authorities. Economists and policy observers alike would have acknowledged that monetary policy is best left in the hands of independent central banks with a clear mandate of price stability. These inflation-targeting central banks were seen as the solution to the problem of high inflation and were credited with the period of great moderation that saw low levels of inflation and moderate output fluctuations (Alesina and Stella 2010).
    Keywords: Monetary policy; Inflation; 2008 global financial crisis; Central Bank independence; Central Bank legislative reforms; Institutional design
    Date: 2019–05
  32. By: D'Erasmo, Pablo (Federal Reserve Bank of Philadelphia); Mendoza, Enrique G. (University of Pennsylvania)
    Abstract: Infrequent but turbulent overt sovereign defaults on domestic creditors are a “for- gotten history” in macroeconomics. We propose a heterogeneous-agents model in which the government chooses optimal debt and default on domestic and foreign creditors by balancing distributional incentives versus the social value of debt for self-insurance, liquidity, and risk-sharing. A rich feedback mechanism links debt issuance, the distribution of debt holdings, the default decision, and risk premia. Calibrated to Eurozone data, the model is consistent with key long-run and debt-crisis statistics. Defaults are rare (1.2 percent frequency) and preceded by surging debt and spreads. Debt sells at the risk-free price most of the time, but the government’s lack of commitment reduces sustainable debt sharply.
    Keywords: public debt; sovereign default; debt crisis; European crisis
    JEL: E44 E6 F34 H63
    Date: 2019–07–22
  33. By: Svend E. Hougaard Jensen; Thorsteinn Sigurdur Sveinsson; Gylfi Zoega
    Abstract: We find that segments of society who have shorter life expectancy can expect a lower retirement income and lifetime utility due to the longevity of other groups participating in the same pension scheme. Linking retirement age to average life expectancy magnifies the negative effect on the lifetime utility of those who suffer low longevity. Furthermore, when the income of those with greater longevity increases, those with shorter life expectancy become even worse off. Conversely, when the income of those with shorter life expectancy increases, they end up paying more into the pension scheme, which benefits those who live longer. The relative sizes of the low and high longevity groups in the population determine the magnitude of these effects. We calibrate the model based on data on differences in life expectancy of men and women and find that males suffer from a 10 percent drop in the amount of pension benefits from being forced to pay into the same scheme as females.
    Keywords: longevity, pension age, retirement, inequality
    JEL: E21 E24
    Date: 2019
  34. By: Miranda-Agrippino, Silvia (Northwestern University Bank of England and CFM (LSE)); Ricco, Giovanni (University of Warwick OFCE-SciencesPo and CEPR)
    Abstract: This paper discusses the conditions for identification in SVAR-IVs when only the shock of interest or a subset of the structural shocks can be recovered as a linear combination of the VAR residuals. This condition of partial invertibility is very general, often of empirical relevance, and less stringent than the standard full invertibility that is routinely assumed in the SVAR literature. We show that, underpartial invertibility, the dynamic responsescan be correctly recoveredusing an external instrument even when this correlates with leads and lags of other invertible shocks. We call this a limited lead-lag exogeneity condition. We evaluate our results in a simulated environment, and provide an empirical application to the case of monetary policy shocks.
    Keywords: Identification with External Instruments ; Structural VAR ; Invertibility ; Monetary Policy Shocks
    JEL: C36 C32 E30 E52
    Date: 2019
  35. By: Pietro Dindo (Department of Economics, University Of Venice Cà Foscari); Andrea Modena (Department of Economics, University Of Venice Cà Foscari); Loriana Pelizzon (Department of Economics, University Of Venice Cà Foscari; SAFE-Goethe University Frankfurt)
    Abstract: This paper investigates the interdependence between the risk-pooling activity of the financial sector and: output, consumption, risk-free rate, and Sharpe ratio in a dynamic general equilibrium model of a productive economy. Due to their exposure to idiosyncratic shocks and market segmentation, heterogeneous households/entrepreneurs (h/entrepreneurs) are willing to mitigate their risk through a financial sector. The financial sector pools risky claims issued by different firms within its assets, faces an associated intermediation cost and, via leverage, provides a risk-free asset to h/entrepreneurs. Exogenous systematic shocks change the relative size of the financial sector, and thus the equilibrium amount of pooled risk, making financial leverage state-dependent and counter-cyclical. We study how this mechanism endogenously channels amplification of consumption and mitigation of output fluctuations. In equilibrium, financial sector leverage also determines counter-cyclical Sharpe ratios and pro-cyclical risk-free interest rates. Last, we investigate the relationship between the size of the financial sector, leverage, and welfare. We show that limiting financial sector leverage determines a sub-optimal pooling of idiosyncratic risk but fosters the growth rate of the h/entrepreneurs' consumption. On the other side, when the financial sector is too large, it destroys too many resources after intermediation costs. Therefore, the h/entrepreneurs benefit the most when the financial sector is neither too small nor too big.
    Keywords: Amplification, Business Cycle, Financial Frictions, Leverage, Risk Pooling
    JEL: E13 E32 E69 G12
    Date: 2019
  36. By: Boris Cournède; Sahra Sakha; Volker Ziemann
    Abstract: Housing markets, which are large and subject to sharp swings, shape to a great extent countries’ exposure to economic crises and their capacity to recover from them. This paper analyses the transmission of housing-related shocks to the real economy: it investigates the role that policy plays in (a) mitigating or amplifying shocks and (b) facilitating or hampering a recovery. It considers macroprudential measures, rental regulation, taxation and land use restrictions. The aim is to investigate, which housing policy-related reforms can foster greater economic resilience. Among other results, it finds that a tighter macroprudential stance is generally linked to a lower likelihood of economic crisis and that higher effective rates of housing taxation are associated with smoother housing cycles.
    Keywords: housing, land use policy, macroprudential policy, rent regulation, resilience, taxation
    JEL: E37 E5 R31
    Date: 2019–07–26
  37. By: Juvenal, Luciana (International Monetary Fund); Petrella, Ivan (University of Warwick)
    Abstract: Fluctuations in terms of trade are one of the major sources of concern for policy makers in developing countries. Theoretical models predict that terms of trade shocks account for a large share of business cycle fluctuations. However, recent empirical studies find a weak link between terms of trade and output fluctuations, uncovering the “terms of trade disconnect.” This disconnect happens because not all terms of trade shocks are alike. When analyzing terms of trade shocks, it is implicitly assumed that the economy responds symmetrically to changes in export and import prices. Our paper shows that this is not the case. To shed light on how terms of trade affect the economy, we estimate export price, import price and global demand shocks, which proxy for world disturbances, using a VAR model with sign-restrictions complemented with a narrative approach for a sample of 36 countries. We construct our own measure of export and import prices using commodity and manufacturing prices matched with trade shares. Our findings indicate that, taken together, export and import price shocks account for around 50 percent of output fluctuations. We also find that global demand shocks explain the high correlation between export and import prices since they generate a simultaneous increase in both, yielding a small effect on the terms of trade but large effects on the economy.
    Keywords: terms of trade ; commodity prices ; business cycles ; world shocks
    JEL: C53 E32
    Date: 2019
  38. By: Mohammed, Mikidadu
    Abstract: This paper uncovers a new economic growth phenomenon whereby an economy becomes increasingly unresponsive to economic growth policies. This new phenomenon is referred to as growth fatigue. In this short paper, I document the growth fatigue phenomenon for the economy of Japan. My observations on Japan suggest that growth fatigue typically occurs in matured economies and that its causes are largely unknown.
    Keywords: growth,fatigue,Japan,fiscal,monetary,unconventional
    JEL: B20 E65 E62 E64 O40
    Date: 2019
  39. By: Ashley, Richard (Virginia Tech); Tsang, Kwok Ping (Virginia Tech); Verbrugge, Randal (Federal Reserve Bank of Cleveland)
    Abstract: The origins of the Great Inflation, a central 20th century U.S. macroeconomic event, remain contested. Prominent explanations are poor forecasts or deficient activity gap estimates. An alternative view: the FOMC was unwilling to fight inflation, perhaps due to political pressures. Our findings, based on a novel approach, support the latter view. New econometric tools allow us to credibly identify the particular activity gap, if any, in use. Persistence-dependent unemployment (gap) responses in the 1970s were essentially the same pre- and post-Volcker. Conversely, FOMC behavior vis-à-vis inflation—also persistence-dependent—changed markedly starting with Volcker, consistent with (though not proving) the political pressures view.
    Keywords: Taylor Rule; Great Inflation; Intermediate Target; Natural Rate; Persistence Dependence;
    JEL: C22 C32 E52
    Date: 2019–07–18
  40. By: Lochner, Ben; Merkl, Christian; Stüber, Heiko; Gürtzgen, Nicole
    Abstract: Using the IAB Job Vacancy Survey for Germany, we look into the black box of recruiting intensity and hiring practices. Our paper shows three important channels for hiring, namely vacancy posting, the selectivity of hiring (labor selection), and the number of search channels. While vacancy posting and labor selection show a U-shape over the employment growth distribution, the number of search channels tends to be upward sloping in terms of employment growth. We argue that shrinking plants post more vacancies and are less selective than plants with a constant workforce because they react to churn triggered by employment-to-employment transitions to other plants. Furthermore, in line with economic theory, vacancy posting, labor selection, and the number of search channels are procyclical over the business cycle. Our paper is the first to link the the Job Vacancy Survey and the Administrative Wage and Labor Market Flow Panel to document the interaction between hiring practices and employment-to-employment transitions to other plants.
    Keywords: recruiting intensity,vacancies,labor selection,administrative data,survey data
    JEL: E24 J63
    Date: 2019
  41. By: Silvio John, Camilleri; Nicolanne, Scicluna; Ye, Bai
    Abstract: This study examines the connections between stock prices and key macroeconomic indicators: inflation, industrial production, interest rates, money supply and select interactions between the latter group of variables. Such links are evaluated through vector-autoregressions (VARs) on monthly data spanning over the period 1999-2017, for Belgium, France, Germany, Netherlands and Portugal. We check whether such relations are confirmed across different sub-periods and also adopt a non-parametric approach by using a Pesaran-Timmermann test. We find different contemporaneous and lead-lag relationships between stock prices and the selected variables, although there are variations across countries. VAR models indicate that stock prices significantly lead inflation across all countries during the sample period and in most cases this relationship was positive. In addition, stock prices significantly lead industrial production in four of the sampled countries and these relationships were positive as well. Contrary to long-established finance theories, we did not find numerous significant links between interest rates and stock indices; however the interaction between interest rates and money supply was a leading indicator of stock prices in France, Germany and Portugal.
    Keywords: Stock prices, Macroeconomic indicators, Pesaran-Timmermann test, Structural breakpoint tests, Vector autoregression
    JEL: G10 G12 G15
    Date: 2019
  42. By: Moretti, Laura; Onorante, Luca; Zakipour Saber, Shayan
    Abstract: We perform a robust estimation of the Phillips curve in the euro area using a battery of 630 theory-driven models. We extend the existing literature by adding model specifications, taking into account the uncertainty in the measurement of variables and testing for potential non-linearities and structural changes. Using Dynamic Model Averaging, we identify the most important determinants of inflation over the sample. We then forecast core inflation 12 quarters ahead and present its probability distribution. We compare the distribution of forecasts performed in recent years, and we assess, in a probabilistic manner, the convergence towards a sustainable path of inflation. JEL Classification: C30, E52, F41, E32
    Keywords: density forecast, Dynamic Model Averaging, non linearities, Phillips curves, structural changes
    Date: 2019–07
  43. By: Angeles Galvan Daniel; Cortés Espada Josué Fernando; Sámano Daniel
    Abstract: This paper analyzes the exchange rate pass through to consumer prices in Mexico using different methodologies. First, we estimate Vector Autoregressive Models (VAR). Subsequently, we estimate Autoregressive Distributed Lags Models (ARDL) in order to make a long run analysis. In particular, we find that the exchange rate pass through to consumer prices is low and has barely changed in relation with the findings in previous studies. We also estimate that when the economy grows above its long-run trend, the point estimation of the exchange rate pass through is larger on average. Finally, we provide some evidence of asymmetry in the exchange rate pass through, that is, the point estimation of the exchange rate pass through is greater when there is a depreciation than when there is a currency appreciation. It should be noted that in the long run analysis these results are preserved.
    Keywords: Depreciation;Inflation;Exchange Rate Pass Through;Asymmetries
    JEL: C22 C32 E31 F31 F41
    Date: 2019–07
  44. By: Marc Gronwald
    Abstract: This paper deals with cryptocurrency bubbles. First, it points out that a number of recent papers on cryptocurrency bubbles are awed due to an insufficient consideration of the fundamental value of cryptocurrencies. As even fiat money is said to exhibit features of bubbles, the same applies to cryptocurrencies. Thus, any empirical investigation into either the presence of cryptocurrency bubbles or the fundamental value of cryptocurrencies is needless. Second, the paper conducts a short empirical analysis into the relationship of the prices of Etherum and Bitcoin. Evidence of explosive periods is found in the price of Etherum even if this price is expressed in terms of Bitcoin rather than US Dollars. These periods, however, are found to be in the first half of 2016 and 2017, respectively, but not during the price peak period of Bitcoin witnessed end of 2017 and beginning of 2018.
    Keywords: cryptocurrencies, bubbles, bitcoin, Etherum, fundamental value, intrinsic value, fiat money
    JEL: C12 C22 E42 E52 G12
    Date: 2019
  45. By: Justin Falk; Nadia Karamcheva
    Abstract: Policymakers are weighing options that would change the retirement system for federal workers by shifting more of their deferred compensation from the defined benefit plan toward the defined contribution plan, called the Thrift Savings Plan (TSP). We use administrative longitudinal data on federal workers’ demographics, compensation, and TSP behavior to estimate the effects of an employer match and plan default options on workers’ TSP savings behavior and the cost of employer contributions. We rely primarily on two sources of exogenous variation stemming from policy changes
    JEL: E21 E27 J26 J32
    Date: 2019–07–16
  46. By: Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Hur, Sewon (Federal Reserve Bank of Cleveland)
    Abstract: How are the gains and losses from trade distributed across individuals within a country? First, we document that tradable goods and services constitute a larger fraction of expenditures for low-wealth and low-income households. Second, we build a trade model with nonhomothetic preferences—to generate the documented relationship between tradable expenditure shares, income, and wealth—and uninsurable earnings risk—to generate heterogeneity in income and wealth. Third, we use the calibrated model to quantify the differential welfare gains and losses from trade along the income and wealth distribution. In a numerical exercise, we permanently reduce trade costs so as to generate a rise in import share of GDP commensurate with that seen in the data from 2001 to 2014. We find that households in the lowest wealth decile experience welfare gains over the transition, measured by permanent consumption equivalents, that are 67 percent larger than those in the highest wealth decile.
    Keywords: trade gains; inequality; consumption;
    JEL: E21 F10 F13
    Date: 2019–07–19
  47. By: Leduc, Sylvain (Federal Reserve Bank of San Francisco); Liu, Zheng (Federal Reserve Bank of San Francisco)
    Abstract: We study the implications of automation for labor market fluctuations in a Diamond-Mortensen-Pissarides (DMP) framework that is generalized to incorporate automation decisions. If a job opening is not filled with a worker, a firm can choose to automate that position and use a robot instead of a worker to produce output. The threat of automation strengthens the firm's bargaining power against job seekers in wage negotiations, depressing equilibrium real wages in a business cycle boom. The option of automation also increases the value of a vacancy, raising the incentive for job creation, and thereby amplifying fluctuations in vacancies and unemployment relative to the standard DMP framework. Since automation improves labor productivity while muting wage increases, it implies a countercyclical labor income share, as observed in the data.
    JEL: E32 J63 J64
    Date: 2019–07–18
  48. By: Luo, Weijie
    Abstract: This paper analyzes the impact of the composition of taxes on economic growth using a panel of OECD countries. In contrast to Kneller et al. (Fiscal policy and growth: evidence from OECD countries, 1999), over 1980-2005 distortionary taxation did not reduce growth, while an increase in non-distortionary taxation had a negative association with growth. When the data are extended to the great recession and its recovery period (1980−2015), distortionary taxation significantly reduces growth as originally conjectured, but the negative effect of non-distortionary taxation survives. This paper argues that distortions from expenditure taxes in recent years can be accounted for by a combination of an exploding increased debt/GDP and globalization.
    Keywords: distortionary taxation,non-distortionary taxation,growth
    JEL: H20 E62 O40
    Date: 2019
  49. By: Konstantina Manou (Bank of Greece); Panagiotis Palaios (National and Kapodistrian University of Athens); Evangelia Papapetrou (Bank of Greece and National and Kapodistrian University of Athens)
    Abstract: This paper evaluates the asymmetric transmission effects of housing wealth, household debt and financial assets on consumption spending in Greece over the period 1999Q4 to 2017Q4. We apply the Enders and Siklos (2001) methodology and use Stevans’s (2004) modification to capture these effects in a multivariate framework. Our results show that consumption responds asymmetrically to all types of changes applied. We provide evidence for the predominance of negative changes compared to positive ones. Our empirical findings are consistent with a stronger consumption response to decreases in financial assets and housing wealth. Furthermore, our results add to the existing literature in that the driving force of the rapidly reducing consumption spending is the deleveraging change. We also check the robustness of our results by applying Hansen’s (2017) kink regression model analysis. The empirical results provide evidence that consumption and wealth component data fit better a threshold model than a linear model.
    Keywords: Consumption; financial wealth; housing wealth; household debt;asymmetric adjustment
    JEL: E21 E44 D12
    Date: 2019–06
  50. By: López-Martín Bernabé; Pérez-Reyna David
    Abstract: We construct a framework of firm dynamics to evaluate the impact of the enforcement of contracts between final goods producers and their intermediate goods suppliers on firm growth, technology accumulation, and aggregate productivity. We build upon the static contracts model of Acemoglu et al. (2007), where the final goods firm chooses technology in contractible activities conducted by suppliers of intermediate inputs. Suppliers select investments in noncontractible activities, anticipating the payoffs that will result from bargaining with the producer of the final good. We show that contractual incompleteness implies a wedge on profits for producers of the final good, which discourages technology accumulation. Our model estimates differences in output per worker of up to 33% between economies with complete and incomplete contracts. The impact on firm growth, the age and size distribution of firms is quantitatively significant.
    Keywords: size-dependent distortions;contracts;aggregate productivity;firm dynamics
    JEL: D86 E23 O11 O40
    Date: 2019–04
  51. By: Christopher L. House (University of Michigan & NBER); Christian Proebsting (Ecole Polytechnique Federale de Lausanne); Linda L. Tesar (University of Michigan & NBER)
    Abstract: Cross-country differences in austerity, defined as government purchases below forecast, account for 75 percent of the observed cross-sectional variation in GDP in advanced economies during 2010-2014. Statistically, austerity is associated with lower GDP, lower inflation and higher net exports. A multi-country DSGE model calibrated to 29 advanced economies generates effects of austerity consistent with the data. Counterfactuals suggest that eliminating austerity would have substantially reduced output losses in Europe. Austerity was so contractionary that debt-to-GDP ratios in some countries increased as a result of endogenous reductions in GDP and tax revenue.
    Keywords: Austerity, Fiscal Policy, Multi-Country DSGE Model
    JEL: E62 F41 F44
    Date: 2019–02–07
  52. By: Hardik A. Marfatia (Department of Economics, Northeastern Illinois University, BBH 344G, 5500 N. St. Louis Ave., Chicago, IL 60625, USA); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Stephen M. Miller (University of Nevada, Las Vegas - Department of Economics, 4505 S. Maryland Parkway, Box 456005, Las Vegas, NV 89154)
    Abstract: This paper examines the effect of fiscal policy on financial markets over a long span of 125 years. Unlike existing studies that mainly focus on monetary policy shocks and model-based identification of fiscal policy shocks, we use a time-varying model to study the effect of fiscal policy with much cleaner and direct identification of fiscal policy shocks. In addition, we extend our analysis by measuring the response volatility in these markets and separately study the effects of good and bad components of volatility. We find significant time-variation in the response of stock and bond market returns and volatility. The overall response of the stock market exceeds that of bond markets, with more pronounced effects in the pre-1950 period than in the last six decades. Fiscal consolidation generates long-term benefits that positively affect financial markets in the latter part of the 20th century, thus providing new insights into the dynamic role of fiscal policy.
    Keywords: Fiscal Policy, Time-Varying impact, Financial returns and risks
    JEL: E5 C32 G14
    Date: 2019–07
  53. By: Matteo Picchio (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche); Raffaella Santolini (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche)
    Abstract: We study the impact of the domestic stability pact on the budget forecast errors of Italian municipalities. The identification of the causal effect exploits a quasi-natural experiment generated by the removal in 2001 of the fiscal restraints on budget decisions for municipalities with less than 5,000 inhabitants and by stricter budgetary restrictions and severe penalties for noncompliers in 2002. We find that relaxing fiscal rules had a sizeable impact on budget forecast errors, especially in 2002. Revenue (expenditure) forecast errors for municipalities below 5,000 inhabitants became indeed 26% (22%) larger than in the past.
    Keywords: budget forecast errors, sub-central fiscal rules, Italian municipalities, quasi-natural experiment, differencein-discontinuities design.
    JEL: E62 H68 H72
    Date: 2019–07
  54. By: Bouchoucha, Najeh; Bakari, Sayef
    Abstract: This paper aims to analyze the impact of domestic investment and Foreign Direct Investment on economic growth in Tunisia during the period 1976–2017. This study is based on the Auto-Regressive Distributive Lags (ARDL) approach that is proposed by Pesaran et al (2001). Bound testing approaches to the analysis of level relationships. According to the results of the analysis, domestic investment and foreign direct investment have a negative effect on economic growth in the long run. However, in the short run, only domestic investment causes economic growth. The findings are important for Tunisian economic policy makers to undertake the effective policies that can promote and lead domestic and foreign investments to boost economic growth.
    Keywords: Domestic Investment; Foreign Direct Investment; Economic Growth; Tunisia; ARDL.
    JEL: C13 E22 F13 F14 O11 O20 O47 O55
    Date: 2019–06
  55. By: Quaas, Georg
    Abstract: The German Institute for Economic Research Berlin (DIW), the Halle Institute for Economic Research (IWH) and the Rheinisch-Westfälisches Institut Essen (RWI) have used their own models to calculate the macroeconomic effects of the measures under the coalition agreement for the 19th parliamentary term and published them in the spring report 2018 of the Joint Economic Forecast project group. A comparison with the simulations of two other econometric models, including an older version of the RWI business cycle model (KM), suggests that these effects have been overestimated. The study focuses on the results of the RWI, which least overestimates those effects. To test the overestimation hypothesis, (1) a black box method is used to show that the implicit multipliers of the simulation results are not plausible. In a further attempt (2), the problematic effects are calculated on the basis of multipliers published in 2012 from an older version of the KM and compared with those of the new version. The hypothesis can be confirmed. Finally, (3) the latest documentation of the new versions of the KM shows that the price development indices are not calculated correctly. This would explain why the simulation results of the KM have a bias. In view of the importance of the KM for the Rheinisch-Westfälisches Institut and beyond that for the project group Gemeinschaftsdiagnose, which informs the public twice a year about the expected economic development, but also because other models may also be affected by this problem, the experts should be informed and encouraged to check their own models. The public should be warned against overly optimistic forecasts. It goes without saying that the wrong calculation method, if it is still used, must be eliminated before further simulations and forecasts are published. For a publicly funded model, it would also be necessary to document which of the technically possible methods for implementing the annual overlap method has been implemented.
    Keywords: RWI business cycle model, price equations, simulation results
    JEL: C53 E6
    Date: 2019–06–03
  56. By: Asatryan, Zareh; Havlik, Annika; Heinemann, Friedrich; Nover, Justus
    Abstract: The "true" size of fiscal multipliers is widely debated by economists and policy makers as large (small) multipliers provide arguments to expand (cut) public spending. Within a meta-analytical framework, we ask whether the large observed variance in multiplier estimates can be explained by the national imprint and various author incentives. For this purpose, we use data on economists' personal characteristics including results from a selfconducted author survey. Our evidence is consistent with the hypotheses that the national background of researchers and the interests of donors financing the research matter for the degree and direction of multiplier estimates. These potential biases largely disappear for teams of international co-authors.
    Keywords: biased research,fiscal multipliers,funding bias,publication bias
    JEL: B4 D72 E62 H11
    Date: 2019
  57. By: Chu, Angus C.; Kou, Zonglai; Wang, Xilin
    Abstract: We explore the dynamic effects of minimum wage in a Schumpeterian model with endogenous market structure and obtain the following results. First, raising the minimum wage decreases the employment of low-skill workers and increases the unemployment rate. Second, it decreases the level of output. Third, it decreases the transitional growth rate of output but does not affect the steady-state growth rate. Our quantitative analysis shows that the magnitude of the negative effects of minimum wage is sharply increasing in low-skill labor intensity in production and that employed low-skill workers gain initially but might suffer from slower growth in future wages.
    Keywords: minimum wage; unemployment; innovation; endogenous market structure
    JEL: E24 O3 O4
    Date: 2019–07
  58. By: Esteban García-Miralles (University of Copenhagen); Nezih Guner (CEMFI); Roberto Ramos (Banco de España)
    Abstract: In this paper, we use administrative data on tax returns to characterize the distributions of before and after-tax income, tax liabilities, and tax credits in Spain for individuals and households. We use the most recent available data, 2015 for individuals and 2013 for households, but also discuss how the income distribution and taxes have changed since 2002. We also estimate effective tax functions that capture the underlying heterogeneity of the data in a parsimonious way. These parametric functions can be used to calculate after-tax incomes in surveys where this information is not directly available, and can also be used in quantitative work in macroeconomics and public finance.
    Keywords: personal income tax, tax functions, income distribution
    JEL: E62 H24 H31
    Date: 2019–07
  59. By: International Monetary Fund
    Abstract: Growth was strong in 2018, backed by high electricity production. Inflation remains subdued, notwithstanding very accommodative monetary conditions. The fiscal stance in 2018 was somewhat tighter than expected, supporting a further decline in public debt. The medium-term economic outlook is broadly favorable, with growth projected to converge to 4 percent and a further narrowing of the current account deficit. However, significant risks remain. Growth is vulnerable to a continued or sharper economic slowdown in the main trading partners. The main vulnerabilities remain in the fiscal sector, as public debt is still high, and contingent liabilities are increasing. Albania’s relatively large financing needs also pose risks that could materialize, in particular, in case of tightening external financing conditions.
  60. By: Sudipto Karmakar; Diogo Lima
    Abstract: Can countercyclical bank capital requirements reduce the negative effects ofglobal liquidity shocks? We use the Lehman Brothers bankruptcy as a natural experiment to document the role of the banking system as a transmission channel of global financial disturbances to domestic economies. Using granular and confidential data from the Bank of Portugal, our results suggest that in the aftermath of the Lehman collapse, domestic firms cut investment by 14% and employment by 2.3%.In order to evaluate the effectiveness of macroprudential regulation, we model an open-economy with a banking sector borrowing from domestic and in-ternational depositors. We show that, during a financial crises, in an economy with counter cyclical bank capital requirements(compared with an economy with constant capital requirements):(i) gross domestic product falls 5 p.p. less and (ii)the fall in investment is 3 p.p. lower. We show that imposing countercyclical capital requirements entails a trade-off between lower volatility and lower economic activity.Overall, we find that countercyclical bank capital requirements may not be welfare improving for the Portuguese economy.
    Date: 2019–07
  61. By: Merkl, Christian (Friedrich-Alexander-University Erlangen-Nuremberg, CESifo and IZA); Rens, Thijs van (University of Warwick, Centre for Macroeconomics, IZA and CEPR)
    Abstract: Firms select not only how many, but also which workers to hire. Yet, in most labor market models all workers have the same probability of being hired. We argue that selective hiring crucially a⁄ects welfare analysis. We set up a model that is isomorphic to a search model under random hiring but allows for selective hiring. With selective hiring, the positive predictions of the model change very little, but implications for welfare are di⁄erent for two reasons. First, a hiring externality occurs with random but not with selective hiring. Second, the welfare costs of unemployment are much larger with selective hiring, because unemployment risk is distributed unequally across workers.
    Keywords: labor market models ; welfare ; optimal unemployment insurance
    JEL: E24 J65
    Date: 2019
  62. By: Mohammed, Mikidadu
    Abstract: The recent U.S. trade policy shift has reignited interest about the macroeconomic effects of import tariffs. This paper examines the impacts of import tariff shocks on U.S. macroeconomic performance using quarterly data from 1989-2017. Relying upon the estimation of structural VAR model with sign restrictions, the results suggest that tariff shocks on net-imported vital intermediate input, such as steel, trigger stagflationary tendencies as characterized by short-run increase in inflation and unemployment and decline in real output.
    Keywords: import tariff shocks, steel, stagflation, structural VAR
    JEL: C3 F10 F14
    Date: 2018–08–15
  63. By: Kronick, Jeremy M.; Villarreal, Francisco G.
    Abstract: This paper asks whether tepid inflation in Canada since the financial crisis can in part be explained by the effects of monetary policy on inequality. Using different structural vector autoregression models we show that expansionary monetary policy post-crisis has offset otherwise falling inequality through the shifting of resources away from lower-income individuals, which in general have higher marginal propensities to consume. As a result, aggregate demand has not risen as much as it otherwise would have, leading to a more muted inflationary response. Our results suggest that failure to account for the heterogeneity of consumption responses across the income distribution could lead to an overestimation of the magnitude of inflation’s response to a monetary policy shock.
    Date: 2019–07–18
  64. By: Wolfgang Britz (Institute for Food and Resource Economics, University of Bonn); Roberto Roson (Department of Economics, University Of Venice Cà Foscari; GREEN Bocconi University Milan; Loyola Andalusia University); Martina Sartori (European Commission, Joint Research Centre, Seville)
    Abstract: In this paper we illustrate the development of a modeling framework aimed at producing detailed quantitative estimates for economic variables, consistent with Shared Socio-economic Pathways, and their assumptions about national income and population. Our model not only provides information on industrial production levels, employment, consumption patterns, trade flows and other macroeconomic variables, but disaggregates them further at the sub-national level, for European NUTS2 regions. Estimates are produced by an especially designed dynamic general equilibrium model (G-RDEM), augmented with a regional down-scaling module. The latter takes into account the different sectoral composition of the regional economies, their endowments of primary resources, as well as the possible existence of structural and agglomeration externalities. After describing the methodology, the paper presents an illustrative sample of results produced by the model, focusing on Italian regions and the Shared Socio-economic Pathway 1 in the period 2011-2051.
    Keywords: Shared Socio-economic Pathways, Regional Economic Growth, Dynamic General Equilibrium Models, Computable General Equilibrium Models, Long-run Economic Scenarios, Structural Change, Economic Growth, Italy
    JEL: C68 C82 C88 D58 E17 F43 O11 O40
    Date: 2019
  65. By: Matthew E. Kahn; Kamiar Mohaddes; Ryan N. C. Ng; M. Hashem Pesaran; Mehdi Raissi; Jui-Chung Yang
    Abstract: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is affected by country-specific climate variables. defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04°C per year, in the absence of mitigation policies, reduces world real GDP per capita by 7.22 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01°C per annum, reduces the loss substantially to 1.07 percent. These effects vary significantly across countries. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment.
    Keywords: climate change, economic growth, adaption, counterfactual analysis
    JEL: C33 O40 O44 O51 Q51 Q54
    Date: 2019
  66. By: Kahn, M. E.; Mohaddes, K.; Ng, R. N. C.; Pesaran, M. H.; Raissi, M.; Yang, J-C.
    Abstract: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is affected by country-specific climate variables-defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we fi?nd that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04° per year, in the absence of mitigation policies, reduces world real GDP per capita by 7.22 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01° per annum, reduces the loss substantially to 1.07 percent. These effects vary signifi?cantly across countries. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment.
    Keywords: Climate change, economic growth, adaptation, counterfactual analysis
    JEL: C33 O40 O44 O51 Q51 Q54
    Date: 2019–07–08
  67. By: Daniel A. Dias; Carlos Robalo Marques; Carlos Robalo Marques
    Keywords: Productivity, firm-level data, entry, exit, survival
    JEL: D24 E32 L25 O47
    Date: 2019–06–05
  68. By: Uchida, Yuki; Ono, Tetsuo
    Abstract: This study presents voting on policies including public education, taxes, and public debt in an overlapping-generations model with physical and human capital accumulation and analyzes the effects of a debt ceiling on the government's policy formation and its impact on growth and welfare. The debt ceiling induces the government to shift the tax burdens from the older to younger generations and increase public education spending, resulting in a higher growth rate. However, it creates a trade-off between generations in terms of welfare. Alternatively, the debt ceiling is measured from the viewpoint of a benevolent planner; lowering the debt ceiling makes it possible for the government to approach the planner's allocation in an aging society.
    Keywords: Debt ceiling; Probabilistic voting, Public debt, Economic growth, Overlapping generations
    JEL: D70 E24 H63
    Date: 2019–07–15
  69. By: Daniel Dejuán (Banco de España)
    Abstract: Investment decisions are generally irreversible and could be affected by holdup problems and opportunism. Thus, investment may need sound enforcement institutions. This paper analyzes firm level data to identify the impact of judicial system efficacy, as representative of the institutional quality, in business investment decisions. More specifically, this research measures the effects of congestion in the Spanish civil (private) jurisdiction at the local level, both when solving ordinary trials and executions (when a judge forces the debtor to pay or to fulfill an obligation) and finds a negative and significant relationship between judicial inefficacy and the gross investment ratio. The effect holds after running several robustness checks. This paper also analyzes the efficacy of the administrative jurisdiction, inspired by the hypothesis of Acemoglu and Johnson (2005), but it does not have a significant impact on investment in our sample.
    Keywords: investment decisions, justice, enforcement
    JEL: E22 K41 K12
    Date: 2019–07
  70. By: Zhenqian Huang (Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: Most Asia-Pacific economies have maintained a largely accommodative monetary policy stance in the past decade. However, lower policy rates have not been fully translated into stronger growth, but contributed to financial instability in terms of higher private debt, which harms long-term economic growth. A prudent approach to monetary policy would be needed to focus on maintaining price and financial stability. Policy makers shall accompany traditional monetary policies with macroprudential policies and regulations to strike a balance between supporting short-term growth prospects while containing the build-up of financial risks.
    Date: 2019–07
  71. By: Cristina Arellano; Yan Bai
    Abstract: This paper develops a New Keynesian model with sovereign debt and default. We focus on domestic interest rules governing monetary policy and external foreign currency government debt that is defaultable. Monetary policy and default risk interact as they both impact domestic consumption and production. We find that default risk generates monetary frictions, which amplify the monetary response to shocks. Large sovereign default risk depresses domestic consumption and production. These monetary frictions in turn discipline sovereign borrowing, resulting in slower debt accumulation and lower spreads. Our framework replicates the positive co-movements of sovereign spreads with domestic nominal rates and inflation, a salient feature of emerging markets data, and can rationalize the experience of Brazil during the 2015 downturn, with high inflation, nominal rates, and sovereign spreads. A counterfactual experiment shows that, by raising the domestic rate, the Brazilian central bank not only reduced inflation but also alleviated the debt crisis.
    Date: 2019
  72. By: Zakipour-Saber, Shayan (Central Bank of Ireland)
    Abstract: This letter analyses the relationship between economic variables in the euro area and the United States and determines the importance of various indicators in forecasting the euro area macroeconomy. Results using a novel empirical technique show that innovations in the U.S. long-term interest rate (long rate) explain substantial variation in euro area GDP and inflation. This finding is consistent over a historical sample and supports the emphasis placed on U.S. economic conditions when constructing projections of the euro area macroeconomic outlook. The important contribution of the U.S. long rate most likely indicates its value as a proxy for the state of the global economy.
    Date: 2019–06
  73. By: Floriana Cerniglia - Enzo Dia - Andrew Hughes Hallett
    Abstract: Economists have traditionally used a rule that restricts primary deficits to less than a threshold determined by the interest-growth rate differential and existing debt in order to judge fiscal sustainability. This rule derives from a single period application of the government’s budget constraint. It is not forward looking. It does not allow for the predictable dynamics of spending liabilities, such as entitlement spending, and assumes immediate and infinitely elastic tax or spending adjustments that are unlikely to be feasible in practice. To address this issue, we derive the equivalent dynamic rule: the primary surplus needs to match any expected discounted increases in public spending, the net interest on existing debt, and terms reflecting the cost of extending debt relative to changing taxes. We find strong and robust empirical evidence supporting the model and we calibrate our model to analyze the impact of shocks to future sustainability (as opposed to current stability, a crucial distinctio n) in different countries.
    Keywords: Sustainable public debt, primary deficit rules, fiscal space
    JEL: E62 H53 H63 I38
    Date: 2018
  74. By: Goetz, Martin
    Abstract: Exploiting heterogeneity in U.S. firms' exposure to an unconventional monetary policy shock that reduced debt financing costs, I identify the impact of financing conditions on firms' toxic emissions. I find robust evidence that lower financing costs reduce toxic emissions and boost investments in emission reduction activities, especially capital-intensive pollution control activities. The effect is stronger for firms in noncompliance with environmental regulation. Examining the ability of regaining regulatory compliance by implementing pollution control activities I find that only capital-intensive activities help firms regaining compliance. These findings underscore the impact of firms' financing conditions for emissions and the environment.
    Keywords: Toxic emissions,Financing conditions,Bond markets,Unconventional Monetary Policy
    JEL: G32 E52 Q52 Q53
    Date: 2019
  75. By: Paul Tucker
    Abstract: The paper discusses why the financial system is not as resilient as policymakers currently claim - despite extensive regulatory reforms from a very weak starting point.The paper discusses different policy strategies for making some of the debt of some banks "information-insensitive", so that they it would be treated as safe in all but the most stressed circumstances. For the current prudential strategy, which is centred on minimum equity requirements, the paper argues that central banks and other agencies should start publishing annual staff reports on where regulatory and supervisory policy has been surreptitiously tightened or loosened.The paper aims to spark and contribute to the debate on the second phase of stability reforms that will be needed. It sets out an alternative policy strategy based on 100% liquidity cover for the short-term debt of banks (and shadow banks), and for the creditor hierarchy of operating banks and holding companies. In this proposal, the haircut policy of central banks would become the key instrument in determining bank equity requirements and the terms on which they could borrow in secured money markets. As such, this strategy would operationalise the theoretical and empirical work of Bengt Holmström and Gary Gorton.
    Keywords: regulatory reforms, Basel III, great financial crisis
    JEL: E44 E58 G28
    Date: 2019–07
  76. By: Davies Rob; Makrelov Konstantin; Harris Laurence
    Abstract: We employ a micro-founded and stock-and-flow-consistent model to study the impact of a higher leverage ratio on the South African economy. The model provides a rich representation of institutional balance sheets.The relationship between bank capital, risk-taking behaviour, lending spreads, and economic activity is highlighted. The financial accelerator mechanism operates through the balance sheets of all economic institutions. The introduction of a higher leverage ratio is likely to generate negative economic impacts in the short run. The negative gross domestic product effect is greatest if the financial sector reduces leverage by reducing the value of assets.The regulatory shock leads the sector to change its perception of risk, reducing the size of the money multiplier and increasing lending spreads. Higher regulatory requirements also affect the transmission of monetary policy. Effective monetary policy requires understanding how the financial sector is likely to meet new requirements and change its perceptions of risk.
    Keywords: Computable general equilibrium,Financial dynamics,leverage ratio,Stock and flow,Risk management
    Date: 2019
  77. By: Michelle Baddeley
    Abstract: This paper brings together divergent approaches to time inconsistency from macroeconomic policy and behavioural economics. Behavioural discount functions from behavioural microeconomics are embedded into a game-theoretic analysis of temptation versus enforcement to construct an encompassing model, nesting combinations of time consistent and time inconsistent preferences. The analysis presented in this paper shows that, with hyperbolic/quasihyperbolic discounting, the enforceable range of inflation targets is narrowed. This suggests limits to the effectiveness of monetary targets, under certain conditions. The paper concludes with a discussion of monetary policy implications, explored specifically in the light of current macroeconomic policy debates.
    Date: 2019–07
  78. By: Katarzyna Budnik (European Central Bank); Gaia Barbic (European Central Bank); Giulio Nicoletti (European Central Bank); Massimiliano Affinito (Banca d’Italia); Fabrizio Venditti (Banca d’Italia); Saiffedine Ben Hadj (Banque Nationale de Belgique/Nationale Bank van België); Hans Dewachter (Banque Nationale de Belgique/Nationale Bank van België); Edouard Chretien (Autorité de contrôle prudentiel et de résolution); Clara Isabel González (Banco de España); Javier Mencía (Banco de España); Jenny Hu (De Nederlandsche Bank); Jairo Rivera-Rozo (De Nederlandsche Bank); Lauri Jantunen (Suomen Panki); Otso Manninen (Suomen Panki); Ramona Jimborean (Banque de France); Ricardo Martinho (Banco de Portugal); Ana Regina Pereira (Banco de Portugal); Elena Mousarri (Central Bank of Cyprus); Constantinos Trikoupis (Central Bank of Cyprus); Laurynas Naruševicius (Lietuvos Bankas); Michael O’Grady (Central Bank of Ireland); Sofia Velasco (Central Bank of Ireland); Selcuk Ozsahin (Banca Slovenije)
    Abstract: The paper proposes a framework for assessing the impact of system-wide and bank-level capital buffers. The assessment rests on a factor-augmented vector autoregression (FAVAR) model that relates individual bank adjustments to macroeconomic dynamics. We estimate FAVAR models individually for eleven euro area economies and identify structural shocks, which allow us to diagnose key vulnerabilities of national banking systems and estimate short-run economic costs of increasing banks’ capitalisation. On this basis, we run a fullyfledged cost-benefit assessment of an increase in capital buffers. The benefits are related to an increase in bank resilience to adverse shocks. Higher capitalisation allows banks to withstand negative shocks and moderates the reduction of credit to the real economy that ensues in adverse circumstances. The costs relate to transitory credit and output losses that are assessed both on an aggregate and bank level. An increase in capital ratios is shown to have a sharply different impact on credit and economic activity depending on the way banks adjust, i.e. via changes in assets or equity.
    Keywords: FAVAR, capital regulation, cost-benefit analysis, banking system resilience
    JEL: E51 G21 G28
    Date: 2019–07
  79. By: Anmol Bhandari; Serdar Birinci; Ellen McGrattan; Kurt See
    Abstract: This paper examines the reliability of survey data on business incomes, valuations, and rates of return, which are key inputs for studies of wealth inequality and entrepreneurial choice. We compare survey responses of business owners with available data from administrative tax records, brokered private business sales, and publicly traded company filings and document problems due to nonrepresentative samples and measurement errors across all surveys, subsamples, and years. We find that the discrepancies are economically relevant for the statistics of interest. We investigate reasons for these discrepancies and propose corrections for future survey designs.
    JEL: C83 E22 H25
    Date: 2019–07
  80. By: Colignatus, Thomas
    Abstract: The UN System of National Accounts (SNA) calculates standard national income (NI) under the condition that owned capital is maintained. Roefie Hueting defined in 1969 environmental functions (state, stock) as the possible uses by humans of the environment. Their actual use (flow) nowadays are also called ecosystem services. Hueting defined in 1986 environmentally sustainable national income (eSNI) (flow) under the condition that the vital environmental functions are maintained for future generations. Then eΔ = NI – eSNI gives the national distance to environmental sustainability. Thus eΔ measures the level of ecosystem services concerning the part that infringes upon environmental sustainability, or the abusive part in the ecosystem services that are provided. This communication aspires at a translation of the terminologies by economist Hueting and ecologists in the research of ecosystem services.
    Keywords: national accounts, national income, environmental sustainability, environmental functions, ecosystem services, eΔ = NI - eSNI, anthropocene, Jan Tinbergen, Roefie Hueting
    JEL: E01 E61 Q01
    Date: 2019–07–11
  81. By: Zouri, Stéphane
    Abstract: This paper focuses on the synchronization of supply and demand shocks in West Africa given the willingness of ECOWAS Heads of State to create a single currency by 2020. Based on the methodology of Blanchard and Quah (1989), the paper relies on structural autoregressive vector models (SVAR) to identify these shocks in the region. Unlike previous works in this area, it is innovative as it proposes a new way of analyzing the dynamic correlation of shocks in the region. In addition, the proposed study makes it possible to analyze the adjustment dynamics of macroeconomic variables to different shocks. The results show that the economies of the zone are marked by relatively high degrees of asymmetry in the sense that the responses to the same type of shock are different. However, the paper shows that the synchronization of shocks evolves over time between the countries in the region. Thus, the paper indicates the need to take into account the dynamic aspect of shocks, since a monetary union considered from the outset to be expensive may over time become beneficial.
    Keywords: synchronization, macroeconomic shocks, structural VAR, ECOWAS
    JEL: C32 E32 F15 O55
    Date: 2019–07–22
  82. By: Jianjun Miao (Boston University)
    Abstract: I propose a multivariate linear-quadratic-Gaussian control framework with rational inattention in continuous time. I propose a three-step solution procedure and numerical methods. The critical step is to transform the problem into a rate distortion problem and derive a semidefinite programming representation. I provide generalized reverse water-filling solutions for some special cases and characterize the optimal signal dimension. I apply my approach to study a consumption/saving problem and illustrate two pitfalls in the literature.
    Keywords: Rational Inattention, Optimal Control, Semidefinite Programming, Consumption, Information Theory
    JEL: C6 D8 E2
    Date: 2019–02
  83. By: Dhamija, Nidhi
    Abstract: The study empirically examines the relationship between trade liberalization and unemployment for the Indian economy using data for Indian states (separately for rural and urban areas). This study provides support to the argument that effects of trade liberalization have been different for the states in India. The results find evidence for the negative relationship unemployment and trade openness. The relationship is significant for rural parts of the states which also drive results for the total state; though for urban part of the states, relationship is not found to be significant. The results also indicate that this effect is higher and stronger for more flexible states. The results hence, confirm to the theory that in developing countries trade openness leads to increase in the employment of labour; but more so of unskilled workers and leads to a movement away from the agriculture and hence rural sector of the economy. This is substantiated by internal migration trends for India which showed an increase in population mobility during post reform period. The data also corroborated the shift from rural agricultural to rural non-agricultural and urban sectors of the economy.
    Keywords: Trade Liberalization, Unemployment, Labour market institutions, Panel data
    JEL: E24 F14 F16
    Date: 2019–07–11
  84. By: Galstyan, Vahagn (Central Bank of Ireland)
    Abstract: The euro area current account was on average in balance over 1999-2010 period, while the average rate of inflation was close to the ECB target. In contrast, the post-2011 increase in the euro area current account surplus has been accompanied by a period of low inflation. This paper suggests that observed low inflation can be partly explained by the surplus in the external balance. I propose a version of an open-economy inflation Phillips curve showing that, in addition to output gap and inflationary expectations, inflation is also shaped by the trade balance. At an empirical level, I find a statistically significant and negative correlation between the two variables.
    Date: 2019–05
  85. By: Taguchi, Hiroyuki
    Abstract: This paper aims to address the issue on bond market development by investigating the determinants of bond market development with a focus on Asian economies, and also by identifying the impediment factors to prevent its development in Mongolian economy. This paper contributes to the literature by enriching evidence of the determinants of bond market development with a focus on Asian economies with common characteristics such as their high dependence on banking sectors. In particular, while there have been few studies on an individual economy’s bond market, the strategic contribution is to identify the Mongolia-specific factors to prevent her bond market development among Asian economies. The estimation result shows that the two manageable variables, namely, bureaucracy quality and level of interest rate, are major determinants for both public and private bond market development in Asian economies, and also that these determinants are main factors to prevent the Mongolian bond market from developing.
    Keywords: Bond Market, Mongolia, Asian Countries, Bureaucracy Quality, and Interest Rate
    JEL: E44 O53
    Date: 2019–07
  86. By: David Anolfatto (University of Waterloo); Glenn M MacDonald (University of Rochester)
    Abstract: In the U.S. economy, real output growth is forecastable with its own lag and the lagged consumption—output ratio. With technological progress modeled as a random walk, standard real-business-cycle (RBC) models fails to replicate this fact: these models generate equilibrium output dynamics that largely inherit the properties of the assumed impulse dynamics, leading some researchers to question the empirical relevance of technology shocks for generating business cycle dynamics. In this paper, we develop a model economy that exhibits endogenous stochas-tic growth with aggregate fluctuations driven by technology shocks that are ab-sorbed with some lag, reflecting the costly and time—consuming nature of inno-vation and diffusion. Our purpose is to compare the resulting business cycle dynamics with those predicted by standard RBC models, which implicitly as-sume the instantaneous diffusion of new technology. Unlike the standard RBC model, the environment studied here generates business cycle dynamics that better resemble observed patterns.
    Keywords: Weak Instruments; Hypothesis Testing; Business Cycle Dynamics
    JEL: C13 C12
    Date: 2019–07
  87. By: Ogunjimi, Joshua; Adebayo, Adedeji
    Abstract: This study examined the relationship among health expenditure, health outcomes and economic growth in Nigeria for the period between 1981 and 2017. This study adopted the Toda-Yamamoto causality framework to examine these relationships. The Augmented Dickey Fuller unit root test was used to check for maximum order of integration of the variables used in the study and the result was one while the Autoregressive Distributed Lag (ARDL) Bounds test approach to cointegration was used to investigate if a long-run relationship exists among the macroeconomic variables used in the study and the result was in the affirmative. The results of the Toda-Yamamoto causality tests showed a unidirectional causality running from health expenditure to infant mortality while there is no causality between real GDP and infant mortality; a unidirectional causal relationship running from health expenditure and real GDP to life expectancy and maternal mortality; and a unidirectional causal relationship running from real GDP to health expenditure. This study therefore recommended that the Nigerian government should make concerted efforts geared towards increasing the health expenditure at least to meet up with the WHO’s recommendation that all countries should allocate at least 13 per cent of their annual budget to the health sector for effective funding as this would bring desired health outcomes and employ the use of modern technology and the services of professional health personnel should be sought to combat the high incidence of maternal and infant mortality in the health sector in Nigeria.
    Keywords: Health Expenditure, Life Expectancy, Infant Mortality, Maternal Mortality, Toda-Yamamoto Causality Test, Nigeria
    JEL: E6 I12 I15
    Date: 2018
  88. By: Williams, John C. (Federal Reserve Bank of New York)
    Abstract: Remarks at 2019 Annual Meeting of the Central Bank Research Association (CEBRA), New York City.
    Keywords: inflation; monetary policy; interest rates; expectations; zero lower bound (ZLB); stimulus; unemployment; r-star; vaccination; powder dry; David Reifschneider
    Date: 2019–07–18
  89. By: Michael Devereux (Vancouver school of economics, University of British Columbia, NBER - National Bureau of Economic Research - National Bureau of Economic Research, CEPR - Center for Economic Policy Research - CEPR); Karine Gente (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Changhua Yu (China Center for Economic Research, National School of Development, Peking University)
    Abstract: This paper analyzes the impact of fiscal spending shocks in a multi-country model with international production networks. In contrast to standard results suggesting that production network linkages are unimportant for the aggregate response to macro shocks in a closed economy, we show that network structures may place a central role in the international propagation of fiscal shocks, particularly when wages are slow to adjust. The paper first develops a simple general equilibrium multi-country model and derives some analytical results on the response to fiscal spending shocks. We then apply the model to an analysis of fiscal spillovers in the Eurozone, using the calibrated sectoral network structure from the World Input Output Database (WIOD). In a version of the model with sticky wages, we find that fiscal spillovers from Germany and other some other large Eurozone countries may be large, and within the range of empirical estimates. More importantly, we find that the Eurozone production network very important for the international spillovers. In the absence of international production network linkages, spillovers would be only a third as large as predicted by the baseline model. Finally, we explore the diffusion of identified German government spending at the sectoral level, both within and across countries. We find that government expenditures have both significant upstream and downstream effects when these links are measured by the direction of sectoral production linkages.
    Keywords: production network,fiscal policy,spillovers,Eurozone,terms of trade,nominal rigidities
    Date: 2019–06–21
  90. By: Juan Pablo Rinc\'on-Zapatero
    Abstract: In this paper we develop a general framework to analyze stochastic dynamic problems with unbounded utility functions and correlated and unbounded shocks. We obtain new results of the existence and uniqueness of solutions to the Bellman equation through a general fixed point theorem that generalizes known results for Banach contractions and local contractions. We study an endogenous growth model as well as the Lucas asset pricing model in an exchange economy, significantly expanding their range of applicability.
    Date: 2019–07
  91. By: Frédérique Bec (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique); Patrick Kanda (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The relative importance of survey-based, VAR-based or myopic expectations is evaluated in accounting for US inflation dynamics in a New Keynesian Phillips Curve (NKPC) setting. Our contribution is threefold. First, we estimate the NKPC with both final and real-time vintage data in order to control for large revisions in the real GDP data. Second, we distinguish between two different series for VAR-based inflation forecasts-derived by a recursive or rolling-window method-to account for changes in the conduct and transmission mechanisms of US monetary policy after World War II. Third, joint restrictions are tested in the NKPC to assess whether one of the expectational variables is able, on its own, to capture inflation dynamics. On a statistical basis, we find that there is no clear-cut winner between VAR-and survey-based inflation expectations. Most of our estimated NKPC variants conclude that survey inflation expectations tend to have the largest numerical weight. Nevertheless, the difference between VAR-and survey-based expectations' estimated coefficients is not statistically significant. Moreover, myopic expectations do not play any significant role in the majority of the estimated NKPC variants.
    Keywords: VAR-based expectations,Myopic expectations,Survey forecasts,New Keynesian Phillips Curve,Inflation
    Date: 2019–07–06
  92. By: Kang, Kee-Youn
    Abstract: We develop a general equilibrium model of cryptocurrency to study the optimal design of a cryptocurrency system. Agents trade cryptocurrency using digital wallets, and the cryptocurrency system provides verification of a digital wallet’s history of double spending attempts. Delaying the delivery of goods until payment information is confirmed in the blockchain prevents double spending. However, double spending can be prevented without a delivery lag under some conditions if a wallet has a good reputation in terms of its history of double spending attempts. In particular, as the difficulty of mining work rises, the incentive to engage in double spending with a good wallet decreases. We study the optimal design of the cryptocurrency system in terms of the difficulty of mining work and the supply of cryptocurrency and evaluate the welfare gain that would be captured if the current Bitcoin system adopted the optimal cryptocurrency system.
    Keywords: Blockchain, Cryptocurrency, Delivery lag, Double spending, Trade history
    JEL: D86 E40 E50 G10
    Date: 2019–05–06
  93. By: Lee, Neil; Clarke, Stephen
    Abstract: Do low-skilled workers benefit from the growth of high-technology industries in their local economy? Policymakers invest considerable resources in attracting and developing innovative, high-tech industries, but there is relatively little evidence on the distribution of the benefits. This paper investigates the labour market impact of high-tech growth on low and mid-skilled workers, using data on UK local labour markets from 2009-2015. It shows that high-tech industries – either STEM-intensive ‘high-tech’ or digital economy – have a positive jobs multiplier, with each 10 new high-tech jobs creating around 7 local non-tradeable service jobs, around 6 of which go to low-skilled workers. Employment rates for mid-skilled workers do not increase, but they benefit from higher wages. Yet while low-skilled workers gain from higher employment rates, the jobs are often poorly paid service work, so average wages fall, particularly when increased housing costs are considered.
    Keywords: wages; labour markets; multipliers; high-technology; cities; Inequality; ES/M007111/1
    JEL: E24 J21 J31 L86 O18 R11 R31
    Date: 2019–11–01
  94. By: Christophe Blot (Observatoire français des conjonctures économiques); Eric Heyer (Observatoire français des conjonctures économiques)
    Abstract: De nombreux travaux menés sur données américaines suggèrent qu'une inversion de la courbe des taux est suivie d'une récession dans un délai moyen de 12 mois. L'aplatissement de la pente des taux observé depuis la fin de l'année 2018 aux États-Unis fait donc ressurgir les craintes d'un ralentissement brutal de l'activité. L'objectif de cet article est alors d'analyser l'information contenue dans la structure par terme des taux d'intérêt afin non seulement de vérifier la pertinence de cette relation pour les États-Unis mais aussi d'en tester la pertinence pour la France et la zone euro. Nos estimations confirment l'existence d'une relation robuste entre la pente de la courbe des taux et la croissance américaine. Les résultats montrent bien qu'une inversion de la courbe des taux accroît la probabilité que les États-Unis subissent une récession dans les mois qui suivront l'inversion. Néanmoins, relativement aux épisodes passés d'inversion de la courbe des taux, l'épisode actuel suggère un risque de récession limité. Par ailleurs, les estimations effectuées pour la France et la zone euro indiquent que l'information contenue dans la courbe des taux est beaucoup trop faible pour prévoir les récessions ou la croissance.
    Keywords: Risque de récession; Structure par termes des taux d'intérêts; Croissance
    Date: 2019–04
  95. By: Gregory Huffman (Vanderbilt University)
    Abstract: A growth model is studied in which the destruction (or exit) and creative (or research) decisions are decoupled. This approach emphasizes that different agents make these interrelated decisions. The growth rate equals the product of a measure of the destruction and creation rates. The determinants of income mobility, income inequality, the lifespan of a firm, and the growth rate are studied. The equilibrium can either yield too high or low a level of innovation, but the destruction rate may also be too high or low. A non-linear tax/subsidy scheme, which alters the innovation and exit decisions, can improve welfare.
    Keywords: Economic Growth, Creative Destruction, Innovation, Tax Policy, Inequality
    JEL: E0 O3
    Date: 2019–07–22
  96. By: Sampreet Singh Goraya
    Abstract: This paper examines the relative importance of the caste system in explaining the resource misallocation in India and quantifies its impact on aggregate productivity. I document that the historically disadvantaged castes (LC) are less likely to enter entrepreneurship even though they are more productive on average. At the intensive margin, the LC entrepreneurs are less capital-intensive but have higher marginal revenue product of capital relative to high castes. In a quantitative model of entrepreneurship, I find that the LC face higher entry cost and stricter financial constraints and that such asymmetries reduce aggregate TFP by 2.54% and output by 6%.
    Keywords: misallocation, productivity, caste system
    JEL: O11 E23 D61
    Date: 2019–07

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