nep-mac New Economics Papers
on Macroeconomics
Issue of 2020‒01‒27
104 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Asset Prices and Unemployment Fluctuations By Patrick J. Kehoe; Pierlauro Lopez; Virgiliu Midrigan; Elena Pastorino
  2. The portfolio theory of inflation and policy (in)effectiveness revisited: Corroborating evidence By Bossone, Biagio; Cuccia, Andrea
  3. Should Monetary Policy Target Financial Stability? By William Chen; Gregory Phelan
  4. The Long-Run Effects of Monetary Policy By Òscar Jordà; Sanjay R. Singh; Alan M. Taylor
  5. We compare welfare and macroeconomic effects of monetary policy and macroprudential policy, in particular targeting loan-to-value (LTV) ratios. We develop a DSGE model with collateral constraints and two types of agents. In this setup, we study seven potential policy rules responding to credit growth and fluctuations in prices of collateral. We show that monetary policy responding to deviations of collateral prices from their steady state value results in the highest level of social welfare. It is also useful in stabilizing output and inflation. Macroprudential policy using LTV ratio as the instrument is dominated in terms of output and inflation stability by the interest rate rules. If interest rate rules are not available, the LTV ratio can be used to improve welfare, but gains are small.. By Piotr Zoch
  6. Debunking the granular origins of aggregate fluctuations : from real business cycles back to Keynes By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  7. Sticky Prices and Costly Credit By Liang Wang; Randall Wright; Lucy Qian Liu
  8. The real effects of loan-to-value limits: Empirical evidence from Korea By Victor Pontines
  9. Debt sustainability and fiscal space in a heterogeneous Monetary Union: normal times vs the zero lower bound By Javier Andrés; Pablo Burriel; Wenyi Shen
  10. Who Bears the Welfare Costs of Monopoly? The Case of the Credit Card Industry By Herkenhoff, Kyle; Raveendranathan, Gajendran
  11. Reassessment of the Fiscal Multiplier in Developing Countries: Regime-Switching Model By Michal Hlavacek; Ilgar Ismayilov; Ayaz Zeynalov
  12. Monetary Policy Is Not Always Systematic and Data-Driven: Evidence from the Yield Curve By Ales Bulir; Jan Vlcek
  13. Monetary Policy, rational confidence, and Neo- Fisherian depressions By Lucio Gobbi; Ronny Mazzocchi; Roberto Tamborini
  14. Macroeconomic Determinants of Housing Prices: A Cross Country Level Analysis By Tripathi, Sabyasachi
  15. The Illusions of Calculating Total Factor Productivity and Testing Growth Models: From Cobb–Douglas to Solow and Romer By Felipe , Jesus; McCombie, John
  16. Fiscal Space and Increasing Fiscal Resilience By Aizenman, Joshua; Jinjarak, Yothin; Nguyen, Hien Thi Kim; Park, Donghyun
  17. The Macroeconomic and Social Investment Outlook for Children in Eastern and Southern Africa By Cummins, Matthew
  18. Specific Human Capital and Real Wage Cyclicality: An Application to Postgraduate Wage Premium By Gu, Ran
  19. Heterogeneous effects of unconventional monetary policy on bond yields across the euro area By Demir, Ishak; Eroglu, Burak A.; Yildirim-Karaman, Secil
  20. The ECB after the crisis: existing synergies among monetary policy, macroprudential policies and banking supervision By Nuno, Cassola; Christoffer, Kok; Francesco Paolo, Mongelli
  21. Causes et consequences of hysteresis : aggregate demand, productivity and employment By Giovanni Dosi; Marcelo C. Pereira; Andrea Roventini; Maria Enrica Virgillito
  22. Debt and Depth of Recessions By Park, Donghyun; Shin, Kwanho; Tian, Shu
  23. "The Empirics of Canadian Government Securities Yields" By Tanweer Akram; Anupam Das
  24. Granger Predictability of Oil Prices after the Great Recession By Szilard Benk; Max Gillman
  25. Liberia; Request for a Four-Year Arrangement Under the Extended Credit Facility-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Liberia By International Monetary Fund
  26. Macroprudential policy and its impact on the Credit Cycle By Selien De Schryder; Frederic Opitz
  27. The case for reform of the RBA's policy and communication strategy By Bruce Preston
  28. Trends and cycles under changing economic conditions By Cláudia Duarte; José R. Maria; Sharmin Sazedj
  29. Macroprudential Policy in Asian Economies By Kim, Soyoung
  30. Optimal fiscal policy without commitment: Beyond Lucas-Stokey By Davide Debortoli; Ricardo Nunes; Pierre Yared
  31. Republic of Georgia; Fifth Review Under the Extended Arrangement, Requests for Waivers of Nonobservance of Performance Criteria, Modification of Performance Criteria, and an Extension of the Arrangement and Rephasing of Access-Press Release; Staff Report; and Statement by the Executive Director for Georgia By International Monetary Fund
  32. Gabon; 2019 Article IV Consultation, Fourth and Fifth Reviews under the Extended Arrangement under the Extended Fund Facility, and Request for Waiver of Nonobservance of Performance Criteria, and Rephasing of the Remaining Purchases; Press Release; Staff Report; and Statement by the Executive Director By International Monetary Fund
  33. Financial Shocks and Exchange Market Pressure By Patnaik , Ila; Pundit, Madhavi
  34. Secular Stagnation, Financial Frictions, and Land Prices By Zhifeng Cai
  35. Capital Income Taxation with Housing By Makoto Nakajima
  36. Price Rigidity and the Granular Origins of Aggregate Fluctuations By Ernesto Pasten; Raphael Schoenle; Michael Weber
  37. Capturing Macroeconomic Tail Risks with Bayesian Vector Autoregressions By Andrea Carriero; Todd E. Clark; Massimiliano Marcellino
  38. International Reserves, Exchange Rate Differences and the CNB’s Financial Result By Igor Ljubaj
  39. Understanding the size of the government spending multiplier: It’s in the sign By Régis Barnichon; Davide Debortoli; Christian Matthes
  40. The long-run information effect of central bank communication By Hansen, Stephen; McMahon, Michael; Tong, Matthew
  41. Central African Economic and Monetary Community (CEMAC); Staff Report on the Common Policies in Support of Member Countries Reform Programs-Press Release, Staff Report, and Statement by the Executive Director By International Monetary Fund
  42. Q-factors and Investment CAPM By Zhang, Lu
  43. Monetary Policy Normalization: Low Interest Rates and the New Normal By Patrick T. Harker
  44. The Euro at 20 : a critical assessment By Christophe Blot; Jérôme Creel; Xavier Ragot
  45. The Financial Channels of Labor Rigidities: Evidence from Portugal By Ettore Panetti; Edoardo M. Acabbi; Alessandro Sforza
  46. Iceland; 2019 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  47. Modeling Azerbaijan’s Inflation and Output Using a Factor-Augmented Vector Autoregressive (FAVAR) Model By Vugar Rahimov; Nijat Guliyev; Vugar Ahmadov
  48. Republic of Equatorial Guinea; Request for an Extended Arrangement Under the Extended Fund Facility and Second Review Under the Staff-Monitored Program-Press Release, Staff Report, and Statement by the Executive Director By International Monetary Fund
  49. Tracing value-added and double counting in sales of foreign affiliates and domestic-owned companies By Miroudot, Sébastien; ye, ming
  50. An Index of African Monetary Integration (IAMI) By Samba Diop; Simplice A. Asongu
  51. People's Republic of China-Hong Kong Special Administrative Region; 2019 Article IV Consultation Discussions-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for the People's Republic of China-Hong Kong Special Administrative Region By International Monetary Fund
  52. Democratic Republic of the Congo; Staff-Monitored Program and Request for Disbursement Under the Rapid Credit Facility; Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of the Congo By International Monetary Fund
  53. New paradigms and old promises: central banks and the market for sovereign debt in the interwar period By Flores Zendejas, Juan; Lopez Soto, David; Sanchez Amador, David
  54. Pakistan; First Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Pakistan By International Monetary Fund
  55. From Micro to Macro: A Note on the Analysis of Aggregate Productivity Dynamics Using Firm-Level Data By Carlos Robalo Marques; Daniel A. Dias
  56. Suriname; 2019 Article IV Consultation-Press Release; Staff Report; Informational Annex; and Statement by the Executive Director for Suriname By International Monetary Fund
  57. Money Creation in Fiat and Digital Currency Systems By Marco Gross; Christoph Siebenbrunner
  58. The employment effects of trade policy reform in Myanmar By Ayoki, Milton
  59. Welfare Effects of Fiscal Procyclicality: Public Insurance with Heterogeneous Agents By Alvaro Aguirre
  60. A Human Capital Theory of Structural Transformation By Max Gillman
  61. Health, wealth, and informality over the life cycle By Julien Albertini; Xavier Fairise; Anthony Terriau
  62. Nowcasting East German GDP growth: A MIDAS approach By Claudio, João C.; Heinisch, Katja; Holtemöller, Oliver
  63. The use of BVARs in the analysis of emerging economies By Ángel Estrada; Luis Guirola; Iván Kataryniuk; Jaime Martínez-Martín
  64. Was the Expansion of Housing Credit in Japan Good or Bad? By Yuji Horioka, Charles; Niimi, Yoko
  65. Экспериментальное моделирование зависимости экспорта товаров Республики Беларусь от привлеченных прямых иностранных инвестиций By Каморников, Сергей; Шалупаева, Наталья
  66. Is Monetary Policy Gender Neutral? Evidence from the Stock Market By Caterina Forti Grazzini; Chi Hyun Kim
  67. Monetary Policy and Shadow Banking: Trapped between a Rock and a Hard Place By Martin Hodula
  68. Barbados; 2019 Article IV Consultation, Second Review Under the Extended Arrangement, Request for Completion of the Financing Assurances Review, and Modification of Performance Criteria-Press Releases; Staff Report; and Statement by the Executive Director for Barbados By International Monetary Fund
  69. Honduras; First Reviews Under the Stand-By Arrangement and the Arrangement Under the Standby Credit Facility, and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Honduras By International Monetary Fund
  70. The impact of the ECB’s targeted long-term refinancing operations on banks’ lending policies: the role of competition By C. Andreeva, Desislava; García-Posada, Miguel
  71. Essays on international finance and empirical asset pricing By Maletic, M.
  72. A Simplified Model of How Macroeconomic Changes Affect the Federal Budget: Working Paper: 2020-01 By Nathaniel Frentz; Jaeger Nelson; Dan Ready; John Seliski
  73. Reconstructing The Past: The Measurement Of Aggregate Product By Fenoaltea, Stefano
  74. Benin; Fifth Review under the Extended Credit Facility Arrangement, Request for Extension, and Request for Modification of Performance Criteria-Press Release; and Staff Report By International Monetary Fund
  75. Burkina Faso; Third Review under the Extended Credit Facility Arrangement-Press Release; and Staff Report By International Monetary Fund
  76. Turkey; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Turkey By International Monetary Fund
  77. ICT and productivity growth within value chains By Liu, Chuan; Saam, Marianne
  78. Commodity Trade Finance Platform using Distributed Ledger Technology: Token Economics in a Closed Ecosystem using Agent Based Modeling By Wang, Jianfu
  79. La Red Eusumo: instrumento público al servicio los ODS en Galicia By María BASTIDA; Ana OLVEIRA
  80. Central Banks, Systemic Risk and Financial Sector Structural Reform By Omarova, Saule T.; Library, Cornell
  81. Angola; Second Review of the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of Nonobservance of Performance Criteria, Modifications of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Angola By International Monetary Fund
  82. Proyección de la Inflación en Chile con Métodos de Machine Learning By Felipe Leal; Carlos Molina; Eduardo Zilberman
  83. India; 2019 Article IV Consultation-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for India By International Monetary Fund
  84. Quality of Employment and Employment Protection. Effects of Employment Protection on Temporary and Permanent Employment By Philip Arestis; Jesus Ferreiro; Carmen Gómez
  85. "Prospects and Challenges for the US Economy: 2020 and Beyond" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  86. From fixed-event to fixed-horizon density forecasts: Obtaining measures of multi-horizon uncertainty from survey density forecasts By Gergely Ganics; Barbara Rossi; Tatevik Sekhposyan
  87. Iceland; Selected Issues By International Monetary Fund
  88. Macroeconomic Instability And Fiscal Decentralization: An Empirical Analysis By Ahmad Zafarullah Abdul Jalil; Mukaramah Harun; Siti Hadijah Che Mat
  89. Cambodia; 2019 Article IV Consultation; Press Release; Staff Report; and Statement by the Executive Director for Cambodia By International Monetary Fund
  90. Bank performance in Europe and the US: a divergence in market-to-book ratios By Mathieu Simoens; Rudi Vander Vennet
  91. A Three-Country Macroeconomic Model for Portugal By Alex Pienkowski
  92. Chad; Fifth Review under the Extended Credit Facility Arrangement and Financing Assurances Review-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Chad By International Monetary Fund
  93. Institutional and Other Determinants of the Net Interest Margin of US and European Banks in a Low Interest Rate Environment By Petr Hanzlík; Petr Teplý
  94. Bürokratieabbau und bessere Rechtsetzung: Wer macht was in EU, Bund und Ländern? By Röhl, Klaus-Heiner
  95. Economic Growth and Public Debt: An Experimental Approach in Search of a Confidence Channel By Luigi Mittone; Matteo Tomaselli
  96. Non-linear exchange rate pass-through to euro area inflation: a local projection approach By Rubene, Ieva; Colavecchio, Roberta
  97. Unequal Political Business Cycles: Inequality, Policy Uncertainty and the Macroeconomy By Alvaro Aguirre
  98. Financial Development and Income Inequality in Indonesia: A Sub-national Level Analysis By Aginta, Harry; Soraya, Debby A; Santoso, Wahyu B
  99. Philippines; Technical Assistance Report-Monetary and Financial Statistics Mission By International Monetary Fund
  100. A Doubly Corrected Robust Variance Estimator for Linear GMM By Jungbin Hwang; Byunghoon Kang; Seojeong Lee
  101. Counting innovations: Schumpeterian growth in discrete time By Cozzi, Guido; Galli, Silvia
  102. Contagion in Dealer Networks By Jean-Sébastien Fontaine; Adrian Walton
  103. Trabajo y economía popular By César Girlado
  104. On the Simultaneous Openness Hypothesis: FDI, Trade and TFP Dynamics in Sub-Saharan Africa By Simplice A. Asongu; Joseph Nnanna; Paul N. Acha-Anyi

  1. By: Patrick J. Kehoe; Pierlauro Lopez; Virgiliu Midrigan; Elena Pastorino
    Abstract: Recent critiques have demonstrated that existing attempts to account for the unemployment volatility puzzle of search models are inconsistent with the procylicality of the opportunity cost of employment, the cyclicality of wages, and the volatility of risk-free rates. We propose a model that is immune to these critiques and solves this puzzle by allowing for preferences that generate time-varying risk over the cycle, and so account for observed asset pricing fluctuations, and for human capital accumulation on the job, consistent with existing estimates of returns to labor market experience. Our model reproduces the observed fluctuations in unemployment because hiring a worker is a risky investment with long-duration surplus flows. Intuitively, since the price of risk in our model sharply increases in recessions as observed in the data, the benefit from creating new matches greatly drops, leading to a large decline in job vacancies and an increase in unemployment of the same magnitude as in the data.
