nep-mac New Economics Papers
on Macroeconomics
Issue of 2019‒10‒28
79 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. The Role of ECB Communication in Guiding Markets By Marc Anderes; Alexander Rathke; Sina Streicher; Filip Jan-Egbert Sturm
  2. Fiscal Policy Experiments By Ilias Georgakopoulos
  3. Monetary policy hysteresis and the financial cycle By Phurichai Rungcharoenkitkul; Claudio Borio; Piti Disyatat Author-X-Name_First: Piti
  4. What is new about cryptocurrencies? A visual analysis By Anil Savio Kavuri; Alistair Milne; Justine Wood
  5. Transmission channels of central bank asset purchases in the Irish economy By Cawley, Cormac; Finnegan, Marie
  6. The effect of the Fed zero-lower bound announcementon bank profitability and diversification By Andrea Landi, Alex Sclip, Valeria Venturelli
  7. Central bank digital currency and monetary policy: a literature review By Beniak, Patrycja
  8. The evolution and heterogeneity of credit procyclicality in Central and Eastern Europe By Juan Carlos Cuestas; Nicolas Reigl; Yannick Lucotte
  9. Central Bank Digital Currency:One, Two or None? By Christian Pfister
  10. Predicting recessions: financial cycle versus term spread By Claudio Borio; Mathias Drehmann; Dora Xia Author-X-Name_First: Dora
  11. R&D, innovation spillover and business cycles By Uluc Aysun; Zeynep Yom
  12. The reaction function channel of monetary policy and the financial cycle By Andrew Filardo; Paul Hubert; Phurichai Rungcharoenkitkul Author-X-Name_First: Phurichai
  13. Unit Values for Import and Export Price Indexes – A Proof of Concept By Don Fast; Susan Fleck
  14. Open Economy Growth Model with Human Capital and Public Debt By Micha? Konopczy?ski
  15. Below the Aggregate: A Sectoral Account of the UK Productivity Puzzle By Rebecca Riley; Ana Rincon-Aznar; Lea Samek
  17. Does Costly Reversibility Matter for U.S. Public Firms? By Bai, Hang; Li, Erica X. N.; Xue, Chen; Zhang, Lu
  18. Interest rate spillovers from the United States : expectations, term premia and macro-financial vulnerabilities By Mehrotra, Aaron; Moessner, Richhild; Shu, Chang
  19. Pecuniary Externalities in Economies with Downward Wage Rigidity By Martin Wolf
  20. Inflation, Complexity and Endogenous Growth By Tiago Miguel Guterres Neves Sequeira; Pedro Mazeda Gil; Óscar Afonso
  21. Multi-product firms and increasing marginal costs By Pavolov, Oscar
  22. Arab Republic of Egypt; Fifth Review Under the Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for the Arab Republic of Egypt By International Monetary Fund
  23. Long run and Short run Macroeconomics Determinants of Economic Growth in the USA: Cointegration and VECM Analysis By Bakari, Sayef; Tiba, Sofien
  24. Digestate Evaporation Treatment in Biogas Plants: A Techno-economic Assessment by Monte Carlo, Neural Networks and Decision Trees By Vondra, Marek; Touš, Michal; Teng, Sin Yong
  25. The Nexus among Domestic Investment, Taxation, and Economic Growth in Germany: Cointegration and Vector Error Correction Model Analysis By Bakari, Sayef; Ahmadi, Ali; Tiba, Sofien
  26. The Primary Cause of European Inflation in 1500-1700: Precious Metals or Population? The English Evidence By Anthony Edo; Jacques Melitz
  27. How Do Short-term Financial Constraints Affect SMEs’ Long-Term Investment: Evidence from the Working Capital Channel By Théo Nicolas
  28. The Potential Industry of Islamic Tourism in ASEAN Countries By Nurrachmi, Rininta
  29. Trade Exposure and the Evolution of Inflation Dynamics By Simon Gilchrist; Egon Zakrajsek
  30. Tie among Domestic Investment, Total Consumption and External Debt: Lessons from Tunisia By Bakari, Sayef; Tiba, Sofien
  31. Minimum Wage in a Multi-Tier Search and Wage-Posting Model with Cross-Market Substitutions By C. Y. Kelvin Yuen; Ping Wang
  32. Are Exchange Rate, Exports and Domestic Investment in Tunisia Cointegrated? A Comparison of ECM and ARDL Model By Bakari, Sayef; Tiba, Sofien
  33. Exchange rate shocks and inflation comovement in the euro area By Danilo Leiva-Leon; Eva Ortega; Jaime Martínez-Martín
  34. Synchronization Patterns in the European Union By Mattia Guerini; Duc Thi Luu; Mauro Napoletano
  35. Uncertainty, Perception and the Internet By M. E. Bontempi; M. Frigeri; R. Golinelli; M. Squadrani
  36. How is Machine Learning Useful for Macroeconomic Forecasting? By Philippe Goulet Coulombe; Maxime Leroux; Dalibor Stevanovic; Stéphane Surprenant
  37. Information, VARs and DSGE Models By Paul Levine; Joseph Pearlman; Stephen Wright; Bo Yang
  38. What Drives Bitcoin Fees? Using Segwit to Assess Bitcoin's Long-run Sustainability By Collin Brown; Jonathan Chiu; Thorsten V. Koeppl
  39. The Chilean economy since the return to democracy in 1990. On how to get an emerging economy growing, and then sink slowly into the quicksand of a “middle-income trap” By Palma, J. G.
  40. The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France By Anne-Laure Delatte; Pranav Garg; Jean Imbs
  41. Copulas and Macroeconomics: the Quantity Theory of Money By Ernst Juerg Weber
  42. The Nonpuzzling Behavior of Median Inflation By Laurence Ball; Sandeeo Mazumder
  43. The link between labor cost and price inflation in the euro area By Elena Bobeica; Matteo Ciccarelli; Isabel Vansteenkiste
  44. Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis By Matthew E. Kahn; Kamiar Mohaddes; Ryan N. C. Ng; M. Hashem Pesaran; Mehdi Raissi; Jui-Chung Yang
  45. Personal Bankruptcy and Wage Garnishment By Florian Exler
  46. Brunei Darussalam; 2019 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  47. Manufacturing Sector and Economic Growth: A Panel Study of Selected African Countries By Clement Moyo
  48. BVAR: Bayesian Vector Autoregressions with Hierarchical Prior Selection in R By Nikolas Kuschnig; Lukas Vashold
  49. Excess Churn in Integrated Labor Markets By Bratsberg, Bernt; Raaum, Oddbjørn; Røed, Knut
  50. Bounded rationality in rules of price adjustment and the Phillips Curve By Ding, Sitong
  51. You’re the One That I Want! Public Employment and Women’s Labor Market Outcomes By Gomes, Pedro Maia; Kuehn, Zoë
  52. Has the U.S. Wage Phillips Curve Flattened? A Semi-Structural Exploration By Jordi Galí; Luca Gambetti
  53. Resource Curse Hypothesis and Role of Oil Prices in USA By Shahbaz, Muhammad; Ahmed, Khalid; Tiwari, Aviral Kumar; Jiao, Zhilun
  54. Macroeconomic Effects of Reforms on Three Diverse Oil Exporters: Russia, Saudi Arabia, and the UK By Samya Beidas-Strom; Marco Lorusso
  55. Gains in evolutionary dynamics: A unifying and intuitive approach to linking static and dynamic stability By Dai Zusai
  56. Trend, Seasonal, and Sectoral Inflation in the Euro Area By James H. Stock; Mark W. Watson
  57. S&P 500 under Dynamic Gordon Model By Rodrigo Alfaro; Andrés Sagner
  58. A Century of High Frequency UK Macroeconomic Statistics: A Data Inventory By Jagjit S Chadha; Ana Rincon-Aznar; Sylaja Srinivasan; Ryland Thomas
  59. Oil curse, economic growth and trade openness By Monoj Kumar Majumder; Mala Raghavan; Joaquin Vespignani
  60. If You Think 9-Ending Prices Are Low, Think Again By Snir, Avichai; Levy, Daniel
  61. Firm dynamics in an global and uncertain economy By Gigout, Timothee
  62. BVAR: Bayesian Vector Autoregressions with Hierarchical Prior Selection in R By Kuschnig, Nikolas; Vashold, Lukas
  63. Forecasting Swiss Exports using Bayesian Forecast Reconciliation By Florian Eckert; Rob Hyndman; Anastasios Panagiotelis
  64. Workers in Declining Occupations: Modest Participation in Adult Education By Asplund, Rita; Kauhanen, Antti; Vanhala, Pekka
  65. Jobless recoveries after financial crises (and the key role of the extensive margin of employment) By Françoise Delmez
  66. The Monetary Foundations of Britain’s Early 19th Century Ascendency By Carolyn Sissoko
  67. Policies for encouraging healthier food choices By Céline Giner; Jonathan Brooks
  68. Transforming the public sector: 1998–2018 By Lapsley, Irvine; Miller, Peter
  69. Credit supply constraint and external solvency: The case of the Czech Republic By Karel Br?na
  70. On the Timing of Production Decisions in Monetary Economies By Nejat Anbarci; Richard Dutu; Ching-Jen Sun
  71. The Pass-Through of Large Cost Shocks in an Inflationary Economy By Fernando Alvarez; Andy Neumeyer
  72. Oil Curse, Economic Growth and Trade Openness By Vespignani, Joaquin; Raghavan, Mala; Majumder, Monoj Kumar
  73. The Perils of Fiscal Rules By Maxime MENUET; Alexandru MINEA; Patrick VILLIEU
  74. Yours inclusively? Income mobility in Ireland, 10 years of tax record microdata By Seán Kennedy; David Haugh; Brian Stanley
  75. Trust in Humans and Robots: Economically Similar but Emotionally Different By Timothy Shields; Eric Schniter; Daniel Sznycer
  76. Modelling Minskyan financial cycles with fundamentalist and extrapolative price strategies: An empirical analysis via the Kalman filter approach. By Filippo Gusella
  77. The rise of corporate net lending among G7 countries: a firm-level analysis By Davide Villani
  78. "The Macroeconomic Loss Due to Violence against Women and Girls: The Case of Ghana" By Srinivas Raghavendra; Kijong Kim; Sinead Ashe; Mrinal Chadha; Felix Asante; Petri T. Piiroinen; Nata Duvvury
  79. Macroeconomic Outcomes in Disaster-Prone Countries By Alessandro Cantelmo; Giovanni Melina; Chris Papageorgiou

  1. By: Marc Anderes (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Alexander Rathke (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Sina Streicher (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Filip Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: Economists and central bankers nowadays believe that forward guidance has become more important in a world in which key interest rates have hit their effective lower bounds (ELB). In case of the European Central Bank (ECB), this should have increased the informational content of the introductory statements at the press conference following ECB policy meetings. We examine whether this form of ECB communication adds information to a shadow interest rate that summarises the overall policy stance as interpreted by financial markets. To measure communication, we use information based on ECB press releases distinguishing between topics like inflation, the real economy and monetary developments. We also look at the effect of communication on consensus expectations about key macroeconomic variables. Especially ECB’s assessment of the economy, i.e. communication related to economic growth, triggers movement in financial markets and thereby the shadow rate. Communication of the ECB through its press releases also causes professional forecasters to change their outlook. Not only their growth forecasts are affected, also their expectations for M3 growth and inflation are.
