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on Macroeconomics |
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Issue of 2020‒12‒14
93 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Hamza Bennani; Matthias Neuenkirch |
| Abstract: | We estimate a logit mixture vector autoregressive model describing monetary policy transmission in the euro area over the period 2003Q1-2019Q4 with a special emphasis on credit conditions. With the help of this model, monetary policy transmission can be described as mixture of two states (e.g., a normal state and a crisis state), using an underlying logit model determining the relative weight of these states over time. We show that shocks to the credit spread and shocks to credit standards directly lead to a reduction of real GDP growth, whereas shocks to the quantity of credit are less important in explaining growth fluctuations. Credit standards and the credit spread are also the key determinants of the underlying state of the economy in the logit submodel. Together with a more pronounced transmission of monetary policy shocks in the crisis state, this provides further evidence for a financial accelerator in the euro area. Finally, the detrimental effect of credit conditions is also reflected in the labor market. |
| Keywords: | Credit growth, credit spread, credit standards, euro area, financial accelerator, mixture VAR, monetary policy transmission |
| JEL: | E44 E52 E58 G21 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:202011&r=all |
| By: | Christoph Basten (University of Zurich; Swiss Finance Institute; CESifo); Mike Mariathasan (KU Leuven- Faculty of Economics & Business) |
| Abstract: | We identify the effects of negative interest rate policies on bank behavior using difference-in differences identification and data on all Swiss banks. First, we find that going negative can interrupt not only the pass-through from policy to deposit rates, but also that to mortgage rates. Second, banks’ ability to offset negative deposit margins with increased mortgage margins is shown to depend on market power. Third, imposing negative rates on all central bank reserves causes banks to replace one sixth with riskier assets, and cut another sixth without replacement, shortening their balance sheets. Together with increased mortgage margins and fee income, the asset replacement preserves profits, but increases financial stability risks. Fourth, mortgage margin increases, balance sheet contractions and risk increases differ from positive rate policy. Fifth, the interruption in pass-through and the risks to financial stability can be reduced by up to 90% through tiered remuneration, charging marginal reserves only. |
| Keywords: | negative interest rate policy, tiered remuneration, interest rate pass-through, credit risk, interest rate risk |
| JEL: | E43 E44 E52 E58 G20 G21 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2098&r=all |
| By: | Radwanski, Juliusz |
| Abstract: | A model is constructed in which completely unbacked fiat money, issued by generic supplier implementing realistically specified monetary policy designed to obey certain sufficient conditions, is endogenously accepted by rational individuals at uniquely determined price level. The model generalizes Lucas (1978) to an economy with frictions and specialization in production, without imposing the cash-in-advance constraint. The uniqueness of equilibrium is the consequence of complete characterization of both the environment, and the equilibrium concept. The results challenge the doctrine that equilibria of monetary economies are inherently indeterminate, and that money can become worthless only due to self-fulfilling expectations. The paper shows that monetary policy canonically features two dimensions, one of which corresponds to nominal interest rate, and the other to continuous helicopter drop of net worth, which in the model takes the form of universal basic income. |
| Keywords: | fiat money, monetary policy, Hahn problem, price level, inflation, sunspots, helicopter drop, universal basic income |
| JEL: | E10 E31 E41 E51 E52 E58 G12 G21 |
| Date: | 2020–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104244&r=all |
| By: | Fernando Borraz (Banco Central del Uruguay); Miguel Mello (Banco Central del Uruguay) |
| Abstract: | We identify differences in the formation of inflationary expectations, credibility, and prediction errors, depending on the communication and in the level of information of price setters. Estimating dynamic panel data models we identify the relevance of being informed about the inflation target and, about the current inflation rate. We also find that the tone of the monetary policy communication reinforces the bias imposed on the monetary instrument. Through the interaction of information about inflation target and range, and the tone of monetary policy statements of the Central Bank, we conclude that partially informed agents form their expectations differently from non-informed ones, have lower prediction errors, and are more skeptical respect to the inflation target. |
| Keywords: | inflation, credibility, inflation target, communication, monetary policy |
| JEL: | E31 E52 E58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bku:doctra:2020005&r=all |
| By: | James Bootsma; Thomas J. Carter; Xin Scott Chen; Christopher Hajzler; Argyn Toktamyssov |
| Abstract: | This paper presents Bank of Canada staff’s current assessment of the US neutral rate, along with a newly developed set of models on which that assessment is based. The overall assessment is that the US neutral rate currently lies in a range of 1.75 to 2.75 percent. This represents a decline of 50 basis points relative to the range judged at the time of the Bank’s last neutral rate update in April 2019. Roughly half of this decline reflects an assessment of conditions prevailing in late 2019 and is thus unrelated to the COVID-19 pandemic. The other half reflects the balance of several key channels through which the COVID 19 shock is likely to influence US interest rates over the years ahead, including its impacts on potential output growth, inequality, demand for safe assets and the level of US government debt. Results from the new models specifically point to upward pressure from higher government debt being more than offset by downward pressure from lower potential output growth, higher inequality and heightened demand for safe assets. |
| Keywords: | Economic models; Interest rates; Monetary policy |
| JEL: | E40 E43 E50 E52 E58 F41 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:20-12&r=all |
| By: | División de Análisis Macroecnómico |
| Abstract: | Este documento de la División de Análisis Macroeconómico realiza un análisis del impacto de las medidas de confinamiento implementadas desde marzo de 2020 para evitar una propagación masiva de la pandemia COVID-19 sobre el empleo en Colombia. Se realiza un análisis de la dinámica del mercado laboral colombiano durante la fase de recuperación hasta septiembre de 2020, con enfoques sectoriales, territoriales y de género. Se concluye que la recuperación de la economía colombiana deberá tener en cuenta los diversos aspectos del mercado laboral, haciendo absolutamente necesaria una agenda de reformas que fomente la formalidad, solucione problemas educativos y de reentrenamiento, y resuelva distorsiones significativas en el funcionamiento del mercado laboral. *** This document from the Macroeconomic Analysis Division carries out an analysis of the impact on employment in Colombia, as a result of the confinement measures implemented since March 2020 to prevent a massive spread of the COVID-19 pandemic. An analysis of the dynamics of the Colombian labor market is also carried out during the recovery phase until September 2020. Results and sectoral, territorial and gender analyses are presented. It is concluded that the recovery of the Colombian economy must take into account the various aspects of the labor market, making it absolutely necessary a reform agenda that encourages formality, solves educational and retraining problems and resolves significant distortions in the functioning of the labor market. |
| Keywords: | análisis macroeconómico, COVID-19, impacto, cuarentena, aislamiento, crisis, Colombia, mercado laboral, desempleo, empleo, nueva normalidad, recuperación económica. |
| JEL: | E00 E01 E20 E23 E60 |
| Date: | 2020–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:col:000178:018522&r=all |
| By: | Elizabeth Bucacos (Banco Central del Uruguay) |
| Abstract: | Vast evidence indicates that the so-called natural rate of interest (NRI) has experienced a sustained fall in both advanced and emerging economies over the last 25 years. This situation threatens the central bank’s ability to guide relevant macroeconomic variables close to their welfare-maximizing path because the range of maneuver is reduced a great deal when interest rates descend to the zero lower bound. In this document, I provide an estimation of the natural interest rate for Uruguay, a small, open and dollarized emerging economy where the monetary policy instrument changes from interest rate to money aggregates in 2013, splitting the sample in two. The fundamentals-based model points a locus for the natural interest rate in the [0.98 2.06] range with 95 percent degree of certainty. This methodological approach is aimed at providing a novel framework for the Uruguayan case that allows to analyze the long-run fundamentals of the NIR and also to explain the reasons for short-run discrepancies between the real rate and its long-run equilibrium value. It is hoped that the fundamentals-based model adds to the myriad methods current in use at the Banco Central del Uruguay to estimate the NIR. |
| Keywords: | interest rate determination, monetary policy, Uruguay |
| JEL: | C10 E43 E52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bku:doctra:2020001&r=all |
| By: | Ostapenko, Nataliia |
| Abstract: | The study proposes a novel way to identify the effects of monetary policy shocks taking into account time-varying signals of the central bank. I augment the standard monetary policy Bayesian Vector Autoregression (BVAR) with additional information variables from Fed statements, which allows us to study the information-free effects of monetary policy shocks and to take into account forward-looking information released by the central bank. The results show that, compared to surprises in 3-month federal funds futures, the policy shock identified in this study has a more negative effect on GDP, a more prolonged negative effect on inflation, and a greater impact effect on the excess bond premium. In the short-run it causes S&P500 to decline and the Fed to raise its interest rate. Furthermore, the results of large-scale Bayesian VAR confirm the standard transmission channels of monetary policy. |
| Keywords: | monetary policy, shock, transmission, statements, Latent Dirichlet Alloca- tion, information |
| JEL: | E52 |
| Date: | 2020–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104501&r=all |
| By: | Ignaszak, Marek (Goethe University Frankfurt); Jung, Philip (TU Dortmund); Kuester, Keith (University of Bonn) |
| Abstract: | Consider a union of atomistic member states, each faced with idiosyncratic business-cycle shocks. Private cross-border risk-sharing is limited, giving a role to a federal unemployment-based transfer scheme. Member states control local labor-market policies, giving rise to a trade-off between moral hazard and insurance. Calibrating the economy to a stylized European Monetary Union, we find notable welfare gains if the federal scheme's payouts take the member states' past unemployment level as a reference point. Member states' control over policies other than unemployment benefits can limit generosity during the transition phase. |
| Keywords: | unemployment reinsurance, labor-market policy, fiscal federalism, search and matching |
| JEL: | E32 E24 E62 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13886&r=all |
| By: | Edwin Le Héron; Nicolas Yol (Observatoire français des conjonctures économiques) |
| Abstract: | Migrants’ remittances are an essential source of income in many developing countries. In this article, we build a post-Keynesian stock–flow consistent model adapted to Moldova, one of the top recipients of remittances. In addition to increasing household consumption, migrants’ transfers have strong effects on economic growth in Moldova. However, remittances are very sensitive to the economic conditions in migrants’ destination countries, especially since the 2008 global financial crisis. After including remittances in consumption behavior and lenders’ risk, we run simulations to show how shocks in migrants’ destination countries (that is, Europe and Russia) impact the Moldovan economy through fluctuations in remittances. First, the increasing instability of remittances explains a significant portion of the economic volatility experienced by Moldova. Second, the high level of imports implies a weak multiplier effect of remittances, leading to an unsustainable pattern of growth. |
