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on Macroeconomics |
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Issue of 2020‒08‒24
177 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Javier G. Gómez-Pineda (Banco de la República de Colombia) |
| Abstract: | With the help of growth forecasts and a simple structural model, we build a likely forward-looking account of the demand and supply shocks explaining the unfolding covid-19 recession as well as of the depth, length and shape of the recession. The results point to a V-shaped recession with partial recovery in advanced economies while in emerging and developing economies to an L-shaped recession. In addition, the projected shapes likely involve, in advanced economies, an output level shock, and in emerging and developing economies, an output growth shock. In light of the forecast performance during the 2008 global financial recession, the output growth shock in emerging and developing economies is the weakest part of the story in the forward-looking account or story; nonetheless, the story might be informative about the depth of the recession 6 months after the outbreak and about the shape of the recession 12 months after the outbreak only in the case of advanced economies. The depth and shape of the recession are important for fiscal debt sustainability analysis; on this matter, the results are robust to specifications of the model parameters and assumptions. In turn, depth and length of the recession in the output gap are important for monetary and fiscal policies; on this matter, we had to appeal to an assumption about the relative extent of the demand shock. The simple structural model can fix a problema of univariate filters. Univariate filters can misleadingly attribute to demand shocks a large part of the variability of output that is actually originated in supply shocks. **** RESUMEN: Con la ayuda de pronósticos de crecimiento y de un modelo estructural sencillo, construimos un probable recuento prospectivo de los choques de demanda y oferta que explican la recesión del covid-19 en desarrollo así como de la profundidad, duración y forma de la recesión. Los resultados indican que en las economías avanzadas la recesión es en forma de V mientras que en las economías emergentes y en desarrollo es en forma de L. Adicionalmente, la forma proyectada de la recesión probablemente supone en las economías avanzadas un choque al nivel de producto y en las economías emergentes y en desarrollo un choque al crecimiento del producto. A la luz del desempeño de los pronósticos durante la crisis financiera global de 2008, el choque al crecimiento del producto en las economías emergentes y en desarrollo es la parte más débil del recuento prospectivo; sin embargo, el relato puede ser informativo acerca de la profundidad de la recesión 6 meses después del brote y acerca de la forma de la recesión 12 meses después del brote solo en el caso de los países avanzados. La profundidad y la forma de la recesión son importantes para el análisis de la sostenibilidad fiscal; sobre esta materia los resultados son robustos a especificaciones de los parámetros y supuestos. Por su parte, la profundidad y la duración de la recesión en la brecha del producto son importantes para las políticas monetaria y fiscal; sobre esta materia tuvimos que recurrir a un supuesto sobre el tamaño relativo del choque de demanda. El modelo estructural sencillo puede remediar el problema de los filtros univariados. Los filtros univariados pueden equivocadamente atribuir a choques de demanda una gran parte de la variabilidad del producto que en realidad es originada en choques de oferta. |
| Keywords: | Covid-19 recession, L-shaped recession, V-shaped recession, scarring effects, forecast performance, recesión del covid-19, recesión en forma de L, recesión en forma de V, secuelas de la recesión, desempeño de los pronósticos |
| JEL: | E17 E37 E32 E58 E47 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1123&r=all |
| By: | Brzezinski, Adam; Chen, Yao; Palma, Nuno Pedro G.; Ward, Felix |
| Abstract: | We exploit a recurring natural experiment to identify the effects of money supply shocks: maritime disasters in the Spanish Empire (1531-1810) that resulted in the loss of substantial amounts of monetary silver. A one percentage point reduction in the money growth rate caused a 1.3% drop in real output that persisted for several years. The empirical evidence highlights nominal rigidities and credit frictions as the primary monetary transmission channels. Our model of the Spanish economy confirms that each of these two channels explain about half of the initial output response, with the credit channel accounting for much of its persistence. |
| Keywords: | DSGE; financial accelerator; Local projection; minimum-distance estimation; Monetary shocks; Natural Experiment; Nominal Rigidity |
| JEL: | E43 E44 E52 N10 N13 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14089&r=all |
| By: | Joshua Bernstein; Alexander W. Richter; Nathaniel A. Throckmorton |
| Abstract: | This paper builds a nonlinear business cycle model with endogenous firm entry and exit and equilibrium unemployment. The entry and exit mechanism generates asymmetry and amplifies the transmission of productivity shocks, exposing the economy to significant tail risk. When calibrating the rates of entry and exit to match their shares of job creation and destruction, our quantitative model generates higher-order moments consistent with U.S. data. Firm exit particularly amplifies the severity and persistence of deep recessions such as the COVID-19 crisis. In the absence of entry and exit, the model generates almost no asymmetry or tail risk. |
| Keywords: | Unemployment; Firm Dynamics; Skewness; Labor Search; Nonlinear; COVID-19 |
| JEL: | E24 E32 E37 J63 L11 |
| Date: | 2020–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:88256&r=all |
| By: | Ozili, Peterson K |
| Abstract: | The current debate on financial inclusion pays little attention to whether financial inclusion is pro-cyclical with the fluctuating business cycle. This article investigates the relationship between financial inclusion and the business cycle. The findings reveal that the level of savings and the number of active formal accounts are pro-cyclical with fluctuations in the business cycle. Also, the level of savings by adults particularly for women and poor people decreases during recessionary periods while the number of active formal accounts decline for the adult population especially for women during recessionary periods. The findings also reveal that not all indicators of financial inclusion are pro-cyclical with fluctuating business cycles. The implication of the findings is that poor people and women will exit the formal financial sector during a recession, as banks become unwilling to lend money to poor individuals and households during bad times, and this will lead to financial exclusion and vice versa. Policy makers seeking to increase the level of financial inclusion should focus on the timing of financial inclusion policies along the business cycle as the findings suggest that it might be more difficult to achieve financial inclusion objectives during recessions. |
| Keywords: | Financial inclusion, pro-cyclicality, business cycle, financial crisis, access to finance, economic cycles, GDP, formal account ownership, borrowing, savings |
| JEL: | E10 E21 E3 E32 E51 G2 G21 I31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102054&r=all |
| By: | Robert Amano; Stefano Gnocchi; Sylvain Leduc; Joel Wagner |
| Abstract: | The Great Recession and current pandemic have focused attention on the constraint on nominal interest rates from the effective lower bound. This has renewed interest in monetary policies that embed makeup strategies, such as price-level or average-inflation targeting. This paper examines the properties of average-inflation targeting in a two-agent New Keynesian (TANK) model in which a fraction of firms have adaptive expectations. We examine the optimal degree of history dependence under average-inflation targeting and find it to be relatively short for business cycle shocks of standard magnitude and duration. In this case, we show that the properties of the economy are quantitatively similar to those under a price-level target. |
| Keywords: | ELB; make-up strategies; inflation targeting; price level targeting |
| JEL: | E31 E32 E52 |
| Date: | 2020–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:88289&r=all |
| By: | Del Negro, Marco; Lenza, Michele; Primiceri, Giorgio E.; Tambalotti, Andrea |
| Abstract: | The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. Inflation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect is due primarily to the muted reaction of inflation to cost pressures, regardless of how they are measured—a flat aggregate supply curve. A shift in policy towards more forceful inflation stabilization also appears to have played some role by reducing the impact of demand shocks on the real economy. The evidence rules out stories centered around changes in the structure of the labor market or in how we should measure its tightness. JEL Classification: E31, E32, E37, E52 |
| Keywords: | DSGE models, inflation, monetary policy trade-off, unemployment, VARs |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202435&r=all |
| By: | Aizhan Bolatbayeva (NAC Analytica, Nazarbayev University) |
| Abstract: | This paper presents a two-country macroeconometric model for the economies of Kazakhstan and Russia. The model can be used for interpreting the structural relationship between the two economies, determining the degree of trade integration and implementing scenario analyses with various shocks. Single-country models are linked through bilateral trade and exchange rate equations. The baseline simulation of the two-country model demonstrates a good accuracy in tracking the actual dynamics of macroeconomic indicators in both countries. Scenario analyses are conducted with a risk premium shock in the bilateral exchange rate and a monetary policy shock in Russia to analyze the transmission mechanism of the shocks, and clarify on the kind of interdependency of the economies. The model shows a larger influence of the risk premium shock on economic activity in Kazakhstan than in Russia. A two percentage point decline in the key rate does not impose significant inflationary pressure while imports and the real exchange rate are the most affected variables in both countries. |
| Keywords: | Two-country macroeconometric model; Cowles Commission approach; Structural macroeconomic model; Scenario analysis |
| JEL: | B22 E17 E27 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ajx:wpaper:5&r=all |
| By: | Rossi, Barbara |
| Abstract: | The recent financial crisis led central banks to lower their interest rates in order to stimulate the economy until they hit the zero lower bound. How should one identify monetary policy shocks in unconventional times? Are unconventional monetary policies as effective as conventional ones? And has the monetary policy transmission mechanism changed in the zero lower bound era? This article aims at providing an overview of the econometric challenges and solutions to the identification of monetary policy shocks in unconventional times as well as a survey of their empirical effects on the economy. |
| Keywords: | External Instruments; forward guidance; monetary policy; Shock identification; Unconventional Monetary Policy; VARs; zero lower bound |
| JEL: | D1 E21 E4 E52 H31 I3 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14064&r=all |
| By: | Tim D. Maurer; Thomas Nitschka |
| Abstract: | We decompose unexpected movements in the stock market returns of 40 countries into different news components to assess why expansionary US monetary policy surprises are good news for stock markets. Our results suggest that prior to the zero lower bound (ZLB) period, federal funds rate surprises affect foreign stock markets mainly because such surprises are associated with news about future real interest rates. The effects of forward guidance surprises are negligible. At the ZLB, large-scale asset purchases (LSAP) reflect more than commitment to forward guidance. LSAP surprises constitute cash-flow news, while unanticipated forward guidance primarily reflects real interest rate news. |
| Keywords: | International spillovers, news, monetary policy, stock returns, vector autoregression |
| JEL: | E44 E52 F36 G15 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2020-10&r=all |
| By: | Jacopo Bonchi (Department of Social Sciences and Economics, Sapienza University of Rome) |
| Abstract: | Asset price bubbles are a major source of macroeconomic instability, but can they play a stabilizing role in a low interest rates environment? To answer this question, I study an economy in which the natural rate of interest declines permanently and a long-lasting zero lower bound (ZLB) episode makes risk-free interest rates persistently low. Asset price bubbles redistribute wealth across generations because of the life-cycle pattern of net worth. In this way, they increase the natural interest rate by serving as a store of value for older cohorts and as a collateral for the younger ones, and the central bank can escape from the ZLB with consequent output gains. Therefore, the redistribution of wealth/consumption across generations, which would be welfare-reducing in normal times, becomes welfare-enhancing. However, asset price bubbles affect mainly the natural interest rate through their role of collateral, and a leveraged bubble is the most detrimental for output when it crashes (Jordá et al., 2015). |
| Keywords: | Asset price bubbles; Natural interest rate; Zero lower bound |
| JEL: | E13 E44 E52 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:9/20&r=all |
| By: | Christian Loenser (University of Cologne, Center for Macroeconomic Research); Andreas Schabert (University of Cologne, Center for Macroeconomic Research) |
| Abstract: | This paper examines how financial constraints affect redistribution via monetary policy. We explore a novel mechanism of monetary non-neutrality, which is based on debt limits imposed in nominal terms. Speci cally, when debt is constrained by current income, monetary policy can alter the real terms of borrowing. Changes in ination exert ambiguous effects, depending on the initial debt/wealth position and the willingness to borrow. We show analytically that borrowers can bene t from increased debt limits under lower inflation rates. This novel effect can dominate conventional debt deflation effects. We find that particularly less indebted borrowers as well as potential future borrowers gain and that aggregate welfare can be enhanced under a permanent reduction in inflation. |
| Keywords: | Monetary policy, redistribution, borrowing limits, non-state contingent nominal debt, heterogeneous agents |
| JEL: | D52 E44 E52 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:011&r=all |
| By: | Tweneboah Senzu, Emmanuel |
| Abstract: | The different target of the time period has been established over the past two decades in the institutionalization of a single currency union in West Africa. Depending on varied reasons the proposed programs have always failed before the set timelines in respect of ECOWAS monetary unification and single currency adoption. As a result, the paper explored and developed its argument based on the existing studies of structured economic shocks, significant to the failure of the single currency union, and its major causal factors. And with observed structured analysis propose catalytic activator method as a theoretical guide to attain the single currency union within three (3) years ahead, if the necessary requirement as the commitment level of members’ State is applied towards the single currency unification program. It then elaborates in the spirit of precision the process required to sustain the eco-currency program in other to elevate members State in an out-date of its domestic currencies struggling as a subservient economic bloc to the adoption of a new anticipated domineering currency in its own merit to shoulder with the global dominating hard currencies. |
| Keywords: | Eco-currency, Monetary Union, ECOWAS, Central Bank, Monetary Policy |
| JEL: | E2 E3 E4 E5 E6 |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102141&r=all |
| By: | Jacopo Bonchi (Department of Social Sciences and Economics, Sapienza University of Rome); Francesco Simone Lucidi (Department of Economics and Law, Sapienza University of Rome) |
| Abstract: | Leveraged asset price bubbles, i.e., periods of boom-bust phases in asset prices accompanied by credit overhangs, are more harmful than unleveraged ones, in terms of financial and price stability. As bubbles are difficult to detect in real-time data, early researches focused on the macroeconomic conditions exacerbating the bubbles' nature. What kind of bubble is likely to emerge in an economy characterized by slow growth and a low real interest rate? This paper shows why the leveraged bubble is the answer to this question. First, we show that a negative real rate is sufficient for leveraged bubbles to emerge but not for unleveraged ones, in a stylized OLG model with incomplete credit markets and income inequality. Second, we show that this result holds empirically for post-World War II bubbles in advanced economies. |
| Keywords: | low interest rates, leveraged bubbles, unleveraged bubbles |
| JEL: | E43 E44 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:12/20&r=all |
| By: | John G. Fernald; Robert Inklaar |
| Abstract: | In the years since the Great Recession, many observers have highlighted the slow pace of labor and total factor productivity (TFP) growth in advanced economies. This paper focuses on the European experience, where we highlight that trend TFP growth was already low in the runup to the Global Financial Crisis (GFC). This suggests that it is important to consider factors other than just the deep crisis itself or policy changes since the crisis. After the mid-1990s, European economies stopped converging, or even began diverging, from the U.S. level of TFP. That said, in contrast to the United States, there is some macroeconomic evidence for some northern European countries that the GFC had a further adverse impact on TFP growth. Still, the challenges for economic policy look surprisingly similar to the ones discussed prior to the Great Recession, even if the policy implications seem less clear. |
| Keywords: | Productivity Growth; Great Recession; Convergence |
| JEL: | D24 E23 E44 F45 O47 |
| Date: | 2020–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:88300&r=all |
| By: | Ferrari, Massimo Minesso |
| Abstract: | In this paper, I incorporate a complex network model into a state of the art stochastic general equilibrium framework with an active interbank market. Banks exchange funds one another generating a complex web of interbanking relations. With the tools of network analysis it is possible to study how contagion spreads between banks and what is the probability and size of a cascade (a sequence of defaults) generated by a single initial episode. Those variables are a key component to understand systemic risk and to assess the stability of the banking system. In extreme scenarios, the system may experience a phase transition when the consequences of one single initial shock affect the entire population. I show that the size and probability of a cascade evolve along the business cycle and how they respond to exogenous shocks. Financial shocks have a larger impact on contagion probability than real shocks that, however, are long lasting. Additionally I find that monetary policy faces a trade off between financial stability and macroeconomic stabilization. Government spending shocks, on the contrary, have smaller effects on both. JEL Classification: E44, E32, E52, E58, D85 |
| Keywords: | contagion, DSGE, heterogenous agents, interbank market, network analysis |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202432&r=all |
| By: | Peter Zorn |
| Abstract: | Macroeconomic and sector-specific shocks exert differential effects on investment in disaggregate sectoral data. The response to macroeconomic shocks is hump-shaped, just as in aggregate data. The effects of sectoral innovations decrease monotonically. A calibrated model of investment with convex capital adjustment costs and rational inattention explains these features of the data. The model matches the empirical responses of sectoral investment because learning about shocks generates additional investment demand over time, and more so after aggregate shocks with relatively higher persistence. The interaction of information frictions and physical adjustment costs is key to this result. |
| Keywords: | investment dynamics, hump shape, rational inattention, adjustment costs |
| JEL: | E22 E32 D83 C38 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8436&r=all |
| By: | Seunghoon Na; Hyunseung Oh |
| Abstract: | Advancements in computer technology have reshaped not only business operations but also household consumption. We estimate a business-cycle model disaggregating consumer IT and non-IT durable goods from the capital stock. We find that shocks to the supply of IT durables account for more than half of the variation in house- holds' real expenditure on IT durables. Furthermore, investment-specific productivity shocks drove nearly half of the rapid growth in household durable expenditures during the 2000s. Nonetheless, they have small influence over output dynamics, because unlike business investment goods, consumer durables do not add to the productive capital of the economy. The shocks become important when household IT goods are complementary to firms' capital, such as when online services are provided through consumers' smartphones. |
| Keywords: | Investment; Durables; Investment-specific productivity |
| JEL: | E22 E32 E37 |
| Date: | 2020–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1292&r=all |
| By: | Robert Kollmann |
| Abstract: | The closed economy macro literature has shown that a liquidity trap can result from the self-fulfilling expectation that future inflation and output will be low (Benhabib et al. (2001)). This paper investigates expectations-driven liquidity traps in a two-country New Keynesian model of a monetary union. In the model here, country-specific productivity shocks induce synchronized responses of domestic and foreign output, while country-specific aggregate demand shocks trigger asymmetric domestic and foreign responses. A rise in government purchases in an individual country lowers GDP in the rest of the union. The result here cast doubt on the view that, in the current era of ultra-low interest rates, a rise in fiscal spending by Euro Area (EA) core countries would significantly boost GDP in the EA periphery (e.g. Blanchard et al. (2016)). |
| Keywords: | Zero lower bound; liquidity trap; monetary union; terms of trade; international fiscal spillovers; Euro Area |
| JEL: | E30 E40 F20 F30 F40 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/310507&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Republic of Kazakhstan discusses that the political transition has increased the focus on social conditions and regional and rural development. Discussions focused on enhancing the inflation-targeting framework, bank soundness, the fiscal framework, structural reforms, and governance. Growth has been buoyed by new spending, retail credit, and oil and gas investments. Inflation has picked up, and the current account has deteriorated. High domestic demand driven by major oil and gas investments and government and household consumption supported by wage increases and consumer lending has underpinned the economy’s strong performance. The state continues to play a strong role in the economy, and the authorities face challenges ensuring that measures are well targeted and effective in promoting private sector growth. The challenges include oil volatility and dependency, reliance on subsidies and other state support, still-impaired banks, and governance vulnerabilities. Progress is being made with structural reform implementation, with many of the flagships “100 Concrete Steps” completed and the remaining ones broadly on track. Efforts to promote a smaller state footprint should continue, with actions to improve governance and mitigate corruption vulnerabilities. |
| Keywords: | Balance of payments;Economic indicators;Central banks;Macroprudential policies and financial stability;Monetary policy;ISCR,CR,NBK,non-oil,percent of GDP,SOEs,tenge |
| Date: | 2020–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/032&r=all |
| By: | Sebastian Graves |
| Abstract: | The responsiveness of job creation to shocks is procyclical, while the responsiveness of job destruction is countercyclical. This new finding can be explained by a heterogeneous-firm model in which hiring costs lead to lumpy employment adjustment. The model predicts that policies that aim to stimulate employment by encouraging job creation, such as hiring subsidies, are significantly less effective in recessions: These are times when few firms are near their hiring threshold and many firms are near their firing threshold. Policies that target the job destruction margin, such as employment protection subsidies, are particularly effective at such times. |
| Keywords: | Labor market frictions; Hiring costs; Hiring subsidies; Employment stabilization policies; Time-varying volatility |
| JEL: | E24 E32 E63 |
| Date: | 2020–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1290&r=all |
| By: | Kandoussi, Malak (University of Evry); Langot, François (University of Le Mans) |
| Abstract: | We develop a multi-sectoral matching model to predict the impact of the lockdown on the US unemployment, considering the heterogeneity of workers to account for the contrasted impacts across various types of jobs. We show that separations and business closures that hit the workers with the first level of education explains the abruptness of the unemployment rise. The existence of significant congestion externalities in the hiring process suggests that a comeback to the pre-crisis unemployment level could be reached in 2024 in a scenario with a double wave. In the same scenario, a calibration on French data leads to more pessimistic forecasts with a comeback to the pre-crisis unemployment level expected until 2027. |
| Keywords: | COVID-19, unemployment dynamics, search and matching, worker heterogeneity |
| JEL: | E24 E32 J64 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13439&r=all |
| By: | Satyajit Chatterjee; Burcu Eyigungor |