    Keywords: Central bank communication, shadow rates, consensus expectations, ECB, euro area, money growth
    JEL: E3 E43 E51 E52 E58
    Date: 2019–10
  2. By: Ilias Georgakopoulos
    Abstract: This paper investigates the macroeconomic implications of alternative tax regimes. For this purpose, a one-sector general equilibrium model is constructed in which heterogeneous agents differ in productivity and holdings of capital in the sense of incurring transaction costs for participating in the capital market. A Cobb-Douglas production function is employed that can capture the capital-skill complementarity effect and the difference in productivities of the skilled and unskilled workers. With regards to fiscal policy experiments, this paper examines tax structures where a permanent reduction in each of the three main tax instruments namely, consumption, labour and capital income tax is compensated by a permanent increase in one of the remaining two policy instruments such that the government budget constraint is tax revenue neutral. The government levies taxes on consumption, labour income and capital income in order to finance its only activity, government consumption. Next, the model economy is calibrated to the Greek economy to reflect the great ratios over 1960:1-2005:4 and then, it studies the long-run, welfare and transitional effects of the undertaken analysis. The sensitivity analysis shows that the quantitative and qualitative findings are quite robust.
    Keywords: General equilibrium model; optimal taxation; business cycle.
    JEL: E24 E32 E62
    Date: 2019–11–11
  3. By: Phurichai Rungcharoenkitkul; Claudio Borio; Piti Disyatat Author-X-Name_First: Piti
    Abstract: This paper studies the interaction between monetary policy and macroeconomic stability in a model with two distinguishing features. First, financing - cash flows - underpins all economic activity, with banks generating deposits by granting loans. Money is non-neutral as the policy interest rate anchors the real economy. Second, bank lending is subject to an endogenous boom-bust cycle due to externalities in the loan market. Together, these features imply that monetary policy may have long-lasting impact on the real economy through its in fluence on the financial cycle. In this `finance-based' economy, there is no well-defined natural rate of interest to which the economy gravitates. The possibility of a `low interest rate trap' emerges: monetary policy that leans insufficiently against the build-up of financial imbalances increases the vulnerability to financial busts over successive cycles. As a result, low rates can beget lower rates.
    Keywords: monetary policy, financial cycle, money neutrality, hysteresis, natural rate of interest
    JEL: E52 E58 E43
    Date: 2019–10
  4. By: Anil Savio Kavuri; Alistair Milne; Justine Wood
    Abstract: In the context of recent developments with cryptocurrencies, as well as the potential rise of central bank digital currencies, we present a new visualisation of money. Using three novel figures, we distinguish between the relevant mechanisms, technologies, recordkeeping, and transactions of various forms of money, as well as the classifications of different types of money; this enables the resolution of omissions and ambiguities in other recent such visualisations (CPMI 2018; Bech and Garratt 2017; Bech and Garratt 2017; CPMI 2015; Wadsworth 2018a; Wadsworth 2018b). This reveals the novelty of cryptocurrencies, which use the software-based cryptographically secured recordkeeping, that support the issue of money with a credible commitment to a limited quantity of issue. We conclude with a discussion of policy implications stemming from our analysis.
    Keywords: Money, Cryptocurrencies, Central bank digital currencies, Bitcoin
    JEL: B22 E40 E41 E42 E50 E51 E52 E58 E59 E61
    Date: 2019–10
  5. By: Cawley, Cormac; Finnegan, Marie
    Abstract: The European Central Bank (ECB) engaged in an expanded asset purchase programme (APP) from 2014 to 2018 to help achieve their primary objective of price stability. Total assets purchased over this period was over €2.5 trillion and new net purchases ended in December 2018. This paper identifies whether the ECB’s APP in Ireland operated through the portfolio rebalancing channel, the signalling channel or the lending channel. It presents a quantitative descriptive analysis of some key Irish data sets in the 2014–2018 period and uses time-series visualisation and trend analysis to identify trends and correlations. There are a number of preliminary findings. First, much downward pressure on sovereign debt yields and spreads had occurred before the APP began due to previous accommodative monetary policy and the signalling channel. Second, the corporate-sector purchase programme (CSPP) did impact on targeted bonds and may have had spill overs to non-targeted bonds. Third, the APP did not lead to much increased lending to the SME sector. Fourth, while households did engage in traditional portfolio rebalancing, Irish banks did not and were perhaps more motivated to meet their capital requirements and manage their level of reserves. This is a first step towards understanding the transmission channels of ECB policy in Ireland and more work needs to be done to detangle the transmission of the most recent APP from other factors and consider these findings in the context of theoretical models. Such work is important to help inform policy makers on enhancing the transmission mechanism to the Irish economy of the recently launched new ECB asset purchase programme from November 2019.
    Keywords: Quantitative easing; asset purchase programme; Ireland; transmission channels of QE
    JEL: E4 E44 E5 E52 E58
    Date: 2019–09–23
  6. By: Andrea Landi, Alex Sclip, Valeria Venturelli
    Abstract: In this paper we investigate the impact of the Federal Reserve's decision to main- tain the zero-lower bound for at least two years on bank profitability and strategies. Using a difference in difference setting we find that banks with lower reliance on deposit funding are more sensitive to the policy event. Reduced net worth of low deposit banks, relative to high deposit banks, induces those banks to change their strategies toward an increase in fee income related products to maintain the tar- geted level of performance. Such an increase is mainly explained by fiduciary and insurance related revenues that entail a lower risk for financial stability.
    Keywords: Profitability, diversification, zero-lower bound, unconventional monetary policy, banking
    JEL: E43 E44 E52 G21
    Date: 2019–10
  7. By: Beniak, Patrycja
    Abstract: Rapid digitalisation of payments leads to greater cost and time efficiency, yet could also potentially trigger legal and security challenges as well as lead to weakening of finan- cial stability and less effective monetary policy transmission. In order to ensure greater safety, central banks are contemplating and testing solutions thanks to which public using payment innovations could transact in funds that are ultimately backed by central bank. One of these solutions is central bank digital currency, a digital version of cash. The pro- posed versions of central bank digital currency are very diverse. Depending on the version assumed by a particular central bank, central bank digital currency can have an impact on central bank interest rate setting, monetary policy implementation and transmission mechanism. This relates most notably to effective lower bound which could either rise or fall, conditional on design on central bank digital currently.
    Keywords: virtual currencies, central bank digital currency, monetary policy, effective lower bound
    JEL: E42 E52 E58 G21 G28
    Date: 2019–10–22
  8. By: Juan Carlos Cuestas; Nicolas Reigl; Yannick Lucotte
    Abstract: This paper presents empirical estimates of bank credit procyclicality for a sample of 11 Central and Eastern Europe countries (CEECs) for the period 2000Q1–2016Q4. In the first step we estimate a traditional-type panel VAR model and analyse the evolution of credit procyclicality in the CEECs by comparing the impulse response functions for different business cycle periods. The results confirm the existence of credit procyclicality in CEECs and show that procyclicality is higher during boom periods. Furthermore we observe the heterogeneity of credit procyclicality in the different countries in our sample. To explain the cross-country heterogeneity in credit procyclicality we construct an interacted panel VAR model (IPVAR) and analyse whether bank level competition, proxied by the aggregate Lerner index, constitutes a driving force of credit procyclicality. Our findings indicate that bank competition affects credit procyclicality and explains the differences in credit dynamics across CEECs. Specifically we show that the reaction of credit to a GDP shock is on average higher in a less competitive banking market.
    Keywords: credit cycle, business cycle, bank competition, interacted panel VAR, CEEC
    JEL: E32 E51 G20 D40 C33
    Date: 2019–10–14
  9. By: Christian Pfister
    Abstract: This paper investigates the real effects of short-term financial constraints in the light of the working capital channel: cash credit constraints may force SMEs to forgo investment opportunities in order to finance their working capital needs. Building on unique indicators of cash and investment credit constraints derived from survey data, I find that: (1) short-term credit constraints are as important as long-term ones in SMEs' investment decisions; (2) the detrimental effect of cash credit constraints on corporate investment is even stronger for firms with higher working capital needs; (3) the negative relationship between working capital and fixed investment is associated with short-term financial frictions; and (4) only liquid SMEs are able to offset short-term financial frictions by adjusting their accounts receivable and inventories.
    Keywords: : Central Bank, Currency, Digitalisation, Financial Stability, Monetary Policy.
    JEL: E40 E42 E52 E58
    Date: 2019
  10. By: Claudio Borio; Mathias Drehmann; Dora Xia Author-X-Name_First: Dora
    Abstract: Financial cycles can be important drivers of real activity, but there is scant evidence about how well they signal recession risks. We run a horse race between the term spread - the most widely used indicator in the literature - and a range of financial cycle measures. Unlike most papers, ours assesses forecasting performance not just for the United States but also for a panel of advanced and emerging market economies. We find that financial cycle measures have significant forecasting power both in and out of sample, even for a three-year horizon. Moreover, they outperform the term spread in nearly all specifications. These results are robust to different recession specifications.
    Keywords: financial cycle, term spread, recession risk, panel probit mode
    JEL: C33 E37 E44
    Date: 2019–10
  11. By: Uluc Aysun (Department of Economics, College of Business Administration, University of Central Florida); Zeynep Yom (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: This paper shows that technology shocks have the largest impact on economies when industries adopt innovations of other industries at a high rate, if costs of adopting new technologies and adjusting R&D expenditures are low, and if innovators face a high degree of competition. It is not the level but the spillover of innovations across industries that is the key determinant of these findings. Under the conditions mentioned above, R&D becomes less procyclical and smoother along the business cycle yet R&D driven innovations have a larger impact on output since these innovations spillover at a higher rate. These inferences are drawn from a dynamic stochastic general equilibrium framework describing a real economy with endogenous growth. The latter feature allows us to infer the welfare implications of R&D processes.
    Keywords: Research and development; spillover effects; endogenous growth
    JEL: E30 E32 O30 O33
    Date: 2019–10
  12. By: Andrew Filardo; Paul Hubert; Phurichai Rungcharoenkitkul Author-X-Name_First: Phurichai
    Abstract: This paper examines whether monetary policy reaction function matters for financial stability. We measure how responsive the Federal Reserve's policy appears to be to imbalances in the equity, housing and credit markets. We find that changes in these policy sensitivities predict the later development of financial imbalances. When monetary policy appears to respond more countercyclically to market overheating, imbalances tend to decline over time. This effect is distinct from that of current and anticipated interest rate levels - the risk-taking channel. The evidence highlights the importance of a "policy reaction function" channel of monetary policy in shaping the financial cycle.