| Keywords: | Remittances; Moldova; Stock-flow consistent models; Business cycles; Migration; Volatility |
| JEL: | E12 E32 F22 F24 F43 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/17g7senmu38qqa09nqh9tk9hbn&r=all |
| By: | Lenarčič, Črt |
| Abstract: | Recent financial crisis has shown that the prior belief that the active monetary policy in pursuing price stability may not be sufficient enough to maintain financial stability as well as macroeconomic stability in an economy. Introducing a new economic policy, the macroprudential policy gave space to a complete new sphere of a�ecting an economy through a policy maker's perspective. Constructing a dynamic stochastic general equilibrium model, which incorporates a banking sector block, enables us to study the effects of financial frictions on the real economy. Taking the case of Slovenia, the simulation results show that taking into account the interplay between the monetary and macroprudential policies in a form of financial shocks matter in the economy. |
| Keywords: | monetary policy, macroprudential policy, DSGE model, banking sector |
| JEL: | E30 E32 E52 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104486&r=all |
| By: | Herwartz, Helmut; Ochsner, Christian; Rohloff, Hannes |
| Abstract: | We conceptualize global liquidity as global monetary policy and credit components by means of a large-scale dynamic factor model in the spirit of Eickmeier,Gambacorta, and Hofmann (2014). Going beyond previous work, we decompose aggregate credit components into credit supply and demand flows directed at the public (governments) and private sector (businesses and households). We show that this decomposition enhances the understanding of global liquidity considerably. Whereas global public sector credit supply is best understood as a safe-haven lending factor from an investors perspective, lenders supply the private sector with credit to maximize profits along the business cycle. Moreover, the public sector demands credit in times of bust-episodes, whereas private entities demand credit in times of booms. In particular, we find that our global credit estimates explain substantial variance shares of a large panel of international financial aggregates. |
| Keywords: | global liquidity,credit composition,financial cycle,dynamic factor model |
| JEL: | C32 C38 E32 E44 E51 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:409&r=all |
| By: | Miguel Mello (Banco Central del Uruguay); Jorge Ponce (Banco Central del Uruguay) |
| Abstract: | We find empirical evidence of a positive correlation between the budget deficit to GDP and inflation expectations of price setters in Uruguay. It implies an interdependence between fiscal and monetary policies: monetary policy faces more challenges to maintain inflation expectation anchored when the fiscal outcome worsen. The result is robust to considering other fiscal variables and to controlling for macroeconomic covariates. During the period under analysis, however, monetary policy has been effective to compensate the distortions introduced by fiscal policy on inflation expectations. |
| Keywords: | Inflation expectations, budget deficit, fiscal policy, monetary policy, Uruguay |
| JEL: | E52 E62 E63 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bku:doctra:2020004&r=all |
| By: | García-Callejas, Danny; Granda-Carvajal, Catalina |
| Abstract: | Este trabajo tiene como objetivos ofrecer una visión panorámica acerca de la economía informal, sus determinantes y principales características en el caso colombiano; y, también, explorar las consecuencias de este fenómeno a nivel macroeconómico, enfatizando en los posibles efectos de la informalidad sobre los rasgos específicos de los ciclos económicos en los países emergentes, particularmente en el comportamiento de la política fiscal en Colombia. Para ello, se efectúa una revisión de la literatura pertinente buscando establecer conexiones entre estos aspectos. Se concluye que la debilidad institucional del país no solo incide en una proporción considerable de la economía informal con respecto al PIB, sino que refuerza el impacto de esta sobre la postura procíclica (o desestabilizadora) de la política fiscal. En este sentido, se requiere que el gobierno ajuste sus instrumentos de política en torno a una senda estabilizadora a la par que promueva la formalización laboral y empresarial. |
| Keywords: | economía informal; ciclos económicos; política fiscal; Colombia |
| JEL: | E26 E32 E62 H30 O17 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:rie:riecdt:70&r=all |
| By: | Ranjan Kumar Mohanty (Xavier Institute of Management, Bhubaneshwar(XIMB)); N R Bhanumurthy (BASE University) |
| Abstract: | In the context of adoption of flexible inflation targeting regime in India since 2016 and is about to be reviewed soon, it is necessary to understand the effectiveness of monetary transmission mechanism. The paper investigates if there are any asymmetries in the transmission during different regimes, and also verify the role of financial frictions in such asymmetries, if it exists. By using Markov-Switching Vector Autoregression (MS-VAR) models, our results suggest that there are asymmetries in the monetary transmission mechanism during highly volatile and low volatile regimes with respect to both output and inflation. It also finds that financial frictions do influence the extent of policy transmission process in India. From a policy perspective, while the Reserve Bank of India (RBI) may continue to target inflation especially during high volatile regimes, it could have output growth as an additional target especially during the low volatile regimes. |
| Keywords: | Monetary Transmission Mechanism, Financial Frictions, Bank Credit Channel, Interest Rate Channel, Markov-Switching Vector Autoregression (MS-VAR), India |
| JEL: | E52 E44 E58 C32 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:alj:wpaper:03/2020&r=all |
| By: | Rieder, Kilian |
| Abstract: | I estimate the comparative causal effects of monetary policy \leaning against the wind" (LAW) and macroprudential policy on bank-level lending and leverage by drawing on a single natural experiment. In 1920, when U.S. monetary policy was still decentralized, four Federal Reserve Banks implemented a conventional rate hike to address financial stability concerns. Another four Reserve Banks resorted to macroprudential policy with the same goal. Using sharp geographic regression discontinuities, I exploit the resulting policy borders with the remaining four Federal Reserve districts which did not change policy stance. Macroprudential policy caused both bank-level lending and leverage to fall significantly (by 11%-14%), whereas LAW had only weak and, in some areas, even perverse effects on these bank-level outcomes. I show that the macroprudential tool reined in over-extended banks more effectively than LAW because it allowed Federal Reserve Banks to use price discrimination when lending to highly leveraged counterparties. The perverse effects of the rate hike in some areas ensued because LAW lifted a pre-existing credit supply friction by incentivizing regulatory arbitrage. My results highlight the importance of context, design and financial infrastructure for the effectiveness of financial stability policies. JEL Classification: E44, E51, E52, E58, G21, N12, N22 |
| Keywords: | bank lending, credit boom, Federal Reserve System, financial crisis, leaning against the wind, leverage, macroprudential policy, monetary policy, progressive discount rate, recession of 1920/1921 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkwps:2020113&r=all |
| By: | Hashmat Khan (Carleton University); Jean-François Rouillard (Université de Sherbrooke); Santosh Upadhayaya (Carleton University) |
| Abstract: | Household investment displays a robust leading indicator property over the US business cycle. It has been challenging to account for this stylized fact. In this paper, we develop the hypothesis that consumer confidence drives household investment. Using a surveybased consumer confidence measure for 1960Q1–2017Q4 we find that it leads household investment by two quarters and housing starts by one quarter, lending support to the hypothesis. We then use VAR analysis to identify a confidence shock. Household investment increases and follows a persistent hump-shaped response after a positive confidence shock. The responses of total hours-worked and output also show a persistent increase and so do real house prices. Confidence shocks account for a substantial share of variation in household investment, total hours-worked and output. We show that household investment plays a quantitatively important role in the transmission of confidence shocks in the economy. Moreover, confidence shocks do not appear to be related to movements in future fundamentals, total factor productivity and the relative price of investment, representing supply side developments. Our findings, therefore, suggest that demand side forces originating in consumers’ social and psychological factors may be a fruitful direction for studying household investment dynamics and their relationship with the business cycle. |
| Keywords: | Consumer confidence; Household investment; Confidence Shocks; Business cycles |
| JEL: | D12 D83 D84 E22 E32 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:20-15&r=all |
| By: | Kuhn, Moritz (University of Bonn); Ploj, Gasper (University of Bonn) |
| Abstract: | Labor markets are characterized by large heterogeneity in job stability. Some workers hold lifetime jobs, whereas others cycle repeatedly in and out of employment. This paper explores the economic consequences of such heterogeneity. Using Survey of Consumer Finances (SCF) data, we document a systematic positive relationship between job stability and wealth accumulation. Per dollar of income, workers with more stable careers hold more wealth. We also develop a life-cycle consumption-saving model with heterogeneity in job stability that is jointly consistent with empirical labor market mobility, earnings, consumption, and wealth dynamics. Using the structural model, we explore the consequences of heterogeneity in job stability at the individual and macroeconomic level. At the individual level, we find that a bad start to the labor market leaves long-lasting scars. The income and consumption level for a worker who starts working life from an unstable job is, even 25 years later, 5 percent lower than that of a worker who starts with a stable job. For the macroeconomy, we find welfare gains of 1.6 percent of lifetime consumption for labor market entrants from a secular decline in U.S. labor market dynamism. |
| Keywords: | employment risk, job stability, consumption-saving behavior |
| JEL: | J64 E21 E24 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13887&r=all |
| By: | Moritz Kuhn; Gašper Ploj |
| Abstract: | Labor markets are characterized by large heterogeneity in job stability. Some workers hold lifetime jobs, whereas others cycle repeatedly in and out of employment. This paper explores the economic consequences of such heterogeneity. Using Survey of Consumer Finances (SCF) data, we document a systematic positive relationship between job stability and wealth accumulation. Per dollar of income, workers with more stable careers hold more wealth. We also develop a life-cycle consumption-saving model with heterogeneity in job stability that is jointly consistent with empirical labor market mobility, earnings, consumption, and wealth dynamics. Using the structural model, we explore the consequences of heterogeneity in job stability at the individual and macroeconomic level. At the individual level, we find that a bad start to the labor market leaves long-lasting scars. The income and consumption level for a worker who starts working life from an unstable job is, even 25 years later, 5 percent lower than that of a worker who starts with a stable job. For the macroeconomy, we find welfare gains of 1.6 percent of lifetime consumption for labor market entrants from a secular decline in U.S. labor market dynamism. |
| Keywords: | employment risk, job stability, consumption-saving behavior |
| JEL: | J64 E21 E24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8710&r=all |