| Abstract: | Larger firms (by sales or employment) have higher leverage. This pattern is explained using a model in which firms produce multiple varieties and borrow with the option to default against their future cash flow. A variety can die with a constant probability, implying that bigger firms (those with more varieties) have a lower coefficient of variation of sales and higher leverage. A lower risk-free rate benefits bigger firms more as they are able to lever more and existing firms buy more of the new varieties arriving into the economy. This leads to lower startup rates and greater concentration of sales. |
| Keywords: | Startup rates; leverage; firm dynamics |
| JEL: | E22 E43 E44 G32 G33 G34 |
| Date: | 2020–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:88451&r=all |
| By: | Kandoussi, Malak (University of Evry); Langot, François (University of Le Mans) |
| Abstract: | Recent events suggest that uncertainty changes play a major role in U.S. labor market fluctuations. This study analyzes the impact of uncertainty shocks on unemployment dynamics. Using a vector autoregression approach, we show that uncertainty shocks measured by stock market volatility have a significant impact on the U.S. unemployment rate. We then develop a quantitative version of the Diamond-Mortensen-Pissarides (DMP) model, in which uncertainty shocks hit the economy. Given the significant nonlinearities of the DMP model, we show that the introduction of uncertainty shocks not only allows this textbook model to account for observed characteristics of the U.S. labor market dynamics, with reasonable values for calibrated parameters, but also for the impact of rare episodes such as economic crises. |
| Keywords: | uncertainty shocks, unemployment dynamics, search and matching, non-linearities |
| JEL: | E24 E32 J64 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13438&r=all |
| By: | Favero, Carlo A.; Mei, Pierfrancesco |
| Abstract: | This paper studies the impact of multi-year fiscal consolidation plans on public debt dynamics. Studying the dynamic impact of narratively identified fiscal adjustment plans we find that tax based adjustments result in significant slowdowns of output and inflation but have almost no effect on the debt GDP ratio over a short to medium-term horizon. Spending cuts have instead milder recessionary effects, but contribute to a sustained reduction in the debt GDP ratio. Extending our model to study non-linearities in the dynamics related to the business-cycle and the public debt to GDP ratio, we find that the heterogeneous impact of tax-based and expenditure-based plans on debt mainly emerges mostly in recessions and when debt is increasing rapidly. |
| Keywords: | austerity; fiscal adjustment plans; output growth; public debt |
| JEL: | E60 E62 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14072&r=all |
| By: | Christofzik, Désirée I.; Fuest, Angela; Jessen, Robin |
| Abstract: | This paper quantifies the dynamic macroeconomic effects of tax changes in Germany, allowing for anticipation effects of preannounced tax reforms. Identification is achieved using a narrative approach which provides information about the timing of tax reforms. For an anticipated tax shock, we find an implied peak tax multiplier after implementation of 1.7. However, this positive effect is accompanied by significantly negative anticipation effects, in particular for output, investment, and hours worked. A substantial positive impact is observed only several quarters after implementation. Our results suggest that tax policy may thus be able to exploit anticipation effects by strategically announcing policy measures. |
| Keywords: | fiscal policy,tax policy,anticipation effects |
| JEL: | H20 H30 E32 E62 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:852&r=all |
| By: | Pablo Aguilar (Banco de España); Corinna Ghirelli (Banco de España); Matías Pacce (Banco de España); Alberto Urtasun (Banco de España) |
| Abstract: | We construct a new newspaper-based sentiment indicator for Spain that allows us to monitor Spanish economic activity in real-time. As opposed to the traditional survey-based confidence indicators that are released at the end of the month, our indicator can be constructed on a daily basis and updated in real-time. We compare our proposed index with the popular Economic Sentiment Indicator of the European Commission, and we show that ours performs significantly better in nowcasting the Spanish GDP. In addition, our indicator proves to be helpful in order to predict the current COVID-19 recession from an earlier date. All in all, our indicator performs similarly to or even outperforms other soft indicators, with the advantage of being updated daily. Thus, it provides a valuable option when measuring the confidence in the economy. |
| Keywords: | nowcasting, GDP, recession, real-time, textual analysis, sentiment indicators, soft indicators |
| JEL: | E32 E37 C53 C23 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2027&r=all |
| By: | George Economides; Pantelis Kammas; Thomas Moutos |
| Abstract: | We explain the public’s support for the minimum wage (MW) institution despite economists’ warnings that the MW is a “blunt instrument” for redistribution. To do so we build a model in which workers are heterogeneous in ability, and the government engages in redistribution through the public provision of private goods. We show that the MW institution is politically viable only when there is a limited degree of in-kind redistribution. To examine the empirical relevance of our hypothesis we investigate the relationship between the probability of adopting MW legislation and the size of primary government spending by employing a dataset of 38 -developing and developed- countries from 1960 to 2017. Probit model estimations yield support for our theoretical prediction that a decrease in government spending increases the likelihood of a country enacting MW legislation. This negative association remains highly robust under alternative empirical specifications and estimation techniques. |
| Keywords: | minimum wage, redistribution, heterogeneity, unemployment |
| JEL: | E21 E24 H23 J23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8355&r=all |
| By: | Thiago Revil T. Ferreira; Samer Shousha |
| Abstract: | We quantitatively evaluate the role of supply and demand of safe assets in determining neutral interest rates. Using an empirical cross-country state-space model, we find that the net supply of sovereign safe assets available to the private sector in secondary markets is an important driver of neutral rates for 11 advanced economies in the period 1970–2018. We also find that the global accumulation of international reserves in sovereign safe assets since the 1990s (the global savings glut) lowered the net supply of these assets and, thus reduced neutral rates by up to 50 basis points in our sample. |
| Keywords: | Neutral interest rates; Scarcity of safe assets; International reserves; Global savings glut |
| JEL: | E21 E43 E52 |
| Date: | 2020–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1293&r=all |
| By: | Sophie Altermatt; Simon Beyeler |
| Abstract: | We study the implementation and effectiveness of Operation Twist, which represents the origin of today's unconventional monetary policy measures. Operation Twist serves as a perfect laboratory to assess the usefulness of such balance sheet policies because at that time interest rates were not at their lower bound and the economy was not in a historic turmoil. We assess the actions of the Fed and the Treasury under Operation Twist based on balance sheet data and evaluate the success of the operation using modern time series techniques. We find that the joint policy actions, despite being of rather moderate scale, were effective in compressing the long-short spreads of Treasury bond rates. |
| Keywords: | Operation Twist, monetary policy, interest rates, yield curve, time series |
| JEL: | C22 E43 E52 E63 E65 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2020-11&r=all |
| By: | Pierpaolo Benigno (Department of Economics, University of Bern); Salvatore Nisticò (Department of Social Sciences and Economics, Sapienza University of Rome) |
| Abstract: | An economy plagued by a slump and in a liquidity trap has some options to exit the crisis. We discuss "helicopter money" and other equivalent policies that can reflate the economy and boost consumption. In the framework analysed - where lump-sum transfers may be the only effective fiscal response, like in the current pandemic crisis - the central bank, and only the central bank, is the rescuer of last resort of the economy. Fiscal policy is bounded by solvency constraints unless the central bank backs treasury's debt. |
| Keywords: | Helicopter money, ZLB, Pandemic Crisis |
| JEL: | E50 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:8/20&r=all |
| By: | Aida Farmand; Teresa Ghilarducci; Siavash Radpour; Bridget Fisher (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | The COVID-19 recession increased the risks of job loss and getting sick on the job and worsened the inequality in the distribution of job safety among older workers. Older women workers and older Black workers are underrepresented in safe jobs and overrepresented in jobs at risk for job loss and illness. |
| Keywords: | Covid-19, Public health, Workers, Jobs, Unemployment, Risk, Frontline, Race, Older workers |
| JEL: | E24 I14 J62 J38 E21 J83 J32 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapn:2020-04&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Philippines highlights that the economic performance remains strong. The discussions focused on macroeconomic policies to keep the economy close to balance under the baseline outlook and risk scenarios; strategies for macroprudential policies to address risks from a potential renewed acceleration in credit growth; and policies and reforms to foster stronger and inclusive growth. 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. Gross domestic product growth is projected to rise further in the near term, underpinned by government spending acceleration and the recent monetary policy easing. Risks to the outlook are to the downside, reflecting risks to the global economy from increased trade tensions, shifts in global financial conditions, and natural disasters. |
| Keywords: | Balance of payments;Financial statistics;Real sector;Economic indicators;National accounts;ISCR,CR,BSP,IMF,percent,GDP,percent of GDP |
| Date: | 2020–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/036&r=all |
| By: | Luo, Yinghao |
| Abstract: | We study the relationship between symmetry, efficient markets and monetary neutrality. We find that information symmetry can lead markets to reach efficient outcomes and will produce the prices which fluctuate randomly. However, information symmetry is almost impossible to achieve without considering the time factor! In addition, efficient markets can lead to monetary neutrality. |
| Keywords: | information symmetry; communism; efficient markets; value neutrality; monetary neutrality |
| JEL: | A13 D3 D8 E44 E5 G14 |
| Date: | 2020–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101891&r=all |
| By: | Gustav Engström; Johan Gars; Niko Jaakkola; Therese Lindahl; Daniel Spiro; Arthur A. van Benthem |
| Abstract: | The coronavirus pandemic has led many countries to initiate unprecedented economic recovery packages. Policymakers tackling the coronavirus crisis have also been encouraged to prioritize policies which help mitigate a second, looming crisis: climate change. We identify and analyze policies that combat both the coronavirus crisis and the climate crisis. We analyze both the long-run climate impacts from coronavirus-related economic recovery policies, and the impacts of long-run climate policies on economic recovery and public health post-recession. We base our analysis on data on emissions, employment and corona-related layoffs across sectors, and on previous research. We show that, among climate policies, labor-intensive green infrastructure projects, planting trees, and in particular pricing carbon coupled with reduced labor taxation boost economic recovery. Among coronavirus policies, aiding services sectors (leisure services such as restaurants and culture, or professional services such as technology), education and the healthcare sector appear most promising, being labor intensive yet low-emission—if such sectoral aid is conditioned on being directed towards employment and on low-carbon supply chains. Large-scale green infrastructure projects and green R&D investment, while good for the climate, are unlikely to generate enough employment to effectively alleviate the coronavirus crisis. |
| Keywords: | coronavirus, climate policy |
| JEL: | Q54 E62 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8367&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Australia discusses that a continued gradual economic recovery is expected, subject to downside risks. Growth should continue to recover in 2020, but it will take time for the economy to return to potential and restore inflation to within the target range. Despite sound macroeconomic fundamentals and policy management, growth remains below potential and inflation is slightly below its target range. Growth is projected to recover gradually in the near term, supported by monetary policy easing, tax cuts, and the recovery of housing markets. Nonetheless, inflation is forecast to remain slightly below the target range until 2021 due to persistent economic slack. Downside risks, including a renewed escalation of the China–US tensions and weaker private consumption, remain elevated and have increased recently due to the widespread bushfires and the coronavirus outbreak. On the upside, looser financial conditions could re-accelerate asset-price inflation, boosting private consumption but also adding to medium-term vulnerabilities. |
| Keywords: | Financial and Monetary Sector;Balance of payments;National accounts;Economic conditions;Unemployment;ISCR,CR,RBA,bushfire,infrastructure spend,wage growth,Haver |
| Date: | 2020–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/068&r=all |
| By: | Anton Grui (National Bank of Ukraine) |
| Abstract: | In this study, I modify the uncovered interest parity condition to account for foreign exchange interventions in the context of a small open economy. This is done in a framework of a semistructural New Keynesian model. I examine the case of Ukraine, which de facto transitioned to inflation targeting with a managed float in 2015 after a long period of pegged exchange rate. I simulate model-consistent foreign exchange interventions and use them to quantify the effectiveness of those actually observed. The proposed modification is relevant for inflation targeting regimes with foreign exchange interventions as an additional instrument and those in transition. |
| Keywords: | New Keynesian model, UIP, exchange rate, FX interventions |
| JEL: | E12 E17 E52 F31 |
| Date: | 2020–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp14-2020&r=all |
| By: | Marina Azzimonti; Gabriel P. Mihalache; Laura Karpuska |
| Abstract: | Do mandatory spending rules improve social welfare? We analyze a dynamic political-economy model in which two parties disagree on the split of a fixed budget between public goods and private transfers. Under a mandatory spending rule, expenditures are governed by criteria set by enacted law, namely last year’s spending bill is applied in the current year unless successfully changed by a majority of policymakers. We model budget rules with an endogenous status quo and study the welfare implications of introducing entitlement programs. Entitlements depend on individual eligibility and participation and, hence, impose constraints on publicly-provided private goods and transfers. We emphasize that bargaining over entitlements is qualitatively different from bargaining over public goods provision, particularly with risk-aversion. Entitlement programs induce under-provision of public goods but also a smoother path for private consumption than discretion. Whether entitlement programs are welfare-improving depends critically on political turnover. When proposers alternate frequently, it benefits society because it reduces volatility in private consumption. Outcomes under rules can be worse than under discretion if political power is persistent enough. We contrast these findings to those from a mandatory spending rule on public goods, commonly studied in the literature. Finally, we describe conditions under which all parties would agree to the introduction of budget rules, within a bargaining equilibrium. |
| JEL: | C7 D6 E6 E62 H53 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27595&r=all |
| By: | Jappelli, Tullio; Pistaferri, Luigi |
| Abstract: | Panel data on reported marginal propensity to consume (MPC) in the 2010 and 2016 Italy's Survey of Household Income and Wealth uncover a strong negative relationship between cash-on-hand and MPC. Even though the relationship is attenuated when using regression methods that control for unobserved heterogeneity, the amount of bias is moderate. MPC estimates are used to evaluate the effectiveness of revenue-neutral fiscal policies targeting different parts of the distribution of household resources. |
| Keywords: | marginal propensity to consume; panel data; Transitory Income Shocks |
| JEL: | D12 D14 E21 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14083&r=all |
| By: | Javier García-Cicco |
| Abstract: | We evaluate the dynamics of a small and open economy under alternative monetary policy instruments, in a model with imperfectly anchored expectations. The consensus under inflation targeting is that rules for an interest rate are preferred, instead of using either some monetary aggregate or the exchange rate. Theses arguments are usually presented assuming rational expectations (RE) hold and there is full credibility. In contrast we consider deviations from RE, where a fraction of agents uses econometric models to form expectations, capturing imperfectly anchored expectations or limited credibility (LC). The model also features a non-trivial banking sector, allowing for different interest rates and monetary aggregates. We compare the dynamics after a shock to the cost of external borrowing (arguably one of the most important sources of fluctuations in emerging countries) under three policy instruments: a Taylor-type rule for the interest rate, a constant-growth-rate rule for base money, and a fixed exchange rate. The analysis allows to identify relevant trade-offs in choosing alternative policy instruments, showing that the differences between the alternatives are exacerbated under LC. |
| JEL: | E52 E31 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4145&r=all |
| By: | Pietro Cova (Bank of Italy); Alessandro Notarpietro (Bank of Italy); Massimiliano Pisani (Bank of Italy) |
| Abstract: | This paper evaluates the macroeconomic impact on the euro area (EA) of the imposition of tariffs by simulating a multi-country New Keynesian model featuring the effective lower bound (ELB) on the EA monetary policy rate. The main results are as follows. First, the bilateral tariff dispute between the United States (US) and China (CH) has positive spillovers on the EA economy, because of favorable trade diversion effects. Second, simultaneous tariff increases between the US and CH and between the US and EA have negative effects on euro-area GDP and (ex-tariff) inflation. The effects are magnified if the ELB binds in the EA. Third, if the elasticity of substitution among tradables is low, the spillovers on euro-area GDP of US-CH trade tensions are negligible if the ELB is not binding, while they become negative if the ELB binds. |
| Keywords: | euro area, inflation, tariffs, effective lower bound, DSGE models. |
| JEL: | C54 E52 F13 F41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1286_20&r=all |
| By: | Born, Benjamin; D'Ascanio, Francesco; Müller, Gernot; Pfeifer, Johannes |
| Abstract: | Under fixed exchange rates, fiscal policy is an effective tool. According to classical views because it impacts the real exchange rate, according to Keynesian views because it impacts output. Both views have merit because the effects of government spending are asymmetric. A spending cut lowers output but does not alter the real exchange rate. A spending increase appreciates the exchange rate but does not alter output unless there is economic slack. We establish these results in a small open economy model with downward nominal wage rigidity and provide empirical evidence on the basis of quarterly time-series data for 38 countries. |
| Keywords: | asymmetric adjustment; Downward Nominal Wage Rigidity; Exchange rate peg; Government Spending Shocks; Non-linear effects; output; real exchange rate |
| JEL: | E62 F41 F44 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14073&r=all |
| By: | De Santis, Roberto A.; Van der Veken, Wouter |
| Abstract: | We show that financial variables contribute to the forecast of GDP growth during the Great Recession, providing additional insights on both first and higher moments of the GDP growth distribution. If a recession is due to an unforeseen shock (such as the Covid-19 recession), financial variables serve policymakers in providing timely warnings about the severity of the crisis and the macroeconomic risk involved, because downside risks increase as financial stress and corporate spreads become tighter. We use quantile regression and the skewed t-distribution and evaluate the forecasting properties of models using out-of-sample metrics with real-time vintages. JEL Classification: C53, E23, E27, E32, E44 |
| Keywords: | Covid-19 Recession, downside risks, Great Recession, non-linear models, real-time forecast |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202436&r=all |
| By: | International Monetary Fund |
| Abstract: | This technical note assesses strengths and weaknesses of the macroprudential policy framework in Austria and provides policy recommendations. Financial sector resilience in Austria has improved significantly since the global financial crisis, and the macroprudential policy framework has been formalized. The institutional framework is appropriate for conducting macroprudential policy effectively, but it could be strengthened in some areas. However, some structural vulnerabilities to financial stability remain and cyclical risks are on the rise. Banks’ low efficiency and the resulting low profitability of domestic operations continues to be a key concern, especially given the fact that the Central Europe and South Eastern Europe region accounts for over 40 percent of Austrian banks' consolidated profits. The framework contains a clear mandate, well-defined objectives, and provides enough powers to the Financial Market Stability Board. Broad-based vulnerabilities remain contained but build-up of risks in the real estate sector warrants further action. The framework for addressing structural vulnerabilities is sophisticated, however, further improvements could be considered. |
| Keywords: | Financial crises;Real sector;Financial markets;Macroprudential policies and financial stability;Financial systems;ISCR,CR,OeNB,FMA,Austrian bank,data gap,real estate sector |
| Date: | 2020–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/064&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents 2019 Article IV Consultation with the Republic of Madagascar and its Sixth Review Under the Extended Credit Facility (ECF) Arrangement. Madagascar’s performance under its economic program supported by the ECF arrangement has been broadly satisfactory with solid growth, moderate single digit inflation, and a robust external position. As a fragile, low-income country, Madagascar continues to face risks associated with weak implementation capacity, potential fiscal slippages, social fragility in a context of widespread poverty, and vulnerability to exogenous shocks including to terms of trade and natural disasters. Going forward, a commitment to strong policies and an ambitious agenda to complete outstanding structural reforms remains crucial to mitigate internal and external risks, strengthen macroeconomic stability, and achieve higher, sustainable, and inclusive growth. The authorities’ economic reform agenda summarized in the Plan Emergence Madagascar aims to raise economic growth through increased public and private investment, strengthening human capital, and improving governance. Creating additional fiscal space by further improving revenue mobilization through a medium-term tax revenue strategy, containing lower priority spending, and enhancing investment implementation capacity is essential for scaling-up priority investment and social spending in education, health, and housing. |
| Keywords: | Economic growth;External sector;Public financial management;Fiscal policy;Public investments;ISCR,CR,social spend,medium-term,percent of GDP,ECF,PEM |
| Date: | 2020–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/060&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Republic of Nauru highlights that it remains vulnerable to climate change and has a narrow economic base and limited capacity. Development challenges are increased by unavailability of land and high incidence of noncommunicable diseases. Growth was stronger than expected in FY2018 but slowed in FY2019. The outlook is subdued, with growth expected to reach 2 percent in the medium term. Revenues are projected to decline, necessitating a fiscal adjustment. Risks are skewed to the downside and include the scaling down of Regional Processing Centre activity and revenues, volatile fishing revenues, climate change, and delays in fiscal and structural reforms. Fiscal adjustment is required to avoid a breach of the fiscal anchor, contain debt, and maintain the Trust Fund contributions. New sources of economic growth and income are needed to support Nauru’s development agenda. Policies should be implemented in the near term to support private sector activity, including through financial sector development, state-owned enterprises reform, and land rehabilitation. The effectiveness of education and health spending needs to be improved to meet development goals. |
| Keywords: | Public financial management;Balance of payments;Real sector;Revenue administration;Development;ISCR,CR,Australian dollar,RPC,percent of GDP,SOEs,trust fund |
| Date: | 2020–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/031&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Estonia discusses that the outlook is favorable for the near term, however, for slower economic activity for the medium term. Th economy has performed well in recent years, supported by prudent management and effective structural reforms. Growth remains strong and unemployment is at a record low. Inflation is above the euro-area average, consistent with Estonia’s convergence process. Wages are rising, reflecting a tight labor market and skill shortages at the high end of the labor market. Absent reforms to boost productivity and manage demographic challenges, however, growth will slow notably. The authorities need to guard against potential overheating in the near term while taking advantage of sizable fiscal buffers in the medium term to support innovation and labor supply and reduce inequality. The report recommends that it is imperative to consider changes that preserve the pension system’s viability and sustainability, while promoting policies that address inequality. This includes raising female labor participation through broader implementation of gender pay transparency and flexible childcare arrangements. |
| Keywords: | External sector;Financial crises;National income;Financial markets;Financial soundness indicators;ISCR,CR,AML,CFT,wage growth,text figure,GDP,article IV consultation |
| Date: | 2020–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/012&r=all |
| By: | Michael Elsby; Ryan Michaels; David Ratner |
| Abstract: | Replacement hiring—recruitment that seeks to replace positions vacated by workers who quit—plays a central role in establishment dynamics. We document this phenomenon using rich microdata on U.S. establishments, which frequently report no net change in their employment, often for years at a time, despite facing substantial gross turnover in the form of quits. We propose a model in which replacement hiring is driven by the presence of a putty-clay friction in the production structure of establishments. Replacement hiring induces a novel positive feedback channel through which an initial rise in vacancy posting induces still more vacancy posting to replace employees who are poached. This vacancy chain in turn induces volatile responses of vacancies, and thereby unemployment, to cyclical shocks. |
| Keywords: | Quits; replacement hiring; unemployment; vacancies; business cycles. |
| JEL: | E32 J63 J64 |
| Date: | 2020–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:88450&r=all |
| By: | Muñoz, Manuel A. |
| Abstract: | Recent empirical studies have documented two remarkable patterns shown by euro area banks in the aftermath of the Great Recession: (i) their tendency to boost capital ratios by shrinking assets (contraction of loans supply), and (ii) their reluctance to cut back on dividends (fall in retained earnings). First, I provide evidence of a potential link between these two trends. When shocks hit their profits, banks tend to adjust retained earnings to smooth dividends. This generates bank equity and credit supply volatility. Then I develop a DSGE model that incorporates this mechanism to study the transmission and effects of a novel macroprudential policy rule - that I shall call Dividend Prudential Target (DPT) - aimed at complementing existing capital regulation by tackling this issue. Welfare-maximizing DPTs are effective (more than the CCyB) in smoothing the financial and the business cycle (by means of less volatile retained earnings) and induce significant welfare gains associated to a Basel III-type of capital regulation through various channels. JEL Classification: E44, E61, G21, G28, G35 |
| Keywords: | capital requirements, countercyclical capital buffer (CCyB), dividend restrictions, DSGE models, macroprudential policy |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202433&r=all |
| By: | Robert E. Hall; Marianna Kudlyak |
| Abstract: | It is a remarkable fact about the historical US business cycle that, after unemployment reached its peak in a recession, and a recovery began, the annual reduction in the unemployment rate was stable at around 0.55 percentage points per year. The economy seems to have had an irresistible force toward restoring full employment. There was high variation in monetary and fiscal policy, and in productivity and labor-force growth, but little variation in the rate of decline of unemployment. We explore models of the labor market's self-recovery that imply gradual working off of unemployment following a recession shock. These models explain why the recovery of market-wide unemployment is so much slower than the rate at which individual unemployed workers find new jobs. The reasons include the fact that the path that individual job-losers follow back to stable employment often includes several brief interim jobs, sometimes separated by time out of the labor force. We show that the evolution of the labor market involves more than the direct effect of persistent unemployment of job-losers from the recession shock--unemployment during the recovery is elevated for people who did not lose jobs during the recession. |
| Keywords: | Business cycle; Recovery; Unemployment; Recession |
| JEL: | E32 J63 J64 |
| Date: | 2020–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:88288&r=all |
| By: | Alina K. Bartscher (University of Bonn); Moritz Kuhn (University of Bonn, CEPR, and IZA); Moritz Schularick (Federal Reserve Bank of New York and University of Bonn, CEPR); Ulrike I. Steins (University of Bonn) |
| Abstract: | This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility. |
| Keywords: | household debt, inequality, household portfolios, financial fragility |
| JEL: | E21 E44 D14 D31 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:015&r=all |
| By: | W. Scott Frame; Eva Steiner |
| Abstract: | An emerging literature documents a link between central bank quantitative easing (QE) and financial institution credit risk-taking. This paper tests the complementary hypothesis that QE may also affect financial risk-taking. We study Agency MREITs – levered shadow banks that invest in guaranteed U.S. Agency mortgage-backed securities (MBS) principally funded with repo debt. We show that Agency MREIT growth is inversely related to the Federal Reserve’s Agency MBS purchases, reflecting investor portfolio rebalancing. We also find that these institutions increased leverage during the later stages of QE, consistent with “reaching for yield” behavior. Agency MREITs seem to concurrently adjust their liquidity and interest rate risk profiles. |
| Keywords: | Quantitative Easing; Risk Taking; GSEs; Mortgages; Agency MBS |
| JEL: | E58 G21 G23 G28 |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:88322&r=all |
| By: | Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa); Xin Sheng (Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, CM1 1SQ, United Kingdom); Qiang Ji (Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China) |
| Abstract: | This paper analyses the dynamic impact of uncertainty due to global pandemics (SARS, H5N1, H1N1, MERS, Ebola, and COVID-19) on global output growth for the quarterly period of 1996:Q1 to 2020:Q1, using a time-varying parameter structural vector autoregressive (TVP-SVAR) model. Besides the index based on the discussion about pandemics which appear in Economist Intelligence Unit (EIU) country reports, our model contains the growth rate of the United States (US), advanced economies excluding the US, and emerging market countries. We find that the negative effect of the coronavirus on the growth rate of output is unprecedented, with the emerging markets being the worst hit. We also find that since 2016, the comovement among the growth rates has increased significantly. Our results imply that policymakers would need to undertake massive expansionary policies, but it is also important to pursue well-coordinated policy decisions across the economic blocs. |
| Keywords: | Pandemics-related uncertainty, output growth, TVP-SVAR |
| JEL: | C32 D80 E23 E32 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202062&r=all |
| By: | Marcin Bielecki (Faculty of Economic Sciences, University of Warsaw); Michał Brzoza-Brzezina (SGH Warsaw School of Economics and Narodowy Bank Polski); Marcin Kolasa (SGH Warsaw School of Economics and Narodowy Bank Polski) |
| Abstract: | We investigate the impact of demographics on the natural rate of interest (NRI) in the euro area, with a particular focus on the role played by economic openness, migrations and pension system design. To this end, we construct a life-cycle model and calibrate it to match the life-cycle profiles from HFCS data. We show that population aging contributes significantly to the decline in the NRI, explaining about two-thirds of its secular decline between 1985 and 2030. Openness to international capital flows has not been important in driving the EA real interest rate so far, but will become a significant factor preventing its further decline in the coming decades, when aging in Europe accelerates relative to the rest of the world. Of two possible pension reforms, only an increase in the retirement age can revert the downward trend on the equilibrium interest rate while a fall in the replacement rate would make its fall even deeper. The demographic pressure on the Eurozone NRI can be alleviated by increased immigration, but only to a small extent and with a substantial lag. |
| Keywords: | population aging, natural interest rate, life-cycle models, pension systems, migrations |
| JEL: | E31 E52 J11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2020-24&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Japan highlights that the rapid aging and shrinking of Japan’s population has become central to macroeconomic policies and outcomes. The consultation centered on the macroeconomic effects of Japan’s demographics. Mutually reinforcing policies are needed to lift current and expected inflation, stabilize public debt, and raise potential growth. Underlying growth is expected to remain resilient but will be increasingly challenged by slowing external demand and intensifying demographic headwinds. Growth in domestic demand is being eroded by the weaker external environment. Frontloading of private consumption ahead of the October 2019 consumption tax rate increase appears to have been smaller than in 2014. |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/039&r=all |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Samba Diop (Alioune Diop University, Bambey, Senegal); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria) |
| Abstract: | This study has: (i) analysed the economic impact of the Covid-19 pandemic, (ii) evaluated the effectiveness and relevance of different measures against the pandemic and (iii) examined nexuses between the corresponding measures and economic outcomes. The study uses a sample of 186 countries divided into four main regions, notably: Asia-Pacific and the Middle East, Europe, Africa and America. 34 preventing and mitigating measures against the Covid-19 pandemic are classified into five main categories: lockdown, movement restrictions, governance and economic, social distancing, and public health measures. The empirical evidence is based on comparative difference in means tests and correlation analyses. The findings show how the effectiveness and consequences of the Covid-19 measures are different across regions. In adopting the relevant policies to fight the ongoing pandemic, the comparative insights from the findings in the study are worthwhile. Inter alia: (i) from a holistic perspective, only European countries have favourably benefited from the Covid-19 measures; (ii) lockdown measures at the global level have not been significant in reducing the pandemic; (iii) the restriction of movement measure has been relevant in curbing the spread in the American continent; (iv) social distancing has been productive in Europe and counter-productive in Africa; (v) governance and economic measures have exclusively been relevant in Europe and (vi) overall public health measures have not had the desired outcomes in flattening the infection curve probably because most of the underlying measures are awareness decisions or oriented toward people already infected. |
| Keywords: | Novel Coronavirus, Social Distance, Macroeconomics effects |
| JEL: | E10 E12 E20 E23 I10 I18 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:20/054&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Congo discusses that the economic situation remains difficult, however, there are some initial signs of stability, and non-oil growth could turn positive for the first time since 2015. The political environment is stable, though there is discontent with government policies due in part to the authorities’ limited engagement with the private sector and civil society. In the near term, the expansion of oil production explains most of the projected recovery in growth. However, peak oil production will be reached in 2020 rather than 2019 as initially expected. Non-oil growth is expected to pick up gradually as the government starts implementing its arrears clearance strategy, which could have a positive impact on business confidence and credit growth. The report recommends pursuing fiscal consolidation efforts and concludes the debt restructuring process for external commercial debt to restore fiscal sustainability. It is imperative to continue to implement measures to improve governance and tackle corruption, including through the adoption of operational decrees for the High Authority on Corruption and the Commission on Transparency. |
| Keywords: | External sector;Debt sustainability;Public debt;External debt;Economic indicators;ISCR,CR,arrears,Congolese authority,non-oil,percent of GDP,primary balance |
| Date: | 2020–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/026&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Republic of Macedonia discusses that after a protracted political crisis, the economy has entered a period of solid growth and stability. Over the recent years, the authorities have reviewed the reform momentum, with crucial institutional and governance reforms and efforts to make public finances more sustainable and equitable. Growth is expected to accelerate in 2020. Lower taxes and higher pensions and wages?including public sector and minimum wages?are expected to provide a further, albeit one-off, stimulus to consumption. Export and investment growth would remain robust but slow somewhat, reflecting weak growth in trading partners. An ambitious consolidation is needed to rebuild fiscal policy space and re-orient public spending toward investment. Reforms to address key labor market and institutional weaknesses will help lift medium-term growth and speed up income convergence. Although growth has been solid in the past two decades, it has not been enough to substantially narrow North Macedonia’s large income gap with the European Union. In order to accelerate convergence, it is essential to continue reforms to improve the public administration, rule of law, and control of corruption. |
| Keywords: | External sector;Central banks;Monetary policy;Balance of payments;Exchange markets;ISCR,CR,north Macedonia,GDP,policy space,capital spend,Proj |
| Date: | 2020–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/024&r=all |
| By: | María Florencia Camusso; Ramiro Emmanuel Jorge |
| Abstract: | El trabajo internaliza información proveniente de las herramientas Google Trends y Google Correlate, con el objetivo de realizar un nowcast de las ventas de supermercados de la Provincia de Santa Fe; indicador que se publica con algunos meses de rezago. En primer lugar se identifican un conjunto de variables proxies con alto poder predictivo y luego se plantea un método de agregación para incorporar los patrones de búsqueda a la serie target. Las estimaciones obtenidas con el modelo, son contrastadas con datos reales de la serie target (ex post) y con los forecasts que arroja el X13-ARIMA-SEATS. Los resultados indican que las herramientas y el procedimiento adoptado permiten realizar una estimación consistente y ganar oportunidad respecto a las publicaciones oficiales. |
| Keywords: | Cycles, nowcast, big data, Google tools Argentino |
| JEL: | E27 E32 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4127&r=all |
| By: | Okwu, Andy; Akpa, Emeka; Oseni, Isiaq; Obiakor, Rowland |
| Abstract: | Oil export constitutes the major source of external revenue, and exchange rate determines the naira amount of the revenue and, thus, is perceived to affect aggregate consumption expenditure in Nigeria. This paper employed Nonlinear ARDL approach to examine the short-run and long-run asymmetric effects of oil export earnings and exchange rate on aggregate consumption in Nigeria from 1981 to 2016. Variables of interest in the paper were oil export earnings (OEE), consumer price index (CPI) as proxy for inflation, nominal effective exchange rate (NEER) and final consumption expenditure (FCE). Based on bounds testing long-run cointegration among the variables was established. Furthermore, Wald test was used to establish the presence of asymmetry between FCE and OEE and NEER. Results from the study indicated that in the short-run, negative shocks to exchange rate exerted significant positive effect on consumption, and negative at a higher lag, while positive shocks to exchange rate exerted negative effect on consumption. Still in the short-run, negative shocks until the first lag exerted a negative and significant effect on consumption; at lag two, the effect became positive and insignificant. In the long-run, positive and negative shocks to both exchange rate and oil export earnings exerted both positive and significant effects on consumption. |
| Keywords: | Oil export, Aggregate consumption, Asymmetry, Nonlinear ARDL |
| JEL: | C22 E21 Q40 |
| Date: | 2020–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102080&r=all |
| By: | López-Salido, J David; Loria, Francesca |
| Abstract: | We find that the recent muted response of the conditional mean of inflation to economic conditions does not convey an adequate representation of the overall pattern of inflation dynamics. Analyzing data from the 1970s reveals ample variability in the entire conditional distribution of inflation. Focusing on the period from 2000 onward bolsters this evidence. Using time-series data for the United States and the Euro Area, we document that looking at the entire conditional distribution of inflation uncovers - after controlling for the state of the labor market and inflation expectations - that heightened financial conditions carry substantial and persistent low-inflation risks, a feature overlooked by much of the literature. Our paper offers a new empirical perspective to existing macroeconomic models, showing that changes in credit conditions are also key to understand the dynamics of the inflation tails. |
| Keywords: | Inflation risk; Quantile regression |
| JEL: | C21 E31 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14074&r=all |
| By: | Honey Karun (International Monetary Fund); Hrishikesh Vinod (Fordham University); Chakraborty, Lekha S. (National Institute of Public Finance and Policy) |
| Abstract: | Our paper uses the ME (Maximum Entropy) bootstrap method to overcome the econometric constraints of using a short time series after the publication of a new macroeconomic series in India. We use a short time series (quarterly data) of stationary and nonstationary variables between 2011-2016 to confirm the positive role of public infrastructure investment. The significant result has policy implications in terms of the current debate, whether public investment `crowds-in' rather than `crowds-out' private corporate investment in India. |
| JEL: | E62 C32 H62 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:20/312&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Morocco’s Second Review Under the Arrangement Under the Precautionary and Liquidity Line. The authorities are committed to further reduce fiscal and external vulnerabilities, while strengthening the foundations for higher and more inclusive growth. Building on recent progress in improving the business environment, sustained reforms are needed to raise potential growth and reduce high unemployment, especially among the youth, increase female labor participation, and reduce regional disparities. Reforms of education, governance, and the labor market should contribute to more private sector-led growth and job creation. Considering the slowdown in fiscal consolidation, stepped up tax reforms and contained wage bill are needed to lower the public debt-to-gross domestic product ratio while securing priority investment and social spending in the medium term. A decisive and comprehensive tax reform should aim to secure adequate revenues while bringing about greater equity and simplicity of the tax system. The transition to greater exchange rate flexibility initiated in 2018 would enhance the economy’s capacity to absorb shocks and preserve its external competitiveness. |
| Keywords: | External sector;Economic policy;Employment;Fiscal policy;Unemployment;ISCR,CR,PLL,percent of GDP,medium term,tourism receipt,net lend |
| Date: | 2020–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/014&r=all |
| By: | Jakob de Haan; Rasmus Wiese |
| Abstract: | This paper examines the impact of labour and product market reforms on economic growth in 25 OECD countries between 1985 and 2013, and tests whether this impact is conditioned by the fiscal policy stance, i.e. whether there are fiscal expansions or adjustments. Our local projection results suggest that controlling for endogeneity of reforms and the stance of fiscal policy is crucial. To control for endogeneity, we use the Augmented Inverse Probability Weighted estimator. Our results suggest that product market reforms mostly cause slight negative growth, except when implemented during periods of neutral fiscal policy. Labour market reforms hurt growth under tight and neutral fiscal policy but are conducive to economic growth if introduced during periods of expansionary fiscal policy. |
| Keywords: | structural reforms, local projections, fiscal policy stance |
| JEL: | E62 H30 J21 J65 L43 L51 O43 O47 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8393&r=all |
| By: | John T. Addison; Liwen Chen; Orgul D. Ozturk |
| Abstract: | Although the adverse labor market effects of economic recessions have been well documented, a notable omission in the literature is how recessions impact workers’ job match quality. This paper considers the short and longer-term losses in productivity associated with the job changing brought in train by the two most recent recessions. Changes in match quality are the mechanism, with dislocated workers being reemployed in jobs for which they are more mismatched. Using monthly data from the 1979 and 1997 cohorts of the National Longitudinal Survey of Youth and the Current Population Survey (CPS), we document direct changes in occupational match quality and the associated changes in wages. We first investigate how workers’ match qualities change over the lifecycle and report that the total amount of mismatch averaged over all workers of the younger cohort actually decreased through time. For the older cohort, we then explore the role of age, education, gender, and occupational task groups. Economic recessions are shown to disproportionately harm the match quality of mid-aged workers versus that of young workers; to have more serious consequences for the match quality of men than women, especially highly educated men; and lead to occupational polarization, thereby amplifying the skill mismatch of mid-aged workers. |
| Keywords: | recessions, match quality, mismatch, wage loss, mid-career effects, mancessions, downskilling |
| JEL: | E24 J24 J63 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8390&r=all |
| By: | Peter Kriesler (School of Economics, University of New South Wales); Joseph Halevi (International University College of Turin); Mark Setterfield (Department of Economics, New School for Social Research) |
| Abstract: | Advocates of Job Guarantee (JG) or Employer of Last Resort (ELR) schemes have suggested that if the state provides ‘buffer stock’ employment to workers displaced from private employment, then full employment can be maintained over the course of the business cycle. Kalecki was sceptical about the prospects for maintaining full employment in capitalist economies, without fundamental institutional change that would alleviate certain political constraints on the maintenance of full employment. We argue that in and of themselves, JG/ELR schemes do not create the fundamental institutional change required to address Kalecki’s concerns and so ensure that full employment becomes achievable as a permanent state. |
| Keywords: | Employer of last resort, job guarantee, buffer stock employment, political aspects of full employment |
| JEL: | E12 E61 J64 J68 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2009&r=all |
| By: | Guzmán González-Torres (Bank of Italy); Giacomo Rodano (Bank of Italy) |
| Abstract: | Credit contract enforcement influences financial market allocations and prices. Well-functioning credit markets enable firms to finance their operations. Can greater judicial efficiency therefore help to improve credit market allocations, by increasing firm dynamism and boosting aggregate productivity? We build a dynamic model of heterogeneous firms with short-term liquidity needs, in which two key features of enforcing credit contract proceedings, case resolution time and the expected recovery rate, directly affect credit supply. Once calibrated to replicate Italian firm dynamics, we use the model to analyze the extent to which court efficiency determines aggregate outcomes through the credit channel. In our economy, either increasing the average recovery rate on defaulted loans from 62 to 80 per cent, or reducing case resolution time from 9 to 5 years, raises average firm productivity by about 2 per cent. These gains are attained through a substantial improvement in the allocation of resources across firms. |
| Keywords: | financial markets, civil law, contracts, aggregate productivity, intertemporal firm choice |
| JEL: | E44 K12 O47 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1287_20&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with South Africa discusses that subdued private investment and exports, and increased uncertainty have depressed growth and worsened social indicators. State-owned enterprises’ (SOEs) risks are materializing, triggering government bailouts of Eskom and administrative intervention in other entities. High fiscal deficits have boosted debt. Nonresident investors are shedding equities and local currency bonds but showing appetite for foreign currency sovereign bonds amid supportive global financing conditions. The external position is moderately weaker than implied by fundamentals and desirable policies. Inflation has slowed to around the mid-point of the target band, aided by one-off factors, but inflation expectations are higher. Banks are sound, albeit with pockets of vulnerabilities. In the absence of fiscal space, a gradual and growth-friendly fiscal consolidation and increased spending efficiency are needed. The authorities should establish a credible debt anchor to stabilize debt in the medium term. Given the structural nature of the growth slowdown, the consolidation should be accompanied by reforms that reduce the cost of doing business and boost private investment. |
| Keywords: | Real sector;Balance of payments;Financial statistics;Unemployment;Macroprudential policies and financial stability;ISCR,CR,SARB,Eskom,SOEs,percent of GDP,percent |
| Date: | 2020–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/033&r=all |
| By: | Addison, John T. (University of South Carolina); Chen, Liwen (East China Normal University); Ozturk, Orgul Demet (University of South Carolina) |
| Abstract: | Although the adverse labor market effects of economic recessions have been well documented, a notable omission in the literature is how recessions impact workers' job match quality. This paper considers the short and longer-term losses in productivity associated with the job changing brought in train by the two most recent recessions. Changes in match quality are the mechanism, with dislocated workers being reemployed in jobs for which they are more mismatched. Using monthly data from the 1979 and 1997 cohorts of the National Longitudinal Survey of Youth and the Current Population Survey (CPS), we document direct changes in occupational match quality and the associated changes in wages. We first investigate how workers' match qualities change over the lifecycle and report that the total amount of mismatch averaged over all workers of the younger cohort actually decreased through time. For the older cohort, we then explore the role of age, education, gender, and occupational task groups. Economic recessions are shown to disproportionately harm the match quality of mid-aged workers versus that of young workers; to have more serious consequences for the match quality of men than women, especially highly educated men; and lead to occupational polarization, thereby amplifying the skill mismatch of mid-aged workers. |
| Keywords: | recessions, match quality, mismatch, wage loss, mid-career effects, mancessions, downskilling |
| JEL: | E24 J24 J63 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13393&r=all |
| By: | Michael D. Bordo; Joseph G. Haubrich |
| Abstract: | Does the yield curve’s ability to predict future output and recessions differ when interest rates are low, as in the current global environment? In this paper we build on recent econometric work by Shi, Phillips, and Hurn that detects changes in the causal impact of the yield curve and relate that to the level of interest rates. We explore the issue using historical data going back to the 19th century for the United States and more recent data for the United Kingdom, Germany, and Japan. This paper is similar in spirit to Ramey and Zubairy (2018), who look at the government spending multiplier in times of low interest rates. |
| Keywords: | low interest rates; policy; predictive content of the yield curve |
| JEL: | E32 G01 N10 |
| Date: | 2020–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:88522&r=all |
| By: | Lekha Chakraborty; Pinaki Chakraborty; Ruzel Shrestha |
| Abstract: | Budget credibility, or the ability of governments to accurately forecast macro-fiscal variables, is crucial for effective public finance management. Fiscal marksmanship analysis captures the extent of errors in the budgetary forecasting. The fiscal rules can determine fiscal marksmanship, as effective fiscal consolidation procedures affect the fiscal behavior of the states in conducting the budgetary forecasts. Against this backdrop, applying Theil's technique, we analyze the fiscal forecasting errors for 28 states (except Telangana) in India for the period 2011-16. There is a heterogeneity in the magnitude of errors across subnational governments in India. The forecast errors in revenue receipts have been greater than revenue expenditure. Within revenue receipts, the errors are more significantly pronounced in the grants component. Within expenditure budgets, the errors in capital spending are found to be greater than revenue spending in all the states. Partitioning the sources of errors, we identified that the errors were more broadly random than due to systematic bias, except for a few crucial macro-fiscal variables where improving the forecasting techniques can provide better estimates. |
| Keywords: | Forecast Errors; Fiscal Policies; Fiscal Forecasting; Political Economy; Fiscal Marksmanship |
| JEL: | H6 E62 C53 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_964&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2020 Article IV Consultation highlights that the Malaysian economy is stable despite domestic and external challenges. The authorities are making progress on their reform agenda including governance reforms and measures to improve the transparency and management of public finances. Policies should focus on medium-term fiscal consolidation, while safeguarding growth and financial stability. Structural reforms are needed to enshrine in law main governance measures, and to boost productivity to achieve high income status and inclusive growth. Growth has held up and inflation has remained subdued. Domestic demand is expected to be the main driver of growth over the medium term. Risks to the outlook are, on balance, to the downside. It is recommended to that medium-term fiscal consolidation plans should be underpinned by well-identified revenue and spending measures. Pushing ahead with structural fiscal reforms, including the adoption of a Fiscal Responsibility Act, as well as improvement in debt management, public procurement, and the public investment framework is important. |
| Keywords: | International investment position;Real sector;Balance of payments;Economic indicators;Macroprudential policies and financial stability;ISCR,CR,percent of GDP,percent,tax refund,medium-term,governance reform |
| Date: | 2020–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/057&r=all |
| By: | Igor Goncharov (Lancaster University); Vasso Ioannidou (Lancaster University); Martin C. Schmalz (University of Oxford, CEPR, and ECGI) |
| Abstract: | We document that central banks are significantly more likely to report slightly positive profits than slightly negative profits, especially amid greater political pressure, the public’s receptiveness to more extreme political views, and when governors are reappointable. The propensity to report small profits over small losses is correlated with more lenient monetary policy and higher inflation. We conclude that profitability concerns, although absent from standard theory, are present and effective in practice. These findings inform a debate about the political economy of central banking, monetary stability, and the effectiveness of non-traditional central banking. |
| Keywords: | Central Banks, Profitability, Non-Traditional Central Banking, Monetary Stability |
| JEL: | E58 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:018&r=all |
| By: | Robert J. Hill (University of Graz, Austria); Michael Scholz (University of Graz, Austria); Chihiro (University of Tokyo, Japan); Miriam Steurer (University of Graz, Austria) |
| Abstract: | The rolling-time-dummy (RTD) method is used by a number of countries to compute their official house price indexes (HPIs), since it requires less data and is more flexible than other hedonic methods. These features also make it well suited for computing higher frequency HPIs (e.g., monthly or weekly). In this paper we address three key issues relating to the RTD hedonic method. First, we develop a method for determining the optimal length of the rolling window. Second, we consider variants on the standard way of linking the current period with earlier periods, and show how the optimal linking method can be determined. Third, we propose three ways of modifying the RTD method to make it robust to the distorting effects of the covid-19 shutdown. These modifications could prove useful for countries using the RTD method in their official HPIs. |
| Keywords: | House price index; Hedonic quality adjustment; Optimal window length; Optimal chain linking; Higher frequency indexes; Covid-19 shutdown. |
| JEL: | C43 E31 R31 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2020-14&r=all |
| By: | Jesse Rothstein |
| Abstract: | I study cohort patterns in the labor market outcomes of recent college graduates, examining changes surrounding the Great Recession. Recession entrants have lower wages and employment than those of earlier cohorts; more recent cohorts’ employment is even lower, but the newest entrants’ wages have risen. I relate these changes to "scarring" effects of initial conditions. I demonstrate that adverse early conditions permanently reduce new entrants’ employment probabilities. I also replicate earlier results of medium-term scarring effects on wages that fade out by the early 30s. But scarring cannot account for the employment collapse for recent cohorts. There was a dramatic negative structural break in college graduates’ employment rates, beginning around the 2005 entry cohort, that shows no sign of abating. |
| JEL: | E24 J2 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27516&r=all |
| By: | Alex Ilek (bank of Israel) |
| Abstract: | In this study we analyze the effect of the Bank of Israel (BOI) monetary surprises on inflation and the exchange rate, in the eyes of professional forecasters (PF) in Israel. We exploit a unique daily dataset in Israel containing various forecasts of the PF in sample from April 2001 to October 2016 and derive the monetary surprises of the BOI by exploiting the specific timing of expectations formation. We found that although the PF-perceived effect of monetary surprises on the exchange rate was stable over the past two decades, the pass-through from the exchange rate to inflation significantly declined after 2007, primarily due to a full dissociation of rent prices from the shekel-dollar exchange rate. We also provide indirect and partial evidence that the effect of the BOI monetary surprises on real activity did not change after 2007. That is, we didn't find evidence that the information channel introduced by Nakamura and Steinsson (2018) intensified in Israel despite a decline in natural rates worldwide and the establishment of a monetary committee at the BOI. We found, however, that after the establishment of the monetary committee there was a significant increase in interest-rate inertia. Finally, we found an asymmetric pattern of the PF's assessment of the CB interest rate after the global financial crisis. Following a positive surprise in the BOI interest rate, the PFs significantly updated upward their forecasts for the interest rate for the coming year. In contrast, when the monetary surprise was negative, the PFs barely updated downward their forecast for the interest rate. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:boi:wpaper:2020.09&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents IMF’s 2019 Discussion on Common Policies of Member Countries of the Eastern Caribbean Currency Union (ECCU). ECCU’s gross domestic product (GDP) growth accelerated from 3/4 percent in 2017 to 3 3/4 percent in 2018, reflecting buoyancy in the tourism sector, sizable Citizenship-by-Investment (CBI) inflows, and a recovery from the 2017 hurricanes in Anguilla and Dominica, which were supported by large public investments in reconstruction. Fiscal deficits increased in 2018–2019, but they have remained moderate. Efforts are needed to streamline, and re-balance tax incentives based on clear principles consistent with international best practices. External imbalances are sizable and significant financial sector vulnerabilities affect both banks and non-banks. Growth is projected to gradually moderate toward its long-term average of 2 1/4 percent as the cyclical momentum normalizes and CBI inflows ease. These trends would also contribute to wider fiscal deficits, ending the downward drift in public debt dynamics. The outlook is clouded by downside risks, including a possible intensification of natural disasters and financial sector weaknesses. |
| Keywords: | External sector;Real sector;Central banks;Macroprudential policies and financial stability;Financial institutions;ISCR,CR,ECCU,ECCB,grenadine,EC dollar,CBI |
| Date: | 2020–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/070&r=all |
| By: | Lei Fang; Jun Nie; Zoe Xie |
| Abstract: | The CARES Act implemented in response to the COVID-19 crisis dramatically increases the generosity of unemployment insurance (UI) benefits, triggering concerns about its substantial impact on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of CARES UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment, but they also reduce infection and save lives. Economic shutdown policies further amplify these effects of UI policies. Quantitatively, the CARES UI policies raise unemployment by an average of 3.7 percentage points over April to December 2020 but also reduce cumulative death by 4.7 percent. Eligibility expansion and the extra $600 increase in benefit level account for more than 90 percent of the total effects, while the 13-week benefit duration extension plays a much smaller role. Overall, UI policies improve the welfare of workers and reduce the welfare of nonworkers, both young and old. |
| Keywords: | COVID-19; CARES Act; unemployment insurance; search and matching |
| JEL: | J64 J65 E24 |
| Date: | 2020–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:88479&r=all |
| By: | Samba Diop (Alioune Diop University, Bambey, Senegal); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This study improves the African Regional Integration Index (ARII) proposed by the African Union, the African Development Bank and the United Nations Economic Commission for Africa by providing a theoretical framework and addressing shortcomings related to weighting and aggregation of the indicator. This paper measures monetary integration in the eight African Regional Economic Communities (RECs) by constructing an Index of African Monetary Integration (IAMI). It proposes an Optimal Currency Area as theoretical framework and uses a panel approach to appreciate the dynamics of the index over different periods of time. The findings show that: (i) inflation and finance (trade and mobility) present the highest (lowest) score while ECOWAS is (EAC and IGAD are) the highest (least) performing. (ii) Surprisingly, in most RECs, the highest contributors to wealth creation are not the top performers in regional monetary integration. (iii) The RECs in Africa are characterized by a stable monetary integration which is different from the gradual process usually observed in monetary integration because with the exception of the EAC and UMA, the dynamics of IAMI show a steady trend in the overall index across time. Policy implications are discussed. |
| Keywords: | Monetary Integration; Currency Unions; Economic Communities; Africa |
| JEL: | E10 E50 O10 O55 P50 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/003&r=all |
| By: | Eric S. Rosengren |
| Abstract: | Today I would like to speak with you about the pandemic, its effects on the economy, the implications for Federal Reserve policymaking, and some of the steps that the Fed is taking to address the crisis and mitigate its financial impact on American households and businesses. |
| Keywords: | COVID-19; pandemic; public health; fiscal policy; monetary policy; employment; Main Street Lending Program |
| Date: | 2020–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:88249&r=all |
| By: | Hardik A. Marfatia (Northeastern Illinois University); Rangan Gupta (University of Pretoria); Stephen M. Miller (University of Nevada, Las Vegas) |
| Abstract: | This paper examines the effect of fiscal policy on financial markets over a long span of 125 years. Unlike existing studies that mainly focus on monetary policy shocks and model-based identification of fiscal policy shocks, we use a time-varying parameter model to study the effect of fiscal policy with much cleaner and direct identification of fiscal policy shocks. In addition, we extend our analysis by measuring the response volatility in these markets and separately study the effects of good and bad components of volatility. We find significant time-variation in the response of stock and bond market returns and volatility. The overall response of the stock market exceeds that of bond markets, with more pronounced effects in the pre-1950 period than in the last six decades. Fiscal consolidation generates long-term benefits that positively affect financial markets in the latter part of the 20th century, thus providing new insights into the dynamic role of fiscal policy. |
| Keywords: | Fiscal Policy; Time-Varying impact; Financial returns and risks |
| JEL: | E5 C32 G14 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2020-12&r=all |
| By: | Anand, Paul; Gao, Qin; Ferrer, Bob; Nogales, Ricardo; Unterhalter, Elaine |
| Keywords: | Covid-19; coronavirus |
| JEL: | E6 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105212&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Senegal’s Request for a Three-Year Policy Coordination Instrument (PCI). The PCI for Senegal is expected to build on the lessons from the previous programs supported by the IMF. It aims to support the authorities’ efforts to consolidate macroeconomic stability and foster sustained and inclusive growth. Program reviews take place on a semi-annual fixed schedule. While the PCI involves no use of IMF resources, successful completion of program reviews would help signal Senegal’s commitment to continued strong economic policies and structural reforms. Although public debt has increased and the current account deficit has widened, the outlook remains favorable, provided the authorities follow through with their comprehensive reform strategy and measures to consolidate macroeconomic stability. The authorities’ economic program supported by the PCI focuses on achieving high, sustainable, and inclusive growth, consolidating macroeconomic stability through prudent fiscal policy and sound debt management, and managing the oil and gas sector in a transparent manner. |
| Keywords: | External sector;Fiscal policy;Economic growth;Public debt;Development;ISCR,CR,percent of GDP,Eurobond,WAEMU,DSA,macroeconomic stability |
| Date: | 2020–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/011&r=all |
| By: | Lukas Buchheim; Carla Krolage; Sebastian Link |
| Abstract: | COVID-19 hit firms by surprise. In a high frequency, representative panel of German firms, the business outlook declined and business uncertainty increased only when the spread of the COVID-19 pandemic led to domestic policy changes: The announcement of nation-wide school closures on March 13 caused by far the largest change in business perceptions. In contrast, business perceptions hardly reacted to any other potential source of information: Firms did not learn from foreign policy measures, even if they relied on inputs from China or Italy. The local, county-level spread of COVID-19 cases affected expectations and uncertainty, albeit to a much lesser extent than the domestic policy changes. |
| Keywords: | expectations, uncertainty, policy, COVID-19, firms |
| JEL: | E66 E32 H32 D22 D84 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8429&r=all |
| By: | Teresa Ghilarducci; Siavash Radpour; Anthony Webb (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | Social Security provides insurance against the risk of outliving one’s wealth that is valuable to low and high earners alike. Both low and high earners would benefit from Social Security expansion. We propose expanding Social Security by allowing workers to buy extra Social Security benefits. We propose defaulting workers into revenue neutral “Catch-Up” contributions. Starting at age 50, workers would contribute an additional 3.1% of salary. The typical worker would receive additional benefits of $226 a month at retirement. |
| Keywords: | Social Security, Retirement, Catch-Up, Benefits, Savings, Wealth, Older Workers |
| JEL: | J26 H55 J32 E21 D63 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapn:2020-02&r=all |
| By: | George Overton; Barbara Castillo Rico |
| Abstract: | The most direct channel of transmission of monetary policy to households is the modification of ECB lending and deposit facilities rates. Outstanding borrowers with adjustable rate loans face affordability conditions changes with important consequences on their financial situation. In this paper, we study the impact of monetary policy changes on housing credit default over the period 2004-2015. We use an extensive panel of French housing loans to reconstruct amortization tables over the life of each loan and compute changes in quarterly payments due to monetary policy action, later using hazard models to map changes in interest rates to default. Importantly, our data set allows the assumption of the absence of strategic default our analysis, which isolates involuntary default in our estimates. First, we find that a 100 bp increase in quarterly payment induced by variations in the 3-month Euribor increases the probability of default by around 5\%. Second, we identify employment stability as a major insurance factor against rising policy rates during contractionary monetary policy action. Finally, we provide evidence about the existence of a self-selection of riskier borrower profiles into adjustable rate loans. The concern regarding payment size on adjustable-rate loans is of heightened importance in a monetary policy context characterized by uncertainty over the timing of a rate increase following a sustained period of low or negative rates. |
| Keywords: | Housing loans, Monetary policy, Default |
| JEL: | R30 H81 E52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2020-23&r=all |
| By: | Fernando Zarzosa Valdivia; Kassandra Moreno Halberstadt |
| Abstract: | Este trabajo analiza, para Argentina, la dinámica de inflación y sus componentes en dos períodos 1995M01- 2001M12 y 2005M10 – 2019M04. La suma de los coeficientes autorregresivos sugiere que la inercia, en general, ha aumentado pasando de ser nula a 0.864 en el caso de la inflación general. Además, encontramos evidencia de persistencia o ‘long-memory’ en los rubros transporte y comunicaciones, vivienda y servicios básicos, en equipamiento y mantenimiento del hogar y en bienes y servicios varios. Con respecto a la duración de los efectos de un shock que golpea a los precios encontramos que el promedio de períodos en que desaparece el efecto (o el 50% del mismo) pasa de 48 (9) meses en la primera etapa a 86 (16) meses en la segunda. |
| JEL: | E31 E37 C5 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4208&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with the Solomon Islands highlights that the country has made substantial progress since the Tensions in the early 2000s but faces considerable economic and governance challenges and is highly vulnerable to natural disasters. Finding new sources of growth is becoming urgent with the decline in logging. The consultation focused on similar issues to last year—restoring fiscal buffers to build resilience, strengthening public financial management and public investment management, setting a medium-term fiscal strategy, improving governance, improving exchange rate management and building conditions for sustainable growth. The report recommends developing a holistic approach to medium-term fiscal policy by setting a realistic spending envelope and establishing a medium-term revenue strategy. Together with strengthened budget planning and expenditure control, this would provide greater budget predictability and support natural disaster contingency planning. It is also imperative to strengthen enforcement of governance standards, apply the mining fiscal regime rigorously, improve transparency and advance the anti-corruption agenda. |
| Keywords: | External sector;Public financial management;Fiscal policy;Economic indicators;Central banks;ISCR,CR,pacific game,Proj,percent of GDP,grant-funded,mine sector |
| Date: | 2020–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/049&r=all |
| By: | Karsten Staehr |
| Abstract: | This paper investigates whether various measures of capacity pressure or available production capacity may help predict the dynamics of exports from the EU countries in Central and Eastern Europe. The analysis uses annual panel data for the 11 countries from 2001 to 2019. Reduced form estimations reveal that cost competitiveness measures have little or no predictive power. The measures of capacity pressure comprise capacity utilisation in industry, the unemployment rate and the output gap, and the measures are all robust predictors of future export dynamics. The results are robust to various changes in the time and country sample, control variables and specification, and also hold in panel vector autoregressive models. |
| Keywords: | export, competitiveness, capacity utilisation, output gap, unemployment, Central and Eastern Europe |
| JEL: | F14 F17 E32 |
| Date: | 2020–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2020-04&r=all |
| By: | Karsten Staehr |
| Abstract: | This paper investigates whether various measures of capacity pressure or available production capacity may help predict the dynamics of exports from the EU countries in Central and Eastern Europe. The analysis uses annual panel data for the 11 countries from 2001 to 2019. Reduced form estimations reveal that cost competitiveness measures have little or no predictive power. The measures of capacity pressure comprise capacity utilisation in industry, the unemployment rate and the output gap, and the measures are all robust predictors of future export dynamics. The results are robust to various changes in the time and country sample, control variables and specification, and also hold in panel vector autoregressive models |
| Keywords: | export, competitiveness, capacity utilisation, output gap, unemployment, Central and Eastern Europe |
| JEL: | F14 F17 E32 |
| Date: | 2020–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2020-4&r=all |
| By: | Satyajit Chatterjee; Dean Corbae; Kyle Dempsey; Jose-Victor Rios-Rull |