    Keywords: policy reaction function channel, asset price booms, credit booms, monetary policy, financial cycles, time-varying models
    JEL: E50 E52 G00 G01 G12
    Date: 2019–10
  13. By: Don Fast; Susan Fleck
    Abstract: The U.S. Bureau of Labor Statistics’ import and export price indexes (MXPI) are published from an ever decreasing sample relative to the size of trade. The Principal Federal Economic Indicator has an opportunity to retain and regain detailed MXPI using unit values calculated from comprehensive administrative trade data. Unit values are known to be biased, although bias is less prevalent among homogeneous products. This research presents a new methodological and statistical approach to blend unit values into official price indexes. First, a proof of concept for identifying homogeneous items is based on an analysis of two export products – dairy and vegetables – for 2015-16. The results provide a prototype and a roadmap for a consistent and testable approach that aligns with the concepts in official MXPI measures, maximizes the use of high-frequency data, and mitigates unit value bias. Applying the prototype, 52 of 142 import and 50 of 129 export 5-digit BEA End Use categories are identified as homogeneous using administrative data. This coverage accounts for 35 and 39 percent of the 2016 value of imports and exports, respectively. Incorporating unit values has the potential to deepen coverage and expand publication of detailed import and export price indexes.
    JEL: E3 E31 F0 F1 F3
    Date: 2019–10
  14. By: Micha? Konopczy?ski (Pozna? University of Economics and Business)
    Abstract: This paper presents an endogenous growth model of an open economy with wide range of instruments of fiscal policy. We distinguish three factors of production: capital, raw labor, and human capital. Education expenditures and investment spending are crucial for long-run growth. Economic agents are continuously optimizing under conditions of imperfect information (externalities). The government may play the role of the benevolent social planner which may transform the second-best decisions of individual agents into the first-best outcome. To that end we search for the optimal values of certain parameters of fiscal policy, including public consumption, public spending on education, the size of public deficit (as percent of GDP). As the model incorporates some open-economy variables, it is very complex, and consequently does not have a closed-form (analytical) solution. We present a numerical procedure which may be applied to numerically solve the model. Finally, we present some preliminary simulations based on stylized values of parameters and exogenous variables.
    Keywords: fiscal policy, economic growth, human capital, public deficit, government debt
    JEL: E13 E62 F43
    Date: 2019–10
  15. By: Rebecca Riley; Ana Rincon-Aznar; Lea Samek
    Abstract: We analyse new industry-level data to re-examine the UK productivity puzzle. We carry out an accounting exercise that allows us to distinguish general macroeconomic patterns from sector trends and idiosyncrasies, providing a roadmap for anyone interested in explaining the puzzle. We focus on the UK market sector. Average annual labour productivity growth was 2.5 percentage points lower during the period 2011-2015 than in the decade before the financial crisis that began in 2007. We find that several years on from the financial crisis stagnation remains widespread across detailed industry divisions, pointing to economy-wide explanations for the puzzle. With some exceptions, labour productivity growth lost most momentum in those industries that experienced strong growth before the crisis. Three fifths of the gap is accounted for by a few industries that together account for less than one fifth of market sector value added. In terms of why we observe continued stagnation, we find that capital shallowing has become increasingly important in explaining the labour productivity growth gap in service sectors, as the buoyancy of the UK labour market has not been sufficiently matched by investment, although our figures suggest that the majority of the productivity gap is accounted for by a TFP gap. The collapse in labour productivity growth has been more pronounced in the UK than elsewhere, but the broad sector patterns of productivity stagnation are in many respects similar across other advanced economies, emphasising the importance of global explanations for the puzzle. UK industries that saw the biggest reductions in productivity growth tended to be internationally competitive and more dependent on global demand than other industries. They were also industries where productivity is difficult to measure.
    Keywords: productivity, competitiveness, sector studies
    JEL: E22 E23 L60 L70 L80 L90 O47
    Date: 2019–10
  16. By: Alexandra Bozhechkova (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: As a rule, the economic policy of various countries of the world, regardless of its specialization, is aimed at maintaining the competitiveness of the national economy. The nature of the relationship between the real exchange rate and competitiveness parameters essentially depends on the level of development of the economy, degree of development of the financial market, institutional environment, exchange rate regime, degree of dependence of the economy on the export of raw materials, accumulation of sovereign funds, etc. Thus, for developed countries, output dynamics are less affected by fluctuations in the real exchange rate, given the wide range of opportunities to diversify currency risks, as well as attracting external financing because of developed financial markets. In developing countries, underestimation of the exchange rate in the context of weak institutions, insufficient development of financial markets, and restrictions on borrowing can stimulate economic growth, increasing the profitability of producers of the traded sector of the economy.It would be logical to assume that under the conditions of the inflation targeting regime, when economic agents while making decisions are less focused on expectations regarding the dynamics of the exchange rate and more take into account inflation expectations. Nonetheless, as the experience of developing countries targeting inflation shows, the monetary authorities continue to conduct currency interventions aimed at curbing the excessive strengthening of the national currency. Such measures, on the one hand, hinder the decline in the competitiveness of national goods on world markets, and on the other, they contribute to the expansion of investment opportunities of firms.These theses are confirmed in our study. Econometric assessment of the degree of influence of the real exchange rate and its overvaluation / underestimation on economic growth rates, growth rates of total factor productivity (TFP), as well as the export diversification rate indicator was implemented by the system generalized method of moments for a group of CIS countries, countries of exporters of raw materials, developing countries that target inflation, on different subperiods: 1990s, 2000s, 2010s.
    Keywords: exchange rate, economic growth, total factor productivity, export diversification, system generalized method of moments
    JEL: C01 F00 E52
    Date: 2019–10
  17. By: Bai, Hang (University of Connecticut - Department of Finance); Li, Erica X. N. (Cheung Kong Graduate School of Business); Xue, Chen (University of Cincinnati); Zhang, Lu (Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER))
    Abstract: Yes, most likely. The firm-level evidence on costly reversibility is even stronger than the prior evidence at the plant level. The firm-level investment rate distribution is highly skewed to the right, with a small fraction of negative investments, 5.79%, a tiny fraction of inactive investments, 1.46%, and a large fraction of positive investments, 92.75%. When estimated via simulated method of moments, the standard investment model explains the average value premium, while simultaneously matching the key properties of the investment rate distribution, including the cross-sectional volatility, skewness, and the fraction of negative investments. The combined effect of costly reversibility and operating leverage is the key driving force behind the model’s quantitative performance.
    JEL: E22 E44 G12 G14
    Date: 2019–10
  18. By: Mehrotra, Aaron; Moessner, Richhild; Shu, Chang
    Abstract: We analyse how movements in the components of sovereign bond yields in the United States affect long-term rates in 10 advanced and 21 emerging economies. The paper documents significant global spillovers from both the expectations and term premia components of long-term rates in the United States. We find that spillovers to domestic long-term rates in emerging economies from the US expectations components tend to be more sizeable than those from the US term premia. Finally, spillovers from US term premia are larger when an emerging economy displays greater macro-financial vulnerabilities.
    JEL: E52 E43 F42 F65
    Date: 2019–10–16
  19. By: Martin Wolf
    Abstract: We describe a pecuniary externality in economies with downward nominal wage rigidity that leads arms to hire too many workers in expansions, which leads to too much unemployment in recessions. The externality arises because of competitive behavior in the labor market. When ?rms hire more workers, they push up market wages for all ?rms. Firms internalize that with higher wages, it is more likely that they will be constrained by downward nominal wage rigidity in the future themselves; however, they fail to internalize the negative e?ects over other arms. In the calibrated model, when compared to a benevolent planner who chooses labor allocations on behalf of arms, the externality raises the welfare cost of downward nominal wage rigidity by a factor of 10, as it makes the economy signifcantly more exposed to unemployment crises.
    JEL: E24 E32 F41
    Date: 2019–06
  20. By: Tiago Miguel Guterres Neves Sequeira (CeBER and Faculty of Economics, University of Coimbra); Pedro Mazeda Gil (CEF.UP, Faculty of Economics, University of Porto); Óscar Afonso (CEF.UP, Faculty of Economics, University of Porto)
    Abstract: In this article, we argue that inflation increases complexity pertaining to knowledge production (or R&D). Then, we expand a recently developed complexity index based on entropy to include the effect of inflation. As a result of this new mechanism in an endogenous growth model, inflation is no longer superneutral. In the model, inflation can decrease economic growth in a nonlinear way, a sudden upward shock on inflation can severely hurt economic growth and an inflation cut can be responsible for a take-off. These effects are illustrated quantitatively.
    Keywords: Inflation, endogenous economic growth, complexity effects, entropy.
    JEL: O10 O30 O40 E22
    Date: 2019–09
  21. By: Pavolov, Oscar (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: Recent literature has addressed how product creation amplifies economic fluctua- tions via the love of variety. Yet, the empirical evidence on variety e¤ects is sparse. The current paper demonstrates that a decreasing returns to scale production technol- ogy, which leads to increasing marginal costs, can similarly amplify business cycles. An expansion of the firm's product scope reduces marginal costs and gives an incentive to produce multiple products even if the variety e¤ects are entirely absent. The e¢ ciency gains from adjusting product scopes makes the economy more susceptible to sunspot equilibria.
    Keywords: Indeterminacy, sunspot equilibria, multi-product firms, business cycles
    JEL: E32
    Date: 2019
  22. By: International Monetary Fund
    Abstract: Egypt’s macroeconomic situation has improved significantly since 2016. Over the last three years, the authorities have carried out an ambitious home-grown reform program that aimed to correct large external and domestic imbalance and promote inclusive growth and job creation. Critical macroeconomic reforms implemented under the program have been successful in achieving macroeconomic stabilization, a recovery in growth and employment, and putting public debt on a clearly declining trajectory. Fiscal savings have been partly utilized to ease the burden of adjustment on the poor.
    Keywords: External sector;Unemployment;Employment;Economic conditions;Central banks;ISCR,CR,Proj,overall balance,percent of GDP,primary balance,finance gap
    Date: 2019–10–10
  23. By: Bakari, Sayef; Tiba, Sofien
    Abstract: The aim of this paper is to search determinants of economic growth in the USA in the long run and the short run for the period 1970 – 2016. By using co-integration analysis and Vector Error Correction Model, we make the compensation of a lot of variables that they did not include with each other before. Empirical analysis show that in the long run that Final consumption expenditure, population, domestic investment, foreign direct investment inflow, and export are the source of economic growth in the long run, however foreign direct investment outflow, military expenditure, tax revenue, and imports are not seen as a source of economic growth in the long run. In the short run, all of the variables have not any effect on economic growth.
    Keywords: Macro Determinants, Economic Growth, Cointegration Analysis, VECM, USA.