    JEL: E0 E2 E24 E32 J6 J63 J64
    Date: 2019–12
  2. By: Bossone, Biagio; Cuccia, Andrea
    Abstract: This study revisits and tests empirically the Portfolio Theory of Inflation (PTI), which analyzes how the effectiveness of macroeconomic policy in open and globally financially integrated economies is influenced by global investor decisions (Bossone, The portfolio theory of inflation and policy (in)effectiveness, 2019). The PTI shows that when an economy is heavily indebted and is perceived by the market to be poorly credible, investors hold it to a tighter intertemporal budget constraint and policies aimed to stimulate output growth dissipate into domestic currency depreciation and higher inflation, with limited or no impact on output, or with lower output and lower inflation. On the other hand, markets afford highly credible economies much greater space for effective and noninflationary macro policies. The study leads to a very basic advice: policymakers of an internationally highly integrated economy should keep public liabilities (the stock of both central bank money and public debt) at low levels: the larger the liabilities, the higher the degree of surrender of the country's national policy sovereignty to external forces and interests.
    Keywords: credibility,exchange rate,financial integration,fiscal and monetary policies,global investor(s),inflation,intertemporal budget constraint,policy effectiveness,public debt
    JEL: E31 E4 E5 E62 F31 G15 H3
    Date: 2020
  3. By: William Chen (Williams College); Gregory Phelan (Williams College)
    Abstract: We theoretically investigate the state-dependent effects of monetary policy on aggregate stability. In the model, banks borrow using deposits and invest in productive projects, and monetary policy affects risk-premia. Because banks do not actively issue equity, aggregate outcomes depend on the level of equity in the financial sector and equilibrium is inefficient. Monetary policy can improve household welfare by affecting banks’ leverage decisions and the rate of bank equity growth. A Fed Put is ex-ante stabilizing, decreasing volatility and the likelihood of crises; it does not lead to excessive leverage in good times but enables higher leverage in bad times.
    Keywords: Monetary policy, Leaning against the wind, Financial stability, Macroeconomic instability, Banks, Liquidity.
    JEL: E44 E52 E58 G01 G12 G20 G21
    Date: 2020–01–03
  4. By: Òscar Jordà; Sanjay R. Singh; Alan M. Taylor (University of California Davis; National Bureau of Economic Research; University of Virginia; Harvard University; University of California Berkeley; Morgan Stanley; Centre for Economic Policy Research (CEPR); ebrary Inc; Northwestern University)
    Abstract: Is the effect of monetary policy on the productive capacity of the economy long lived? Yes, in fact we find such impacts are significant and last for over a decade based on: (1) merged data from two new international historical databases; (2) identification of exogenous monetary policy using the macroeconomic trilemma; and (3) improved econometric methods. Notably, the capital stock and total factor productivity (TFP) exhibit hysteresis, but labor does not. Money is non-neutral for a much longer period of time than is customarily assumed. A New Keynesian model with endogenous TFP growth can reconcile all these empirical observations.
    Keywords: monetary policy; money neutrality; hysteresis; trilemma; instrumental variables; local projections
    JEL: E01 E30 E32 E44 E47 E51 F33 F42 F44
    Date: 2020–01–16
  5. By: Piotr Zoch (Group for Research in Applied Economics (GRAPE); Department of Economics, University of Chicago)
    Keywords: discounted collateral constraint, financial friction, macroprudential policy
    JEL: E30 E32 E44 E52
    Date: 2019
  6. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Observatoire français des conjonctures économiques); Tania Treibich (Observatoire français des conjonctures économiques)
    Abstract: In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by Gabaix (Econometrica 79:733–772, 2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate volatility. Yet, we question the original view grounded on “supply granularity”, as proxied by productivity growth shocks – in line with the Real Business Cycle framework–, and we provide empirical evidence of a “demand granularity”, based on investment growth shocks instead. The role of demand in explaining aggregate fluctuations is further corroborated by means of a macroeconomic Agent-Based Model of the “Schumpeter meeting Keynes” family Dosi et al. (J Econ Dyn Control 52:166–189, 2015). Indeed, the investigation of the possible microfoundation of RBC has led us to the identification of a sort of microfounded Keynesian multiplier.
    Keywords: Business cycles; Granular residual; Granularity hypothesis; Agent-based models; Firm dynamics ; Productivity growth; Investment growth
    JEL: C63 E12 E22 E32 O4
    Date: 2019–03
  7. By: Liang Wang (University of Hawaii at Manoa); Randall Wright (University of Wisconsin - Madison, Zhejiang University, and FRB Minneapolis); Lucy Qian Liu (International Monetary Fund)
    Abstract: We develop a theory of money and credit as competing payment instruments, then put it to work in applications. Agents use cash and credit because the former (latter) is subject to the inflation tax (transaction costs). Frictions that make the choice of payment method interesting also imply equilibrium price dispersion. We derive closed- form solutions for money demand, and show how to simultaneously account for the price-change facts, cash-credit shares in micro data, and money-interest correlations in macro data. The effects of inflation on welfare, price dispersion and markups are discussed, as are nonstationary equilibria with dynamics in the price distribution.
    Keywords: Money, Credit, Inflation, Price Dispersion, Sticky Prices
    JEL: E31 E42 E51 E52
    Date: 2020–01
  8. By: Victor Pontines
    Abstract: This study adds to a recent and growing literature that assesses the effects of macroprudential policy. We compare the effects of monetary policy and loan-to-value ratio shocks for Korea, an inflation targeting economy and an active user of loan-to-value limits. We identify shocks using sign-restricted structural VARs and rely on a recent approach within this method to conduct structural inference. This study finds that both monetary policy and loan-to-value ratio shocks have effects on different measures of credit, i.e., real bank credit, real total credit and real household credit. We also find that both shocks have non-negligible effects on real house prices, including effects on real output, real consumption and real investment. We do, however, find that loan-to-value ratio shocks have negligible effects on the price level. These findings indicate that for the period covered by this study, limits on loan-to-value achieved their financial stability objectives in Korea in terms of limiting credit and house price appreciation under an inflation targeting regime. Furthermore, it attained these objectives without posing any threat to its price stability objective. Overall, these findings suggest that limits on loan-to-value have important aggregate consequences despite it being a sectoral, targeted policy instrument.
    Keywords: Macroprudential Policy, Limits on Loan-to-Value, Monetary Policy, Sign Restrictions, Impulse Response, Forecast Error Variance Decomposition
    JEL: E31 E32 E52 E58 G28
    Date: 2020–01
  9. By: Javier Andrés (Universidad de Valencia); Pablo Burriel (Banco de España); Wenyi Shen (Oklahoma State University)
    Abstract: In this paper we study fiscal policy effects and fiscal space for countries in a monetary union with different levels of public debt. We develop a dynamic stochastic general equilibrium (DSGE) model of a two-country monetary union, calibrated to match the characteristics of Spain and Germany, in which debt sustainability is endogenously determined a la Bi (2012) to shape the responses of the risk premium on public debt. Policy shocks change the market’s expectation about future primary surplus, producing a direct effect on the sovereign risk premium and macroeconomic responses of the economy. In normal times the costs of a government spending driven fiscal consolidation in the high-debt country are greatly diminished when this consolidation improves endogenously its debt sustainability prospects. Fiscal consolidations in both members of the monetary union decrease real interest rates and amplify the reduction in risk premium in the highly-indebted country, improving union-wide output in the long run, but at the cost of lower output in the low-debt country in the short term. On the contrary, when monetary policy is constrained at the zero lower bound, the risk premium channel arising from the endogenous determination of debt sustainability becomes muted. In the ZLB, a fiscal consolidation generates deflation expectations which increase the real interest rate and may compensate partially or completely, depending on the calibration, the benefits from a lower risk premium. In this context, a fiscal expansion in the low-debt country and a consolidation in the high-debt country delivers the greater positive impact on union-wide output. Finally, the risk premium channel only affects countries with medium or low levels of public debt indirectly through the negative spillovers from other high-debt members of the monetary union.
    Keywords: fiscal sustainability, sovereign debt default risk, monetary union
    JEL: E31 E62 H30
    Date: 2020–01
  10. By: Herkenhoff, Kyle (University of Minnesota); Raveendranathan, Gajendran (McMaster University)
    Abstract: How are the welfare costs from monopoly distributed across U.S. households? We answer this question for the U.S. credit card industry, which is highly concentrated, charges interest rates that are 3.4 to 8.8 percentage points above perfectly competitive pricing, and has repeatedly lost antitrust lawsuits. We depart from existing competitive models by integrating oligopolistic lenders into a heterogeneous agent, defaultable debt framework. Our model accounts for 20 to 50 percent of the spreads observed in the data. Welfare gains from competitive reforms in the 1970s are equivalent to a one-time transfer worth between 0.24 and 1.66 percent of GDP. Along the transition path, 93 percent of individuals are better off. Poor households benefit from increased consumption smoothing, while rich households benefit from higher general equilibrium interest rates on savings. Transitioning from 1970 to 2016 levels of competition yields welfare gains equivalent to a one-time transfer worth between 1.87 and 3.20 percent of GDP. Lastly, homogeneous interest rate caps in 2016 deliver limited welfare gains.
    Keywords: welfare costs of monopoly, consumer credit, competition, welfare
    JEL: D14 D43 D60 E21 E44 G21
    Date: 2019–12
  11. By: Michal Hlavacek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Ilgar Ismayilov (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Ayaz Zeynalov (Faculty of International Relations, University of Economics in Prague, Winston Churchill Sq. 4, 130 67 Prague, Czech Republic)
    Abstract: The existing literature on fiscal policy has mainly employed linear models that found a small fiscal multiplier in developing economies. These findings challenge the importance and effectiveness of fiscal policy for these countries. However, linear models are not capable of distinguishing the size of the fiscal multiplier in different phases of economic cycles. Responding to some recent studies that confirm regime dependency of a fiscal multiplier, our model enriches the literature of regime-switching models using a nonlinear panel threshold vector autoregression (PTVAR) model to measure the size of the fiscal multiplier for developing countries. Our finding confirms asymmetry in the response of GDP with regard to the economic situation. The main result of our paper shows that the response of GDP to government expenditure shock during a recovery period for developing countries is double that for developed ones. Our results also confirm a significantly larger fiscal multiplier during recovery compared to economic downturn.
    Keywords: Fiscal multiplier, developing countries, regime-switching, the panel threshold vector autoregression model
    JEL: E32 E62 G15 C54
    Date: 2020–04
  12. By: Ales Bulir; Jan Vlcek
    Abstract: Does monetary policy react systematically to macroeconomic innovations? In a sample of 16 countries - operating under various monetary regimes - we find that monetary policy decisions, as expressed in yield curve movements, do react to macroeconomic innovations and these reactions reflect the monetary policy regime. While we find evidence of the primacy of the price stability objective in the inflation-targeting countries, the links to inflation and the output gap are generally weaker and less systematic in money-targeting and multiple-objective countries.
    Keywords: Monetary transmission, yield curve
    JEL: E43 E52 G12
    Date: 2019–09
  13. By: Lucio Gobbi; Ronny Mazzocchi; Roberto Tamborini
    Abstract: We examine the so-called "Neo-Fisherian" claim that, at the zero lower bound (ZLB) of the monetary policy interest rate, and the economy in a depression equilibrium, in order to restore the desired inflation rate the policy rate should be raised consistently with the Fisher equation. This claim has been questioned on the ground that the Fisher equation cannot be used mechanically to peg the long-run inflation expectations. It is necessary to examine how inflation expectations are formed in response to, and interact with, policy actions and the evolution of the economy. Hence we study a New Keynesian economy where agents' inflation expectations are based on their correct understanding of the data generations process, and on their probabilistic confidence in the central bank's ability to keep inflation on target, driven by the observed state of the economy. We find that the Neo-Fisherian claim is a theoretical possibility depending on the interplay of a set of parameters and very low levels of agents' confidence. Yet, on the basis of simulations of the model, we may say that this possibility is remote for most commonly found empirical values of the relevant parameters. Moreover, the Neo-Fisherian policy-rate peg is not sustained by the expectations formation process.
    Keywords: conventional monetary policy, Neo-Fisherian theory, formation of inflation expectations, monetary policy at the zero lower bound
    JEL: D84 E31 E52
    Date: 2019
  14. By: Tripathi, Sabyasachi
    Abstract: The paper investigates the macroeconomic determinants of rising housing prices from a cross country perspective. The random-effect models’ analysis suggests that rent, price-to-income ratio, price-to-rent ratio, urbanization, per-capita GDP, inflation, the share of population aged 15-64, GDP growth rate, broad money, and real exchange rate have a positive and statistically significant effect on real house prices. In contrast, the percentage share of employment in services has a negative effect on real house prices. We suggest that government should adjust macroeconomic policies such as inflation, broad money supply, real exchange rate, urbanization, and employment dynamics to control the real house prices.
    Keywords: Real house prices, macroeconomy, random effect models, cross countries
    JEL: C33 E39 E44
    Date: 2019–11–19
  15. By: Felipe , Jesus (Asian Development Bank); McCombie, John (University of Cambridge)
    Abstract: This paper shows that because growth models in the tradition of Solow’s and Romer’s are framed in terms of production functions, they are equally subject to a criticism developed by, among others, Phelps Brown (1957), Simon (1979a), and Samuelson (1979). These authors argued that production function estimations are flawed exercises. The reason is that the series of output, labor, and capital stock used are definitionally related through an accounting identity. Consequently, the identity predetermines the estimates that regressions yield. We show that the identity argument helps demystify two illusions in the literature: (i) finding the Holy Grail: total factor productivity is, by construction, a weighted average of dollars per worker and a pure number (the rate of profit or the rental rate of capital); and (ii) the possibility of testing: if estimated properly, production function regressions will yield: (a) a very high fit, potentially an of unity; and (b) estimated factor elasticities equal to the factor shares, hence they must always add up to 1. We illustrate these points by discussing a series of well-known growth accounting exercises and models directly derived from production functions. They are merely tautologies. We conclude that we know substantially less than we think about growth and that many of the discussions in the growth literature are Kuhnian puzzles that only make sense within the neoclassical growth model paradigm.
    Keywords: accounting identity; Cobb–Douglas; dual TFP; growth accounting; primal TFP; production function; Romer; Solow
    JEL: E22 E23 E25 O11 O33 O47
    Date: 2019–10–28
  16. By: Aizenman, Joshua (University of Southern California); Jinjarak, Yothin (Victoria University of Wellington); Nguyen, Hien Thi Kim (Victoria University of Wellington); Park, Donghyun (Asian Development Bank)
    Abstract: The paper compares fiscal cyclicality across regions and countries from 1960 to 2016. It finds that more than half of 170 countries analyzed in seven regions had, in more recent years, limited fiscal space, and that their fiscal policy was either cyclical or procyclical. This was particularly apparent since the 2008–2009 global financial crisis, which was marked by increased procyclical government spending when accounting for net acquisition of nonfinancial assets and capital expenditure. We construct a limited-fiscal-capacity statistic, measured by public debt–average tax revenue ratio and its volatility, which is found to be positively associated with fiscal procyclicality. The cyclicality is asymmetric: on average, a more indebted government (relative to the tax base) spends more in good times and cuts back spending indifferently compared with low-debt countries in bad times. Having sovereign wealth funds is also associated with larger countercyclicality. An enduring interest rate rise entails diminished fiscal space—a 10% increase in the public debt–tax base ratio is associated with an upper bound of a 5.6% increase in government-spending procyclicality.
    Keywords: cross-country analysis; fiscal cyclicality; public debt
    JEL: E02 E62 F40
    Date: 2019–05–14
  17. By: Cummins, Matthew
    Abstract: Child well-being is inextricably linked to the performance of the macroeconomy. Although not always explicit, there are very clear and powerful channels that need to be understood, monitored and linked to decision-making processes, including economic growth, labour markets, price levels and the fiscal balance. As the young and fast-growing population in the Eastern and Southern Africa region (ESAR) explodes from 540 million today to more than a billion in less than 30 years, the stakes for children have never been higher. And this is the main objective of the report: to understand whether macroeconomic forces will catalyse sustainable change for children – or not. When looking at recent trends and projections, optimism is hard to come by: * Economic growth is not nearly fast enough to propel incomes and poverty alleviation on a meaningful scale. * Labour markets are not providing the quality jobs needed by parents and young workers to improve their lives and the lives of children. * Rising prices are negatively influencing real economic output, the impact of government investment and household welfare. * Continuous budget deficits, rising debt and the changing foreign aid landscape limit available funding for children’s services. * The current levels, design and performance of social sector budgets prevent systems from delivering the services demanded by children and their families. However, many factors could influence the outlook. Economic growth could outperform expectations… Labour markets could rapidly expand and create formal sector opportunities for young and adult workers… Price levels could permanently stabilize… Domestic resource mobilization and other financing efforts could produce unprecedented returns… And social sector investment could suddenly grow in size and impact… Sound policies and favorable external conditions could help improve the macroeconomic trajectory for children, but achieving meaningful improvements in child well-being will largely be dictated by the investment choices of governments starting today. UNICEF country offices can play a critical role in influencing budgets for children as well as in protecting and promoting child well-being in response to different macroeconomic situations.
    Keywords: Population growth Income Poverty Social development Economic growth Income inequality Employment Working poverty Youth unemployment Inflation Consumer price index Expenditure Revenue Debt Borrowing Official development assistance Social sector spending Human capital investment Budget execution
    JEL: E00 E30 E52 E60 H0 I0 J0
    Date: 2019
  18. By: Gu, Ran
    Abstract: This paper examines how specific human capital affects labour turnover and real wage cyclicality in a frictional labour market. I develop an equilibrium search model with long-term contracts and imperfect monitoring of worker effort. Imperfect monitoring creates a moral hazard problem that requires firms to pay efficiency wages. The optimal contract implies that more specific capital reduces job separation, thereby alleviating the moral hazard and increasing wage stability over the business cycle. I apply this model to explain novel stylised facts about the cyclicality of the postgraduate-undergraduate wage premium. Postgraduate degree holders experience lower cyclical variation in real wages than those with undergraduate degrees. This effect is significant for workers with a long tenure, but not for new hires. Moreover, postgraduates have more specific human capital than undergraduates. Estimates reveal that specific capital can explain the educational gaps both in labour turnover and in real wage cyclicality.
    Keywords: specific human capital, real wage cyclicality, postgraduates, wage premium, contracts, search
    JEL: E24 E32 I24 J31 J64
    Date: 2019–12–02
  19. By: Demir, Ishak; Eroglu, Burak A.; Yildirim-Karaman, Secil
    Abstract: This paper investigates the impact of European Central Bank's unconventional monetary policies between 2008-2016 on the government bond yields of eight European Monetary Union countries and up to eleven different maturities. In identifying this impact, it adopts a novel econometric approach that combines data-rich dynamic factor analysis and VAR with heteroskadasiticy based identification. This novel approach allows a single model to estimate the impact of a common unconventional monetary policy shock across different countries, maturities, yield components and over time. The results identify a significant and substantial impact for all countries and all maturities in the sample. The evidence also suggests that the impact was stronger and persistent in the periphery countries which have higher financial distress, uncertainty, country risk and lower liquidity. When we decompose the impact into separate yield components, we find that unconventional shocks decreased the common market component of the yields in all countries. As for the risk component, unconventional policies decreased it for the periphery countries permanently at the cost of a small increase in the core countries, as consistent with the international portfolio balance channel. These findings contribute to the literature by providing a comprehensive characterization of the impact of unconventional monetary policies for different economic environments.
    Keywords: Unconventional monetary policy,ECB,QE,international monetary transmission,portfolio balance,cross-country difference,yield curves,risk premia
    JEL: C38 E43 E52 E58 F42 G12
    Date: 2019
  20. By: Nuno, Cassola; Christoffer, Kok; Francesco Paolo, Mongelli
    Abstract: The prolonged crisis exposed the vulnerability of a monetary union without a banking union. The Single Supervisory Mechanism (SSM), which started operating in November 2014, is an essential step towards restoring banks to health and rebuilding trust in the banking system. The ECB is today responsible for setting a single monetary policy applicable throughout the euro area and for supervising all euro area banks in order to ensure their safety and soundness, some directly and some indirectly. Its role in the area of financial stability has also expanded through the conferral of macroprudential tasks and tools that include tightening national measures when necessary. It thus carries out these complementary functions, while its primary objective of pursuing price stability remains unchanged. What are the working arrangements of this enlarged ECB, and what are the similarities and existing synergies among these functions? In the following pages, focusing on the organisational implications of the “new†ECB, we show the relative degrees of centralisation and decentralisation that exist in discharging these functions, the cycles of policy preparation and the rules governing interaction between them.
    Keywords: European Central Bank, monetary policy, banking union, banking supervision, financial stability, systemic risks, macroprudential policies, decision-making process
    JEL: E42 E58 F36 G21
    Date: 2019–12
  21. By: Giovanni Dosi (Laboratory of Economics and Management); Marcelo C. Pereira (Universidade Estadual de Campinas); Andrea Roventini (Observatoire français des conjonctures économiques); Maria Enrica Virgillito (Scuola Superiore Sant'Anna)
    Abstract: In this work we develop an agent-based model where hysteresis in major macroeconomic variables (e.g., gross domestic product, productivity, unemployment) emerges out of the decentralized interactions of heterogeneous firms and workers. Building upon the “Schumpeter meeting Keynes” family of models (cf. in particular Dosi et al. (2016b, 2017c)), we specify an endogenous process of accumulation of workers’ skills and a state-dependent process of firms entry. Indeed, hysteresis is ubiquitous. However, this is not due to market imperfections, but rather to the very functioning of decentralized economies characterized by coordination externalities and dynamic increasing returns. So, contrary to the insider–outsider hypothesis (Blanchard and Summers, 1986), the model does not support the findings that rigid industrial relations may foster hysteretic behavior in aggregate unemployment. On the contrary, this contribution provides evidence that during severe downturns, and thus declining aggregate demand, phenomena like decreasing investment and innovation rates, skills deterioration, and declining entry dynamics are better candidates to explain long-run unemployment spells and reduced output growth. In that, more rigid labor markets may well dampen hysteretic dynamics by sustaining aggregate demand, thus making the economy more resilient.
    Keywords: Computational techniques; Employment; Institutions
    JEL: E24 E02
    Date: 2018–04
  22. By: Park, Donghyun (Asian Development Bank); Shin, Kwanho (Korea University); Tian, Shu (Asian Development Bank)
    Abstract: This paper empirically investigates the relationship between the speed of buildup of private debt (household and corporate) and the depth of recessions. To do this, we differentiate between financial recessions and normal recessions on the basis of how quickly their private debt builds up. In addition to output recessions, we look at consumption and investment recessions. We find that financial recessions are deeper than normal recessions in advanced economies—and the differences become even more pronounced when emerging market economies are added to the sample. Our evidence suggests that a buildup in corporate debt is especially damaging for emerging markets during financial recessions. A higher ratio of debt to gross domestic product—in other words, less fiscal space—exacerbates recessions only beyond a certain threshold level, suggesting a nonlinear effect. We find that the buildup of corporate debt—and not just household debt—can worsen recessions, especially in emerging market economies.
    Keywords: business cycle; corporate debt; fiscal space; government debt; household debt; private debt; recessions
    JEL: E32 E44 G01
    Date: 2019–04–26
  23. By: Tanweer Akram; Anupam Das
    Abstract: Keynes argued that the short-term interest rate is the main driver of the long-term interest rate. This paper empirically models the relationship between short-term interest rates and long-term government securities yields in Canada, after controlling for other important financial variables. The statistical analysis uses high-frequency daily data from 1990 to 2018. It applies both the cointegration technique and Granger causality within the vector error correction (VEC) framework. The empirical results suggest that the action of the monetary authority is an important determinant of Canadian government securities yields, which supports the Keynesian perspective. These findings have important implications for investors, financial analysts, and policymakers.