| By: | Arigoni, Filippo; Breznikar, Miha; Lenarčič, Črt; Maletič, Matjaž |
| Abstract: | We estimate the impact of the fiscal expansion due to the COVID-19 outbreak on the Slovene economy using two models. First, we simulate fiscal shocks in 3-scenarios in a calibrated large-scale DSGE model. Second, we employ a small-scale VAR model to check the robustness of the theoretical results. The findings suggest a significant response of GDP, private consumption, and imports to fiscal shocks. In particular, the outcomes highlight that compared to other unanticipated fiscal developments a government consumption shock explains the lion's share of domestic fluctuations. The main transmission channel is high complementarity between private and government consumption. |
| Keywords: | Fiscal shocks, Fiscal multipliers, DSGE model, VAR model. |
| JEL: | C32 E32 E62 |
| Date: | 2020–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104474&r=all |
| By: | Fernando Borraz (Banco Central del Uruguay); Giacomo Livan (University College London); Anahí Rodríguez-Martínez (Centro de Estudios Monetarios Latinoamericano); Pablo Picardo (Banco Central del Uruguay) |
| Abstract: | The main contribution of this work consist on studying sales behavior and their relationship with local market conditions like labor market indicators through a time series principal component analysis. We study the correlation structure of a large database on prices and found that all product sectors share a common correlation structure and the highest correlation and significance is achieved between employment variation and the first principal component, mostly in the second week of the following month. Sales or promotions, are a channel for price flexibility because firms can use them to change effective prices keeping sticky reference prices. We use a rich database of retail prices from Uruguay to characterize prices' flexibility, the behavior of sales, and their relationship with local market conditions like labor market indicators. Finally, we find a positive and significant relationship between sales and unemployment and perform a time series principal component analysis to study these relationships. |
| Keywords: | price rigidity, sales, unemployment, principal component analysis |
| JEL: | E31 E32 E24 C38 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bku:doctra:2020002&r=all |
| By: | Gabor Katay (European Commission – JRC); Lisa Kerdelhué (Banque de France, Aix-Marseille Université); Matthieu Lequien (Institut National de la Statistique et des Études Économiques (INSEE), Paris School of Economics) |
| Abstract: | The paper assesses the impact of adding information on financial cycles on the output gap estimates for eight advanced economies using two unobserved components models: a reduced form extended Hodrick-Prescott filter, and a standard semi-structural unobserved components model. To complement these models, a semi-structural vector autoregression model is proposed in which only supply shocks are identified. The accuracy of the output gap estimates is assessed based on their performance in predicting recessions. The models with financial variables generally produce more accurate output gap estimates at the expense of increased real-time volatility. While the extended Hodrick-Prescott filter is particularly appealing for its real-time stability, it lags behind the two semi-structural models in terms of forecasting performance. The vector autoregression model augmented with financial variables features the best in-sample forecasting performance, and it has similar real-time prediction capabilities to the semi-structural unobserved components model. Overall, financial cycles appear to be relevant in Japan, Spain, the UK, and – to a lesser extent – in the US and in France, while they are relatively muted in Canada, Germany, and Italy. |
| Keywords: | unobserved components model, semi-structural VAR, output gap, financial cycle, sustainable growth, credit, house prices, advanced economies |
| JEL: | C32 E32 E44 G01 O11 O16 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:jrs:wpaper:202011&r=all |
| By: | Oviedo Moguel Rodolfo |
| Abstract: | In the USA, the share of household wealth held by the richest 1% increased from 23.5% in 1980 to 41.8% in 2012. This paper contributes to understanding the causes behind this increase. First, using an accounting decomposition, I show that more than half of the increase in the share of the top 1% can be attributed to a decrease in the saving rate of the bottom 99%. Second, using a heterogeneous agent model, I show that the decrease in the saving rate of the bottom groups cannot be rationalized by the reduction in the progressively of taxation or changes in the volatility and concentration of labor earnings. Lastly, I introduce a shock to the credit market into the model in the form of loosening the borrowing constraints of the economy. This shock can simultaneously match the increase in wealth concentration and the decrease of the saving rate of the economy. |
| JEL: | D14 D31 D33 E21 E62 G51 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2020-13&r=all |
| By: | De Koning, Kees |
| Abstract: | In the financial accounts as collected by the U.S. Federal Reserve, one Balance Sheet item stands out: “The Household Balance Sheet over the period 2000-2020”. In Q4 2005, the market value of households’ real estate assets was $14.416 trillion. By Q4 2011 the market value had dropped to $8.319 trillion: a loss of $6.1 trillion over five years or a loss of 42.2% over the same period. For all households it took to Q2 2016 before the loss had been recovered when the market value reached $14.488 trillion. This reflects an adjustment period of over 10 years! The U.S. Federal government tax receipts over the three-year period 2009, 2010 and 2011 totaled $6.573 trillion. Even the government borrowings over these three years together amounted to a smaller sum of $4.169 trillion. The loss on households’ real estate between Q4 2005 and Q4 2011 was equal to 93% of all U.S. government tax receipts, not just for one year, but over three years! Whilst the Great Recession of 2008-2012 wreaked havoc with U.S. government budgets, but more important was the damage inflicted on households’ economies over these years and beyond. To counter the 2008 recession, two of the instruments used were the Quantitative Easing (“Q.E.”) program by the Federal Reserve and the deficit financing by the U.S. Federal Government. The Q.E. program focused on buying up U.S. government debt and mortgage-backed securities paper issued by the state sponsored financial institutions, such as Fannie Mae and Freddy Mac. Interest rates were kept at historical lows. The U.S. government debt to GDP level did rise from 62% in 2007 to 135.6% of GDP as per Q2 2020.The four Q.E. programs have pumped in just over $6 trillion into the U.S. economy as per the latest figures. The current coronavirus crisis can be expected to bring with it a substantial rise in unemployment levels, significant company failures and a greater reluctance by banks to lend to those most in need. Further increasing U.S. government debt levels might not be an attractive option. More Q.E. directed to funding existing debt levels also has its limits. One solution that has not been tried is to use Q.E. to help households directly in releasing some home equity on a temporary basis. Funding savings rather than debts could be more effective. A new type of Q.E. will be set out in this paper. |
| Keywords: | U.S. households' balance sheet; Home mortgage levels by income group; Government debt levels. Quantitative Easing and an improved Q.E. method. |
| JEL: | D1 D12 D14 D4 D5 D53 D57 E1 E2 E21 E24 |
| Date: | 2020–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104369&r=all |
| By: | Francesca Vinci; Omar Licandro |
| Abstract: | Data suggests that the level of GDP shifted to a permanently lower trend following the Great Recession for most advanced countries, and researchers have not yet reached a consensus concerning the drivers of this phenomenon. We contribute to this literature by suggesting a DSGE model with financial frictions and endogenous growth through learning-by-doing. With an aggregate AK technology, a negative shock to the capital stock has the effect of moving the economy to a lower trend. A Taylor rule policy designed to reduce the output gap may counterbalance the shock, bringing the economy back to the past trend. However, when the recession is deep and persistent and the ZLB binds, a revision of potential output measures may weaken the recovering role of monetary policy, making the economy converge to a lower trend. We calibrate the model to the U.S. economy and find that GDP can fully recover from a textbook TFP shock under a standard Taylor rule, whilst large demand shocks can affect the supply side permanently. Our framework is thus consistent with episodes of economic recovery as well as episodes of no-recovery. Results rely on the observation that the measurement of U.S. potential output switched track as the Great Recession unfolded, because the severe and prolonged slump put downward pressure on estimates. As a consequence, the output gap closed following the switching-track of potential output, rather than faster GDP growth. |
| Keywords: | Great Recession, Economic Recovery, Endogenous Growth, Hysteresis, Trend Shift, Switching-track |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcfc:2020/02&r=all |
| By: | Alemán, Christian; Busch, Christopher; Ludwig, Alexander; Santaeulàlia-Llopis, Raül |
| Abstract: | We develop a novel empirical approach to identify the effectiveness of policies against a pandemic. The essence of our approach is the insight that epidemic dynamics are best tracked over stages, rather than over time. We use a normalization procedure that makes the pre-policy paths of the epidemic identical across regions. The procedure uncovers regional variation in the stage of the epidemic at the time of policy implementation. This variation delivers clean identification of the policy effect based on the epidemic path of a leading region that serves as a counterfactual for other regions. We apply our method to evaluate the effectiveness of the nationwide stay-home policy enacted in Spain against the Covid-19 pandemic. We find that the policy saved 15:9% of lives relative to the number of deaths that would have occurred had it not been for the policy intervention. Its effectiveness evolves with the epidemic and is larger when implemented at earlier stages. |
| Keywords: | Macroeconomics,Pandemic,Stages,Covid-19,Stay-Home,Policy Effects,Identification |
| JEL: | E01 E22 E25 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20068&r=all |
| By: | Hackethal, Andreas; Weber, Annika |
| Abstract: | We review early evidence on how household consumption behavior has evolved over the pandemic and how different groups of households have responded to fiscal stimulus programs. Due to the scarcity of evidence for Europe, our review focuses on evidence from the US. Notwithstanding the institutional and demographic differences, we highlight generalizable findings and challenges to the design of stimulus policies from the pandemic. In conclusion, we identify several open issues for discussion. |
| Keywords: | Household Finance,Consumption,COVID-19,Stimulus |
| JEL: | D14 E21 E62 E71 G51 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewh:76&r=all |
| By: | Dennis Bonam; Paul Konietschke3 |
| Abstract: | We estimate the impact of tax shocks on output across different stages of the business cycle. We do this for a panel of nine advanced economies using a harmonized dataset of narratively identified exogenous tax changes and a smooth transition local projection model. The output response to an exogenous tax shock is significant, but only during economic expansions. In recessions, the tax multiplier is insignificant, both in the short- and long run. We also find that, during booms, output only responds to tax hikes and is unresponsive to tax cuts. The results on the state-dependent and asymmetric effects of tax shocks are robust to a number of alternative model specifications and definitions of the business cycle. |
| Keywords: | tax multiplier; state-dependent effects of fiscal policy; local projection method |
| JEL: | E32 E62 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:699&r=all |
| By: | Jens H. E. Christensen; Glenn D. Rudebusch; Patrick Shultz |