    JEL: E2 E22 F14 F43 O4 O47 O51
    Date: 2019–01
  24. By: Vondra, Marek; Touš, Michal; Teng, Sin Yong
    Abstract: Biogas production is one of the most promising pathways toward fully utilizing green energy within a circular economy. The anaerobic digestion process is the industry standard technology for biogas production due to its lowered energy consumption and its reliance on microbiology. Even in such an environmental-friendly process, liquid digestate is still produced from the remains of digested bio-feedstock and will require treatment. With unsuitable treatment procedure for liquid digestate, the mass of bio-feedstock can potentially escape the circular supply chain within the economy. This paper recommends the implementation of evaporator systems to provide a sustainable liquid digestate treating mechanism within the economy. Studied evaporator systems are represented by vacuum evaporation in combination with ammonia scrubber, stripping and reverse osmosis. Nevertheless, complex multi-dimensional decisions should be made by stakeholders before implementing such systems. Our work utilizes a novel techno-economics model to study the techno-economics robustness in implementing recent state-of-art vacuum evaporation systems with exploitation of waste heat from combined heat and power (CHP) units in biogas plants (BGP). To take into the account the stochasticity of the real world and robustness of the analysis, we used the Monte-Carlo simulation technique to generate more than 20,000 of different possibilities for the implementation of the evaporation system. Favourable decision pathways are then selected using a novel methodology which utilizes the artificial neural network and a hyper-optimized decision tree classifier. Two pathways that give the highest probability of providing a fast payback period are identified. Descriptive statistics are also used to analyse the distributions of decision parameters that lead to success in implementing the evaporator system. The results highlighted that integration of evaporation system are favourable when transport costs and incentives for CHP units are large and while feed-in tariffs for electricity production and specific investment costs are low. The result of this work is expected to pave the way for BGP stakeholders and decision makers in implementing liquid digestate treating technologies within the currently existing infrastructure.
    Keywords: Anaerobic Digestion; Machine Learning; Vacuum Evaporation; Liquid Digestate; Biogas Plant; Energy Consumption; Nutrient Recovery; Circular economy; Ammonium sulphate solution
    JEL: C0 C1 C6 C8 E0 E2 E3 E6 L1 L6 L9
    Date: 2019–09–20
  25. By: Bakari, Sayef; Ahmadi, Ali; Tiba, Sofien
    Abstract: The development of endogenous growth theory has opened an avenue through which the effects of taxation on economic growth can be explored. Indeed, several empirical studies have examined the effect of many criteria, typically measured as domestic investment, on economic growth. This study reviews the theoretical and empirical evidence to assess whether a consensus arises as to how taxation affects the rate of economic growth. It is shown that the theoretical models isolate several channels through which taxation can affect growth and that these effects may be very. Our empirical facts record that both taxation of corporate and domestic investment positively influence economic growth, as well as, economic growth can affect taxation.
    Keywords: Taxation, Domestic Investment, Economic Growth, Germany, VECM
    JEL: E22 E62 H2 O47 O52
    Date: 2019
  26. By: Anthony Edo; Jacques Melitz
    Abstract: We perform the first econometric test to date of the influences of inflows of precious metals and population growth on the “Great Inflation” in Europe following the discovery of the New World. The English evidence strongly supports the near-equivalent importance of both influences. For 1500-1700, silver is the only relevant precious metal in the estimates. The study controls for urbanization, government spending, mortality crises and climatic changes. The series for inflows of the precious metals into Europe from America and European mining are newly constructed based on the secondary sources.
    Keywords: The “Great Inflation”;Demography;Precious Metals;European Economic History 1500-1700
    JEL: E31 F00 J10 N13 N33
    Date: 2019–10
  27. By: Théo Nicolas
    Abstract: This paper investigates the real effects of short-term financial constraints in the light of the working capital channel: cash credit constraints may force SMEs to forgo investment opportunities in order to finance their working capital needs. Building on unique indicators of cash and investment credit constraints derived from survey data, I find that: (1) short-term credit constraints are as important as long-term ones in SMEs' investment decisions; (2) the detrimental effect of cash credit constraints on corporate investment is even stronger for firms with higher working capital needs; (3) the negative relationship between working capital and fixed investment is associated with short-term financial frictions; and (4) only liquid SMEs are able to offset short-term financial frictions by adjusting their accounts receivable and inventories.
    Keywords: : Investment, Bank credit, Financial constraints, Working capital, Survey data.
    JEL: D82 E32 E51 G01 G21
    Date: 2019
  28. By: Nurrachmi, Rininta
    Abstract: ASEAN countries are rich with natural resources and historical heritage. The high number of Muslim populations in ASEAN countries can be a potential revenue to promote Islamic tourism. This study aimed to examine the potential industry of Islamic tourism as an alternative revenue and it seeks to investigate the effective and efficient way in promoting Islamic tourism in ASEAN. There are many factors that promote Islamic tourism in ASEAN countries. Push and pull factors influence Muslim tourists is deciding which place they want to visit. Collaboration and coordination among ASEAN countries can enhance Islamic tourism in developing Islamic tourism which can provide economic benefit to enhance the countries’ revenue.
    Keywords: Islamic tourism, muslim, southeast countries
    JEL: E2 E24 O1 O11
    Date: 2019–10
  29. By: Simon Gilchrist; Egon Zakrajsek
    Abstract: The diminished sensitivity of inflation to changes in resource utilization that has been observed in many advanced economies over the past several decades is frequently linked to the increase in global economic integration. In this paper, we examine this “globalization” hypothesis using both aggregate U.S. data on measures of inflation and economic slack and a rich panel data set containing producer prices, wages, output, and employment at a narrowly defined industry level. Our results indicate that the rising exposure of the U.S. economy to international trade can indeed help explain a significant fraction of the overall decline in responsiveness of aggregate inflation to fluctuations in economic activity. This flattening of the U.S. Phillips curve is supported strongly by our cross-sectional evidence, which shows that increased trade exposure significantly attenuates the response of inflation to fluctuations in output across industries. Our estimates indicate that the inflation-output tradeoff is about three times larger for low-trade intensity industries compared with their high-trade intensity counterparts.
    Date: 2019–10
  30. By: Bakari, Sayef; Tiba, Sofien
    Abstract: This paper aimed at examining the tie between domestic investment, total consumption, and external debt in the case of Tunisia over the period 1970-2017. By applying the VECM, in the long-run, our findings recorded the fact that that external debt and domestic investment have a negative effect on total consumption. However, we found a significant negative impact of the total consumption and external debt on domestic investment. In the short run, we recorded that only total consumption and external debt cause domestic investment. Due to the importance of our insights, several lessons for Tunisia in terms of commitment towards the aims of the 14 January revolution and reforms should be undertaken.
    Keywords: Domestic investment, Total consumption, External debt, VECM, Tunisia.
    JEL: E21 E22 F34 O55
    Date: 2019–02
  31. By: C. Y. Kelvin Yuen; Ping Wang
    Abstract: While minimum wage policy is widely adopted in the real world, can it effectively raise the average wage of lower paid jobs without having large detrimental consequences for employment? The empirical literature fails to establish robust findings. We develop a general-equilibrium search and wage-posting framework with heterogeneous workers and tasks matching in multi-tier labor markets: abstract, routine high-skilled, routine middle-skilled, manual middle-skilled and manual low-skilled. We incorporate rich cross-market spillovers and compositional effects from individual responses to market thickness. As a result of minimum wage hikes, we show that (i) the unemployment rate at the minimum wage binding market is higher, while all other markets enjoy a lower unemployment rate; (ii) employment in the manual low-skilled jobs is lower, whereas employment in the routine high-skilled and manual middle-skilled markets is higher due to cross-market substitutions; and, (iii) employment in other markets has ambiguous responses due to conflicting effects on potential worker entry and unemployment. By calibrating the model to fit the U.S. data, we evaluate the impacts of the federal minimum wage hike (2007-2009) and the on-going minimum wage increase in Seattle (2017-2021). We find that the minimum wage effects on employment on the binding markets depend crucially on the magnitudes of spillover and compositional effects and that the employment effects may be weak in a nonbinding market. Moreover, our results suggest that, while both minimum wage hikes reduce aggregate output, they only generate small effects on submarket average and overall average wages.
    JEL: D83 E24 E60 J64
    Date: 2019–10
  32. By: Bakari, Sayef; Tiba, Sofien
    Abstract: The objective of the paper is to investigate the effect of the exchange rate, exports, and domestic investment by adopting a comparative approach between the ECM and ARDL procedure for the case of the Tunisian economy during the period of study1966-2017. Our insights of Error Correction Model recorded that the Domestic Investment and Exports have a negative impact on Exchange Rate. In accordance with the highlights of the ARDL model. Understanding these controversial nexus seems to be vitality, especially, for this current critical situation of the Tunisian economy.
    Keywords: Exchange rate, Exports, Domestic investment, ECM, ARDL.
    JEL: E2 E22 F00 F13 F14 F31 F68
    Date: 2019
  33. By: Danilo Leiva-Leon (Banco de España); Eva Ortega (Banco de España); Jaime Martínez-Martín (European Central Bank)
    Abstract: This paper decomposes the time-varying effect of exogenous exchange rate shocks on euro area countries inflation into country-specific (idiosyncratic) and region-wide (common) components. To do so, we propose a flexible empirical framework that is based on dynamic factor models subject to drifting parameters and exogenous information. We show that exogenous shocks to the euro/USD account for over 50% of the nominal euro/USD exchange rate fluctuations in more than 1/3 of the quarters over the past six years – especially in turning points periods. Our main results indicate that headline inflation in euro area countries, and in particular its energy-related component, has significantly become more affected by these exogenous exchange rate shocks since the early 2010s, in particular, for the largest economies of the region. While such increasing sensitivity relies solely on a sustained surge in the degree of comovement for headline inflation, it is also based on a higher region-wide effect of the shocks for the case of energy inflation. Instead, purely exogenous exchange rate shocks do not seem to have a significant effect on the core component of headline inflation, which also displays a lower degree of comovement across euro area countries.
    Keywords: exchange rate, inflation, factor model, structural VAR model
    JEL: E31 F3 F41
    Date: 2019–10
  34. By: Mattia Guerini; Duc Thi Luu; Mauro Napoletano
    Abstract: We propose a novel approach to investigate the synchronization of business cycles and we apply it to a Eurostat database of manufacturing industrial production time-series in the European Union (EU) over the 2000-2017 period. Our approach exploits Random Matrix Theory and extracts the latent information contained in a balanced panel data by cleaning it from possible spurious correlation. We employ this method to study the synchronization among different countries over time. Our empirical exercise tracks the evolution of the European synchronization patterns and identifies the emergence of synchronization clusters among different EU economies. We find that synchronization in the Euro Area increased during the first decade of the century and that it reached a peak during the Great Recession period. It then decreased in the aftermath of the crisis, reverting to the levels observable at the beginning of the 21st century. Second, we show that the asynchronous business cycle dynamics at the beginning of the century was structured along a East-West axis, with eastern European countries having a diverging business cycle dynamics with respect to their western partners. The recession brought about a structural transformation of business cycles co-movements in Europe. Nowadays the divide can be identified along the North vs. South axis. This recent surge in asynchronization might be harmful for the European Union because it implies countries' heterogeneous responses to common policies.
    Keywords: Business Cycle Synchronization; Random Matrix Theory; European Union.
    Date: 2019–10–21
  35. By: M. E. Bontempi; M. Frigeri; R. Golinelli; M. Squadrani
    Abstract: Macroeconomic uncertainty consists of three components: the unobservable, the heterogeneous and the “uncertain”. We are unaware of exactly when economic agents perceive uncertainty and which type of uncertainty interests them. This paper introduces and outlines a way of conducting large-scale data searches on the Web. We create the EURQ index of “economic uncertainty related queries” for both the USA and Italy. We show that the EURQ encapsulates agents’ need to gather more information during periods of uncertainty. This need either spontaneously arises in the case of macro-real and political uncertainty, or is induced by the media in the case of normative and financial uncertainty. This distinction is extremely important when trying to understand the immediate impact of fiscal policy uncertainty on economic variables, and how financial shocks can produce a significant short-term impact on economic activity. It is also helpful when trying to solve the identification and endogeneity issues encountered in the literature when assessing the role of uncertainty.
    JEL: D80 D91 E66 C32 H30
    Date: 2019–10
  36. By: Philippe Goulet Coulombe; Maxime Leroux; Dalibor Stevanovic; Stéphane Surprenant
    Abstract: We move beyond Is Machine Learning Useful for Macroeconomic Forecasting? by adding the how. The current forecasting literature has focused on matching specific variables and horizons with a particularly successful algorithm. To the contrary, we study a wide range of horizons and variables and learn about the usefulness of the underlying features driving ML gains over standard macroeconometric methods. We distinguish 4 so-called features (nonlinearities, regularization, cross-validation and alternative loss function) and study their behavior in both the data-rich and data-poor environments. To do so, we carefully design a series of experiments that easily allow to identify the “treatment” effects of interest. We conclude that (i) more data and nonlinearities are true game-changers for macroeconomic prediction, (ii) the standard factor model remains the best regularization, (iii) cross-validations are not all made equal (but K-fold is as good as BIC) and (iv) one should stick with the standard L2 loss. The forecasting gains of nonlinear techniques are associated with high macroeconomic uncertainty, financial stress and housing bubble bursts. This suggests that Machine Learning is useful for macroeconomic forecasting by mostly capturing important nonlinearities that arise in the context of uncertainty and financial frictions.
    Keywords: Machine Learning,Big Data,Forecasting,
    JEL: C53 C55 E37
    Date: 2019–10–17
  37. By: Paul Levine (University of Surrey and CIMS); Joseph Pearlman (City University); Stephen Wright (Birkbeck College); Bo Yang (Swansea University)
    Abstract: How informative is a time series representation of a given vector of observables about the structural shocks and impulse response functions in a DSGE model? In this paper we refer to this econometrician's problem as “E-invertibility" and consider the corresponding information problem of the agents in the assumed DGP, the DSGE model, which we refer to as “A-invertibility" We consider how the general nature of the agents' signal extraction problem under imperfect information impacts on the econometrician's problem of attempting to infer the nature of structural shocks and associated impulse responses from the data. We also examine a weaker condition of recoverability. A general conclusion is that validating a DSGE model by comparing its impulse response functions with those of a data VAR is more problematic when we drop the common assumption in the literature that agents have perfect information as an endowment. We develop measures of approximate fundamentalness for both perfect and imperfect information cases and illustrate our results using analytical and numerical examples.
    JEL: C11 C18 C32 E32
    Date: 2019–10
  38. By: Collin Brown; Jonathan Chiu; Thorsten V. Koeppl
    Abstract: We use block level data from the Bitcoin blockchain to estimate the impact of congestion and the USD price on average fee rates. The introduction and adoption of the Segwit protocol allows us to identify an aggregate demand curve for bitcoin transactions. We nd that Segwit has reduced fee revenue by about 80%. Fee revenue could be maximized at a blocksize of about 0.6 MB when Segwit adoption remains at 40%. At this blocksize, maximum fee revenue would be roughly 1/8 of the current block reward { or the equivalent of 1.6375 BTC as a reward in the long run given current prices and demand for Bitcoin.
    Keywords: Bitcoin, Payment Systems, Fees, Congestion, Segwit Protocol
    JEL: E42 G2
    Date: 2019–10
  39. By: Palma, J. G.
    Abstract: The main hypothesis of this paper is that the Chilean economy's poor performance over the last two decades (e.g., average productivity growth collapsed by three quarters vis-à-vis the previous cycle) results from its development strategy having run its course -being now in desperate need of a full “upgrade” (one capable of generating new engines of productivity growth; e.g., the industrialisation of commodities, a “green new deal”, or the spread of the new technological paradigm to the four corners of the economy). The same can be said of the neo-liberal ideology at its foundations, as most of its “absolute certainties” are being shaken to the core. However, neither the (not so) invisible hand of distorted markets, nor centre-left or centre-right governments have had much of a clue as to how to bring this change about. There is also (unlike, say, in some Asian economies) a generalised lack of nerve to do anything about it. Consequently, the Chilean economy is now jammed in a rather transparent -and self-made- “middle-income trap”. In fact, change has come in the opposite direction: in order to reinforce the growingly fragile status quo, a new policy-straightjacket has been added in the form of the Transpacific Treaty, or TPP-11, which gives large corporations (foreign and domestic) a de facto veto against any change in policy. In turn, the advanced countries’ “reverse catching-up” isn’t helping either, as this also helps reinforce the convictions of those in Chile defending the status quo. We are all now indeed converging in the West, north and south, but towards Latin American features such as mobile élites creaming off the rewards of economic growth, and ‘magic realist’ politics that lack self-respect if not originality. In fact, it is now even tempting to say to those in the high-income OECD “Welcome to the Third World”.
    Keywords: Chile, Latin America, emerging Asia, Catching-up, “Reverse catching-up”, Export “upgrading”, Productivity, Immigration, “premature” de-industrialisation, Keynes, Hirschman, Foucault, Neo-liberalism, Inequality, Rent-seeking
    JEL: B52 E20 F13 F53 H54 J20 L52 N16 N66 O16 O40 P50
    Date: 2019–10–16
  40. By: Anne-Laure Delatte; Pranav Garg; Jean Imbs
    Abstract: Using a bank-firm level credit registry combined with firm-level balance sheet data we establish the presence of heterogeneity in the effects of unconventional monetary policy transmission. We examine the consequences of a loosening in the collateral eligibility requirement for credit refinancing in France. The policy was designed to affect bank lending positively. We expect a linear increase in lending and an additional increase in loans to firms with newly acceptable rating. We find a large heterogeneity of the monetary policy transmission including the unexpected reduction of lending by the banks benefiting the most from the policy. These are small, risk-averse banks whose foremost concern after the recession was to strengthen their balance sheets. Banks least affected by the policy respond with a reduction in credit to low risk borrowers in reaction to the change in the market structure. Last we document heterogenous effects of the policy on firms depending on their size.
    Keywords: Unconventional Monetary Policy;Transmission Channels;Corporate Finance;Real Effects of Monetary Policy;Individual Data
    JEL: C55 C58 E44 G21 G32
    Date: 2019–05
  41. By: Ernst Juerg Weber (Economics Programme, University of Western Australia)
    Abstract: The quantity theory of money remains a cornerstone of modern macroeconomics that provides a benchmark for the long-run behaviour of macroeconomic models. The direct empirical evidence for it is, however, less conclusive than suggested by scatterplots and the exaggerated correlations between money growth and inflation that can be found in the macroeconomic literature. Copulas with upper tail dependence show a considerably weaker relationship between money growth and inflation than Pearson’s r. Even so, the quantity theory will continue to be part of macroeconomics because economics as a science is driven both by observation and by the inherent structure of the accumulated body of economic theory.
    Date: 2019
  42. By: Laurence Ball; Sandeeo Mazumder
    Abstract: Economists are puzzled by the behavior of U.S. inflation since the Great Recession of 2008-2009, and many suggest that the Phillips curve relating inflation to unemployment has broken down. This paper argues that inflation behavior is easier to understand if we divide headline inflation into core and transitory components, and if core inflation is measured by the weighted median of industry inflation rates. This weighted median is less volatile than the traditional measure of core inflation, the inflation rate excluding food and energy prices, because it filters out large price changes in all industries. We illustrate the usefulness of the weighted median with a case study of inflation in 2017 and early 2018. We also show that a Phillips curve relating the weighted median to unemployment appears clearly in the data for 1985-2017, with no sign of a breakdown in 2008.
    Date: 2019–10
  43. By: Elena Bobeica; Matteo Ciccarelli; Isabel Vansteenkiste
    Abstract: This paper documents, for the first time in a systematic manner, the link between labor cost and price inflation in the euro area. Using country and sector quarterly data over the period 1985Q1-2018Q1 we find a strong link between labor cost and price inflation in the four major economies of the euro area and across the three main sectors. The dynamic interaction between prices and wages is timevarying and depends on the state of the economy and on the shocks hitting the economy. Our results show that it is more likely that labor costs are passed on to price inflation with demand shocks than with supply shocks. However, the pass-through is systematically lower in periods of low inflation as compared to periods of high inflation. These results confirm that, under circumstances of predominantly demand shocks, labor cost increases will be passed on to prices. Coming from a period of low inflation, however, this pass-through could be moderate at least until inflation stably reaches a sustained path.
    Date: 2019–10
  44. By: Matthew E. Kahn; Kamiar Mohaddes; Ryan N. C. Ng; M. Hashem Pesaran; Mehdi Raissi; Jui-Chung Yang
    Abstract: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labor productivity is affected by country-specific climate variables—defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04°C per year, in the absence of mitigation policies, reduces world real GDP per capita by more than 7 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01°C per annum, reduces the loss substantially to about 1 percent. These effects vary significantly across countries depending on the pace of temperature increases and variability of climate conditions. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labor productivity and employment.
    Date: 2019–10–11
  45. By: Florian Exler
    Abstract: Contrary to Chapter 7 bankruptcy in the U.S., many European bankruptcy regimes are stricter and force bankrupts to repay some outstanding debt through wage garnishment. Since wage garnishment raises the efective marginal tax rate, it distorts labor supply. Explicitly modeling the garnishment period and endogenizing labor supply, this paper examines the optimal garnishment regime for Germany: optimal garnishment rates are 18 percentage points lower and the garnishment du-ration increases from six to ten years. Consequently, repayment during bankruptcy increases and interest rates fall. Welfare improves by 3.3%. Low-income households gain the most due to better access to cheaper credit.
    JEL: D14 E44 K35
    Date: 2019–09
  46. By: International Monetary Fund
    Abstract: Brunei Darussalam’s economy has been adjusting to the lower oil and gas (O&G) prices since 2014, with the authorities undertaking wide-ranging reforms. The reforms aim to ensure long-term fiscal sustainability and intergenerational equity, and to foster economic diversification. Growth is expected to pick up in 2019, with the outlook improving further over the medium term, driven by expansion in the O&G sector and large investment projects. Nonetheless, lower-than-expected O&G prices or production would reduce fiscal revenues and exports, with significant spillovers to the non-O&G sector.
    Keywords: Balance of payments;Economic indicators;Public financial management;Financial soundness indicators;Financial systems;ISCR,CR,Proj,Brunei dollar,non-oil,percent of GDP,digitalization
    Date: 2019–10–10
  47. By: Clement Moyo (Nelson Mandela University, South Africa Author-2-Name: Leward Jeke Author-2-Workplace-Name: Nelson Mandela University, South Africa 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 manufacturing sector plays an important role in any economy. However, Africa has experienced significant deindustrialisation over the last few decades, whilst economic growth has been on an upward trend over the same period. The high growth rates have mostly been propelled by improved macroeconomic stability and the commodity price boom. Further, the slowdown in commodity prices has recently caused a deceleration of economic growth which begs the question: Does promoting the manufacturing sector result in higher and sustainable economic growth and reduce unemployment? This study assesses the impact of the manufacturing sector on economic growth in 37 African countries.Methodology/Technique - This study employs the System-GMM Model for the period between 1990 and 2017. This technique is ideal as the number of cross-sectional units is greater than the number of time periods. This technique also caters for problems of endogeneity and heteroscedasticity.Findings - The results show that manufacturing value has a positive effect on economic growth in African countries. Therefore, it is recommended that policy makers enact measures to boost manufacturing output.Novelty - The deceleration of economic growth in African countries coupled with high unemployment and poverty levels has brought the issue of re-industrialisation into the spotlight. This study is vital for policy makers in African countries who seek to promote economic growth and employment levels. The study contributes to literature in African countries by incorporating variables such as human capital and institutional quality which are major determinants of economic growth.Type of Paper - Empirical.
    Keywords: Manufacturing Value Added; Economic Growth; African Countries; System-GMM.
    JEL: C23 E23 O14 O40
    Date: 2019–09–22
  48. By: Nikolas Kuschnig (Vienna University of Economics and Business, Institute of Ecological Economics); Lukas Vashold (Vienna University of Economics and Business, Department of Economics)
    Abstract: Vector autoregression (VAR) models are widely used models for multivariate time series analysis, but often suffer from their dense parameterization. Bayesian methods are commonly employed as a remedy by imposing shrinkage on the model coefficients via informative priors, thereby reducing parameter uncertainty. The subjective choice of the informativeness of these priors is often criticized and can be alleviated via hierarchical modeling. This paper introduces BVAR, an R package dedicated to the estimation of Bayesian VAR models in a hierarchical fashion. It incorporates functionalities that permit addressing a wide range of research problems while retaining an easy-to-use and transparent interface. It features the most commonly used priors in the context of multivariate time series analysis as well as an extensive set of standard methods for analysis. Further functionalities include a framework for defining custom dummy-observation priors, the computation of impulse response functions, forecast error variance decompositions and forecasts.
    Keywords: Vector autoregression, VAR, Bayesian, multivariate, hierarchical, R, package
    JEL: C87 C30 C11
    Date: 2019–10
  49. By: Bratsberg, Bernt (Ragnar Frisch Centre for Economic Research); Raaum, Oddbjørn (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: The common European labor market encourages worker mobility that enhances allocative efficiency, but certain institutional features may trigger inefficient migration. As a job in one of Europe's high-income countries typically also entails coverage in a generous welfare and social insurance system, migrants' reservation wages may lie below their opportunity cost of labor. This represents an externality because employers and migrant workers can pass some of their remuneration costs onto the welfare state. Once welfare benefit entitlement is secured, the reservation wage of the migrant worker is expected to rise, giving the firm an incentive to replace the worker with a new migrant willing to accept lower pay. This leads to excess churn—the reallocation of labor within firms simultaneously involving the flow of employees to unemployment insurance and the hiring of similar workers. Based on Norwegian data, we present evidence of high excess churn rates in firms with many workers from the new EU member states.
    Keywords: churning, Integrated labor markets, social dumping, EU enlargement
    JEL: F22 D62 E24
    Date: 2019–10
  50. By: Ding, Sitong
    Abstract: This paper presents a model of endogenous bias in rules of price adjustment that allows one to analyse the behaviour of inflation and output continuously throughout the entire spectrum of rationality, from one end to the other. Specifically, it proposes an alternative microfoundation for both the New Keynesian sticky-price and the sticky-information Phillips Curve by considering a possibility where price setters are constrained by the length of the time horizon over which they can form rational expectations, and they use the growth of past prices at the rate of the central bank’s inflation target as a heuristic alternative in place of their own expectations beyond this horizon. Three interesting results emerge. Firstly, how price setters form inflation expectations and whether these expectations are accurate or heterogeneous do not matter when they are able to gather information or change prices more frequently. Secondly, should policymakers expect private agents to similarly adopt the inflation target as a nominal anchor for their own expectations, then even the choice of this numerical target could prove to be pivotal to output stabilization. Thirdly, larger degrees of bounded rationality increase the persistence of inflation, and, under sticky-information, raise the possibility of discontinuous jumps and oscillatory dynamics of inflation and real output. ⇤
    JEL: J1
    Date: 2018–04
  51. By: Gomes, Pedro Maia (Birkbeck, University of London); Kuehn, Zoë (Universidad Autónoma de Madrid)
    Abstract: In most countries, the public sector hires disproportionally more women than men. We document gender differences in employment, transition probabilities, hours, and wages in the public and private sector using microdata for the United States, the United Kingdom, France, and Spain. We then build a search and matching model where men and women decide if to participate and if to enter private or public sector labor markets. We calibrate our model separately to the four countries. Running counterfactual experiments, we quantify whether the selection of women into the public sector is driven by: (i) lower gender wage gaps and thus relatively higher wages for women in the public sector, (ii) possibilities of better conciliation of work and family life for public sector workers, (iii) greater job security in the public compared to the private sector, or (iv) intrinsic preferences for public sector occupations. We find that, quantitatively, women's higher public sector wage premia and their preferences for working in the public sector explain most of the selection. We calculate the monetary value of public sector job security and work-life balance premia, for both men and women, and we estimate how higher public sector wages and employment affect male and female unemployment, inactivity rates, and wages differently.
    Keywords: public sector employment, female labor force participation, gender wage gap
    JEL: J21 J16 J45 H10 E60
    Date: 2019–10
  52. By: Jordi Galí; Luca Gambetti
    Abstract: Unconditional reduced form estimates of a conventional wage Phillips curve for the U.S. economy point to a decline in its slope coefficient in recent years, as well as a shrinking role of lagged price inflation in the determination of wage inflation. We provide estimates of a conditional wage Phillips curve, based on a structural decomposition of wage, price and unemployment data generated by a VAR with time varying coefficients, identified by a combination of long-run and sign restrictions. Our estimates show that the key qualitative findings from the unconditional reduced form regressions also emerge in the conditional evidence, suggesting that they are not entirely driven by endogeneity problems or possible changes over time in the importance of wage markup shocks. The conditional evidence, however, suggests that actual changes in the slope of the wage Phillips curve may not have been as large as implied by the unconditional estimates.
    Date: 2019–10
  53. By: Shahbaz, Muhammad; Ahmed, Khalid; Tiwari, Aviral Kumar; Jiao, Zhilun
    Abstract: This paper employs an augmented production function to examine resource curse hypothesis by incorporating oil prices as an additional determinant of economic growth. In doing so, the bounds testing approach to cointegration is applied in the presence of structural breaks in the series. The directional of causal association between the variables is examined by applying the VECM Granger causality approach. The empirical results show the existence of long run relationship between the variables. Moreover, natural resource abundance is negatively linked with economic growth confirms the validation of resource curse hypothesis. The nonlinear relationship between natural resource abundance and economic growth is inverted U-shaped. Oil prices add in economic growth. Capitalization increases economic growth. Labor boosts economic growth. The causality analysis reveals the unidirectional causal relationship running from natural resource abundance to economic growth. The feedback effect exists between oil prices and economic growth. Capitalization causes economic growth and in return, economic growth causes capitalization in Granger sense.
    Keywords: Natural Resources, Economic Growth, Oil Prices, USA
    JEL: E0
    Date: 2019–10–06
  54. By: Samya Beidas-Strom; Marco Lorusso
    Abstract: We build and estimate open economy two-bloc DSGE models to study the transmission and impact of shocks in Russia, Saudi Arabia and the United Kingdom. After accounting for country-specific fiscal and monetary sectors, we estimate their key policy and structural parameters. Our findings suggest that not only has output responded differently to shocks due to differing levels of diversification and structural and policy settings, but also the responses to fiscal consolidation differ: Russia would benefit from a smaller state foot-print, while in Saudi Arabia, unless this is accompanied by structural reforms that remove rigidities, output would fall. We also find that lower oil prices need not be bad news given more oil-intensive production structures. However, lower oil prices have hurt these oil producers as their public finances depend heavily on oil, among other factors. Productivity gains accompanied by ambitious structural reforms, along with fiscal and monetary reforms could support these economies to achieve better outcomes when oil prices fall, including via diversifying exports.
    Date: 2019–10–11
  55. By: Dai Zusai (Department of Economics, Temple University)
    Abstract: This paper presents a universal and economically intuitive approach to linking static and dynamic stability. In economics, static stability is traditionally defined by negative relationship between endogenous and exogenous variables in a model: for a population game, this is characterized by negative semidefiniteness of the Jacobian matrix of the payoff function. We consider economically reasonable dynamics, in which we can justify agents' choices of new strategies as optimal choices possibly by introducing additional costs and constraints. This class of dynamics covers major payoff-based (non-imitative) evolutionary dynamics. The key is expected net gains (payoff improvements) from strategy revisions after paying switching costs. Static stability implies that the aggregate net gain diminishes over time under economic reasonable dynamics and thus can be used as a Lyapunov function. While our analysis here is confined to myopic evolutionary dynamics in population games, our approach is applicable to more complex situations.
    Keywords: evolutionary dynamics, dynamic stability, static stability, evolutionary stable state, Lyapunov function, contractive games
    JEL: C73 C62 C61
    Date: 2019–10
  56. By: James H. Stock; Mark W. Watson
    Abstract: An unobserved components model with stochastic volatility is used to decompose aggregate Euro area HICP inflation into a trend, seasonal and irregular components. Estimates of the components based only on aggregate data are imprecise: the width of 68% error bands for the seasonally adjusted value of aggregate inflation is 1.0 percentage points in the final quarter of the sample. Estimates are more precise using a multivariate model for a 13-sector decomposition of aggregate inflation, which yields a corresponding error band that is roughly 40% narrower. Trend inflation exhibited substantial variability during the 2001-2018 period and this variability closely mirrored variation in real activity.
    Date: 2019–10
  57. By: Rodrigo Alfaro; Andrés Sagner
    Abstract: In this paper, we extend the Dynamic Gordon Model (Campbell and Shiller, 1988) with a semistructural, medium-term macroeconomic model. The proposed framework allows us to analyze the relationship between output gap, inflation, stock prices, and interest rate as in Blanchard (1981). We estimate the model using Bayesian techniques on quarterly data from 1984 to 2006. The decomposition of the unconditional variance of the variables shows that (i) demand shocks are relevant for both macroeconomic variables and stock prices; (ii) supply and interest rate shocks affect, to a lesser extent, inflation and interest rates, respectively; and (iii) shocks to the pricedividend ratio account for around 30% of the variability of the output gap, inflation, and interest rates, reflecting in this manner the importance of stock prices on the dynamics of macroeconomic variables.
    Date: 2019–10
  58. By: Jagjit S Chadha; Ana Rincon-Aznar; Sylaja Srinivasan; Ryland Thomas
    Abstract: This paper provides an inventory of the available macroeconomic statistics in the UK for the last hundred years or so. The focus is on documenting the higher frequency (daily, monthly and quarterly) macroeconomic data that are available after the World War 1, rather than longer run annual time series which has been the focus of other collections. It discusses some of the challenges that need to be overcome in order to create a continuous historical dataset over this period. The inventory follows the structure of the Economic Trends Annual Supplement (ETAS) that was produced for many years by the Office for National Statistics. It covers statistics on National Accounts, prices, labour market indicators, selected demand and output indicators and financial market data (including money and credit aggregates). Using this structure the paper explores to what extent it is possible to create a consistent, usable and comprehensive high frequency macroeconomic dataset back to the 1920s and earlier.
    Keywords: national accounts, macroeconomics, UK Statistics
    JEL: C82 E01 N1
    Date: 2019–10
  59. By: Monoj Kumar Majumder; Mala Raghavan; Joaquin Vespignani
    Abstract: An important economic paradox that frequently arises in the economic literature is that countries with abundant natural resources are poor in terms of real gross domestic product per capita. This paradox, known as the ‘resource curse’, is contrary to the conventional intuition that natural resources help to improve economic growth and prosperity. Using panel data for 95 countries, this study revisits the resource curse paradox in terms of oil resources abundance for the period 1980–2017. In addition, the study examines the role of trade openness in influencing the relationship between oil abundance and economic growth. The study finds that trade openness is a possible avenue to reduce the resource curse. Trade openness allows countries to obtain competitive prices for their resources in the international market and access advanced technologies to extract resources more efficiently. Therefore, natural resource–rich economies can reduce the resource curse by opening themselves to international trade.
    Keywords: Oil rents, real GDP per capita, trade openness, dynamic panel data model
    JEL: E23 F13 Q43
    Date: 2019–10
  60. By: Snir, Avichai; Levy, Daniel
    Abstract: 9-ending prices, which comprise between 40%–95% of retail prices, are popular because shoppers perceive them as being low. We study whether this belief is justified using scanner price-data with over 98-million observations from a large US grocery-chain. We find that 9-ending prices are higher than non 9-ending prices, by as much as 18%. Two factors explain why shoppers believe, mistakenly, that 9-ending prices are low. First, we find that among sale-prices, 9-ending prices are indeed lower than non 9-ending prices, giving 9-ending prices an aura of being low. Second, at first, 9-ending prices were indeed lower than other prices. Shoppers, therefore, learned to associate 9-endings with low prices. Over time, however, 9-ending prices rose substantially, which shoppers failed to notice, because the continuous use of 9-ending prices for promoting deep price cuts draws shoppers’ attention to them, and helps to maintain-and-preserve the image of 9-ending prices as bargain prices.
    Keywords: Behavioral Pricing, Psychological Prices, Price Perception, Image Effect, 9-Ending Prices, Price Points, Regular Prices, Sale Prices, Sale Filter
    JEL: D12 D22 D40 D87 D90 D91 E31 E50 K22 L11 L16 L81 M21 M30 M31
    Date: 2019–10–18
  61. By: Gigout, Timothee
    Abstract: In this dissertation, I study firm dynamics in the context of a global and uncertain economy. In the first chapter, I show how uncertainty generates reallocation among French multinationals. In a second chapter, I study how an increase in demand uncertainty negatively impacts firm growth and how the persistence of this effect depends on the synchronicity of the firm dynamic with that of the other firms in its sector. Finally in the third chapter, I highlight how the extensive margin of international trade contribute to shape the direction, quantity and content of the international transmission of knowledge.
    Keywords: International Economics; Uncertainty; Firm Dynamics; Heterogeneity
    JEL: D22 D81 F1 F14 F23 F61 G15 O33 O34 O4
    Date: 2019–09–03
  62. By: Kuschnig, Nikolas; Vashold, Lukas
    Abstract: Vector autoregression (VAR) models are widely used models for multivariate time series analysis, but often suffer from their dense parameterization. Bayesian methods are commonly employed as a remedy by imposing shrinkage on the model coefficients via informative priors, thereby reducing parameter uncertainty. The subjective choice of the informativeness of these priors is often criticized and can be alleviated via hierarchical modeling. This paper introduces BVAR, an R package dedicated to the estimation of Bayesian VAR models in a hierarchical fashion. It incorporates functionalities that permit addressing a wide range of research problems while retaining an easy-to-use and transparent interface. It features the most commonly used priors in the context of multivariate time series analysis as well as an extensive set of standard methods for analysis. Further functionalities include a framework for defining custom dummy-observation priors, the computation of impulse response functions, forecast error variance decompositions and forecasts.
    Keywords: Vector autoregression, VAR, Bayesian, multivariate, hierarchical, R, package
    Date: 2019–10
  63. By: Florian Eckert (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Rob Hyndman (Department of Econometrics & Business Statistics, Monash University, Australia); Anastasios Panagiotelis (Department of Econometrics & Business Statistics, Monash University, Australia)
    Abstract: This paper conducts an extensive forecasting study on 13,118 time series measuring Swiss goods exports, grouped hierarchically by export destination and product category. We apply existing state of the art methods in forecast reconciliation and introduce a novel Bayesian reconciliation framework. This approach allows for explicit estimation of reconciliation biases, leading to several innovations: Prior judgment can be used to assign weights to specific forecasts and the occurrence of negative reconciled forecasts can be ruled out. Overall we find strong evidence that in addition to producing coherent forecasts, reconciliation also leads to improvements in forecast accuracy.
    Keywords: Hierarchical Forecasting, Bayesian Forecast Reconciliation, Swiss Exports, Optimal Forecast Combination.
    JEL: C32 C53 E17
    Date: 2019–07
  64. By: Asplund, Rita; Kauhanen, Antti; Vanhala, Pekka
    Abstract: Abstract Occupational restructuring means that worker skills need to be updated, broadened or totally renewed. This report focuses on persons whose employment prospects have been particularly challenged by occupational restructuring: persons who in the mid-1990s were employed in occupations characterized by declining employment throughout the period of study, i.e. up to the year 2009. The analysis focuses on their participation in various modes of adult education and their long-term labour market outcomes. Employees in declining occupations are found to have participated only moderately in adult education. The result is the same also when adult education is split into four main modes, and into shorter and longer time horizons. Younger cohorts and those with a higher education are strongly overrepresented among those participating in adult education programmes leading to a certificate. The labour market status of the older cohorts and the low-educated is typically much weaker, and labour market training their most common form of adult education. In view of these findings, it would be imperative to reliably evaluate the economic but, to the extent possible, also the social effects of adult education and its various modes.
    Keywords: Occupation, Occupational restructuring, Adult education, Labour market training, Labour market status, Age, Education
    JEL: J24 J62 I21 E24
    Date: 2019–10–17
  65. By: Françoise Delmez (UNamur - DeFiPP)
    Abstract: Using an dynamic panel of 15 developed countries over the 1960-2010 period, this paper compares employment and hours recovery paths after financial vs. non-financial crises. We show that post financial crises recoveries display a stronger uplift of individual hours and a weaker one of the employment rate. The results are robust to controlling for the strength of the recovery in terms of GDP growth per capita, the depth of the preceeding recession, labour-market institutions differences potentially correlated with financial vs non-financial crises and for dynamic panel bias. In conclusion, we argue that considering both margins of employment, in particular the role of extended hours in coping with rising output, improves our understanding of financial crises as a source of jobless recoveries.
    Keywords: Financial crises, jobless recoveries, employment, working time
    Date: 2019–04–01
  66. By: Carolyn Sissoko (University of the West of England, Bristol)
    Abstract: This paper argues that Britain’s monetary system at the start of the Napoleonic Wars was substantially different from its monetary system at their end, and that the Restriction and the Bank of England’s discount policy during the Restriction played a determining role in the transformation of the monetary system. Specifically, I argue that Britain’s monetary system through the second half of the 18th century was built on transaction-based credit, and that by the end of the war this monetary system had been transformed into one based on personal credit. I find that the Bullion Committee deliberately reset the public’s inflation expectations in order to stabilize the monetary system. And that the Bank was acting as a lender of last resort with an explicit duty to support commercial interests in the crisis of 1810-11.
    Date: 2019–01–06
  67. By: Céline Giner; Jonathan Brooks
    Abstract: What is the role of government policies in encouraging healthier food choices to fight the current overweight and obesity epidemics. This report examines the evidence base on the health implications of unhealthy diets and its associated burden on health systems. It takes stock of current knowledge on the effectiveness of policy instruments and proposes a four-track policy approach to encourage healthier food choices that is consistent with wider objectives for the food and agriculture sector. This policy approach includes demand side public interventions, voluntary collaboration with the food industry at the supply-demand interface, firmer regulations when public-private incentives are misaligned, and fiscal measures. An important insight from this report is that effective policies require a robust evidence base, which in turn requires effective data systems. The Annex takes stock of how well developed food data systems are currently across a range of OECD countries and provides some recommendations on how to move forward.
    Keywords: data systems, food chain, food choices, health policies, obesity, overweight
    JEL: Q18 I18 C90 M38
    Date: 2019–10–28
  68. By: Lapsley, Irvine; Miller, Peter
    Abstract: The purpose of this paper is to provide an evaluation of public sector research in the 1998–2018 period. Design/methodology/approach The paper uses the extant literature of this era to study the theorisation of, and the findings of, public sector research. Findings This is a vibrant field of a study in a wide range of study settings and with many interdisciplinary studies. The influence of new public management is pervasive over this period. There are numerous instances of innovations in study settings, in key findings and the approach taken by investigators. Research limitations/implications This is not a comprehensive review of all literature in this period. Practical implications This study also explored the relevance of academic research of this era to policymaking by governments. Originality/value This paper offers a distinctive critique of theorisation of public sector accounting research. It reveals the dominant theoretical reference points in use during this period and observes the increasing tendency for theoretical pluralism to investigate complex study settings.
    Keywords: theorization; neoliberal; new public sector; public sector research
    JEL: E6
    Date: 2019–09–23
  69. By: Karel Br?na (University of Economics, Prague)
    Abstract: The submission contains formal and empirical analyses of the constraints on the supply of credit in open transition economies as the external solvency of the economy and the banking sector is ensured when their international investment position is negative, foreign owners have significant participation in domestic banks, and banks face increasing regulatory requirements under Basel III. Our objective is to define the factors that affect constraints on the supply of credit at both the macro and banking level and to quantify the relationship between international investment sustainability determinants and the sources of foreign funding in the economy/banking system using an unrestricted ARDL ECM model in the Czech Republic.
    Keywords: net foreign assets, credit supply, external solvency, Basel III
    JEL: F32 F34 E51
    Date: 2019–10
  70. By: Nejat Anbarci (Faculty of Business and Law, Deakin University - Deakin University [Burwood]); Richard Dutu (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine); Ching-Jen Sun (Faculty of Business and Law, Deakin University - Deakin University [Burwood])
    Abstract: In most macroeconomic models inflation tends to be harmful. In this article, we show that by simply changing the timing of production decisions by firms from "on demand" to "in advance," some inflation can boost welfare as long as goods are sufficiently perishable. The main conclusion from this research is that by effectively hiding the strategic interaction between supply and demand, assuming production on demand is not without loss of generality.
    Keywords: Timing,Perishability,Production,Money,Inflation,Search
    Date: 2019
  71. By: Fernando Alvarez; Andy Neumeyer
    Abstract: We describe several events in Argentina between 2012 and 2018 in which public utilities or the exchange rate increase by a large amount in a single month. During these months the nominal increase in our measure of the cost of the goods included in the core CPI was as high as 10%. Motivated by these events, we use a menu cost model of price adjustment to derive the theoretical pass-through of large cost shocks to consumer prices for an economy with an underlying inflation rate of the order of 25% per year, as well as the impact of these shocks on the size and on the frequency of price changes. Using a comprehensive, never used in the price adjustment literature, micro-data set underlying the construction of the core CPI for the city of Buenos Aires we compare the theoretical effect of the cost shocks to the empirical one. As predicted by the theory we find that despite the high level of underlying inflation, the large frequency of both price increases and decreases points to the importance of idiosyncratic firm shocks, such as the ones we use in our model. Right after large increases in costs, both the fraction of price increases and the average size of price increases dramatically rises, while the size of price decreases stays approximately the same, just at the simple model predicts. On the other hand, the model predicts a small decrease in the fraction of price decreases which we don't observe in the data. We conclude that for large sudden changes in cost, consumer prices behave almost as if they were fully flexible. On the other hand, for small shocks the short-term pass-through will be smaller and its half-life larger.
    Date: 2019–10
  72. By: Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania); Raghavan, Mala (Tasmanian School of Business & Economics, University of Tasmania); Majumder, Monoj Kumar (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: An important economic paradox that frequently arises in the economic literature is that countries with abundant natural resources are poor in terms of real gross domestic product per capita. This paradox, known as the ‘resource curse’, is contrary to the conventional intuition that natural resources help to improve economic growth and prosperity. Using panel data for 95 countries, this study revisits the resource curse paradox in terms of oil resources abundance for the period 1980–2017. In addition, the study examines the role of trade openness in influencing the relationship between oil abundance and economic growth. The study finds that trade openness is a possible avenue to reduce the resource curse. Trade openness allows countries to obtain competitive prices for their resources in the international market and access advanced technologies to extract resources more efficiently. Therefore, natural resource–rich economies can reduce the resource curse by opening themselves to international trade.
    Keywords: Oil rents, real GDP per capita, trade openness, dynamic panel data model
    JEL: E23 F13 Q43
    Date: 2019
  73. By: Maxime MENUET; Alexandru MINEA; Patrick VILLIEU
    Keywords: , Fiscal rules, Indeterminacy, Limit cycle, Public Debt, Bifurcation
    Date: 2019
  74. By: Seán Kennedy; David Haugh; Brian Stanley
    Abstract: While policymakers are rightly concerned about evidence of rising income concentration at the top, it is often wrongly assumed that the same rich individuals stay rich. In reality, the membership of this group are in a state of constant flux. This new study, based on more than 20 million tax records over 10 years, examines the highest income earners in Ireland but also who moves up and down the income ladder over time. While income inequality has increased in most OECD countries, in Ireland it has been broadly stable for most of the income distribution. The top 10% of income earners receive 1/3 of total income and pay around 2/3 of all income tax. Unlike other OECD countries, the top 1% has not expanded its gross income share, partly due to long range downward mobility during the recession for those with the highest incomes. Moreover, more progressive taxation has also reduced the top 1 per cent’s share of disposable income. This paper finds that income inequality increases with age and differs dramatically across economic sectors – the difference between the top 1% and the median is greatest in the professional, financial and health sectors. In the professional sector for example, the top 1% threshold is 12 times the median compared to 3 times in the public sector. The share of employment in these sectors has grown contributing to greater income inequality but also higher upward income mobility. Indeed, the analysis in the paper shows upward income mobility is higher for those working in finance, professional and technical occupations and among the young, those living in Dublin, and those changing jobs. Finally, there is also evidence that economic mobility has declined among median income classes over the past 10 years in Ireland – relatively fewer workers are now moving up or down the income ladder than before.
    Keywords: administrative data, growth, income distribution, income mobility, inequality, tax
    JEL: D31 D63 E24 H24
    Date: 2019–10–25
  75. By: Timothy Shields (Economic Science Institute, Chapman University; Argyros School of Business and Economics, Chapman University); Eric Schniter (Economic Science Institute, Chapman University; Argyros School of Business and Economics, Chapman University); Daniel Sznycer (Department of Psychology, University of Montreal)
    Abstract: Trust-based interactions with robots are increasingly common in the marketplace, workplace, on the road, and in the home. However, a looming concern is that people may not trust robots as they do humans. While trust in fellow humans has been studied extensively, little is known about how people extend trust to robots. Here we compare trust-based investments and emotions from across three nearly identical economic games: human-human trust games, human-robot trust games, and human-robot trust games where the robot decision impacts another human. Robots in our experiment mimic humans: they are programmed to make reciprocity decisions based on previously observed behaviors by humans in analogous situations. We find that people invest similarly in humans and robots. By contrast, the social emotions elicited by the interactions (but not non-social emotions) differed across human and robot trust games, and did so lawfully. Emotional reactions depended on how one’s trust game decision interacted with the partnered agent’s decision, and whether another person was affected economically and emotionally.
    Keywords: Trust; Robots; Artificial Intellgience; Emotion; Experiment
    Date: 2018
  76. By: Filippo Gusella
    Abstract: In this paper we empirically analyse Minskyan financial cycles in asset prices, where the cycles are driven by the presence of two unobserved evaluation price strategies: the fundamentalist and the extrapolative price strategy. To achieve this, we construct a model, that incorporates the two behavioural equations and we investigate the financial cycles via a state space model. Using the Kalman filter, the conditions for the existence of cycles can be evaluated empirically. The model is estimated for four OECD countries using the times series of equity and housing prices over the period 1970-2017 for annual data. We find evidence of cycles in the equity market for the UK, France, Germany and the USA. Regarding housing prices, we find evidence of cyclical fluctuations in the UK, France and the USA but not in Germany. For both the equity market and the housing market, we find the highest price overshooting in the UK and the USA. Our results provide empirical support for the Minskyan theory, highlighting the role of the evaluation effect for an endogenous generation of cyclical phenomena in asset prices.
    Keywords: Minsky cycles, asset prices, financial instability hypothesis, state space model, Kalman Filter
    Date: 2019
  77. By: Davide Villani
    Abstract: In recent decades, corporate net lending has been increasing in several developed countries. This paper discusses the impact of financialisation and income distribution on the level of corporate net lending among G7 countries. We argue that financialisation affects the level of corporate net lending through firms' re-organisation towards a model of accumulation based on the maximisation of “shareholder value” and through the negative impact on investment. Moreover, the reduction in the wage share can increase the capacity of accumulation of liquidity of corporations, increasing the gap between corporate savings and investment, leading to the rise in net lending. We test our hypotheses using panel data of publicly listed non-financial corporations for the period 1990-2015. According to our findings, the process of financialisation has a positive impact on the level of net lending after 2001, while the wage share at the firm-level has a strong negative impact on the level of net lending throughout the whole period.
    Keywords: Net lending, Financialisation, Functional income distribution, Firm-level analysis
    JEL: E21 G30 O16
    Date: 2019–10
  78. By: Srinivas Raghavendra; Kijong Kim; Sinead Ashe; Mrinal Chadha; Felix Asante; Petri T. Piiroinen; Nata Duvvury
    Abstract: Violence against women and girls (VAWG) is a widely recognized human rights violation with serious consequences for the health and well-being of women and their families. However, the wider ramifications of VAWG for businesses, communities, economies, and societies are only recently being recognized. Despite this recognition, there are few studies exploring how the economic and social impacts of VAWG affect economic growth, development, and social stability. In this paper, applying the social accounting approach, we outline the ripple effects of VAWG from the individual micro-level impacts to the macroeconomy. Our analysis shows the loss due to VAWG amounts to about 0.94 percent of Ghanaian GDP and is a permanent invisible leakage from the circular flow of the economy. The analysis also shows that the loss due to violence is not just a one-off leakage from the macroeconomic circular flow and explores the potential consequences of the multiplier loss due to VAWG over a period of time. The cumulative loss is sizeable and inflicts a premium on GDP growth over time--in simple terms, inaction today in addressing VAWG for cost considerations will impose a larger cost premium on economic growth, which will constrain tomorrow's resources.
    Keywords: Violence against Women and Girls; Social Accounting Matrix; Productivity Loss; Economic Growth
    JEL: E16 E19 J16 B54 O55
    Date: 2019–10
  79. By: Alessandro Cantelmo; Giovanni Melina; Chris Papageorgiou
    Abstract: Using a dynamic stochastic general equilibrium model, we study the channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries. We solve the model using Taylor projection, a solution method that is shown to deal effectively with high-impact weather shocks calibrated in accordance to empirical evidence. We find large and persistent effects of weather shocks that significantly impact the income convergence path of disaster-prone countries. Relative to non-disaster-prone countries, on average, these shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.6 percent. Welfare gains to countries that self-finance investments in resilient public infrastructure are found to be negligible, and international aid has to be sizable to achieve significant welfare gains. In addition, it is more cost-effective for donors to contribute to the financing of resilience before the realization of disasters, rather than disbursing aid after their realization.
    Date: 2019–10–11

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