nep-mac New Economics Papers
on Macroeconomics
Issue of 2020‒03‒16
101 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Natural Interest Rate and Asset Price Bubbles: How Bubbles Counteract Low Interest Rates By Jacopo Bonchi
  2. A Text Mining Analysis of Central Bank Monetary Policy Communication in Nigeria By Omotosho, Babatunde S.
  3. Monetary policy and bank lending in developing countries: loan applications, rates, and real effects By Charles Abuka; Ronnie K. Alinda; Camelia Minoiu; José-Luis Peydró; Andrea F. Presbitero
  4. Saving Constraints, Debt, and the Credit Market Response to Fiscal Stimulus By Jorge Miranda-Pinto; Daniel P. Murphy; Kieran Walsh; Eric R. Young
  5. Technical Appendix: “International Business Cycle and Financial Intermediation” By Tamas Csabafi; Max Gillman; Ruthira Naraidoo
  6. Academic Scholarship in Light of the 2008 Financial Crisis: Textual Analysis of NBER Working Papers By Levy, Daniel; Mayer, Tamir; Raviv, Alon
  7. Banks, Maturity Transformation, and Monetary Policy By Pascal Paul
  8. The Fed's Response to Economic News Explains the “Fed Information Effect” By Michael D. Bauer; Eric T. Swanson
  9. A Forward Guidance Indicator For The South African Reserve Bank: Implementing A Text Analysis Algorithm By Ruan Erasmus; Hylton Hollander
  10. Wage Setting and Unemployment: Evidence from Online Job Vacancy Data By Oleksandr Faryna; Tho Pham; Oleksandr Talavera; Andriy Tsapin
  11. Asset Prices and Unemployment Fluctuations By Pierlauro Lopez; Patrick J. Kehoe; Virgiliu Midrigan; Elena Pastorino
  12. Weak Economic Conditions and the Objective of the Government Programme By Anttonen, Jetro; Lehmus, Markku; Vihriälä, Vesa
  13. What Drives Forecaster Disagreement about Monetary Policy? By Stefano Eusepi; Richard K. Crump
  14. Relationship Finance, Informed Liquidity, and Monetary Policy By Araujo, Luis; Minetti, Raoul; Murro, Pierluigi
  15. Sectoral Okun's Law and Cross-Country Cyclical Differences By Eiji Goto; Constantin Bürgi;
  16. Uncertainty Shocks and Business Cycle Research By Jesús Fernández-Villaverde; Pablo A. Guerrón-Quintana
  17. The Macro Effects of the Recent Swing in Financial Conditions By Marc Giannoni; Micah Smith; Marco Del Negro
  18. Fiscal Consolidations: Welfare Effects of the Adjustment Speed By Fonseca, Miguel
  19. How Much Do Inflation Expectations Matter for Inflation Dynamics? By Sara Shahanaghi; Argia M. Sbordone
  20. Use it or Lose it: Efficiency Gains from Wealth Taxation By Fatih Guvenen; Gueorgui Kambourov; Burhanettin Kuruscu; Daphne Chen; Sergio Ocampo
  21. Monetary policy and the top one percent: Evidence from a century of modern economic history By Mehdi El Herradi; Aurelien Leroy
  22. Time Preference and International Trade By Kazumichi Iwasa; Kazuo Nishimaura
  23. The Market Events of Mid-September 2019 By Adam Copeland; Antoine Martin; Gabriele La Spada; Marco Cipriani; Anna Kovner; Gara Afonso
  24. Fiscal Consolidation and the Current Account: OECD Evidence By Christian Breuer; Chang Woon Nam
  25. Japan; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Japan By International Monetary Fund
  26. Labor Share Heterogeneity and Fiscal Consolidation Programs By Pedro Brinca; Bruno Freitas; Margarida Isabel Mano Tavares Simões Lopes Marques Almeida
  27. Self-Employment at Older Ages in Canada By Raquel Fonseca Benito; Simon Lord; Simon C. Parker
  28. What’s Driving Up Money Growth? By James J. McAndrews; Donald P. Morgan; James Vickery
  29. The Keynesian Growth Approach to Macroeconomic Policy and Productivity By Luca Fornaro; Gianluca Benigno
  30. Populism, Political Risk and the Economy: Lessons from Italy By Balduzzi, Pierluigi; Brancati, Emanuele; Brianti, Marco; Schiantarelli, Fabio
  31. Global Macro-Financial Cycles and Spillovers By Ha, Jongrim; Kose, M. Ayhan; Otrok, Christopher; Prasad, Eswar
  32. Global Macro-Financial Cycles and Spillovers By Jongrim Ha; M. Ayhan Kose; Christopher Otrok; Eswar S. Prasad
  33. Nonlinear Business Cycle and Optimal Policy: A VSTAR Perspective By Vito Polito
  34. The Myth of First-Quarter Residual Seasonality By Patrick Russo; Jan J. J. Groen
  35. A Validation of the Phillips Curve Hypothesis in Nigeria: A Quarterly Data-Based Approach By Efayena, Obukohwo Oba; Olele, Hilda Enoh
  36. Growth models in advanced countries before and after the 2008 crisis: competitiveness, financial cycles and austerity By Karsten Kohler; Engelbert Stockhammer
  37. The Role of Central Bank Lending Facilities in Monetary Policy By Helene Lee; Asani Sarkar
  38. 非分割的な労働供給のもとでの非自発的失業の存在 - 単純な世代重複完全競争モデルによって - By Tanaka, Yasuhito
  39. Flooded through the back door: The role of bank capital in local shock spillovers By Oliver Rehbein; Steven Ongena
  40. Les sphères d’influence dans les régimes monétaires : l’expérience de la Corne de l’Afrique (1860-1950) By AMAN, Moustapha
  41. Household Debt Revaluation and the Real Economy: Evidence from a Foreign Currency Debt Crisis By Emil Verner; Győző Gyöngyösi
  42. Market Intelligence Gathering and Money Demand By Seon Tae Kim; Alessandro Marchesiani
  43. From Policy Rates to Market Rates—Untangling the U.S. Dollar Funding Market By Fabiola Ravazzolo; Alessandro Zori; Gara M. Afonso
  44. Real-Time Forecasting Using Mixed-Frequency VARS with Time-Varying Parameters By Markus Heinrich; Magnus Reif
  45. 非自発的失業の存在 - 単純な世代重複完全競争モデルによって - By Tanaka, Yasuhito
  46. Recessions as Breadwinner for Forecasters State-Dependent Evaluation of Predictive Ability: Evidence from Big Macroeconomic US Data By Boriss Siliverstovs; Daniel Wochner
  47. Discretionary Services Spending Has Finally Made It Back (to 2007) By Jonathan McCarthy
  48. Why Do Fiscal Multipliers Depend on Fiscal Positions? By Huidrom,Raju; Kose,Ayhan; Lim,Jamus Jerome; Ohnsorge,Franziska Lieselotte
  49. China’s Debt Revisited By Sun, Lixin
  50. Consumer Debt and Default: A Macro Perspective By Florian Exler; Michèle Tertilt
  51. The Collateral Channel of Monetary Policy: Evidence from China By Hanming Fang; Yongqin; Xian Wu
  52. Disentangling commodity demand, commodity supply, and international liquidity shocks on an emerging market By Renee Fry-McKibbin; Rodrigo da Silva Souza
  53. Rotemberg and Imperfect Common Knowledge: A Solution Algorithm By Radek Šauer
  54. Financial Crises and the Desirability of Macroprudential Policy By Albert Queraltó; Ozge Akinci
  55. Global Asset Prices and Taper Tantrum Revisited By Jan J. J. Groen
  56. Currency compositions of international reserves and the euro crisis By Laser, Falk Hendrik; Weidner, Jan
  57. Why Pay Interest on Required Reserve Balances? By Antoine Martin; Heather Wiggins; Laura Lipscomb
  58. Inflation and Exchange Rate Pass-Through By Ha,Jongrim; Stocker,Marc; Yilmazkuday,Hakan
  59. Why Did U.S. Branches of Foreign Banks Borrow at the Discount Window during the Crisis? By Linda S. Goldberg; David R. Skeie
  60. Short-Term Inflation Projections Model and Its Assessment in Latvia By Andrejs Bessonovs; Olegs Krasnopjorovs
  61. How to Improve the Model Selection Procedure in a Stress-testing Framework By Jiri Panos; Petr Polak
  62. International Evidence on the Use and Effectiveness of Macroprudential Policies By Ozge Akinci
  63. Wirtschaftspolitische Antworten auf die Corona-Krise: Liquidität hat Vorrang! By Grömling, Michael; Hüther, Michael; Beznoska, Martin; Demary, Markus
  64. Are the stock indices of FTSE Malaysia, China and USA causally linked together ? By Nasir, Nur Alissa; Masih, Mansur
  65. How Do the Fed's MBS Purchases Affect Credit Allocation? By Antoine Martin; Sam Schulhofer-Wohl
  66. Buying and Selling Entrepreneurial Assets By Kankanamge, Sumudu; Gaillard, Alexandre
  67. Ramsey Optimal Policy versus Multiple Equilibria with Fiscal and Monetary Interactions By Jean-Bernard Chatelain; Kirsten Ralf
  68. Inflation Expectations : Review and Evidence By Kose,Ayhan; Matsuoka,Hideaki; Panizza,Ugo G.; Vorisek,Dana Lauren
  69. Forward Guidance and Household Expectations By Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Michael Weber
  70. Debt dynamics in Europe: a network general equilibrium GVAR approach By Michaelides, Panayotis G.; Tsionas, Efthymios G.; Konstantakis, Konstantinos N.
  71. Low Productivity Growth: The Capital Formation Link By Richard Peach; Charles Steindel
  72. Bank Lending and Maturity: the Anatomy of the Transmission of Monetary Policy By Selva Bahar Baziki; Tanju Capacioglu
  73. Recycling Oil Revenue By Michael Fosco; Thomas Klitgaard
  74. Kingdom of Eswatini; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Kingdom of Eswatini By International Monetary Fund
  75. Emerging and Developing Economies: Ten Years After the Global Recession By M. Ayhan Kose; Franziska Ohnsorge
  76. The Reluctance of Firms to Interview the Long-Term Unemployed By Gregor Jarosch; Laura Pilossoph
  77. Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms By Gokmen, Gunes; Nannicini, Tommaso; Onorato, Massimiliano Gaetano; Papageorgiou, Chris
  78. Las entidades de contrapartida central en la mitigación del riesgo de contraparte y de liquidez: El caso de los derivados cambiarios en Colombia By Mariño-Martínez, Ricardo; León, Carlos; Cadena-Silva, Carlos
  79. The FOMC’s Substantial Turn during 2019 By James B. Bullard
  80. Short- vs Long-Term Intergenerational Correlations of Employment and Self-Employment in Europe By Gimenez-Nadal, J. Ignacio; Molina, José Alberto; Velilla, Jorge
  81. The Great Recession and Recovery in the Tri-State Region By Jason Bram; James A. Orr
  82. What Is the Composition of Central Bank Balance Sheets in Normal Times? By Ylva Søvik; Antoine Martin; Emily Eisner
  83. States Are Recovering Lost Jobs at Surprisingly Similar Rates By James A. Orr; Jason Bram
  84. Philippines; 2019 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund
  85. Crisis Chronicles: The Crisis of 1816, the Year without a Summer, and Sunspot Equilibira By Jim Narron; Donald P. Morgan
  86. Good News, Leverage, and Sudden Stops By Ryan Chahrour; Ozge Akinci
  87. Tech in Fin before FinTech: Blessing or Curse for Financial Stability? By Nicola Pierri; Yannick Timmer
  88. Expecting the Unexpected: Job Losses and Household Spending By Fatih Karahan; Laura Pilossoph; Brendan Moore
  89. Measuring Output Gap: Is It Worth Your Time? By Jiaqian Chen; Lucyna Gornicka
  90. An Update on the U.S. Economy and the Federal Reserve’s Review of Its Monetary Policy Framework; 03.03.2020; The Society of Professional Economists, Annual Dinner, London, United Kingdom By Loretta J. Mester
  91. Opportunity and Inequality across Generations By Winfried Koeniger; Carlo Zanella
  92. Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks By Nils Mæhle
  93. A note on "zero growth and structural change in a post Keynesian growth model" By Antoine Monserand
  94. Cameroon; Fifth Review Under the Extended Credit Facility Arrangement and Request for a Waiver of Nonobservance of a Performance Criterion and Modification Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Cameroon By International Monetary Fund
  95. Enhancing ICT for Productivity in Sub-Saharan Africa: Thresholds for Complementary Policies By Simplice A. Asongu; Paul N. Acha-Anyi
  96. Understanding PRC Investment Statistics By Carsten A. Holz
  97. Toward the path of Economic Expansion in Nigeria: The Role of Trade Globalization By Udi Joshua; Oladimeji M. Salami; Andrew A. Alola
  98. Proxying Economic Activity with Daytime Satellite Imagery: Filling Data Gaps Across Time and Space By Patrick Lehnert; Michael Niederberger; Uschi Backes-Gellner
  99. Agrarian Economy and Rural Development - Realities and Perspectives for Romania By Ursu, Ana
  100. Validity Assessments of International Parity in the ‘Ecozone’: Implications for Monetary Models of Exchange Rate Determination By Mogaji, Peter Kehinde
  101. Movement of Exchange Rate on Balance-of-Payments Constrained Growth in South Asia: Panel ARDL By Jayasooriya, Sujith

  1. By: Jacopo Bonchi (Department of Social Sciences and Economics, Sapienza University of Rome)
    Abstract: By developing a three-period OLG model with rational asset price bubbles and non-neutral monetary policy, I show how bubbles prevent low interest rates, when the natural rate of interest declines permanently. Bubbles push the natural interest rate up by serving as store of value (saving channel) and collateral (borrowing channel), and this avoids a long-lasting ZLB episode. Bubbles reallocate resources across generations too, and this reallocation implies welfare losses. These results shed light on the pattern of the US risk-free interest rates and on that of net worth and consumption across generations before the Great Recession.