| Abstract: | What is the role of credit scores in credit markets? We argue that it is a stand in for a market assessment of a person's unobservable type (which here we take to be patience). We pose a model of persistent hidden types where observable actions shape the public assessment of a person's type via Bayesian updating. We show how dynamic reputation can incentivize repayment without monetary costs of default beyond the administrative cost of filing for bankruptcy. Importantly we show how an economy with credit scores implements the same equilibrium allocation. We estimate the model using both credit market data and the evolution of individual's credit scores. We find a 3% difference in patience in almost equally sized groups in the population with significant turnover and a shift towards becoming more patient with age. If tracking of individual credit actions is outlawed, the benefits of bankruptcy forgiveness are outweighed by the higher interest rates associated with lower incentives to repay. |
| Keywords: | Credit scores; Unsecured consumer credit; Bankruptcy; Persistent private information |
| JEL: | D82 E21 |
| Date: | 2020–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:88517&r=all |
| By: | Boukraine, Wissem |
| Abstract: | This paper employs the smooth transition autoregressive models (STAR) to analyze Tunisian exchange rate pass-through on quarterly data over the period 2011Q4 2019Q4. The non linearity tests suggest that the LSTAR specification describes better the behavior of exchange rate pass-through in Tunisia and our empirical results confirm its nonlinearity. We found evidence on high pass-through to inflation through external debt in both regimes. |
| Keywords: | Exchange rate pass-through, Regime Change, LSTAR, Tunisia |
| JEL: | C24 E31 F31 H60 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102037&r=all |
| By: | Kai Lessmann; Matthias Kalkuhl |
| Abstract: | Interest rates are central determinants of saving and investment decisions. Costly financial intermediation distort these price signals by creating a spread between the interest rates on deposits and loans with substantial effects on the supply of funds and the demand for credit. This study investigates how interest rate spreads affect climate policy in its ambition to shift capital from polluting to low-carbon sectors of the economy. To this end, we introduce financial intermediation costs in a dynamic general equilibrium climate policy model. We find that costly financial intermediation affects carbon emissions in various ways through a number of different channels. For low to moderate interest rate spreads, carbon emissions increase by up to 7 percent, in particular, because of lower investments into the capital intensive clean energy sector. For very high interest rate spreads, emissions fall because lower economic growth reduces carbon emissions. If a certain temperature target should be met, carbon prices have to be adjusted upwards by up to one third under the presence of capital market frictions. |
| Keywords: | financial friction, banking, greenhouse gas mitigation |
| JEL: | E43 G21 Q54 Q58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8380&r=all |
| By: | Ziqiao Chen; Giovanni Marin; David Popp; Francesco Vona |
| Abstract: | As nations struggle to restart their economy after COVID-19 lockdowns, calls to include green investments in a pandemic-related stimulus are growing. Yet little research provides evidence of the effectiveness of a green stimulus. We begin by summarizing recent research on the effectiveness of the green portion of the 2009 American Recovery and Reinvestment Act on employment growth. Green investments are most effective in communities whose workers have the appropriate “green” skills. We then provide new evidence on the skills requirements of both green and brown occupations, as well as from occupations at risk of job losses due to COVID-19, to illustrate which workers are most likely to benefit from a pandemic-related green stimulus. We find similarities between some energy sector workers and green jobs, but a poor match between green jobs and occupations at risk due to COVID-19. Finally, we provide suggestive evidence on the potential for job training programs to help ease the transition to a green economy. |
| Keywords: | green subsidies, green stimulus, American Recovery Act, heterogeneous effect, distributional impacts |
| JEL: | E24 E62 H54 H72 Q58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8419&r=all |
| By: | Thiago Trafane Oliveira Santos |
| Abstract: | Is there a general expression for the real natural interest rate? This paper shows, based on a general characterization of the steady state capital cost, it is possible to obtain natural interest rate equations for (i) the standard or single funding rate case and (ii) the dual funding rate case. These equations become economically interpretable when more theoretical structure is added, assuming, for instance, a CES production function and a price-setting rule. This allows the use of the equations not only to estimate the natural interest rate, but also to evaluate its results. As an application, I estimate the Brazilian natural rate between 2002Q2 and 2017Q4 using the dual funding rate equation for a Cobb-Douglas production function and a semistructural macroeconomic model. The results indicate the real natural interest rate in Brazil has rapidly decreased between 2009 and 2014, from 12% p.a. to 4% p.a., mainly reflecting the lowering of the steady-state output growth rate. Given a higher potential growth, Brazil’s natural rate would be still high by international standards. Comparing to Chile, Colombia, Mexico and Peru between 2005 and 2012, the higher Brazilian rate is justified by the impact of the subsidized lending by the BNDES and, most importantly, by both the low total savings rate and the low level of firms’ markup. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:524&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Nicaragua highlights that social unrest and its aftermath eroded confidence and caused large capital and bank deposits outflows that resulted in a prolonged output contraction. Banks cut lending, which exacerbated the downturn. Faced with sharply lower revenues and a severe tightening in available financing, including on account of sanctions, the government was forced to cut spending and adopt a procyclical tax package. The economy is projected to continue to contract in the near term as it adjusts to weaker confidence and lower external financing. The sharp contraction in credit will continue to depress investment, and the tight fiscal and external financing situation will continue to drag down medium-term growth. The key risks relate to further erosion in confidence and renewed deposit outflows. The imposition of additional sanctions by trading partners could also heighten economic stress. It is recommended to maintain a conservative fiscal stance in 2020 remains the key to maintain macroeconomic stability. Curbing expenditures on goods and services will allow increased spending on social programs, social safety nets, and public investment, which would lead to more equitable and sustainable growth. |
| Keywords: | Financial and Monetary Sector;Central banks;Economic integration;Real sector;Financial systems;ISCR,CR,percent of GDP,national authority,INSS,net international reserve,Proj |
| Date: | 2020–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/059&r=all |
| By: | Retirement Equity Lab (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | An examination of the status of older workers in the third quarter of 2019 reveals two highlights: older workers have higher levels of financial fragility than in 2006, before the Great Recession, and millions of workers who are now nearing retirement lost jobs in the 2008-09 recession, saw their wages fall, and now face increased risk of repeated job loss. Policy recommendations include boosting financial security for older people by strengthening Social Security, creating Guaranteed Retirement Accounts, bolstering unemployment insurance, and creating a federal Older Workers Bureau to protect this growing population in the labor market. |
| Keywords: | older workers, financial fragility, recession, financial security, unemployment, wages, bargaining power |
| JEL: | E24 J30 J38 J60 J88 J58 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapb:2019-03&r=all |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper studies the growth-inflation trade-off of monetary policy in South Africa. The combination of low growth and stubbornly high inflation expectations for a protracted period has complicated monetary policy decisions. The IMF staff analysis contributes to the ongoing growth-inflation trade-off discussion in South Africa, concluding that there is limited growth trade-off of monetary policy efforts to anchor inflation expectations at a lower level at present. The findings in this note suggest that the South African Reserve Bank should continue its efforts of anchoring inflation and inflation expectations at a lower level because monetary policy lends limited support to growth dampened by structural issues. During the 2010s, domestic demand growth responded little to monetary policy action. The environment of weak growth, low interest rates, and relatively moderate inflation (expectations) could have muted monetary policy transmission. Ultimately, the constraints to economic growth need to be removed. Meanwhile, inflation expectations continue to respond to monetary policy action albeit to a lesser extent. Monetary policy transmission through demand has weakened––demand growth does not systematically respond to monetary policy action nor does core inflation––but the exchange rate and credibility channels appear to remain operational. |
| Keywords: | Economic growth;Fiscal sector;Exchange policy;Central banks;Private investments;ISCR,CR,SARB,inflation expectation,volatility,rand,economic Outlook |
| Date: | 2020–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/034&r=all |
| By: | Hubar, Sylwia; Koulovatianos, Christos; Li, Jian |
| Abstract: | In fifteen European countries, China, and the US, stocks and business equity as a share of total household assets are represented by an increasing and convex function of income/wealth. A parsimonious model fitted to the data shows why background labor-income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle-income households more because labor income is a larger fraction of their total lifetime resources compared with the rich. In response, middle-income households reduce (controllable) financial risk. Richer households, having less pressure, can afford more risk-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption. |
| Keywords: | background risk,household-portfolio shares,business equity,subsistence consumption,wealth inequality |
| JEL: | G11 D91 D81 D14 D11 E21 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:640&r=all |
| By: | Carroll, Christopher D.; Slacalek, Jiri; White, Matthew N.; Crawley, Edmund S. |
| Abstract: | To predict the effects of the 2020 U.S. ‘CARES’ act on consumption, we extend a model that matches responses of households to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during the lockdown, many types of spending are undesirable or impossible. Second, some of the jobs that disappear during the lockdown will not reappear when it is lifted. We estimate that, if the lockdown is short-lived, the combination of expanded unemployment insurance benefits and stimulus payments should be sufficient to allow a swift recovery in consumer spending to its pre-crisis levels. If the lockdown lasts longer, an extension of enhanced unemployment benefits will likely be necessary if consumption spending is to recover. JEL Classification: D83, D84, E21, E32 |
| Keywords: | consumption, coronavirus, stimulus |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202441&r=all |
| By: | Ashworth, J.; Goodhart, C. A. E. |
| Abstract: | Currency usage began a long trend decline in the decades after World War II. This was expected to continue, and even accelerate, owing to payment technology innovations. Surprisingly, however, such usage as a percentage of GDP stopped falling and has increased quite sharply in recent years in most countries, with Sweden the major outlier. We examine to what extent this may have been due to increasing interest elasticity, nearing the zero lower bound, and also to rising tax evasion, as indirect taxes rise. We also show how currency holdings increased temporarily as the financial crisis struck in 2008. |
| Keywords: | currency; interest elasticity; financial crisis; Grey economy; tax evasion |
| JEL: | E40 E49 E63 H26 N10 N20 |
| Date: | 2020–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105303&r=all |
| By: | Seydou Coulibaly (African Development Bank); Yannis Arvanitis (Governance and Public Financial Management Coordination, African Development Bank) |
| Abstract: | Recent oil and gas discoveries in Senegal have prompted the Government to review its 1998 Oil Code and adopt a new one in 2019. The revision was made with an eye on increasing revenue collection for the State with limited impacts on incentives for investment. In this paper, a three-pronged analysis of the new Senegalese Oil Code is presented. Firstly, a stand-alone analysis of the Code reveals that issues linked to investment cost control is crucial in order to determine a fair share of revenues for the country. Secondly, a comparative analysis of the new Code's fiscal provisions with those of peer countries suggests that it embeds tools to ensure revenues while still catering for investor needs. Lastly, revenue simulations comparing the 1998 and the 2019 codes reveal the high revenue potential of the latter. To ensure that Senegal reaps the full benefits the new oil code provisions, the paper suggests that the creation of an upstream oil and gas regulator with key technical capacities is crucial. Furthermore, articulating any future negotiating position around maintaining most of the provisions of the new 2019 oil code is a must for optimizing resource mobilization from oil and gas exploitation. |
| Keywords: | Gas, Oil, Contract, Law, Public revenue, Senegal JEL classification: E62, E64, K12, K32, L95, Q48 |
| Date: | 2020–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:2465&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Uruguay highlights that the country enjoys political stability, strong governance and institutions, and a high degree of social cohesion. Following a decade and a half of robust growth, the country boasts high per capita income, low levels of poverty and inequality, and a resilient financial sector. More recently, in a context of a volatile region and global uncertainties, challenges have emerged. The political and economic landscapes—with the post-election mandate and a growth boost due to large private and infrastructure investments—present an opportunity to address these challenges and preserve the social compact for future generations. The authorities are expected to use the opportunity to reduce debt and bring inflation toward the mid-point of the target range, to rebuild buffers and manage sizable risks. In addition, the authorities should leverage Uruguay’s institutional advantages to further improve the fiscal and inflation targeting frameworks and implement structural reforms, in order to raise potential growth and safeguard the achievements of the past decade. |
| Keywords: | Balance of payments;Fiscal sector;Economic growth;Economic indicators;Central banks;ISCR,CR,target range,percent change,percent of GDP,SOEs,primary balance |
| Date: | 2020–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/051&r=all |
| By: | Van, Germinal |
| Abstract: | The purpose of this paper is to explain the effect that economic sectors exert on the national income of West African countries during the last decade. Since the post-colonial era, agriculture has been the primary and the predominant sector of West African economies. However, since the late 1990s and early 2000s, through various observational data, we could perceive that the manufacturing and services sectors began to bring a broader contribution to the economic production of West African countries. Through the use of a multiple regression analysis, this paper aims to explain the correlation and impact that each of these sectors exercises on the national income of the sixteen countries that encapsulate the West African region. |
| Keywords: | Econometrics, Economic Growth, Statistical Modeling, Development Economics, Macroeconomics, Aggregate Production |
| JEL: | C10 C5 C55 E01 E13 O47 |
| Date: | 2020–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102417&r=all |
| By: | Teresa Ghilarducci; Siavash Radpour; Anthony Webb (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | Social Security benefits are progressive and offset the unequal distribution of retirement wealth generated by a broken employer-based retirement system. Though Social Security benefits keep retirees out of poverty, American workers still face a retirement income crisis. Policymakers need to strengthen and expand Social Security and mandate employer-sponsored retirement plans to ensure universal coverage and adequate retirement income. |
| Keywords: | Social Security, Retirement, Wealth, Income, Older Workers |
| JEL: | J26 H55 J32 E21 D63 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapn:2020-01&r=all |
| By: | de Ferra, Sergio; Mitman, Kurt; Romei, Federica |
| Abstract: | We study the role of heterogeneity in the transmission of foreign shocks. We build a Heterogeneous-Agent New-Keynesian Small Open Model Economy (HANKSOME) that experiences a current account reversal. Households' portfolio composition and the extent of foreign currency borrowing are key determinants of the magnitude of the contraction in consumption associated with a sudden stop in capital inflows. The contraction is more severe when households are leveraged and owe debt in foreign currency. In this setting, the revaluation of foreign debt causes a larger contraction in aggregate consumption when debt and leverage are concentrated among poorer households. Closing the output gap via an exchange-rate devaluation may therefore be detrimental to household welfare due to the heterogeneous impact of the foreign debt revaluation. Our HANKSOME framework can rationalize the observed "fear of floating" in emerging market economies, even in the absence of contractionary devaluations. |
| Keywords: | Exchange Rate Policy; foreign currency debt; incomplete markets; Sudden stops |
| JEL: | E21 F32 F41 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14062&r=all |
| By: | Retirement Equity Lab (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | An examination of the status of older workers in the first quarter of 2019 reveals two key trends: older worker wage growth is minimal and lags behind prime-age wage growth, and older workers increasingly resort to precarious alternative work, eroding their bargaining power and impacting other older workers’ wages. To address these troubling trends, Congress and the President should create an Older Workers’ Bureau, Guaranteed Retirement Accounts, and expanded Social Security to protect older workers. |
| Keywords: | older workers, wage growth, alternative work, gig work, wages, unemployment |
| JEL: | E24 J30 J38 J60 J88 J58 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapb:2019-01&r=all |
| By: | Matteo Accornero (Department of Social Sciences and Economics, Sapienza University of Rome) |
| Abstract: | This work provides a model where the repercussions on financial stability of collateral re-use in repo contracts can be analysed and assessed. In the model, the rationale for repo contracts is the arbitrage activity of a leveraged hedge fund, which is profitably financed by a dealer bank. Repo contracts, in connection with collateral re-use, lubricate both the credit and the financial system, increasing the financial operators’ profits and improving equilibrium rates and volumes. At the same time, they amplify the leverage of the whole economy, making it vulnerable to shocks. Introducing a default risk for the hedge fund, the proposed model identifies diverging effects of collateral re-use on financial stability. In states with low dealer bank profitability, the increase in collateral re-use renders a sound dealer bank management style the profit maximising strategy. Where an unsound balance sheet expansion is highly profitable, the increase in collateral re-use provides destabilising incentives to the dealer bank. |
| Keywords: | repo markets, collateral re-use, rehypothecation, systemic risk |
| JEL: | E58 G01 G21 G23 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:10/20&r=all |
| By: | Eric S. Rosengren |
| Abstract: | Today I’ll focus on two of the Federal Reserve’s lending programs being run by the Boston Fed: the Money Market Mutual Fund Liquidity Facility and the Main Street Lending Program. |
| Keywords: | COVID-19; employment; money market mutual funds; fiscal policy; monetary policy; pandemic; economic shock; public health; Main Street Lending Program |
| Date: | 2020–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:88248&r=all |
| By: | Ionut Jianu |
| Abstract: | This research aims to provide an explanatory analyses of the business cycles divergence between Euro Area and Romania, respectively its drivers, since the synchronisation of output-gaps is one of the most important topic in the context of a potential EMU accession. According to the estimates, output-gaps synchronisation entered on a downward path in the subperiod 2010-2017, compared to 2002-2009. The paper demonstrates there is a negative relationship between business cycles divergence and three factors (economic structure convergence, wage structure convergence and economic openness), but also a positive relationship between it and its autoregressive term, respectively the GDP per capita convergence. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2007.11407&r=all |
| By: | Stephanie Schmitt-Grohé; Martín Uribe |
| Abstract: | This paper provides microfoundations to the Salter-Swan policy framework, a graphical apparatus designed to ascertain the exchange-rate and fiscal stance of a policymaker with internal and external economic targets. The environment is an infinite-horizon small open economy producing tradable and nontradable goods that takes world prices and world interest rates as given and is populated by optimizing households and firms. The economy is subject to terms-of-trade and interest-rate shocks. The internal target of the government is the unemployment rate and the external target is the current account. Downward nominal wage rigidity and financial frictions serve as the rationale for meaningful policy intervention. |
| JEL: | F41 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27447&r=all |
| By: | Eduardo C. Castro |
| Abstract: | RegGae is a toolkit to adapt DSGE models for analyzing macroprudential policy. To be useful for macroprudential policy, a DSGE needs to have financial crises along the equilibrium path. RegGae embeds financial crises in DSGEs as regime switches, events that change the structural relationships in the economy. The solu-tion concept of RegGae is regime-wise linearization, a procedure that preserves the non-linearities of models of financial crises. The transition probabilities governing the switch are endogenous, conditional on the state variables. With the toolkit, DSGEs can be used to draw the distribution of variables in order to measure the expected welfare of macroprudential policy. This allows for calibrating macropru-dential tools to trade off mean and variance optimally. The toolkit unifies DSGE modeling with early warning (crisis prediction) methods. The endogeneity of the probability of regime switches reflects the fact that the probability of financial crises depends on the state of the economy while its timing cannot be forecasted. Because financial markets do not anticipate financial crises, RegGae assumes the typical per-fect foresight of the future sequence of regimes. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:526&r=all |
| By: | Beissinger, Thomas; Hellier, Joël; Marczak, Martyna |
| Abstract: | We develop a model which shows that wages, prices and real income should grow faster in countries with low increase in their labour force. If not, other countries experience growing unemployment and/or trade deficit. This result is applied to the case of Germany, which has displayed a significantly lower increase in its labour force than its trade partners, except in the moment of the reunification. By assuming that goods are differentiated according to their country of origin (Armington’s hypothesis), a low growth of the working population constrains the production of German goods, which entails an increase in their prices and in German wages. This mechanism is magnified by the low price elasticity of the demand for German goods. Hence, the German policy of wage moderation could severely constrain other countries’ policy options. The simulations of an extended model which encompasses offshoring to emerging countries and labour market imperfections suggest that (i) the impact of differences in labour force growth upon unemployment in Eurozone countries has been significant and (ii) the German demographic shock following unification could explain a large part of the 1995-2005 German economic turmoil. |
| Keywords: | Population growth,Labour force,Inflation,Wages,Germany |
| JEL: | E24 F16 J11 O57 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:620&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Rwanda’s First Review Under the Policy Coordination Instrument (PCI) and Monetary Policy Consultation. Rwanda’s macroeconomic performance under the program remains strong. The PCI-supported program focuses on creating budget space for the implementation of Rwanda’s National Strategy for Transformation. The program also calls for improving fiscal transparency, boosting revenue, and supporting the implementation of the new interest rate-based monetary policy framework. Looking ahead, the fiscal deficit path is forecasted to adhere to the fiscal rule under the program, which provides space for the implementation of the National Strategy for Transformation (NST) while safeguarding debt sustainability. The government plans to finance the NST partly through public borrowing, which should continue to be supported by careful debt management. There are several plans underway to increase domestic revenues by boosting the registration of new taxpayers as well as through innovative schemes and greater use of technology to strengthen tax compliance. Further progress on identifying and managing potential government liabilities—so-called fiscal risks—will be important to ensure that public resources are well protected for use on priority spending. |
| Keywords: | External sector;Economic indicators;Fiscal sector;Credit;Capital;Monetary policy instruments;ISCR,CR,Proj,Prog,PKO,overall balance,net lend |
| Date: | 2020–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/009&r=all |
| By: | Patel, Anita; McDaid, David |
| Keywords: | gambling; interventions; economic approach; impacts |
| JEL: | E6 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105220&r=all |
| By: | Teresa Ghilarducci; Siavash Radpour; Owen Davis; Anthony Webb (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | A first-of-its-kind analysis reveals sharp and persistent inequalities in retirement wealth. Using survey data matched with tax records, this study finds striking levels of retirement inequality within lifetime earnings groups as well as growing disparities between earnings quintiles. Retirement inequality mainly reflects the plight of low to moderate earners, rather than the outsize accumulations of the wealthy few. Measures to address retirement inequality should focus on those most disadvantaged by the failings of the U.S. retirement system. |
| Keywords: | Retirement, Inequality, Wealth, Disparities, Retirement savings |
| JEL: | J26 J32 E21 D63 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapn:2019-01&r=all |
| By: | Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa); Syed Jawad Hussain Shahzad (Montpellier Business School, Montpellier, France; South Ural State University, Chelyabinsk, Russian Federation); Xin Sheng (Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, CM1 1SQ, United Kingdom); Sowmya Subramaniam (Indian Institute of Management Lucknow, Prabandh Nagar off Sitapur Road, Lucknow, Uttar Pradesh 226013, India) |
| Abstract: | We use daily data for the period 5 January 2000 to 31 October 2018 to analyse the impact of structural oil supply, oil demand and financial market risk shocks on the level, slope and curvature factors derived from the term structure of interest rates of the United States covering maturities of 1 to 30 years. Linear causality tests detect no evidence of predictability of these shocks on the three latent factors. However, statistical tests performed on the linear model provide evidence of nonlinearity and structural breaks, and hence indicate that the Granger causality test results are based on a misspecified framework, and cannot be relied upon. Given this, we use a nonparametric causality in-quantiles test to reconsider the predictive ability of the three shocks on the three latent factors, with this model being robust to misspecification due to nonlinearity and regime change, as it is a data-driven approach. Moreover, this framework allows us to model the entire conditional distribution of the level, slope and curvature factors, and hence can accommodate, via the lower quantiles, the zero lower bound situation seen in our sample period. Using this robust model, we find overwhelming evidence of causality from the two oil shocks and the risk shock for the entire conditional distribution of the three factors, suggesting the predictability of the entire US term structure based on information contained in oil and financial market innovations. Our results have important implications for academics, investors and policymakers. |
| Keywords: | Yield Curve Factors, Oil Supply and Demand Shocks, Risk Shock, Causality-in-Quantiles Test |
| JEL: | E43 C22 C32 G12 Q41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202063&r=all |
| By: | Retirement Equity Lab (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | An examination of the status of older workers in the second quarter of 2019 reveals two highlights: over the past three decades, older workers’ wages declined and lagged behind younger workers’ wages, and older workers’ declining wages are evidence of weakened bargaining power. Policy recommendations include protecting workers’ rights and restoring retirement income to provide an alternative to low-quality jobs. |
| Keywords: | older workers, wage growth, unemployment, wages, bargaining power, workers’ rights |
| JEL: | E24 J30 J38 J60 J88 J58 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapb:2019-02&r=all |
| By: | Hiroyuki Yamada (Faculty of Economics, Keio University); Yuki Kanayama (Faculty of Economics, Keio University); Kanako Yoshikawa (Osaka School of International Public Policy, Osaka University); Kyaw Wai Aung (STI Myanmar University) |
| Abstract: | Commercial sex is a prevalent but risky profession in many countries, including Myanmar. While risk attitude is a potentially important factor in determining risky behavior of female sex workers (FSWs), few studies have explicitly investigated the issue. This is one of the first studies to elicit the risk attitude of FSWs using a simple risk game. We conducted the risk game with FSWs in Yangon, Myanmar, where the average GDP per capita is very low, to study how risk attitude is related with observable characteristics and with risky behavior related to the use of condoms in the commercial sex market. We found that risk attitude is relatively independent of observable characteristics and the decision to use a condom. However, transaction prices were directly associated with risk attitude. |
| Keywords: | Commercial sex work, female sex worker, risk attitude, transaction price, Myanmar |
| JEL: | D81 E26 J46 O53 |
| Date: | 2020–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:keo:dpaper:2020-013&r=all |
| By: | Isiaq O. Oseni (Olabisi Onabanjo University, Ogun State, Nigeria); Ibrahim A. Adekunle (Olabisi Onabanjo University, Ogun State, Nigeria); Ayomide O. Ogunade (Olabisi Onabanjo University, Ogun State, Nigeria) |
| Abstract: | In spite of the massive revenue emanating from oil wealth, the successive government of Nigeria failed to give to its citizenry the dividend of democracy owing in large part to their inability to establish a market clearing situation because of inadequate linkage between the sources and the markets (transport infrastructures). An enquiry into the cause and potential solutions to the problems of transport infrastructure development in Nigeria informed the need to regress indices of fiscal vulnerability on the indicator of transport infrastructure development in Nigeria from 1986 through 2017 using the dynamic ordinary least squares regression technique. Results show that high-levelfiscal vulnerability deters optimal government expenditure on transport infrastructure development in Nigeria. Based on the findings of the study, itis recommended that government should do more to block all leakages of fiscal revenues and subsequently ensure that more allocation is channelled into transporting infrastructure development because of its forward and backward linkages. |
| Keywords: | Fiscal Vulnerability; Transport Infrastructure Development; Nigeria |
| JEL: | H5 E44 H12 R4 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:20/051&r=all |
| By: | Serena Merrino |
| Abstract: | This paper aims at providing new evidence over the effect of conventional monetary policy shocks on wage inequality through the earnings heterogeneity channel under the inflation-targeting regime implemented in South Africa since 2000. The empirical contribution follows previous studies by implementing a multivariate time-series analysis and identifying the structural shocks in a vector error correction model. Impulse response functions show that the overall wage distribution worsens immediately after a positive shock to the prime rate. |
| Keywords: | Earnings, Earnings inequality, Inequality, Monetary policy, Distributions, vector error correction |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-86&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Sudan discusses that regime change has created a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth. The economy is shrinking, fiscal and external imbalances are large, inflation is high, the currency is overvalued, and competitiveness is weak. The humanitarian situation is dire with large numbers of internally displaced people and refugees. US sanctions on trade and financial flows were revoked in October 2017, but Sudan remains on the state sponsors of terrorism list, which effectively discourages external investment and blocks progress toward both heavily indebted poor countries debt relief and the clearance of large arrears to the IMF. In this context, staff engagement has intensified to render the necessary policy and technical assistance to help the authorities seize this once-in-a-generation opportunity for reforms. There is broad agreement between the authorities and the IMF staff about the key reform priorities, however, the authorities have yet to put together a fully coherent and viable plan that enjoys broad public support and can plausibly attract adequate donor financing. |
| Keywords: | Social safety nets;Balance of payments;Central banks;Public financial management;Multiple currency practices;ISCR,CR,fuel subsidy,percent,Proj,percent of GDP,alternative scenario |
| Date: | 2020–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/072&r=all |
| By: | Wiedenbrug, Anahi |
| JEL: | E6 |
| Date: | 2018–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:90329&r=all |
| By: | Teresa Ghilarducci; Martha Susana Jaimes; Anthony Webb (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | Rates of elder poverty among widows and single women are higher than among couples and men. Poverty among single women reflects low lifetime earnings and spotty pension coverage, whereas poverty among widows results from the exhaustion of financial resources. In both cases, women will benefit from the creation of Guaranteed Retirement Accounts (GRAs), a source of independent retirement income lasting a lifetime. |
| Keywords: | Retirement, Women, Widows, Poverty, Older workers, Earnings, Pensions |
| JEL: | J26 J16 I30 H55 J32 E21 D63 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapn:2018-06&r=all |
| By: | Robin Döttling (Erasmus University Rotterdam); Enrico Perotti (University of Amsterdam) |
| Abstract: | We study the redistributive effects of a gradual productivity shift from tangible to intangible capital. Intangible asset creation relies on the commitment of skilled human capital. To ensure retention,firms reward innovators by deferred compensation, so funding demand by firms drops as the importance of intangible assets rises. Since human capital income is not tradable,the supply of investable assets falls and innovator rents rise.The general equilibrium effect is a fall in interest rates, while surplus savings are stored in higher asset valuations. This shift leads to increasing inequality and skewness in both the capital and labor income share.Rising house prices and wage inequality lead to higher household leverage. |
| Keywords: | Intangible capital, skill-biased technological change, human capital, excess savings,house prices |
| JEL: | D33 E22 G32 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:006&r=all |
| By: | Giovanni Caggiano; Efrem Castelnuovo; Silvia Delrio; Richard Kima |
| Abstract: | This paper quantifies the finance uncertainty multiplier (i.e., the magnifying effect of the real impact of uncertainty shocks due to financial frictions) by relying on two historical events related to the US economy, i.e., the large jump in financial uncertainty occurred in October 1987 (which was not accompanied by a deterioration of the credit supply conditions), and the comparable jump in financial uncertainty in September 2008 (which went hand-in-hand with an increase in financial stress). Working with a VAR framework and a set-identification strategy which focuses on - but it is not limited to - restrictions related to these two dates, we estimate the finance uncertainty multiplier to be equal to 2, i.e., credit supply disruptions are found to double the negative output response to an uncertainty shock. We then employ our model to estimate the overall economic cost of the COVID-19-induced uncertainty shock under different scenarios. Our results point to the possibility of a cumulative yearly loss of industrial production as large as 31% if credit supply gets disrupted. Liquidity interventions that keep credit conditions as healthy as they were before the COVID-19 uncertainty shock are found to substantially reduce such loss. |
| Keywords: | uncertainty shocks, finance-uncertainty multiplier, set-identification, VAR, financial frictions, COVID-19 |
| JEL: | C32 E32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8426&r=all |
| By: | Duman, Anil |
| Abstract: | We develop a possibility to work index (PWI) taking the ability to work from home and workplace closures into account. By using the data from the HLFS in Turkey, we examine the individual level determinants of PWI. Our findings reveal that PWI and ability to work from home are significantly different, and essential or closed jobs are not necessarily concentrated at the bottom of the wage distribution. Therefore, from a policy perspective, PWI can be a more encompassing measure of risk and can assist the public authorities to design better targeted social policies. Our results also point out that wage inequality is likely to deteriorate as a result of the supply shocks from confinement policies. However, the overall negative distributional effects of lockdown and disparity between employees in different economic activities become more substantial with duration. These suggest that in order to avoid major increases in earning inequalities and related social problems, governments would be better off with shorter and stricter lockdowns. |
| Keywords: | workplace closures,wage loss,wage inequality,teleworking,developing countries |
| JEL: | D33 E24 J21 J31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:602&r=all |
| By: | Cornelsen, Laura; Quaife, Matthew; Lagarde, Mylene; Smith, Richard D. |
| Abstract: | Taxes on sugar-sweetened beverages (SSBs) are in place in many countries to combat obesity with emerging evidence that these are effective in reducing purchases of SSBs. In this study, we tested whether signalling and framing the price increase from an SSB tax explicitly as a health-related, earmarked measure reduces the demand for SSBs more than an equivalent price increase. We measured the demand for non-alcoholic beverages with a discrete choice experiment (DCE) administered online to a randomly selected group of n = 603 households with children in Great Britain (GB) who regularly purchase SSBs. We find a suggestive evidence that a price increase leads to a larger reduction in the probability of choosing SSBs when it is signalled as a tax and framed as a health-related and earmarked policy. Respondents who did not support a tax on SSBs, who were also more likely to choose SSBs in the first place, were on average more responsive to a price increase framed as an earmarked tax than those who supported the tax. The predictive validity of the DCE, to capture preferences for beverages, was confirmed using actual purchase data. The findings imply that a well-signalled and earmarked tax on SSBs could improve its effectiveness at reducing the demand. |
| Keywords: | demand analysis; discrete choice experiment; framing and signalling; sugar-sweetened beverage tax; United Kingdom; MR/L012324/1; MR/P021999/1; 1+3 Economic and Social Research Council studentship |
| JEL: | E6 |
| Date: | 2020–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105777&r=all |
| By: | Vergote, Olivier; Sugo, Tomohiro |
| Abstract: | This paper investigates motives of banks to borrow funds from the ECB through its first two series of targeted longer-term refinancing operations (TLTROs) allotted between September 2014 and March 2017. We quantify that the top-three parameters that determine banks’ take-up decisions are the price of the operation, the amount of eligible collateral of the bank, and the composition of that collateral. In particular, the opportunity for banks to transform their less liquid assets partly into liquid central bank reserves by pledging these assets as collateral with the central bank is a strong motive for take-up and suggests that accepting a broad set of collateral was important for the monetary easing provided by TLTROs. In addition, we find that the conditions attached to TLTRO participation and take-up played an important role in creating broad-based participation across banks of different financial strength and size. JEL Classification: C23, C24, E52, E58, G21 |
| Keywords: | dynamic tobit panel, funding for lending, monetary policy operations, take-up behaviour, targeted longer-term refinancing operations |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202439&r=all |
| By: | Mohammad Abu-Zaineh (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Sameera Awawda (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Bruno Ventelou (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université) |
| Abstract: | In their quest for universal health coverage (UHC), many developing countries use alternative financing strategies including general revenues to expand health coverage to the whole population. Unless a policy adjustment is undertaken, future generations may foot the bill of the UHC. This raises the important policy questions of who bears the burden of UHC and whether the UHC-fiscal stance is sustainable in the long term. These two questions are addressed using an overlapping generations model within a general equilibrium (OLG-CGE) framework applied to Palestine. We assess and compare alternative ways of financing the UHC-ridden deficit (viz. deferred-debt, current and phased-manner finance) and their implications on fiscal sustainability and intergenerational inequalities. The policy instruments examined include direct labour-income tax and indirect consumption taxes as well as health insurance contributions. Results show that in the absence of any policy adjustment, the implementation of UHC would explode the fiscal deficit and debt-GDP ratio. This indicates that the UHC-fiscal stance is rather unsustainable in the long term, thus, calling for a policy adjustment to service the UHC debt. Among the policies we examined, a current rather than deferred-debt finance through consumption taxation emerged to be preferred over other policies in terms of its implications for both fiscal sustainability and intergenerational inequality. |
| Keywords: | intergenerational inequality,universal health coverage,overlapping generations,computable general equilibrium,fiscal sustainability |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02877144&r=all |
| By: | Prüser, Jan; Schmidt, Torsten |
| Abstract: | House price cycles may have considerable macroeconomic effects even if they evolve heterogeneous across local markets. In this paper we use a panel Markov switching model allowing for time-varying volatility to analyze national and state level house price regimes for the US jointly. Our approach identifies three house price regimes endogenously. A nationwide boom regime, a spatially limited bust regime and a nationwide bust regime. The spatially limited bust regime occurs in the coastal states where compared to other states the population density is high, the unemployment rate, the housing density as well as the land supply elasticity is low. This spatially limited bust regime usually follows a nationwide house price boom. Hence, house price movements in the coastal states usually determine the nationwide cycle in the US. Moreover, boom and bust cycles are accompanied by an exaggeration of house price increases during the boom in this group of states. In contrast, a bubble in the housing market occored in almost all states previous to the Great Recession. This is one explanation for the severity of the Great Recession. |
| Keywords: | house price cycles,regional house prices,Markov switching |
| JEL: | E31 R31 C11 C32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:853&r=all |
| By: | Bauermann, Tom; Roos, Michael W. M.; Schaff, Frederik |
| Abstract: | Agent-based computational economics (ACE) is gaining interest in macroeconomic research. Agent-based models (ABM) are increasingly able to replicate micro- and macroeconomic stylised facts and to extend the knowledge about real-world economic systems. These advances allow ABM to become a valuable and more frequently used tool for policy analysis in academia and economic practice. However, ACE is a rather complex approach to already complex investigations like policy analyses, i.e. the analyses on how a variety of policy measures affects the (model) economy, which makes policy analyses in ABM prone to critique. The following research paper addresses these problems. We have developed a procedure for policy experiments in ACE which helps to conceptualise and conduct policy experiments in macroeconomic ABM efficiently. The procedure makes policy implementation decisions and their consequences transparent by conducting what we term the policy implementation sensitivity analysis (POSA). The application of the procedure produces graphical and/or numerical reports that should be included in the appendix of the original research paper in order to increase the credibility of the research, similar to proofs and protocols in analytical and empirical research. |
| Keywords: | agent-based macroeconomics,policy experiments,sensitivity analyses |
| JEL: | C63 E6 B4 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:854&r=all |
| By: | Retirement Equity Lab (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | An examination of the status of older workers in the first quarter of 2020 reveals two highlights: older workers are more likely than younger workers to think they can’t find a job comparable to their current one, a well-founded fear that persists at every earnings level and reflects the reality of an unfriendly labor market, and are less likely to quit their jobs without ability to find a better one, further eroding their bargaining power. Policy recommendations include increasing older workers’ opportunities by increasing their bargaining power in the workplace, establishing a federal Older Workers Bureau, expanding Social Security, and creating universal Guaranteed Retirement Accounts & an emergency savings program. |
| Keywords: | older workers, employment, ageism, labor market, unemployment, wages, bargaining power |
| JEL: | E24 J30 J38 J60 J88 J58 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapb:2020-01&r=all |
| By: | Sri Dewi Anggadini (Department of Accounting, Indonesia Computer University, Indonesia Jl. Dipati Ukur 112- 116 Bandung West Java - Indonesia Author-2-Name: Deden A.Wahab Author-2-Workplace-Name: Department of Master of Management, Indonesia Computer University, Indonesia Jl. Dipati Ukur 112- 116 Bandung West Author-3-Name: Rio Yunanto Author-3-Workplace-Name: Department of Computerized Accounting, Indonesia Computer University, Indonesia Jl. Dipati Ukur 112- 116 Bandung West Java -Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | Objective - The purpose of this study is the development of integrated information systems and models, developing and developing information systems of zakat, infaq, and shadaqoh (ZIS) which are integrated in the Amil Zakat District / City Institution in West Java, Indonesia. Indonesia's West Java Province has the potential for zakat collection, but it is still not effective. Methodology – This research program was conducted to measure the effect of ZIS information systems on the quality of accounting information as measured by the quality of financial statements, in order to establish a strategy for obtaining muzakki satisfaction in West Java Province. This study will identify the relationship model between them. The research program was conducted in 27 cities/regencies in West Java Province of Indonesia Findings – The research used a series of different research approaches such as structured review and qualitative work with interviews or focus group discussions to develop key factors for the success of information systems and Partial Least Squares Structural Equation Modeling as an analysis method. Novelty – The results of this study indicate that an integrated ZIS information system has an impact on the quality of accounting information measured by the quality of financial statements. Type of Paper - Empirical. |
| Keywords: | information systems, zakat, infaq, shodaqoh, information. |
| JEL: | E6 H2 H3 |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr169&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Note provides a summary of the review of systemic risk oversight arrangements and macroprudential policy issues in Canada. The paper discusses the existing systemic risk oversight arrangements and potential challenges, and then presents steps that can be taken to modernize the framework to ensure its effectiveness going forward. The paper focuses on systemic risk surveillance, including the current approaches and existing challenges such as data gaps and coordination. It also covers macroprudential policy issues, including the toolkit, the current policy stance and overall policy effectiveness. The review recommends that steps can be taken to improve the current system with a more formalized arrangement for systemic risk oversight. A single body in charge of systemic risk oversight would be the first-best option. Over time, the authorities should review whether systemic risk oversight under the Heads of Agencies Committee leadership with no statutory mandate is adequate. Macroprudential policy at the federal level has been effective; however, better coordination is essential given multiple provincial authorities’ ownership of prudential tools. |
| Date: | 2020–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/019&r=all |
| By: | Retirement Equity Lab (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | An examination of the status of older workers in the second quarter of 2020 reveals two highlights: increased downward mobility at all earnings levels and middle earners being hit twice, sustaining both job loss and market loss. Policy recommendations include Congress discouraging early retirement withdrawals and increasing and extending unemployment benefits for older workers. The recession exposes the need for comprehensive reform: expanding Social Security and creating a public option retirement plan in the form of Guaranteed Retirement Accounts. |
| Keywords: | older workers, recession, COVID-19, coronavirus, downward mobility, poverty, unemployment, wages |
| JEL: | E24 J30 J38 J60 J88 J58 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepapb:2020-02&r=all |
| By: | Isiaq O. Oseni (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Ibrahim A. Adekunle (Olabisi Onabanjo University, Ago-Iwoye, Nigeria) |
| Abstract: | Policy ambiguity in the form of non-directional and non-purposeful use of state resources has made sustainable growth outcomes a mirage in Nigeria. Recent economic crisis prompted the debate on how increased government spending induces sustainable economic growth in Nigeria. This paper examines the validity or otherwise of Wagner’s theory in Nigeria for the realisation of the Sustainable Development Goals (SDGs) from 1980 through 2017. Using time-series data on real gross domestic product, total government expenditure, money supply and domestic investment and adopting the two-step Engle and Granger estimation procedure, result shows that increased government spending significantly predicts variations in real gross domestic product and thus leaned empirical credence to Wagner’s hypothesis as an essential concept for the attainment of Sustainable Development Goals in Nigeria. This paper recommended that the government should exhaust all possible options to increase expenditure in order to realise sustainable growth in Nigeria. |
| Keywords: | Government Expenditure, Economic Growth, Wagner law, Granger Causality |
| JEL: | E62 O11 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/006&r=all |
| By: | Denis Belomestny; Ekaterina Krymova; Andrey Polbin |
| Abstract: | The main goal of this paper is to develop a methodology for estimating time varying parameter vector auto-regression (TVP-VAR) models with a timeinvariant long-run relationship between endogenous variables and changes in exogenous variables. We propose a Gibbs sampling scheme for estimation of model parameters as well as time-invariant long-run multiplier parameters. Further we demonstrate the applicability of the proposed method by analyzing examples of the Norwegian and Russian economies based on the data on real GDP, real exchange rate and real oil prices. Our results show that incorporating the time invariance constraint on the long-run multipliers in TVP-VAR model helps to significantly improve the forecasting performance. |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2008.00718&r=all |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper conducts a review of taxes on labor in Kazakhstan, which, despite the current relatively low level of collections, have the potential to become an important source of non-oil fiscal revenue. This paper focuses on one group of non-oil taxes, personal income tax and other taxes on labor, and reviews their effective burden, progressivity, and efficiency. These taxes are found to have limited responsiveness to oil-sector fluctuations, and thus help enhance the resilience of public finance to oil shocks. The existing labor tax system is characterized by a low, flat headline rate, limited progressivity except at the lower end of household income distribution due to deduction of the minimum wage, and a relatively high tax burden mainly born by the formal sector. Having a more equitable and efficient labor tax system would involve a targeted strategy for deductions and exemptions, expanding the tax base, and continuing to improve tax design, administration, and collection enforcement. |
| Keywords: | Economic growth;Public finance;Fiscal sustainability;Capital;Oil prices;ISCR,CR,rules-based,extrabudgetary,labor tax,progressivity,medium-term |
| Date: | 2020–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/038&r=all |
| By: | Chiaruttini, Maria Stella |
| Abstract: | When in 1860 Southern Italy was annexed to the Kingdom of Italy, it suddenly found itself within a larger national market characterised by high levels of public debt, a new currency and increased competition in banking. Monetary problems, the depreciation of public bonds and the loss of pre-eminence of the Southern public banks to the advantage of the Piedmontese National Bank, the predecessor of the Bank of Italy, are increasingly often taken as evidence of the harmful effects of financial integration on the Southern economy. This paper, focusing on the banking side of the story, argues, on the contrary, that the South benefited significantly from its integration with the North and that the relative underdevelopment of its credit markets was not due to a policy of 'internal financial colonialism' pursued by Northern capitalists with the backing of the Italian state, but to different economic conditions and the long-lasting impact of the poor banking policies implemented under the Bourbons. |
| JEL: | E50 F36 G21 G28 N23 P51 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ibfpps:0320&r=all |
| By: | Perazzi, Elena |
| Abstract: | In contrast to narrow banking proposals, I argue that deposits are a special form of financing, that makes banks more suitable to extend long-term loans when confronted with the risks of monetary policy. The synergy between deposit-taking and long-term lending arises because profits on deposits are highest after a contractionary monetary policy shock, precisely when the banks' balance sheets deteriorate due to maturity mismatch, and equity-constrained banks deleverage by cutting their lending. I quantify the impact of this mechanism in a dynamic bank model embedded in general equilibrium, and find that deposits mitigate the contraction of new lending at high interest rates by a factor between 25% and 50%. |
| Keywords: | Deposits, Banks, Long-Term Lending, Narrow Banking |
| JEL: | E5 G21 |
| Date: | 2019–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101932&r=all |
| By: | Simplice A. Asongu (Yaounde, 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 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/008&r=all |
| By: | Angelini, Elena; Darracq Pariès, Matthieu; Zimic, Srečko; Damjanović, Milan |
| Abstract: | This paper studies the macroeconomic consequences of the COVID-19 pandemic and makes a first step in adapting the central bank modelling apparatus to the new economic landscape. We augment the ECB-BASE model with the predictive dynamics of the SIR model in order to assess the interplay between epidemiological fundamentals, containment policies and the macroeconomy. Containment policies considerably reduce the share of infected and deceased people, but generate a sharp decline in economic activity. Barring the materialization of amplification risks, the induced recession may remain broadly V-shaped under targeted confinement policies. By comparison, a "laissez-faire" approach to the pandemic emergency can even inflict in some cases higher long-term economic costs. Nevertheless, the depth of the recession and the speed of the recovery (if at all) crucially depend on the magnitude and persistence of the supply-side retrenchment, as well as on the risk of macro-financial feedback loops. JEL Classification: E1, E3, I1 |
| Keywords: | COVID-19, ECB-BASE, epidemic, modelling |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202431&r=all |
| By: | Adelaide Baronchelli; Alessandra Foresta; Roberto Ricciuti |
| Abstract: | This paper empirically evaluates the impact of accountability on fiscal capacity. It adopts an instrumental variable approach using, as an instrument, the measurement of how far, on average, official language differs from ordinary language. The main hypothesis is that if the average citizen cannot understand the central government and the elite, she will find it difficult/impossible to hold the government to account. The first stage results suggest that this instrument is strong and reliable and is negatively correlated with our measure of accountability in line with the hypothesis. The results in the second stage support the main hypothesis. Our results are robust to plausible exogeneity tests and different specifications. |
| Keywords: | language, accountability, fiscal capacity, insulation |
| JEL: | H20 D02 D72 C26 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8437&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents Austria’s 2019 Financial System Stability Assessment. The Austrian authorities have proactively strengthened the financial stability framework since the previous Financial Sector Assessment Program (FSAP). The FSAP analysis suggests that banks are, in aggregate, resilient to severe macrofinancial shocks, although most banks would make use of capital conservation buffers. Mutual financial cooperation arrangements among banks act as a shock absorber for idiosyncratic shocks, but high financial interlinkages may fuel loss propagation in a systemic event. While a robust regulatory framework and prudential policy actions have lowered financial stability risks, challenges include data and regulatory gaps, resource constraints, high interconnectedness, and exposure to cross-border and money-laundering risks. Authorities should enhance monitoring and oversight related to contagion/spill over risks. This would include enhancing the stress testing framework to consider second round effects and contagion, improving data collection on foreign exposures, nonfinancial corporates and real estate, and strengthening supervision of related party, group-wide, and money-laundering risks. Supervisors should be able to take timely action and correct unsustainable risk taking, including unsustainable lending and business models. |
| Keywords: | Real sector;Financial systems;Financial institutions;Macroprudential policies and financial stability;Financial sector oversight;ISCR,CR,OeNB,AML,FMA,Austrian bank,BMF |
| Date: | 2020–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/035&r=all |
| By: | International Monetary Fund |
| Abstract: | This review provides an update on the Austrian insurance sector and an analysis of certain key aspects of the regulatory and supervisory regime. The note analyzes regulation and supervision in relation to key issues identified in previous Financial Sector Assessment Programs (FSAP), as well as material changes since the last FSAP. This note also covers the current situation and potential changes in the crisis management and early intervention framework of the insurance sector. It focuses on issues relevant to a long-standing policyholder protection mechanism, early intervention powers—existing and under discussion—and crisis management and resolution arrangements for insurance companies and groups. The analysis recommends that proper implementation of Solvency II needs ongoing validation and scrutiny by regulators, which could be at risk if supervisory resources with skills and expertise are not retained. Higher legal, reputational, and conduct risks are posing additional pressures to the life insurance sector. Market conduct supervision should be enhanced, with active use of enforcement powers in addition to the insights that studies launched by the government will provide. |
| Keywords: | Financial regulation and supervision;Financial crises;Financial markets;Financial institutions;Macroprudential policies and financial stability;ISCR,CR,FMA,insurer,solvency,policyholder,insurance sector |
| Date: | 2020–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/063&r=all |
| By: | Eric S. Rosengren |
| Abstract: | The economy has suffered a truly severe shock from the COVID-19 public health crisis. The unemployment rate has risen very significantly in response to necessary shutdowns intending to limit the health impact of the pandemic. However, even when businesses are free to open, many may face diminished demand until customers once again feel secure leaving their homes, which underlines that public health is at the root of this crisis and its solutions. |
| Keywords: | COVID-19; employment; money market mutual funds; fiscal policy; monetary policy; pandemic; economic shock; public health; Main Street Lending Program |
| Date: | 2020–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:88247&r=all |
| By: | Hanan Morsy (Research Department, African Development Bank); Lacina Balma (Research Department, African Development Bank); Adamon N. Mukasa (Research Department, African Development Bank) |
| Abstract: | The paper studies the effects of the COVID-19 pandemic on African economies and household welfare using a top-down sequential macro-micro simulation approach. The pandemic is modeled as a supply shock that disrupts economic activities of African countries and then affects households' consumption behavior, the level of their welfare, and businesses' investment decisions. The DSGE model is calibrated to account for informality, a key feature of African economies. We find that COVID-19 could diminish employment in the formal and informal sectors and contract consumption of savers and non-savers, especially for savers. These contractions would lead to an economic recession in Africa and widen both fiscal and current account deficits. Extreme poverty is expected to increase further in Africa, in particular if the welfare of the poorest households grows at lower rates. We also use the DSGE model to analyze the effects of different fiscal policy responses to the COVID-19 pandemic. |
| Keywords: | COVID-19, Macro-micro simulation, Welfare, Fiscal policy, Africa JEL Classification: E17, E62, I18, I3 |
| Date: | 2020–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:2464&r=all |
| By: | Pereira, Márcia; Tavares, José |
| Abstract: | We propose a new method to estimate implicit country weights in the conduct of monetary policy by the European Central Bank (ECB). We estimate linear and non-linear Taylor rules for 11 countries in the pre-Euro period, and then use the estimated response to produce counterfactual reference interest rates for those same countries in the post-Euro period. The distance between counterfactual interest rates and the ECB's reference rate provides an estimate of a country's implicit weight in Euro area monetary policy, in which the sum of weights adds up to 1. The concept of monetary weight draws on that of monetary stress, initially proposed by Clarida, Gali, and Gertler, 1998, and further developed by Sturm and Wollmershauser, 2008. Our results show that Germany, Belgium and the Netherlands are persistently assigned the largest weights, whereas Greece and Ireland secure the smallest. This is especially so during the Sovereign Debt Crisis (SDC). The estimated country weights increase with the degree of co-movement between each country's and Germany's business cycle. |
| Keywords: | Aggregate Supply and Demand Shocks; Counterfactual Interest Rates; Monetary Weights; Taylor rule |
| JEL: | E52 F15 F33 P16 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14090&r=all |
| By: | Danilo Cascaldi-Garcia; Deepa Dhume Datta; Thiago Revil T. Ferreira; Olesya V. Grishchenko; Mohammad R. Jahan-Parvar; Juan M. Londono; Francesca Loria; Sai Ma; Marius del Giudice Rodriguez; John H. Rogers; Cisil Sarisoy; Ilknur Zer |
| Abstract: | Researchers, policymakers, and market participants have become increasingly focused on the effects of uncertainty and risk on financial market and economic outcomes. This paper provides a comprehensive survey of the many existing measures of risk, uncertainty, and volatility. It summarizes what these measures capture, how they are constructed, and their effects, paying particular attention to large uncertainty spikes, such as those appearing concurrently with the outbreak of COVID-19. The measures are divided into three types: (1) news-based, survey- based, and econometric; (2) asset market based; and (3) Knightian uncertainty. While uncertainty has significant real and financial effects and spills over across countries, the size and persistence of these effects depend crucially on the source of uncertainty. |
| Keywords: | Global risk; Uncertainty; Volatility; Crises; Economic policy; Monetary policy; Geopolitical risk; Trade policy; Downside risk |
| JEL: | E60 G10 G15 |
| Date: | 2020–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1294&r=all |
| By: | Juan Guerra-Salas (Central Bank of Chile); Markus Kirchner (Central Bank of Chile); Rodrigo Tranamil (Central Bank of Chile) |
| Abstract: | Online appendix for the Review of Economic Dynamics article |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:red:append:18-407&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents 2019 Article IV Consultation with the Republic of Ethiopia and its Requests for Three-Year Arrangement Under the Extended Credit Facility and an Arrangement Under the Extended Fund Facility. Ethiopia has enjoyed strong growth for over a decade, which has reduced poverty and raised living standards. However, the public investment-driven growth model has reached its limits. The authorities have announced a Homegrown Economic Reform Plan, consisting of a mix of macroeconomic, structural and sectoral policies, to address vulnerabilities and tackle structural bottlenecks inhibiting private sector activity. Over the medium term, macroeconomic and structural reforms announced by the authorities are expected to lead to a reduction in public debt, lower external vulnerabilities, and stronger growth, investment and exports. The risks to the outlook are tilted to the downside. Domestic opposition to reforms ahead of the upcoming elections could increase investor uncertainty and weigh on investment and growth. External risks stem from rising protectionism and weaker than expected global growth as well as climate-related shocks. |
| Keywords: | External sector;Balance of payments;Economic policy;Monetary statistics;Financial statistics;ISCR,CR,SOEs,NBE,percent of GDP,Proj,overvaluation |
| Date: | 2020–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/029&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Cameroon’s Fifth Review Under the Extended Credit Facility Arrangement and Request for a Waiver of NonObservance of a Performance Criterion and Modification of Performance Criteria (PC). 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). Program implementation over the first nine months of 2019 was mixed and faces challenges. The continuous PC on external arrears accumulation and three September ITs were also missed. Structural reforms are advancing but with delays. The IMF staff supports the authorities’ requests for completion of the fifth review, a waiver of nonobservance of one continuous performance criterion and modification of one December 2019 and one 2020 performance criterion. |
| Keywords: | Financial and Monetary Sector;Fiscal sector;Macroprudential policies and financial stability;Credit;Development;ISCR,CR,SOEs,non-oil,primary balance,percent of GDP,BEAC |
| Date: | 2020–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/048&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents the Technical Assistance report National Accounts Mission in Botswana. As a result of recommendations made during the previous mission, Statistics Botswana (SB) have revised the release date for the rebase of national accounts estimates from March 2020 to December 2020 and updated the workplan accordingly. SB has made progress in finalizing the statistical frame and associated weights to compile gross value added (GVA) estimates for industries in the economic survey and estimates of GVA for the other industries. Once the business frame is determined, SB will have to reconcile the establishments that responded to the economic census ensuring that there is good coverage of industries as well as size of establishments. The previous mission strongly recommended that the release date for the rebased estimates be revised given the workload in rebasing the national accounts. The two temporary staff that have been with the national accounts for approximately 18 months as reported by the previous mission have been extended for a further two years. This is very positive news as they demonstrated a good understanding of the national accounts and a willingness to build their capacity. |
| Keywords: | Financial statistics;National accounts;Economic analysis;Financial services industry;Price indexes;ISCR,CR,SUT,national account,GVA,rebased,SGO |
| Date: | 2020–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/053&r=all |
| By: | Vanda Almeida (European Commission - JRC); Salvador Barrios (European Commission - JRC); Michael Christl (European Commission - JRC); Silvia De Poli (European Commission - JRC); Alberto Tumino (European Commission - JRC); Wouter van der Wielen (European Commission - JRC) |
| Abstract: | We analyse the impact of the COVID-19 crisis on EU households' income and assess the cushioning effect of discretionary policy measures taken by the EU Member States. Our assessment is based on the European Commission Spring 2020 forecasts and counterfactual scenarios under a no policy change assumption. Our analysis suggests that over the course of 2020, on average, households' disposable income in the EU would fall by -5.9% due to the COVID-19 crisis without discretionary policy measures, and by -3.6% with policy intervention, pointing to a significant cushioning effect of these measures in protecting households against income losses. Furthermore, our results confirm that the impact of the COVID-19 crisis is likely to be highly regressive, with the poorest households being the most severely hit. However, discretionary policy measures are expected to contain the regressive effects of the recession, resulting in a quite homogeneous impact along the income distribution. Poverty, as measured by the at risk of poverty (AROP) rate, would increase significantly, even in presence of policy measures (+1.7pp), although this result depend on whether we anchor the poverty line to its pre-crisis level. When doing so, the impact of the COVID crisis on poverty becomes very close to the one observed in the aftermath of the financial crisis (i.e. +0.1pp) once policy measures are considered. Given the sheer size of the COVID shock, we might consider that the anchored poverty line may provide a more reliable assessment of the impact of the Great lockdown on poverty, however. Policy interventions are therefore seen as instrumental in cushioning against the impact of the crisis on inequality and poverty. Finally, our results suggest that the social impact of the Great Lockdown is likely to be much larger than the one experienced during the 2008/2009 financial crisis, at least for what concerns the immediate impact of the crisis. |
| Keywords: | COVID-19, Great Lockdown, EUROMOD, household income, inequality, poverty |
| JEL: | E24 D31 H12 H23 H84 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202006&r=all |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper discusses reforms that could generate higher revenues from the non-oil sector through measures to rationalize the tax code, broaden the tax base, and increase administrative efficiency. These efforts should be complemented by economic diversification policies that support non-oil growth and thereby expand the potential tax base. The paper also reflects on lessons learned from other country experiences that could be relevant for the Republic of Congo. The authorities should step up revenue mobilization as a key component of their medium-term fiscal strategy. This will require a well-sequenced structure of reforms that includes three key elements. First, the newly created Tax Policy Unit in the Ministry of Finance should reduce institutional fragmentation and facilitate the design, coordination and implementation of a medium-term revenue strategy. Second, the government should urgently address the erosion of the tax base generated by an excessive and discretionary use of tax exemptions that do not comply with existing laws and regulations. Finally, the government should continue to focus on rationalizing the tax code, and increasing administrative efficiency to recover tax arrears, including through the modernization of existing income tax systems. |
| Keywords: | Oil sector;Fiscal policy;Oil revenues;Tax policy;Tax revenue;ISCR,CR,Congolese authority,non-oil,arrears,SNPC,import price |
| Date: | 2020–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/027&r=all |
| By: | Wilson, Tim; Bevan, Gwyn; Gray, Muir; Day, Clara; McManners, Joe |
| Keywords: | NHS; integrated health and social care; commons |
| JEL: | E6 |
| Date: | 2020–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:106182&r=all |
| By: | Goodhart, C. A. E.; Ashworth, Jonathan |
| Abstract: | Over the past decade the media have regularly reported on the imminent death of cash amid rapid innovation in payment technologies. However, cash in circulation has actually been growing strongly in many counties. Perhaps unsurprisingly given Coronavirus-related health concerns, there have been renewed calls to abandon cash and some observers have argued the virus will accelerate its demise. Data thus far suggest, however, that currency in circulation has actually surged in a number of countries. While the economic shutdowns and increased use of online retailing are currently diminishing cash's traditional function as a medium of exchange, it seems that this is being more than offset by panic driven hoarding of banknotes. |
| Keywords: | coronavirus; Covid-19; currency usage; payment technologies; hoarding in panics |
| JEL: | E40 E41 E49 E63 N10 |
| Date: | 2020–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105311&r=all |
| By: | Jerome De Henau; Susan Himmelweit |
| Abstract: | This paper discusses new methods of combined macro-micro analysis of labor demand and supply to investigate the gender impacts of public policy. In particular it examines how studies have used input-output analysis together with more or less sophisticated methods of allocating people to jobs to model the impact of public investment in care on the gender employment gap and other inequality measures. It presents some results of a cross-country comparison of investment in the care and construction industries, suggesting methodological refinements to take account of the labor supply effects of such investment policies in order to enable a more detailed analysis of who gets the jobs generated and under what conditions of employment to achieve a more accurate assessment of a policy's full impact on employment inequalities. We argue that such a microsimulation of who is likely to get any newly created jobs should be able to take account of the (child)care "tax" paid by those with caring responsibilities on time spent in employment (as well as the formal tax and benefit system). |
| Keywords: | Care; Microsimulation; Public Investment; Labor Demand; Gender |
| JEL: | E17 J16 J21 R15 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_966&r=all |
| By: | Eric S. Rosengren |
| Abstract: | I would like to thank the organizers of this conference for inviting me to participate on this panel – and more broadly for organizing a conference examining many of the challenges policymakers have faced over the past 20 years. As many of you know, these were challenges that Marvin Goodfriend anticipated, well before the Great Recession forced policymakers to confront them. Specifically, our panel topic – monetary policy and the zero lower bound – is one that Marvin devoted a good deal of thought to. And as I’ll touch on today, his emphasis on this topic proved prescient. |
| Keywords: | monetary policy; zero lower bound; low interest rate environment; fiscal policy; federal funds rate; negative interest rates |
| Date: | 2020–03–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:88245&r=all |
| By: | Knobel, Alexandr (Кнобель, Александр) (The Russian Presidential Academy of National Economy and Public Administration); Zaitsev, Yuriy (Зайцев, Юрий) (The Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | This working paper is devoted to the study of interaction mechanism transformation aspects of economic agents within the framework of the modern economic system under the influence of digitalization. It also studies influence of digitalization on the behaviour of various types of economic agents, the identification of its direct and indirect effects on economic growth. Based on the research some we give some economic policy recommendations for Russian economy in order to maximize the positive effects of digitalization for the further growth. A wide range of factors was studied, an analysis of their influence was carried out, methodological approaches to assessing the impact of the digitalization of the economy on the dynamics of the main socio-economic parameters were developed, and empirical studies based on these approaches were carried out. The experimental calculations carried out in the study are more demonstrative in nature, and their main goal is to test the proposed methodological approach to measuring the level and dynamics of digitalization of the Russian economy in the system of macroeconomic estimates. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:wpaper:042033&r=all |
| By: | International Monetary Fund |
| Abstract: | This technical note on Austria presents the Financial Stability analysis, stress testing, and interconnectedness. Austria’s banking sector presents unique structural vulnerabilities. Private credit growth has supported the cyclical boom without jeopardizing household and corporate indebtedness. Profits of Austrian subsidiaries in Central, Eastern, and South-eastern Europe have increased recently; however, the cycle is turning and the ability of the sector to maintain a solid net interest margin may be further challenged. The Austrian authorities have targeted vulnerabilities related to interconnectedness by imposing Other Systemically Important Institution buffers also at the unconsolidated level. Institutional cooperation arrangements are shown to act as a shock absorber for idiosyncratic shocks, but holdings among participating members of respective IPSs may lead to substantial inward stability risks in a systemic event. Under favorable economic conditions inverse ownership contributes strongly to their capital generation by allowing partial redistribution of profits higher tier banks in the Raiffeisen sector earn on their more profitable international business. |
| Keywords: | Financial soundness indicators;Real sector;Macroprudential policies and financial stability;Financial services;Financial systems;ISCR,CR,OeNB,Austrian bank,central institution,solvency,IPS |
| Date: | 2020–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/066&r=all |
| By: | International Monetary Fund |
| Abstract: | The IMF conducted a Financial Sector Stability Review of the Republic of Guinea in June 2019. The review shows that while the current economic situation is benign, the financial soundness indicators (FSIs) point to increasing vulnerabilities. The economic outlook is currently positive. Moreover, financial inclusion is growing rapidly as mobile money services are quickly adopted. However, the FSIs suggest growing vulnerabilities and possibly some idiosyncratic stress in the banking sector. As a result of data quality and availability issues, it is difficult to make a more in-depth assessment of financial stability and potential vulnerabilities. The financial sector structure is, to some extent, a mitigant to the potential financial stability vulnerabilities. All banks are part of foreign financial groups that they can fall back on during periods of stress. While the current economic situation is benign, it is an opportune moment to develop the necessary capacity to handle potential financial stability vulnerabilities. As a priority, on and offsite supervision and the availability and quality of data on the banking sector, and in a later stage also for the other financial sectors, should be significantly improved, and the regulatory framework for banks should be modernized. |
| Keywords: | Macroprudential policies and financial stability;Financial institutions;Islamic finance;Financial markets;Financial services;ISCR,CR,WAMZ,bank law,AFW,deposit-taking,commercial bank |
| Date: | 2020–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/042&r=all |
| By: | Brendan Epstein (University of Massachusetts, Lowell); Alan Finkelstein Shapiro (Tufts University) |
| Abstract: | Online appendix for the Review of Economic Dynamics article |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:red:append:19-234&r=all |
| By: | Skelton, Mac; Ali Saleem, Zmkan |
| Abstract: | Since 2003, analysts have conceptualized Iraqi politics from the standpoint of the national scene in Baghdad. From this perspective, power dynamics in Iraq are understood through the lens of a national quota-based system (called muhassasah in Arabic) that distributes ministries and oil revenues across the country’s political groups according to ethno-sectarian allotments. Ignored in this national-level approach are the distinct arenas of political competition beyond the capital, where both national and subnational political actors struggle for control over local oil and gas fields, border crossings, and government contracts. This report focuses on three of Iraq’s most strategically important governorates, Nineveh, Basra, and Diyala. Since 2003, political parties and their corresponding armed forces – in addition to international actors such as the US military – have vied for influence in the three provinces through locally distinct forms of clientelism and violence. The report tracks the key shifts in each political marketplace between 2003 and the present, paying particular attention to the evolving usages of violence and flows of political finance. Political power at the local level is constituted and maintained both through coercion and transactional deals. Opportunistic alliances often cut across ethno-sectarian lines, defying assumptions around post-2003 identity-based politics. The primacy of purchasing loyalties over providing services has led to poor governance and pervasive instability. In the short and medium term, the political marketplaces of Nineveh, Basra and Diyala are likely to witness particularly turbulent dynamics due to the global crash in oil prices related to the COVID-19 pandemic, driving the parties and armed groups controlling the three governorates to compete more uncompromisingly over non-oil forms of revenue generation. In light of such developments on the horizon, the newly installed government in Baghdad has an ever-decreasing set of options at its disposal. The report concludes with both country-wide and locally-specific policy implications. |
| JEL: | E6 R14 J01 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105184&r=all |
| By: | Malunda, Dickson. |
| Keywords: | full employment, labour market analysis |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:ilowps:995085493402676&r=all |
| By: | International Monetary Fund |
| Abstract: | This technical note on Austria focuses on bank resolution and crisis management. This note assesses and makes recommendations regarding bank resolution and crisis management arrangements. The scope of the assessment includes the institutional arrangements for recovery, resolution, and crisis management; the supervision of banks’ recovery plans; the legal regime for bank bankruptcy and resolution; resolution planning by the authorities and addressing impediments to resolution; assuring funding to support resolution; the two deposit guarantee schemes; and the government authorities’ collective preparedness to deal with financial crisis. Recovery and resolution planning are well advanced. Key impediments to resolution have been identified and are being addressed, yet adequate means to ensure enough funding in resolution remains to be determined. The legal framework is sound, although additional flexibility could be provided in the bankruptcy regime. The authorities’ collective contingency planning for financial crisis and testing of plans should be intensified. |
| Keywords: | Financial crises;Financial institutions;Macroprudential policies and financial stability;Financial markets;Central banks;ISCR,CR,OeNB,FMA,MOF,recovery plan,ELA |
| Date: | 2020–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/062&r=all |
| By: | Nie,Owen |
| Abstract: | Capital controls, policy measures used by governments to regulate cross-country financial flows, have become standard policy options in many emerging market economies. This paper will focus on what capital controls reveal about the state of the economy and the implications of such revelation for policy efficacy. Using a small open economy model with a collateral constraint and overborrowing relative to the social optimum, this paper incorporates a representative agent's Bayesian updating of information in response to change in policy and show that the efficacy of capital controls to contain financial crises and improve welfare could be undermined if the agent rationally learns from policy. Empirically, this paper finds that capital controls convey important information market participants use to improve their understanding of fundamentals. This paper highlights the need for policymakers to consider the unintended consequences of information revelation in the design of capital flow management policies. |
| Keywords: | Macroeconomic Management,Banks&Banking Reform,Fiscal&Monetary Policy,Consumption,International Trade and Trade Rules |
| Date: | 2020–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9343&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Assistance Report paper on Chile advices on the planned integration of the superintendency for banking supervision, Superintendencia de Bancos y Instituciones Financieras (SBIF), into the Comisión para el Mercado Financiero (CMF). While the approved Bills contain important enhancements to the governance and regulatory framework, several legal aspects would benefit from further clarification. These include aspects related to the mandate, objectives, powers, and governance of the CMF. This report discusses the mission’s main observations and recommendations regarding the integration of the SBIF into the CMF. The report also provides an overview of the existing supervisory architecture and discusses the legal mandate, objectives, and powers of the new CMF, followed by a discussion on the governance arrangements that existed prior to the integration and of the main changes brought in the Law recently approved. It also discusses a possible blueprint for the organizational structure of the new CMF aimed at realizing the desired synergies in the supervision function and strengthening conglomerate supervision. |
| Keywords: | Financial crises;Macroprudential policies and financial stability;Financial institutions;Financial systems;Financial markets;ISCR,CR,CMF,legal mandate,transition process,taskforce,section V |
| Date: | 2020–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/056&r=all |
| By: | Rosario G. Manasan |
| Abstract: | The Philippine planning and budgeting systems are well placed in terms of their capacity to support the achievement of the Sustainable Development Goals (SDGs) and could serve as a useful reference for other countries. First, all the SDGs can be mapped into the priorities of the Philippines Development Plan (PDP). Greater congruence between the SDG indicators, on the one hand, and the PDP Results Matrices indicators, on the other, improves the integration of SDG implementation and PDP implementation. Second, the considerably improved and fairly strong emphasis on results and performance of the existing government budgeting system provides a solid foundation for linking the annual budget with the PDP and the SDGs so that limited resources are allocated and spent on programmes that achieve the desired societal goals and outcomes. Given the breadth and scope of the SDGs, however, this study supports incipient efforts to put in place an SDG expenditure tagging exercise to assist policy makers in evaluating the effectiveness of the SDG-related programmes of various government agencies and in prioritizing its limited resources. At the same time, it recommends that current efforts towards SDG localization be intensified given that recent Supreme Court ruling on the Mandanas-Garcia IRA petitions which will effectively increase the share of local governments in national taxes. |
| Keywords: | budget reform, medium-term expenditure framework, public expenditure management. SDGs, tax reform |
| JEL: | E62 H50 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:unt:wpmpdd:wp/20/05&r=all |
| By: | Muhammet Berigel (Faculty of Economics and Administrative Sciences, Karadeniz Technical University); Onur Ad?yaman (Republic of Turkey Ministry of Economy, Science and Industry; Eastern Black Sea Development Agency); Özlem Özgenç (Faculty of Forestry, Karadeniz Technical University); Furkan Kalyoncu (Fatih Education Faculty, Trabzon University); Merve Y?ld?z (Distance Education Application and Research Center, Karadeniz Technical University) |
| Abstract: | Today, the structure of employment and the number of unemployment in many countries are an important indicator of the country's level of economic development and social development. Unemployment is one of Turkey's most important social and economic problem. Functional relationship between employment and the education/skill level is quite weak in Turkey. In addition, people who have vocational education do not have the qualifications demanded by the labor market, while on the other hand, there is a qualified intermediate shortage in the enterprises. A detailed investigation of these problems will be useful in developing policies for unemployment. In this study, it is aimed to reveal the problems and needs for basic skill assessment processes, which is one of the problems experienced by the public and private institutions. This study is a deeply qualitative research to expose existing problems to improve the basic skills of low-qualified adults. Semi conducted interviews were made with 6 job and occupational consultant from ISKUR (Turkish Employment Agency), 5 job experts from Trabzon Chamber of Commerce and Industry and 5 vocational education experts from Public Education Center.Results of this study showed that there is no systematic approach for institutions dealing with employment affairs in Turkish organizations. In addition, business and vocational consultants faced lack of vocational training in the process of guiding the unemployed applicants to jobs. |
| Keywords: | Problems at Employment in Turkey, Skills Problems, Need Analyses, Assessing Unemployment |
| JEL: | J64 C18 E24 |
| URL: | http://d.repec.org/n?u=RePEc:sek:itepro:12113012&r=all |
| By: | Van, Germinal |
| Abstract: | The purpose of this paper is to analyze the impact that the rule of law and property rights exert on the economic output of Africa. In this paper, we seek to demonstrate that economic output occurs steadily and sustainably when the rule of law and access to property rights are highly valued and ensconced. The objective of our analysis is thus to establish a positive correlation in which the rule of law and property rights do contribute to the augmentation of the economic output of a country, especially that of African countries. To validate our hypothesis, we aim to test our postulations with raw empirical data by running a multiple regression model. |
| Keywords: | Econometrics, Macroeconomics, Economic Growth, Mathematical Modeling, Quantitative Analysis, Economic Development |
| JEL: | C1 C12 C50 E01 F62 O47 |
| Date: | 2020–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102024&r=all |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa) |
| Abstract: | This study assesses the simultaneous openness hypothesis that trade modulates foreign direct investment (FDI) to induce positive net effects on total factor productivity (TFP) dynamics. Twenty-five countries in Sub-Saharan Africa and data for the period 1980 to 2014 are used. The empirical evidence is based on the Generalised Method of Moments. First, trade imports modulate FDI to overwhelmingly induce positive net effects on TFP, real TFP growth, welfare TFP and real welfare TFP. Second, with exceptions on TFP and welfare TFP where net effects are both positive and negative, trade exports modulate FDI to overwhelmingly induce positive net effects on real TFP growth and welfare real TFP. In summary, the tested hypothesis is valid for the most part. Policy implications are discussed. |
| Keywords: | Productivity; Foreign Investment; Sub-Saharan Africa |
| JEL: | E23 F21 F30 L96 O55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/001&r=all |
| By: | Maurice Obstfeld (Peterson Institute for International Economics) |
| Abstract: | Fifty years ago, Harry G. Johnson published "The Case for Flexible Exchange Rates, 1969," its title echoing Milton Friedman’s classic essay of 1953. Though somewhat overlooked today, Johnson’s reprise was an important element in the late 1960s debate over the future of the international monetary system. In this Working Paper, Obstfeld lays out the historical context in which Johnson’s “Case†was written and read and then examines Johnson’s main points and sees how they stand up to nearly five decades of experience with floating exchange rates since the end of the Bretton Woods system. He also reviews the most recent academic critiques of exchange rate flexibility and asks how fatal they are to Johnson’s basic argument. He concludes that the essential case for exchange rate flexibility still stands strong. |
| Keywords: | Monetary policy, natural rate of interest, Phillips curve, current account, capital flows, policy spillbacks |
| JEL: | E52 F32 F41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp20-12&r=all |
| By: | Ricardo Correa; Wenxin Du; Gordon Y. Liao |
| Abstract: | We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the "lenders-of-second-to-last-resort". Using daily supervisory bank balance sheet information, we find that U.S. GSIBs modestly increase their dollar liquidity provision in response to dollar funding shortages, particularly at period-ends, when the U.S. Treasury General Account balance increases, and during the balance sheet taper of the Federal Reserve. The increase in the dollar liquidity provision is mainly financed by reducing excess reserve balances at the Federal Reserve. Intra-firm transfers between depository institutions and broker-dealer subsidiaries within the same bank holding company are crucial to this type of "reserve-draining" intermediation. Finally, we discuss factors that contributed to the repo spike in September 2019 and the subseque nt response of U.S. GSIBs to recent policy interventions by the Federal Reserve. |
| Keywords: | Liquidity; Global banks; Repos; Reserves; Covered interest rate parity |
| JEL: | G20 F30 E40 |
| Date: | 2020–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1289&r=all |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper investigates the drivers of business investment in Australia, focusing on the non-mining sectors. The paper also identifies aggregate-level drivers for non-mining business investment by looking at long-term trends. It delves into firm-level investment behavior and assesses the role of credit availability and uncertainty in different types of firms. Long-term empirical and simulation-based analyses suggest that global factors such as rising policy uncertainty and weaker commodity prices have been key drivers of the slowdown, while in the short term, a renewed escalation in US–China trade tensions could spill over to investment and growth in Australia. Yet, domestic factors are also at play, including domestic policy uncertainty and financial constraints, especially for smaller and younger firms. The pace of product market reforms can also impact business investment. Australia can promote business investment by reducing domestic policy uncertainty, easing credit constraints for small- and medium-sized enterprises, incentivizing research and development, and continuing with product market and tax reforms. |
| Keywords: | Economic policy;Financial crises;Economic growth;Real effective exchange rates;Real interest rates;ISCR,CR,non-mining,business investment,financial constraint,term of trade,advanced economy |
| Date: | 2020–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/069&r=all |
| By: | Ngozi E. Egbuna; Ismaila Jarju; Sani Bawa; Ibrahima Diallo; Isatou Mendy; Ozolina Haffner; Kormay Adams |
| Abstract: | Empirical evidence suggests that regional economic integration plays a crucial role in accelerating growth and development, reducing poverty and economic disparity and boosting productivity and employment, in addition to expanding markets, maximising the efficiency of resource allocation and increasing investment opportunities. Consequently, countries across the globe, including those in Africa, participate in regional integration arrangements to derive the huge benefits associated with it. The Economic Community of West African States (ECOWAS) was, therefore, established in May 1975 to promote cooperation and integration among the countries of the West African sub-region. To fast-track the ECOWAS Monetary Cooperation Programme (EMCP), a two-track approach to monetary integration was adopted by the ECOWAS Authority, leading to the establishment of the West African Monetary Zone (WAMZ) in 2000. The second monetary zone was initially scheduled to kick-off in January 2003, but there have been several postponements due to the slow progress in meeting the macroeconomic convergence criteria by Member States. In spite of the slow progress, evidence has shown that WAMZ countries have made considerable progress towards achieving economic integration in the sub-region. This called for the need to measure and assess Member countries’ performance in the WAMZ integration process using a composite index. Against this background, the study seeks to develop an economic integration index to adequately measure the intensity and pace of regional economic integration in the Zone. The index would help to assess each Member State’s efforts towards the WAMZ integration process. The WAMZ Economic Integration Index (WEII) is composed of five dimensions – trade integration, regional infrastructure, compliance with ECOWAS trade-related protocols, compliance with WAMZ macroeconomic convergence criteria and financial integration. Twenty indicators were identified across the five dimensions to compute the composite index for the period 2015 - 2017. Index weights were obtained and assigned to each of the five dimensions using Principal Component Analysis. Results from the analysis showed that the WAMZ trade integration index increased from 0.063 in 2015 to 0.073 in 2016, but declined to 0.032 in 2017. The result indicated that intra-regional trade was significantly low among the WAMZ economies compared to other regions across the world; thus, Member countries would need to expand their intra-regional trade volumes overtime to improve regional economic integration. The WAMZ regional infrastructure index, however, declined marginally from 0.382 in 2015 to 0.381 in 2016 before rising to 0.386 in 2017, with four Member States recording increases in both 2016 and 2017, while the other two recorded declines in 2016 before increasing in 2017. The WAMZ countries have recorded significant progress in their compliance with ECOWAS trade-related protocols, as the WAMZ compliance index increased to 0.698 and 0.740 in 2016 and 2017, respectively, from 0.649 in 2015. Compliance with the WAMZ macroeconomic convergence criteria, however, has been slow, as the compliance index remained at 0.528 in both 2015 and 2016 before rising to 0.667 in 2017. The financial integration index declined from 0.955 in 2015 to 0.927 in 2016 before increasing to 0.943 in 2017. The WAMZ economic integration index showed increased level of integration among Member States, as the index scores rose to 0.536 and 0.571 in 2016 and 2017, respectively, from 0.529 in 2015, indicating increased commitment to the WAMZ integration agenda. The under-performance by some of the Member States in the WAMZ-index is attributable to the twin shocks of the Ebola Virus Disease (EVD) and the fall in world commodity prices, in addition to the massive landslide in Sierra Leone in 2017. In terms of country performances, whereas Nigeria recorded the highest WAMZ-index depicting the country as the most integrated in the sub-region, the composite indexes of Sierra Leone and Liberia were the lowest with the indexes for Sierra Leone being below the sub-regional averages throughout the three years while that of Liberia was below the sub-regional average in 2017. |
| Keywords: | Economic Integration Index, trade integration, macroeconomic convergence, WAMZ. |
| JEL: | C38 C43 F15 O55 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:wam:wpaper:15&r=all |
| By: | Brodeur, Abel; Gray, David; Islam, Anik; Bhuiyan, Suraiya Jabeen |
| Abstract: | The goal of this piece is to survey the emerging and rapidly growing literature on the economic consequences of COVID-19 and governmental responses, and to synthetize the insights emerging from a very large number of studies. This survey (i) provides an overview of the data sets used to measure social distancing and COVID-19 cases and deaths; (ii) reviews the literature on the determinants of compliance and effectiveness of social distancing; (iii) summarizes the literature on the socio-economic consequences of COVID-19 and governmental interventions, focusing on labor, health, gender, discrimination and environmental aspects; and (iv) discusses policy proposals. |
| Keywords: | COVID-19,coronavirus,employment,lockdowns |
| JEL: | E00 I15 I18 J20 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:601&r=all |