| Abstract: | In recent decades, long-term interest rates around the world have fallen to historic lows. We examine this decline using a dynamic term structure model of Canadian nominal and real yields with adjustments for term, liquidity, and inflation risk premiums. Canada provides a useful case study that has been little examined despite its established indexed debt market, negligible distortions from monetary quantitative easing or the zero lower bound, and no sovereign credit risk. We find that since 2000, the steady-state real interest rate has fallen by more than 2 percentage points, long-term inflation expectations have edged down, and real bond and inflation risk premiums have fluctuated but shown little longer-run trend. Therefore, the drop in the equilibrium real rate appears largely to account for the lower new normal in interest rates. |
| Keywords: | liquidity risk; financial market frictions; r-star; affine arbitrage-free term structure model |
| JEL: | C32 E43 E52 G12 G17 |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:89104&r=all |
| By: | Dimitris Christelis (University of Glasgow, CSEF, CFS, CEPAR and Netspar); Dimitris Georgarakos (European Central Bank and CFS); Tullio Jappelli (Università di Napoli Federico II, CSEF, CFS, CEPAR and Netspar); Geoff Kenny (European Central Bank) |
| Abstract: | Using new panel data from a representative survey of households in the six largest euro area economies, the paper estimates the impact of the Covid-19 crisis on consumption. The panel provides, each month, household-specific indicators of the concern about finances due to Covid-19 from the first peak of the pandemic until October 2020. The results show that this concern causes a significant reduction in non-durable consumption. The paper also explores the potential impact on consumption of government interventions and of another wave of Covid-19, using household-level consumption adjustments to scenarios that involve positive and negative income shocks. Fears of the financial consequences of the pandemic induce a significant reduction in the marginal propensity to consume, an effect consistent with models of precautionary saving and liquidity constraints. The results are robust to endogeneity concerns through use of panel fixed effects and partial identification methods, which account also for time varying unobservable variables, and provide informative identification regions of the average treatment effect of the concern for Covid-19 under weak assumptions. |
| Keywords: | Covid-19, Consumption, Income Shocks, Marginal Propensity to Consume, Financial concerns, Fiscal policies. |
| JEL: | D12 D81 E21 G51 H31 |
| Date: | 2020–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:590&r=all |
| By: | Engelbert Stockhammer (None) |
| Abstract: | Since the global financial crisis and the ensuing weak growth interest in macroeconomic issues has grown within Comparative Political Economy (CPE). The dominant Varieties of Capitalism approach focuses on how different institutional arrangements contribute to competitiveness and thus has a strong supply-side focus, which is complementary with modern mainstream economics. Baccaro and Pontusson (2016) have suggested basing CPE on post-Keynesian theory of distribution and growth. This paper generalises their point and makes a systematic case for post-Keynesian (PK) foundations for CPE. It highlights the PK theory of money and finance and that PKE analyses inequality as well as financial relations as based on class and power relations. The paper identifies the analysis of financialisation, financial cycles, the understanding of neoliberal growth models and the political economy of central banks as areas where PKE can provide specific insights for CPE. |
| Keywords: | post-Keynesian economics, comparative political economy, growth models, financial instability |
| JEL: | E02 E12 P50 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2022&r=all |
| By: | Mikel Bedayo (Banco de España); Gabriel Jiménez (Banco de España); José-Luis Peydró (Imperial College London, ICREA-Universitat Pompeu Fabra-CREI-Barcelona GSE, and CEPR); Raquel Vegas (Banco de España) |
| Abstract: | We show that loan origination time is key for bank lending standards, cycles, defaults and failures. We exploit the credit register from Spain, with the time of a loan application and its granting. When VIX is lower (booms), banks shorten loan origination time, especially to riskier firms. Bank incentives (capital and competition), capacity constraints, and borrower-lender information asymmetries are key mechanisms driving results. Moreover, shorter (loan-level) origination time is associated with higher ex-post defaults, also using variation from holidays. Finally, shorter precrisis origination time —more than other lending conditions— is associated with more bank-level failures in crises, consistent with lower screening. |
| Keywords: | loan origination time, lending standards, credit cycles, defaults, bank failures, screening |
| JEL: | G01 G21 G28 E44 E51 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2037&r=all |
| By: | James Mitchell; Gary Koop; Stuart McIntyre; Aubrey Poon |
| Abstract: | In the US, income and expenditure side estimates of GDP (GDPI and GDPE) measure "true" GDP with error and are available at the quarterly frequency. Methods exist for producing reconciled quarterly estimates of GDP based on GDPI and GDPE. In this paper, we extend these methods to provide reconciled historical GDP estimates at the monthly frequency from 1960. We do this using a Bayesian Mixed Frequency Vector Autoregression involving GDPE, GDPI, unobserved true GDP and monthly indicators of short-term economic activity. We illustrate how the new monthly data contribute to our historical understanding of business cycles. |
| Keywords: | Income, Output, Expenditure, Monthly, Business cycle, Expansion, Contraction, Recession, Turning point, State-space model, Vector autoregressions, Bayesian methods |
| JEL: | E32 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:escoed:escoe-dp-2020-16&r=all |
| By: | Beretta, Edoardo; Neuberger, Doris |
| Abstract: | By "hostility to cash" we refer to the recent trend of incentivizing individuals towards a (privately managed) digital payment system driven by banking and financial sectors and supported by Governments. COVID-19 has on the one hand boosted this movement, with false messages about banknotes spreading the virus as a new instrument of convincement. On the other, the enduring flight to cash shows that this "relic" is even more essential in bad economic times. Restricting or eliminating cash is synonymous of welfare losses due to increased monopoly power of the financial and technology industry, reduced privacy, and threatened financial stability as a public good. As a consequence, financial exclusion and social discrimination would increase, adding to the impact of the COVID-19 crisis on inequality. By means of a logical-analytical approach combined with the newest statistical evidence and never-published comparative tables, the paper demonstrates why banknotes and coins are - all the more, in uncertain times due to SARS-CoV-2 - not otherwise substitutable, but rather a public good to be safeguarded. |
| Keywords: | banknotes and coins,COVID-19,digital payments,financial inclusion,money,payments system |
| JEL: | E42 E44 G21 G41 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:roswps:166&r=all |
| By: | Bartłomiej Wiczewski |
| Abstract: | In recent years, amid solid economic growth and measures to increase tax collection, Poland significantly reduced its fiscal deficit and public debt. Simultaneously, the country implemented several policies that are likely to weigh on public finances in the future. In the medium and long term, Poland will face challenges resulting from the Covid-19 pandemic and high expenditure related to population ageing, switching its growth engine to more knowledge-based activities and tackling climate challenges. Given recent increases in tax collection, procyclicality of tax revenue and the recession caused by the pandemic, achieving further collection gains does not appear plausible. Thus, an efficient management of public expenditure is expected to be crucial for fiscal policy. The budget system plays a major role in this. The current budget system in Poland has not undergone a major reform for years. Its current setup may not always be conducive to an effective management and control of funds. Longer-term planning is not sufficient and value-adding tools, like spending reviews, are not an inherent part of the process. Also, external, independent oversight is not optimal. The authorities, recognising the scale of these issues, are reforming the budget system. They benefit from a technical support financed by the EU under the Structural Reform Support Programme. As the reform will involve nearly all general government units and entail a significant change of working methods, it needs to be spread over several years. |
| Keywords: | budget system, budget, reform, spending reviews, performance budgeting, public finances, budget system in Poland: challenges and ongoing reforms, Wiczewski. |
| JEL: | E62 H61 H68 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecobri:060&r=all |
| By: | Michael D. Bordo; John V. Duca |
| Abstract: | In the financial crisis and recession induced by the COVID-19 pandemic, many investment-grade firms became unable to borrow from securities markets. In response, the Fed not only reopened its commercial paper funding facility but also announced it would purchase newly issued and seasoned bonds of corporations rated as investment grade before the COVID pandemic. A careful splicing of different unemployment rate series enables us to assess the effectiveness of recent Fed interventions in these long-term debt markets over long sample periods, spanning the Great Depression, Great Recession and COVID Recession. Findings indicate that the announcement of forthcoming corporate bond backstop facilities had helped stop risk premia from rising further than they had by late-March 2020. In doing so, these Fed facilities have limited the role of external finance premia in amplifying the macroeconomic impact of the COVID pandemic. Nevertheless, the corporate bond programs blend the roles of the Federal Reserve in conducting monetary policy via its balance sheet, acting as a lender of last resort and pursuing credit policies. |
| Keywords: | financial crises; Federal Reserve; credit easing; lender of last resort; corporate bonds; corporate bond facility |
| JEL: | E51 G12 |
| Date: | 2020–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:89114&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Social Protections and Labor - Employment and Unemployment Social Protections and Labor - Labor Markets |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34114&r=all |
| By: | Mahama Samir Bandaogo |
| Keywords: | Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Macroeconomic Management |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34217&r=all |
| By: | Kuikeu, Oscar |
| Abstract: | With the Advent of Community his members must to have an rate of inflation less than 3% per annum. An rhythm very closed to that of industrialized economies in Europe the anchor economy. Thus, is this means that the relative purchasing power parity is verified into the union? In other words, what are the consequences of this for the living cost into the Community in this context of adjustment due to the Outbreak? These are the main questions we are try to answer, here. Globally speaking, considering the results panel data remains an confortable and suitable framework to assess this kind of hypotheses with the structure of the member States into the Community very closed to each other. |
| Keywords: | relative purchasing power, living cost, CEMAC |
| JEL: | C33 E52 O47 |
| Date: | 2020–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104251&r=all |
| By: | Dan Andrews; Nathan Deutscher; Jonathan Hambur; David Hansell |
| Abstract: | This paper explores the effects of labour market conditions at graduation on an individual’s work-life over the following decade. Australians graduating into a state and year with a 5 percentage point higher youth unemployment rate can expect to earn roughly 8 per cent less in their first year of work and 3½ per cent less after five years, with the effect gradually fading to around zero ten years on. The magnitude of this effect varies according to the characteristics of the individual and the tertiary institution they attend. We then explore the mechanisms behind this scarring. Scarring partly reflects the subsequent evolution of the unemployment rate — the fact that unemployment shocks tend to persist — highlighting the potential for timely and effective macroeconomic stabilisation policies to ameliorate these scarring effects. More generally, job switching to more productive firms emerges as a key channel through which workers recover from adverse shocks that initially disrupt (worker-firm) match quality. We find some evidence that the speed of recovery has slowed since 2000, which is consistent with the decline in labour market dynamism observed in Australia over that period. |