    Keywords: Asset price bubbles; Natural interest rate; Zero lower bound
    JEL: E13 E32 E44 E52
    Date: 2020–02
  2. By: Omotosho, Babatunde S.
    Abstract: This paper employs text-mining techniques to analyse the communication strategy of the Central Bank of Nigeria (CBN) during the period 2004-2019. Since the policy communique released after each meeting of the CBN’s monetary policy committee (MPC) represents an important tool of central bank communication, we construct a corpus based on 87 policy communiques with a total of 123, 353 words. Having processed the textual data into a form suitable for analysis, we examined the readability, sentiments, and topics of the policy documents. While the CBN’s communication has increased substantially over the years, implying increased monetary policy transparency; the computed Coleman and Liau readability index shows that the word and sentence structures of the policy communiques have become more complex, thus reducing its readability. In terms of monetary policy sentiments, we find an average net score of -10.5 per cent, reflecting the level of policy uncertainties faced by the MPC over the sample period. In addition, our results indicate that the topics driving the linguistic contents of the communiques were influenced by the Bank’s policy objectives as well as the nature of shocks hitting the economy per period.
    Keywords: Central bank communication, Text mining, Monetary policy
    JEL: E02 E32 E52 E58 E61
    Date: 2019
  3. By: Charles Abuka; Ronnie K. Alinda; Camelia Minoiu; José-Luis Peydró; Andrea F. Presbitero
    Abstract: Recent studies of monetary policy in developing countries document a weak bank lending channel based on aggregate data. In this paper, we bring new evidence using Uganda’s supervisory credit register, with microdata on loan applications, volumes and rates, coupled with unanticipated variation in monetary policy. We show that a monetary contraction reduces bank credit supply—increasing loan application rejections and tightening loan volume and rates—especially for banks with more leverage and sovereign debt exposure. There are associated spillovers on inflation and economic activity—including construction permits and trade—and even social unrest.
    Keywords: Bank lending channel of monetary policy; bank credit; real effects; credit register; developing countries
    JEL: E42 E44 E52 E58 G21 G28
    Date: 2018–11
  4. By: Jorge Miranda-Pinto (University of Queensland); Daniel P. Murphy (University of Notre Dame; University of Michigan; Darden Graduate School of Business Administration); Kieran Walsh (Darden Graduate School of Business Administration; Yale University; Vassar College); Eric R. Young (Carnegie Mellon University; University of Virginia)
    Abstract: We document that the interest rate response to fiscal stimulus (IRRF) is lower in countries with high inequality or high household debt. To interpret this evidence we develop a model in which households take on debt to maintain a consumption threshold (saving constraint). Now debt-burdened, these households use additional income to deleverage. In economies with more debt-burdened households, increases in government spending tighten credit conditions less (relax credit conditions more), leading to smaller increases (larger declines) in the interest rate. Our theoretical framework predicts that the negative relationship between the IRRF and debt only holds when credit is not restricted. It also predicts that the consumption response to fiscal stimulus is falling in debt and inequality (only during periods of relaxed credit). We perform a series of empirical tests and find support for these predictions. In doing so, we provide context to recent evidence on the debt-dependent effects of government spending by highlighting that the relationship between debt and fiscal effects varies with credit conditions.
    Keywords: interest rates; fiscal stimulus; household debt; inequality
    JEL: E62 E43 E21 D31 H31
    Date: 2020–02–27
  5. By: Tamas Csabafi (Department of Economics, University of Missouri-St. Louis); Max Gillman (Department of Economics, University of Missouri-St. Louis); Ruthira Naraidoo (Department of Economics, University of Pretoria)
    Abstract: A technical appendix for “International Business Cycle and Financial Intermediation.” The paper extends a standard two-country international real business cycle model to include financial intermediation by banks of loans and government bonds. Taking in household deposits from home and abroad, the loans are produced by the bank in a Cobb-Douglas production approach such that a bank productivity shock can explain financial data moments. The paper contributes an explanation, for both the US relative to the Euro-area, and the US relative to China, of cross-country correlations of loan rates, deposit rates, and the loan premia. It provides a sense in which financial retrenchment resulted in the US following the 2008 bank crisis, and how the Euro-area and China reacted. The paper contributes evidence of how the Euro-area has been more Önancially integrated with the US, and China less financially integrated, with the Euro-area becoming more financially integrated after the 2008 crisis, and China becoming less so integrated.
    Keywords: international real business cycles, financial intermediation, credit spread, bank productivity, 2008 crisis.
    JEL: E13 E32 E44 F41
    Date: 2020–02
  6. By: Levy, Daniel; Mayer, Tamir; Raviv, Alon
    Abstract: Textual analysis of the NBER Working Papers published during 1999–2016 is done to assess the effects of the 2007–2009 crisis on the academic literature. The volume of crisis-related WPs is counter-cyclical, lagging the financial-instability-index. WPs by the Monetary-Economics, Asset-Pricing, and Corporate-Finance program members, hardly refer to “crisis/crises” in the pre-crisis period. As the crisis develops, however, their study-efforts of crisis-related issues increase rapidly, focusing on the links between ‘Repo-and-Securitization’ and the crisis. In contrast, WPs in macroeconomics-related programs refer extensively to “crisis/crises” in the pre-crisis period. These WPs abandon topics of ‘Sudden-Stop’ and ‘Emerging-Markets’ as the crisis developed.
    Keywords: 2008 Financial Crisis, Financial Crises, Textual Analysis, LDA Topic Modeling, Securitization, Repo, Sudden Stop
    JEL: A10 A23 C55 E0 E20 E30 E44 E58 E60 F33 F34 F40 F44 F45 F62 F65 G01 G12 G13 G14 G15 G18 G20 G21 G22 G23 G24 G28 G32 G38 K22 L51 M0 N20 Z13
    Date: 2020–02–23
  7. By: Pascal Paul
    Abstract: Banks engage in maturity transformation and the term premium compensates them for bearing the associated duration risk. Consistent with this view, I show that banks’ net interest margins and term premia have comoved in the United States over the last decades. On monetary policy announcement days, banks’ stock prices fall in response to an increase in expected future short-term interest rates but rise if term premia increase. These effects are reflected in the response of banks’ net interest margins and amplified for institutions with a larger maturity mismatch. The results reveal that banks are not immune to interest rate risk.
    Keywords: Banks; Maturity Transformation; Monetary Policy; Term Premium; Interest Rate Risk; Bank Profitability
    JEL: E43 E44 E52 E58 G21 G32
    Date: 2020–02–28
  8. By: Michael D. Bauer; Eric T. Swanson (Federal Reserve Bank of San Francisco; University of California Irvine; Federal Reserve Bank; Board of Governors of the Federal Reserve System (U.S.))
    Abstract: High-frequency changes in interest rates around FOMC announcements are a standard method of measuring monetary policy shocks. However, some recent studies have documented puzzling effects of these shocks on private-sector forecasts of GDP, unemployment, or inflation that are opposite in sign to what standard macroeconomic models would predict. This evidence has been viewed as supportive of a “Fed information effect” channel of monetary policy, whereby an FOMC tightening (easing) communicates that the economy is stronger (weaker) than the public had expected. We show that these empirical results are also consistent with a “Fed response to news” channel, in which incoming, publicly available economic news causes both the Fed to change monetary policy and the private sector to revise its forecasts. We provide substantial new evidence that distinguishes between these two channels and strongly favors the latter; for example, (i) high-frequency stock market responses to Fed announcements, (ii) a new survey that we conduct of individual Blue Chip forecasters, and (iii) regressions that include the previously omitted public macroeconomic data releases all indicate that the Fed and Blue Chip forecasters are simply responding to the same public news, and that there is little if any role for a “Fed information effect”.
    Keywords: Federal Reserve; Delphic forward guidance; Blue Chip; forecasts; survey
    JEL: E43 E52 E58
    Date: 2020–02–27
  9. By: Ruan Erasmus (Department of Economics, Stellenbosch University); Hylton Hollander (Department of Economics, Stellenbosch University)
    Abstract: The expansion of central bank communications and the increased use thereof as a policy tool to manage expectations have led to an area of research, semantic modelling, that analyses the words and phrases used by central banks. We use text-mining and text-analysis techniques on South African Reserve Bank monetary policy committee statements to construct an index measuring the stance of monetary policy: a forward guidance indicator (FGI). We show that, after controlling for market expectations, FGIs provide significant predictive power for future changes in the repurchase interest rate (the primary monetary policy instrument). Furthermore, we show that FGIs are primarily driven by inflation expectations, which highlights the strong link between the SARB's communication strategy and its inflation targeting mandate. In fact, we observe a systematic anti-inflation bias in the communicated stance of monetary policy---both absolutely and asymmetrically. The results are, however, sensitive to the selection of the dictionary used to analyse the text.
    Keywords: Monetary policy, Text analysis, Forward guidance, Inflation targeting
    JEL: C43 C53 E42 E47 E52 E58
    Date: 2020
  10. By: Oleksandr Faryna (National Bank of Ukraine); Tho Pham (Department of Economics, University of Reading); Oleksandr Talavera (University of Birmingham); Andriy Tsapin (National Bank of Ukraine)
    Abstract: This paper examines the relationship between labour market conditions and wage dynamics by exploiting a unique dataset of 0.8 million online job vacancies. We find a weak trade-off between aggregated national-level wage inflation and unemployment. This link becomes more evident when wage inflation is disaggregated at sectoral and occupational levels. Using exogenous variations in local market unemployment as the main identification strategy, a negative correlation between vacancy-level wage and unemployment is also established. The correlation magnitude, however, is different across regions and skill segments. Our findings suggest the importance of micro data's unique dimensions in examining wage setting – unemployment relationship.
    Keywords: Phillips curve, wage curve, heterogeneity, micro data, online vacancies
    JEL: C55 E24 E31 E32
    Date: 2020–03–10
  11. By: Pierlauro Lopez (Bank of France); Patrick J. Kehoe (Stanford University; University of Minnesota; Federal Reserve Bank of Minneapolis; Harvard University; National Bureau of Economic Research; University College London; Federal Reserve Bank; University of Pennsylvania); 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: E24 E32 E44 J64
    Date: 2020–03–05
  12. By: Anttonen, Jetro; Lehmus, Markku; Vihriälä, Vesa
    Abstract: Abstract The key economic objectives of the current Finnish government are valid only in normal international economic conditions. However, weaker than normal conditions have not been defined. We propose to base such a definition on the expected negative deviation from the euro-area gdp path projected by a statistical model. This implies that the probability of weak economic conditions would be about 20 per cent. Our simulations suggest that a negative deviation of international economic conditions from the normal conditions as defined by us would weaken GDP, employment and public finances in Finland significantly. The employment rate could end up even 2 percentage points smaller than in the baseline.
    Keywords: Government programme, Employment objective, Normal economic conditions
    JEL: C11 E32 E37 E61
    Date: 2020–03–06
  13. By: Stefano Eusepi; Richard K. Crump
    Abstract: What can disagreement teach us about how private forecasters perceive the conduct of monetary policy? In a previous post, we showed that private forecasters disagree about both the short-term and the long-term evolution of key macroeconomic variables but that the shape of this disagreement differs across variables. In contrast to their views on other macroeconomic variables, private forecasters disagree substantially about the level of the federal funds rate that will prevail in the medium to long term but very little on the rate at shorter horizons. In this post, we explore the possible explanations for what drives forecasts of the federal funds rate, especially in the longer run.