    Keywords: : Canadian Government Bond Yields; Long-Term Interest Rate; Short-Term Interest Rate; Monetary Policy; Cointegration; Granger Causality
    JEL: E43 E50 E60 G10 G12
  24. By: Szilard Benk; Max Gillman
    Abstract: Real oil prices surged from 2009 through 2014, comparable to the 1970's oil shock period. Standard explanations based on monopoly markup fall short since inflation remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.
    Keywords: oil price shocks; Granger predictability; monetary base; M1 Divisia; Swaps; inflation;
    JEL: Q43 E51 E52
    Date: 2019–12
  25. By: International Monetary Fund
    Abstract: Resource constraints, macroeconomic imbalances, and longstanding fragility continue to challenge the authorities’ efforts to improve living standards. An initial rush to deliver election promises has, at times, led to shortcomings in their execution. After grappling with these challenges for over a year, a consensus on the need for broad-based reform has emerged, leading to a request for a Fund-supported program. The authorities are requesting Fund support in the form of a four-year arrangement under the Extended Credit Facility of SDR155 million (60 percent of quota) to guide policies and reforms aimed at restoring macroeconomic stability, providing a foundation for sustainable growth, and addressing weaknesses in governance.
    Keywords: Central banks;Financial and Monetary Sector;Central bank governance;Credit;Monetary policy;ISCR,CR,CBL,percent of GDP,Liberian authority,Proj,central bank of Liberia
    Date: 2019–12–20
  26. By: Selien De Schryder; Frederic Opitz (-)
    Abstract: We identify a novel set of macroprudential policy shocks and estimate their effects on credit cycle variables in a panel of 13 EU countries during 1999-2018. We find that a typical macroprudential policy tightening shock reduces bank credit-to-GDP by 1.8% points and household credit-to-GDP by 1.6% points over a period of four years. The non-financial corporations and total credit-to-GDP ratios, however, do not react significantly. Using state-dependent local projections, we further find that the effects on the credit-to-GDP ratios are stronger in credit cycle upturns than in downturns. We also detect a sizable leakage of firm credit from the banking to the non-banking sector next to a shift from firm to household credit.
    Keywords: Macroprudential policy, Effectiveness, State dependency
    JEL: C23 E58 G18 G28
    Date: 2019–12
  27. By: Bruce Preston
    Abstract: At any time, the public should be able to evaluate whether the Reserve Bank of Australia’s interest rate decisions are consistent with achieving statutory mandates. The current policy and communication strategy makes this difficult. The mandates, as interpreted by the RBA, fail to provide a clearly identifiable performance benchmark. And the supporting communication strategy falls short of a commitment to explain the economic basis of why and how interest-rate decisions achieve mandated objectives. Examples of both concerns are given from various public documents. Basic reforms would improve the accountability and effectiveness of monetary policy.
    Keywords: Monetary policy, central bank communication, transparency, accountability
    JEL: E32 D83 D84
    Date: 2020–01
  28. By: Cláudia Duarte; José R. Maria; Sharmin Sazedj
    Abstract: The identification of trends and cycles is often a challenging task under sizeable changes in economic conditions. We solve this problem with a flexible unobserved components model, featuring an (unobserved) evolving trend inflation drift to cope with distinct inflationary periods and data-driven low frequency movements to partly influence ex ante key trend components. In the long run the model displays a balanced growth path, in addition to other standard restrictions (e.g. nil output and labour market slacks). We estimate the model with Bayesian techniques using two datasets, one for the euro area and another for Portugal, two economies displaying distinct macroeconomic environments over the last four decades, and conclude that Portugal witnessed (i) a steeper deceleration of potential output, since the 1990s; (ii) a pervasively higher volatility in labour and product markets; and (iii) a long-lived interruption in convergence trends after the 2000s. Results are robust to sensitivity analyses. Parameter uncertainty is, nevertheless, significant.
    JEL: C11 C30 E32
    Date: 2019
  29. By: Kim, Soyoung (Seoul National University)
    Abstract: This paper analyzes the conduct and effects of macroprudential policy in 11 Asian economies. Of these, India, the People’s Republic of China, and the Republic of Korea frequently used loan-to-value ratios and required reserve ratios even before the global financial crisis. India and the People’s Republic of China are the most frequent users of macroprudential policy tools. Since 2000, tightening actions have been more frequent than loosening in the 11 economies. Most took tightening actions more frequently after the global financial crisis than before it. In most of these economies, macroprudential policy tends to be tightened when credit expands. The main empirical results from the analysis, which uses panel vector autoregression models, are that contractionary macroprudential policy has significant negative effects on credit and output; and that these effects are qualitatively similar to those of monetary policy. This suggests that policy authorities may experience potential policy conflicts when credit conditions are excessive and the economy is in recession.
    Keywords: credit; macroprudential policy; monetary policy; output; vector autoregression
    JEL: E58 E60 G28
    Date: 2019–04–16
  30. By: Davide Debortoli; Ricardo Nunes; Pierre Yared
    Keywords: Public debt, optimal taxation, fiscal policy
    JEL: H63 H21 E62
    Date: 2019–02
  31. By: International Monetary Fund
    Abstract: GDP growth remains on track to reach 4.6 percent despite the ban on direct flights from Russia. The current account deficit reached a historic low. Inflation accelerated to 6.9 percent in October reflecting higher food prices and nominal depreciation. The National Bank of Georgia used FX sales and higher policy rates to address rising inflationary pressures. Strong revenue growth has more than offset higher-than-envisaged capital spending, and the 2019 fiscal deficit is likely to be lower than projected at the Fourth Review.
    Keywords: External sector;Economic growth;Financial indicators;Monetary policy;Inflation;ISCR,CR,percent of GDP,EFF,performance criterion,NBG,medium-term
    Date: 2019–12–18
  32. By: International Monetary Fund
    Abstract: Prudent macroeconomic policies, supported by the Extended Arrangement, have contributed to Gabon’s economic recovery. Growth is picking up, the fiscal and external positions have improved, public debt has started to decline, and Gabon has contributed to the rebuilding of regional international reserves. Challenges remain, though, as buffers are still insufficient and deep-rooted institutional and structural weaknesses continue to constraint growth and poverty reduction. Almost one-third of the population still lives below the poverty line.
    Date: 2019–12–23
  33. By: Patnaik , Ila (National Institute of Public Finance and Policy); Pundit, Madhavi (Asian Development Bank)
    Abstract: The taper tantrum episode induced a sudden outflow of capital from emerging markets back to the United States. This paper analyzes exchange market pressure in 93 developing and emerging market economies during this episode, drawing on recent methodological improvements in measuring exchange market pressure. We find that all economies in the sample that were integrated with global capital markets were heavily hit. Although popular discourse suggested that the extent of an economy’s fragility depended on its macroeconomic fundamentals, we find these fundamentals did not have much of a role in determining the level of pressure on a currency.
    Keywords: capital flows; exchange market pressure; financial shock; international trade and finance; macroeconomics; taper tantrum
    JEL: E52 F31 F32
    Date: 2019–05–15
  34. By: Zhifeng Cai (Rutgers University)
    Abstract: This paper explores a model in which large transitory financial shocks can generate persistent slumps in output, land prices, and interest rate. The propagation originates from high sensitivity of land prices with respect to fundamental, which is achieved by a land consumption channel that exploits the high complementarity of land services and consumption in households’ preference. When this complementarity is disciplined by micro-level evidence, the unique recursive equilibrium features an S-shaped law of motion for capital with two locally stable steady states. Small shocks move the economy around the unconstrained steady state whereas large transitory financial shocks push the economy into the constrained steady state at which low interest rate makes firm unwilling to save out of the financial friction, leading to a secular stagnation.
    Keywords: Secular Stagnation, Steady-State Multiplicity, Financial Frictions, House Prices
    JEL: E0
    Date: 2020–01–23
  35. By: Makoto Nakajima
    Abstract: This paper quantitatively investigates capital income taxation in the general-equilibrium overlap-ping generations model with household heterogeneity and housing. Housing tax policy is found to affect how capital income should be taxed, due to substitution between housing and non-housing capital. Given the existing U.S. preferential tax treatment for owner-occupied housing, the optimal capital income tax rate is close to zero (1%), contrary to the high optimal capital income tax rate found with overlapping generations models without housing. A low capital income tax rate improves welfare by narrowing a tax wedge between housing and non-housing capital; the narrowed tax wedge indirectly nullifies the subsidies (taxes) for homeowners (renters) and corrects over-investment to housing. Naturally, when the preferential tax treatment for owner-occupied housing is eliminated, a high capital income tax rate improves welfare as in the model without housing.
    Keywords: Incomplete Markets; Capital Income Taxation; Heterogeneous Agents; Overlapping Generations; Housing; Life Cycle; Optimal Taxation
    JEL: E21 H21 H24 R21
    Date: 2020–01–07
  36. By: Ernesto Pasten; Raphael Schoenle; Michael Weber
    Abstract: We study the potency of sectoral productivity shocks to drive aggregate fluctuations in the presence of three empirically relevant heterogeneities across sectors: sector size, intermediate input consumption, and pricing frictions in a multi-sector New Keynesian model. We derive conditions under which sectoral shocks matter for aggregate volatility in a simplified model and find the distribution of sector size or input-output linkages are neither necessary nor sufficient to generate aggregate fluctuations. Quantitatively, we calibrate our full model to 341 sectors using U.S. data and find (1) fully heterogeneous price rigidity across sectors doubles the aggregate volatility from sectoral shocks relative to a calibration with homogeneous price rigidity; 2) realistically calibrated sectoral productivity shocks are key to generating sizable aggregate fluctuations of both GDP and prices; 3) heterogeneity of price rigidity matters because it changes the effective distribution of sector size and network centrality. Our quantitative exercise generates large aggregate fluctuations under different empirically plausible monetary policy rules.
    Date: 2020–01
  37. By: Andrea Carriero; Todd E. Clark; Massimiliano Marcellino (European University Institute; Universität Commerciale Luigi Bocconi; National Bureau of Economic Research; Centre for Economic Policy Research (CEPR); Universität degli Studi di Firenze; Bocconi University)
    Abstract: A rapidly growing body of research has examined tail risks in macroeconomic outcomes. Most of this work has focused on the risks of significant declines in GDP, and has relied on quantile regression methods to estimate tail risks. In this paper we examine the ability of Bayesian VARs with stochastic volatility to capture tail risks in macroeconomic forecast distributions and outcomes. We consider both a conventional stochastic volatility specification and a specification featuring a common volatility factor that is a function of past financial conditions. Even though the conditional predictive distributions from the VAR models are symmetric, our estimated models featuring time-varying volatility yield more time variation in downside risk as compared to upside risk—a feature highlighted in other work that has advocated for quantile regression methods or focused on asymmetric conditional distributions. Overall, the BVAR models perform comparably to quantile regression for estimating tail risks, with, in addition, some gains in standard point and density forecasts.
    Keywords: forecasting; downside risk; asymmetries
    JEL: C53 E17 E37 F47
    Date: 2020–01–16
  38. By: Igor Ljubaj (The Croatian National Bank, Croatia)
    Abstract: IntInternational reserves are liquid foreign assets readily available to the central bank for mitigating the effects of possible balance of payments imbalances. When monetary policy is based on maintaining the stability of the domestic currency, as it is the case of the Croatian National Bank (CNB), the role of international reserves is even larger; international reserves as foreign exchange assets usually account for most of the central bank’s assets, while liabilities are denominated in the domestic currency, so that a currency mismatch between the assets and the liabilities tends to arise. Any change in the exchange rate of the domestic currency against world reserve currencies will lead to the calculation of unrealised exchange rate differences. This also was why in 2017 and 2018 the CNB recorded the first negative result since 2003. In 2017, it was mostly due to the strengthening of the euro against the dollar in the global foreign exchange market, while in 2018, it was due to the strengthening of the kuna against the euro. As a result of both circumstances, international reserves in kuna terms were reduced, while, excluding the exchange rate differences, the CNB's revenues exceeded expenditures, as they had in all the previous years. The large amount of exchange rate differences was also a consequence of the considerable increase of international reserves in the recent period, exchange rate differences thus being much larger for the same change in the exchange rate. Some central banks, indeed, lost their entire capital because of the large foreign exchange losses. The CNB’s capital was never in jeopardy, because losses were easily covered from general reserves created in the previous years. For the CNB, accession to the euro area will require the application of ECB accounting guidelines, which are more appropriate for the central bank’s operation. Then, because of a different accounting treatment, exchange rate differences will no longer impact the financial result in the same way as it does today. This will increase the stability and predictability of the financial result, as well as the probability of the allocation of profits to the state budget.
    Keywords: international reserves, CNB, financial result, exchange rate differences, financial independence
    JEL: E58 E59 N20
    Date: 2020–01
  39. By: Régis Barnichon; Davide Debortoli; Christian Matthes
    Keywords: Public debt, optimal taxation, fiscal policy
    JEL: C32 E62
    Date: 2019–02
  40. By: Hansen, Stephen; McMahon, Michael; Tong, Matthew
    Abstract: Why do long-run interest rates respond to central bank communication? Whereas existing explanations imply a common set of signals drives short and long-run yields, we show that news on economic uncertainty can have increasingly large effects along the yield curve. To evaluate this channel, we use the publication of the Bank of England’s Inflation Report, from which we measure a set of high-dimensional signals. The signals that drive long-run interest rates do not affect short-run rates and operate primarily through the term premium. This suggests communication plays an important role in shaping perceptions of long-run uncertainty. JEL Classification: E52, E58, C55
    Keywords: communication, machine learning, monetary policy
    Date: 2020–01
  41. By: International Monetary Fund
    Abstract: Tighter macroeconomic and financial policies helped to avert a deeper crisis, and gross external reserves increased more rapidly in recent months, largely exceeding the mid-2019 target. However, reserves are still below the level appropriate for commodityexporting economies (5 months of imports) to absorb terms of trade shocks. Fiscal consolidation has been tilted towards cuts in public investment. This, together with a lack of significant progress in structural reforms, has weighed on growth which remains too low. The outlook for 2019 and beyond foresees further improvement in regional reserves assuming CEMAC countries remain committed to their program objectives and new programs with CAR and Equatorial Guinea could start around end-2019. This outlook is subject to potentially significant risks, including: a significant slowdown in global growth and associated decline in oil prices; a deterioration in the security situation in some countries; and weaker implementation of IMF-supported programs.
    Keywords: Monetary policy;Monetary policy operational framework;Macroprudential policies and financial stability;Central banks;Foreign exchange regulations;ISCR,CR,CEMAC,BEAC,non-oil,arrears,Proj
    Date: 2019–12–20
  42. By: Zhang, Lu (Ohio State U)
    Abstract: The q-factor model shows strong explanatory power and largely summarizes the cross section of average stock returns. In particular, the q-factor model fully subsumes the Fama-French (2018) 6-factor model in head-to-head factor spanning tests. The q-factor model is an empirical implementation of the investment CAPM. The basic philosophy is to price risky assets from the perspective of their suppliers (firms), as opposed to their buyers (investors). As a disruptive innovation, the investment CAPM has broad-ranging implications for academic finance and asset management practice.
    JEL: D21 D92 E22 E44 G12 G14 G31 G32 G35
    Date: 2019–12
  43. By: Patrick T. Harker
    Abstract: Philadelphia Fed President Patrick T. Harker discussed “where we were, where we are, and where we’re going” in the Fed’s effort toward monetary policy normalization during opening remarks to a roundtable at the Official Monetary and Financial Institutions Forum in New York City. Harker said the Fed is reviewing its strategies, tools, and communication practices to reflect the changes in the U.S. economy since the Great Recession.
    Keywords: monetary policy
    Date: 2020–01–15
  44. By: Christophe Blot (Observatoire français des conjonctures économiques); Jérôme Creel (Observatoire français des conjonctures économiques); Xavier Ragot (Observatoire français des conjonctures économiques)
    Abstract: Eurozone monetary governance was framed for a stable macroeconomic environment. While the ECB policy framework changed much after the global financial crisis, this did not prevent important nominal divergences. These ones prove the importance of non-monetary factors affecting relative nominal prices, such as fiscal policy and labor market institutions. New tools are necessary to limit these nominal divergences, otherwise real divergence will continue to weaken the euro. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.
    Date: 2019–01
  45. By: Ettore Panetti; Edoardo M. Acabbi; Alessandro Sforza
    Abstract: How do credit shocks affect labor market reallocation, firms’ exit and other real outcomes? How do labor-market rigidities impact their propagation? To answer these questions, we match administrative data on worker, firms, banks and credit relationships in Portugal, and conduct an event study of the interbank market freeze at the end of 2008. Our results highlight that the credit shock had significant effects on employment dynamics and firms’ survival. These findings are entirely driven by the interaction of the credit shock with labor market frictions, determined by rigidities in labor costs and exposure to working-capital financing, which we label “labor-as-leverage” and “labor-as-investment” financial channels. The credit shock explains about 29 percent of the employment loss among large Portuguese firms between 2008 and 2013, and contributes to productivity losses due to increased labor misallocation.
    JEL: D24 E24 G21
    Date: 2019
  46. By: International Monetary Fund
    Abstract: After years of robust growth, economic activity has significantly weakened. Supply disruptions in tourism, the engine of recent growth, and the associated uncertainty have triggered a drop in domestic demand and an increase in unemployment. A swift policy response, with fiscal relaxation and monetary easing, has stabilized expectations and cushioned the effects. A moderate but fragile growth recovery is expected in 2020. Significant downside risks weigh on the outlook. World trade tensions and weaker than expected global growth, the UK’s still uncertain Brexit process, worsening of tourism activity in Iceland, and pressures in financial markets or payments due to Iceland’s grey-listing by the FATF could negatively impact the economy.
    Keywords: External sector;Financial soundness indicators;Economic conditions;International investment position;Economic growth;ISCR,CR,CBI,inflation expectation,medium-term,percent of GDP,Proj
    Date: 2019–12–19
  47. By: Vugar Rahimov (Central Bank of the Republic of Azerbaijan); Nijat Guliyev (Central Bank of the Republic of Azerbaijan); Vugar Ahmadov (Central Bank of the Republic of Azerbaijan)
    Abstract: In this study, we build and use a factor-augmented vector autoregressive (FAVAR) model to forecast inflation and output in Azerbaijan. The FAVAR model is particularly effective in data-rich environments, alleviating the curse of dimensionality of the standard VAR model and handling omitted variable bias. Using 77 variables for factor extraction and quarterly data for the period 2003 to 2018, we build several multivariate models, including a FAVAR model, and compare their performance with that of a benchmark univariate model. Our findings show that almost all of the multivariate models underperform in comparison with the univariate model. This result is in line with the literature, which finds that simple models are better forecasters of some macroeconomic variables, especially inflation. We acknowledge that the results might be affected by the relatively short length of the sample period and existence of irregularities in the data.
    Date: 2020–01–21
  48. By: International Monetary Fund
    Abstract: Macroeconomic imbalances have narrowed in the last few years, supported by fiscal consolidation. However, the economic situation and outlook remain difficult, with the economy still in deep recession. GDP is expected to contract for the sixth consecutive year in 2019, driven by a continued strong decline in hydrocarbon output and a stagnant non-oil sector. Imputed net foreign assets (NFAs) at the BEAC turned positive in mid-2019 but are very low. The banking sector remains weak, with high non-performing loans related to government arrears, hindering the recovery of the non-oil sector. The outlook is expected to improve over the medium term, with a gradual recovery of the non-hydrocarbon sector—helped by arrears clearance—and the coming on stream of new hydrocarbon projects, and a strengthening of the external position supported by fiscal consolidation. Risks to the outlook are broadly balanced, with the possibility of lower oil prices offset by upside on hydrocarbon output.
    Keywords: Economic policy;Fiscal policy;External sector;Public financial management;Fiscal sector;ISCR,CR,non-hydrocarbon,EITI,BEAC,arrears,authority plan
    Date: 2019–12–20
  49. By: Miroudot, Sébastien; ye, ming
    Abstract: In this paper, we propose a new accounting framework for the decomposition of value-added into domestic, foreign and double counting terms in domestic sales. In this framework, we show where the value-added double counting is derived from and give an explicit expression of domestic and foreign double counting terms based on the Inter-Country Input-Output (ICIO) tables’ Ghosh insight. We can distinguish domestic sales from exports and trace the value added and double counting in sales of foreign affiliates and domestic-owned enterprises. Based on this framework, we then calculate the value-added by foreign-owned and domestic-owned firms in exports and in domestic sales by using an Inter-Country Input-Output table split according to ownership. Preliminary results suggest that there is much more double counting in sales of foreign affiliates than in exports and that more value-added is created through exports than through sales of foreign affiliates in world GDP.
    Keywords: inter-country input-output, value-added decomposition, global value chains, foreign affiliates
    JEL: E01 E16 F23 L14
    Date: 2018–03–14
  50. By: Samba Diop (Alioune Diop University, Bambey, Senegal); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This study improves the African Regional Integration Index (ARII) proposed by the African Union, the African Development Bank and the United Nations Economic Commission for Africa by providing a theoretical framework and addressing shortcomings related to weighting and aggregation of the indicator. This paper measures monetary integration in the eight African Regional Economic Communities (RECs) by constructing an Index of African Monetary Integration (IAMI). It proposes an Optimal Currency Area as theoretical framework and uses a panel approach to appreciate the dynamics of the index over different periods of time. The findings show that: (i) inflation and finance (trade and mobility) present the highest (lowest) score while ECOWAS is (EAC and IGAD are) the highest (least) performing. (ii) Surprisingly, in most RECs, the highest contributors to wealth creation are not the top performers in regional monetary integration. (iii) The RECs in Africa are characterized by a stable monetary integration which is different from the gradual process usually observed in monetary integration because with the exception of the EAC and UMA, the dynamics of IAMI show a steady trend in the overall index across time. Policy implications are discussed.
    Keywords: Monetary Integration; Currency Unions; Economic Communities; Africa
    JEL: E10 E50 O10 O55 P50
    Date: 2020–01
  51. By: International Monetary Fund
    Abstract: Hong Kong SAR economy has been hit hard by both external and domestic shocks and fell into a technical recession in the third quarter. The economy is projected to start recovering next year, but the pace is expected to be gradual and both near- and medium-term risks have increased significantly, including from trade and technology tensions, ongoing social unrest, and structural challenges of insufficient housing supply and high income inequality.
    Date: 2019–12–26
  52. By: International Monetary Fund
    Abstract: While macroeconomic policies in recent years have succeeded in restoring elements of macroeconomic stability under difficult circumstances, macroeconomic conditions are nonetheless precarious. The recent fall in commodity prices, new spending initiatives, and looser spending oversight during the political transition period have led to a weaker fiscal position mostly financed by the central bank. In that context, international reserves have fallen to critically low levels (one week of import coverage). Balance of payments needs remain both urgent and protracted.
    Date: 2019–12–23
  53. By: Flores Zendejas, Juan; Lopez Soto, David; Sanchez Amador, David
    Abstract: This paper analyses the motives behind the establishment of central banks during the interwar period. We argue that most governments with difficulties in accessing financial markets established central banks, as this was a general recommendation provided by contemporary money doctors. However, even if central banks served to facilitate the issue of foreign loans on the New York financial market, we find that governments with central banks did not obtain more favorable terms for those loans. Our analysis further demonstrates that investors concentrated on macroeconomic achievements such as inflation and monetary stability, and whether a lender-of-last resort facility existed, regardless of whether or not this was pursued by a central bank.
    Keywords: Money doctors, Central banking, Great depression, Sovereign debt
    JEL: N00 N1 N20 E50 H63
    Date: 2020
  54. By: International Monetary Fund
    Abstract: Recent economic developments. Decisive policy implementation since June has started to reverse Pakistan’s large imbalances, preserving financial stability. The external adjustment is proceeding quickly on the back of an orderly adjustment to a market-determined exchange rate. Fiscal performance was strong in the first quarter of FY 2020 and budgetary allocations to the Benazir Income Support Program (BISP) have been expanded. Growth has slowed, broadly in line with expectations, and market confidence is gradually returning. Inflation has started to stabilize and the State Bank of Pakistan has paused its interest rate hike cycle.
    Keywords: Tax policy;Social safety nets;Financial and Monetary Sector;Economic reforms;Tax revenue;ISCR,CR,SBP,pakistani authority,Proj,percent of GDP,pakistani rupee
    Date: 2019–12–23
  55. By: Carlos Robalo Marques; Daniel A. Dias
    Abstract: In the empirical literature, the analysis of aggregate productivity dynamics using firm-level productivity has mostly been based on changes in the mean of log-productivity. This paper shows that there can be substantial quantitative and qualitative differences in the results relative to when the analysis is based on changes in the mean of productivity, and discusses the circumstances under which such differences are likely to happen . We use firm-level data for Portugal for the period 2006-2015 to illustrate the point. When the mean of productivity is used, we estimate that TFP and labor productivity for the whole economy increased by 17.7 percent and 5.2 percent, respectively, over this period. But, when the mean of log-productivity is used, we estimate that these two productivity measures declined by 4.3 percent and 1.8 percent, respectively. Similarly disparate results are obtained for productivity decompositions regarding the contributions for productivity growth of surviving, entering and exiting rms.
    JEL: D24 E32 L25 O47
    Date: 2019
  56. By: International Monetary Fund
    Abstract: Suriname continues to grow steadily with low inflation. However, there has been little progress in implementing urgently-needed fiscal reforms, and the fiscal position is likely to continue to weaken in the coming year. Advances have been made in developing the central bank’s monetary tools and facilities, but more is needed to strengthen the credibility of the monetary framework. The banking sector faces important downside risks and there are gaps in the central bank’s supervisory and resolution framework. Annex I reports the implementation status of key prior Fund policy recommendations.
    Date: 2019–12–23
  57. By: Marco Gross; Christoph Siebenbrunner
    Abstract: To support the understanding that banks’ debt issuance means money creation, while centralized nonbank financial institutions’ and decentralized bond market intermediary lending does not, the paper aims to convey two related points: First, the notion of money creation as a result of banks’ loan creation is compatible with the notion of liquid funding needs in a multi-bank system, in which liquid fund (reserve) transfers across banks happen naturally. Second, interest rate-based monetary policy has a bearing on macroeconomic dynamics precisely due to that multi-bank structure. It would lose its impact in the hypothetical case that only one (“singular”) commercial bank would exist. We link our discussion to the emergence and design of central bank digital currencies (CBDC), with a special focus on how loans would be granted in a CBDC world.
    Date: 2019–12–20
  58. By: Ayoki, Milton
    Abstract: This paper investigates employment responses to trade liberalisation in a developing economy, Myanmar. Using data from the 2014 Census and the 2017, labour force survey and previous surveys contained in Myanmar Statistical Yearbook, 2017, we find that trade liberalization did not affect the relative size of industry sectors in terms of employment. The OLS results finds support for the theoretical predictions of differential responses to trade reforms between sectors. Conversely, while empirical support is found for tariff reduction in influencing sector level employment, the tariff predictors are weaker overall than the sector productivity and competitiveness (in export market) predictors—implying that trade policy reforms need to be correctly tailored to raising productivity of labour force and sector competitiveness if their impact on employment is to be effectively realised.
    Keywords: ASEAN, employment, international trade, trade policy, revealed comparative advantage, Asia Pacific, Myanmar
    JEL: E24 F13 F14
    Date: 2020–01–12
  59. By: Alvaro Aguirre
    Abstract: This paper pursues a welfare analysis of fiscal policy, specifically public spending, in an economy with heterogenous agents and incomplete markets. The main quantitative exercise consists in measuring the gains of switching from the (procyclical) spending path of the typical developing country to an acyclical or countercyclical path. The model emphasizes the role of transfer payments from the government to households in alleviating the costs of idiosyncratic shocks. Since these correlate with aggregate shocks, the way fiscal policy is conducted along the business cycle has important welfare effects. I find that the costs of procyclicality are relatively large and very heterogeneous. While wealth-rich agents don't suffer from procyclicality, poor agents, being either unemployed or unskilled, lose the most. In terms of life-time consumption equivalents these agents may lose as much as 2% from fiscal procyclicality, considering only the fraction of spending that is allocated as transfer payments.
    Date: 2020–01
  60. By: Max Gillman
    Abstract: The paper presents a human capital based theory of the sectoral transformation along the balanced growth path equilibrium. Allowing a small upward trend in the productivity of the human capital sector, combined with di§erential human capital intensity and constant productivity across sectors, output gradually shifts over time from relatively less human capital intensive sectors towards more human capital intensive sectors. Sectors intensive in the factor that is becoming relatively more plentiful find their relative prices falling, their "effective productivities" rising at di§erential rates inversely to their relative price decline, and their relative outputs expanding. Adding more sectors of greater human capital intensity causes labor time to decrease across existing sectors, and by relatively more in the least human capital sectors. literature.
    Keywords: human capital intensity; sectoral allocation; labor shares; productivity; technological change; neoclassical; optimal growth model
    JEL: E13 J24 O11 O14 O33 O41
    Date: 2019–12
  61. By: Julien Albertini (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Xavier Fairise (GAINS, University of Le Mans); Anthony Terriau (GAINS, University of Le Mans)
    Abstract: How do labor market and health outcomes interact over the life cycle in a country characterized by a large informal sector and strong inequalities? To quantify the effects of bad health on labor market trajectories, wealth, and consumption, we develop a life-cycle heterogeneous agents model with a formal and an informal sector. We estimate our model using data from the National Income Dynamics Study, the first nationally representative panel study in South Africa. We run counterfactual experiments and show that health shocks have an important impact on wealth and consumption. The channel through which these shocks propagate strongly depends on the job status of individuals at the time of the shock. For formal workers, bad health reduces labor efficiency, which translates into lower earnings. For informal workers and the non-employed, the shock lowers the job finding rate and in- creases job separation into non-employment, which results in a surge in non-employment spells. As bad health spells persist more for non-employed than for employed individuals, the interaction between labor market risks and health risks generates a vicious circle.
    Keywords: Health, Wealth, Life cycle, Informality
    JEL: I14 I15 E26 O17 J46 J64
    Date: 2019
  62. By: Claudio, João C.; Heinisch, Katja; Holtemöller, Oliver
    Abstract: Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.
    Keywords: business surveys,East Germany,MIDAS model,nowcasting
    JEL: C22 C52 C53 E37 R11
    Date: 2019
  63. By: Ángel Estrada (Banco de España); Luis Guirola (Banco de España); Iván Kataryniuk (Banco de España); Jaime Martínez-Martín (Banco de España)
    Abstract: The process of internationalisation that many Spanish banks have embarked upon in recent years has resulted in the need for much closer monitoring of the economies in which they are present, especially by a supervisory body such as the Banco de España. In this paper, we present a comprehensive theoretical and empirical modelling approach, developing a set of …five country-specific structural BVARs for Brazil, Mexico, Turkey, Chile and Peru, the economies representing the largest exposures of Spanish banks to the emerging markets. The results obtained show that our modelling strategy provides useful tools to: (i) analyse the structural shocks that underlie their recent macroeconomic behaviour; (ii) study the impact of certain decisions of policymakers on GDP, inflation and other variables; and (iii) carry out accurate conditional and unconditional projections two years ahead of the most policy-relevant variables. These projections, together with the “analyst’s judgement”, constitute the bulk of our assessment of the future behaviour of these economies.
    Keywords: structural analysis, vector autoregressions, bayesian estimation, sign restrictions
    JEL: E32 C22 E27
    Date: 2020–01
  64. By: Yuji Horioka, Charles; Niimi, Yoko
    Abstract: This paper shows, using data from the Family Income and Expenditure Survey, that housing credit has become increasingly available over time in Japan, especially since 2000, and that this has made it easier for Japanese households to purchase housing and enabled them to do so at an earlier age. However, it also shows that the greater availability of housing credit has increased households’ housing loan repayment burden, which has resulted in their cutting back on their other consumption expenditures and created the potential for retirement insecurity. Another concern is that the increasing availability of housing credit has been accompanied by a pronounced shift from fixed-rate to variablerate housing loans. This is cause for concern given the low level of financial literacy that prevails among the Japanese population and the likelihood that interest rates on variablerate housing loans will be raised sooner or later as monetary policy is tightened.
    Keywords: Homeownership, Housing credit, Housing loans, Mortgages, Household debt, Household liabilities, D14, E21, R21
    Date: 2020–01
  65. By: Каморников, Сергей; Шалупаева, Наталья
    Abstract: Проведено исследование взаимосвязи накопленных в экономике Республики Беларусь прямых иностранных инвестиций и товарного экспорта страны на основе осуществления эконометрических оценок взаимозависимости рассматриваемых показателей. Доказано, что приток прямых иностранных инвестиций является существенным фактором развития товарного экспорта республики. На макроуровне установлен комплементарный характер взаимосвязи между накопленными в национальной экономике прямыми иностранными инвестициями и товарным экспортом страны. The relation between foreign direct investment accumulated in the economy of the Republic of Belarus and the country's merchandise export was investigated in the article on the basis of econometric estimates of this indicators interdependence. It is proved that the inflow of foreign direct investment in the republic is a significant factor of its merchandise export development. At macro level the complementary relation between the foreign direct investments accumulated in the national economy and the country's merchandise export has been established.
    Keywords: прямые иностранные инвестиции, внешняя торговля, экспорт товаров, эмпирические исследования, эконометрические оценки, foreign direct investment, foreign trade, merchandise export, empirical researches, econometric estimates
    JEL: E22 F14
    Date: 2019
  66. By: Caterina Forti Grazzini; Chi Hyun Kim
    Abstract: We use US household survey data from 2001-2017 to investigate whether monetary policy has heterogeneous effects on women's and men's financial portfolio decisions by analyzing their equity investment. On the one hand, monetary policy significantly affects the entry decisions of women, but not of men: after a contractionary shock, the probability of women entering the stock market decreases. On the other hand, monetary policy is gender-neutral for stock market participants: there are no significant differences in exit or in portfolio rebalancing decisions between women and men. Our results suggest that monetary policy does not have a heterogeneous effect on portfolio decisions across genders once women participate in the stock market.
    Keywords: Monetary policy, gender, stock market participation, portfolio choices
    JEL: E58 J16 G11
    Date: 2020
  67. By: Martin Hodula
    Abstract: In this paper, I collect data on the euro area shadow banking system and demonstrate that tightening of monetary policy conditions in the run-up to the global financial crisis successfully reduced the growth of traditional banking but strengthened the growth of shadow banking due to a general escape from high funding costs. After the crisis, when interest rates were depressed to all-time lows, the empirical link between monetary policy and traditional banking was significantly weakened, while the relationship with shadow banking turned from positive to negative, i.e., the post-crisis monetary easing is found to have caused massive inflows into investment funds as a result of search for yield induced by persistently low interest rates.
    Keywords: Interactions, monetary policy, shadow banking, traditional banking
    JEL: E52 G21 G23
    Date: 2019–12
  68. By: International Monetary Fund
    Abstract: The Barbadian authorities continue to make good progress in implementing the comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, rebuilding reserves, and increasing growth. Since May 2018, international reserves have increased from a low of US$220 million (or 5-6 weeks of import coverage) to more than US$600 million at end- October 2019. The completion of a domestic debt restructuring in November 2018 has been very helpful in reducing economic uncertainty, and the terms agreed with domestic creditors have helped to put debt on a clear downward trajectory. Risks to the outlook are elevated but growth could surprise on the upside, with private sector confidence now increasing.
    Keywords: Financial and Monetary Sector;External sector;External debt;Economic indicators;Balance of payments;ISCR,CR,CBB,SOEs,debt restructure,EFF,article IV consultation
    Date: 2019–12–18
  69. By: International Monetary Fund
    Abstract: Program objective. An SBA and an SCF arrangements with total access of SDR 224.8 million (90 percent of quota) were approved on July 15, 2019. The Fundsupported program aims at maintaining macroeconomic stability and supporting growth through reforms to foster revenue mobilization, secure sustainability in the electricity sector, and improve governance and the business climate. The authorities plan to continue treating the SBA and SCF arrangements as precautionary. Economic and political context. Growth has slowed down more than expected due to a challenging external environment and a series of shocks to economic activity— notably, a severe drought. Some social tensions over political reforms and sectoral demands arose over the summer, but recent agreements on electoral management bodies have lessened them. It remains critical to secure the implementation of economic reforms, notably on revenue mobilization and the electricity sector.
    Keywords: Fiscal policy;Central banks;Public financial management;Investment policy;Economic stabilization;ISCR,CR,FRL,BCH,percent of GDP,performance criterion,net lend
    Date: 2019–12–20
  70. By: C. Andreeva, Desislava; García-Posada, Miguel
    Abstract: We assess the impact of the Eurosystem’s Targeted Long-Term Refinancing Operations (TLTROs) on the lending policies of euro area banks. We first build a theoretical model in which banks compete in the credit and deposit markets. We distinguish between direct and indirect effects. Direct effects take place because bidding banks expand their loan supply due to the lower marginal costs implied by the TLTROs. Indirect effects on non-bidders operate via changes in the competitive environment in banks’ credit and deposit markets. We then test these predictions with a sample of 130 banks from 13 countries focusing on the first TLTRO series. Regarding direct effects, we find an easing impact on margins on loans to relatively safe borrowers, but no impact on credit standards. Regarding indirect effects, there is a positive impact on the loan supply on non-bidders which operates via an easing of credit standards. JEL Classification: G21, E52, E58
    Keywords: competition, lending policies, TLTROs, unconventional monetary policy
    Date: 2020–01
  71. By: Maletic, M. (Tilburg University, School of Economics and Management)
    Abstract: The Ph.D. dissertation consists of three chapters. The first chapter is investigating the impact of the Chinese economy on the term structure of interest rates in Germany and the United States through the lenses of the traditional asset pricing models. In the post financial crisis environment with low growth and inflation, and the monetary policy, which is constrained by the effective lower bound, investors are willing to accept lower compensation for holding nominal long-term bonds instead of short-term securities when the outlook about the Chinese economy deteriorates. The second chapter is investigating how the accumulation of the Chinese foreign reserves is affecting the US yield curve thorough the lenses of the modern portfolio-balance models. It is found that when the Chinese official sector rebalances away from the US Dollar, it lowers, in a way similar to the deteriorating outlook about the Chinese economy, the term premium of long-term bonds. The third chapter is investigating how R&D investments and past returns interact in explaining future returns. Firms, which are reluctant to cut the level of R&D expenditures despite the poor past performance, are rewarded with higher subsequent returns. On the other hand, only firms that have demonstrated their ability to make good investment decisions, and therefore exerted positive price performance over the last year, are rewarded with higher future returns when they increase the R&D.
    Date: 2020
  72. By: Nathaniel Frentz; Jaeger Nelson; Dan Ready; John Seliski
    Abstract: The budgetary feedback model (BFM) is one tool that CBO uses to estimate how changes in the macroeconomy might affect the federal budget. The BFM approximates the budgetary feedback that would be arrived at by using a wider array of CBO's budgetary models and was built to provide a unified framework to quantify changes in projected revenues and outlays relative to CBO's baseline budget projections. This paper describes how the BFM is constructed, how it is used in CBO's dynamic analyses, and the model's limitations.
    JEL: E17 H20 H50 H68
    Date: 2020–01–16
  73. By: Fenoaltea, Stefano
    Abstract: This paper summarizes the author’s considerations on the measurement of a national economy’s historical aggregate product. Given the sources from which we can start, and the objective we wish to reach, the proper path follows logically; the extant corpus of historical national accounts seems to follow a very different path, uninformed by due reflection.
    Keywords: measurement, historical national accounts
    JEL: C13 E01 N01
    Date: 2020–01
  74. By: International Monetary Fund
    Abstract: Fifth Review under the Extended Credit Facility Arrangement, Request for Extension, and Request for Modification of Performance Criteria-Press Release; and Staff Report
    Date: 2019–12–26
  75. By: International Monetary Fund
    Abstract: Third Review under the Extended Credit Facility Arrangement-Press Release; and Staff Report
    Date: 2019–12–30
  76. By: International Monetary Fund
    Abstract: Following the sharp lira depreciation and associated recession in late-2018, growth has improved, helped by policy stimulus and favorable market conditions. The lira recovered and the current account has seen a remarkable adjustment. Turkey remains susceptible to external and domestic risks, however, and prospects for strong and sustainable growth over the medium term look challenging without reforms to address vulnerabilities, strengthen policy credibility, and boost productivity.
    Date: 2019–12–26
  77. By: Liu, Chuan; Saam, Marianne
    Abstract: To what extent have economies become better off because of the diffusion of information and communication technologies (ICT)? We analyze this question based on a growth accounting approach at the level of final output. This approach traces productivity improvements not within sectors but within value chains. It allows judging in a better way to what extent more or better products have become available to final users, in particular consumers, as a result of the diffusion of ICT. A main result is that more than half of the productivity gains related to ICT capital deepening for manufactured goods are contributed by upstream industries. The major part of this contribution is domestic rather than foreign. Moreover, the high sectoral growth in total factor productivity (TFP) in the ICT sector contributes only moderately to TFP growth in non-ICT value chains via the use of intermediates.
    Keywords: ICT,economic growth,productivity,value chains,growth accounting
    JEL: E22 F62 O47
    Date: 2019
  78. By: Wang, Jianfu
    Abstract: Distributed Ledger Technology (DLT) creates a decentralized system for trust and transaction validation using executable smart contracts to update information across a distributed database. This type of ecosystem can be applied to Commodity Trade Finance to alleviate critical issues of information asymmetry and the cost of transacting which are the leading causes of the Trade Finance Gap (ie. the lack of supply of capital to meet total trade finance demand). The possibility of scaling up such ecosystems with a number of Institutional Investors and micro small medium enterprises (MSME) would be advantageous, however, it brings up its own set of challenges including the stability of the system design. Agent-based modeling (ABM) is a powerful method to assess the financial ecosystem dynamics. DLT ecosystems model well under ABM, as the agents present a clearly defined taxonomy. In this study, we use ABM to assess the Aquifer Institute Platform - a DLT-based Commodity Trade Finance system, in which a growing number of participating parties is closely related to the circulation of utility tokens and transaction flows. We study the system dynamics of the platform and propose an appropriate setup for different transaction loads.
    Date: 2018–04–02
  79. By: María BASTIDA (Universidad de Santiago de Compostela, Santiago de Compostela (Spain)); Ana OLVEIRA (Universidad de Santiago de Compostela, Santiago de Compostela (Spain))
    Abstract: The number of organizations under the scope of Social Economy (SE) in Galicia (i.e., a Spanish autonomous community) has noticeably increased since 2005, particularly if we focus on cooperatives. This evolution has maintained even in the worst years of the economic crisis, differing from the behaviour that had other corporative models in the same period and region. The Eusumo Network seems have been critical for this development. This network is a public policy aimed to promote both cooperatives and SE. In its design, Eusumo’s main objective was to provide aid to set up new cooperative projects as a beneficial driver for employment; and also, to contribute to the consolidation of the existent companies in SE by improving their competitiveness. In this work it is argued that the Eusumo Network could be leading to raising a favourable ecosystem for Galician cooperatives, as well as other organizations in the SE sector, and that this effect could be munificent to the achievement of the Global Goals for Sustainable Development (SDG), especially those regarding quantitative and qualitative improvement of the employment (objectives number 8 and 9). To start with this argument, we provide a description of the relationship between SE and the SDG. Then, we continue to explain the Eusumo Network, by deeply explaining the model (namely, its aims and both managerial and financial processes). We also explore Eusumo’s role as a driver for the creation of organizations and provide a 360º assessment from stakeholders. Finally, we contribute some best practices to favour the dissemination of this tool among other contexts. The results of our work suggest that Eusumo has played a critical role in Galician’s micro-entrepreneurship. Taking into account the contextual reality of this autonomous community (high dispersion of population, hard aging, wide zones with depopulation, strong people’s concentration in urban zones, abandonment of the rural, for example-), our findings suggest a desirable improvement of the project. We are mindful that this tool can be beneficial on returning this trend. Besides, our results also shed light on an example of public policy that might contribute to the improvement of a favourable ecosystem to SE and, in turn, to the achievement of the SDGs in Galicia.
    Keywords: Social economy; Public politics; Employment; Eusumo Network; Entrepreneurship; Cohesion; Sustainable Development Goals – SDG
    JEL: E24 J18 J54 P13
    Date: 2019
  80. By: Omarova, Saule T.; Library, Cornell
    Abstract: This chapter contribution to an edited volume examines financial sector structural reform as a critical, though largely under-appreciated to date, dimension of central banks’ post-crisis systemic risk prevention agenda. By limiting the range of permissible transactions or organizational affiliations among different types of financial firms, structural reforms alter the fundamental pattern of interconnectedness in the financial system. In that sense, the chapter argues, reforming the institutional structure of the financial industry operates as a deeper form of the currently evolving macroprudential regulation. The chapter identifies three principal models that form a continuum of potential financial sector structural reform choices and applies this conceptual framework to analysis of post-crisis structural reforms in the U.K., EU, and U.S. It further examines how deeply issues of financial industry structure are embedded in central banks’ regulatory and policy agenda and, in light of this connection, discusses potential implications of current structural reforms for central banks’ post-crisis financial stability mandate.
    Date: 2018–01–11
  81. By: International Monetary Fund
    Abstract: The economic outlook has deteriorated since the First Review. Real GDP is expected to contract in 2019, driven by lower-than-expected oil production. Disinflation is expected to halt, inter alia because of increases in regulated prices. Beyond 2019, lower oil prices and slower recovery in oil production are expected to weigh on oil exports and put pressure on the external current account and international reserves. While the rapid depreciation of the exchange rate has led to a sizable increase in the debt-to-GDP ratio, the ongoing fiscal retrenchment will help shield public expenditure from oil-price volatility and reverse the public debt trend.
    Keywords: Balance of payments;Financial institutions;External debt;Fiscal policy;International reserves;ISCR,CR,non-oil,BNA,Proj,Sonangol,percent change
    Date: 2019–12–19
  82. By: Felipe Leal; Carlos Molina; Eduardo Zilberman
    Abstract: In this paper, in line with Medeiros et al. (2019) for the US, we apply Machine Learning (ML) methods with Big Data to forecast the total and underlying CPI inflation in Chile. We show that the ML methods do not gain in the inflation projection for the Chilean case in a consistent way on simple and univariate linear competitors such as the AR, the mean and the median of the past inflation, which have proven to be highly competitive. In fact, these are the winning methods in many cases. A second contribution of this work is the construction of a large dataset with macroeconomic variables related to the Chilean economy similar to McCracken and Ng (2016), who built (and maintains) a similar data for the United States.
    Date: 2020–01
  83. By: International Monetary Fund
    Abstract: India has been among the world’s fastest-growing economies in recent years, lifting millions out of poverty. However, growth slowed to a six-year low in the first half of 2019, with both consumption and investment decelerating owing to weak, especially rural, income growth, stresses in the non-bank financial sector, and corporate and environmental regulatory uncertainty. On the external sector, following a rise in vulnerabilities in 2018, stability has returned, anchored by high foreign reserve buffers and a modest current account deficit.
    Date: 2019–12–23
  84. By: Philip Arestis; Jesus Ferreiro; Carmen Gómez
    Abstract: For mainstream economics, rigidities in the labour market are a key determinant of the labour market results in terms of employment and unemployment. Thus, mainstream economics recommends full flexibility in the labour markets. Following these prescriptions, most European countries have introduced labour market reforms that have affected affect the conditions to hire and fire permanent workers and the constraints to the use of temporary employment contracts. However, the empirical evidence clearly shows that a conclusion about the impact of labour market reforms on total employment cannot be reached. Indeed, recent empirical evidence, argues that a higher flexibility in the employment protection has a negative impact on employment. This implies that a higher labour flexibility is associated with a higher labour segmentation, characterized by a rising share of temporary workers but not with a higher total employment
    Keywords: Employment protection legislation, employment, unemployment
    JEL: E24 J21 J41 J48 J68
    Date: 2020–01
  85. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: This Strategic Analysis examines the US economy's prospects for 2020-23 and the risks that lie ahead. The baseline projection generated by the Levy Institute's stock-flow consistent macroeconomic model shows that, given current fiscal arrangements and the slowdown in the global economy, the pace of the US recovery will slacken somewhat, with a growth rate that will average 1.5 percent over the next several years. The authors then point to three factors that can derail this already weak baseline trajectory: (1) an overvalued stock market; (2) evidence that the corporate sector's balance sheets are more fragile than they have ever been in the postwar period; and (3) risks in the foreign sector stemming from the slowdown of the global economy, an overvalued dollar, and the current administration's erratic trade policy.
    Date: 2020–01
  86. By: Gergely Ganics; Barbara Rossi; Tatevik Sekhposyan
    Abstract: Surveys of professional forecasters produce precise and timely point forecasts for key macroeconomic variables. However, the accompanying density forecasts are not as widely utilized, and there is no consensus about their quality. This is partly because such surveys are often conducted for “fixed events”. For example, in each quarter panelists are asked to forecast output growth and inflation for the current calendar year and the next, implying that the forecast horizon changes with each survey round. The fixed-event nature limits the usefulness of survey density predictions for policymakers and market participants, who often wish to characterize uncertainty a fixed number of periods ahead (“fixed-horizon”). Is it possible to obtain fixed-horizon density forecasts using the available fixed-event ones? We propose a density combination approach that weights fixed-event density forecasts according to a uniformity of the probability integral transform criterion, aiming at obtaining a correctly calibrated fixed-horizon density forecast. Using data from the US Survey of Professional Forecasters, we show that our combination method produces competitive density forecasts relative to widely used alternatives based on historical forecast errors or Bayesian VARs. Thus, our proposed fixed-horizon predictive densities are a new and useful tool for researchers and policy makers.
    Keywords: Survey of professional forecasters, density forecasts, forecast combination, predictive density, probability integral transform, uncertainty, real-time.
    JEL: C13 C32 C53
    Date: 2019–12
  87. By: International Monetary Fund
    Abstract: Selected Issues
    Keywords: Fiscal policy;Economic policy;Economic forecasting;Real interest rates;Economic growth;ISCR,CR,output gap,countercyclical,overall balance,percent of GDP,escape clause
    Date: 2019–12–19
  88. By: Ahmad Zafarullah Abdul Jalil; Mukaramah Harun; Siti Hadijah Che Mat
    Abstract: The main objective of this paper is to fill a critical gap in the literature by analyzing the effects of decentralization on the macroeconomic stability. A survey of the voluminous literature on decentralization suggests that the question of the links between decentralization and macroeconomic stability has been relatively scantily analyzed. Even though there is still a lot of room for analysis as far as the effects of decentralization on other aspects of the economy are concerned, we believe that it is in this area that a more thorough analyses are mostly called for. Through this paper, we will try to shed more light on the issue notably by looking at other dimension of macroeconomic stability than the ones usually employed in previous studies as well as by examining other factors that might accentuate or diminish the effects of decentralization on macroeconomic stability. Our results found that decentralization appears to lead to a decrease in inflation rate. However, we do not find any correlation between decentralization with the level of fiscal deficit. Our results also show that the impact of decentralization on inflation is conditional on the level of perceived corruption and political institutions.
    Date: 2020–01
  89. By: International Monetary Fund
    Abstract: Stable macroeconomic environment, strong growth and ongoing structural reforms have contributed to significant progress towards Sustainable Development Goals (SDGs). At the same time, uncertainties, including from slower global growth and potential suspension of preferential market access under the Everything but Arms (EBA) scheme, highlight the importance of maintaining macroeconomic stability while meeting still large development needs, addressing elevated financial sector vulnerabilities and accelerating structural reforms.
    Date: 2019–12–23
  90. By: Mathieu Simoens; Rudi Vander Vennet (-)
    Abstract: Post 2008, the market-to-book ratios of European and US banks have diverged markedly. We use panel regressions to investigate the determinants of the M/B ratios of 112 European and US banks. We show that the underperformance of European banks is mainly driven by non-performing loans and by the negative impact of policy rates on bank interest margins. The higher US bank valuations are mainly driven by higher pro tability and better cost eciency. Our results for European banks stress the importance of timely NPL resolution and imply that low-for-long monetary policy may harm bank health.
    Keywords: market-to-book ratio, European banks, US banks, franchise value, bank performance
    JEL: G21 G28 E52
    Date: 2019–12
  91. By: Alex Pienkowski
    Abstract: This paper outlines a simple three-country macroeconomic model designed to focus on the transmission of external shocks to Portugal. Building on the framework developed by Berg et al (2006), this model differentiates between shocks originating from both inside and outside the euro area, as well as domestic shocks, each of which have different implications for Portugal. This framework is also used to consider the dynamics of the Portuguese economy over recent decades. The model, which is designed to guide forecasts and undertake simulations, can easily be modified for use in other small euro area countries.
    Date: 2019–12–20
  92. By: International Monetary Fund
    Abstract: Fifth Review under the Extended Credit Facility Arrangement and Financing Assurances Review-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Chad
    Date: 2019–12–27
  93. By: Petr Hanzlík (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Petr Teplý (Department of Banking and Insurance, Faculty of Finance and Accounting, University of Economics in Prague, Winston Churchill Sq. 4, 130 67 Prague, Czech Republic)
    Abstract: In this paper, we analyze the relationship between the net interest margin (NIM) of US and European banks and market interest rates in a low interest rate environment. We contribute to the literature by examining a large sample of annual data on 1,155 banks from United States and EU member countries during the 2011-2016 period, which also covers periods of zero and negative rates in many of the observed countries. We test three hypotheses and come to three main conclusions. First, NIM is significantly influenced by the different institutional designs of bank-based or capital-based financial markets. Second, there are differences in NIM caused by bank size, although these are not fully captured by our methodology. Finally, we show significant differences by bank type: savings banks, real estate and mortgage banks, and cooperative banks report consistently lower NIMs than commercial banks and bank holdings. Contrary to other researchers, we observe a negative relationship between NIM and the yield curve slope.
    Keywords: banks, bank-based market, capital-based market interest rates, institutional design, net interest margin, profitability, system GMM
    JEL: C33 E43 G21
    Date: 2020–01
  94. By: Röhl, Klaus-Heiner
    Abstract: Dieses Policy Paper untersucht für die Europäische Union, die Bundesebene und die Bundesländer die institutionelle und inhaltliche Ausgestaltung der Regulierungskontrolle und der Maßnahmen zum Bürokratieabbau. Die Analyse der administrativen Belastungen für die Unternehmen in Deutschland und der Institutionen zu ihrer Reduzierung ist bislang überwiegend auf die gesamtstaatliche Ebene mit der Bundesgesetzgebung fokussiert, eine zusammenfassende Darstellung der Zuständigkeiten nach staatlichen Ebenen fehlt. Auf EU-Ebene wurde erst nach der Jahrtausendwende und damit relativ spät die bürokratische Belastung für Unternehmen durch europäische Rechtsakte und Vorgaben thematisiert. Ausgehend von der Kleinunternehmenscharta 2000 folgten 2007 die Einsetzung der Hochrangigen Gruppe im Bereich Verwaltungslasten, 2008 der Small Business Act und 2015 das REFIT-Programm. Auf gesamtstaatlicher Ebene in Deutschland wurde nach diversen Einzelmaßnahmen 2006 mit dem Standardkostenmodell und der Einsetzung des Nationalen Normenkontrollrats ein systematisches Vorgehen gegen administrative Belastungen für Unternehmen eingeleitet, dass eine Reduktion dieser eng abgegrenzten Bürokratie um ein Viertel bringen sollte. Seit 2010 wird auch der Erfüllungsaufwand von neuen Gesetzen gemessen. Die Bundesländer sind dem deutschen Föderalismus gemäß sehr unterschiedlich aufgestellt, was die Begrenzung von Bürokratie betrifft. Bis auf Berlin verfügen alle Länder über ein Mittelstandsgesetz oder eine entsprechende Richtlinie zur Berücksichtigung der Belange des Mittelstands, aber nur wenige Länder verfügen über eine eigene Standardkostenmessung nach Bundesvorbild. Das Policy Paper schließt mit Empfehlungen für die drei untersuchten Staatsebenen.
    JEL: D73 E61 H79
    Date: 2020
  95. By: Luigi Mittone; Matteo Tomaselli
    Abstract: This paper aims at investigating the relationship between public debt and the consumption side of economic growth from an experimental macroeconomics point of view, by analysing whether consumers’ expectations about public debt are linked to tax compliance, consumption, and savings choices, that in turn affect GDP. To this end, we have implemented a laboratory experiment in which the participants earn an income to be allocated between consumption, savings, and voluntary taxation for an unknown number of rounds. Debt’s dynamics arises endogenously within a public good game with threshold: taxation is used to cover a given level of public expenditure, which is equally distributed to the participants at the beginning of each subsequent round. If the collected amount of taxes is lower than required, a deficit is generated, and it feeds public debt. Debt can then be unexpectedly reduced by the government through accessing subjects’ savings. To check for the role of beliefs, participants’ expectations about future debt reduction and perceived debt sustainability are elicited during the experiment. Results show that this experimental framework is characterized by relatively high and often increasing aggregate savings and relatively low and decreasing aggregate consumption. An increase in the debt-reduction expectations and a decrease in the perceived debt sustainability are also found to explain savings and consumption behaviours. These conclusions do not change if tax audits are introduced, but the average savings level lowers, thus increasing subjects’ exposure to the unexpected shocks.
    Keywords: experimental macroeconomics, public debt, economic growth, expectations, intertemporal choices, public-good games, fiscal audits
    Date: 2019
  96. By: Rubene, Ieva; Colavecchio, Roberta
    Abstract: How long does it take for exchange rate changes to pass through into inflation? Does it make a difference whether the exchange rate depreciates or appreciates? Do relatively large exchange rate changes entail more exchange rate pass-through? In this paper, we examine possible non-linearities in the transmission of exchange rate movements to import and consumer prices in all 19 euro area countries as well as the euro area as a whole from 1997 to 2019Q1. We extend a standard single-equation linear framework with additional interaction terms to account for possible non-linearities and apply local projections to obtain state-dependent impulse response functions. We find that (i) euro area consumer and import prices respond significantly to exchange rate movements after one year, responding more when the exchange rate change is relatively large; and (ii) euro appreciations and depreciations affect the level of euro area exchange rate pass-through in a symmetric fashion; (iii) for euro area countries results differ for import and consumer prices and across countries. JEL Classification: E31, F41
    Keywords: exchange rate pass-through, inflation, local projections, non-linearities
    Date: 2020–01
  97. By: Alvaro Aguirre
    Abstract: This paper explores the presence of political cycles that are contingent on inequality. I claim that high inequality leads to high policy uncertainty as pressures for redistribution increase at the same time that the richest become politically more powerful. This higher policy uncertainty harms the economy through channels already studied by the literature. Using data for the US from 1947 to 2014 I find supporting evidence for this mechanism. Only when inequality is sufficiently high, policy uncertainty spikes during an election and GDP falls below its trend thereafter.
    Date: 2020–01
  98. By: Aginta, Harry; Soraya, Debby A; Santoso, Wahyu B
    Abstract: It is widely believed that financial inclusion aids inclusive growth and reducing inequality. This study constructs financial inclusion indicator and analyzes the link of financial inclusion and income inequality for 33 provinces in Indonesia. In extension to analyses at national level, estimation has been done by dividing provinces into three categories which are agriculture, manufacture, and mining economies. By using Fixed Effect Panel Model, we find financial inclusion appears to have insignificant effect to inequality at national level. While at sub-national level, adding other variables such as GRDP, years of schooling, and trade openness, we find financial inclusion appears to have negative and significant impact on income inequality in manufacture and mining-based provinces, not in agriculture-based. The results suggest that financial inclusion helps to lower income inequality when economic condition encourage people to utilize financial access for productive purposes. More effective financial inclusion programs in rural area are highly demanded.
    Keywords: Financial development, income inequality, Fixed Effect Panel Model
    JEL: E5 G21 G28 R11 R12
    Date: 2018–12
  99. By: International Monetary Fund
    Abstract: Technical Assistance Report-Monetary and Financial Statistics Mission
    Date: 2019–12–30
  100. By: Jungbin Hwang (Department of Economics, The University of Connecticut); Byunghoon Kang (Department of Economics, Lancaster University); Seojeong Lee (School of Economics, The University of New South Wales)
    Abstract: We propose a new finite sample corrected variance estimator for the linear generalized method of moments (GMM) including the one-step, two-step, and iterated estimators. Our formula additionally corrects for the over-identification bias in variance estimation on top of the commonly used finite sample correction of Windmeijer (2005) which corrects for the bias from estimating the efficient weight matrix, so is doubly corrected. Formal stochastic expansions are derived to show the proposed double correction estimates the variance of some higher-order terms in the expansion. In addition, the proposed double correction provides robustness to misspecification of the moment condition. In contrast, the conventional variance estimator and the Windmeijer correction are inconsistent under misspecification. That is, the proposed double correction formula provides a convenient way to obtain improved inference under correct specification and robustness against misspecification at the same time.
    Keywords: generalized method of moments; finite-sample correction; standard error; misspecification; consumption insurance; weighting schemes; quasi maximum likelihood
    JEL: C12 C13 C33 C36 E21 C13 C33
    Date: 2019–08
  101. By: Cozzi, Guido; Galli, Silvia
    Abstract: Schumpeterian growth theory based on creative destruction was originally designed for continuous time innovation and growth models. However its recently expanding use in DSGE modelling calls for an easily usable discrete time recast. We here show how to construct a discrete time version of creative destruction fully equivalent to its continuous time counterpart.
    Keywords: R&D and Growth; Creative Destruction; Discrete Time; DSGE.
    JEL: E3 O3
    Date: 2019
  102. By: Jean-Sébastien Fontaine; Adrian Walton
    Abstract: Dealers connect investors who want to buy or sell securities in financial markets. Over time, dealers and investors form trading networks to save time and resources. An emerging field of research investigates how networks form. Using detailed data on trades in Government of Canada bonds, we reconstruct dealer networks and document how they respond to the release of relevant economic information. On one hand, we find that networks handle larger volumes of transactions and become more complex. On the other hand, we document more frequent and more severe contagion of settlement fails across dealer networks following these information releases. Settlement fails are unexpected delays in a buyer receiving bonds from a seller, creating counterparty risk and potential disruption to trading. Our findings suggest a trade-off. Large, complex dealer networks effectively connect investors but are also associated with contagion and an increase in counterparty risk due to settlement fails. One way to simplify dealer networks is through a central counterparty (CCP). A CCP reduces settlement volume, making fails less likely.
    Keywords: Financial markets; Market structure and pricing; Payment clearing and settlement systems
    JEL: E4 G1 G21 L14
    Date: 2020–01
  103. By: César Girlado
    Abstract: El debilitamiento de la relación salarial se ha invocado para afirmar que el trabajo ha perdido centralidad en la construcción de los social, y argumentar que se deben utilizar otras categorías ligadas a las diferencias culturales, étnicas, sexuales. También que el capitalismo ha expulsado poblaciones y las convierte en residuos sociales. Aquí se niegan tales afirmaciones y se señala que el trabajo sigue el centro de la construcción de lo social, y que la contradicción entre el capital trabajo, en el mundo contemporáneo, se expresa en terrenos adicionales, como por ejemplo, la disputa por la apropiación del excedente económico a través de las finanzas públicas. Se afirma que los sectores populares si son explotados por el capital, y que la explotación se expresa a través del intercambio desigual en el mercado donde su trabajo es subvalorado, y en estar forzados a obtener ingresos monetarios en el mercado para pagar las rentas que el capitalismo demanda para poder permitir el acceso a los servicios básicos. *** The weakening of the wage relationship has been invoked to affirm that work has lost centrality in the construction of social relations, and argue that other categories such as cultural, ethnic, sexual differences should be used. Also, that capitalism has expelled populations that convert them into social waste. These statements are denied here and it is pointed out that work remains at the center of the construction of the social, and that the contradiction between working capital, in the contemporary world, is expressed in additional areas, such as the dispute over the appropriation of the economic surplus through public finances. It is affirmed that the popular sectors are exploited by capital, and that exploitation is expressed through unequal exchange in the market where their work is undervalued, and in being forced to obtain monetary income in the market to pay rents that capitalism demands to allow access to basic services.
    Keywords: economía popular, relación salarial, fin del trabajo, trabajo, explotación, capitalismo.
    JEL: A14 E26 J08 J81
    Date: 2020–01–10
  104. By: Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa)
    Abstract: This study assesses the simultaneous openness hypothesis that trade modulates foreign direct investment (FDI) to induce positive net effects on total factor productivity (TFP) dynamics. Twenty-five countries in Sub-Saharan Africa and data for the period 1980 to 2014 are used. The empirical evidence is based on the Generalised Method of Moments. First, trade imports modulate FDI to overwhelmingly induce positive net effects on TFP, real TFP growth, welfare TFP and real welfare TFP. Second, with exceptions on TFP and welfare TFP where net effects are both positive and negative, trade exports modulate FDI to overwhelmingly induce positive net effects on real TFP growth and welfare real TFP. In summary, the tested hypothesis is valid for the most part. Policy implications are discussed.
    Keywords: Productivity; Foreign Investment; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2020–01

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