nep-mac New Economics Papers
on Macroeconomics
Issue of 2021‒02‒22
114 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. The Riddle of the Natural Rate of Interest By Weshah Razzak
  2. Optimal Bailouts in Banking and Sovereign Crises By Sewon Hur; César Sosa-Padilla; Zeynep Yom
  3. The Fed, housing and household debt over time By Giacomo Rella
  4. Lumpy Durable Consumption Demand and the Limited Ammunition of Monetary Policy By ; Alisdair McKay
  5. State dependent government spending multipliers: Downward nominal wage rigidity and sources of business cycle fluctuations By Yoon J. Jo; Sarah Zubairy
  6. A data-driven approach to measuring financial soundness throughout the world By Alessandro Bitetto; Paola Cerchiello; Charilaos Mertzanis
  8. Prices and inflation in the UK - A new dataset By Richard Davies
  9. Effective Policy Communication: Targets versus Instruments By Francesco D'Acunto; Daniel Hoang; Maritta Paloviita; Michael Weber
  10. Identification of fiscal SVARs in small open economies using trading partner forecast errors as instruments By Henri Keränen; Sakari Lähdemäki
  11. Measuring the Labor Market at the Onset of the COVID-19 Crisis By Alexander W. Bartik; Marianne Bertrand; Feng Lin; Jesse Rothstein; Matt Unrath
  12. Financial Destabilization By Ken-ichi Hashimoto; Ryonghun Im; Takuma Kunieda; Akihisa Shibata
  13. Aggregate Employment Effects of Unemployment Benefits During Deep Downturns: Evidence from the Expiration of the Federal Pandemic Unemployment Compensation By Arindrajit Dube
  14. Banks, shadow banks, and business cycles By Becard, Yvan; Gauthier, David
  15. Reforming the Fiscal Rulebook for the Euro Area – and the Challenge of Old and New Public Debt By Jan Priewe
  16. The Recovery From The Great Recession: A Long, Evolving Expansion By Jay C. Shambaugh; Michael R. Strain
  17. Conditions for Effective Macroprudential Policy Interventions By Khan, Fahad; Ramayandi, Arief; Schröder, Marcel
  18. Spillover Effects of the European Central Bank's Expanded Asset Purchase Program to Non-eurozone Countries in Central and Eastern Europe By Lorant Kaszab; Mark Antal
  19. The Impact of Oil Price Shocks on Turkish Sovereign Yield Curve By Oguzhan Cepni; Selcuk Gul; Muhammed Hasan Yilmaz; Brian Lucey
  20. Identifying Key Macroeconomic Shocks to Canadian GDP By Jamil Sayeed
  22. Diagnostic Expectations and Macroeconomic Volatility By Jean-Paul L'Huillier; Sanjay R. Singh; Donghoon Yoo
  23. When Does the Introduction of a New Currency Improve Welfare? By Max Fuchs; Jochen Michaelis
  24. Fiscal Policy and Households' Inflation Expectations: Evidence from a Randomized Control Trial By Coibion, Olivier; Gorodnichenko, Yuriy; Weber, Michael
  25. What determines private and household savings in India? By Soumya Kanti Ghosh; Hiranya K. Nath
  26. Decomposition of Bank Loans and Economic Activity in Turkey By Hande Kucuk Yesil; Pinar Ozlu; Caglar Yunculer
  27. The firm-level link between productivity dispersion and wage inequality: A symptom of low job mobility? By Chiara Criscuolo; Alexander Hijzen; Michael Koelle; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Alfred Garloff; Katharzyna Grabska; Ryo Kambayashi; Valerie Lankester; Balazs Stadler; Oskar Nordström Skans; Satu Nurmi; Balazs Murakozy; Richard Upward; Wouter Zwysen
  28. Common Components Structural VARs By Mario Forni; Luca Gambetti; marco Lippi; Luca Sala
  29. The Transmission of Monetary Policy via the Banks' Balance Sheet - Does Bank Size Matter? By Tumisang Loate; Nicola Viegi
  30. Macroeconomic Uncertainty and Vector Autoregressions By Mario Forni; Luca Gambetti; Luca Sala
  31. External Vulnerabilities and Exchange Rate Pass-Through: The Case of Emerging Markets By Abdullah Kazdal; Muhammed Hasan Yilmaz
  32. Asymmetric Effects of Monetary Policy Easing and Tightening By Davide Debortoli; Mario Forni; Luca Gambetti; Luca Sala
  33. Why Might Lump-sum Transfers Not Be a Good Idea? By Yunmin Chen; YiLi Chien; Yi Wen; C. C. Yang
  34. A multivariate unobserved components model to estimate potential output in the euro area: a production function based approach By Tóth, Máté
  35. Designing a European Monetary Fund: What role for the IMF? By Jost, Thomas; Seitz, Franz
  36. Nigeria; 2020 Article IV Consultation-Press Release; Staff Report; and Statement by the Alternate Executive Director for Nigeria By International Monetary Fund
  37. The Power of Sentiment: Irrational Beliefs of Households and Consumer Loan Dynamics By Zuzana Rakovska; Dominika Ehrenbergerova; Martin Hodula
  38. Policy uncertainty, lender of last resort and the real economy By Jasova, Martina; Mendicino, Caterina; Supera, Dominik
  39. Wenn eine geldpolitische Nebensache zur politischen Hauptsache wird: Das riesige Vermögen der Schweizerischen Nationalbank By Brunetti, Aymo; Foellmi, Reto
  40. Aggregate Output Measurements: a Common Trend Approach By Martín Almuzara; Gabriele Fiorentini; Enrique Sentana
  41. Public finances and Public Private Partnerships in the European Union By Alessandra Cepparulo; Giuseppe Eusepi; Luisa Giuriato
  42. Uncertainty and Forecastability of Regional Output Growth in the United Kingdom: Evidence from Machine Learning By Mehmet Balcilar; David Gabauer; Rangan Gupta; Christian Pierdzioch
  43. Trend of Core inflation in DRCongo : a model based on the Structural VAR approach By Pacifique Murhula
  44. Effectiveness of Foreign Exchange Interventions: Evidence from New Zealand By Andrew Besuyen; Tom Coupé; Kuntal K. Das
  45. Global Value Chains and the transmission of exchange rate shocks to consumer prices By Hadrien Camatte; Guillaume Daudin; Violaine Faubert; Antoine Lalliard; Christine Rifflart
  46. Aggregate output measurements: a common trend approach By Martín Almuzara; Gabriele Fiorentini; Enrique Sentana
  47. Job search during the covid-19 crisis. By Hensvik, Lena; Le Barbanchon, Thomas; Rathelot, Roland
  48. Effective Exchange Rate Regimes and Inflation By Philipp Harms; Jakub Knaze
  49. Understanding the Racial and Income Gap in Commuting for Work Following COVID-19 By Ruchi Avtar; Rajashri Chakrabarti; Maxim L. Pinkovskiy
  50. The Analytic Theory of a Monetary Shock By Fernando E. Alvarez; Francesco Lippi
  51. The evolution of debtor-creditor relationships within a monetary union: Trade imbalances, excess reserves and economic policy By Gräbner, Claudius; Heimberger, Philipp; Kapeller, Jakob; Landesmann, Michael; Schütz, Bernhard
  52. INNOVATION IN UTILITY CRAFTSMANSHIP: ANALYSIS BASED ON HUMAN CAPITAL By José G. Vargas-Hernández; Jonathan Daniel Chávez Ascencio; Omar Cristian Vargas González
  53. The Balance Sheet of the Exchange Stabilization Fund, 1934-2019 By Sheng, Jiemin
  54. Reparations and Persistent Racial Wealth Gaps By Job Boerma; Loukas Karabarbounis
  55. Mali; Request for Modification of Criteria Under the Extended Credit Facility-Staff Report By International Monetary Fund
  56. Global Uncertainty By Caggiano, Giovanni; Castelnuovo, Efrem
  57. Iraq; 2020 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Iraq By International Monetary Fund
  58. The Relationship Between Nominal Wage and Price Flexibility: New Evidence By Solórzano Diego; Dixon Huw
  59. The Visegrád Countries: Coronavirus Pandemic, EU Transfers, and their Impact on Austria By Vasily Astrov; Mario Holzner
  61. The Role of Expectations in the Inflation Process in Turkey: Have the Dynamics Changed Recently? By Umit Koc; Fethi Ogunc; Mustafa Utku Ozmen
  62. Consumption and Income Inequality across Generations By Giovanni Gallipoli; Hamish Low; Aruni Mitra
  63. A Macro-Finance Model of Government Bonds Yields in Vietnam By Ly Dai Hung
  64. Central African Republic; First and Second Reviews Under the Extended Credit Facility Arrangement and Request for Waivers of Nonobservance of Performance Criteria-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for the Central African Republic By International Monetary Fund
  65. Permissioned Distributed Ledgers and the Governance of Money By Raphael Auer; Cyril Monnet; Hyun Song Shin
  66. SIR Economic Epidemiological Models with Disease Induced Mortality By Aditya Goenka; Lin Liu; Manh-Hung Nguyen
  67. Asymmetric Information and Sovereign Debt: Theory Meets Mexican Data By Harold L. Cole; Daniel Neuhann; Guillermo Ordoñez
  68. Financial crises, macroprudential policy and the reliability of credit-to-GDP gaps By Alessandri, Piergiorgio; Bologna, Pierluigi; Galardo, Maddalena
  69. Market sentiment, financial fragility, and economic activity: The role of corporate securities issuance By Dieckelmann, Daniel
  70. Implications of the Slowdown in Trend Growth for Fiscal Policy in a Small Open Economy By Beames, Alexander; Kulish, Mariano; Yamout, Nadine
  71. Online Appendix: Star Wars at Central Banks By ; ; ; ; Benjamin A. Malin
  72. Financial Vulnerability and Volatility in Emerging Stock Markets: Evidence from GARCH-MIDAS Models By Riza Demirer; Rangan Gupta; He Li; Yu You
  73. Republic of Poland; 2020 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Poland By International Monetary Fund
  74. On the search for environmental sustainability in Africa: the role of governance By Ibrahim A. Adekunle
  76. Panama; Request for an Arrangement Under the Precautionary and Liquidity Line-Press Release; Staff Report; and Statement by the Executive Director for Panama By International Monetary Fund
  77. When it Rains, it Pours: Multifactor Asset Management in Good and Bad Times By Marie Briere; Ariane Szafarz
  78. Escaping the middle income trap and getting economic growth: How does FDI can help the host country? By Nguyen-Huu, Thanh Tam; Pham, Ngoc-Sang
  79. The Impact of the Bank of Japan’s Exchange Traded Fund and Corporate Bond Purchases on Firms’ Capital Structure By Linh, Nguyen Thuy
  80. Russian Federation; 2020 Article IV Consultation-Press Release; Staff Report By International Monetary Fund
  81. Unpaired Kidney Exchange: Overcoming Double Coincidence of Wants without Money By Mohammad Akbarpour; Julien Combe; Yinghua He; Victor Hiller; Robert Shimer; Olivier Tercieux
  82. Does bank efficiency affect the bank lending channel in China? By Fungáčová, Zuzana; Kerola, Eeva; Weill, Laurent
  83. Goverment Debt Post COVID-19: Back To Golden Rules By Christian Breuer
  84. Black and White Differences in the Labor Market Recovery from COVID-19 By Fatih Karahan; Laura Pilossoph
  86. The asymmetry hypothesis between entrepreneurs and employees: standard or exception in the history of economic analysis? By Nicolas Piluso; Thomas Ruellou
  87. Guinea-Bissau; Request for Disbursement Under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Guinea-Bissau By International Monetary Fund
  90. Why Does Productivity Matter? By Le Van, Cuong; Pham, Ngoc-Sang
  91. The evolution of debtor-creditor relationships within a monetary union: Trade imbalances, excess reserves and economic policy By Claudius Graebner; Philipp Heimberger; Jakob Kapeller; Michael Landesmann; Bernhard Schuetz
  92. What goes around comes around: How large are spillbacks from US monetary policy? By Max Breitenlechner; Georgios Georgiadis; Ben Schumann
  93. Using the Theory of Planned Behavior to Explore Employees Intentions to Implement Green Practices By Bouarar, Ahmed Chemseddine; Mouloudj, kamel
  94. Property Rights and Economic Freedom By Germinal G. Van
  95. The Effects of Land Markets on Resource Allocation and Agricultural Productivity By Chaoran Chen; Diego Restuccia; Raul Santaeulalia-Llopis
  96. Gender Inclusive Intermediary Education, Financial Stability and Female Employment in the Industry in Sub-Saharan Africa By Simplice A. Asongu; Yann Nounamo; Henri Njangang; Sosson Tadadjeu
  97. Homeownership and portfolio choice over the generations By Paz-Pardo, Gonzalo
  98. The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data By ; ; Benjamin S. Kay
  99. Economic Uncertainty Before and During the COVID-19 Pandemic By Dave Altig; Scott Baker; Jose Maria Barrero; Nick Bloom; Phil Bunn; Scarlet Chen; Steven J. Davis; Brent Meyer; Emil Mihaylov; Paul Mizen; Nick Parker; Thomas Renault; Pawel Smietanka; Greg Thwaites
  100. A Division of Laborers: Identity and Efficiency in India By Guilhem Cassan; Daniel Keniston; Tatjana Kleineberg
  101. Short and long-run relations between capital netflows and the differential of american and brazilian interest rates By Alan M. M. Leal; Stefan D'Amato; Igor V. M. Viveiros
  102. Global Bitcoin Markets and Local Regulations By Park , Cyn-Young; Tian , Shu; Zhao , Bo
  103. Chain linking over December and methodological changes in the HICP: view from a central bank perspective By Dietrich, Andreas; Eiglsperger, Martin; Mehrhoff, Jens; Wieland, Elisabeth
  104. Researching the Research: A Central Banking Edition By Simona Malovana; Martin Hodula; Zuzana Rakovska
  106. Applications of Markov Chain Approximation Methods to Optimal Control Problems in Economics By ; Tom Phelan
  108. Gang rule: Understanding and Countering Criminal Governance By Christopher Blattman; Gustavo Duncan; Benjamin Lessing; Santiago Tobón
  109. Monetary Policy, Credit Risk, and Profitability: The Influence of Relationship Lending on Cooperative Banks' Performance By Bruno de Menna
  110. Evaluating financial and development additionality in blended finance operations By Ole Winckler Andersen; Henrik Hansen; John Rand
  111. "Paraísos fiscales", wealth taxation, and mobility By David R. Agrawal; Dirk Foremny; Clara Martínez-Toledano
  112. The Transitional Dynamic of Finance Led Growth By Weshah Razzak; E. M. Bentour
  113. The hidden side of Jan Tinbergen’s approach to economic policy (1934-1944) By Michaël Assous; Vincent Carret
  114. La qualité de la dépense publique dans les pays en développement : mesure et déterminants By Grégoire Rota-Graziosi; Emilie Caldeira; Alou Adessé Dama; Hélène Djoufelkit; Hélène Ehrhart

  1. By: Weshah Razzak
    Abstract: We provide a general equilibrium model with optimizing agents to compute the natural rate of interest for the G7 countries over the period 2000 to 2017. The model is solved for the equilibrium natural rate of interest, which is determined by a parsimonious equation that is easily computed from raw observable data. The model predicts that the natural rate depends positively on the consumption – leisure growth rates gap, and negatively on the capital – labor growth rates gap. Given our computed natural rate, the short-term nominal interest rates in the G7 have been higher than the natural rate since 2000, except for Germany and the U.S. during the period 2009-2017. In addition, the data do not support the prediction of the Wicksellian theory that prices tend to increase when the short-term nominal rate is lower than the natural rate. Projections of the natural rate over the period 2018 to 2024 are positive in Germany, Italy, Japan, and the U.K. and negative in Canada, France, and the U.S. The model predicts that fiscal expansion is an expensive policy to achieve a 2 percent inflation target when the Zero Lower Bound (ZLB) constraint is binding.
    Keywords: Natural rate of interest, Monetary policy
    JEL: C68 E43 E52
    Date: 2020–08–08
  2. By: Sewon Hur (Federal Reserve Bank of Dallas); César Sosa-Padilla (University of Notre Dame and NBER); Zeynep Yom (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: We study optimal bailout policies in the presence of banking and sovereign crises. First, we use European data to document that asset guarantees are the most prevalent way in which sovereigns intervene during banking crises. Then, we build a model of sovereign borrowing with limited commitment, where domestic banks hold government debt and also provide credit to the private sector. Shocks to bank capital can trigger banking crises, with government sometimes finding it optimal to extend guarantees over bank assets. This leads to a trade-off: Larger bailouts relax domestic financial frictions and increase output, but also imply increasing government fiscal needs and possible heightened default risk (i.e., they create a 'diabolic loop'). We find that the optimal bailouts exhibit clear properties. Other things equal, the fraction of banking losses that the bailouts would cover is: (i) decreasing in the level of government debt; (ii) increasing in aggregate productivity; and (iii) increasing in the severity of the banking crisis. Even though bailouts mitigate the adverse effects of banking crises, we find that the economy is ex ante better off without bailouts: the 'diabolic loop' they create is too costly.
    Keywords: Bailouts; Sovereign Defaults; Banking Crises; Conditional Transfers; Sovereign-bank diabolic loop
    JEL: E32 E62 F34 F41 G01 G15 H63
    Date: 2021–01
  3. By: Giacomo Rella
    Abstract: Did the transmission mechanism of monetary policy through housing and household debt change over time? I explore this question using a ten-variable time-varying parameter VAR model with stochastic volatility estimated on US data from 1960 to 2018. The model captures the joint dynamics of aggregate economy, housing sector, policy and household debt. Monetary policy shocks are identified with timing restrictions. I find evidence that the transmission mechanism of monetary policy through housing and household debt changed over time. The response of new housing starts and residential investment to monetary policy shocks has become slower and slightly larger. In contrast, the sensitivity of household debt to monetary policy shocks diminished since the late 1960s, except of the early 2000s when it increased. House prices stand as the most important variable for the transmission of monetary policy through housing in most recent decades. In the last part of the paper, I frame the aggregate evidence in the light of the institutional changes that have been affecting the US housing finance system since the 1970s.
    Keywords: time-varying parameter VAR, monetary policy, housing, household debt
    JEL: E44 E52 E58 G51 N1
    Date: 2021–02
  4. By: ; Alisdair McKay
    Abstract: The prevailing neo-Wicksellian view holds that the central bank's objective is to track the natural rate of interest (r*), which itself is largely exogenous to monetary policy. We challenge this view using a fixed-cost model of durable consumption demand, in which expansionary monetary policy prompts households to accelerate purchases of durable goods. This yields an intertemporal trade-off in aggregate demand as encouraging households to increase durable holdings today leaves fewer households acquiring durables going forward. Interest rates must be kept low to support demand going forward, so accommodative monetary policy today reduces r* in the future. We show that this mechanism is quantitatively important in explaining the persistently low level of real interest rates and r* after the Great Recession.
    Keywords: Monetary policy; Durable goods; Interest rates
    JEL: E21 E43 E52
    Date: 2021–02–16
  5. By: Yoon J. Jo (Texas A&M University, Department of Economics); Sarah Zubairy (Texas A&M University, Department of Economics)
    Abstract: This paper shows that the source of business cycle fluctuations matters for determining the size of government spending multipliers. We present a New Keynesian model with downward nominal wage rigidity (DNWR) and show that government spending is much more effective in stimulating output in a demand shock driven recession compared to a supply shock driven recession. Government spending multiplier is large when DNWR binds in a recession, but the nature of recession matters due to the opposing responses of inflation depending on the type of recession. In a demand-driven recession, inflation falls, preventing real wages from falling, leading to consequences for employment, while inflation rises in a supply-driven recession limiting the consequences of DNWR on employment. We document supporting empirical evidence, using both historical time series data and cross-sectional data from U.S. states, that the government spending multiplier for output is larger in a demand-driven recession compared to a supply-driven recession.
    Keywords: Government Spending Multipliers, Source of Fluctuation, Downward Nominal Wage Rigidity.
    JEL: E24 E32 E62
    Date: 2021–01–27
  6. By: Alessandro Bitetto (University of Pavia); Paola Cerchiello (University of Pavia); Charilaos Mertzanis (University of Pavia)
    Abstract: We use a fully data-driven approach and information provided by the IMF’s financial soundness indicators to measure the soundness of a country’s financial system around the world. Given the nature of the measurement problem, we apply principal component analysis (PCA) to deal with the presence of strong cross-sectional dependence in the data due to unobserved common factors. Using this comprehensive sample and various statistical methods, we produce a data-driven measure of financial soundness that provides policy makers and financial institutions with a tool that is easy to implement and update.
    Keywords: Financial soundness, Data-driven, Cross-country, Policy framework, Principal Component Analysis, Random Forest
    JEL: E32 E42 E61 E02 F02
    Date: 2021–02
  7. By: Adeela Rustam (Nanjing University of Aeronautics and Astronautics, China); Ying Wang (Nanjing University of Aeronautics and Astronautics, China)
    Abstract: This study analyses the effectiveness of monetary policy innovations in Pakistan by price and quantity based monetary anchors. We hypothesize that state bank of Pakistan (SBP) cannot evaluate the unanticipated variations in inflation and output in the same year by applying a recursive limitation on structural vector autoregressive disturbances. The monetary policy is found partial in the short-term and rejects the impartiality condition. Whereas the monetary policy execution on price based tools has a robust effect on inflation and output level by rapid improvement. While transformation by quantity based policy, anchors has a mixed impact on economic activity. The effectiveness of policy innovations inclines more towards price anchors rather than quantity. The restricted SVAR suggest that the choice of policy and non-policy variables are essential for monetary policy operations. SBP policy transformation still has the potential to control economic fluctuations. Hence, we put forward the policy that SBP needs to concentrate on price based instruments for effective implementation and assessment of monetary policy.
    Keywords: Monetary Policy Effectiveness South Asia Economic Activity SVAR Pakistan
    JEL: E51 E52 E62 E44
    Date: 2019–06
  8. By: Richard Davies
    Abstract: This paper presents a new dataset of 41 million UK consumer prices, providing facts on the frequency, size and timing of price changes between 1988 and 2020. The micro data are the 'price quotes' of individual consumer products that make up the official Consumer Prices Index (CPI) for the UK. Prices are recorded between January 1988 and December 2020 and cover a wide-ranging selection of items including food and drink, homewares, furniture and appliances, motoring supplies and fuels as well as a range of services. The extended time coverage allows a comparison of historic shocks, including the ERM crisis, 2008 financial crash and 2016 EU referendum, with the Coronavirus pandemic. The long-run facts fit closely with the pattern of nominal rigidities seen in other countries. Overall, state-dependent rather than time-dependent pricing models are consistent with UK firm behaviour, and the data show strong support for the notion that prices are 'volatile while anchored' as in the more recent menu cost models. The facts show the extraordinary experience of 2020, which was the most volatile year, in terms of pricing, since at least 1991.
    Keywords: EU referendum, covid-19, consumer prices, inflation
    JEL: E12 E31 E32 E51 E52 E58
    Date: 2021–02
  9. By: Francesco D'Acunto (Boston College - Carroll School of Management); Daniel Hoang (Karlsruhe Institute of Technology - Department for Finance and Banking); Maritta Paloviita (Bank of Finland); Michael Weber (University of Chicago - Booth School of Business; NBER)
    Abstract: Communication targeting households and ï¬ rms has become a stand-alone policy tool of many central banks. But which forms of communication, if any, can reach ordinary people and manage their economic expectations effectively? In a large-scale randomized control trial, we show that communication manages expectations when it focuses on policy targets and objectives rather than on the instruments designed to reach such objectives. It is especially the least sophisticated demographic groups, which central banks typically struggle to reach, who react more to target-based communication. When exposed to target-based communication, these groups are also more likely to believe that policies will beneï¬ t households and the economy. Target-based communication enhances policy effectiveness and contributes to strengthen the public’s trust in central banks, which is crucial to guarantee the credibility of their policies.
    Keywords: Behavioral macroeconomics, heterogeneous beliefs, limited cognition, expectations formation, household finance
    JEL: D12 D84 D91 E21 E31 E32 E52 E65
    Date: 2020
  10. By: Henri Keränen; Sakari Lähdemäki
    Abstract: We identify structural vector autoregressions with external instruments (SVAR-IV) to study the dynamic effects of fiscal policy. Our main contribution is a novel instrument for aggregate output shocks of a small open economy. Unexpected shocks in domestic output are proxied by forecast errors of professional forecasters in trading partner economies. Our instrument relies on two key assumptions. Firstly, unexpected changes in trading partners are correlated with unexpected shocks of an open economy (relevance). Secondly, unexpected fiscal shocks of a small economy are unrelated with the forecast errors of its trading partners (exogeneity). Test results show that this instrument is relevant. We find suggestive evidence that our instrument is more credibly exogenous than the prevailing TFP instrument. We apply our instrument to estimating fiscal SVAR models of two countries, Canada and Finland, and find that estimates of the spending multiplier are sensitive to conventional identification assumptions.
    Keywords: Fiscal policy, Fiscal multiplier, SVAR-IV, Small open economy
    JEL: E62 C26 C32
    Date: 2020–12–18
  11. By: Alexander W. Bartik (University of Illinois Urbana-Champaign - Department of Economics); Marianne Bertrand (University of Chicago - Booth School of Business); Feng Lin (University of Chicago - Booth School of Business); Jesse Rothstein (University of California, Berkeley - Goldman School of Public Policy and Department of Economics); Matt Unrath (University of California, Berkeley - Goldman School of Public Policy)
    Abstract: We use traditional and non-traditional data to measure the collapse and partial recovery of the U.S. labor market from March to early July, contrast this downturn to previous recessions, and provide preliminary evidence on the effects of the policy response. For hourly workers at both small and large businesses, nearly all of the decline in employment occurred between March 14 and 28. It was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job losses in small businesses reflected firms that closed entirely, though many subsequently reopened. Firms that were already unhealthy were more likely to close and less likely to reopen, and disadvantaged workers were more likely to be laid off and less likely to return. Most laid off workers expected to be recalled, and this was predictive of rehiring. Shelter-in-place orders drove only a small share of job losses. Last, states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries. We find no evidence that high UI replacement rates drove job losses or slowed rehiring.
    JEL: E24 E32 J2 J63
    Date: 2020
  12. By: Ken-ichi Hashimoto (Graduate School of Economics, Kobe University); Ryonghun Im (Institute of Economic Research, Kyoto University); Takuma Kunieda (School of Economics, Kwansei Gakuin University); Akihisa Shibata (Institute of Economic Research, Kyoto University)
    Abstract: This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a flip bifurcation occurs at a certain level of financial frictions under an empirically plausible elasticity of substitution between capital and labor. Furthermore, the amplitude of fluctuations increases as financial frictions are mitigated and is maximized when the financial market approaches perfection. These outcomes imply that financial innovations are likely to destabilize an economy.
    Keywords: Financial innovations, endogenous business cycles, financial destabilization, heterogeneous agents.
    JEL: E13 E32 E44
    Date: 2021–02
  13. By: Arindrajit Dube
    Abstract: The expiration of the temporary $600 boost to weekly UI benefits under the Federal Pandemic Unemployment Compensation (FPUC) led to a sharp, unprecedented, 98 percentage point reduction (on average) in the replacement rate during a time when employment was recovering during the Covid recession. Leveraging the considerable variation in this drop across states, I use a difference-in-differences event study design to estimate the macro employment effects. I find little impact of job gains from the benefit reduction, especially when I focus on groups (non-college graduates, and those from non-high-income households) that comprise of most UI recipients. The estimates rule out job gains implied by much of the micro UI duration elasticities from the existing literature.
    JEL: E24 E62 E65
    Date: 2021–02
  14. By: Becard, Yvan (PUC-Rio); Gauthier, David (Bank of England)
    Abstract: Credit spreads on household and business loans move in lockstep and spike in every recession. We propose a theory as to why banks tighten their lending standards following a drop in market sentiment. The key feature is a procyclical shadow banking sector that shifts risk from traditional banks to investors through securitisation. We fit the model to euro‑area data and find that market sentiment shocks are the main driver of business and financial cycles over the past two decades.
    Keywords: Credit spreads; shadow banks; business cycles; financial shocks
    JEL: E32 E44 G21 G23
    Date: 2021–02–12
  15. By: Jan Priewe
    Abstract: Upholding the EU fiscal rules at the elevated public debt level due to the Corona crisis would trigger a phase of long-standing austerity in the euro area. In this study, major proposals for reforms are reviewed, with a critical focus on the expenditure rule, which is central in many think-tanks’ and academic researchers’ advice. A different reform based on a fiscal analogue to the well-known Taylor-rule for monetary policy is designed here. It is argued that under a low-interest environment growth rates exceed interest rates, a fact not compatible with the present ruleset and with far-reaching consequences. This requires redefining debt sustainability. The proposal chooses as the operational variable for fiscal policy primary balances rather than structural balances. The anchor for fiscal stability, until know the 60% cap on public debt, should be replaced by a cap on the interest payments on public debt at roughly 3% of GDP. This allows higher fiscal space for investment and innovations. The fact that the interest rate burden of all Member States in the euro area stands at the lowest level ever experienced, although the debt level is at an all-time high, clarifies that the focus on the debt ratio is misleading. Change could be possible in the secondary law of the EU without change of the Treaties.
    Keywords: Fiscal rules, public debt, deficit bias, austerity, fiscal policy
    JEL: E43 E62 H62 H63
    Date: 2021
  16. By: Jay C. Shambaugh; Michael R. Strain
    Abstract: Prior to 2020, the Great Recession was the most important macroeconomic shock to the United States economy in generations. Millions lost jobs and homes. At its peak, one in ten workers who wanted a job could not find one. On an annual basis, the economy contracted by more than it had since the Great Depression. A slow and steady recovery followed the Great Recession's official end in the summer of 2009, but because it was slow and the depth of the recession so deep, it took years to reduce slack in labor markets. But because the slow-and-steady recovery lasted so long, many pre-recession peaks were exceeded, and eventually real wage growth began to accumulate for workers across the distribution. In fact, the business cycle (including recession and recovery) beginning in December 2007 was one of the better periods of real wage growth in many decades, with the bulk of that coming in the last years of the recovery. We place the Great Recession in historical context and trace the path of the recovery, studying its different phases and how different groups of workers were impacted in each phase. We also discuss the response of fiscal and monetary policy to the Great Recession, and draw lessons for the future.
    JEL: E24 E3 E6 J3
    Date: 2021–02
  17. By: Khan, Fahad (Asian Development Bank); Ramayandi, Arief (Asian Development Bank); Schröder, Marcel (Lebanese American University)
    Abstract: This paper aims at identifying effective macroprudential policy (MPP) interventions and analysing the macroeconomic conditions that promote them. We define effective MPP interventions as those that stabilize its underlying target variable, such as credit growth, house price growth, etc. For our analysis, we construct a new database that documents the use of a large number of MPP instruments for 61 advanced and emerging market economies from 2000 to 2016. The new feature of the database is that it maps every recorded MPP intervention in these economies and over this period to stabilize a specific target variable category for banking, health, domestic loans, the exchange rate, foreign capital movements, and house prices. Using this dataset, we introduce a practical way for defining the macroprudential policy effectiveness. We find that MPP interventions are more likely to be effective when several prudential measures are taken together, but at the same time avoid the diminishing returns of repeated MPP tightening. Monetary tightening seems to override the effectiveness of MPP instruments. The output gap, credit cycle, external debt, current account, and global risk appetite also count for the likelihood of MPP successes. The paper provides a guideline for the effective conduct of MPPs.
    Keywords: effectiveness; financial stability; macroprudential policy; probabilistic analysis
    JEL: E32 E58 G15 G28
    Date: 2020–02–25
  18. By: Lorant Kaszab (Magyar Nemzeti Bank (Central Bank of Hungary)); Mark Antal (European Central Bank)
    Abstract: For a panel of six Central and Eastern European countries outside the eurozone (Bulgaria, Croatia, Czechia, Hungary, Poland and Romania) we estimate the spillover effects of the European Central Bank's Expanded Asset Purchase Program (APP) on exchange rates, equity prices, government bond yields of various maturities, and CDS spreads. We find that the most pronounced spillovers induced sovereign bond yields to drop by around 1-6 basis points in a two-day time window in response to the Public Sector Purchase Program (PSPP) announcements.
    Keywords: ordinary least squares estimation, panel data, unconventional monetary policy
    JEL: E51 E32 E44 F45 F47
    Date: 2021
  19. By: Oguzhan Cepni; Selcuk Gul; Muhammed Hasan Yilmaz; Brian Lucey
    Abstract: This paper investigates the impact of oil price shocks on Turkish sovereign yield curve factors. The recent oil shock identification scheme of Ready (2018) is modified by using geopolitical oil price risk index in order to capture the changes in the risk perceptions of oil markets driven by geopolitical tensions such as terrorism, conflicts and sanctions. The modified identification scheme attributes more power to demand shocks in explaining the variation of the oil price. Furthermore, our findings demonstrate that the various oil price shocks influence the yield curve factors quite differently. A supply shock leads to a statistically significant increase in the level factor. This result shows that elevated oil prices due to supply disruptions are interpreted as a signal of surge in inflation expectations since the cost channel prevails. Moreover, unanticipated demand shocks have a positive impact on the slope factor as a result of the central bank policy response for offsetting the elevated inflation expectations. Overall, our results provide new insights to understand the driven forces of yield curve movements that are induced by various oil shocks in order to formulate appropriate policy responses.
    Keywords: Emerging markets, Local projections, Oil price, Supply and demand shocks, Yield curve factors, Geopolitical oil price risks
    JEL: E43 E44 G12 G15 Q43
    Date: 2021
  20. By: Jamil Sayeed
    Abstract: This paper seeks to identify the largest two shocks that can explain the movement in Canadian GDP for the period 1981Q1 to 2011Q4. I employ a very flexible identification method proposed by Uhlig (2003) that allows us to identify the key shocks from the time series data without imposing any strict identification assumption. The largest two shocks are extracted by maximizing the forecast error variance of GDP for a ten years horizon. Two shocks are sufficient to explain most of the variation in the GDP in Canada. My findings suggest that TFP news shock is the key driver of GDP in the medium run and it creates significant positive co-movements among the aggregate variables at business cycle frequencies. Demand shock dominates in the short run, however, its hard to pin down the exact source of the shock. The findings are robust to alternative SVAR identification strategy and variable specification.
    Keywords: Macroeconomic Shocks, TFP News Shock, Canadian GDP, Forecast Error Variance
    JEL: E32 O32 C32 E63 E20
    Date: 2020–11–11
  21. By: Anvar Kobilov (Department of “Economics and Service†, Faculty of Social Sciences, Kashkadarya region, Karshi sity, Kuchabag street, 17, Karshi State University, Uzbekistan); Oybek Kurbanov (Department of “Economics and Service†, Faculty of Social Sciences, Kashkadarya region, Karshi sity, Kuchabag street, 17, Karshi State University, Uzbekistan)
    Abstract: This paper investigates the determinants of Foreign direct investment (FDI) in selected 78 countries. The paper uses the data sets from 2000 to 2018, according to World Bank Statistics. The chosen empirical model is based on FDI theories and previous empirical studies on this subject. Due to availability of data, selected counties are divided into 4 groups (advanced economies, developing countries, transition economies and low income counties). The results indicate trade openness is significant factor for FDI inflows in selected countries.
    Keywords: Foreign direct investment, grows rate of per capita GDP, age dependency ratio, gross domestic savings, trade openness, inflation, real interest rate.
    JEL: E22 E44
    Date: 2020–09
  22. By: Jean-Paul L'Huillier; Sanjay R. Singh; Donghoon Yoo (Department of Economics, University of California Davis)
    Abstract: Diagnostic expectations have emerged as an important departure from rational expectations in macroeconomics and finance. We present a first treatment of diagnostic expectations in linear macroeconomic models. To this end, we establish a strong additivity property for diagnostic expectations. The solution method and stability properties are discussed in full generality. Under some conditions, diagnostic expectations generate higher volatility than rational expectations. We show that this is true in standard New Keynesian models, as in medium-scale DSGE models; in real business cycle models output and investment are characterized by dampening, instead. Finally, we discuss how the combination of diagnosticity with imperfect information can rationalize under- and over-reaction in macroeconomics.
    Keywords: diagnostic expectations, macroeconomics, volatility, linear rational expectations, overshooting
    JEL: E12 E32 E71
    Date: 2021–02–09
  23. By: Max Fuchs (University of Kassel); Jochen Michaelis (University of Kassel)
    Abstract: In recent years, cryptocurrencies such as Bitcoin have emerged, in upcoming years, corporate currencies such as Libra (Diem) and central bank digital currencies will emerge even in low-inflation developed economies. Using the dual currency search model of Kiyotaki and Wright (1993), we show how the introduction of a supplement to traditional money affects average utility. The room for a welfare improvement depends on differences in returns and costs, but, in particular, on the fraction of cash traders who will be replaced by digital money traders.
    Keywords: digital money, dual currency regime, welfare comparison
    JEL: E41 E42 E51
    Date: 2021
  24. By: Coibion, Olivier (University of Texas at Austin); Gorodnichenko, Yuriy (University of California, Berkeley); Weber, Michael (World Bank)
    Abstract: Rising government debt levels around the world are raising the specter that authorities might seek to inflate away the debt. In theoretical settings where fiscal policy "dominates" monetary policy, higher debt without offsetting changes in primary surpluses should lead households to anticipate this higher inflation. Are household inflation expectations sensitive to fiscal considerations in practice? We field a large randomized control trial on U.S. households to address this question by providing randomly chosen subsets of households with information treatments about the fiscal outlook and then observing how they revise their expectations about future inflation as well as taxes and government spending. We find that information about the current debt or deficit levels has little impact on inflation expectations but that news about future debt leads them to anticipate higher inflation, both in the short run and long run. News about rising debt also induces households to anticipate rising spending and a higher rate of interest for government debt.
    Keywords: expectations management, inflation expectations, surveys
    JEL: E31 C83 D84
    Date: 2021–02
  25. By: Soumya Kanti Ghosh (State Bank of India, Mumbai (India)); Hiranya K. Nath (Department of Economics and International Business, Sam Houston State University)
    Abstract: This paper uses annual data from 1960 to 2016 to examine the determinants of private and household saving behavior in India. The results indicate that per capita real income and access to banks are significant determinants with favorable impacts on private as well as household saving rates in short as well as long run. Further, as inflation accelerates, the uncertainty about the future value of their accumulated savings and expected real rate of return discourage households and other private agents from saving. A desire to maintain a certain level of real expenditures also contributes to this decrease in saving rate. An increase in dependent population reduces private and household saving rates in the short run while it increases the private saving rate in the long run. The results further indicate that a rise in the real interest rate increases household saving rate in the short run but reduces both private and household saving in the long run. It does not seem to have any significant impact on total private saving in the short run. Additionally, increased corporate saving tends to reduce household saving in both time horizons. Further, both private and household saving rates have declined significantly after the global financial crisis. Finally, any deviation from the long run equilibrium for saving rates dissipates rather quickly. Overall, these results seem to suggest that policies intended to increase per capita income, lower inflation, and increase accessibility to banking will go a long way in increasing private and household saving in India.
    Keywords: Private saving rate, household saving rate, Autoregressive Distributed Lag (ARDL), Bounds test, India
    JEL: E21 E43
    Date: 2021–01
  26. By: Hande Kucuk Yesil; Pinar Ozlu; Caglar Yunculer
    Abstract: We examine the empirical link between loans and economic activity in Turkey with a focus on the components of loans by borrower (household/business) and by purpose of use (housing/personal) as well as currency of denomination (domestic/foreign). We estimate a separate VAR model for each type of loan and each GDP expenditure item to analyse whether different types of loans have different effects on economic activity and through what channels. According to our empirical results, credit shocks have statistically significant impact on economic activity, especially within the first two quarters. We find that shocks that expand household and TL-denominated business loans by the same rate have quite similar effects on private consumption, final domestic demand and GDP while household loans has a much smaller impact on investment compared to business loans. While shocks to FX-denominated business loans have significant effect on total investment, they have much weaker effect on private consumption and GDP. The effect of housing loans on investment is found to be comparable to that of business loans, suggesting strong feedback between demand for housing and construction investment. We also investigate the robustness of findings to alternative data samples, as well as some alternative identifying restrictions.
    Keywords: Household credit, Business credit, GDP growth, Credit shocks
    JEL: E44 E32 C32
    Date: 2021
  27. By: Chiara Criscuolo; Alexander Hijzen; Michael Koelle; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Alfred Garloff; Katharzyna Grabska; Ryo Kambayashi; Valerie Lankester; Balazs Stadler; Oskar Nordström Skans; Satu Nurmi; Balazs Murakozy; Richard Upward; Wouter Zwysen
    Abstract: Differences in average wages across firms – which account for around one-half of overall wage inequality – are mainly explained by differences in firm wage premia (the part of wages that depends exclusively on characteristics of firms) rather than workforce composition. Using a new cross-country dataset of linked employer-employee data, this paper investigates the role of cross-firm dispersion in productivity in explaining dispersion in firm wage premia, as well as the factors shaping the link between productivity and wages at the firm level. The results suggest that around 15% of cross-firm differences in productivity are passed on to differences in firm wage premia. The degree of pass-through is systematically larger in countries and industries with more limited job mobility, where low-productivity firms can afford to pay lower wage premia relative to high-productivity ones without a substantial fraction of workers quitting their jobs. Stronger product market competition raises pass-through while more centralised bargaining and higher minimum wages constrain firm-level wage setting at any given level of productivity dispersion. From a policy perspective, the results suggest that the key priority should be to promote job mobility, which would reduce wage differences between firms while easing the efficient reallocation of workers across them.
    Keywords: labour mobility, linked employer-employee data, productivity dispersion, Wage inequality
    JEL: E02 E25 E63 J31 J61
    Date: 2021–02–22
  28. By: Mario Forni; Luca Gambetti; marco Lippi; Luca Sala
    Abstract: Small scale VAR models are subject to two major issues: first, the information set might be too narrow; second, many macroeconomic variables are measured with error. The two features produce distorted estimates of the impulse response functions. We propose a new procedure, called Common Components Structural VARs (CC-SVAR), which solves both problems. It consists in (a) treating the variables, prior to estimation, in order to extract their common components; this eliminates measurement errors; (b) estimating a VAR with m > q common components, that is a singular VAR, where q is the number of shocks driving the economy; this solves the fundamentalness problem. SVARs and CC-SVARs are compared in the empirical analysis of monetary policy and technology shocks. The results obtained by SVARs are not robust, in that they strongly depend on the choice and the treatment of the variables considered. On the contrary, using CCSVARs (i) contractionary monetary shocks produce a decrease of prices independently of the variables included in the model, (ii) irrespective of whether hours worked enter the model in log-levels or growth rates, technology improvements produce an increase in hours worked.
    Keywords: Structural VAR models, structural factor models, nonfundamentalness, measurement errors
    JEL: C32 E32
    Date: 2020–12
  29. By: Tumisang Loate (Department of Economics, University of Pretoria); Nicola Viegi (SARB Chair in Monetary Economics, Department of Economics, University of Pretoria)
    Abstract: We study the credit channel of monetary policy in South Africa between 2002 and 2019 using banks' balance sheets. We show that there is a significant heterogeneity within the banking sector in both the loan and deposit sides of the banks' balance sheets. In response to a contractionary monetary policy shock, big banks adjust their loan portfolio by lending to businesses and reducing lending to households whereas for small banks we find the opposite. The increase in corporate lending amid declining inventories is consistent with the hypothesis of ``hedging and safeguarding the capital adequacy ratio" rather than funding business inventories. This paper highlights the importance of heterogeneity in customers, market power and business models in the banking sector, which characterises the socio-demographics dynamics in South Africa.
    Keywords: Credit channel, banks balance sheets, monetary policy
    JEL: E32 E52 G21
    Date: 2021–01
  30. By: Mario Forni; Luca Gambetti; Luca Sala
    Abstract: We estimate macroeconomic uncertainty and the effects of uncertainty shocks by means of a new procedure based on standard VARs. Under suitable assumptions, our procedure is equivalent to using the square of the VAR forecast error as an external instrument in a proxy SVAR. We add orthogonality constraints to the standard proxy SVAR identification scheme. We also derive a VAR-based measure of uncertainty. We apply our method to a US data set; we find that uncertainty is mainly exogenous and is responsible of a large fraction of business-cycle fluctuations.
    Keywords: Uncertainty shocks, OLS estimation, Stochastic volatility
    JEL: C32 E32
    Date: 2020–12
  31. By: Abdullah Kazdal; Muhammed Hasan Yilmaz
    Abstract: This study investigates the differentiation of exchange rate-inflation nexus in emerging markets (EM) in the context of external vulnerabilities for the period 2010-2018. In the empirical setting, EM countries are classified into two subgroups as “more vulnerable” and “less vulnerable” according to vulnerability indicators to identify how exchange rate pass-through (ERPT) dynamics change when the vulnerability is amplified by utilizing the interacted panel vector autoregression (IPVAR) model. Empirical results show that more resilient EM countries are experiencing a lower degree of ERPT during the sample period. Countries facing more prominent dollarization and current account deficit are subject to stronger ERPT, while higher inflation, higher risk premium and higher FX debt levels are associated with increasing ERPT as well. On the other hand, countries with higher reserve adequacy or higher foreign direct investment show lower ERPT compared to lower EM groups.
    Keywords: Exchange rate pass-through, External vulnerabilities, Interacted panel VAR model
    JEL: C23 E31 F31
    Date: 2021
  32. By: Davide Debortoli; Mario Forni; Luca Gambetti; Luca Sala
    Abstract: Monetary policy easing and tightening have asymmetric effects: a policy easing has large effects on prices but small effects on real activity variables. The opposite is found for a policy tightening: large real effects but small effects on prices. Non-linearities are estimated using a new and simple procedure based on linear Structural Vector Autoregressions with exogenous variables (SVARX). We rationalize the results through the lenses of a simple model with downward nominal wage rigidities.
    Keywords: monetary policy shocks, non-linear effects, structural VAR models
    JEL: C32 E32
    Date: 2020–12
  33. By: Yunmin Chen; YiLi Chien; Yi Wen; C. C. Yang
    Abstract: We adopt an analytically tractable Aiyagari-type model to study the distinctive roles of unconditional lump-sum transfers and public debt in reducing consumption inequality due to uninsurable income risk. We show that in the absence of wealth inequality, using lump-sum transfers is not an optimal policy for reducing consumption inequality---because the Ramsey planner opts to rely solely on public debt to mitigate income risk without the need for lump-sum transfers. This result is surprising in light of the popularity of universal basic income advocated by many politicians and scholars.
    Keywords: Lump-sum Transfers; Universal Basic Income; Ramsey Problem; Public Liquidity; Incomplete Markets; Heterogeneous-Agents
    JEL: C61 E22 E62 H21 H30
    Date: 2021–02–09
  34. By: Tóth, Máté
    Abstract: This paper builds an unobserved components model that combines a multivariate filter approach with a Cobb-Douglas production function. This combination allows potential output estimates to incorporate more economic structure than the traditional production function approach, while retaining the ability to conduct growth accounting exercises. The model is a backward-looking state space model estimated with Bayesian methods employing the Kalman filter to jointly decompose six key observable variables (real GDP, unemployment rate, labour force participation rate, hours worked per person, a measure of core inflation and wage inflation) into trend and cyclical components. To do so, it relies on several reduced form relationships across the cyclical components, such as a wage and a price Phillips curve and an Okun's law type relationship, while it also assumes common trends for a few variables and allows for hysteresis effects. The model is estimated on aggregate euro area data with Bayesian methods. The paper finds that the resulting output gap estimates have good revision properties and reasonable forecasting performance in particular in terms of GDP and core inflation vis-a-vis a set of benchmarks. JEL Classification: C32, D24, E32, E37
    Keywords: Bayesian estimation, production function, state-space model
    Date: 2021–02
  35. By: Jost, Thomas; Seitz, Franz
    Abstract: The so-called Troika, consisting of the EU-Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), was supposed to support the member states of the euro area which had been hit hard by a sovereign debt crisis. For that purpose, economic adjustment programs were drafted and monitored in order to prevent the break-up of the euro area and sovereign defaults. The cooperation of these institutions, which was born out of necessity, has been partly successful, but has also created persistent problems. With the further increase of public debt, especially in France and Italy, the danger of a renewed crisis in the euro area was growing. The European Stability Mechanism (ESM) together with the (strongly politicized) European Commission will replace the Troika in the future, following decisions of the EU Summit of December 2018. It shall play the role of a European Monetary Fund in the event of a crisis. The IMF, on the other side, will no longer play an active role in solving sovereign debt crises in the euro area. The current course is, however, inadequate to tackle the core problems of the euro zone and to avoid future crises, which are mainly structural in nature and due to escalating public debt and lack of international competitiveness of some member countries. The current Corona crisis will aggravate the institutional problems. It has led to a common European fiscal response ("Next Generation EU"). This rescue and recovery program will not be financed by ESM resources and will not be monitored by the ESM. One important novelty of this package is that it involves the issuance of substantial common European debt.
    Keywords: euro area,European Monetary Fund,International Monetary Fund,euro crisis,European Stability Mechanism
    JEL: E61 F02 F33 F55
    Date: 2021
  36. By: International Monetary Fund
    Abstract: The Nigerian economy is at a critical juncture. A weak pre-crisis economy characterized by falling per capita income, double-digit inflation, significant governance vulnerabilities and limited buffers, is grappling with multiple shocks from the COVID-19 pandemic. Real output is projected to contract by 3.2 percent in 2020, with a weak recovery likely to keep per capita income stagnant and no higher than the 2010 level in the medium term. Policy adjustment and reforms are urgently needed to navigate this crisis and change the long-running lackluster course.
    Date: 2021–02–08
  37. By: Zuzana Rakovska; Dominika Ehrenbergerova; Martin Hodula
    Abstract: We examine whether household sentiment can explain fluctuations in newly issued consumer loans. We construct a novel measure of household sentiment using detailed data from the harmonized consumer surveys conducted in European countries. We differentiate between rational sentiment, which mimics dynamics in macroeconomic fundamentals, and irrational sentiment, which proxies households' optimism/pessimism on top of their rationally sourced beliefs. We show that shocks to the sentiment of households do have a measurable impact on growth of consumer loans. Specifically, we assert a significantly positive role of irrational sentiment on top of the economic fundamentals identified in the literature. Moreover, a closer examination reveals that the studied relationship is not symmetric over the business cycle - the effect of irrational sentiment is present only in periods in which a country's output is well above its potential.
    Keywords: Consumer loans, consumer survey, expectations, optimism, sentiment
    JEL: D12 D84 E51 G41 G51
    Date: 2020–12
  38. By: Jasova, Martina; Mendicino, Caterina; Supera, Dominik
    Abstract: We show that a reduction in lender of last resort (LOLR) policy uncertainty positively affects bank lending and propagates to investment and employment. We exploit a unique policy that reduced uncertainty regarding the availability of future LOLR funding for banks as a quasi-natural experiment. Using micro-level data on banks, firms and loans in Portugal, we generate cross-sectional variation in banks’ exposure to uncertainty and find that the size of the haircut subsidy - the gap between private market and central bank security valuations - plays a key role in the propagation of the shock to lending and the real economy. JEL Classification: E44, E52, E58, G21, G32
    Keywords: bank credit, central bank liquidity, firm-level employment and investment, haircut subsidy, policy uncertainty
    Date: 2021–02
  39. By: Brunetti, Aymo; Foellmi, Reto
    Abstract: The extraordinary monetary policy of the past decade has caused a major political problem for the Swiss National Bank (SNB). To avoid an excessive appreciation of the Swiss Franc, it has increased its foreign currency holdings more than tenfold in a very short time. This has increased its assets so massively that they are increasingly becoming the object of political desire; the recent flood of parliamentary motions is proof of this. Although this is purely a side effect of operations motivated by monetary policy, this gigantic fortune and their revenues are increasingly the focus of public attention. The paper analyses the build-up of the SNB's assets and places the political demands in this context. With the help of a stylised balance sheet of the SNB, we analyse the various ways of dealing with the assets and their earnings. From this, we derive three main recommendations on how the SNB could deal with this challenge relating both to contents and communication. First, profits should be distributed without earmarking to prevent a zero-price-illusion in the political arena. Second, an increase in profit distributions must follow clear rules. And finally, the investment policy of the SNB needs a more coherent justification. Die aussergewöhnliche Geldpolitik des vergangenen Jahrzehnts hat der SNB ein grösseres politisches Problem eingebrockt. Im Bemühen, den Schweizer Franken vor schädlichen Aufwertungsschüben zu bewahren, hat sie ihre Devisenbestände in kürzester Zeit mehr als verzehnfacht. Das hat ihr Vermögen derart massiv erhöht, dass es in zunehmendem Masse zum Objekt politischer Begierden wird; die jüngste Flut parlamentarischer Vorstösse belegt dies. Obwohl es sich dabei um einen reinen Nebeneffekt geldpolitisch motivierter Operationen handelt, steht dieses gigantische Vermögen zunehmend im Zentrum der öffentlichen Aufmerksamkeit. Das Papier analysiert den Aufbau des SNB-Vermögens und ordnet die politischen Forderungen in diesem Zusammenhang ein. Mithilfe einer stilisierten Bilanz der SNB analysieren wir die verschiedenen Möglichkeiten, das Vermögen und seine Erträge zu behandeln. Daraus leiten wir Empfehlungen ab, wie die SNB materiell und kommunikativ mit dieser Herausforderung umgehen könnte.
    Keywords: Monetary policy, SNB, foreign currency reserves
    JEL: E52 E58 F31
    Date: 2021–01
  40. By: Martín Almuzara (Federal Reserve Bank of New York); Gabriele Fiorentini (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Enrique Sentana (CEMFI and CEPR)
    Abstract: We analyze a model for N different measurements of a persistent latent time series when measurement errors are mean-reverting, which implies a common trend among measure-ments. We study the consequences of overdifferencing, finding potentially large biases in maximum likelihood estimators of the dynamics parameters and reductions in the preci-sion of smoothed estimates of the latent variable, especially for multiperiod objects such as quinquennial growth rates. We also develop an R 2 measure of common trend observability that determines the severity of misspecification. Finally, we apply our framework to US quarterly data on GDP and GDI, obtaining an improved aggregate output measure.
    Keywords: Cointegration, GDP, GDI, Overdifferencing, Signal Extraction
    JEL: C32 E01
    Date: 2021–02
  41. By: Alessandra Cepparulo; Giuseppe Eusepi; Luisa Giuriato
    Abstract: We analyse the Public Private Partnerships (PPPs) in order to account for their uneven distribution among the European Union countries and to identify the motivations of the public actor in selecting PPPs. We focus on the fiscal incentives to overcome budget and borrowing constraints, taking into account the political features and institutional frameworks of the countries. Using IMF data over the years 1990-2015, we confirm that the state of public finances impacts on the government’s choice of PPPs: more financially constrained governments find the PPP option attractive, while high-debt countries reduce the private investors’ interest in PPP. Fiscal rules increased the PPP bias in the pre-crisis period due to the possibility of off-balance accounting, while the post-crisis reform of the Stability and Growth Pact and the increased supranational and domestic surveillance seem to better discipline PPP employment. PPPs are, also, confirmed to be under the influence of political competition and government’s preferences for current expenditures.
    Keywords: Public Private Partnerships, Fiscal illusion, Budget constraints Fiscal rules
    JEL: C23 H54 L32 E62
    Date: 2021–02
  42. By: Mehmet Balcilar (Eastern Mediterranean University, Famagusta, via Mersin 10, Northern Cyprus, Turkey); David Gabauer (Data Analysis Systems, Software Competence Center Hagenberg, Austria); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield, 0028, South Africa); Christian Pierdzioch (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany)
    Abstract: Utilizing a machine-learning technique known as random forests, we study whether regional output growth uncertainty helps to improve the accuracy of forecasts of regional output growth for twelve regions of the United Kingdom using monthly data for the period from 1970 to 2020. We use a stochastic-volatility model to measure regional output growth uncertainty. We document the importance of interregional stochastic volatility spillovers and the direction of the transmission mechanism. Given this, our empirical results shed light on the contribution to forecast performance of own uncertainty associated with a particular region, output growth uncertainty of other regions, and output growth uncertainty as measured for London as well. We find that output growth uncertainty significantly improves forecast performance in several cases, where we also document cross-regional heterogeneity in this regard.
    Keywords: Regional Output Growth, Uncertainty, United Kingdom, Forecasting, Machine Learning
    JEL: C22 C53 D8 E32 E37 R11
    Date: 2021–02
  43. By: Pacifique Murhula (Université évangélique en Afrique)
    Abstract: In diesem Beitrag schätzen wir ein strukturelles autoregressives Modell (SVAR), um den Trend der zugrunde liegenden Inflation in der Demokratischen Republik Kongo zu analysieren, und folgen dem Identifikationsansatz von Blanchard und Quah (1989), um langfristige Restriktionen auf der Grundlage der Wirtschaftstheorie aufzuerlegen. Tatsächlich wird die Inflation im Lichte der Lehren der Monetaristen als ein rein monetäres Phänomen wahrgenommen, und die Neuausrichtung der Geldpolitik auf das Ziel der Preisstabilität entspringt der fast einhelligen Ansicht von Ökonomen und Zentralbankern, dass die Geldpolitik die Aktivität langfristig nicht beeinflusst. Daher haben mehrere Zentralbanken Preisstabilität als oberstes Ziel ihrer Geldpolitik festgelegt. Diese wichtige Rolle können die Zentralbanken jedoch nicht in vollem Umfang wahrnehmen, ohne die Kerninflation zu kontrollieren, da nur diese auf monetäre Faktoren zurückzuführen ist. Zu diesem Zweck verwenden wir kongolesische Daten zur Wachstumsrate der Aktivität und der Inflationsrate von 2002Q1 bis 2019Q4. Unsere Ergebnisse bestätigen im Großen und Ganzen die in der Literatur gefundenen und zeigen, dass der monetäre Schock in Übereinstimmung mit der Identifikationsbeschränkung fast keine Auswirkungen auf die Wirtschaftstätigkeit hat, was dazu tendiert, die Vertikalität der Phillips-Kurve zu bestätigen und die Persistenz des negativen realen Schocks erklärt die Volatilität der Inflation in der Demokratischen Republik Kongo (DRK) erheblich.
    Abstract: In this paper, we estimate a structural autoregressive model (SVAR) to analyze the trend of underlying inflation in the Democratic Republic of Congo and follow the identification approach of Blanchard and Quah (1989) to impose long-run restrictions based on economic theory. Indeed, in the light of the teachings of monetarists, inflation is perceived as a purely monetary phenomenon, and the refocusing of monetary policy on the objective of price stability comes from the almost unanimous view of economists and central bankers that monetary policy does not affect activity in the long term. Thus, several central banks have adopted price stability as the ultimate objective of their monetary policy. This important role cannot be fully played, however, by central banks without controlling core inflation because, only this one is due to monetary factors. To this end, we use Congolese data on the growth rate of activity and the inflation rate from 2002Q1 to 2019Q4. Our results broadly confirm those generally found in the literature and show that the monetary shock has, in accordance with the identification constraint, almost no effect on economic activity, which tends to validate the verticality of the Phillips curve and the persistence of the negative real shock considerably explains the volatility of inflation in the Democratic Republic of Congo (DRC).
    Abstract: Dans ce papier, nous estimons un modèle autorégressif structurel (SVAR) pour analyser la tendance de l'inflation sous-jacente en République Démocratique du Congo et nous suivons la démarche d'identification de Blanchard et Quah (1989) pour imposer les restrictions de long terme en se basant sur la théorie économique. En effet, au regard des enseignements des monétaristes, l'inflation est perçue comme un phénomène purement monétaire, et le recentrage de la politique monétaire à l'objectif de stabilité des prix vient de la quasi-unanimité des économistes et banquiers centraux selon laquelle la politique monétaire n'affecte pas l'activité à long terme. De ce fait, plusieurs banques centrales ont adopté la stabilité des prix comme objectif ultime de leur politique monétaire. Cet important rôle ne peut cependant être pleinement joué que si les banques centrales peuvent maîtriser l'inflation sous-jacente, car c'est cette dernière qui est d'origine monétaire. Nous utilisons à cet effet les données congolaises sur le taux de croissance de l'activité et le taux d'inflation de 2002Q1 à 2019Q4. Nos résultats confortent globalement ceux généralement retrouvés dans la littérature et montrent que le choc monétaire n'a conformément à la contrainte d'identification, presque pas d'effet sur l'activité économique, ce qui tend à valider l'hypothèse de verticalité de la courbe de Phillips et la persistance du choc réel négatif explique considérablement la volatilité de l'inflation en République Démocratique du Congo (RDC).
    Keywords: Inflation sous-jacente,Stabilité des prix,Politique monétaire,Croissance,VAR structurel,Price Stability,Monetary Policy,Economic Growth,Structural VAR
    Date: 2021–01–08
  44. By: Andrew Besuyen; Tom Coupé (University of Canterbury); Kuntal K. Das (University of Canterbury)
    Abstract: This paper examines the effectiveness of explicit and implicit foreign exchange (FX) interventions in New Zealand: one secret spot market intervention and two implicit interventions – a regular Monetary Policy Statement (MPS) and an unexpected oral intervention by the Reserve Bank of New Zealand (RBNZ) governor addressing the New Zealand Dollar (NZD). By applying a synthetic control methodology to a unique dataset of RBNZ interventions, we construct a counterfactual to estimate their effect. The results indicate that the actual intervention and the MPS release were ineffective in moving the NZD. However, the speech depreciated the NZD by 1.12%, although the effect was small and short lived. Our findings suggest that FX interventions, explicit or implicit, are a weak policy tool to affect the exchange rate in New Zealand.
    Keywords: Foreign exchange intervention; Explicit intervention; Implicit intervention; Synthetic control; Effectiveness
    JEL: C31 E58 F31
    Date: 2021–02–01
  45. By: Hadrien Camatte (Banque de France - Gaz de France Direction de la Recherche); Guillaume Daudin (LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres); Violaine Faubert (Banque de France - Gaz de France Direction de la Recherche); Antoine Lalliard (Banque de France - Gaz de France Direction de la Recherche); Christine Rifflart (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Following the 2008 financial crisis, inflation rates in advanced economies have been at odds with the prediction of a standard Phillips curve. This puzzle has triggered a debate on the global determinants of domestic prices. We contribute to this debate by investigating the impact of exchange rate shocks on consumer prices from 1995 to 2018. We focus on cost-push inflation through global value chains, using three sectoral world input-output datasets. Depending on countries, the absolute value of the elasticity of the household consumption expenditure (HCE hereafter) deflator to the exchange rate ranges from 0.05 to 0.35, confirming the importance of global value chains in channelling external shocks to domestic inflation. Using data from WIOD on a sample of 43 countries, we find that the mean output-weighted elasticity of the HCE deflator to the exchange rate increased in absolute value from 0.075 in 2000 to 0.094 in 2008. After peaking in 2008, it declined to 0.088 in 2014. World Input-Output tables (WIOT hereafter) are released with a lag of several years and the latest WIOT dates back to 2015. To fill this gap, we approximate the impact of an exchange rate shock on the HCE deflator from 2016 onwards using up-to -date GDP and trade data. Our extrapolations suggest that the decline in the elasticity of the HCE deflator continued until 2016, before reversing in 2017 and 2018. Our findings are robust to using three different datasets.
    Keywords: Inflation,global value chains,Phillips curve,input output tables,international trade,pass through
    Date: 2021–02–08
  46. By: Martín Almuzara (Federal Reserve Bank of New York, USA); Gabriele Fiorentini (Universitá di Firenze, Italy; Rimini Centre for Economic Analysis); Enrique Sentana (CEMFI; CEPR)
    Abstract: We analyze a model for N different measurements of a persistent latent time series when measurement errors are mean-reverting, which implies a common trend among measurements. We study the consequences of overdifferencing, finding potentially large biases in maximum likelihood estimators of the dynamics parameters and reductions in the precision of smoothed estimates of the latent variable, especially for multiperiod objects such as quinquennial growth rates. We also develop an R2 measure of common trend observability that determines the severity of misspecification. Finally, we apply our framework to US quarterly data on GDP and GDI, obtaining an improved aggregate output measure.
    Keywords: Cointegration, GDP, GDI, Overdifferencing, Signal Extraction
    JEL: C32 E01
    Date: 2021–02
  47. By: Hensvik, Lena (Uppsala University); Le Barbanchon, Thomas (Bocconi University); Rathelot, Roland (University of Warwick)
    Abstract: This paper measures the job-search responses to the COVID-19 pandemic using realtime data on vacancy postings and job ad views on Sweden’s largest online job board. First, new vacancy postings drop by 40%, similar to the US. Second, job seekers respond by searching less intensively, to the extent that effective labour market tightness increases during the first three months after the COVID outbreak. Third, they redirect their search towards less severely hit occupations, beyond what changes in vacancies would predict. Overall, these job search responses have the potential to amplify the labour demand shock.
    Keywords: coronavirus; search intensity; search direction; labour demand shock; job vacancies; online job board
    JEL: E24 J21 J22 J23 J62 J63 J64
    Date: 2021–01–22
  48. By: Philipp Harms (Johannes Gutenberg University); Jakub Knaze (Johannes Gutenberg University)
    Abstract: This paper introduces a new effective exchange rate regime classification. Traditional classifications define the stability or flexibility of a currency with respect to one (“anchor”) currency, thus implicitly neglecting information on exchange rate relationships against other currencies. Our new measure is computed as a trade-weighted average of bilateral exchange rate regimes, thus taking into account both direct and indirect relationships against all other currencies. We argue that our “effective” approach is superior when it comes to assessing the impact of exchange rate regimes on inflation, because fixing an exchange rate vis-`a-vis one currency does not completely anchor domestic prices in a world with multiple trading partners. Using our measure of effective exchange rate regimes in a standard empirical analysis of inflation determinants, we find that – compared to freely floating regimes – not only hard pegs, but also narrow and wide soft pegs are associated with significantly lower inflation rates. This challenges the established view that soft pegs do not matter – or are even detrimental – for price stability. We find that the effect of fixing the exchange rate goes significantly beyond the “disciplining effect” on money growth, with the inflation reduction being at least as strong as the effect of an official inflation target.
    Keywords: Exchange rate regimes · Effective exchange rates · Inflation
    JEL: E31 E52 F41
    Date: 2021–01–29
  49. By: Ruchi Avtar; Rajashri Chakrabarti; Maxim L. Pinkovskiy
    Abstract: The introduction of numerous social distancing policies across the United States, combined with voluntary pullbacks in activity as responses to the COVID-19 outbreak, resulted in differences emerging in the types of work that were done from home and those that were not. Workers at businesses more likely to require in-person work—for example, some, but not all, workers in healthcare, retail, agriculture and construction—continued to come in on a regular basis. In contrast, workers in many other businesses, such as IT and finance, were generally better able to switch to working from home rather than commuting daily to work. In this post, we aim to understand whether following the onset of the pandemic there was a wedge in the incidence of commuting for work across income and race. And how did this difference, if any, change as the economy slowly recovered? We take advantage of a unique data source, SafeGraph cell phone data, to identify workers who continued to commute to work in low income versus higher income and majority-minority (MM) versus other counties.
    Keywords: essential worker; work from home; COVID-19; full time; part time
    JEL: E24 E3 I14 J20
    Date: 2021–02–09
  50. By: Fernando E. Alvarez; Francesco Lippi
    Abstract: We propose an analytical method to analyze the propagation of a once-and-for-all shock in a broad class of sticky price models. The method is based on the eigenvalue- eigenfunction representation of the dynamics of the cross-sectional distribution of firms’ desired adjustments. A key novelty is that, under assumptions that are appropriate for low-inflation economies, we can approximate the whole profile of the impulse response for any moment of interest in response to an aggregate shock (any displacement of the invariant distribution). We present several applications and discuss extensions.
    JEL: E5 E50
    Date: 2021–02
  51. By: Gräbner, Claudius; Heimberger, Philipp; Kapeller, Jakob; Landesmann, Michael; Schütz, Bernhard
    Abstract: This paper analyses the emergence of internal debtor-creditor relationships within a monetary union. Developing a stock- ow consistent model consisting of three regions - North, South, and the Rest of the World (RoW), where North and South form a monetary union - it shows how the simultaneous presence of investment booms, declining export performance and mercantilist policies within a monetary union can interact in order to create Minsky-type boom-bust cycles. Fiscal policy and an internal lender of last resort can help sustain economic life under existing structural imbalances, though without eliminating the root causes of boom-bust patterns.
    JEL: E12 F41 F45 G01 G18
    Date: 2021
  52. By: José G. Vargas-Hernández (Department of Administration, University Center for Economic and Managerial Sciences, University of Guadalajara, Periférico Norte 799 Edif. G201-7 Núcleo Universitario los Belenes Zapopan, Jalisco, 45100, México); Jonathan Daniel Chávez Ascencio (Maestría en Negocios y Estudios Económicos, Centro Universitario de Ciencias EconómicoAdministrativas. Universidad de Guadalajara, Mexico); Omar Cristian Vargas González (Master in Computer Systems, Tecnológico Nacional de México - Instituto Tecnológico de Ciudad Guzmán, Av. Tecnológico 100, Ciudad Guzmán, Jalisco, 49000, México)
    Abstract: The objective of this work is to determine the relationship between human capital and artisanal innovation, nowadays, in Tonalá Jalisco, artisanal pieces are produced in an innovative way, either ceramic or any variant of the mud technique, but what A substantial part of the business is what makes innovative business thinking possible. The Intellectus model, created by Eduardo Bueno in 2011, is used as a reference, distinguishing intellectual capital in three types of capital, but for the purpose of this study only analyzed the relationship of human capital with respect to artisanal innovation, the study was conducted in 2018 to 73 craft economic units, it was obtained through the technique of chi square that if there is a positive dependence on human capital and the innovation.
    Keywords: Competitive advantage, craft, human capital, innovation
    JEL: D24 E23 E24 J24
    Date: 2020–06
  53. By: Sheng, Jiemin (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: In this paper, the author explores the balance sheet of the Exchange Stabilization Fund (ESF) over its first 85 years as a lens though which to analyze the fund. An accompanying spreadsheet workbook provides data from the annual balance sheet of the ESF since the fund’s inception in 1934. These data are available in electronic form for the first time, which will be of interest to those wishing to do quantitative analyses of its role in U.S. monetary policy.
    Keywords: Exchange Stabilization Fund (ESF); balance sheet; assets; liabilities; gold; foreign exchange intervention
    JEL: E52 E59 N12
    Date: 2021–02
  54. By: Job Boerma; Loukas Karabarbounis
    Abstract: Reparations is a policy proposal aiming to address the wealth gap between Black and White households. We provide a first formal analysis of the economics of reparations using a long-run model of heterogeneous dynasties with an occupational choice and bequests. Our innovation is to introduce endogenous dispersion of beliefs about risky returns, reflecting differences in dynasties' experiences with entrepreneurship over time. Feeding the exclusion of Black dynasties from labor and capital markets as driving force, the model quantitatively reproduces current and historical racial gaps in wealth, income, entrepreneurship, mobility, and beliefs about risky returns. We use the model to evaluate reparations and find that transfers eliminating the racial gap in average wealth today do not lead to wealth convergence in the long run. The logic is that century-long exclusions lead Black dynasties to enter into reparations with pessimistic beliefs about risky returns and to forego investment opportunities. We conclude by showing that entrepreneurial subsidies are more effective than wealth transfers in achieving racial wealth convergence in the long run.
    JEL: D31 E21 J15
    Date: 2021–02
  55. By: International Monetary Fund
    Abstract: This staff report proposes the modification of the performance criteria for end-December 2020 for the economic program supported by the three-year Extended Credit Facility (ECF) arrangement that was approved by the Executive Board on August 28, 2019. The modifications aim to accommodate the needed response to combat the COVID-19 pandemic and to adjust the end-December 2020 targets to take account of the impact of the pandemic shock.
    Date: 2021–02–12
  56. By: Caggiano, Giovanni; Castelnuovo, Efrem
    Abstract: We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves self-identifcation via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after GFU shocks, the larger the world output contraction is.
    JEL: C32 E32
    Date: 2021–02–11
  57. By: International Monetary Fund
    Abstract: Iraq's socio-economic fragilities have been severely aggravated by the pandemic and the sharp decline in oil revenues, which arrived on the heels of widespread social unrest and political instability. The health system’s limited capacity has been strained, while the fiscal position has become untenable as oil revenues declined sharply to a level that barely covers the government’s large wage and pension bills. Although the number of new infections declined recently, Iraq registered the second-highest COVID-related fatalities in the region, and the fiscal response to the pandemic has been one of the lowest. A six-month political paralysis preceding the formation of the government in May 2020 and plans to hold early parliamentary elections in mid-2021 have been weighing on political support for reforms. Risks of social unrest, geopolitical tensions, and insecurity remain elevated.
    Date: 2021–02–11
  58. By: Solórzano Diego; Dixon Huw
    Abstract: The frequencies at which prices and wages are adjusted, interpreted as price and wage flexibility, are key elements in workhorse models used for policy analysis. Yet, there is little evidence regarding the relationship between these two sources of nominal rigidities. Using two large and highly disaggregated price and wage microdata sets, this paper provides evidence that the industries changing more frequently wages reset prices more often. Once the frequency of wage adjustments is accounted for, the share of labor costs becomes less relevant in explaining the frequency of price changes, calling for a reinterpretation on previous findings that the labor share is a robust determinant of the frequency of price adjustments. The results in this study have implications for New Keynesian models' microfoundations, as their predictions have proven to be sensitive to the nominal rigidities assumptions.
    JEL: E31 J31 C26
    Date: 2020–12
  59. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The Visegrád economies have been hit hard by the COVID-19 pandemic, especially its second wave. In response, macroeconomic policies have been markedly relaxed, with fiscal stimulus packages reaching up to 14% of GDP in Poland and Czechia. The projected recovery of the Visegrád economies from 2021 onwards should be significantly helped by the massive inflow of EU transfers, particularly from the newly established Next Generation EU recovery fund. Such transfers will boost their economies by between 2.1% per year in Slovakia and 1% in Czechia, at a minimum; the effect should be stronger once EU transfers to other member states are taken into account. The cumulative boost to the Austrian economy in 2021-2022 from EU transfers to the Visegrád countries is estimated at least at 0.12%, thus partly offsetting the net contributions paid by Austria to the EU budget (which stood at 0.31% of Austria’s GNI in 2019). Given strong cross-border spillovers of fiscal policy measures and historically low interest rates, the governments of the Visegrád countries and Austria (and Germany) should be interested in a more expansionary fiscal policy at EU level for the benefit of the less-developed EU member states. In addition, greater co-ordination of national policies among the above-mentioned countries would be advisable in the planning and implementation of COVID-19 restrictions, as well as in the resolution of mass insolvencies that are likely to follow the withdrawal of large-scale fiscal stimulus measures. It might also be advisable to establish joint Central European working groups to analyse possible scenarios of the economic situation in the post-COVID world.
    Keywords: fiscal policy, EU transfers, fiscal multiplier, input-output tables
    JEL: F0 H30 H50 H77
    Date: 2021–02
  60. By: Trabelsi Ramzi (High Business School of Tunis (ESCT), Manouba University, Tunisia)
    Abstract: The main purpose in this paper is to examine the impact of different public policies on the economic growth in Tunisia between 1990 and 2014. We estimated our basic model by using the ARDL bounds test technique. The econometric analysis gave various images and very interesting results .Our main findings indicate that Tunisian’s disappointed economic growth results from bad designed and misguided public policies. This finding provides key insights on policy recommendations for policymakers.
    Keywords: Economic Growth; Public policy; ARDL
    JEL: O40 E62 C22
    Date: 2019–12
  61. By: Umit Koc; Fethi Ogunc; Mustafa Utku Ozmen
    Abstract: In this paper, we analyze the role of inflation expectations in inflation dynamics. The hike in inflation following the exchange rate shock in 2018 provides an interesting period to analyze whether the sensitivity of inflation to its main determinants, including expectations, has changed. To this end, we estimate a time-varying parameter Phillips curve model to focus on the changes in inflation dynamics. We also jointly study the formation of inflation expectations to further investigate how the setting of inflation expectations evolved over the course of the rapid rise and the following gradual decline in inflation observed since the second half of 2018. Our results reveal that inflation expectations play an important role in inflation dynamics; and that the sensitivity of inflation to expectations did not change much recently. Meanwhile, the sensitivity of inflation to the exchange rate has sharply risen and corrected only partially afterwards. However, the most notable change has been witnessed in the weight attached to the past inflation in forming expectations; agents pay higher attention to inflation realizations. Overall, our results reveal that inflation expectations and the exchange rate movements are the leading driving forces of inflation in Turkey, in which the interaction between them further amplifies the impact on inflation.
    Keywords: Inflation, Survey-based inflation expectations, State-space model, Turkey
    JEL: E31 C32 C36
    Date: 2021
  62. By: Giovanni Gallipoli (UBC; CEPR; HCEO; Rimini Centre for Economic Analysis); Hamish Low (University of Oxford, UK; IFS); Aruni Mitra (European University Institute, Italy)
    Abstract: We characterize the joint evolution of cross-sectional inequality in earnings, other sources of income and consumption across generations in the U.S. To account for cross-sectional dispersion, we estimate a model of intergenerational persistence and separately identify the influences of parental factors and of idiosyncratic life-cycle components. We find evidence of family persistence in earnings, consumption and saving behaviours, and marital sorting patterns. However, the quantitative contribution of idiosyncratic heterogeneity to cross-sectional inequality is significantly larger than parental effects. Our estimates imply that intergenerational persistence is not high enough to induce further large increases in inequality over time and across generations.
    Keywords: income, consumption, intergenerational persistence, inequality
    JEL: D15 D64 E21
    Date: 2021–02
  63. By: Ly Dai Hung (Vietnam Institute of Economics, Hanoi, Vietnam)
    Abstract: We characterize a macro-finance model of government bonds yields in Vietnam. The evidence is based on a time-varying structural vector autoregression (TVC-VAR) model with a monthly sample from 02/2012 to 10/2018. The bonds yields serve as effective indicators for the macroeconomic variables. For the two-month horizon of forecasting, the model tends to forecast the inflation more effectively than the economic growth and exchange rate's change. Moreover, the macroeconomic fundamentals also drive the bonds yields curve: the output growth move closely with the long-run value of curve, the depreciation rate of domestic currency is consistent with the medium-run of curve, and the inflation rate goes in line with the short-run of curve.
    Keywords: Government Bonds,Vector Autoregression,Macro-Finance
    Date: 2020–06
  64. By: International Monetary Fund
    Abstract: The Covid-19 pandemic had a substantial impact on C.A.R.’s economy but appears now somewhat contained. The number of positive cases and related deaths has been very limited over the last few months, even though most containment measures have been progressively loosened. Despite some progress since the February 2019 peace agreement, the security situation remains precarious. Despite some delays in voter registration, the first round of the presidential and general elections is still scheduled on December 27.
    Date: 2021–02–01
  65. By: Raphael Auer; Cyril Monnet; Hyun Song Shin
    Abstract: We explore the economics and optimal design of “permissioned” distributed ledger technology (DLT) in a credit economy. Designated validators verify transactions and update the ledger at a cost that is derived from a supermajority voting rule, thus giving rise to a public good provision game. Without giving proper incentives to validators, however, their records cannot be trusted because they cannot commit to verifying trades and they can accept bribes to incorrectly validate histories. Both frictions challenge the integrity of the ledger on which credit transactions rely. In this context, we examine the conditions under which the process of permissioned validation supports decentralized exchange as an equilibrium, and analyze the optimal design of the trade and validation mechanisms. We solve for the optimal fees, number of validators, supermajority threshold and transaction size. A stronger consensus mechanism requires higher rents be paid to validators. Our results suggest that a centralized ledger is likely to be superior, unless weaknesses in the rule of law and contract enforcement necessitate a decentralized ledger.
    Keywords: digital currencies, money, distributed ledger, blockchain, coordination game, global game, consensus, market design.
    JEL: C72 C73 D4 E42 G2 L86
    Date: 2021–02
  66. By: Aditya Goenka; Lin Liu; Manh-Hung Nguyen
    Abstract: This paper studies an optimal growth model where there is an infectious disease with SIR dynamics which can lead to mortality. Health expenditures (alternatively intensity of lockdowns) can be made to reduce infectivity of the disease. We study implications of two different ways to model the disease related mortality - early and late in infection mortality - on the equilibrium health and economic outcomes. In the former, increasing mortality reduces infections by decreasing the fraction of infectives in the population, while in the latter the fraction of infectives increases. We characterize the steady states and the outcomes depend in the way mortality is modeled. With early mortality, increasing mortality leads to higher equilibrium per capita output and consumption while in the late mortality model these decrease. We establish sufficiency conditions and provide the first results in economic models with SIR dynamics with and without disease related mortality - a class of models which are non-convex and have endogenous discounting so that no existing results are applicable.
    Keywords: Infectious diseases, Covid-19, SIR model, mortality, sufficiency condi-tions, economic growth, lockdown, prevention, health expenditure
    JEL: E13 E22 D15 D50 D63 I10 I15 I18 O41 C61
    Date: 2021–01
  67. By: Harold L. