nep-mac New Economics Papers
on Macroeconomics
Issue of 2019‒08‒12
94 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects By Christopher D. Carroll; Jiri Slacalek; Martin Sommer
  2. Do Negative Interest Rates Affect Bank Risk-Taking? By AAlessio Reghezza; Jonathan Williams; Alessio Bongiovanni; Riccardo Santamaria
  3. Lending Standards, Productivity and Credit Crunches By Jonathan Swarbrick
  4. Income Redistribution, Consumer Credit, and Keeping up with the Riches By Mathias Klein; Christopher Krause
  5. Has globalization changed the inflation process? By Kristin Forbes
  6. New Essentials of Economic Theory I. Assumptions, Economic Space and Variables By Olkhov, Victor
  7. Dinar and Dirham As One Alternative Inflation Control Solution in Indonesia By Martono, Budi
  8. Inflation and deflationary biases in inflation expectations By Michael J. Lamla; Damjan Pfajfar; Lea Rendell
  9. Medium-term asymmetric fluctuations and EMU as an optimum currency area By Jeroen Hessel
  10. Inflation, Inflation Expectations, and the Phillips Curve: Working Paper 2019-07 By Yiqun Gloria Chen
  11. New Essentials of Economic Theory By Olkhov, Victor
  12. Yield Curve and Financial Uncertainty: Evidence Based on US Data By Efrem Castelnuovo
  13. Does the Bank of Thailand have the control over the money supply? By Jiranyakul, Komain
  14. Financial and fiscal interaction int the euro area crisis : this time was different By Alberto Caruso; Lucrezia Reichlin; Giovanni Ricco
  15. The Neo-Goodwinian model, reconsidered By Michael Cauvel
  16. Default, Bailouts and the Vertical Structure of Financial Intermediaries By Tatiana Damjanovic; Vladislav Damjanovic; Charles Nolan
  17. Helicopter Drops of Money under Secular Stagnation By Jean-Baptiste MICHAU
  18. Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database By Jeremie Cohen-Setton; Egor Gornostay; Colombe Ladreit de Lacharriere
  19. The OECD potential output estimation methodology By Thomas Chalaux; Yvan Guillemette
  20. RState dependent fiscal multipliers with preferences over safe assests By Ansgar Rannenberg
  21. Global real rates: a secular approach By Pierre-Olivier Gourinchas; Hélène Rey
  22. The mirror does not lie: Endogenous ?scal limits for Slovakia By Zuzana Mucka
  23. Criptovalute, Sovranismo e Sistema Monetario. By Salvatore Nisticò
  24. Should we care? : The economic effects of financial sanctions on the Russian economy By Pestova, Anna; Mamonov, Mikhail
  25. Digital Currencies and Central Banking: A Sense of Déjà Vu By Sigitas Siaudinis
  26. Do SVARs with sign restrictions not identify unconventional monetary policy shocks? By Jef Boeckx; Maarten Dossche; Alessandro Galesi; Boris Hofmann; Gert Peersman
  27. Expectations-driven liquidity traps: implications for monetary and fiscal policy By Nakata, Taisuke; Schmidt, Sebastian
  28. A Review of the South African Reserve Bank’s Financial Stability Policies By Hylton Hollander; Dawie van Lill
  30. Explaining Unusual Cash Patterns in 2018 By Walter Engert; Ben Fung; Jozsef Molnar; Gradon Nicholls
  31. The efficiency wage hypothesis and the role of corporate governance in firm performance By DiGabriele, Jim; Ojo, Marianne
  32. Macroprudential Regulation and Leakage to the Shadow Banking Sector By Stefan Gebauer; Falk Mazelis
  33. Time-Varying Money Demand and Real Balance Effects By Jonathan Benchimol; Irfan Qureshi
  34. The Preference for Net Wealth By Jean-Baptiste MICHAU
  35. On the Equivalence of Private and Public Money By Markus K. Brunnermeier; Dirk Niepelt
  36. Variable Mismeasurement in a Class of DSGE Models: Comment By Ray C. Fair
  37. SVARs Identification through Bounds on the Forecast Error Variance By Alessio Volpicella
  38. Size, Efficiency, Market Power, and Economies of Scale in the African Banking Sector By Simplice A. Asongu; Nicholas M. Odhiambo
  39. Harrodian instability in Kaleckian models and Steindlian solutions By Eckhard Hein
  40. Monetary policy, macroprudential policy, and financial stability By Martinez-Miera, David; Repullo, Rafael
  41. Product Cycle and Prices: a Search Foundation By Mei Dong; Toshiaki Shoji; Yuki Teranishi
  42. Time-Varying Local Projections By Germano Ruisi
  43. Exchange Rate Driven Balance Sheet Effect and Capital Flows to Emerging Market Economies By Can Kadirgan
  44. Some Important Macro Points By Ray C. Fair
  45. The macroeconomic effects of international uncertainty By Cuaresma, Jesús Crespo; Huber, Florian; Onorante, Luca
  46. Determinantes del crecimiento del crédito y el canal de préstamo bancario en el Perú: Un análisis a nivel de préstamos By Bustamante, José; Cuba, Walter; Nivín, Rafael
  47. Revisiting the global decline of the (non-housing) labor share By Gutiérrez, Germán; Piton, Sophie
  48. The Rise of Niche Consumption By Brent Neiman; Joseph S. Vavra
  49. The Great Trade Collapse: An Evaluation of Competing Stories By Hakan Yilmazkuday
  50. (A)-symétrie des cycles économiques dans la Communauté Economique des Etats de l'Afrique de l'Ouest (CEDEAO) By Zouri, Stéphane
  51. Revisiting the Global Decline of the (Non-Housing) Labor Share By German Gutierrez; Sophie Piton
  52. Monetary policy shocks and the health of banks By Jung, Alexander; Uhlig, Harald
  53. Complexity of ECB Communication and Financial Market Trading By Bernd Hayo; Kai Henseler; Marc Steffen Rapp
  54. The Marriage Market, Inequality and the Progressivity of the Income Tax By Tim Obermeier
  55. Credit constraints and the propagation of the Great Depression in Germany By Adam, Marc C.; Jansson, Walter
  56. How Oil Supply Shocks Affect the Global Economy: Evidence from Local Projections By Olivier Gervais
  57. On Average Establishment Size across Sectors and Countries By Pedro Bento; Diego Restuccia
  58. Fashion in Islamic Perspective By Pancarini, Ans Shinta
  59. Blended Finance Funds and Facilities: 2018 Survey Results By OECD
  60. Analyse du pass-through du taux d’intérêt au Maroc By harraou, Khalid
  61. Trump Pressuring the Fed By Peter Tillmann
  62. Business cycles,bilateral trade and international financial intergration : Evidence from Economic Community of West African States (ECOWAS) By Zouri, Stéphane
  63. An Application of Shapley Value Cost Allocation to Liquidity Savings Mechanisms By Rod Garratt
  64. Nonlinear relationship between the weather phenomenon El Niño and Colombian food prices By Davinson Stev Abril Salcedo; Luis Fernando Melo-Velandia; Daniel Parra-Amado
  65. Disentangling the role of the exchange rate in oil-related scenarios for the European stock market By Ojea Ferreiro, Javier
  66. Why should the government provide the infrastructure through the Public-Private Partnership mode? By Bara, Aman Appolinus; Chakraborty, Bidisha
  67. A new approach to estimation of actively managed component of foreign exchange reserves By Dąbrowski, Marek A.
  68. Why have interest rates fallen far below the return on capital By Magali Marx; Benoit Mojon; François R. Velde
  69. Markups and Productivity under Heterogeneous Financial Frictions By Carlo Altomonte; Domenico Favoino; Tommaso Sonno
  70. The Role of Central Banks and the Political Environment in Financial Stability: A Literature Review By Zoe Venter
  71. Is there any theory that explains the SEK? By Papahristodoulou, Christos
  72. Systemic Privacy as a Public Good: A Case for Electronic Cash By Rod Garratt; Maarten van Oordt
  73. Do Import Tariffs Generate Stagflationary Tendencies? By Mohammed, Mikidadu
  74. Predicting Future Recessions By David S. Miller
  75. Continuities and Discontinuities in Economic Forecasting By Tara M. Sinclair
  76. Financing low-carbon generation in the UK: The hybrid RAB model By Newbery, D.; Pollitt, M.; Reiner, D.; Taylor, S.
  77. Winter is possibly not coming : mitigating financial instability in an agent-based model with interbank market By Lilit Popoyan; Mauro Napoletano; Andrea Roventini
  78. The anatomy of the euro area interest rate swap market By Fontana, Silvia Dalla; Holz auf der Heide, Marco; Pelizzon, Loriana; Scheicher, Martin
  79. Temporal disaggregation of short time series with structural breaks: Estimating quarterly data from yearly emerging economies data By Jérôme TRINH
  80. The Real-Time Information Content of Financial Stress and Bank Lending on European Business Cycles By Jakob Fiedler; Josef Ruzicka; Thomas Theobald
  81. An Early Warning System for banking crises: From regression-based analysis to machine learning techniques By Elizabeth Jane Casabianca; Michele Catalano; Lorenzo Forni; Elena Giarda; Simone Passeri
  82. Impact of Crude Oil Price Changes on Household Consumption Expenditure in Oman (1990 -2016) By Abubakar El-Sidig A.A Mahdi
  83. How to Handle the Fiscal Crisis in Greece? Empirical Evidence Based on a Survey of Economic Experts By Martin Mosler; Niklas Potrafke; Markus Reischmann
  84. Heterogeneous beliefs and the Phillips curve By Meeks, Roland; Monti, Francesca
  85. Health care spending in the United States and other high-income countries By Papanicolas, Irene; Woskie, Liana R.; Jha, Ashish K.
  86. Kritik atas Sistem Bunga Perbankan Konvensional dan Solusi Moneter Islam By Mutaqin, Diana Agustina
  87. Alternative frameworks for measuring credit gaps and setting countercyclical capital buffers By Nicolas Reigl; Lenno Uuskula
  88. Price Control in Islamic Economics By Kusnadi, Jamaludin
  89. Do African economies grow similarly? By Franses, Ph.H.B.F.
  90. “Distant or close cousins: Connectedness between cryptocurrencies and traditional currencies volatilities” By Julián Andrada-Félix; Adrian Fernandez-Perez; Simón Sosvilla-Rivero
  91. A simple aggregate demand analysis with dynamic optimization in a small open economy By Ken-ichi Hashimoto; Yoshiyasu Ono
  92. The criterion validity of willingness to pay methods: a systematic review and meta-analysis of the evidence By Kanya, Lucy; Saghera, Sabina; Lewin, Alex; Fox-Rushby, Julia
  93. Data revisions to German national accounts: Are initial releases good nowcasts? By Strohsal, Till; Wolf, Elias
  94. Wirtschaftspolitik-Fehlorientierung des Westens nach 1989: Bankenkrise, Globalisierungs-Ordnungsdefizit und Desintegrationsdruck By Paul J.J. Welfens

  1. By: Christopher D. Carroll; Jiri Slacalek; Martin Sommer
    Abstract: We show that an estimated tractable ‘buffer stock saving’ model can match the 30-year decline in the U.S. saving rate leading up to 2007, the sharp increase during the Great Recession, and much of the intervening business cycle variation. In the model, saving depends on the gap between ‘target’ and actual wealth, with the target determined by measured credit availability and measured unemployment expectations. Following financial deregulation starting in the late 1970s, expanding credit supply explains the trend decline in saving, while fluctuations in wealth and consumer-survey-measured unemployment expectations capture much of the business-cycle variation, including the sharp rise during the Great Recession.
    JEL: D14 E2 E21 E24 E44
    Date: 2019–08
  2. By: AAlessio Reghezza (Bangor University); Jonathan Williams (Bangor University); Alessio Bongiovanni (University of Turin); Riccardo Santamaria (Sapienza – University of Rome)
    Abstract: We offer early evidence on how negative interest rate policy affects bank risk-taking. We identify a dichotomy between monetary policy and prudential regulation. Our primary result suggests NIRP produced an unintended outcome, which we measure as a 10 per cent reduction in banks’ holdings of risky assets. It infers that banks deleverage their balance sheets and invest in safer, liquid assets to meet new and binding capital and liquidity requirements. We find risk-taking behaviour is sensitive to capitalisation and banks with stronger capital ratios take more risks. Similarly, tighter prudential requirements could inadvertently retard economic growth should poorly capitalised banks reduce investment in riskier assets in favour of zero risk-weighted assets, such as, sovereign bonds to comply with risk-based capital requirements. Risk-taking is greater in less competitive markets because stronger market power insulates net interest margins and profitability. We obtain our results from a sample of 2,371 banks from 33 OECD countries between 2012 and 2016, and a difference-in-differences framework.
    Keywords: NIRP, Bank risk-taking, Monetary Policy, Difference-in-Differences, Propensity-Score-Matching.
    JEL: E43 E44 E52 E58 G21 F34
    Date: 2019–05
  3. By: Jonathan Swarbrick
    Abstract: We propose a macroeconomic model in which adverse selection in investment drives the amplification of macroeconomic fluctuations, in line with prominent roles played by the credit crunch and collapse of the asset-backed security market in the financial crisis. Endogenous lending standards emerge due to an informational asymmetry between borrowers and lenders about the riskiness of borrowers. By using loan approval probability as a screening device, banks ration credit following financial disturbances, generating large endogenous movements in total factor productivity, explaining why productivity often falls during crises. Furthermore, the mechanism implies that financial instability is heightened when interest rates are low.
    Keywords: Business fluctuations and cycles; Credit and credit aggregates; Financial markets; Financial stability; Interest rates; Productivity
    JEL: E22 E32 E44 G01
    Date: 2019–07
  4. By: Mathias Klein; Christopher Krause
    Abstract: In this study, we set up a DSGE model with upward looking consumption comparison and show that consumption externalities are an important driver of consumer credit dynamics. Our model economy is populated by two different household types. Investors, who hold the economy’s capital stock, own the firms and supply credit, and workers, who supply labor and demand credit to finance consumption. Furthermore, workers condition their consumption choice on the investors’ level of consumption. We estimate the model and find a significant keeping up-mechanism by matching business cycle statistics. In reproducing credit moments, our proposed model significantly outperforms a model version in which we abstract from consumption externalities.
    Keywords: Income redistribution, consumer credit, relative consumption motive, business cycles
    JEL: E21 E32 E44
    Date: 2019
  5. By: Kristin Forbes
    Abstract: The relationship central to most inflation models, between slack and inflation, seems to have weakened. Do we need a new framework? This paper uses three very different approaches - principal components, a Phillips curve model, and trend-cycle decomposition - to show that inflation models should more explicitly and comprehensively control for changes in the global economy and allow for key parameters to adjust over time. Global factors, such as global commodity prices, global slack, exchange rates, and producer price competition can all significantly affect inflation, even after controlling for the standard domestic variables. The role of these global factors has changed over the last decade, especially the relationship between global slack, commodity prices, and producer price dispersion with CPI inflation and the cyclical component of inflation. The role of different global and domestic factors varies across countries, but as the world has become more integrated through trade and supply chains, global factors should no longer play an ancillary role in models of inflation dynamics.
    Keywords: inflation, Phillips curve, trend-cycle, price dynamics, globalization
    JEL: E31 E37 E52 E58
    Date: 2019–07
  6. By: Olkhov, Victor
    Abstract: This paper develops economic theory framework free from general equilibrium assumptions. We describe macroeconomics as system of economic agents under action of n risks. Economic and financial variables of agents, their expectations and transactions between agents define macroeconomic variables. Agents variables depend on transactions between agents and transactions are performed under agents expectations. Agents expectations are formed by economic variables, transactions, expectations of other agents, other factors that impact macroeconomic evolution. We use risk ratings of agents as their coordinates on economic space and approximate description of economic and financial variables, transactions and expectations of numerous separate agents by description of variables, transactions and expectations as density functions on economic space. We describe evolution of macroeconomic density functions of variables, transactions and expectations and their flows induced by motion of separate agents on economic space due to change of agents risk rating. We apply our model to description of business cycles, present models of wave propagation for disturbances of economic variables and transactions, model asset price fluctuations and argue hidden complexities of classical Black-Scholes-Merton option pricing.
    Keywords: Economic Theory, Risk Ratings, Economic Space, Economic Flows, Density Functions
    JEL: C02 E00 E30 E32 G0 G12
    Date: 2019–03–30
  7. By: Martono, Budi
    Abstract: The phenomenon of soaring inflation and the depreciation of a country's currency has become a factual discussion on several discussions of economic disciplines. In the context of the rupiah exchange rate, an empirical fact explains that in some periods, the currency of the Republic of Indonesia, the rupiah, continued to weaken against the currencies that became references such as USD and Euro. It becomes interesting when you notice that some countries have the same profile as Indonesia, a currency issue becomes a global issue. Especially when we notice that the weakening of a country's currency will correlate in line with the soaring increase in inflation in a country. The economic growth of a country is influenced by several factors including the positive trade balance, significant GDP growth, and in some areas, a stable currency. It is common knowledge, that Indonesia as a country that has a high dependence on imports, always faces endless conditions when its import payments must be made using the dollar or euro. The amount issued by IDR to buy 1 USD is now almost reaching Rp. 15,000. Inevitably, the country's foreign exchange reserves as a barometer of a nation's economic strength when facing a crisis become a challenge. The need for a very high USD currency from large corporations and profit-seeking individuals from currency buying and selling transactions, adding to the burden of the IDR became even more severe which in turn also affected the soaring inflation.
    Keywords: Dinar and Dirham, Alternative, Inflation Control Solution.
    JEL: E25 E4 E41 E42 E52 G2
    Date: 2019–07–12
  8. By: Michael J. Lamla; Damjan Pfajfar; Lea Rendell
    Abstract: We explore the consequences of losing confidence in the price-stability objective of central banks by quantifying the inflation and deflationary biases in inflation expectations. In a model with an occasionally binding zero-lower-bound constraint, we show that both inflation bias and deflationary bias can exist as a steady-state outcome. We assess the predictions of this model using unique individual-level inflation expectations data across nine countries that allow for a direct identification of these biases. Both inflation and deflationary biases are present and sizable, but different across countries. Even among the euro-area countries, perceptions of the European Central Bank's objectives are very distinct.
    Keywords: inflation bias, deflationary bias, confidence in central banks, trust, effective lower bound, inflation expectations, microdata
    JEL: E31 E37 E58 D84
    Date: 2019–06
  9. By: Jeroen Hessel
    Abstract: Recent studies find that short-term fluctuations in EMU have been symmetric. This finding leads to benign views on the functioning of EMU as an optimum currency area (OCA), that are difficult to reconcile with the sovereign debt crisis. We try to solve this puzzle by looking at medium-term fluctuations instead, and reach five conclusions. First, medium-term fluctuations in EMU are much larger and less symmetric than short-term fluctuations. Second, medium-term fluctuations have become larger and less symmetric over time, while short-term fluctuations have become smaller and more symmetric. Third, medium-term fluctuations in EMU are less symmetric than in the US, while short-term fluctuations are more symmetric. Fourth, medium-term fluctuations in the euro area have become more strongly correlated with financial variables like credit and house prices, and less strongly correlated with real variables like productivity. Finally, medium-term fluctuations are more closely related to imbalances in price competitiveness, current accounts and budget deficits than short-term fluctuations. We conclude that our medium-term perspective has become relevant in the monetary union, due to the increasing importance of financial factors. It leads to less benign views on the functioning of EMU and on the endogenous OCA hypothesis.
    Keywords: EMU; optimum currency areas; economic fluctuations; financial cycle
    JEL: E44 E58 F36 G15 G21
    Date: 2019–07
  10. By: Yiqun Gloria Chen
    Abstract: This paper studies the current state of inflation dynamics using a Phillips curve model, assesses the degree of anchoring of inflation expectations, and analyzes the sensitivity of inflation to cyclical fluctuations of economic conditions.
    JEL: E17 E31 E37
    Date: 2019–08–02
  11. By: Olkhov, Victor
    Abstract: This paper develops economic theory tools and framework free from general equilibrium assumptions. We describe macroeconomics as system of economic agents under action risks. Economic and financial variables of agents, their expectations and transactions between agents define macroeconomic variables. Agents variables depend on transactions between agents and transactions are performed under agents expectations. Agents expectations are formed by economic variables, transactions, expectations of other agents, other factors that impact macroeconomic evolution. We use risk ratings of agents as their coordinates on economic space and approximate description of economic and financial variables, transactions and expectations of numerous separate agents by description of variables, transactions and expectations of aggregated agents as density functions on economic space. Motion of separate agents on economic space due to change of agents risk rating induce economic flows of variables, transactions and expectations and we describe their impact on economic evolution. We apply our model equations to description of business cycles, model wave propagation for disturbances of economic variables and transactions, model asset price fluctuations and argue hidden complexities of classical Black-Scholes-Merton option pricing.
    Keywords: economic theory; risk ratings; economic space; economic flows; density functions
    JEL: C00 C18 E30 E32 G00 G12 G17
    Date: 2019–07–12
  12. By: Efrem Castelnuovo
    Abstract: How do short and long term interest rates respond to a jump in financial uncertainty? We address this question by conducting a local projections analysis with US monthly data, period: 1962-2018. The state-of-the-art financial uncertainty measure proposed by Ludvigson, Ma, and Ng (2019) is found to predict movements in interest rates at different maturities. In particular, an increase in financial uncertainty is found to trigger a negative and significant response of both short and long term interest rates. The response of the short end of the yield curve (i.e., of short term interest rates) is found to be stronger than that of the long end (i.e., of long term ones). In other words, a financial uncertainty shock causes a temporary steepening of the yield curve. This result is consistent, among other interpretations, with medium-term expectations of a recovery in real activity after a financial uncertainty shock.
    Keywords: financial uncertainty shocks, yield curve, local projections, inflation dynamics, output growth
    JEL: C22 E32 E52
    Date: 2019
  13. By: Jiranyakul, Komain
    Abstract: This paper estimates the broad money multiplier for Thailand using monthly data from 1997M1 to 2017M12. It is found that there is nonlinear relationship between money supply and monetary base. An increase in monetary base causes the broad money supply to increase proportionally, and vice versa. This implies that the estimated money multiplier is stable during the period of investigation. This finding suggests that the Bank of Thailand has the ability to control the broad money supply. The finding also points to the soundness of the current monetary policy regime.
    Keywords: Money multiplier, exogeneity of money supply, cointegration
    JEL: E5 E51 E52
    Date: 2019–07
  14. By: Alberto Caruso; Lucrezia Reichlin (London Business School (LBS)); Giovanni Ricco (Observatoire français des conjonctures économiques)
    Abstract: This paper highlights the anomalous characteristics of the Euro Area ‘twin crises’ by contrasting the aggregate macroeconomic dynamics in the period 2009-2013 with the business cycle fluctuations of the previous decades. We report three novel stylised facts. First, the contraction in output was marked by an anomalous downfall in private investment and an increase in households’ savings, while consumption and unemployment followed their historical relation with GDP. Second, households’ and financial corporations’ debts, and house prices deviated from their precrisis trends, while non-financial corporations’ debt followed historical regularities. Third, the jumps in the public deficit GDP and debt-GDP ratios in 2008-2009 were unprecedented and so was the fiscal consolidation that followed. Our analysis points to the financial nature of the crisis as a likely explanation for these facts. Importantly, the ‘anomalous’ increase in public debt is in large part explained by extraordinary measures in support of the financial sector, which show up in the stock-flow adjustments and reveal a key interaction between the fiscal and the financial sectors.
    Keywords: Euro area; Government debt; Financial crisis; Business cycles
    JEL: C11 C32 C50 E52 E62 F40
    Date: 2019–06
  15. By: Michael Cauvel
    Abstract: This paper estimates the relationship between aggregate demand and the functional distribution of income in the U.S. economy using a series of aggregative VAR models. Like most previous aggregative studies, it finds evidence of Goodwin cycle effects - i.e. profit-led demand and a profit-squeeze effect - for the U.S. economy in baseline estimates using assumptions traditionally used in the aggregative literature. However, the results of other specifications suggest that these observed Goodwin cycle effects likely reflect a misinterpretation of procyclical variation in labor productivity - one of the main components of the wage share. When correcting for the cyclical effects of demand on productivity, the results differ dramatically; estimates are indicative of wage-led demand, and the effects of demand on distribution are mixed or insignificant. These findings suggest that evidence of Goodwin cycle effects is likely the result of biased estimates. Instead, it appears that the short-run relationship between the wage share and demand should be viewed as a combination of wage-led demand and procyclical productivity effects.
    Keywords: Functional distribution of income, neo-Kaleckian model, wage-led and profit-led demand regimes
    JEL: E25 E11 E12 E32
    Date: 2019
  16. By: Tatiana Damjanovic (Durham Business School); Vladislav Damjanovic (Durham Business School); Charles Nolan (Adam Smith Business School, University of Glasgow)
    Abstract: Should we break up banks and limit bailouts? We study vertical integration of deposit-taking institutions and those investing in risky equity. Integration, by eliminating a credit spread, increases output but entails larger, more frequent bailouts. Bailouts of leveraged institutions boost economic activity but are costly. The optimal structure of intermediaries depends largely on the efficiency of government intervention, the competitiveness of the Önancial sector and shocks hitting the economy. Separated institutions are preferred when profit margins are small, financial shocks systemic and volatile, and bailouts costly. For a baseline calibration, universal banks are typically preferred.
    Keywords: Financial intermediation in DSGE models, Vertical structure of financial intermediary, separation of retail and investment banks, bailouts, trade-off between financial stability and efficiency.
    JEL: E13 E44 G11 G24 G28
    Date: 2019–05
  17. By: Jean-Baptiste MICHAU (CREST; Ecole Polytechnique.)
    Abstract: What are the effects of helicopter drops of money under secular stagnation? This paper shows that, if the government cannot sustain a Ponzi debt scheme under full employment, then helicopter drops of money cannot transfer real wealth to households under secular stagnation. In that case, despite being in a permanent liquidity trap, a one-off helicopter drop triggers an upward jump in the price level, without any real effect on the economy. Conversely, if a Ponzi scheme can be sustained, then the helicopter drop can stimulate aggregate demand by raising household wealth. If the stagnation real interest rate is larger than the economic growth rate, the economy converges to full employment and a sustainable Ponzi scheme and, otherwise, it gradually reverts back to stagnation. Finally, continuous helicopter drops of money under stagnation must induce the economy to reach a full employment steady state, with or without a Ponzi scheme.
    Keywords: Helicopter drops of money, Liquidity trap, Ponzi scheme, Secular stagnation.
    JEL: E12 E31 E63 H63
    Date: 2019–06–01
  18. By: Jeremie Cohen-Setton (Peterson Institute for International Economics); Egor Gornostay (Peterson Institute for International Economics); Colombe Ladreit de Lacharriere (Peterson Institute for International Economics)
    Abstract: This paper estimates the effects of fiscal stimulus on economic activity using a novel database on large fiscal expansions for 17 OECD countries for the period 1960-2006. The database is constructed by combining the statistical approach to identifying large shifts in fiscal policy with narrative evidence from contemporaneous policy documents. When correctly identified, large fiscal stimulus packages are found to have strong and persistent expansionary effects on economic activity, with a multiplier of 1 or above. The effects of stimulus are largest in slumps and smallest in booms.
    Keywords: Fiscal Policy, Public Economics, Public Finance, Tax Elasticities, National Government Expenditure, National Budget, Macroeconomic Policy, Stabilization, Macroeconomic History
    JEL: E6 H3 H5 H6 N1
    Date: 2019–07
  19. By: Thomas Chalaux; Yvan Guillemette
    Abstract: This paper describes the methodology used in the OECD Economics Department to produce historical estimates and short-run projections of potential output. These estimates are used mainly in the OECD Economic Outlook, in country surveys and as starting point for long-run scenarios. Total-economy potential output is modelled using a constant-returns-to-scale Cobb-Douglas production function with fixed factor shares. The three main inputs are labour, fixed capital excluding housing and labour efficiency, the latter obtained as a decomposition residual. The trend unemployment rate is estimated by Kalman filtering within a forward-looking Phillips curve. Other trend components are obtained by HP-filtering but labour efficiency and the labour force participation rate are cyclically adjusted before filtering to help alleviate the end-point problem associated with filters. This pre-filtering cyclical adjustment is especially helpful at cyclical turning points. It helps to lower the cyclicality of potential output as well as the extent of future revisions.
    Keywords: capital stock, labour efficiency, NAIRU, output gap, potential growth, potential output
    JEL: E20 E32
    Date: 2019–08–05
  20. By: Ansgar Rannenberg (Economics and Research Department, National Bank of Belgium)
    Abstract: I examine the effect of fiscal policy at the zero lower bound if households have preferences over safe assets (POSA) calibrated consistent with evidence on household savings behavior and individual discount rates, and empirical estimates of the effect of the supply of US government debt on government bond yields. POSA attenuate the effect of changes in the household’s permanentincome on her consumption today and implies a wealth effect from government bonds. It therefore strongly increases the multiplier of a permanent expenditure change, moving it much closer to the multiplier of temporary expenditure changes. The result becomes even stronger with credit constrained households and firms.
    Keywords: Fiscal multiplier of temporary and persistent expenditure changes, Zero lower bound, wealth in the utility function
    JEL: E52 E62 E32
    Date: 2019–07
  21. By: Pierre-Olivier Gourinchas; Hélène Rey
    Abstract: The current environment is characterized by low real rates and by policy rates close to or at their effective lower bound in all major €nancial areas. We analyze these unusual economic conditions from a secular perspective using data on aggregate consumption, wealth and asset returns. Our present-value approach decomposes fluctuations in the global consumption-to-wealth ratio over long periods of time and show that this ratio anticipates future movements of the global real risk-free rate. Our analysis identifies two historical episodes where the consumption-to-wealth ratio declined rapidly below its historical average: in the roaring 1920s and again in the exuberant 2000s. Each episode was followed by a severe global €financial crisis and depressed real rates for an extended period of time. Our empirical estimates suggest that the world real rate of interest is likely to remain low or negative for an extended period of time.
    Keywords: real interest rates, consumption-wealth ratio, financial boom-bust cycle
    JEL: E21 E43 E40
    Date: 2019–07
  22. By: Zuzana Mucka (Council for Budget Responsibility)
    Abstract: We study the interactions among ?scal policy, ?scal limits and the associated sovereign risk premium. The ?scal limit distribution, which measures the ability of the government to service its debt, arises endogenously from dynamic Laffer curves. We assume a feedback loop between the ?scal limit distribution and the risk premium and determine them simultaneously using and ef?cient iterative scheme. A nonlinear relationship between the sovereign risk premium and the level of government debt then emerges in equilibrium. The model is calibrated to Slovak data assuming steeply growing age-related transfers and volatile business cycle. We study the impact of various model parameters on the conditional (state-dependent) and unconditional distributions of the ?scal limit. Fiscal limit distributions obtained via Markov–Chain–Monte–Carlo regime switching algorithm depend on the rate of growth of government transfers, the degree of countercyclicality of policy, and the distribution of the underlying economic conditions. We ?nd that both distributions are considerably more heavy-tailed compared with those usually obtained in the literature for advanced economies, and are very sensitive to the size and rate of growth of transfers, the business cycle phase and the ?scal policy credibility. The main policy message is that the Maastricht debt limit of 60 percent of GDP is not safe enough for Slovakia. Furthermore, credible reforms reining in age-related spending and thus stabilising public ?nance in the long-run, should be a priority.
    Keywords: Simulation Methods and Modelling, Fiscal Policy, Government Expenditures, Debt Management and Sovereign Debt
    JEL: C15 C63 E62 H5 H63
    Date: 2019–05
  23. By: Salvatore Nisticò (Department of Social Sciences and Economics, Sapienza University of Rome (IT).)
    Abstract: La storia finanziaria dell’ultimo decennio ci offre diversi spunti di riflessione sullo stato e le prospettive dell’attuale sistema monetario. Le dinamiche sui mercati delle criptovalute e le trasformazioni politiche in atto sembrano sottoporre l’attuale assetto monetario a pressioni di segno opposto: mentre le prime promuovono – da una prospettiva liberale e sovranazionale – la riduzione della contiguità tra emissione monetaria e potere politico, le seconde – da una prospettiva populista e sovranista – premono per un suo deciso rafforzamento. Questo lavoro discute la natura e le implicazioni di queste due tensioni, attraverso le lenti della memoria storica del nostro continente, e del pensiero di A. Smith e F. Von Hayek.
    Keywords: Smith, Hayek, Criptovalute, Sovranismo, Moneta, Banche Centrali.
    JEL: B12 B25 E31 E51 E58 N23
    Date: 2019–07
  24. By: Pestova, Anna; Mamonov, Mikhail
    Abstract: We employ a Bayesian VAR model to estimate the economic effects on the Russian economy from Western financial sanctions imposed in 2014. Sanctions caused a decrease in the amount of out-standing Russian corporate external debt, but it occurred during an episode of falling oil prices. We disentangle the effects of sanctions and oil prices by computing out-of-sample projections of key Russian macroeconomic variables conditioned solely on the oil price drop and on both the oil price drop and external debt deleveraging. Declining oil prices alone do not explain the depth of economic crisis in Russia, but we get rather accurate conditional forecasts when the actual path of external debt deleveraging is added. We treat the difference between these two projections as the effect of sanctions against Russia. The effect is modest, yet significant, for most of the variables discussed. While our estimate of the impact of sanctions on GDP growth has large uncertainty, over two-thirds of the density lies in the negative area.
    JEL: C51 E37 E44 F34
    Date: 2019–07–29
  25. By: Sigitas Siaudinis (Bank of Lithuania)
    Abstract: This paper examines the implications of digital currencies – both private cryptocurrencies and central bank digital currencies (CBDCs) – for central banking. We discuss some déjà vu episodes from monetary history in order to obtain a clearer understanding the present and potential implications of these currencies. We find that not only the current limitations of private cryptocurrencies, but also their conceptual underpinnings, argue against their replacement of conventional money. The two main potential problems with broadly accessible (general purpose) CBDC are a digital run and an excessive involvement of a central bank in the funding of the real economy. Meanwhile, alternative reserve-backed accounts or tokens (an implicit CBDC known as Tobin’s alternative) would also be exposed to these problems, albeit in a less pronounced way. CBDC-related hopes for monetary policy to eliminate the effective lower bound constraint are found to be exaggerated, even in a cashless world. We argue that central banks’ response to the digitalisation trend should be an integrative solution which satisfies the public demand for a safe means of payment, safeguards private innovations, and ensures financial stability. We conclude that there is no observable form of CBDC that would serve as a best-choice central bank response in advanced economies. Such a response might be considered as a temporary solution (if any), however, in emerging economies with weak financial inclusion.
    Keywords: private cryptocurrencies, central bank digital currency (CBDC), fintechs, financial stability, monetary policy
    JEL: E51 E58 N20
    Date: 2019–08–06
  26. By: Jef Boeckx; Maarten Dossche; Alessandro Galesi; Boris Hofmann; Gert Peersman
    Abstract: A growing empirical literature has shown, based on structural vector autoregressions (SVARs) identified through sign restrictions, that unconventional monetary policies implemented after the outbreak of the Great Financial Crisis (GFC) had expansionary macroeconomic effects. In a recent paper, Elbourne and Ji (2019) conclude that these studies fail to identify true unconventional monetary policy shocks in the euro area. In this note, we show that their findings are actually fully consistent with a successful identification of unconventional monetary policy shocks by the earlier studies and that their approach does not serve the purpose of evaluating identification strategies of SVARs.
    Keywords: unconventional monetary policy, SVARs, shock identification
    JEL: C32 E52
    Date: 2019–06
  27. By: Nakata, Taisuke; Schmidt, Sebastian
    Abstract: We study optimal monetary and fiscal policy in a New Keynesian model where occasional declines in agents’ confidence can give rise to persistent liquidity trap episodes. Unlike in the case of fundamental-driven liquidity traps, there is no straightforward recipe for mitigating the welfare costs and the systematic inflation shortfall associated with expectations-driven liquidity traps. Raising the inflation target or appointing an inflation-conservative central banker improves inflation outcomes away from the lower bound but exacerbates the shortfall at the lower bound. Using government spending as an additional policy tool worsens stabilization outcomes both at and away from the lower bound. However, appointing a policymaker who is sufficiently less concerned with government spending stabilization than society can eliminate expectations-driven liquidity traps altogether. JEL Classification: E52, E61, E62
    Keywords: discretion, effective lower bound, fiscal policy, monetary policy, policy delegation, sunspot equilibria
    Date: 2019–08
  28. By: Hylton Hollander (Department of Economics, Stellenbosch University); Dawie van Lill (Department of Economics, Stellenbosch University)
    Abstract: The establishment of the Financial Stability Board (FSB) in April 2009 by the Group of 20 (G20) leaders legitimized the South African Reserve Bank’s (SARB) role to incorporate a clearly defined strategy to deal with instability generated in the financial sector. Accordingly, as affirmed by the “twin peaks” regulatory framework, in 2017 the SARB was tasked with a new mandate to protect and enhance the financial system. In its capacity as Prudential Authority, the SARB emphasize that the purpose of macroprudential policy is to ensure a resilient financial system and to limit the build-up of systemic risk, with the ultimate objective of curtailing macroeconomic costs associated with any financial distress. Although macroprudential policies are designed to mitigate financial instability, the lack of consensus on a clear definition for financial stability is well-documented. This article contextualizes the SARB’s formal depiction of financial stability in relation to other central banks and in the academic literature. In addition, we also evaluate the appropriateness of the SARB’s framework in limiting financial instability, and its associated influence on the real economy. We pay particular attention to the SARB’s alignment within international best practices (the Basel accords), and whether or not this is sufficient within an integrated global financial system. Our preliminary finding is that the SARB has showcased commendable restraint in the face of mounting pressure to implement macroprudential tools at its disposal.
    Keywords: Financial stability, macroprudential policy
    JEL: E44 E61
    Date: 2019
  29. By: Donato Masciandaro; Davide Romelli
    Abstract: This chapter reviews the evolution of the theory of monetary policy design since the 1980s, highlighting the emerging role of central banker psychology. Three subsequent stages are evident. First, the central bank was considered as an independent institution (modern economics). Second, central bankers were assumed to be delegated bureaucrats (advanced political economy). Third, a link with psychology was established (behavioural economics).
    JEL: E52 E58
    Date: 2019
  30. By: Walter Engert; Ben Fung; Jozsef Molnar; Gradon Nicholls
    Abstract: There was an unusually large decline of bank notes in circulation in October 2018. Some have argued that this was due to the legalization of cannabis in Canada in mid-October. We consider whether that explanation is consistent with the evidence and conclude that the unusual cash patterns observed in 2018 are more likely the result of an operational event specific to Toronto. Nevertheless, it would be useful to continue monitoring developments in cannabis consumption and its impact on the demand for cash.
    Keywords: Bank notes; Digital Currencies and Fintech; Financial services
    JEL: E41 E42 E58
    Date: 2019–07
  31. By: DiGabriele, Jim; Ojo, Marianne
    Abstract: Implications of the digital economy and its impact on the Economics of Employment in the 21st Century are reflected through lower wages which have been fueled through the rise of Information Technology, with the consequential advents of phenomena such as the Fourth Industrial Revolution and the rise of emerging technologies such as Artificial Intelligence, block chain systems, Vertical Integration, Hyper-focused specialty lending, Lender-fintech partnerships, New engagement models, Product Innovation, to name but a few. As well as a consideration of the two-fold contribution to the literature, as highlighted in their paper, “Financial Disruptions and the Cyclical Upgrading of Labor” (2017:6), and elaborated on by Epstein et al (2017:6-8), the reconciliation of two quantitative limitations of current general equilibrium theories constituting part of such contribution, is also re iterated. The inability to account for variables which are independent of exogenously or endogenously determined factors and which are outside their model, also necessitates the incorporation of other theories and factors to be taken into account in arriving at more accurate conclusions which determine firm performance.
    Keywords: efficiency wage hypothesis; pro cyclicality; financial cycles; firm performance; corporate governance
    JEL: D4 D8 E3 E5 E6 G2 G3 M4
    Date: 2017–08
  32. By: Stefan Gebauer; Falk Mazelis
    Abstract: Macroprudential policies for financial institutions have received increasing prominence since the global financial crisis. These policies are often aimed at the commercial banking sector, while a host of other non-bank financial institutions, or shadow banks, may not fall under their jurisdiction. We study the effects of tightening commercial bank regulation on the shadow banking sector. For this purpose, we develop a DSGE model that differentiates between regulated, monopolistically competitive commercial banks and a shadow banking system that relies on funding in a perfectly competitive market for investments. After estimating the model using euro area data from 1999-2014 including information on shadow banks, we find that tighter capital requirements on commercial banks increase shadow bank lending, which may have adverse financial stability effects. Coordinating the macroprudential tightening with monetary easing can limit this leakage mechanism, while still bringing about the desired reduction in aggregate lending. We discuss how regulators that either do or do not consider credit leakage to shadow banks set policy in response to macroeconomic shocks. Lastly, in a counterfactual analysis, we then compare how a macroprudential policy implemented before the crisis on all financial institutions, or just on commercial banks, would have dampened the leverage cycle.
    Keywords: Macroprudential Regulation, Monetary Policy, Shadow Banking, Non-Bank Financial Institutions, Financial Frictions
    JEL: E58 G23 G28
    Date: 2019
  33. By: Jonathan Benchimol (Bank of Israel, Research Department, Jerusalem, Isreal); Irfan Qureshi (Asian Development Bank, Macroeconomics Division, Metro Manila, Philippines)
    Abstract: This paper presents an analysis of the stimulants and consequences of money demand dynamics. By assuming that household?s money holdings and consumption preferences are not separable, we demonstrate that the interest-elasticity of demand for money is a function of the household?s preference to hold real balances, the extent to which these preferences are not separable in consumption and real balances, and trend infl?ation. An empirical study of U.S. data revealed that there was a gradual fall in the interest elasticity of money demand of approximately one-third during the 1970s due to high trend in?flation. A further decline in the interest-elasticity of the demand for money was observed in the 1980s due to the changing household preferences that emerged in response to ?financial innovation. These developments led to a reduction in the welfare cost of infl?ation that subsequently explains the rise in monetary neutrality observed in the data.
    Keywords: Time-Varying Money Demand, Real Balance Effect, Welfare Cost of Infl?ation, Monetary Neutrality
    JEL: E31 E41 E52
    Date: 2019–07
  34. By: Jean-Baptiste MICHAU (CREST; Ecole Polytechnique.)
    Abstract: This paper provides a de…nition of the preference for wealth such that households do not su¤er from any wealth illusion from the ownership of government bonds. People understand that public indebtedness will translate into future taxes. Each household is therefore assumed to own a share government liabilities equal to the future taxes that these liabilities will cause. A household’s net wealth is de…ned as the sum its private wealth and of its own share of public liabilities. The preference for net wealth ensures that the Ricardian equivalence holds. The endogeneity of the ownership share through distortionary taxes is carefully investigated.
    Keywords: Government debt, Preference for wealth, Ricardian equivalence.
    JEL: E21 E62 H63
    Date: 2019–07–29
  35. By: Markus K. Brunnermeier; Dirk Niepelt
    Abstract: When does a swap between private and public money leave the equilibrium allocation and price system unchanged? To answer this question, the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles. We derive sufficient conditions for equivalence and apply them in the context of the “Chicago Plan”, cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). Our results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability.
    Keywords: money creation, monetary system, inside money, outside money, equivalence, CBDC, Chicago Plan, sovereign money
    JEL: E40 E50 G10 H60
    Date: 2019
  36. By: Ray C. Fair (Cowles Foundation, Yale University)
    Abstract: This comment points out mismeasurement of three of the variables in the DSGE model in Smets and Wouters (2007) and in models that use the Smets-Wouters model as a benchmark. The mismeasurement appears serious enough to call into question the reliability of empirical results using these variables.
    Keywords: DSGE models, Macro data
    JEL: E12 E32
    Date: 2019–02
  37. By: Alessio Volpicella (Queen Mary University of London)
    Abstract: Sign-restricted Structural Vector Autoregressions (SVARs) are increasingly common. However, they usually result in a set of structural parameters that have very different implications in terms of impulse responses, elasticities, historical decomposition and forecast error variance decomposition (FEVD). This makes it difficult to derive meaningful economic conclusions, and there is always the risk of retaining structural parameters with implausible implications. This paper imposes bounds on the FEVD as a way of sharpening set-identification induced by sign restrictions. Firstly, in a bivariate and trivariate setting, this paper analytically proves that bounds on the FEVD reduce the identified set. For higher dimensional SVARs, I establish the conditions in which the placing of bounds on the FEVD delivers a non-empty set and sharpens inference; algorithms to detect non-emptiness and reduction are also provided. Secondly, under a convexity criterion, a prior-robust approach is proposed to construct estimation and inference. Thirdly, this paper suggests a procedure to derive theory-driven bounds that are consistent with the implications of a variety of popular, but different, DSGE models, with real, nominal, and financial frictions, and with sufficiently wide ranges for their parameters. The methodology is generalized to incorporate uncertainty about the bounds themselves. Fourthly, a Monte-Carlo exercise verifies the effectiveness of those bounds in identifying the data-generating process relative to sign restrictions. Finally, a monetary policy application shows that bounds on the FEVD tend to remove unreasonable implications, increase estimation precision, sharpen and also alter the inference of models identified through sign restrictions.
    Keywords: Bounds, Forecast Error Variance, Monetary Policy, Set Identification, Sign Restrictions, Structural Vector Autoregressions (SVARs)
    JEL: C32 C53 E10 E52
    Date: 2019–07–29
  38. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: There is a growing body of evidence that interest rate spreads in Africa are higher for big banks compared to small banks. One concern is that big banks might be using their market power to charge higher lending rates as they become larger, more efficient, and unchallenged. In contrast, several studies found that when bank size increases beyond certain thresholds, diseconomies of scale are introduced that lead to inefficiency. In that case, we also would expect to see widened interest margins. This study examines the connection between bank size and efficiency to understand whether that relationship is influenced by exploitation of market power or economies of scale. Using a panel of 162 African banks for 2001–2011, we analyzed the empirical data using instrumental variables and fixed effects regressions, with overlapping and non-overlapping thresholds for bank size. We found two key results. First, bank size increases bank interest rate margins with an inverted U-shaped nexus. Second, market power and economies of scale do not increase or decrease the interest rate margins significantly. The main policy implication is that interest rate margins cannot be elucidated by either market power or economies of scale. Other implications are discussed.
    Keywords: Sub-Saharan Africa; banks; lending rates; efficiency; Quiet Life Hypothesis; competition
    JEL: E42 E52 E58 G21 G28
    Date: 2018–01
  39. By: Eckhard Hein
    Abstract: The notion of dynamic instability of demand driven growth put forward by Harrod (1939) has triggered several responses in the history of economic thought. The modern Kaleckian solution, including Bhaduri/Marglin (1990) among several others, considers the rate of capacity utilisation to be endogenous beyond the short run, thus assuming, explicitly or implicitly, that Harrod's warranted rate of growth is either irrelevant or endogenous in the long run, eliminating the problem of Harrodian instability. In the modern debate several authors have criticised this Kaleckian approach, as reviewed in Hein/Lavoie/van Treeck (2011, 2012). In this debate, however, two arguments proposed by Steindl (1979, 1985) in favour of at least partial endogeneity of the warranted rate of growth have received little attention. The first is related to the endogeneity of the capital output ratio through endogenous capital scrapping (Steindl 1979); the second refers to government budget balances and the related effects on the aggregate propensity to save (Steindl 1979, 1985). In this paper we will therefore discuss in particular the two Steindlian arguments. For this purpose the model framework proposed by Hein/Lavoie/van Treeck (2011, 2012) will be extended in order to allow for endogenous capital scrapping and endogenous overall propensities to save through variations in the government financial balance.
    Keywords: Kaleckian distribution and growth models, Harrodian instability, Steindl
    JEL: E12 E20 O41
    Date: 2019
  40. By: Martinez-Miera, David; Repullo, Rafael
    Abstract: This paper reexamines from a theoretical perspective the role of monetary and macroprudential policies in addressing the build-up of risks in the financial system. We construct a stylized general equilibrium model in which the key friction comes from a moral hazard problem in firms financing that banks’ equity capital serves to ameliorate. Tight monetary policy is introduced by open market sales of government debt, and tight macroprudential policy by an increase in capital requirements. We show that both policies are useful, but macroprudential policy is more effective in fostering financial stability and leads to higher social welfare. JEL Classification: G21, G28, E44, E52
    Keywords: bank monitoring, capital requirements, financial stability, intermediation margin, macroprudential policy, monetary policy
    Date: 2019–07
  41. By: Mei Dong (University of Melbourne); Toshiaki Shoji (Seikei University); Yuki Teranishi (Keio University)
    Abstract: This paper develops a price model with a product cycle. Through a frictional product market with search and matching frictions, an endogenous product cycle is accompanied with a price cycle where a price for a new good and a price for an existing good are set in a different manner. This model nests a New Keynesian Phillips curve with the Calvo's price adjustment as a special case and generates several new phenomena. Our simple model captures observed facts in Japanese product level data such as the pro-cyclicality among product entry, demand, and price. In a general equilibrium model, an endogenous product entry increase variation of the inflation rate by 20 percent in Japan. This number increases to 72 percent with a price discounting after a first price.
    Keywords: Phillips curve; product and price cycles; search and matching
    Date: 2019–08
  42. By: Germano Ruisi (Queen Mary University of London)
    Abstract: In recent years local projections have become a more and more popular methodology for the estimation of impulse responses. Besides being relatively easy to implement, the main strength of this approach relative to the traditional VAR one is that there is no need to impose any specific assumption on the dynamics of the data. This paper models local projections in a time-varying framework and provides a Gibbs sampler routine to estimate them. A simulation study shows how the performance of the algorithm is satisfactory while the usefulness of the model developed here is shown through an application to fiscal policy shocks.
    Keywords: Time-Varying Coefficients, Local Projections
    JEL: C11 C32 C36 E32
    Date: 2019–07–29
  43. By: Can Kadirgan
    Abstract: Turkish firm-level data suggests that firms borrowing from domestic banks have, on average, a higher degree of currency mismatch than firms with direct access to international financial markets. Higher FX exposure for the former group implies that their balance sheet are more likely to deteriorate when the local currency depreciates. This risk might in turn spillover onto creditors, potentially affecting the financial health of domestic banks. In a set of emerging market economies, I indeed find that when global liquidity tightens, domestic banks are more adversely affected by the above described channel, than firms with direct access to international financial markets. When the US$ index is countercyclical over the global credit cycle, countries whose foreign currency liabilities are heavily weighted in US$ experience a larger valuation effect. Using this variation to identify the exchange rate driven balance sheet effect, I find that banking sectors in countries heavily indebted in US$ have more difficulties accessing foreign funds when global liquidity tightens. In the same countries, this additional hindrance is however absent for firms with direct access to international financial markets. I develop a partial equilibrium model whose predictions are consistent with these results. The results favor the implementation of FX-related macro prudential policies during periods of abundant global liquidity. These policies should reinforce the financial stability of the banking system at a potential reversal of global funds.
    Keywords: FX debt, Balance sheet effect, Capital flows, Banks, Systemic risk, Global liquidity
    JEL: E0 F0 F3
    Date: 2019
  44. By: Ray C. Fair (Cowles Foundation, Yale University)
    Abstract: This paper lists 19 points that follow from results I have obtained using a structural macroeconomic model (SEM). Such models are more closely tied to the aggregate data than are DSGE models, and I argue that DSGE models and similar models should have properties that are consistent with these points. The aim is to try to bring macro back to its empirical roots.
    Keywords: Macro models, Macro properties
    JEL: E1 E2 E3
    Date: 2019–02
  45. By: Cuaresma, Jesús Crespo; Huber, Florian; Onorante, Luca
    Abstract: This paper proposes a large-scale Bayesian vector autoregression with factor stochastic volatility to investigate the macroeconomic consequences of international uncertainty shocks in G7 countries. The curse of dimensionality is addressed by means of a global-local shrinkage prior that mimics certain features of the well-known Minnesota prior, yet provides additional flexibility in terms of achieving shrinkage. The factor structure enables us to identify an international uncertainty shock by assuming that it is the joint volatility process that determines the dynamics of the variance-covariance matrix of the common factors. To allow for first and second moment shocks we, moreover, assume that the uncertainty factor enters the VAR equation as an additional regressor. Our findings suggest that the estimated uncertainty measure is strongly connected to global equity price volatility, closely tracking other prominent measures commonly adopted to assess uncertainty. The dynamic responses of a set of macroeconomic and financial variables show that an international uncertainty shock exerts large effects on all economies and variables under consideration. JEL Classification: C30, E52, F41, E32
    Keywords: factor stochastic volatility, global propagation of shocks, global uncertainty, vector autoregressive models
    Date: 2019–07
  46. By: Bustamante, José; Cuba, Walter; Nivín, Rafael (Banco Central de Reserva del Perú)
    Abstract: Este documento de trabajo utiliza información a nivel de créditos bancarios provenientes del Registro Consolidado de Créditos del sistema financiero Peruano con el fin de determinar el rol de las características específicas de las entidades bancarias (por ejemplo, tamaño, liquidez, capitalización, fondeo, ingresos y rentabilidad) en la oferta de crédito tanto en moneda local como extranjera. Asimismo, se analiza cómo estas características afectan la respuesta de los bancos ante choques de política monetaria. Finalmente, se analiza cómo los cambios en las condiciones financieras globales y en los precios de commodities afectan la relación entre las características propias a los bancos y la oferta de crédito. Los resultados muestran que bancos con altos niveles de capital, liquidez y capital, así como los de menor riesgo tienen a ofrecer mayor crédito, especialmente en moneda local. Adicionalmente, encontramos evidencia que los requerimientos de encaje tanto en moneda local como extranjera son efectivos en contener el crédito doméstico peruano, respaldando al activo uso por parte del BCRP de los requerimientos de encaje como herramienta macroprudencial para suavizar el ciclo crediticio. Por último, encontramos que bancos con una mayor diversificación en sus fuentes de fondeo son menos afectados ante shock negativo en el precio de commodities.
    Keywords: Credit Channel, Monetary Policy, and Credit Registry Data
    JEL: E44 G21 G32 L25
    Date: 2019–07
  47. By: Gutiérrez, Germán (NYU Stern); Piton, Sophie (Bank of England)
    Abstract: We show that cross-country comparisons of corporate labor shares are affected by differences in the delineation of corporate sectors. While the US excludes all self-employed and most dwellings from the corporate sector, other countries include large amounts of both — biasing labor shares downwards. We propose two methods to control for these differences and obtain ‘harmonized’ non-housing labor share series. Contrary to common wisdom, the harmonized series remain stable across all major economies except the US, where the labor share still declines, primarily due to manufacturing. These new facts cast doubts on most technological explanations for the labor share decline.
    Keywords: Labor share; residential real estate; self-employment; national accounts
    JEL: E22 E25 L85
    Date: 2019–07–19
  48. By: Brent Neiman; Joseph S. Vavra
    Abstract: We show that over the last 15 years, the typical household has increasingly concentrated its spending on a few preferred products. However, this is not driven by “superstar” products capturing larger market shares. Instead, households increasingly focus spending on different products from each other. As a result, aggregate spending concentration has in fact decreased over this same period. We use a novel heterogeneous agent model to conclude that increasing product variety is a key driver of these divergent trends. When more products are available, households can select a subset better matched to their particular tastes, and this generates welfare gains not reflected in government statistics. Our model features heterogeneous markups because producers of popular products care more about maximizing profits from existing customers, while producers of less popular niche products care more about expanding their customer base. Surprisingly, however, our model can match the observed trends in household and aggregate concentration without any resulting change in aggregate market power.
    JEL: D12 D4 E21 E31
    Date: 2019–08
  49. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: The reduction in international trade has been more than the reduction in economic activity during the 2008 financial crisis, against the one-to-one relationship between them implied by standard trade models. This so-called the great trade collapse (GTC) has been investigated extensively in the literature resulting in alternative competing stories as potential explanations. By introducing and estimating a dynamic stochastic general equilibrium model using eighteen quarterly series from the U.S., including those that represent the competing stories, this paper evaluates the contribution of each story to GTC. The results show that retail inventories have contributed the most to the collapse and the corresponding recovery, followed by protectionist policies, intermediate-input trade, and trade finance. Productivity and demand shocks have played negligible roles.
    Keywords: Trade Collapse, Inventories, Intermediate Inputs, Trade Finance, Protectionist Policies
    JEL: E32 F12 F41
    Date: 2019–08
  50. By: Zouri, Stéphane
    Abstract: L’asymétrie des cycles constitue un obstacle majeur à la viabilité des unions monétaires. C’est pourquoi le présent article s’intéresse à la convergence des cycles économiques en Afrique de l’Ouest au regard de la volonté des Chefs d’Etat de la CEDEAO de créer une monnaie unique. Pour cela, l’article utilise une mesure de synchronicité et de similarité permettant d’analyser l’asymétrie des cycles. L’article est novateur car il vient pallier les limites liées à l’identification des chocs spécifiques issue des modèles vectoriels. En outre, la méthodologie utilisée permet de savoir comment l’asymétrie des cycles économiques varie période par période plutôt que d'être mesurée comme un seul coefficient de corrélation sur toute la période d'étude. Enfin, l’étude tient compte des changements au fur et à mesure que les pays maintiennent ou transforment leurs régimes monétaires. Les résultats montrent un faible degré de synchronicité et de similarité dans la zone. De plus, les résultats indiquent que l’entrée du Mali et de la Guinée-Bissau dans l’Union Economique et Monétaire Ouest Africaine (UEMOA) n’a pas accru leurs degrés de synchronisation et de similarité. Enfin, les résultats montrent que le Nigéria n’est pas responsable du faible degré de symétrie dans la zone.
    Keywords: synchronicité, similarité, union monétaire, CEDEAO
    JEL: E3 O11 O55
    Date: 2019–07–22
  51. By: German Gutierrez (New York University); Sophie Piton (Bank of England; Centre for Macroeconomics (CFM))
    Abstract: We show that cross-country comparisons of corporate labor shares are aected by dierences in the delineation of corporate sectors. While the US excludes all self-employed and most dwellings from the corporate sector, other countries include large amounts of both biasing labor shares downwards. We propose two methods to control for these dierences and obtain 'harmonized' nonhousing labor share series. Contrary to common wisdom, the harmonized series remain stable across all major economies except the US, where the labor share still declines, primarily due to manufacturing. These new facts cast doubts on most technological explanations for the labor share decline.
    Keywords: Labour share, Residential real estate, Self-employment, National accounts
    JEL: E22 E25 L85
    Date: 2019–06
  52. By: Jung, Alexander; Uhlig, Harald
    Abstract: Based on high frequency identification and other econometric tools, we find that monetary policy shocks had a significant impact on the health of euro area banks. Information effects, which made the private sector more pessimistic about future prospects of the economy and the profitability of the banking sector, were strongly present in the post-crisis period. We show that ECB communications at the press conference were crucial for the market response and that bank health benefitted from surprises, which steepened the yield curve. We find that the effects of monetary policy shocks on banks displayed some persistence. Other bank characteristics, in particular bank size, leverage and NPL ratios, amplified the impact of monetary policy shocks on banks. After the OMT announcement, we detect that the response of bank stocks to monetary policy shocks normalised. We discover that, in the post-crisis episode, Fed monetary policy shocks influenced euro area bank stock valuations. JEL Classification: E40, E52, G14, G21
    Keywords: high-frequency identification, information effects, local projections, panel of individual banks
    Date: 2019–07
  53. By: Bernd Hayo (Philipps-Universitaet Marburg); Kai Henseler (Philipps-Universitaet Marburg); Marc Steffen Rapp (Philipps-Universitaet Marburg)
    Abstract: We examine how the verbal complexity of ECB communications affects financial market trading based on high-frequency data from European stock index futures trading. Studying the 34 events between May 2009 and June 2017, during which the ECB Governing Council press conferences covered unconventional monetary policy measures, and using the Flesch-Kincaid Grade Level to measure the verbal complexity of introductory statements to the press conferences, we find that more complex communications are associated with a lower level of contemporaneous trading. Increasing complexity of introductory statements leads to a temporal shift of trading activity towards the subsequent Q&A session, which suggests that Q&A sessions facilitate market participants’ information processing.
    Keywords: ECB, central bank communication, textual analysis, linguistic complexity, readability, financial markets, European stock markets
    JEL: D83 E52 E58 G12 G14
    Date: 2019
  54. By: Tim Obermeier
    Abstract: This paper studies how the progressivity of the income tax affects intra-household inequality and the marriage market. Tax progressivity increases the after-tax earnings of the lowerearning spouse and improves their bargaining position in marriage. This mechanism reduces inequality in consumption and leisure within households. In addition, tax progressivity can change who is single and who marries whom. I study these effects in an equilibrium search and matching model with intra-household bargaining, labor supply and savings. The model is calibrated to data from the Netherlands and used to study a hypothetical reform which increases progressivity by 40% relative to the current system. The reduction of intra-household inequality accounts for 24.77% of the reduction in inequality in private consumption due to the reform, and 11.43% of the reduction in inequality in utility from private and public consumption, leisure and home production. Changes in the composition of couples and singles, due to endogenous marriage and divorce, have small implications for inequality.
    Keywords: Tax Progressivity, Intra-Household Bargaining, Equilibrium search, Assortative matching
    JEL: H20 E21 J12
    Date: 2019–07
  55. By: Adam, Marc C.; Jansson, Walter
    Abstract: We evaluate the role played by loan supply shocks in the decline of investment and industrial production during the Great Depression in Germany from 1927 to 1932. We identify loan supply shocks in the context of a time varying parameter vector autoregression with stochastic volatility. Our results indicate that credit constraints were a significant driver of industrial production between 1927 and 1932, supporting the view that a structurally weak banking sector was an important contributor to the German Great Depression. We find further that loan supply shocks were an important driver of investment in the early phase of the depression, between 1927 and 1929, but not between 1930 and 1932. We suggest possible explanations for this puzzle and directions for future research.
    Keywords: Bayesian,Credit supply,Great Depression,Germany
    JEL: C11 E32 N14 N24
    Date: 2019
  56. By: Olivier Gervais
    Abstract: We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature. Impulse response functions are then estimated using local projections. This technique has recently been used to estimate the effect of monetary policy and government spending shocks. To our knowledge, however, this is the first time it is used to analyze the effect of oil supply shocks on global aggregates. While there is a high level of uncertainty around our estimates, results can be summarized with three main takeaways. Following a supply-driven decline in oil prices: (1) US business investment usually decreases, highlighting the importance of the shale oil industry, while the reaction of US gross domestic product (GDP) is often not statistically significant; (2) domestic demand in the euro area usually increases strongly; and (3) GDP among commodity exporters declines in the short term, reflecting the importance of the terms-of-trade channel, but increases in the longer term, reflecting the aggregate benefits of increased oil production.
    Keywords: Business fluctuations and cycles; International topics
    JEL: C22 C5 E37 Q43
    Date: 2019–07
  57. By: Pedro Bento; Diego Restuccia
    Abstract: We construct a new dataset for the average employment size of establishments across sectors and countries from hundreds of sources. Establishments are larger in manufacturing than in services, and in each sector they are larger in richer countries. The cross-country income elasticity of establishment size is remarkably similar across sectors, about 0.3. We discuss these facts in light of several prominent theories of development such as entry costs and misallocation. We then quantify the sectoral and aggregate impact of entry costs and misallocation in an otherwise standard two-sector model with endogenous firm entry, firm-level productivity, and sectoral employment shares. We find that observed measures of misallocation account for the entire range of establishment-size differences across sectors and countries and almost 50 percent of the difference in non-agricultural GDP per capita between rich and poor countries.
    Keywords: establishment size, manufacturing, services, distortions, misallocation, productivity.
    JEL: O1 O4 O5 E02 E1
    Date: 2019–08–05
  58. By: Pancarini, Ans Shinta
    Abstract: The need clothes that bring benefit serves as a cover nakedness, over the times fashion became an icon for Muslim identity as identity, nation and civilization. Islamhas instilled the values of philosophy as well as being bargading position for Muslims.
    Keywords: Fashion, Islamic Law
    JEL: A1 A14 E2 E20 E3 E39 K0
    Date: 2018–10–27
  59. By: OECD
    Abstract: The OECD Survey on Blended Finance Funds and Facilities represents a major step forward to consolidate evidence and provide further policy guidance in support of the OECD DAC Blended Finance Principles, whose focus is unlocking commercial finance for the Sustainable Development Goals.This working paper presents findings from the 2018 survey edition relating to the management, capital structure, investment strategy and portfolio allocation of the surveyed blended finance funds and facilities. The quantitative analysis is complemented by the OECD statistics on private finance mobilised by official development interventions and by information provided by Convergence. It will be followed by another OECD Development Co-operation working paper discussing the development strategy, performance tracking and evaluation approach.The 180 responses received illustrate to what extent blended finance funds and facilities vary widely in characteristics and functioning. Collectively, the managing organisations reported over USD 60.2 billion invested in 111 developing countries at the end of 2017. This new evidence confirms trends observed on the broader blended finance market (priority sectors, geographical coverage, targeted SDGs), while shedding light on additional aspects (e.g. investors, clients and investment instruments).
    Keywords: blended finance, development, development co-operation, development finance, investment
    JEL: E44 F3 F35 F4 O16 O19 O2
    Date: 2019–08–02
  60. By: harraou, Khalid
    Abstract: This article is devoted in particular to examining the relationship between the money market rate and bank rates through pass-through analysis and also to studying the presence of asymmetry in the transmission dynamics of the policy. at the level of the Moroccan banking system. For this, an Error Correction Model is used to measure the degree of responsiveness of bank rates following changes in monetary conditions.
    Keywords: Pass-through, monetary policy, transmission channels, lending rates, credit rates, interbank rate, Error Correction Model (ERM)
    JEL: E43
    Date: 2019–07–09
  61. By: Peter Tillmann (Justus-Liebig-University Giessen)
    Abstract: After appointing Federal Reserve Chairman Powell, President Trump steadily put pressure on the Fed to cut interest rates. We show that, on average, a statement from Trump led to lower long-term interest rates, consistent with expectations of lower expected future short rates. However, the impact of Trump's statements declined over time.
    Keywords: Federal Reserve, monetary policy, yield curve, political economy, central bank independence
    Date: 2019
  62. By: Zouri, Stéphane
    Abstract: This paper identifies the determinants of synchronization of business cycles in ECOWAS because it allows decision-makers to better target their economic policies. It is relevant given the willingness of ECOWAS heads of state to create a single currency by 2020. Indeed, conducting actions in the direction of the synchronization of business cycles is important because the asymmetries of the cycles observed within a monetary union determine its sustainability. Unlike previous studies in this area, it is innovative as it takes into account international financial integration. In addition, it proposes new measures to increase the quality of results. Finally, it takes into account the structure of trade by analyzing inter-regional links. The results show that bilateral trade and financial openness are determinants of the synchronization of business cycles in the region. However, they show that, trade channel dominates financial openness channel. In addition, the results show that the weakness of intra-community trade doesn’t constitute a barrier to monetary union.
    Keywords: business cycles, trade intensity, financial integration, ECOWAS.
    JEL: E32 F15 F36 O55
    Date: 2019–07–22
  63. By: Rod Garratt
    Abstract: Liquidity demands in real-time gross settlement payment systems can be enormous. To reduce the liquidity requirement, central banks around the world have implemented liquidity savings mechanisms (LSMs). The most effective LSMs are those that economize on liquidity needs by matching offsetting payments that have been submitted to a central queue and settling these payments using only the liquidity needed to cover the net obligations. Maximizing the value of payments settled in a queue given available liquidity is computationally difficult. Existing centralized queuing systems do not always meet this objective. Even when they do, the resulting outcome does not necessarily maximize system welfare. This paper seeks to improve upon existing centralized netting queues by making two fundamental changes. First, instead of making decisions on how much liquidity to provide to the queue before netting arrangements are determined, banks receive take-it-or-leave-it offers that determine which of their payments will be settled as well as their share of the liquidity cost. Second, rather than attempting to maximize the value or volume of payments settled in the queue, I propose using information regarding the instantaneous benefits and costs of participants to define a welfare measure for any set of netted payments. The full benefits of these two changes are realized through an application of the Shapley value cost allocation method, which ensures welfare maximizing netting proposals are always accepted.
    Keywords: Payment clearing and settlement systems
    JEL: C72 E58
    Date: 2019–07
  64. By: Davinson Stev Abril Salcedo; Luis Fernando Melo-Velandia (Banco de la República de Colombia); Daniel Parra-Amado (Banco de la República de Colombia)
    Abstract: Extreme weather events, like a strong El Niño (ENSO), affect society in many different ways especially in the context of recent globe warming. In the Colombian case, ENSO had a significant impact on consumer food prices during the strongest event in 2015-16. Our research evaluates the relationship between ENSO and Colombian food inflation growth by using a smooth transition non-linear model. We estimate the impacts of a strong ENSO on food inflation growth by adopting Generalized Impulse Response Functions (GIRFs) and the results suggest that the weather shocks are transitory and asymmetric on inflation. A strong El Niño shock has a significate effect on the food inflation growth from six to nine months after the shock and the accumulated elasticity is close to 465 basic points. We build the GIRFs for eight different episodes associated with a strong El Niño in the period corresponding from March 1962 to December 2018 and there is no evidence of changes in the size of Colombian food inflation growth responses over time. **** RESUMEN: Eventos extremos del clima como El Niño (ENSO) fuerte afectan la sociedad de diferentes maneras en especial en el reciente contexto de calentamiento global. En 2015-16, se observó el evento de El Niño más fuerte en los últimos cien años el cual presentó un impacto significativo sobre los precios de alimentos al consumidor en el caso colombiano. El presente trabajo de investigación evalúa la relación entre ENSO y el crecimiento de la inflación de alimentos para el consumidor en Colombia usando un modelo no lineal de transición suave y estimando funciones de impulso respuesta generalizadas (GIRFs). Los resultados sugieren que dichos choques climáticos son transitorios y asimétricos sobre la inflación. Así, El Niño fuerte tiene un impacto significativo sobre el crecimiento de la inflación de alimentos entre seis y nueve meses después del choque climático y la elasticidad acumulada es 465 puntos básicos. Adicionalmente, se construyeron GIRFs para ocho diferentes episodios de tiempo asociados con un fenómeno de El Niño fuerte que se observaron entre marzo de 1962 y diciembre de 2018 y se encontró que no hay evidencia estadística de cambios en el tamaño de las respuestas del crecimiento de la inflación de alimentos en Colombia a través del tiempo.
    Keywords: El Niño Southern Oscillation (ENSO), non-linear smooth transition models, inflation, El Niño-Oscilación del Sur, modelos no lineales de transición suave, inflación,
    JEL: C32 C50 E31
    Date: 2019–07
  65. By: Ojea Ferreiro, Javier
    Abstract: Until now, stock market responses to a distress scenario for oil prices have been analysed considering prices in domestic currency. This assumption implies merging the commodity risk with the exchange rate risk when oil and stocks are traded in different currencies. This article proposes incorporating explicitly the exchange rate, using the convolution concept, to assess how could change the stock market response depending on the source of risk that moves oil prices. I apply this framework to study the change in the 10th lowest percentile of the European stock market under an oil-related stress scenario, without overlooking the role of the exchange rate. The empirical exercise shows that the same stress oil-related scenario in euros could generate an opposite impact in the European stock market depending on the source of risk. The source of risk is not incorporated when performing a bivariate analysis, which suggests ambiguous estimates of the stock response. This framework can improve our understanding of how the exchange rate interacts in global markets. Also, it contributes to reduce the inaccuracy in the impact assessment of foreign shocks where the exchange rate plays a relevant role. JEL Classification: E30, E37, E44, G10
    Keywords: convolution, exchange rate, spillover analysis, stress test
    Date: 2019–07
  66. By: Bara, Aman Appolinus; Chakraborty, Bidisha
    Abstract: This paper develops an endogenous growth model with the non-rival but excludable public good. We seek to answer the question that whether this kind of infrastructure should be provided by pure private firm or by state or by Public-Private Partnership (PPP). And, if the government invests in this type of infrastructure, how should it finance the manufacturing cost-through accumulating debt or imposing a tax or by charging user-fees? In this paper, PPP in infrastructure is defined as a profit-making private firm-producing infrastructure with the partial cost borne by the government. The authors make a comparison of the macro-economic performances under the purely private provision, purely public provision and PPP provision of infrastructure in an economy. In the purely public provision of infrastructure, if the government runs a balanced budget or has constant debt, our model suggests that government should finance the infrastructure solely by charging user fees instead of imposing the tax. The model finds the condition under which the PPP provision of infrastructure is justified. The present paper finds the user fees and growth rate under the private provision and also user fees and growth maximising tax rate in 3 budgetary regimes: (a) when the government has constant debt, (b) when public debt is zero and (c) when there is accumulating debt, under the pure public provision of infrastructure and PPP provision of infrastructure. We find that there exists a unique, equilibrium steady state balanced growth rate in all the regimes. We compare the user fees and growth rates across different regimes.
    Keywords: Infrastructure, Public-Private Partnership, Endogenous growth, Public debt
    JEL: E6 H42 O40
    Date: 2019–05–17
  67. By: Dąbrowski, Marek A.
    Abstract: Changes in foreign exchange (FX) reserves are difficult to measure in an economically meaningful way because central banks do not decompose reported data into passive and active components. Only the latter should be used when the usefulness of FX reserves in crisis management is assessed or symptoms of currency manipulations are looked for. The applicability of the existing approach to identification of active component of FX reserves is highly limited as it relies on data that are available for a relatively short timespan. To overcome these problems the new approach to estimation of active component of FX reserves is laid out. It makes use of a time-varying coefficient model estimated with Bayesian techniques. The empirical results are obtained for 20 countries over 1995-2017 period. The main finding is that the estimates from the new approach are highly correlated with those from the existing approach, but the timespan of the former is substantially larger than that of the latter. The estimates based on the new approach are cross-checked against the data on FX market interventions of the Czech National Bank. It is demonstrated that the estimates are in general superior to plain changes in FX reserves as a measure of FX interventions and are not worse than those from the existing approach.
    Keywords: foreign exchange reserves, foreign exchange interventions, open economy macroeconomics, Czech National Bank, state space models
    JEL: C32 E58 F31 F41
    Date: 2019–07–22
  68. By: Magali Marx; Benoit Mojon; François R. Velde
    Abstract: Risk-free rates have been falling since the 1980s while the return on capital has not. We analyse these trends in a calibrated overlapping-generations model with recursive preferences, designed to encompass many of the "usual suspects" cited in the debate on secular stagnation. Deleveraging cannot account for the joint decline in the risk free rate and increase in the risk premium, and declining labour force and productivity growth imply only a limited decline in real interest rates. If we allow for a change in the (perceived) risk to productivity growth to fit the data, we find that the decline in the risk-free rate requires an increase in the borrowing capacity of the indebted agents in the model, consistent with the increase in the sum of public and private debt since the crisis.
    Keywords: secular stagnation, interest rates, risk, return on capital
    JEL: E00 E40
    Date: 2019–07
  69. By: Carlo Altomonte; Domenico Favoino; Tommaso Sonno
    Abstract: We incorporate heterogeneous financial frictions in a setting of monopolistically competitive firms with endogenous markups. Before producing, firms must pledge collateral to obtain a bank loan, needed to cover part of production costs. Firms differ both in productivity and in their cost of raising collateral. Firm-specic financial frictions, together with productivity, therefore figure in the equilibrium expressions of prices and markups. We validate our theoretical results on a representative sample of European manufacturing firms surveyed during the financial crisis. Guided by our model we retrieve from balance-sheet data firm-specic measures of access to finance, total factor productivity and markups, and then use these variables to estimate our equilibrium equations structurally. Consistent with our model, we show how heterogeneity in access to finance explains part of the dispersion of prices and markups, even after controlling for firms' productivity and size. In the aggregate industry equilibrium, the amount of collateral required by banks significantly affects the cost pass-through to prices.
    Keywords: Financial frictions, heterogeneous firms, markups
    JEL: D24 E22 F36 G20
    Date: 2018
  70. By: Zoe Venter
    Abstract: Financial instability and the subsequent credit crunches experienced by a number of countries following two decades of global structural reforms highlighted the importance of stabilizing credit supply and assigning a higher importance to financial stability. In this paper, I look at the independence of the Central Bank, the political environment and the impact of these factors on financial stability. I substantiate the literature review discussion with a brief empirical analysis of the effect of Central Bank independence on credit growth using an existing database created by Romelli (2018). The empirical results show that fluctuations in credit growth are larger for higher levels of Central Bank Independence and hence, in periods of financial instability or ultimately financial crises, Central Bank Independence would be reined back in an effort to reestablish financil stability.
    Keywords: Central Banks, Central BankIndependence, Financial Stability,Reform, Political Environment
    JEL: E58 F36 N14 N16
    Date: 2019–07
  71. By: Papahristodoulou, Christos
    Abstract: This paper investigates if the value of the Swedish krona (SEK) against the US dollar ($) and the Euro (€) can be explained by some standard theories and fundamentals, such as the purchasing power parity, the interest rate parity, the debt-ratio and the trade balance ratio, using monthly data since Feb. 1993. All of them fail to explain why the SEK is so “weak”. The lower inflation rate in Sweden over the recent years has not strengthened the currency. Similarly, the theoretically stronger SEK implied by the lower interest rates in Sweden as the uncovered interest rate parity predicts, has not emerged yet. Finally, neither the persistent trade balance surpluses, nor the declining and very low debt ratio in Sweden have had any positive effects on the currency. It seems that the traders and investors ignore the fundamentals, speculate against the currency and keep it undervalued. Moreover, a number of simulated paths, predicted from various ARIMA-processes, based on the historic exchange rates, show that the worse exchange rates have already gone and by the end of 2020 the $ and the € will cost around 8 and 9.8 SEK respectively.
    Keywords: exchange rate, interest rate parity, purchasing power parity, forecasting
    JEL: E43 F31 F47
    Date: 2019–07–05
  72. By: Rod Garratt; Maarten van Oordt
    Abstract: Cash gives users a high level of privacy when making payments, but the use of cash to make payments is declining. People increasingly use debit cards, credit cards or other methods to pay. These payment methods do not provide the same level of privacy as cash. Meanwhile, providers of such payment methods are increasingly seeking ways to earn money from the payments data of their clients. We identify an economic mechanism that explains why people may choose too little privacy when considering how to pay. People do not bear the full costs of failing to protect their privacy. Data revealed by one person when they do not protect their privacy can be used to make inferences about the purchasing habits of another individual, even if that individual has taken steps to protect their own data. Economists call this mechanism an externality. It is easy to imagine a scenario where, because of this externality, people have very little privacy when making payments, even though privacy is highly valued in society. When left to market forces, this externality could also result in a faster decline in the use of cash than what would be optimal. Is it possible to reverse the trend toward less privacy in payments? Perhaps introducing a widely accepted electronic cash that offers the convenience of digital payments and the privacy of cash could help.
    Keywords: Staff Research; Staff Working Papers
    JEL: E42 G28
    Date: 2019–07
  73. 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
    Date: 2018
  74. By: David S. Miller
    Abstract: This note introduces a general method to derive recession probabilities from forecasts using real-time data in parsimoniously specified logistic regressions. I apply two specifications of the general method that produces an implied recession probability to forecasts contained in releases of the Survey of Professional Forecasters (SPF). Using yearly forecasts from the 2018:Q3 SPF, the probability of a recession peaks between 30 percent in 2020 and 40 percent in 2021. Using quarterly forecasts, the probability of a recession within four quarters is monotonically increasing during the forecast, hitting a high between 35 and 40 percent in 2019:Q3.
    Date: 2019–05–06
  75. By: Tara M. Sinclair (The George Washington University)
    Abstract: Throughout the history of macroeconomic forecasting, several major themes have remained surprisingly consistent. The failure to forecast economic downturns ahead of time is perhaps the most significant of these. Forecasting approaches have changed, but forecasts for recessions have not improved. What can we learn from past evaluations of macroeconomic forecasts? Is it possible to predict major economic shocks or is it a fool’s errand? This chapter discusses how forecasting techniques have evolved over time and yet the record on forecasting recessions remains dismal. There are several competing hypotheses for why forecasters fail to foresee recessions, but little evidence any of them are going to be addressed before the next recession occurs. This suggests planners and policymakers should expect to be surprised by the arrival of downturns and develop ways to be prepared for recessions without having clear warning of their coming.
    Keywords: Forecast evaluation, recessions
    JEL: E37 C53
    Date: 2019–08
  76. By: Newbery, D.; Pollitt, M.; Reiner, D.; Taylor, S.
    Abstract: Decarbonising electricity is a critical first step in mitigating climate damage but low/zero-carbon generation is very capital intensive. Its cost depends critically on the weighted average cost of capital (WACC). Three factors combine to make a low WACC both desirable and feasible in the UK. First, the Stern Report argues for a low social discount rate (1.4% real) for investments in climate mitigation. Second, global and UK real interest rates have been falling steadily - UK gilt index-linked 20-year rates have fallen from +4% in 1995 to -2% (negative) in 2019. CCS and nuclear have long lifetimes over which to recover their capital cost, longer than commercial finance would accept without guarantees, in contrast to renewables where off-take contracts have proven sufficient. Nuclear power faces the additional investment challenge of lengthy uncertain construction. No nuclear plant has ever been built privately without substantial regulatory guarantees. The Regulated Asset Base (RAB) model can address these financing problems for long-lived low-carbon assets. The benefits of placing risk on developers to motivate cost control are small compared to the extra costs of a higher weighted average cost of capital (WACC). A hybrid RAB model (like that used for the Thames Tideway Tunnel) – with excess cost sharing and a cost cap – can reduce risk to deliver an adequately low WACC by accessing infrastructure funds that do not require extensive specialised project knowledge. If the risk of excess costs is spread over the 27 million households and other customers taking two-thirds of electricity, each would bear minimal risk and the cumulative cost would be significantly lower. The levelised cost at the WACC (3.5% real) is £53/MWh (in £2018) if on time and budget, which should be compared with a counterfactual in which all the risk is placed on the company requiring a contract-for-difference with a strike price of £96/MWh for the life of the project (equal to the levelised cost).
    Keywords: Nuclear power, financing, RAB, WACC, risk
    JEL: C54 D53 E43 G11 H23 H54 L94 Q48
    Date: 2019–07–29
  77. By: Lilit Popoyan (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Observatoire français des conjonctures économiques)
    Abstract: We develop a macroeconomic agent-based model to study how financial instability can emerge from the co-evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy. The model is populated by heterogenous firms, consumers, and banks that locally interact in dfferent markets. In particular, banks provide credit to firms according to a Basel II or III macro-prudential frameworks and manage their liquidity in the interbank market. The Central Bank performs monetary policy according to dfferent types of Taylor rules. We find that the model endogenously generates market freezes in the interbank market which interact with the financial accelerator possibly leading to firm bankruptcies, banking crises and the emergence of deep downturns. This requires the timely intervention of the Central Bank as a liquidity lender of last resort. Moreover, we find that the joint adoption of a three mandate Taylor rule tackling credit growth and the Basel III macro-prudential frame-work is the best policy mix to stabilize financial and real economic dynamics. However, as the Liquidity Coverage Ratio spurs financial instability by increasing the pro-cyclicality of banks’ liquid reserves, a new counter-cyclical liquidity buffer should be added to Basel III to improve its performance further. Finally, we find that the Central Bank can also dampen financial in- stability by employing a new unconventional monetarypolicy tool involving active management of the interest-rate corridor in the interbank market.
    Keywords: Financial instability; Interbank market freezes; Monetary policy; Macro-prudential policy; Basel III regulation; Tinbergen principle; Agent - based models
    Date: 2019–07
  78. By: Fontana, Silvia Dalla; Holz auf der Heide, Marco; Pelizzon, Loriana; Scheicher, Martin
    Abstract: Using a novel regulatory dataset of fully identified derivatives transactions, this paper provides the first comprehensive analysis of the structure of the euro area interest rate swap (IRS) market after the start of the mandatory clearing obligation. Our dataset contains 1.7 million bilateral IRS transactions of banks and non-banks. Our key results are as follows: 1) The euro area IRS market is highly standardised and concentrated around the group of the G16 Dealers but also around a significant group of core "intermediaries"(and major CCPs). 2) Banks are active in all segments of the IRS euro market, whereas non-banks are often specialised. 3) When using relative net exposures as a proxy for the "flow of risk" in the IRS market, we find that risk absorption takes place in the core as well as the periphery of the network but in absolute terms the risk absorption is largely at the core. 4) Among the Basel III capital and liquidity ratios, the leverage ratio plays a key role in determining a bank's IRS trading activity.
    Keywords: derivatives,network analysis,interest rate risk,banking,risk management,hedging
    JEL: G21 E43 E44
    Date: 2019
  79. By: Jérôme TRINH (Institut Polytechnique de Paris, CREST; Thema, University of Cergy-Pontoise.)
    Abstract: his article develops a methodology to compute up-to-date quarterly macroeconomic data for emerging countries by adapting a well known method of temporal disaggregation to time series with small sample size and instable relationships between them. By incorporating di erent procedures of structural break detection, the prediction of higher-frequency estimations of yearly oficial data can be improved. A methodology with a model selection procedure and disaggregation formulas is proposed. Its predictive performance is assessed by using empirical advanced countries data and simulated time series. An application to the Chinese national accounts allows the estimation of the cyclical components of the Chinese expenditure accounts and shows the Chinese economy to have second order moments more in line with emerging countries than advanced economies like the United States.
    Keywords: Time series, macroeconomic forecasting, disaggregation, structural change, business cycles, emerging economies,
    Date: 2019–06–27
  80. By: Jakob Fiedler; Josef Ruzicka; Thomas Theobald
    Abstract: We integrate newly created financial stress indices (FSIs) into an automated real-time recession forecasting procedure for the Euro area and Germany. The FSIs are based on a large number of financial indicators, each of them potentially signaling financial stress. A subset of these indicators is selected in real-time and their stress signal is summarized by principal component analysis (PCA). Besides conventional measures of realized financial stress, such as volatilities, we include variables related to the financial cycle, such as different types of credit growth, for which strong increases may anticipate future financial market stress. Building blocks in our fully automated real-time probit forecasts are then i. the use of a broad set of widely acknowledged macroeconomic and financial variables with predictive power for a real economic downturn, ii. the use of both general-to-specific and specific-to-general approaches for variable and lag selection, and iii. the averaging of different specifications into a composite forecast. As a real-time out-of-sample analysis shows, the inclusion of financial stress leads to an improved recession forecast for the Euro area, while the results for Germany are mixed. Finally, we also evaluate the predictive power of the change in bank lending (credit impulse) and find that it adds little additional information.
    Date: 2019
  81. By: Elizabeth Jane Casabianca (Prometeia Associazione per le Previsioni Econometriche, and DiSeS, Polytechnic University of Marche); Michele Catalano (Prometeia Associazione per le Previsioni Econometriche); Lorenzo Forni (Prometeia Associazione per le Previsioni Econometriche, and DSEA, University of Padua); Elena Giarda (Prometeia Associazione per le Previsioni Econometriche, and Cefin, University of Modena and Reggio Emilia); Simone Passeri (Prometeia Associazione per le Previsioni Econometriche)
    Abstract: Ten years after the outbreak of the 2007-2008 crisis, renewed attention is directed to money and credit fluctuations, financial crises and policy responses. By using an integrated dataset that includes 100 countries (advanced and emerging) spanning from 1970 to 2017, we propose an Early Warning System (EWS) to predict the build-up of systemic banking crises. The paper aims at (i) identifying the macroeconomic drivers of banking crises, (ii) going beyond the use of traditional discrete choice models by applying supervised machine learning (ML) and (iii) assessing the degree of countries’ exposure to systemic risks by means of predicted probabilities. Our results show that ML algorithms can have a better predictive performance than the logit models. All models deliver increasing predicted probabilities in the last years of the sample for the advanced countries, warning against the possible build-up of pre-crisis macroeconomic imbalances.
    Keywords: banking crises, EWS, machine learning, decision trees, AdaBoost
    JEL: C40 G01 C25 E44 G21
    Date: 2019–08
  82. By: Abubakar El-Sidig A.A Mahdi (Al-Buraimi University College – Sultanate of Oman Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - The preceding three years (2014, 2015, and 2016) saw a drop in the price of oil which has impacted all parts of Omani macroeconomic life. This study aims to identify the association between oil price changes and aggregate household consumption expenditure in the Sultanate by analyzing the long term relationship between the variables of interest. Methodology/Technique - The (ARDL) Autoregressive Distributed Lag bound test of co- integration is used with 27 annual observations obtained between 1990 and 2016. Finding - The statistical results show that there is a long term, positive relationship between the two variables. Novelty – As Oman is heavily dependent on oil, any fluctuation in the price of oil will undoubtedly cause instability in the economy (macroeconomic variables) demonstrating the presence of a robust correlation between consumption and oil prices. The bound test of the ARDL approach demonstrates this relationship. This study is therefore useful for Muscat officials to identify ways to reduce the dependency on oil.
    Keywords: Total Household Consumption Expenditure; Crude Oil Price; Autoregressive Distributed Lag (ARDL); Omani Economy.
    JEL: D1 D13 D19 E30
    Date: 2019–06–19
  83. By: Martin Mosler; Niklas Potrafke; Markus Reischmann
    Abstract: We asked economic experts polled by the CESifo World Economic Survey how to handle the fiscal crisis in Greece in the year 2015. The sample includes about 850 experts from 110 countries. We find systematic differences in experts’ recommendations. Our results suggest that policy advice is related to an expert’s personal and country-level attributes. Country-level characteristics, especially credit default swaps as a measure of fiscal stability, predict views on whether Greece should exit the eurozone. An expert’s educational background, age and professional affiliation predict opinions on the credit programs of the International Monetary Fund. We propose that policymakers who seek balanced policy advice should consult experts from different countries and personal backgrounds.
    Keywords: Greece, Grexit, experts’ survey, public debt crisis, IMF, international organizations, policy advice
    JEL: H63 C83 H12 F53 E42 D72
    Date: 2019
  84. By: Meeks, Roland (International Monetary Fund); Monti, Francesca (Bank of England)
    Abstract: We establish a set of novel empirical facts concerning cross-section distributions of inflation expectations reported in surveys. Almost all the variation in expectations about their mean may be summarized via three factors we call disagreement, skew, and shape. We adopt a functional principal component regression approach to estimating forward-looking models of inflation that exploits the heterogeneity present in individual-level data. By using survey information more effectively, our approach reveals an enhanced role for expectations in inflation dynamics that is robust to lagged inflation, trend inflation, and supply factors. Our findings hold in similar form across two major economies.
    Keywords: Survey expectations; inflation dynamics; density function; functional regression; functional principal components
    JEL: E31
    Date: 2019–06–28
  85. By: Papanicolas, Irene; Woskie, Liana R.; Jha, Ashish K.
    Abstract: Health care spending in the United States is a major concern and is higher than in other high-income countries, but there is little evidence that efforts to reform US health care delivery have had a meaningful influence on controlling health care spending and costs.
    JEL: E6
    Date: 2018–03–03
  86. By: Mutaqin, Diana Agustina
    Abstract: The purpose of this study is to review some of the criticisms of the Bank's interest system. Issues related to whether bank interest including usury or not usury has been debated and is still being discussed to date by Islamic economists. But now there has been criticism from Western or Conventional Economists of the negative impact of the Bank's interest in the economy. The method used is a qualitative method using descriptive analysis and literature review. From these experiences, the Islamic Monetary System which is free from interest can be a solution to realize prosperity and guarantee economic injustice. this system is expected not only to increase the money in circulation but how to be able to improve the performance of the real sector in accordance with Islamic sharia. Because basically in the Islamic monetary system, it is not only aimed at material welfare but aims at moral well-being. There are at least five values of Islamic economic instruments that can be integrated into the economic system, namely zakat, waqf, social security, the justice system in resolving economic disputes and sharia financial institutions.
    Keywords: criticism, interest system, Islamic monetary
    JEL: A10 E42 P43 P51
    Date: 2019–07–11
  87. By: Nicolas Reigl; Lenno Uuskula
    Abstract: This paper complements the standard Basel countercyclical capital buffer framework by suggesting four additional measures for credit gaps that can be used to measure the financial cycle and to decide on countercyclical capital buffers for banks. The new measures behave similarly to the gaps calculated with the standard Basel one-sided Hodrick-Prescott filter in long samples, but they have the properties desired for countries with relatively short historical samples. While the standard Basel credit gaps have been deep in negative territory for many European Union countries since the Great Recession the new gaps are close to zero and the buffers suggested are more in line with the countercyclical capital buffer ratios that were in place in 2018.
    Keywords: credit gaps, countercyclical capital buffer, Basel III, Estonia
    JEL: G01 E59
    Date: 2019–01–23
  88. By: Kusnadi, Jamaludin
    Abstract: In economics, we often hear the word price and its scope. In this case, the relation is how the value that becomes the transaction between the seller and the buyer is the replacement of the goods or services exchanged. The economy is one of the teachers in the country's life. The strength and weakness of a country's economic system are determined by pricing so that price stability occurs. But it is not easy to create an economy at a stable price because sometimes the demand level is higher than the supply and vice versa.
    Keywords: Price, Price Control, Islamic Economics, Market Mechanism
    JEL: A10 A11 B10 E6 E64
    Date: 2019–07–01
  89. By: Franses, Ph.H.B.F.
    Abstract: This paper examines economic growth in 52 African countries for 1961-2016 and seeks to find if there is common growth. As all African countries have their particular features, concerning climate, harvest, industry, size, politics, and infrastructure, and more, it seems best to rely on a non-parametric method. Dynamic Time Warping is such a convenient method, also as it allows leads and lags across countries to vary over time, and as it can easily be incorporated into a clustering technique. Five clusters are found, two of which concern Equatorial Guinea and Botswana, and the three other clusters have common growth rates of about 0, 2 and 4 over more than five decades.
    Keywords: Economic growth, Africa, Non-parametric method, Dynamic Time Warping, Clusters
    JEL: C14 E32 N17
    Date: 2019–07–31
  90. By: Julián Andrada-Félix (Department of Quantitative Methods in Economics, Universidad de Las Palmas de Gran Canaria, Las Palmas de Gran Canaria, Spain); Adrian Fernandez-Perez (Department of Finance, Auckland University of Technology, Auckland, New Zealand); Simón Sosvilla-Rivero (Complutense Institute for Economic Analysis, Universidad Complutense de Madrid.)
    Abstract: This paper examines the volatility interconnection between the main cryptocurrencies and traditional currencies during the period of February 2014-September 2018 using both a framework proposed by Diebold and Yilmaz (2014) and the modified approach of Antonakakis and Gabauer (2017). Our results suggest that a 34.43%, of the total variance of the forecast errors is explained by shocks across the eight examined cryptocurrencies and traditional currencies, indicating that the remainder 65.57% of the variation is due to idiosyncratic shocks. Furthermore, we find that volatility connectedness varies over time, with a surge during periods of increasing economic and financial instability. When we aggregate both markets by blocks, we find that the block of traditional currencies and the block of cryptocurrencies are mostly disconnected with periods of mild net volatility spill over between both blocks. Finally, our findings suggest that financial market variables are the main drivers of total connectedness within the traditional currencies, while the cryptocurrency-specific variables are identified as the key determinant for the total connectedness within the traditional currencies and a combination of business cycles and cryptocurrency-specific variables explain the directional volatility connectedness between both blocks.
    Keywords: Exchange rates, Cryptocurrencies, Connectedness, Time-varying parameters, Stepwise regressions. JEL classification:C53, E44, F31, G15.
    Date: 2019–07
  91. By: Ken-ichi Hashimoto; Yoshiyasu Ono
    Abstract: We develop an aggregate demand analysis of a small open economy based on all agents’ dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which the structure is as simple as the conventional Keynesian cross analysis. We apply the model to examine the effects of changes in various parameters, such as the terms of trade, foreign asset holdings and government purchases, on aggregate demand. They are quite different from those under full employment and those of the Mundell-Fleming model.
    Date: 2019–07
  92. By: Kanya, Lucy; Saghera, Sabina; Lewin, Alex; Fox-Rushby, Julia
    Abstract: Background: The contingent valuation (CV) method is used to estimate the willingness to pay (WTP) for services and products to inform cost benefit analyses (CBA). A long-standing criticism that stated WTP estimates may be poor indicators of actual WTP, calls into question their validity and the use of such estimates for welfare evaluation, especially in the health sector. Available evidence on the validity of CV studies so far is inconclusive. We systematically reviewed the literature to (1) synthesize the evidence on the criterion validity of WTP/willingness to accept (WTA), (2) undertake a meta-analysis, pooling evidence on the extent of variation between stated and actual WTP values and, (3) explore the reasons for the variation. Methods: Eight electronic databases were searched, along with citations and reference reviews. 50 papers detailing 159 comparisons were identified and reviewed using a standard proforma. Two reviewers each were involved in the paper selection, review and data extraction. Meta-analysis was conducted using random effects models for ratios of means and percentage differences separately. Meta-bias was investigated using funnel plots. Results: Hypothetical WTP was on average 3.2 times greater than actual WTP, with a range of 0.7–11.8 and 5.7 (0.0–13.6) for ratios of means and percentage differences respectively. However, key methodological differences between surveys of hypothetical and actual values were found. In the meta-analysis, high levels of heterogeneity existed. The overall effect size for mean summaries was 1.79 (1.56–2.04) and 2.37 (1.93–2.80) for percent summaries. Regression analyses identified mixed results on the influence of the different experimental protocols on the variation between stated and actual WTP values. Results indicating publication bias did not account for differences in study design. Conclusions: The evidence on the criterion validity for CV studies is more mixed than authors are representing because substantial differences in study design between hypothetical and actual WTP/WTA surveys are not accounted for.
    Keywords: contingent valuation; willingness to pay; external validity; criterion validity; hypothetical values; simulated market experiments; systematic revuew; meta-analysis
    JEL: E6
    Date: 2019–07–01
  93. By: Strohsal, Till; Wolf, Elias
    Abstract: Data revisions to national accounts pose a serious challenge to policy decision making. Well-behaved revisions should be unbiased, small and unpredictable. This paper shows that revisions to German national accounts are biased, large and predictable. Moreover, using filtering techniques designed to process data subject to revisions, the real-time forecasting performance of initial releases can be increased by up to 17%. For total real GDP growth, however, the initial release is an optimal forecast. Yet, given the results for disaggregated variables, the averaging-out of biases and inefficiencies at the aggregate GDP level appears to be good luck rather than good forecasting.
    Keywords: Revisions,Real-Time Data,German National Accounts,Nowcasting
    JEL: C22 C53 C82 E66
    Date: 2019
  94. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: Der Zerfall der sozialistischen Wirtschaftssysteme vollzog sich Ende der 1980er Jahre in den Ländern Osteuropas und der Sowjetunion, wobei osteuropäische EU-Länder einen ökonomischen Aufholprozess begonnen haben. 1991 hat aber der Westen teilweise keine vernünftigen Konsequenzen aus der beginnenden Systemtransformation gezogen und eine Phase geringer politischer Selbstdisziplin bei manchen westlichen Regierungen bzw. eine Expansion des Populismus - erklärbar unter Bezug auf Harry-Johnson-Ansätze und Identity Economics - begonnen. Die Transatlantische Bankenkrise ergab sich aus überzogener Bankenderegulierung in den USA und UK, die faktisch auch die Länder der Eurozone zur Bankenderegulierung brachte und sich absehbar wiederholen könnte; auch als Folge des BREXIT. Bei der Digitalisierung fehlt ein Ordnungsrahmen. Dessen Fehlen hat zu einer Art digitalem Sozialismus geführt – mit negativen Konsequenzen für Effizienz in der Marktwirtschaft und für die Demokratie. Mit dem Populismus in UK, dem strukturellen US-Populismus – inklusive Anti-Multilateralismus - und dem Anti-Liberalismus in Teilen der EU(27) steht der Westen vor einer Abstiegs- und die EU vor einer politischen Spannungsphase; eine sinnvolle Reformagenda wäre eine Stabilisierungschance für die EU, wird aber teilweise blockiert, während zugleich verfrühte Vergemeinschaftung, etwa bei Einlagensicherung, droht. Der US-Sachverständigenrat unter Trump sieht die USA wohlfahrtsmäßig vor Nordeuropa, was eine Fehlsicht ist.
    Keywords: Systemtransformation, Internetwirtschaft, Bankenkrise, Populismus, EU-Reformen
    JEL: E50 F5 H12 P5 P11 P51 P52
    Date: 2019–04

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