    Keywords: monetary policy rules; survey forecasts; expectations; imperfect information; term structure of disagreement
    JEL: E2 E5
  14. By: Araujo, Luis (Michigan State University, Department of Economics); Minetti, Raoul (Michigan State University, Department of Economics); Murro, Pierluigi (Luiss University)
    Abstract: We study the aggregate effects of credit relationships in an economy where lenders’ effort in acquiring knowledge about firms’ investments endogenously depends on their financial involvement in investments. Firms trade off the benefits of precautionary internal liquidity with the need to incentivize lenders’ effort through their involvement in investment financing. We find that, through these intensive margin effects, tight credit relationships can induce suboptimally high investment levels, calling for a positive interest rate policy that departs from the Friedman rule. Loose credit relationships, however, amplify the aggregate impact of negative real shocks. Credit policies that inject liquidity into the lending sector enhance the welfare effect of credit relationships but have ambiguous effects on stabilization.
    Keywords: Liquidity; Credit relationships; Monetary policy
    JEL: D02 E02 E44 G21
    Date: 2020–03–10
  15. By: Eiji Goto; Constantin Bürgi;
    Abstract: We estimate Okun’s law, the negative relationship between output and the unemployment rate, at the sector level for the US, the UK, Japan, and Switzerland to test several hypotheses that may explain why the aggregate Okun’s coeffcients are different across countries. Specifically, we show that the sectoral composition is not a driver and find that the sectoral coefficients are proportional to the aggregate in all four countries. We also show that the standard deviation of unemployment is the main driver of the cross-country differences. This is consistent with labor market policies being crucial to explain the cross-country cyclical differences in the aggregate Okun’s coefficient.
    Keywords: Okun’s law, cross-country differences, sectors
    JEL: E24 E32
    Date: 2020
  16. By: Jesús Fernández-Villaverde; Pablo A. Guerrón-Quintana
    Abstract: We review the literature on uncertainty shocks and business cycle research. First, we motivate the study of uncertainty shocks by documenting the presence of time-variation in the volatility of macroeconomic time series. Second, we enumerate the mechanisms that researchers have postulated to link uncertainty shocks and business cycles. Third, we outline how we can specify uncertainty shocks. Fourth, we postulate a real business cycle model augmented with financial frictions and uncertainty shocks. Fifth, we use the model to illustrate our previous discussions and to show how uncertainty shocks can be expansionary.
    JEL: E30 E32 E50
    Date: 2020–02
  17. By: Marc Giannoni; Micah Smith (Research and Statistics Group); Marco Del Negro
    Abstract: Credit conditions tightened considerably in the second half of 2015 and U.S. growth slowed. We estimate the extent to which tighter credit conditions last year were responsible for the slowdown using the FRBNY DSGE model. We find that growth would have slowed substantially more had the Federal Reserve not delayed liftoff in the federal funds rate.
    Keywords: DSGE; Monetary Policy; Spreads; Financial Conditions
    JEL: E2 E5 G1
  18. By: Fonseca, Miguel
    Abstract: This work studies the response of social welfare to fiscal consolidations, by focusing on a less debated characteristic of fiscal plans: the speed of deleveraging. A neoclassical overlapping generations model is calibrated to the German economy, and a sequence of reductions of the same size in the debt-to-GDP ratio are simulated considering different adjustment periods. Welfare gains are found to be larger in slow, delayed fiscal consolidations, due to the presence of incomplete markets. It is also found that the aggregate welfare response depends on the distribution of wealth and the type of fiscal instrument used.
    Keywords: Fiscal Consolidation, Wealth Inequality, Incomplete Markets, Consumption Smoothing Hypotesis
    JEL: E13 E21 E62 H63
    Date: 2020–01–06
  19. By: Sara Shahanaghi (Research and Statistics Group); Argia M. Sbordone
    Abstract: Inflation dynamics are often described by some form of the Phillips curve. Named after A. W. Phillips, the British economist whose study of U.K. wage and unemployment data laid the groundwork, the Phillips curve denotes an inverse relationship between inflation and some measure of economic slack. A much-discussed issue in the literature is how forward-looking this relationship is. In this post, we address this question using a flexible version of the New Keynesian Phillips curve (NKPC) to illustrate the key role that expectations play in inflation dynamics.
    Keywords: Inflation expectations; Inflation; New Keynesian Phillips Curve
    JEL: E2 E5
  20. By: Fatih Guvenen; Gueorgui Kambourov; Burhanettin Kuruscu; Daphne Chen (Econ One); Sergio Ocampo (University of Minnesota)
    Abstract: How does wealth taxation differ from capital income taxation? When the return on investment is equal across individuals, a well-known result is that the two tax systems are equivalent. Motivated by recent empirical evidence documenting persistent heterogeneity in rates of return across individuals, we revisit this question. With such heterogeneity, the two tax systems have opposite implications for both efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones. This reallocation increases aggregate productivity and output. In the simulated model parameterized to match the US data, replacing the capital income tax with a wealth tax in a revenue-neutral fashion delivers a significantly higher average lifetime utility to a newborn (about 7.5% in consumption-equivalent terms). Turning to optimal taxation, the optimal wealth tax (OWT) in a stationary equilibrium is positive and yields even larger welfare gains. In contrast, the optimal capital income tax (OCIT) is negative—a subsidy—and large, and it delivers lower welfare gains than the wealth tax. Furthermore, the subsidy policy increases consumption inequality, whereas the wealth tax reduces it slightly. We also consider an extension that models the transition path and find that individuals who are alive at the time of the policy change, on average, would incur large welfare losses if the new policy is OCIT but would experience large welfare gains if the new policy is an OWT. We conclude that wealth taxation has the potential to raise productivity while simultaneously reducing consumption inequality.
    Keywords: Wealth taxation; Capital income tax; Rate of return heterogeneity; Power law models; Wealth inequality
    JEL: E21 E22 E62 H21
    Date: 2019–09–24
  21. By: Mehdi El Herradi (University of Bordeaux); Aurelien Leroy (University of Bordeaux)
    Abstract: While a growing line of research has assessed the distributional consequences of monetary policy, most of these studies rely on survey-based estimates of inequality and feature a shorter time coverage. This paper examines the distributional implications of monetary policy on top income shares in 12 advanced economies between 1920 and 2015. We exploit the implications of the macroeconomic policy trilemma with an external instrument approach to identify exogenous variations in monetary conditions. The obtained results indicate that contractionary monetary policy strongly decreases the share of national income held by the top one percent and vice versa, irrespective of the state of the economy. Our findings also suggest that the effect of monetary tightening on top income shares is likely to be channeled via lower asset prices.
    Keywords: Monetary policy, Top income shares, Macroeconomic Policy Trilemma, External Instrument.
    JEL: E25 E42 E52
    Date: 2020–01
  22. By: Kazumichi Iwasa (Research Institute for Economics and Business Administration, Kobe University, Japan); Kazuo Nishimaura (Research Institute for Economics and Business Administration, Kobe University, Japan)
    Abstract: We first consider a closed model, where households' time discount depends on externality in consumption. We can prove that there is a unique steady state, which is a saddle point. Then, we extend the model to a two country world, and derive the condition about the effects of consumption externality under which there is a unique free trade steady state with saddle-point stability.
    Keywords: Time preference; Consumption externality; Two-country model; Heckscher-Ohlin
    JEL: E13 E21 F11 F43
    Date: 2020–02
  23. By: Adam Copeland (Research and Statistics Group; National Bureau of Economic Research; Federal Reserve Bank of New York; Federal Reserve Bank; University of Minnesota); Antoine Martin; Gabriele La Spada; Marco Cipriani (New York University; Federal Reserve Bank; Federal Reserve Bank of New York; George Washington University; National Bureau of Economic Research); Anna Kovner (Harvard University; Federal Reserve Bank); Gara Afonso
    Abstract: This paper studies the mid-September 2019 stress in U.S. money markets: On September 16 and 17, unsecured and secured funding rates spiked up and, on September 17, the effective federal funds rate broke the ceiling of the Federal Open Market Committee (FOMC) target range. We highlight two factors that may have contributed to these events. First, reserves may have become scarce for at least some depository institutions, in the sense that these institutions’ reserve holdings may have been close to, or lower than, their desired level. Moreover, frictions in the interbank market may have prevented the efficient allocation of reserves across institutions, so that although aggregate reserves may have been higher than the sum of reserves demanded by each institution, they were still scarce given the market’s inability to allocate reserves efficiently. Second, we provide evidence that some large domestic dealers likely experienced an increase in intermediation costs, which led them to charge higher spreads to ultimate cash borrowers. This increase was due to a temporary reduction in lending from money market mutual funds, including through the Fixed Income Clearing Corporation’s (FICC’s) sponsored repo program.
    Keywords: central bank reserves; repo market; monetary policy; federal funds market; regulation
    JEL: E42 E58 G14
    Date: 2020–03–01
  24. By: Christian Breuer; Chang Woon Nam
    Abstract: We apply a “new” conventional (CAPB-based) measure of fiscal policy, which is less prone to endogeneity issues, and find that a 1-percent of GDP fiscal consolidation leads to the improvement of the current account-to-GDP ratio by approximately 0.8 percent of GDP, while previous research based on conventional measures found a relationship of only 0.1-0.3 percentage points. We suggest that previous results based on conventional measures are biased towards underestimating the twin-deficit linkage because of endogeneity issues and the failure to adjust the CAPB for cyclical effects. After adjustment, the twin-deficit effect is particularly pronounced in the case of expenditure cuts and in Eurozone countries. These findings are in line with previous evidence based on narrative measures.
    Keywords: fiscal adjustment, current account, twin deficit, Eurozone countries
    JEL: E62 E63 H50
    Date: 2020
  25. By: International Monetary Fund
    Abstract: The rapid aging and shrinking of Japan’s population has become central to macroeconomic policies and outcomes. Abenomics—now entering its seventh year—has eased financial conditions, reduced the fiscal deficit, and raised employment and female labor force participation. Nonetheless, reflation efforts have fallen short and under current policies the public debt-to-GDP ratio will continue to rise. Achieving sustained high growth and durable reflation will require a package of strengthened policies and accelerated reforms that exploit synergies.
    Keywords: External sector;Financial and Monetary Sector;Economic growth;Macroprudential policies and financial stability;Economic indicators;ISCR,CR,reflation,structural reform,percent of GDP,medium-term,staff report
    Date: 2020–02–10
  26. By: Pedro Brinca (Nova School of Business and Economics (SBE)); Bruno Freitas (Nova School of Business and Economics (SBE)); Margarida Isabel Mano Tavares Simões Lopes Marques Almeida (Centre for Business and Economics CeBER and Faculty of Economics, University of Coimbra)
    Abstract: We show that the labor share of income is an important factor affecting the mechanisms behind fiscal consolidation programs, thus requiring consideration when evaluating fiscal multipliers across countries. We calibrate a life-cycle, overlapping generations model to match key characteristics of different European economies and evaluate the recessive impacts of fiscal consolidation programs. We find a positive relationship between the labor share and the impact fiscal multipliers generated by our model. This result directly follows from the higher weight of labor on production and the lower opportunity cost of leisure present in economies with a higher labor share. Following the impact period, the relationship between the labor share and the fiscal multipliers is dependent on the type of fiscal instrument employed in the consolidation.
    Keywords: Political connections, Gender diversity, Bank performance, ECB, GMM; Fiscal Consolidation,Labor Share,Fiscal Multipliers,Public Debt.
    JEL: D33 E21 E62 H31
    Date: 2020–04
  27. By: Raquel Fonseca Benito; Simon Lord; Simon C. Parker
    Abstract: This paper examines the work motivations and incentives of employees and selfemployed workers near retirement age. We use a sample of Canadians 50 years and older taken from LISA, the Longitudinal and International Study of Adult. Results are as follows. Poverty is associated positively with the transition from employment to self-employment after 50. Optimism appears to explain in part why employees decide to do the switch. For respondents who were self-employed at least once between 50 and 64 years old, it appears that having had prior self-employment experience does not reduce significantly the probability of being poor after 65.
    Keywords: Self-Employment,Elderly,Retirement,Canada,Poverty, Travail autonome,Ainés,Retraite,Canada,Pauvreté
    JEL: E24 E32 J14 J20 L26
    Date: 2020–02–24
  28. By: James J. McAndrews; Donald P. Morgan; James Vickery
    Abstract: Two key monetary aggregates, M1 and M2, have grown quickly recently?especially M1, the narrow aggregate. In this post, we show that we can attribute most, but not all, of the recent high money growth rate of M1 to low current interest rates as well as the growth in bank reserves that has resulted from the Fed?s asset purchase programs. It?s unlikely that the current high growth rate will continue in the long term, however, as both low interest rates and the Fed?s expansion of bank reserves will likely be reversed as economic growth accelerates.
    Keywords: Money growth; QE2; large scale asset purchases; QE1
    JEL: E5 G2
  29. By: Luca Fornaro; Gianluca Benigno (Centre for Economic Performance (CEP); London School of Economics (LSE); Centre for Economic Policy Research (CEPR))
    Abstract: Productivity is one of the key determinants of potential output?that is, the trend level of production consistent with stable inflation. A productivity growth slowdown has occurred in several advanced economies in the aftermath of the global financial crisis, raising concerns about long-term growth. In response, a variety of supply-side policy options have been proposed, such as reforms to increase labor and product market flexibility. In this blog post, we consider the role of demand-side policies in raising trend productivity growth.
    Keywords: monetary policy Keynesian
    JEL: E2
  30. By: Balduzzi, Pierluigi (Boston College); Brancati, Emanuele (Sapienza University of Rome); Brianti, Marco (Boston College); Schiantarelli, Fabio (Boston College)
    Abstract: We study the effects on financial markets and real economic activity of changes in risk related to political events and policy announcements in Italy during the 2013-2019 period that saw the rise to power of populist parties. We focus on events that have implications for budgetary policy, debt sustainability and for Euro membership. We use changes in the Credit Default Swaps (CDS) spread on governments bonds around those dates as an instrument for shocks to policy and institutional risk – political risk for short – in the context of Local Projections - IV. We show that shocks associated with the rise of populist forces or their policies have adverse and sizable effects on financial markets. These negative effects were moderated by European institutions and domestic constitutional constraints. In addition, Italian political developments generate international spillover effects on the spreads of some other euro-zone countries. Finally, political risk shocks have a negative impact on the real economy, although the accommodating stance of monetary policy helped in cushioning their effect.
    Keywords: populism, political risk, policy uncertainty, sovereign debt, fiscal policy, CDS spread
    JEL: E44 G10 H62 H63
    Date: 2020–01
  31. By: Ha, Jongrim (World Bank); Kose, M. Ayhan (International Monetary Fund); Otrok, Christopher (University of Virginia); Prasad, Eswar (Cornell University)
    Abstract: We develop a new dynamic factor model that allows us to jointly characterize global macroeconomic and financial cycles and the spillovers between them. The model decomposes macroeconomic cycles into the part driven by global and country-specific macro factors and the part driven by spillovers from financial variables. We consider cycles in macroeconomic aggregates (output, consumption, and investment) and financial variables (equity and house prices, and interest rates). We find that the global macro factor plays a major role in explaining G-7 business cycles, but there are also spillovers from equity and house price shocks onto macroeconomic aggregates. These spillovers operate mainly through the global macro factor rather than the country-specific macro factors (i.e., these spillovers affect business cycles in all G-7 economies) and are stronger in the period leading up to and following the global financial crisis. We find little evidence of spillovers from macroeconomic cycles to financial cycles.
    Keywords: global business cycles, global financial cycles, common shocks, international spillovers, dynamic factor models
    JEL: E32 F4 C32 C1
    Date: 2020–02
  32. By: Jongrim Ha (World Bank); M. Ayhan Kose (World Bank, Brookings Institution, and CEPR); Christopher Otrok (University of Missouri and Federal Reserve Bank of St Louis); Eswar S. Prasad (Cornell University, Brookings Institution, and NBER)
    Abstract: We develop a new dynamic factor model that allows us to jointly characterize global macroeconomic and financial cycles and the spillovers between them. The model decomposes macroeconomic cycles into the part driven by global and country-specific macro factors and the part driven by spillovers from financial variables. We consider cycles in macroeconomic aggregates (output, consumption, and investment) and financial variables (equity and house prices, and interest rates). We find that the global macro factor plays a major role in explaining G-7 business cycles, but there are also spillovers from equity and house price shocks onto macroeconomic aggregates. These spillovers operate mainly through the global macro factor rather than the country-specific macro factors (i.e., these spillovers affect business cycles in all G-7 economies) and are stronger in the period leading up to and following the global financial crisis. We find little evidence of spillovers from macroeconomic cycles to financial cycles.
    Keywords: Global business cycles; global financial cycles; common shocks; international spillovers; dynamic factor models.
    JEL: E32 F4 C32 C1
    Date: 2020–03
  33. By: Vito Polito
    Abstract: This paper studies optimal macroeconomic policy when nonlinearity in the business cycle is described by a vector smooth transition autoregression (VSTAR). A structural identification of the VSTAR that yields a low-dimension and certainty-equivalent nonlinear quadratic regulator (NLQR) problem is derived. Optimal rules are calculated by adapting from the engineering theory the approach of State Dependent Riccati Equation, which allows standard dynamic programming techniques to solve NLQR problems. The methodology is employed to study optimal conventional and quantitative easing (QE) monetary policy using a VSTAR model esti-mated on data for the United States during 1979-2018. The model allows for regime changes during periods of economic slack and when interest rates are near the zero lower bound. The results highlight the quantitative significance of nonlinearity in the analysis of optimal monetary policy and how the size, timing and composition of QE can influence macroeconomic dynamics.
    Keywords: smooth transition models, nonlinear quadratic regulator, zero lower bound, quantitative easing, optimal monetary policy
    JEL: C30 C60 E50
    Date: 2020
  34. By: Patrick Russo (Research and Statistics Group); Jan J. J. Groen
    Abstract: The current policy debate is influenced by the possibility that the first-quarter GDP data were affected by ?residual seasonality.? That is, the statistical procedures used by the Bureau of Economic Analysis (BEA) did not fully smooth out seasonal variation in economic activity. If this is indeed the case, then the weak readings of the economy in the first quarter give an inaccurate picture of the state of the economy. In this post, we argue that unusually adverse winter weather, rather than imperfect seasonal adjustment by the BEA, was an important factor behind the weak first-quarter GDP data.
    Keywords: adverse weather shocks; residual seasonality; GDP Growth forecasting
    JEL: E5 E2
  35. By: Efayena, Obukohwo Oba; Olele, Hilda Enoh
    Abstract: The simultaneous attainment of inflation and unemployment reduction has been pursued vigorously by various government with little or no plausible outcome, leading to the debate of a possible trade-off between inflation and unemployment in an economy. This paper thus attempt to validate the Phillips curve hypothesis in Nigeria. Employing the Generalized Method of Moments (GMM) and Canonical Cointegrating Regression (CCR) methods on quarterly data of inflation and unemployment between 2010 and 2018, the study validated the presence of a Phillips curve in the Nigerian economy. In order to cushion the devastating effects of these macroeconomic misnonal, the study among others, recommends the adoption of policy-mix that hugely leans towards ensuring employment based on the economic stage of Nigeria.
    Keywords: Phillips curve, GMM, CCR, inflation, unemployment
    JEL: C01 E24
    Date: 2020–02–25
  36. By: Karsten Kohler (King’s College London); Engelbert Stockhammer
    Abstract: The paper contributes to the recent growth models debate through a cross-country analysis of macroeconomic growth drivers after the 2008 crisis. It examines the role of competitiveness, finance, and fiscal policy as sources of foreign, private and public demand. While all countries experienced a slowdown in economic growth and a stronger export-orientation, macroeconomic performance has been highly uneven. Growth drivers have partly changed, calling for reconsideration of some key topics in the growth models debate. We argue that (i) non-price competitiveness has gained importance compared to price competitiveness, (ii) debt-driven growth models are cyclical and financial booms come with busts and debt overhang, (iii) post-crisis growth models are strongly shaped by fiscal policy. Northern Europe reinforced its export-orientation despite some wage and property price inflation, but with limited effects on growth. Eastern Europe benefitted from an improvement in export sophistication prior to the crisis and outperforms in terms of growth. Southern Europe underwent a debt-driven depression, exacerbated by contractionary austerity policies. While also affected by the downturn of a financial cycle, the English-speaking countries sustained demand through slower fiscal consolidation.
    Keywords: growth models, austerity, financial cycles, comparative political economy, post-Keynesian macroeconomics
    JEL: B50 O47 O57
    Date: 2020–03
  37. By: Helene Lee (Markets Group); Asani Sarkar
    Abstract: Central bank lending facilities were vital during the financial crisis of 2007-08 when many banks and nonbank financial institutions turned to them to meet funding needs as private funding dried up. Since then, there has been renewed interest in the design of central bank lending facilities in the post-crisis period. In this post, we compare the Federal Reserve?s discount window with the lending facilities at three other major central banks: the Bank of England (BoE), the European Central Bank (ECB), and the Bank of Japan (BoJ). We observe that, relative to the other central banks, the Fed?s discount window is less integrated into the monetary policy framework. In a follow-up post, we will discuss differences in the central banks? counterparty and collateral policies.
    Keywords: Monetary Policy; Standing Lending Facility; Central Banks
    JEL: E5
  38. By: Tanaka, Yasuhito
    Abstract: We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an overlapping generations model under perfect competition with constant returns to scale technology. We show that there exists involuntary unemployment in a case where labor supply is indivisible. We also show that reduction of nominal wages can not rescue involuntary unemployment.
    Keywords: 非自発的失業,完全競争,非分割的労働供給,世代重複モデル
    JEL: E12 E24
    Date: 2020
  39. By: Oliver Rehbein (University of Bonn - Department of Economics; Halle Institute for Economic Research); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))
    Abstract: This paper demonstrates that low bank capital carries a negative externality because it amplifies local shock spillovers. We exploit a natural disaster that is transmitted to firms in non-disaster areas via their banks. Firms connected to a strongly disaster-exposed bank with lowest-quartile capitalization significantly reduce total borrowing by 4.8%, employment by 2.7% and tangible assets by 7.5% compared to similar firms connected to a well-capitalized bank. These findings translate to negative regional effects on GDP and unemployment. Banks also particularly reduce their exposure to this-time-unaffected but in general disaster-prone areas following a disaster.
    Keywords: natural disaster, real effects, shock transmission, bank capital
    JEL: G21 G29 E44 E24
    Date: 2020–02
  40. By: AMAN, Moustapha
    Abstract: Résumé La monnaie est souvent considérée comme un instrument permettant de projeter pouvoir et influence. L’article retrace l’évolution des rapports de force et des hiérarchies monétaires dans la corne de l’Afrique où se sont mêlés les intérêts français, anglais et italiens en lutte d’expansion impériale autour de la mer rouge et en Éthiopie, et où paradoxalement une monnaie autrichienne s’est répandit sans aucune domination politique. L’article souligne le lien étroit existant entre monnaie et géopolitique et défend l'utilisation des notions théoriques d'espace/réseau essentiels tant d’un point de vue conceptuel qu’opérationnel pour l’analyse de rapport entre les acteurs politico-économiques et les relations géostratégiques. Abstract Currency is often seen as an instrument for projecting power and influence. The article traces the evolution of power relations and monetary hierarchies in the Horn of Africa, where French, English and Italian interests mingled in the struggle for imperial expansion around the Red Sea and Ethiopia, and where paradoxically an Austrian currency spread without any political domination. The article underlines the close link between currency and geopolitics and promotes the use of theoretical notions of space/network that are essential from both a conceptual and operational point of view for the analysis of the relationship between political-economic actors and geostrategic relations.
    Keywords: Régime monétaire, Banque centrale, Développement économique, Histoire régionale; monetary regime, Central Bank, Economic development, Regional History
    JEL: B50 E41 E5 E50 N1 N17 N9 O17
    Date: 2018–12
  41. By: Emil Verner (Massachusetts Institute of Technology); Győző Gyöngyösi (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: We examine the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary’s late-2008 currency crisis. The revaluation of debt burdens leads to higher default rates and a collapse in spending. These responses lead to a worse local recession, driven by employment losses at non-exporting firms, and negative spillover effects on nearby borrowers without foreign currency debt. The estimates translate into a multiplier on higher debt service of 1.67. The impact of debt revaluation is particularly severe when foreign currency debt is concentrated on household, rather than firm, balance sheets.
    Keywords: Fiscal household debt, foreign currency debt, currency crisis, financial crisis, business cycles
    JEL: E2 E3 G2 F3 D12
    Date: 2020
  42. By: Seon Tae Kim; Alessandro Marchesiani
    Abstract: The observed money demand in the U.S. had a stable negative relation with the interest rate up until the 1990s. After this period, this relation fell apart and has never been restored. We show that the central bankís ability to gather information, referred to as market intelligence, matters to generate an upward-sloping money demand curve. We calibrate the model to the U.S. data for the period from 1990 to 2019 and show that market intelligence helps to match the money demand. We also show that it is beneficial for the society, since it mitigates the inefficiency associated with asymmetric information.
    Keywords: Money demand, asymmetric information, mechanism design
    JEL: D9 E4 E5
    Date: 2020–02
  43. By: Fabiola Ravazzolo (Markets Group); Alessandro Zori (Markets Group); Gara M. Afonso
    Abstract: How do changes in the interest rate that the Federal Reserve pays on reserves affect interest rates in money markets in which the Fed does not participate? And through which channels do changes in the so-called administered rates influence rates in onshore and offshore U.S. dollar money markets? This post offers an interactive map illustrating the web of relationships between the Fed, key market players, and the various instruments in the U.S. dollar funding market.
    Keywords: passthrough; US dollar funding market; monetary policy
    JEL: E5
  44. By: Markus Heinrich; Magnus Reif
    Abstract: This paper provides a detailed assessment of the real-time forecast accuracy of a wide range of vector autoregressive models (VAR) that allow for both structural change and indicators sampled at different frequencies. We extend the literature by evaluating a mixed-frequency time-varying parameter VAR with stochastic volatility (MF-TVP-SV-VAR). Overall, the MF-TVP-SV-VAR delivers accurate now- and forecasts and, on average, outperforms its competitors. We assess the models’ accuracy relative to expert forecasts and show that the MF-TVP-SV-VAR delivers better inflation nowcasts in this regard. Using an optimal prediction pool, we moreover demonstrate that the MF-TVP-SV-VAR has gained importance since the Great Recession.
    Keywords: time-varying parameters, forecasting, nowcasting, mixed-frequency models, Bayesian methods
    JEL: C11 C53 C55 E32
    Date: 2020
  45. By: Tanaka, Yasuhito
    Abstract: We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an overlapping generations model under perfect competition with constant returns to scale technology. We show that there exists involuntary unemployment even when labor supply is divisible. We also show that reduction of nominal wages can not rescue involuntary unemployment.
    Keywords: 非自発的失業,完全競争,分割的労働供給,世代重複モデル
    JEL: E12 E24
    Date: 2020
  46. By: Boriss Siliverstovs (Bank of Latvia); Daniel Wochner (ETH Zurich)
    Abstract: This paper re-examines the findings of Stock and Watson (2012b) who assessed the predictive performance of DFMs over AR benchmarks for hundreds of target variables by focusing on possible business cycle performance asymmetries in the spirit of Chauvet and Potter (2013) and Siliverstovs (2017a; 2017b; 2020). Our forecasting experiment is based on a novel big macroeconomic dataset (FRED-QD) comprising over 200 quarterly indicators for almost 60 years (1960–2018; see, e.g. McCracken and Ng (2019b)). Our results are consistent with this nascent state-dependent evaluation literature and generalize their relevance to a large number of indicators. We document systematic model performance differences across business cycles (longitudinal) as well as variable groups (cross-sectional). While the absolute size of prediction errors tend to be larger in busts than in booms for both DFMs and ARs, DFMs relative improvement over ARs is typically large and statistically significant during recessions but not during expansions (see, e.g. Chauvet and Potter (2013)). Our findings further suggest that the widespread practice of relying on full sample forecast evaluation metrics may not be ideal, i.e. for at least two thirds of all 216 macroeconomic indicators full sample rRMSFEs systematically over-estimate performance in expansionary subsamples and under-estimate it in recessionary subsamples (see, e.g. Siliverstovs (2017a; 2020)). These findings are robust to several alternative specifications and have high practical relevance for both consumers and producers of model-based economic forecasts.
    Keywords: forecast evaluation, dynamic factor models, business cycle asymmetries, big macroeconomic datasets, US
    JEL: C32 C45 C52 E17
    Date: 2020–02–11
  47. By: Jonathan McCarthy
    Abstract: The current economic expansion is now the third-longest expansion in U.S. history (based on National Bureau of Economic Research [NBER] dating of U.S. business cycles). Even so, average growth in this expansion?a 2.1 percent annual rate?has been extraordinarily weak. In this post, I return to previous analysis on a specific portion of consumer spending?household discretionary services expenditures?that has displayed unusual weakness in the current expansion (see this post for the definition of discretionary versus nondiscretionary services expenditures, and these posts from 2012 and 2014 for previous updates). Even though these expenditures have picked up over the past couple of years, such that they have finally exceeded their previous peak, their recovery remains well behind that of other major categories of consumer spending. One explanation for the slow growth of spending on discretionary services is that households are concerned about their future income.
    Keywords: Consumer spending; income growth; services; productivity growth
    JEL: E2
  48. By: Huidrom,Raju; Kose,Ayhan; Lim,Jamus Jerome; Ohnsorge,Franziska Lieselotte
    Abstract: The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors'concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. The paper documents empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. It finds that fiscal multipliers tend to be smaller when fiscal positions are weak than strong.
    Keywords: Public Finance Decentralization and Poverty Reduction,Macro-Fiscal Policy,Public Sector Economics,Economic Adjustment and Lending,Macroeconomics and Economic Growth,Economic Policy, Institutions and Governance,Fiscal&Monetary Policy,Macroeconomic Management,Financial Crisis Management&Restructuring
    Date: 2019–03–20
  49. By: Sun, Lixin
    Abstract: This paper updates the dataset on the structure of China’s debt published in Sun (2015, 2019) with the debt effects. The new dataset extends the sample to the end of 2018 including the collected annual and the estimated quarterly data covering the period 1985-2018, and presents the updated changes in deleverage ratios for all debt categories in China. In addition, we examine the effects of the debt on the monetary policy transmission and the macroeconomy in China with the GMM approach and a VAR model. We find that the monetary policy transmissions have been weakened in times of high indebtedness by both the public and the private debt despite at the heterogenous magnitude. Our study sheds new lights to policy design and debt management in China.
    Keywords: China’s Debt Dataset; Non-financial Private and Public Debt; Monetary Policy Transmission; GMM Approach; VAR Model; Chinese Economy
    JEL: E50 H63
    Date: 2019–12
  50. By: Florian Exler; Michèle Tertilt
    Abstract: In this survey, we review the quantitative macroeconomic literature analyzing consumer debt and default. We start by providing an overview of consumer bankruptcy law in the US and document the relevant institutional changes over time. We proceed with a comprehensive empirical section, describing key facts about consumer debt, defaults and delinquencies, as well as charge-off and interest rates for the United States. In addition to the evolution of these variables over time, we construct life-cycle profiles using data from the Survey of Consumer Finances and show that debt and defaults display a clear hump-shaped profile by age. Third, we show how credit card debt has evolved along the income distribution. Finally, we document a large amount of heterogeneity in credit card interest rates across consumers. In the second part of the survey, we describe what has by now become the workhorse model of consumer credit and default. We discuss a quantitative version of the model and use it to decompose the main reasons for default. We also use the model to illustrate how the details of default costs matter. The remainder of the survey then discusses the literature centered around two questions. First, what are the welfare implications of various bankruptcy laws? And second, what caused the rise in filings over time? We end with a discussion of open questions and fruitful avenues for future research.
    Keywords: consumer debt, bankruptcy, Chapter 7, default, credit cards, charge-offs
    JEL: C60 E20 G20 O30
    Date: 2020
  51. By: Hanming Fang (University of Pennsylvania); Yongqin (Fudan University); Xian Wu (University of Wisconsin)
    Abstract: Collateral-based monetary policy tools have been used extensively by major central banks. Lack of proper policy counterfactuals, however, makes it di?cult to empirically identify their causal e?ects on the ?nancial market and the real economy. We exploit a quasi-natural ex-periment in China, where dual-listed bonds are traded in two mostly segmented markets: the interbank market regulated by the Central Bank, and the exchange market regulated by the securities regulator. During a policy shift in our study period, China’s Central Bank included a class of previously ineligible bonds in the interbank market to become eligible collateral for ?nancial institutions to borrow money from its Medium-Term Lending Facility (MLF). This policy shift allows us to implement a triple-di?erence strategy to estimate the causal impact of the collateral-based unconventional monetary policy. We ?nd that in the secondary market the policy reduced the spreads of the newly collateralizable bonds in the treatment market (the interbank market) by 42-62 basis points. We also ?nd that there is a pass-through e?ect from the secondary market to the primary market: the spreads of the treated bonds newly issued in the interbank market were reduced by 54 basis points.
    Keywords: Unconventional Monetary Policy, Collateral, Bond Spread, Medium-Term Lend-ing Facility
    JEL: E52 E58 G12
    Date: 2020–02–18
  52. By: Renee Fry-McKibbin; Rodrigo da Silva Souza
    Abstract: This paper examines the effects of commodity demand and supply shocks as well as international liquidity shocks on the small open economy of Brazil using an SVAR model. The paper highlights the importance of modeling both types of shocks in the commodity sector. Including only commodity prices overstates the effect of commodity price shocks on the output of Brazil. Commodity demand shocks are much larger than commodity supply shocks in the long run. Including commodity demand and international liquidity also reduces the impact of commodity price shocks on the interest rate made available to Brazil in international capital markets. The interest rate channel is considered a source of business cycles for emerging market economies in the literature.
    Keywords: Commodity demand shocks, commodity supply shocks, emerging market interest rates, liquidity, Brazil, SVAR
    JEL: C51 E32 F43 F62
    Date: 2020–02
  53. By: Radek Šauer
    Abstract: This paper develops an algorithm that enables to solve macroeconomic models with Rotemberg pricing and imperfect common knowledge. Under the concept of imperfect common knowledge, Rotemberg pricing requires the solution algorithm to take prices explicitly into account. The state space includes the hierarchy of average higher-order expectations as well as the aggregate price level. In addition to determining the usual policy functions of output, inflation, and the nominal interest rate, the algorithm has to search for the policy function of the aggregate price and for the policy function of the firm-specific price.
    Keywords: Rotemberg pricing, dispersed information, heterogenous beliefs, Kalman filter, higher-order expectations
    JEL: C63 D82 E31
    Date: 2020
  54. By: Albert Queraltó; Ozge Akinci
    Abstract: The global financial crisis has put financial stability risks?and the potential role of macroprudential policies in addressing them?at the forefront of policy debates. The challenge for macroeconomists is to develop new models that are consistent with the data while being able to capture the highly nonlinear nature of crisis episodes. In this post, we evaluate the impact of a macroprudential policy that has the government tilt incentives for banks to encourage them to build up their equity positions. The government has a role since individual banks do not internalize the systemic benefit of having more bank equity. Our model allows for an evaluation of the tradeoff between the size of such incentives and the probability of a future financial crisis.
    Keywords: occasionally binding constraints; sudden stops; financial intermediation; financial stability policy; leverage constraints
    JEL: E2
  55. By: Jan J. J. Groen
    Abstract: Global asset market developments during the summer of 2013 have been attributed to changes in the outlook for U.S. monetary policy, starting with former Chairman Bernanke?s May 22 comments concerning future curtailing of the Federal Reserve?s asset purchase programs. A previous post found that the signal of a possible change in U.S. monetary policy coincided with an increase in global risk aversion which put downward pressure on global asset prices. This post revisits this episode by measuring the impact of changes in Fed?s expected policy rate path and in the economic outlook on the U.S. dollar and emerging market equity prices. The analysis suggests that changes in the U.S. and foreign outlooks had a meaningful role in explaining global asset price movements during the so-called taper tantrum.
    Keywords: Policy expectations; emerging market equities.; growth expectations; exchange rates
    JEL: G1 F00 E5
  56. By: Laser, Falk Hendrik; Weidner, Jan
    Abstract: During recent years, central banks have increased the levels of their international reserves at an unprecedented pace. In this paper, we introduce new country-specific reserve data and examine determinants of the composition of international reserves. Using a dataset of 36 countries (and the euro area) for the years from 1996 to 2016, we identify currency pegs and trade patterns as determinants of currency compositions. Our results emphasize the importance of transaction motives for the composition of currency reserves. The euro crisis appears to have been a setback for the euro, which temporarily seemed to challenge the US dollar as the most important international reserve currency and potentially impacted the determination of international reserve compositions.
    Keywords: International reserves,central banks,euro crisis
    JEL: E58 F31 G01
    Date: 2020
  57. By: Antoine Martin; Heather Wiggins (Federal Reserve Board of Governors’ Division of Monetary Affairs); Laura Lipscomb (Federal Reserve Board of Governors’ Division of Monetary Affairs)
    Abstract: The Federal Reserve has paid interest on reserves held by banks in their Fed accounts since 2008. Why should it do so? Here, we describe some benefits of paying interest on required reserve balances. Since forcing banks to hold unremunerated reserves would be akin to levying a tax on them, paying interest on these balances is a way to eliminate or greatly reduce that tax and its negative effects.
    Keywords: monetary policy; reserve requirements; Interest on reserves
    JEL: E5
  58. By: Ha,Jongrim; Stocker,Marc; Yilmazkuday,Hakan
    Abstract: The degree to which domestic prices adjust to exchange rate movements is key to understanding inflation dynamics, and hence to guiding monetary policy. However, the exchange rate pass-through to inflation varies considerably across countries and over time. By estimating structural factor-augmented vector-autoregressive models for 47 countries, this paper brings to light two fundamental factors accounting for these variations: the nature of the shock triggering currency movements and country-specific characteristics. The empirical results in this paper are three-fold. First, an empirical investigation demonstrates that different domestic and global shocks can be associated with widely different pass-through ratios. Second, country characteristics matter, including policy frameworks that govern monetary policy responses, as well as other structural features that affect an economy's sensitivity to currency fluctuations. Pass-through ratios tend to be lower in countries that combine flexible exchange rate regimes and credible inflation targets. Finally, the empirical results suggest that central bank independence can greatly facilitate the task of stabilizing inflation following large currency movements and allows fuller use of the exchange rate as a buffer against external shocks.
    Keywords: Inflation,Macroeconomic Management,Financial Structures,International Trade and Trade Rules,Trade and Services
    Date: 2019–03–13
  59. By: Linda S. Goldberg; David R. Skeie
    Abstract: To help contain the economic damage caused by the recent financial crisis, the Federal Reserve extended large amounts of liquidity to financial firms through traditional lending facilities such as the discount window as well as through newly designed facilities. Recently released Federal Reserve data on discount window borrowing show that some U.S. branches and agencies of foreign banks were among the most active users of the window. In this post, we explain why U.S. branches borrow at the discount window. We also discuss two main reasons why these branches had a large need for dollars during the crisis and how discount window loans to them helped stabilize the financial system and the real economy in the United States.
    Keywords: currency mismatch; discount window; foreign banking organizations; wholesale funding
    JEL: E5 G2
  60. By: Andrejs Bessonovs (Bank of Latvia); Olegs Krasnopjorovs (Bank of Latvia)
    Abstract: This paper develops a Short-Term Inflation Projections (STIP) model, which captures cointegrated relationships between highly disaggregated consumer prices and their determinants. We document a significant pass-through of domestic labour costs, crude oil and global food commodity prices to consumer prices in Latvia. We also assess the model's forecast accuracy of Latvia's inflation during 2014–2018 and find that the STIP model statistically significantly outperforms a na?ve benchmark model in real time.
    Keywords: inflation forecasting, autoregressive distributed lag model, pass-through, oil prices, food commodity prices, labour costs
    JEL: C32 C51 C52 C53 E31
    Date: 2020–01–29
  61. By: Jiri Panos; Petr Polak
    Abstract: This paper aims to introduce a contemporary, computing-power-driven approach to econometric modeling in a stress-testing framework. The presented approach explicitly takes into account model uncertainty of satellite models used for projecting forward paths of financial variables employing the constrained Bayesian model averaging (BMA) technique. The constrained BMA technique allows for selecting models with reasonably severe but plausible trajectories conditional on given macro-financial scenarios. It also ensures that the modeling is conducted in a sufficiently robust and prudential manner despite the limited time-series length for the explained and/or explanatory variables.
    Keywords: Bayesian model averaging, model selection, model uncertainty, probability of default, stress testing
    JEL: C11 C22 C51 C52 E58 G21
    Date: 2019–12
  62. By: Ozge Akinci
    Abstract: In recent years, policymakers in advanced and emerging economies have employed a variety of macroprudential policy tools?targeted rules or requirements that enhance the stability of the financial system as a whole by addressing the interconnectedness of individual financial institutions and their common exposure to economic risk factors. To examine the foreign experience with these tools, we constructed a novel macroprudential policy (MAPP) index. This index allows us to quantify the effects of these policies on bank credit and house prices, two variables that are often the target of policymakers because of their links to boom-bust leverage cycles. We then used the index in the empirical analysis to measure the effectiveness of these policies in emerging market countries and advanced economies. Our estimates suggest that macroprudential tightening can significantly reduce credit growth and house price appreciation.
    Keywords: Macroprudential Policy; Bank Credit; Boom-Bust Leverage Cycles; House Prices
    JEL: F00 E2
  63. By: Grömling, Michael; Hüther, Michael; Beznoska, Martin; Demary, Markus
    Abstract: Die Corona-Krise ist eine globale Herausforderung. Die Ausbreitung von COVID-19 stellt gesamtwirtschaftlich gesehen sowohl einen negativen Nachfrageschock als auch einen negativen Angebotsschock dar. Es kommt zu merklichen Exportausfällen nach China und in andere betroffene Volkswirtschaften. Das Tempo der Weltwirtschaft und des Welthandels wird 2020 deutlich nachlassen. Auch im Inland geht in bestimmten Branchen die Nachfrage ruckartig zurück. Über fehlende Mitarbeiter, eingeschränkte Mobilität und ausbleibende Zulieferungen werden zudem die Produktionsmöglichkeiten eingeschränkt - was wiederum die Nachfrage weiter schwächt. Die Kombination dieser Nachfrage- und Angebotsschocks sowie das fehlende Wissen über Dauer und Ausmaß der Krise reduzieren den wirtschaftspolitischen Handlungsspielraum. Klassische Konjunkturprogramme - höhere Staatsausgaben, Sonderabschreibungen, Konsumstimuli über Steuersenkungen oder Infrastrukturprojekte - werden in der kurzen Frist auch wegen der angebotsseitigen Beschränkungen nicht wirksam. Das Institut der deutschen Wirtschaft befürwortet jetzt inmitten der großen Anpassungslasten folgende wirtschaftspolitische Maßnahmen als Antwort auf die Corona-Krise: - Stabilisierung der Unternehmensliquidität über Liquiditätshilfen der Kreditanstalt für Wiederaufbau und der Förderbanken der Länder. - Stabilisierung der Finanzmarktliquidität durch die Europäische Zentralbank. - Stabilisierung der Unternehmensliquidität durch Steuerstundung, etwa durch eine großzügigere Gewährung des Investitionsabzugsbetrags. - Stabilisierung der Beschäftigung und der Arbeitseinkommen durch eine unbürokratische und zeitlich anpassungsfähige Nutzung der Kurzarbeit.
    JEL: E32 E60 F62 H81
    Date: 2020
  64. By: Nasir, Nur Alissa; Masih, Mansur
    Abstract: In this paper, we test the causal linkages among the FTSE Malaysia, FTSE China and FTSE USA stock market indices. The investigation is conducted using the standard time series econometric techniques using monthly data. The issue is approached from two perspectives: (i) whether these markets move together (ii) and the dynamic linkages of the lead-lag relationships. Our analysis finds one significant cointegrating relationship among the selected markets, with the FTSE Malaysia being the follower and the FTSE China being being the most leading one. These findings tend to suggest that the FTSE Stock Indices of these three markets have a strong long-run equilibrium relationship mostly driven by fundamental elements of the economy. In addition, the strong leading role of the FTSE China Index implies that the China market may have a strong influence over the other regional markets. These findings have strong policy implications.
    Keywords: FTSE stock indices, causal linkages, VECM, VDC
    JEL: C22 C58 E44
    Date: 2018–05–30
  65. By: Antoine Martin; Sam Schulhofer-Wohl
    Abstract: It is sometimes said that the Federal Reserve should not engage in ?credit allocation.? But what does credit allocation actually mean? And how do current Fed policies affect the allocation of credit? In this post, we describe two separate ideas often associated with credit allocation. The first idea is that the Fed should not take credit risk, which taxpayers would ultimately have to bear. The second idea is that the Fed?s actions should not influence the flow of credit to particular sectors. We consider whether the Fed?s holdings of agency mortgage-backed securities (MBS) could affect the allocation of credit. In a companion post, we discuss how the economic effects of the Fed?s MBS holdings compare with the economic effects of more traditional holdings.
    Keywords: credit allocation; MBS; asset purchases
    JEL: E5
  66. By: Kankanamge, Sumudu; Gaillard, Alexandre
    Abstract: This paper introduces a theory of entrepreneurial assets transfer consistent with empirical evidence and centered around a business for sale market that values firms based on their intangible assets. We consider the key endogenous entrepreneurial choices to purchase, found, sell or liquidate business assets and the equilibrium price designed to capture both the intertemporal and the intangible value of a firm. We distinguish earlystage and mature firms as the latter are less likely to fail, make higher profits and face less stringent financial constraints. We argue that maturity translates the intangible value of a firm. We discipline our model using U.S. surveys and a new dataset of business selling transactions. We show that the absence of the business for sale market leads to a severe drop in aggregate output. Then, decomposing the effects of maturity, we show how they shape aggregate outcomes and wealth concentration.
    Keywords: Entrepreneurship, Business transfers, Intangible Assets
    JEL: E21 E23 J24
    Date: 2020–02
  67. By: Jean-Bernard Chatelain (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Kirsten Ralf (Ecole Supérieure du Commerce Extérieur - ESCE - International business school)
    Abstract: We consider a frictionless constant endowment economy based on Leeper (1991). In this economy, it is shown that, under an ad-hoc monetary rule and an ad-hoc fiscal rule, there are two equilibria. One has active monetary policy and passive fiscal policy, while the other has passive monetary policy and active fiscal policy. We consider an extended setup in which the policy maker minimizes a loss function under quasi-commitment, as in Schaumburg and Tambalotti (2007). Under this formulation there exists a unique Ramsey equilibrium, with an interest rate peg and a passive fiscal policy. We thank John P. Conley, Luis de Araujo and one referree for their very helpful comments.
    Keywords: Ramsey optimal policy,Fiscal theory of the Price Level,Frictionless endowment economy,Interest Rate Rule,Fiscal Rule
    Date: 2020–02–05
  68. By: Kose,Ayhan; Matsuoka,Hideaki; Panizza,Ugo G.; Vorisek,Dana Lauren
    Abstract: This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.
    Keywords: Inflation,Macroeconomic Management,Financial Structures,International Trade and Trade Rules,Public Sector Economics,Public Finance Decentralization and Poverty Reduction,Economic Adjustment and Lending,Macro-Fiscal Policy
    Date: 2019–03–20
  69. By: Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Michael Weber
    Abstract: We compare the causal effects of forward guidance communication about future interest rates on households’ expectations of inflation, mortgage rates, and unemployment to the effects of communication about future inflation in a randomized controlled trial using more than 25,000 U.S. individuals in the Nielsen Homescan panel. We elicit individuals’ expectations and then provide 22 different forms of information regarding past, current and/or future inflation and interest rates. Information treatments about current and next year’s interest rates have a strong effect on household expectations but treatments beyond one year do not have any additional impact on forecasts. Exogenous variation in inflation expectations transmits into other expectations. The richness of our survey allows us to better understand how individuals form expectations about macroeconomic variables jointly and the non-response to long-run forward guidance is consistent with models in which agents have constrained capacity to collect and process information.
    JEL: C83 D84 E31
    Date: 2020–02
  70. By: Michaelides, Panayotis G.; Tsionas, Efthymios G.; Konstantakis, Konstantinos N.
    Abstract: In this work, we investigate the dynamic interdependencies among the EU12 economies using a competitive general equilibrium network system representation. Additionally, using Bayesian techniques, we estimate the autoregressive scheme that characterizes the equilibrium price system of the network, while characterizing each economy/node in the universe of our network in terms of its degree of pervasiveness. In this context, we unveil the dominant(s) unit(s) in our model and estimate the dynamic linkages between the economies/nodes. Lastly, in terms of robustness analysis, we compare the findings of the degree pervasiveness of each economy against other popular quantitative methods in the literature. According to our findings, the economy of Germany acts as weakly dominant entity in the EU12 economy. Meanwhile, all shocks die out in the short run, without any long lasting effect.
    Keywords: Bayesian; GVAR; Crisis; Transmission; Debt; EU12
    JEL: E1 O5
    Date: 2018–08–01
  71. By: Richard Peach; Charles Steindel (New Jersey. Department of the Treasury)
    Abstract: A major economic concern is the ongoing sluggishness in the growth of output per worker hour, generally called labor productivity. In an arithmetic sense, the growth of the economy can be accounted for by the increase in hours worked plus that of labor productivity. With the unemployment rate now at a level widely regarded as near ?full employment,? growth in hours worked is likely to be limited by demographic forces, most importantly the very limited expansion of the working-age population. If productivity growth also remains low, the sustainable pace of increase of real GDP will be limited and remain noticeably lower than historic norms.
    Keywords: Depreciation; Capital Stock; Productivity Growth
    JEL: E2
  72. By: Selva Bahar Baziki; Tanju Capacioglu
    Abstract: We study the effects of monetary policy decisions on banks’ loan issuance and maturity decisions using a unique matched firm-bank-loan level granular database. We find that changes in the policy rate impact both credit and maturity channels - an increase of 100 basis points reduces commercial loan volumes by 1.6% and maturities by 1.2%, with tighter monetary policy having a larger effect on both. Small banks, banks with relatively weaker capital and liquidity structures, and with weaker access to foreign funding are more sensitive to policy changes. Bank ownership types and loan currency denomination also create asymmetries in responses. Banks reflect these changes to firms with which they have longer established relationships or which have a healthier past credit performance to a lesser extent. A quasi-experimental analysis adds that the intense use of a collateral guarantee scheme has increased maturities at the time of tight monetary policy stance, reversing their long-run negative relationship. These results highlight the importance of the financial regulatory process on banks’ risk taking behavior, search-for yield appetites, identifying areas of potential systemic risk buildup, and finally policy design and coordination.
    Keywords: Monetary policy, Transmission channel, Credit guarantee fund, Loan maturity, Bank type
    JEL: E51 E58 G20 G21 G28
    Date: 2020
  73. By: Michael Fosco (Research and Statistics Group); Thomas Klitgaard
    Abstract: Almost half the U.S. merchandise trade deficit was tied to petroleum ten years ago. Oil prices were above $100 a barrel, the economy was doing well enough that oil consumption was growing despite high oil prices, and domestic oil production was falling. The U.S. petroleum trade balance has since narrowed substantially from $400 billion in 2008 to under $65 billion in 2017 as a result of lower oil prices, higher domestic production, and a prolonged period of flat-to-falling petroleum consumption. Going forward, the changes in domestic production and consumption have significantly moderated the impact of oil prices on the petroleum trade deficit. That is, changes in oil prices are increasingly redirecting income between domestic consumers and producers rather than between U.S. consumers and foreign oil producers.
    Keywords: oil petroleum trade balance imports exports consumption production
    JEL: E2
  74. By: International Monetary Fund
    Abstract: The authorities have recently taken some policy actions toward stabilizing the economy. However, reflecting expansionary spending policies and declining Southern African Customs Union (SACU) revenue, public debt is still rising, domestic arrears have accumulated, and international reserves have fallen below adequate levels. Decelerating private investment and declining external competitiveness are hindering the country’s growth prospects, leaving 40 percent of the population in extreme poverty and unemployment high.
    Keywords: Public financial management;External sector;Macroprudential policies and financial stability;Financial statistics;Fiscal policy;ISCR,CR,SACU,arrears,SACU revenue,international reserve,Proj
    Date: 2020–02–11
  75. By: M. Ayhan Kose (Prospects Group, World Bank; Brookings Institution; CEPR; CAMA); Franziska Ohnsorge (Prospects Group, World Bank; CEPR; CAMA)
    Abstract: Although emerging market and developing economies (EMDEs) weathered the global recession a decade ago relatively well, they now appear less well placed to cope with the substantial downside risks facing the global economy. In many EMDEs, the room for monetary and fiscal policies to respond to shocks has eroded; underlying growth potential has slowed; and the momentum for improving policy frameworks, institutions, and business climates seems to have slackened. The experience of the 2009 global recession highlights once again the critical role of policy room in shielding economic activity during adverse shocks. The subsequent decade of anemic growth underlines the need for sound policy frameworks, institutions, and business environments to promote sustained growth. With the global growth outlook weakening and vulnerabilities rising, the policy priority for EMDEs is now to improve resilience to shocks and to lift long-term growth prospects.
    Keywords: Economic integration; International business cycles; Financial crises; Macroeconomic policy.
    JEL: F36 F44 G01 E60
    Date: 2020–03
  76. By: Gregor Jarosch (Stanford University); Laura Pilossoph
    Abstract: Estimates from the Current Population Survey show that the probability of finding a job declines the longer one is unemployed. Is this due to a loss of skills from being unemployed, employer discrimination against the long-term unemployed, or are there characteristics of workers in this segment of the workforce that lower their probability of finding a job? Studies that send out fictitious resumes find that employers do consider the length of unemployment in deciding whom to interview. Our recent work examines how such employer screening based on unemployment duration ultimately affects job-finding rates and long-term unemployment.
    Keywords: Unemployment; Discrimination
    JEL: E2 J00
  77. By: Gokmen, Gunes (Lund University); Nannicini, Tommaso (Bocconi University); Onorato, Massimiliano Gaetano (University of Bologna); Papageorgiou, Chris (International Monetary Fund)
    Abstract: It is commonly argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. The argument goes that the political cost of deep reforms declines as crises unravel structural problems that need to be urgently rectified and the public is more willing to bear the pains associated with such reforms. This paper casts doubt on this prevalent view by showing that not only the crises-reforms nexus is unfounded in the data, but rather crises are associated with slowing structural reforms depending on the institutional environment. In particular, we look at measures of reforms in international trade, agriculture, network industries, and financial markets. We find that, after a financial crisis, democracies neither open nor close their economy. On the contrary, autocracies reduce reforms in multiple economic sectors, as the fear of regime change lead non-democratic rulers to please vested economic interests.
    Keywords: financial crises, structural reforms, institutional systems, IMF programs, government crises, public opinion
    JEL: E44 G01 L51 P16
    Date: 2020–01
  78. By: Mariño-Martínez, Ricardo; León, Carlos; Cadena-Silva, Carlos
    Abstract: Las entidades de contrapartida central (ECC) se interponen entre compradores y vendedores para eliminar sus obligaciones bilaterales y así mitigar el riesgo de contraparte. Es de esperar que esta interposición afecte la manera en que interactúan los participantes en los mercados financieros. Con base en datos transaccionales de las operaciones de intercambio a plazo peso-dólar sin entrega (COP/USD FX-non-delivery forwards) y en el análisis de redes, este artículo compara las transacciones cuando se acuerda la compensación y liquidación por intermedio de la Cámara de Riesgo Central de Contraparte de Colombia (CRCC) con aquellas en las que se acuerda la compensación y liquidación bilateral –sin la CRCC. El efecto de la interposición de la CRCC es el esperado. La red de transacciones en las que se acuerda la interposición de la CRCC muestra un aumento significativo en la conectividad (i.e. mayor densidad, reciprocidad y agrupamiento), y una disminución significativa en la distancia entre participantes. Esto sugiere que acordar la interposición de la CRCC permite mitigar el riesgo de liquidez. Con la interposición, la red de exposiciones resultante presenta una menor conectividad y mayor distancia, lo cual es consistente con la mitigación del riesgo de contraparte. Las diferencias en la estructura de las redes son significativas. Los resultados son relevantes porque permiten visualizar y cuantificar el efecto que tiene la CRCC en la administración del riesgo.
    Keywords: Riesgo de contraparte; Riesgo de liquidez; Redes
    JEL: D85 L14 G2 E42
    Date: 2020–03
  79. By: James B. Bullard
    Abstract: During a presentation in Louisville, Ky., St. Louis Fed President James Bullard noted that the U.S. economy has been slowing down in 2019 after relatively rapid growth during 2017 and 2018. The economy faces downside risk that may cause a sharper-than-expected slowdown, which “may make it more difficult for the Federal Open Market Committee (FOMC) to achieve its 2% inflation target,” he said.
    Date: 2019–11–14
  80. By: Gimenez-Nadal, J. Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of Zaragoza)
    Abstract: This paper analyzes the existence of short- and long-term intergenerational correlation of employment and self-employment in European countries, using data from the European Union Statistics on Income and Living Conditions. Using longitudinal data for the period 2003-2016, fixed effect estimates show a significant short-term correlation between the current employment status of parents and that of their children. However, short-term correlation of self-employment seems to be driven only by father-son correlations. Conversely, using the special module on Intergenerational Transmissions for the year 2011, estimates show a strong and significant correlation between respondents' self-employment status, and that of their parents when respondents were 14 years old. This suggests that self-employment decisions are not related to short-term family labor supply decisions, but to long-term intergenerational transmission.
    Keywords: short- and long-term, Intergenerational transmissions, employment, self-employment, EU-SILC data
    JEL: J62 E24
    Date: 2020–01
  81. By: Jason Bram; James A. Orr
    Abstract: In 2008, as the financial crisis unfolded and the U.S. economy tumbled into a sharp recession, the outlook for the tri-state region (New York, New Jersey, and Connecticut) and especially New York City?the heart of the nation's financial industry?looked grim. Regional economists feared an economic downturn as harsh as the one in 2001, or the even deeper recession of the early 1990s. Now, as the recovery takes hold, we can report that although the economic downturn was severe in the region, with the unemployment rate surging above 9 percent in many places, it was less severe than many had anticipated. This post?which is based on the New York Fed?s May 6 Regional Economic Press Briefing?recaps how the Great Recession affected employment across the region, how the ensuing recovery has progressed, and what the prospects are for job growth as we go forward.
    Keywords: New Jersey; New York; Employment. regional; job outlook; Second District
    JEL: E2
  82. By: Ylva Søvik; Antoine Martin; Emily Eisner (Research and Statistics Group)
    Abstract: There has been unusually high activity on central banks? balance sheets in recent years. This activity, which has expanded beyond the core operations and collateral of the central bank, has been called ?unconventional,? ?nonstandard,? ?nontraditional,? and ?active.? But what constitutes a normal central bank balance sheet? How does central bank asset and liability composition vary across countries and how did the crisis change this composition? In this post, we focus on the main characteristics of central bank balance sheets before the crisis. In our next piece, we describe how this composition has changed in response to the crisis.
    Keywords: Central bank balance sheet
    JEL: E5
  83. By: James A. Orr; Jason Bram
    Abstract: The U.S. economy lost more than 8 million jobs between January 2008 and February 2010. In contrast with earlier recessions, employment declines were seen across almost all states. The extent varied: In this recession, states with big housing busts generally saw steeper job losses, especially in construction, while some states also had severe job losses driven by manufacturing declines. One feature of this employment recovery is that it?s actually been quite uniform across states?and much more uniform than in earlier recoveries. With few exceptions, states appear to be marching in lockstep.
    Keywords: recession; recovery; Employment; state economy
    JEL: E2 J00 R1
  84. By: International Monetary Fund
    Abstract: Economic performance remains strong. Growth regained momentum in the second half of 2019 following a slowdown in the first half. The latter primarily reflected budgetary developments, with some temporary government underspending in the early part of the year. A decisive monetary policy tightening in response to the inflation spike and overheating risks in 2018, and weaker external demand also contributed. The structural reform momentum and infrastructure push remain strong.
    Date: 2020–02–06
  85. By: Jim Narron; Donald P. Morgan
    Abstract: In 1815, England emerged victorious after what had been nearly a quarter century of war with France. And during those years, encouraged by high prices and profits, England greatly expanded its agricultural and industrial capacity in terms of land and new machinery, with these activities often financed on credit. Improved harvests from 1812 to 1815 coincided with an export market boom in 1814, as the continent began to reopen for trade and speculation in South America increased. But the speculation turned to frenzy compared to the boom of 1810 as everything that could be shipped was shipped?until the speculation broke. The crisis started first with farmers and landlords, spread to business and industry, and was followed by mass starvation on the continent. In this edition of Crisis Chronicles, we recount the Crisis of 1816, the Year without a Summer, and the idea of Sunspot Equilibria.
    Keywords: poverty year; crisis of 1816; sunspot equilibrium
    JEL: E2
  86. By: Ryan Chahrour; Ozge Akinci
    Abstract: One of the major debates in open economy macroeconomics is the extent to which capital inflows are beneficial for growth. In principle, these flows allow countries to increase their consumption and investment spending beyond their income by enabling them to tap into foreign saving. Periods of such borrowing, however, are associated with large trade deficits, external debt accumulation, and, in some cases, overheating when these economies operate beyond their potential output level for an extended period of time. The relevant question in this context is whether the rate at which a country is taking on external debt has useful predictive information about financial crises.
    Keywords: Boom-Bust Cycle; Sudden Stops; Leverage; News Shocks
    JEL: E2 F00
  87. By: Nicola Pierri; Yannick Timmer
    Abstract: Motivated by the world-wide surge of FinTech lending, we analyze the implications of lenders’ information technology adoption for financial stability. We estimate bank-level intensity of IT adoption before the global financial crisis using a novel dataset that provides information on hardware used in US commercial bank branches after mapping them to their parent bank. We find that higher intensity of IT-adoption led to significantly lower non-performing loans when the crisis hit: banks with a one standard deviation higher IT-adoption experienced 10% lower non-performing loans. High-IT-adoption banks were not less exposed to the crisis through their geographical footprint, business model, funding sources, or other observable characteristics. Loan-level analysis indicates that high-IT-adoption banks originated mortgages with better performance and did not offload low-quality loans. We apply a simple text-analysis algorithm to the biographies of top executives and find that banks led by more “tech-oriented” managers adopted IT more intensively and experienced lower non-performing loans during the crisis. Our results suggest that technology adoption in lending can enhance financial stability through the production of more resilient loans.
    Keywords: technology, financial stability, IT adoption, non-performing loans
    JEL: G21 G14 E44 D82 D83
    Date: 2020
  88. By: Fatih Karahan; Laura Pilossoph; Brendan Moore (Research and Statistics Group)
    Abstract: Unemployment risk constitutes one of the most significant sources of uncertainty facing workers in the United States. A large body of work has carefully documented that job loss may have long-term effects on one?s career, depressing earnings by as much as 20 percent after fifteen to twenty years. Given the severity of a job loss for earnings, an important question is how much such an event affects one?s standard of living during a spell of unemployment. This blog post explores how unemployment and expectations of job loss interact to affect household spending.
    Keywords: expectations; unemployment; labor market risk; spending
    JEL: E2
  89. By: Jiaqian Chen; Lucyna Gornicka
    Abstract: We apply a range of models to the U.K. data to obtain estimates of the output gap. A structural VAR with an appropriate identification strategy provides improved estimates of output gap with better real time properties and lower sensitivity to temporary shocks than the usual filtering techniques. It also produces smaller out-of-sample forecast errors for inflation. At the same time, however, our results suggest caution in basing policy decisions on output gap estimates.
    Date: 2020–02–07
  90. By: Loretta J. Mester
    Abstract: This evening I will update you on the outlook for the economy and monetary policy from my side of the pond and on the Federal Reserve’s review of our monetary policy framework: the strategy, tools, and communications we use to make monetary policy. As always, the views I’ll present are my own and not necessarily those of the Federal Reserve System or of my colleagues on the Federal Open Market Committee.
    Date: 2020–03–03
  91. By: Winfried Koeniger; Carlo Zanella
    Abstract: We analyze inequality and mobility across generations in a dynastic economy. Nurture, in terms of bequests and the schooling investment into the next generation, is observable but the draw of nature in terms of ability is hidden, stochastic and persistent across generations. We calibrate the model to U.S. data to illustrate mechanisms through which nurture and nature affect mobility and the transmission of income inequality across generations, thus complementing the vast empirical literature. To provide a benchmark for the observed status quo, we solve for the social optimum in which the planner weighs dynasties equally and chooses optimal tax schedules subject to incentive compatibility. Analyzing the transition from the calibrated steady state to this social optimum, we find that insurance against intergenerational ability risk increases on the transition path by making welfare of family dynasties more dependent on nurture relative to nature. The insurance comes at the cost of less social mobility. We compare welfare in the social optimum and economies with a simple history-independent tax and subsidy system.
    Keywords: human capital, schooling, bequests, asymmetric information, intergenerational mobility, inequality
    JEL: E24 H21 I24 J24 J62
    Date: 2020
  92. By: Nils Mæhle
    Abstract: This paper discusses operational issues for countries that want to reform their monetary policy frameworks. It argues that stabilizing short-term interest rates on a day-to-day basis has significant advantages, and thus that short-term interest rates, not reserve money, in most cases should be the daily operating target, including for countries relying on a money targeting policy strategy. The paper discusses how a policy formulation framework based on monetary aggregates can be combined with an operational framework that ensures more stable and predictable short-term rates to enhance policy transmission. It also discusses how to best configure an interest-rate-based operational framework when markets are underdeveloped and liqudity management capacity is weak.
    Date: 2020–02–07
  93. By: Antoine Monserand (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This note is a critique of the results found by Rosenbaum concerning zero growth and structural change in a post-Keynesian growth model, some of which are shown to be problematic. First, the (im)possibility for a neo-Kaleckian model of growth and distribution to generate a profit-led growth regime is discussed. Next, we review the role played by the "paradox of costs" when introducing the depreciation of capital and how this changes the stability characteristics of the model presented by Rosenbaum. Finally we show that, contrary to what is claimed in the article, the proposed model is not able to show that zero growth is compatible with a positive net rate of profit.
    Keywords: Kaleckian,Stability,Wage-led/Profit-led,Profit rate,Zero growth
    Date: 2020
  94. By: International Monetary Fund
    Abstract: Growth reached 3.9 percent in the first half of 2019, supported by a rebound in the oil and gas sector. The overall fiscal deficit was 1.4 percent of GDP for the first three quarters of 2019, slightly better than the program’s projection. External buffers are being rebuilt, despite external and domestic headwinds. The economy is coping with the impact of the suspension of production at the national oil refinery (SONARA).
    Date: 2020–02–14
  95. By: Simplice A. Asongu (Yaoundé/Cameroon); Paul N. Acha-Anyi (Walter Sisulu University, South Africa)
    Abstract: The purpose of this research is to investigate the relevance of enhancing information and communication technology (ICT) on dynamics of total factor productivity (TFP) in 25 Sub-Saharan African countries using data covering the period 1980-2014. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, while enhancing ICT overwhelmingly has net positive effects on productivity, the corresponding marginal effects are negative. Second, anextended analysis is performed to establish thresholds for complementary policies. These thresholds are: 100 % mobile phone penetration for TFP; between 101.214 % and 101.419 % mobile phone penetration for welfare TFP and 15 % internet penetration for welfare real TFP. It follows that approximately 100% mobile penetration and 15% internet penetration are thresholds at which ICT should be complemented with other macroeconomic policies for favorable outcomes on productivity dynamics. Other policy implications are discussed.
    Keywords: Productivity; Information Technology; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2020–01
  96. By: Carsten A. Holz
    Abstract: Investment statistics of the People’s Republic of China are a source of many puzzles. Some investment data are of dubious quality, while the particular concepts of investment and their changing definitions over time are often poorly understood. Fixed asset investment, a remnant of the planned economy, comes with severe limitations in terms of data coverage and compilation. Detailed sector data are available, but only for a repeatedly changing subset. Gross fixed capital formation, an alternative investment measure based on the national accounts, may be more reliable but only the most aggregate data are available. The researcher or policy-maker in need of investment data encounters a veritable minefield of data issues that this paper helps navigate.
    Keywords: fixed asset investment, gross fixed capital formation, newly increased fixed assets, national accounts, Chinese statistics, data falsification
    JEL: E22 C82 O53
    Date: 2020
  97. By: Udi Joshua (Federal University Lokoja, Kogi state, Nigeria); Oladimeji M. Salami (Federal University Lokoja, Kogi state, Nigeria); Andrew A. Alola (Istanbul Gelisim University, Istanbul, Turkey)
    Abstract: There are debates regarding the effect of globalization on national economies, and whether or not trade openness has a significant positive or negative influence on economic expansion and development. Thus, this study is aimed at investigating the relationship between trade globalization and Nigeria’s economic advancement. The autoregressive distributed lags (ARDL) model was employed for the time series data: real GDP, openness, foreign direct investment and population growth over the period 1981-2017. The findings of this estimation revealed that population growth is significant but inhibitor of economic prosperity (real GDP) in the short-term. However, the significant and long-run determinants of the real GDP are population growth and trade openness but not foreign direct investment. Furthermore, the Granger Causality test revealed that real GDP granger causes population growth. The study therefore concluded that trade openness and globalization are necessary for Nigeria’s economic expansion and development. Consequently, the study opined that the land border closure policy recently implemented by the Nigerian government might necessitate a significant reassessment so that the economic development projections of the country are not hindered.
    Keywords: Economic Expansion; Trade Globalization; Nigeria
    Date: 2020–01
  98. By: Patrick Lehnert; Michael Niederberger; Uschi Backes-Gellner
    Abstract: This paper develops a novel procedure for proxying economic activity across time periods and spatial units, for which other data is not available. In developing this proxy, we apply machine-learning techniques to a unique historical time series of daytime satellite imagery dating back to 1984. Compared to night lights intensity, a satellite-based proxy that economists commonly use, our proxy has the advantages of more precisely predicting economic activity over a longer time series and at smaller regional levels. We demonstrate the proxy's usefulness for the example of Germany, where data on economic activity is otherwise unavailable, in particular for the regions belonging to the former German Democratic Republic. However, our procedure is generalizable to other regions and countries alike, and thus yields great potential for analyzing historical developments, evaluating local policy reforms, and controlling for economic activity at highly disaggregated regional levels in econometric applications.
    JEL: E01 E23 O18 R11 R14
    Date: 2020–03
  99. By: Ursu, Ana
    Abstract: The present volume is the collection of the conference papers presented on the 10th International Symposium Agricultural economics and Rural Development - Realities and Perspectives for Romania, organized by the Research Institute for Agrarian Economy and Rural Development during 14 of November, in Bucharest, Romania. The purpose of the symposium is to present and promote the latest results of research in the field of Agricultural Economics and Rural Development regarding the use of statistical methods in conducting studies, directions of development of regions, assessment of economic sustainability, zoning of agricultural production, bioeconomic agriculture, trade in agri-food products, protection of biodiversity, innovative technologies in the field of agro-zoo-veterinary, Common Agricultural Policy reform, protected natural areas, typology of rural households, factors determining the standard of living in rural communities, agrotourism potential - a component of sustainable rural development etc. The symposium proceedings is structured in 4 specialized sections, where the read my find interesting argues regarding this research field.
    Keywords: Agriculture systems, rural development, common agricultural policy, food production
    JEL: C3 E6 F1 H2 J1 O1 P48 Q1 R1 R2
    Date: 2019–11–14
  100. By: Mogaji, Peter Kehinde
    Abstract: In proposing monetary integration, the fifteen-member Economic Community of West African States (ECOWAS) resolved to evolve and adopt a single currency, ‘eco’ across the African sub-continent by January 2020.This proposed monetary region is consequently styled by this author as ‘proposed Ecozone’. This paper appraised the international parity conditions in the proposed monetary union with specific focus on purchasing power parity (PPP), international Fisher Effect (IFE) and uncovered interest parity (UIP). The examination of simultaneous validity of these postulations and theories in the cases of the 15-countries were performed through the investigation of directions of bilateral relationship of the countries of the Ecozone. Monthly, quarterly and annual data spanning averagely over a period of 28 years between 1990 and 2017 were employed in this study. Residual-based cointegration test methods of Engle-Granger, Philip-Ouliaris and Park’s Added Variable and the Johansen cointegration tests were applied in evaluating these parity conditions. Results generated by various empirical estimations generally revealed that the international parity theoretical propositions of absolute PPP, relative PPP, international Fisher Effects and the uncovered interest parity are hugely not valid across the proposed ‘Ecozone’. However, the cointegration of real exchange rate, based on the possible anchor country for the proposed monetary union, Nigeria, holds, thus implying positive implications for the proposed monetary integration of the West African sub-continent as there are evidences to conclude that there are long run association and co-movements of these real exchange rates which more importantly have bearings and relationships with the lead economy in the region. One crucial implications of the failure of the validity of PPP to hold across the proposed Ecozone is that monetary models of exchange rate determination will be inappropriate for the proposed monetary union because purchasing power parity is a crucial building block of these monetary models of exchange rate determination.
    Keywords: International Parity Conditions, Purchasing Power Parity, International Fisher Effect, Uncovered Interest Rate Parity, WAMZ, WAEMU
    JEL: E43 E66 F36 F45 P52
    Date: 2019–06–10
  101. By: Jayasooriya, Sujith
    Abstract: Movement of the exchange rate is highly influential for the balance of payments in South Asia. Underpinning literature reveled both positive and negative impacts of real effective exchange rate on current account deficit. The objective of the paper is to understand the exchange rate movement on current account balance and to estimate the misalignment of exchange rates in South Asia. The study use empirical methods including Pooled mean group (PMG) regression, Mean group (MG) estimation, and Dynamic fixed effects (DFE) regression for estimating the predicted values for the current account deficit. Further, the exchange rate misalignment is estimated on the basis of Behavioural Equilibrium Exchange Rate (BEER) theory. The empirical results also support the Thirlwall’s hypothesis which states that balance of payments position of the South Asian economies are the main constraint on its economic growth. Panel Dynamic Ordinary Least Square (DOLS) method is used to estimate the misalignment using net foreign assets and productivity differential. The results show that in the long run of PMG model, Real effective exchange rate is negatively significant while GDP growth, Productivity, Trade openness, and Broad money (M2) are positively significant, imply those variables have positive impacts on current account balance. Since Hausman test revealed PGM as the efficient model to predict the relationship, in short run, EC and Real Effective Exchange Rate are negatively and Productivity and Trade openness are positively significant. The results of DEF model suggest that Real effective exchange rate is also negative, meanwhile GDP growth, Productivity, Net foreign assets, Trade openness, Terms of trade are positively predict the impacts on current account balance. Panel estimation of BEER model shows that the productivity differential and net foreign assets are significant positive predictors of the real effective exchange rate. Total misalignment is the difference between the fitted and actual value of the real exchange rate. These determinants of current account balance imply the effectiveness of targeting one of the variables in influencing the long run behavior of other variables by policymakers.
    Keywords: Balance of Payment, Exchange rate, Panel ARDL, Misalignment, South Asia
    JEL: E60 F6 F62 G18
    Date: 2020–02–19

This nep-mac issue is ©2020 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.