| Keywords: | job mobility, job search, Wages |
| JEL: | E24 J62 J64 |
| Date: | 2020–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaac:20-en&r=all |
| By: | Alkhareif, Ryadh M.; Barnett, William A. |
| Abstract: | The paper constructs monthly GDP nowcasts for Saudi Arabia by estimating a Generalized Dynamic Factor Model (GDFM) on a panel of 272 variables over the period from January 2010 to June 2018. The GDP nowcasts produced in this paper can accurately mimic GDP growth rates for Saudi Arabia, including for the non-oil sector. Our GDFM has outperformed other traditional models in tracking the business cycle in Saudi Arabia. In our view, the non-oil private sector GDP nowcasts provided in this paper can substitute the traditional set of indicators used to monitor monthly private sector activity. |
| Keywords: | Nowcast; non-oil GDP; generalized dynamic factor model; principal components analysis. |
| JEL: | C22 E37 E5 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104278&r=all |
| By: | Alexander Mihailov (Department of Economics, University of Reading); Harun Nasir (Department of Economics, Zonguldak Bülent Ecevit University) |
| Abstract: | This paper contributes to the theory of optimal international reserves by extending the Jeanne and Rancière (2011) endowments mall open economy (SOE) model to a SOE with capital and production that explicitly accounts for the main sources of economic growth. A first version of our set-up considers capital as the sole factor of production in the spirit of the AK model of endogenous growth with constant population, implying increasing returns to scale and justified on the grounds of its ability to generate sustained long-run growth, as observed empirically. Under a plausible calibration for typical emerging market countries facing the risk of sudden stops in capital inflows, we find that the optimal ratio of international reserves to output is 1.7%, which is quite lower than that in Jeanne and Rancière (2011), of 9.1%, even if calibrated to the same sample of 34 middle-income countries. A richer version then introduces also labour as a second factor in a conventional labour- augmenting Cobb-Douglas production function with constant returns to scale and exogenous population growth, consistent with a long-run balanced growth path and the sustained per capita income growth in the data. Under this alternative technology and the same calibration, we similarly find that the optimal reserves-to-output ratio for emerging market SOEs decreases - but not as much, being 5.5% - relative to the endowment case. We conclude that our results are explained by the role of capital accumulation as precautionary saving: the accumulated capital stock can potentially be used as a pledge to external creditors in obtaining borrowing, therefore insuring better a SOE against sudden stops. |
| Keywords: | optimal international reserves, small open economies, sudden stops,production technology, capital accumulation, precautionary saving, insurance contracts |
| JEL: | E21 E23 F32 F34 F41 O40 |
| Date: | 2020–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2020-24&r=all |
| By: | David Martinez Turegano (European Commission - JRC) |
| Abstract: | Labour productivity growth in developed economies has slowed down during the last decade relative to the pre-Great Recession period. The EU27 has been no exception to this trend, keeping both a large negative gap relative to the US and strong country heterogeneity following an uneven convergence process between Member States. Based on these stylized facts, in this paper we investigate which are the main explanatory variables accounting for productivity heterogeneity within the EU, both in level and growth terms. From a policy perspective, our findings suggest a number of areas in which action seems to be warranted, improving technological adoption, increasing innovation intensity, boosting the capital triad (human, tangible and intangible assets), and, with respect to the two micro-structural characteristics we put a focus on, eliminating barriers to growth in firm size and facilitating the entry and exit of enterprises. These same recommendations are even more valid in the specific case of business services, for which productivity performance and convergence seem more sensitive to progress in those policy areas. |
| Keywords: | Productivity, convergence, sectoral heterogeneity, firm structure, business demographics. |
| JEL: | E24 J24 L11 O47 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc122059&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34271&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34268&r=all |
| By: | World Bank |
| Keywords: | Education - Tertiary Education Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34219&r=all |
| By: | Giorgio Canarella (University of Nevada, Las Vegas, NV, U.S); Luis A. Gil-Alana (University of Navarra, Faculty of Economics, Pamplona, Spain); Rangan Gupta (University of Pretoria, Pretoria, South Africa); Stephen M. Miller (University of Nevada, Las Vegas, NV, U.S.) |
| Abstract: | Globalization, a complex phenomenon, reflects the interaction of many technological, cultural, economic, social, and environmental trends. This paper investigates a narrow aspect of three waves of globalizations that occurred in the last 150 years, which refers to the stochastic properties of real interest rates and real interest rate differentials using fractional integration methods. The empirical results provide evidence that in all three globalization waves rejects the hypothesis that a unit root exists in the real interest rate series and supports the hypothesis of real interest rates converge across countries. We fail to find evidence, however, that the results are uniformly consistent across the three waves, suggesting that each globalization involves its own distinct stochastic dynamics. |
| Keywords: | Globalization, fractional integration, real interest rate parity |
| JEL: | C22 E43 G15 N20 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:2020106&r=all |
| By: | Ghamsi Deffo, Salomon Leroy; Adjoumessi Houmpe, Donald; Dasi Yemkwa, Gyslin Hermann |
| Abstract: | Recent studies have shown that economies rich in natural resources (NR) are generally less developed than those which do not have them. However, the CEMAC countries are not excluded from this observation; hence the aim of our study is to determine on the first hand the effects of natural resources on economic development in CEMAC countries and on the other hand, analyze the contribution of human capital in the transmission of these effects. Results of the estimation by the fixed-effect method show that the abundance of natural resources measured by: total rent, oil rent and forest rent has a negative and significant effect on economic development. Likewise, human capital contributes to the transmission of these effects. The minimum education rate beyond which natural resources no longer have a negative effect on economic development, measured by the logarithm of GDP, is approximately 0.52, 0.51 and 0.48 respectively when considering total rent, oil rent and forest rent. This result is confirmed when using two stages least squared and maximum likelihood method. |
| Keywords: | Natural rent, economic development, human capital |
| JEL: | A1 E0 Q0 Q3 |
| Date: | 2020–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104492&r=all |
| By: | Òscar Jordà (Federal Reserve Bank of San Francisco; and Department of Economics, University of California, Davis); Martin Kornejew (Department of Economics, University of Bonn); Moritz Schularick (Federal Reserve Bank of New York; and Department of Economics, University of Bonn; and CEPR); Alan M. Taylor (Department of Economics and Graduate School of Management, University of California, Davis; NBER; and CEPR) |
| Abstract: | With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the nearuniverse of modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when inefficient debt restructuring and liquidation impede the resolution of corporate financial distress and make it more likely that corporate zombies creep along. |
| Keywords: | corporate debt, business cycles, local projections |
| JEL: | E44 G32 G33 N20 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:042&r=all |
| By: | World Bank |
| Keywords: | Conflict and Development - Conflict and Fragile States Finance and Financial Sector Development - Currencies and Exchange Rates Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Inflation |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34365&r=all |
| By: | Charles Bellemare; Rolande Kpekou Tossou; Kevin Moran |
| Abstract: | We propose and estimate a dynamic and individual model of expectations formation that links individual consumers’ inflation expectations to their own lagged forecasts as well as proxies for the rational expectation forecasts. The model builds on the existing rational inattention literature and extends it in several dimensions. We explicitly model the expectations updating rule which consumers use to incorporate new information in their experience and take seriously heterogeneity in inflation expectations extensively documented in the literature. We estimate the model using data from two important new surveys — the Federal Reserve Bank of New York’s Survey of Consumer Expectations and the Bank of Canada’s Canadian Survey of Consumer Expectations. We find that inflation expectations appear to correlate more strongly to measures of rational expectations forecasts in Canada than in the US, and conversely less to lagged expectations. More specifically, the median respondent assigns overall weights of roughly 75% to proxies for the rational expectation forecasts and 25% to lagged expectations in Canada, while these weights are around 50-50 for the US. We show that these differences in weights are not explained by differences in the characteristics of their stand-in consumers. Given this finding, one candidate explanation could be related to the explicit inflation target in Canada in comparison to the dual mandate in the US. |
| Keywords: | Central bank research, Econometric and statistical methods, Inflation and prices, Inflation targets |
| JEL: | C33 D83 D84 E31 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:20-52&r=all |
| By: | World Bank |
| Keywords: | Public Sector Development - Public Sector Economics Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Private Sector Development - Legal Regulation and Business Environment Social Protections and Labor - Labor Law Social Protections and Labor - Labor Markets Social Protections and Labor - Labor Policies |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34105&r=all |
| By: | World Bank |
| Keywords: | Energy - Energy Policies & Economics Energy - Oil & Gas Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth Poverty Reduction - Inequality |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34045&r=all |
| By: | Frédéric BEC (THEMA, CY Cergy Paris Université and CREST, Paris.); Alain GUAY (Université du Québec à Montréal and Chaire en macroéconomie et prévisions ESG-UQAM.) |
| Abstract: | This paper proposes t-like unit root tests which are consistent against any stationary alternatives, nonlinear or noncausal ones included. It departs from existing tests in that it uses an unbounded grid set including all possible values taken by the series. In our setup, thanks to the very simple nonlinear stationary alternative specification and the particular choice of the thresholds set, the proposed unit root test contains the standard ADF test as a special case. This, in turn, yields a sufficient condition for consistency against any ergodic stationary alternative. From a Monte-Carlo study, it turns out that the power of our unbounded non adaptive tests, in their average and exponential versions, outperforms existing bounded tests, either adaptive or not. This is illustrated by an application to interest rate spread data. |
| Keywords: | Unit root test, Threshold autoregressive model, Interest rate spread. |
| JEL: | C12 C22 C32 E43 |
| Date: | 2020–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2020-28&r=all |
| By: | Frédérique Bec; Alain Guay (Université de Cergy-Pontoise, THEMA) |
| Abstract: | This paper proposes t-like unit root tests which are consistent against any stationary alternatives, nonlinear or noncausal ones included. It departs from existing tests in that it uses an unbounded grid set including all possible values taken by the series. In our setup, thanks to the very simple nonlinear stationary alternative specification and the particular choice of the thresholds set, the proposed unit root test contains the standard ADF test as a special case. This, in turn, yields a sufficient condition for consistency against any ergodic stationary alternative. From a Monte-Carlo study, it turns out that the power of our unbounded non adaptive tests, in their average and exponential versions, outperforms existing bounded tests, either adaptive or not. This is illustrated by an application to interest rate spread data. |
| Keywords: | Unit root test, Threshold autoregressive model, Interest rate spread. |
| JEL: | C12 C22 C32 E43 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2020-10&r=all |
| By: | Knolle, Julia |
| Abstract: | Persistently low interest rates in several advanced economies during the past decade have puzzled economists. Explanations on what caused them and what could or even should be done in light of such rates abound. One of the most prominent narratives is the so-called “secular stagnation hypothesis”. According to this theory, low interest rates indicate a lack of profitable investment opportunities. If left unchecked, this leads to high unemployment and stunted growth for the economies in question. This has caused several economists to call for government interventions in order to close the presumed gap between investment and saving. However, these gloomy predictions are in stark contrast to the actual economic development observed over the past decade, which featured record-lows in unemployment, continuing growth, and more or less steady capital investment levels. The ongoing debate focuses mainly on interest rates on debt instruments. The cost of equity is often overlooked, even though it is a significant source of financing for firms. This thesis addresses this shortcoming by taking into account both cost components. Instead of approximating the marginal productivity of capital using interest on government bonds, a new measure based on the Weighted Average Cost of Capital (WACC) is employed. The WACC – a widely used instrument from the field of finance – takes both equity and debt into account and constitutes a hurdle rate for firms’ investment decisions. Using proprietary data from Bloomberg, an analysis covering all OECD countries ranging from 2000-2017 is undertaken, including over 25,000 firms. The results are striking: while the cost of debt has declined over the course of the timeline, the cost of equity has remained stable or even increased, keeping the overall WACC constant. This stresses the importance of distinguishing between different sources of financing to get a comprehensive picture. The approach introduced here is thus able to shed new light on different aspects of the current low interest environment. |
| Keywords: | Low Interest Environment, Marginal Productivity of Capital, Investment, Weighted Average Cost of Capital, WACC, Secular Stagnation, Equity Premium Puzzle |
| JEL: | D24 E43 E60 H6 |
| Date: | 2020–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104332&r=all |
| By: | Christa D. Court (Food and Resource Economics Department, University of Florida); Randall Jackson (Geology and Geography Department and Regional Research Institute, West Virginia University); Amanda J. Harker Steele (KeyLogic Systems LLC-NETL); Justin Adder (U.S. Department of Energy, National Energy Technology Laboratory); Gavin Pickenpaugh (U.S. Department of Energy, National Energy Technology Laboratory); Charles Zelek (U.S. Department of Energy, Office of Fossil Energy) |
| Abstract: | To comprehensively model the macroeconomic impacts that result from changes in long-term energyeconomy forecasts, the United States Department of Energy’s National Energy Technology Laboratory (NETL) partnered with West Virginia University’s (WVU) Regional Research Institute to develop the NETL/WVU econometric input-output (ECIO) model. The NETL/WVU ECIO model is an impacts forecasting model that functions as an extension of the U.S. energy-economic models available from the United States (U.S.) Energy Information Administration’s National Energy Modeling System (NEMS) and the U.S. Environmental Protection Agency’s Market Allocation (MARKAL) model. The ECIO model integrates a macroeconomic econometric forecasting model and an input-output accounting framework along derived forecast scenarios detailing a baseline of the U.S. energy-economy and an alternative forecast on how power generation resources can meet future levels of energy demand to generate estimates of the impacts to gross domestic product, employment, and labor income. This manuscript provides an overview of the model design, assumptions, and standard outputs. |
| Keywords: | Energy-Economy Forecasting, National Energy Modeling System, Input-Output Model, Econometric Model |
| JEL: | Q43 E17 O33 |
| Date: | 2020–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:rri:wpaper:2020wp05&r=all |
| By: | World Bank |
| Keywords: | Education - Educational Policy and Planning Energy - Oil & Gas Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Health Policy and Management Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Water Resources - Water Policy & Governance |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34223&r=all |
| By: | CERQUA, AUGUSTO; LETTA, MARCO |
| Abstract: | Impact evaluations of the microeconomic effects of the COVID-19 upheavals are essential but nonetheless highly challenging. Data scarcity and identification issues due to the ubiquitous nature of the exogenous shock account for the current dearth of counterfactual studies. To fill this gap, we combine up-to-date quarterly local labor markets (LLMs) data, collected from the Business Register kept by the Italian Chamber of Commerce, with the machine learning control method for counterfactual building. This allows us to shed light on the pandemic impact on the local economic dynamics of one of the hardest-hit countries, Italy. We document that the shock has already caused a moderate drop in employment and firm exit and an abrupt decrease in firm entry at the country level. More importantly, these effects have been dramatically uneven across the Italian territory and spatially uncorrelated with the epidemiological pattern of the first wave. We then use the estimated individual treatment effects to investigate the main predictors of such unbalanced patterns, finding that the heterogeneity of impacts is primarily associated with interactions among the exposure of economic activities to high social aggregation risks and pre-existing labor market fragilities. These results call for immediate place- and sector-based policy responses. |
| Keywords: | impact evaluation; counterfactual approach; machine learning; local labor markets; firms; COVID-19; Italy |
| JEL: | C53 D22 E24 R12 |
| Date: | 2020–11–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104404&r=all |
| By: | Gabriel Jiménez; David Martinez-Miera; José-Luis Peydró |
| Abstract: | We show strong overall and heterogeneous economic incidence effects, as well as distortionary effects, of only shifting statutory incidence (i.e., the agent on which taxes are levied), without any tax rate change. For identification, we exploit a tax change and administrative data from the credit market: (i) a policy change in 2018 in Spain shifting an existing mortgage tax from being levied on borrowers to being levied on banks; (ii) some areas, for historical reasons, were exempt from paying this tax (or have different tax rates); and (iii) an exhaustive matched credit register. We find the following robust results: First, after the policy change, the average mortgage rate increases consistently with a strong - but not complete - tax pass-through. Second, there is a large heterogeneity in such pass-through: larger for borrowers with lower income, a smaller number of lending relationships, not working for the lender, or facing less banks in their zip-code, thereby suggesting a bargaining power mechanism at work. Third, despite no variation in the tax rate, and consistent with the non-full tax pass-through, the tax shift increases banks' risk-taking. More affected banks reduce costly mortgage insurance in case of loan default (especially so if banks have weaker ex-ante balance sheets) and expand into non-affected but (much) ex-ante riskier consumer lending, experiencing even higher ex-post defaults within consumer loans. |
| Keywords: | taxes; incidence, banks; inequality; risk-taking; mortgages. |
| JEL: | E51 G21 G28 G51 H22 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1756&r=all |
| By: | Joseph P Byrne; Erkal Ersoy (Centre for Energy Economics Research and Policy, Heriot-Watt University) |
| Abstract: | There continues to be considerable interest in the relationship between oil market fundamentals, oil prices, and uncertainty. This paper examines the impact of oil market uncertainty shocks upon oil fundamentals and prices. We utilise a Bayesian stochastic volatility-in-mean VAR approach, which endogenously models oil market uncertainty and allows the data to dynamically impact uncertainty. We find evidence that supply uncertainty shocks are linked to demand uncertainty, and that supply shocks are associated with a fairly pronounced increase in oil price uncertainty. |
| Keywords: | Oil Prices; Endogenous Uncertainty; Bayesian VAR; Stochastic Volatility-in-Mean. |
| JEL: | C32 E32 Q43 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:hwc:wpaper:012&r=all |
| By: | World Bank |
| Keywords: | Energy - Renewable Energy Environment - Climate Change Mitigation and Green House Gases Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Achieving Shared Growth |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33904&r=all |
| By: | Gabriel Jiménez; David Martinez-Miera; José-Luis Peydró |
| Abstract: | We show strong overall and heterogeneous economic incidence effects, as well as distortionary effects, of only shifting statutory incidence (i.e., the agent on which taxes are levied), without any tax rate change. For identification, we exploit a tax change and administrative data from the credit market: (i) a policy change in 2018 in Spain shifting an existing mortgage tax from being levied on borrowers to being levied on banks; (ii) some areas, for historical reasons, were exempt from paying this tax (or have different tax rates); and (iii) an exhaustive matched credit register. We find the following robust results: First, after the policy change, the average mortgage rate increases consistently with a strong - but not complete - tax pass-through. Second, there is a large heterogeneity in such pass-through: larger for borrowers with lower income, a smaller number of lending relationships, not working for the lender, or facing less banks in their zip-code, thereby suggesting a bargaining power mechanism at work. Third, despite no variation in the tax rate, and consistent with the non-full tax pass-through, the tax shift increases banks' risk-taking. More affected banks reduce costly mortgage insurance in case of loan default (especially so if banks have weaker ex-ante balance sheets) and expand into non-affected but (much) ex-ante riskier consumer lending, experiencing even higher ex-post defaults within consumer loans. |
| Keywords: | taxes, incidence, banks, Inequality, risk-taking, mortgages |
| JEL: | E51 G21 G28 G51 H22 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1222&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Public Health Promotion Information and Communication Technologies - Digital Divide Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Achieving Shared Growth |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33879&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Social Protections and Labor - Labor Markets Social Protections and Labor - Social Protections & Assistance |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33960&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Macroeconomics and Economic Growth - Consumption Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Inequality Social Protections and Labor - Social Protections & Assistance |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34367&r=all |
| By: | World Bank Group |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Public Health Promotion Information and Communication Technologies - Digital Divide Information and Communication Technologies - Information Technology Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33878&r=all |
| By: | Martínez-Miera, David; Jiménez, Gabriel; Peydró, José-Luis |
| Abstract: | We show strong overall and heterogeneous economic incidence effects, as well as distortionary effects, of only shifting statutory incidence (i.e., the agent on which taxes are levied), without any tax rate change. For identification, we exploit a tax change and administrative data from the credit market: (i) a policy change in 2018 in Spain shifting an existing mortgage tax from being levied on borrowers to being levied on banks; (ii) some areas, for historical reasons, were exempt from paying this tax (or have different tax rates); and (iii) an exhaustive matched credit register. We find the following robust results: First, after the policy change, the average mortgage rate increases consistently with a strong – but not complete – tax pass-through. Second, there is a large heterogeneity in such pass-through: larger for borrowers with lower income, a smaller number of lending relationships, not working for the lender, or facing less banks in their zip-code, thereby suggesting a bargaining power mechanism at work. Third, despite no variation in the tax rate, and consistent with the non-full tax pass-through, the tax shift increases banks’ risk-taking. More affected banks reduce costly mortgage insurance in case of loan default (especially so if banks have weaker ex-ante balance sheets) and expand into non-affected but (much) ex-ante riskier consumer lending, experiencing even higher ex-post defaults within consumer loans. |
| Keywords: | taxes,incidence,banks,inequality,risk-taking,mortgages |
| JEL: | E51 G21 G28 G51 H22 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:226689&r=all |
| By: | Janine Boshoff; Xuxin Mao; Garry Young |
| Abstract: | The construction of consumer price indexes (CPI) has historically relied on manually and centrally collected price data. As point of sale (POS) scanner data and web-scraped data become more accessible, these alternative data represent a rich new source of information to produce consumer price information. While outlier detection methodologies are well established for traditional data sources, more research is required to better understand the unique quality and format of the alternative data. Several national statistical institutions (NSIs) have already started to conduct research into alternative data source and the outlier detection methodologies that are necessary before these data can be incorporated into CPI calculations. This project reviews the outlier detection methodologies adopted by NSIs that have started to incorporate alternative data sources in their calculation of CPI. |
| Keywords: | consumer price index, multilateral indices, outlier detection, scanner data, webscraped data |
| JEL: | C43 E31 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:523&r=all |
| By: | World Bank Group |
| Keywords: | Public Sector Development - Public Financial Management Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth Information and Communication Technologies - Digital Divide Information and Communication Technologies - Telecommunications Infrastructure |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33830&r=all |
| By: | World Bank Group |
| Keywords: | Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Investment and Investment Climate Poverty Reduction - Employment and Shared Growth |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34047&r=all |
| By: | World Bank |
| Keywords: | Finance and Financial Sector Development - Public & Municipal Finance Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Stabilization Macroeconomics and Economic Growth - Fiscal & Monetary Policy Public Sector Development - Public Sector Expenditure Policy Public Sector Development - Public Investment Management |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33998&r=all |
| By: | Cecilia Dassatti (Banco Central del Uruguay); Francesc Rodriguez-Tous (Cass Business School); Rodrigo Lluberas (Banco Central del Uruguay) |
| Abstract: | Banks' incentives to implement a policy of forbearance in order to avoid increasing their loan loss reserves leads to loan “evergreening”, through which a bank grants additional credit to a troubled firm. Exploiting granular data of all corporate loans from the Credit Registry in Uruguay, we identify banks' zombie lending strategies. While most papers on zombie lending focus on firms that display low levels of profitability, low productivity or that receive subsidized loans, we analyze zombie lending strategies by looking at changes in loans' repayment schedules granted by banks to firms. This allows us to actually observe the implementation of a zombie lending strategy, instead of inferring it through firms' balance-sheet indicators. After identifying and characterizing zombie lending, we study its effects on credit growth, finding a positive and statistically significant relationship between credit growth and zombie lending. |
| Keywords: | banks, credit, loan evergreening, regulatory arbitrage, zombie lending |
| JEL: | G21 G28 E44 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bku:doctra:2020003&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth Poverty Reduction - Inequality |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34049&r=all |
| By: | Bauer, Anja (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Keveloh, Kristin; Mamertino, Mariano; Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "Little is known so far about how the corona crisis has changed search processes in the labour market. We provide insights on labour market competition, reallocation of applications and potential sullying effects by analysing data from the LinkedIn professional network for Germany. We find that competition among workers for jobs strongly increased. The data allow us to trace that back to additional job seekers rather than higher search intensity. Furthermore, the LinkedIn data show that people from industries particularly affected by the crisis apply much more frequently and there has been a substantial shift in the target industries for applications. Finally, we find that during the crisis applications are made significantly more often below and significantly less often above a person's level of seniority." (Author's abstract, IAB-Doku) ((en)) |
| Keywords: | Pandemie, Auswirkungen, Arbeitsuche, Arbeitsuchende, Wettbewerb, sektorale Verteilung, Überqualifikation, unterwertige Beschäftigung, Bewerbungsverhalten, matching, Verhaltensänderung, Kurzarbeit, Entlassungen, beruflicher Abstieg |
| JEL: | J60 E24 |
| Date: | 2020–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:202033&r=all |
| By: | World Bank |
| Keywords: | Agriculture - Food Security Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Inflation Macroeconomics and Economic Growth - Remittances Poverty Reduction - Inequality Poverty Reduction - Migration and Development |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34046&r=all |
| By: | María García-Vega |
| Abstract: | In this paper, I provide evidence of automation and skill-upgrading of R&D for young firms during the Great Recession of the late 2000s (henceforth abbreviated as GR). Using a difference-in-difference approach and propensity score matching, for a panel of more than 12,000 Spanish firms from 2005 to 2014, I examine if the GR had an effect on the organization of R&D in young versus older firms. I find that young firms adjust their R&D employment during the GR. I show that young firms implemented three key compositional changes in their R&D policies during the GR as compared to older firms: a) they reduced their R&D employment by firing medium-skilled R&D workers; b) they hired high-skilled R&D workers; and c) they increased their capital investments for R&D. These changes in R&D policies suggest that during the GR, young firms substituted medium-skilled R&D workers by high-skilled workers and machines. These effects are mediated by the firms’ financial health. |
| Keywords: | Young firms; Great Recession; Firm performance; R&D; Innovation; Automation; skillupgrading; Job polarization. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:2020-09&r=all |
| By: | Cappelletti, Giuseppe; Ponte Marques, Aurea; Salleo, Carmelo; Martín, Diego Vila |
| Abstract: | We study the impact of macroprudential capital buffers on banking groups' lending and risk-taking decisions, also investigating implications for internal capital markets. For identification, we exploit heterogeneity in buffers applied to other systemically important institutions, using information from three unique confidential datasets, including information on the EBA scoring process. This policy design induces a randomized experiment in the neighborhood of the threshold, which we use to identify the effect of higher capital requirements by comparing the change in the outcome for banks just above and below the cut-off, before and after the introduction of the buffer. The analysis is implemented relying on a fuzzy regression discontinuity and on a difference-in-differences matching design. We find that, when parent banks are constrained with higher buffers, subsidiaries deleverage lending and risk-taking towards non-financial corporations and marginally expanded lending towards households, with negative effects on protability. Also, we find that parents cut down on holdings of debt and equity issued by their subsidiaries. Our findings support the hypothesis that higher capital buffers have a positive disciplinary effect by reducing banks' risk-taking while having a (temporary) adverse impact on the real economy through a decrease in affiliated banks' lending activity. Therefore, to ensure the effectiveness of macroprudential policy, it is essential that policymakers assess their potential cross-border effects. JEL Classification: E44, E51, E58, G21, G28 |
| Keywords: | capital buffers, Internal capital markets, lending, macroprudential policy, risk-taking |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202497&r=all |
| By: | World Bank |
| Keywords: | Public Sector Development - Public Sector Expenditure Policy Conflict and Development - National Protection and Security Health, Nutrition and Population - Disease Control & Prevention Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34239&r=all |
| By: | Oasis Kodila-Tedika (Kinshasa, DRC); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | We assess the correlations between tribalism and financial development in 60 countries using data averages from 2000-2010. The tribalism index is used to measure tribalism whereas financial development is measured from perspectives of financial intermediary and stock market developments. The long term finance variable is stock market capitalisation while the short run variable is private and domestic credit. We find that tribalism is negatively correlated with financial development and the magnitude of negativity is higher for financial intermediary development relative to stock market development. The findings are particularly relevant to African and Middle Eastern countries where the scourge of tribalism is most pronounced. |
| Keywords: | Tribalism; Financial Development |
| JEL: | E62 H11 H20 G20 O43 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:20/092&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention Health, Nutrition and Population - Health Service Management and Delivery Health, Nutrition and Population - Public Health Promotion Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34048&r=all |
| By: | World Bank |
| Keywords: | Health, Nutrition and Population - Disease Control & Prevention International Economics and Trade - Export Competitiveness Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Taxation & Subsidies |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34092&r=all |
| By: | Woubet Kassa |
| Keywords: | International Economics and Trade - Trade Facilitation International Economics and Trade - Trade Policy International Economics and Trade - Trade and Regional Integration Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33841&r=all |
| By: | World Bank |
| Keywords: | Public Sector Development - Public Sector Management and Reform Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Social Development - Social Inclusion & Institutions Public Sector Development - Public Sector Economics |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:34330&r=all |
| By: | Lorenzo Nalin; Giuliano Toshiro Yajima |
| Abstract: | This working paper empirically and theoretically analyzes the exchange rate's role in Mexico's development for the period 2004-19. We test the hypothesis of the re(emergence) of the balance sheet effect due to an increase in external debt in the nonfinancial corporate sector; higher foreign debt would affect private investment after episodes of real currency depreciation, in the spirit of the literature put forward by Gertler, Gilchrist, and Natalucci (2007) and Céspedes, Chang, and Velasco (2004). We build a stock-flow consistent (SFC) model, following the OPENFLEX model proposed in Godley and Lavoie (2006), to explore the balance sheet implications from a theoretical perspective. We simulate the 2014 fall in the Mexican peso generated by the drop in oil prices to replicate stylized facts for Mexico for the period under investigation. The scenario analysis points to a hysteresis effect of the real exchange rate (RER) depreciation on investment flows. That is, firms' investment ratio does not completely recover from negative shocks in the currency. |
| Keywords: | International Finance Forecasting and Simulation; Models; Applications; Foreign Exchange; Macro-Based Behavioral Economics |
| JEL: | F37 F31 E7 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_980&r=all |
| By: | María Victoria Landaberry (Banco Central del Uruguay); Miguel Mello (Banco Central del Uruguay) |
| Abstract: | This is an empirical study of price setting dollarization in Uruguay using product level data. Using web scraping we developed a unique dataset for online e-commerce. We describe price setting in US dollars by categories, sub-categories and value of more than 9 million announcements for consumer goods. We conclude that dollarization is determined principally by the value and by the type of products. The persistence of dollarization in the used products market, is also determined by its value. These implies that high value goods are perceived as goods with a reserve of value by consumers, so they set the price of that residual value of second hand products in dollars. This result is in line with previous research on the cultural dollarization of Uruguayan consumers. |
| Keywords: | price setting, foreign currency, dollarization, Uruguay, web scraping, persistence, R, data analysis |
| JEL: | D40 D49 E30 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bku:doctra:2019005&r=all |
| By: | Demiessie, Habtamu |
| Abstract: | This study is aimed at modeling the essential behavioral and institutional aspects of the economic fabric of urban eastern Ethiopian communities with an emphasis on consumption/saving regime. Analysis made was based on interdisciplinary approach. The principles of a hypothetical research govern key aspects of inferences made. The study hypothesized that the essential construct of the consumption/saving regime is by product of shared value system in the communities of interest. In this regard, the shared value system is the result of a more or commonly shared environment (economic, socio-cultural, political, past governance, geographic and geo-political) by urban eastern Ethiopian communities in the past and present. The importance of shared value system is interpreted in shaping consumption/saving decision making behavior of people in its implications to making life uncertain/risky. The study found out that the constructs of prevailing consumption/saving regime is behavioral and institutional response mechanisms people/households/communities design to cope up the uncertain/risky nature of life in general and that of their economic life in particular. As prevailing uncertainties in life are not faced and/or felt equally by people/households/communities, generalization made on behavioral and institutional features of the consumption/saving regime is not linear across the board. In this regard, the potency of behavioral and institutional modeling made on consumption/saving regime is subjected to variations across individuals/communities of various entities: income/ occupational/ consumption groups; generations; locations (urban versus rural); socio demographic variables, among others. The study further concludes that consumption/saving decision of individuals and/or the overall economic fabric in the settings of eastern Ethiopian communities is a complex phenomenon which is not only motivated by economic factors, but triggered by a host of non economic determinants attributed to psychological,psychosocial, sociological, anthropological and geographical variables. Therefore, academic and policy interventions meant to study/influence the consumption/saving regime in the case of urban eastern Ethiopian communities requires considering the mentioned economic and non economic variables with an interdisciplinary/multi sectoral tools/approaches. |
| Keywords: | Eastern Ethiopia Shared Value System Consumption Decision Process Group Decision Making |
| JEL: | B52 E21 J17 Z1 |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104144&r=all |
| By: | Papanicolas, Irene; Marino, Alberto; Jha, Ashish |
| Abstract: | The United States spends more on health care than any other country.1 Unlike many other high-income countries, which have largely uniform financing schemes for health care, the US has different financing schemes for different populations. The degree to which this fragmentation in US financing explains higher spending is not clear. Some policy makers believe that expanding the Medicare model, which has a financing system that more closely resembles that of other high-income countries (ie, it is government run and tax financed), could reduce spending substantially. To examine whether this policy has potential, this cross-sectional study compared nominal and relative spending in the US, by 5-year age groupings, with that of other high-income countries that have more homogenous financing systems. This comparison allows us to better understand spending differentials between the US and other countries for people aged 65 years or older, as well as for other age groups. |
| JEL: | E6 |
| Date: | 2020–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105109&r=all |
| By: | Cavalcanti, T.; Hasna, Z.; Santos, C. |
| Abstract: | We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral input–output linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals. Workers with a comparative advantage in dirty energy sectors who do not reallocate bear relatively more of the cost but constitute a small fraction of the labor force. |
| Keywords: | Climate change, carbon taxes, worker heterogeneity, labor reallocation |
| JEL: | E13 H23 J24 |
| Date: | 2020–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20117&r=all |
| By: | Jip Leendertse; Mirella T. Schrijvers; Erik Stam; ; |
| Abstract: | In spite of the popularity of the entrepreneurial ecosystem approach in science and policy, there is a scarcity of credible, accurate and comparable metrics of entrepreneurial ecosystems. This is a severe shortcoming for both scientific progress and successful policy. In this paper, we bridge this metrics gap. We use the entrepreneurial ecosystem approach to quantify and qualify regional economies. Entrepreneurial ecosystems consist of the actors and factors that enable entrepreneurship. We operationalize the elements and outputs of entrepreneurial ecosystems for 273 European regions. The ecosystem elements show strong and positive correlations between them, confirming the systemic nature of entrepreneurial economies, and the need for a complex systems perspective. Our analyses show that physical infrastructure, finance, formal institutions, and talent take a central position in the interdependence web, providing a first indication of these elements as fundamental conditions of entrepreneurial ecosystems. The measures of the elements are used to calculate an index to approximate the quality of entrepreneurial ecosystems. This index is robust and performs well in regressions to predict entrepreneurial output, which we measure with novel data on productive entrepreneurship. The entrepreneurial ecosystem approach and the metrics we present provide a lens for public policy to better diagnose, understand and improve entrepreneurial economies. |
| Keywords: | entrepreneurial ecosystem; regional dynamics; entrepreneurship; economic development; economic policy; entrepreneurship policy |
| JEL: | D2 E02 L26 M13 O43 P00 R1 R58 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2056&r=all |
| By: | Capella-Ramos, João; Checherita-Westphal, Cristina; Leiner-Killinger, Nadine |
| Abstract: | Before the outbreak of the coronavirus (COVID-19) pandemic, discussions were already taking place on how to complete Economic and Monetary Union (EMU) and increase its resilience, inter alia, by speeding up economic convergence. The impact of the current unprecedented crisis on the euro area economy has given the debate new impetus. As a contribution to this topic – and without going into details of new mechanisms for crisis resolution – this paper analyses the role of fiscal transfers in real and business cycle convergence at a regional level. The paper distinguishes between net fiscal transfers – a broad measure defined as the ratio between disposable and primary incomes – and EU structural and investment funds. It provides evidence that net fiscal transfers have contributed to income redistribution across regions and to faster convergence in disposable incomes, although not to higher economic growth and real convergence. More positive evidence has been found for the role of the EU structural and investment funds over the medium term, based on the newly available – and richest so far – European Commission database. Going forward, in addition to efficiency considerations, which are important for real convergence, recommendations on the size and allocation of fiscal transfers should account for their impact on the business cycle. At the same time, in the longer run, it should be borne in mind that fiscal transfers are no substitute for genuine structural reforms and sound macroeconomic and fiscal policies when it comes to promoting sustainable economic growth and convergence. JEL Classification: H54, H77, O47 |
| Keywords: | business cycle, business cycle convergence, economic growth, European structural and investment funds, fiscal transfers, real convergence |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2020252&r=all |
| By: | Nicolas Woloszko |
| Abstract: | This paper introduces the OECD Weekly Tracker of economic activity for 46 OECD and G20 countries using Google Trends search data. The Tracker performs well in pseudo-real time simulations including around the COVID-19 crisis. The underlying model adds to the previous Google Trends literature in two respects: (1) the data are adjusted for common long-term bias and (2) the data include variables based on both Google Search categories and topics (the latter being a collection of related keywords), thus further exploiting the potential of Google Trends. The paper highlights the predictive power of specific topics, including "bankruptcies", "economic crisis", "investment", "luggage" and "mortgage". Calibration is performed using a neural network that captures non-linear patterns, which are shown to be consistent with economic intuition using machine learning interpretability tools ("Shapley values"). The tracker sheds light on the recent downturn and the dynamics of the rebound, and provides evidence about lasting shifts in consumption patterns. |
| Keywords: | COVID-19, Google Trends, high-frequency, interpretability, machine learning, nowcasting |
| JEL: | C45 C53 C55 E37 |
| Date: | 2020–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1634-en&r=all |
| By: | Simona Nistor (Babes-Bolyai University - Department of Finance); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)) |
| Abstract: | What is the impact of policy interventions on the systemic risk of banks? To answer this question, we analyze a comprehensive sample that combines bank-specific bailout events with balance sheets of key affected and non-affected European banks between 2008 and 2014. We find that guarantees reduce the systemic risk contribution made by small banks in the short run and by small or less liquid banks in the long run. Recapitalizations immediately decrease banks’ systemic importance, but the effect is also short-lived. Liquidity injections may even significantly increase systemic risk especially when administered to the less capitalized or highly profitable banks. |
| Keywords: | systemic risk, policy interventions, risk profile, Conditional Value at Risk, G-SIBs |
| JEL: | E58 G01 G21 G28 H81 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp20101&r=all |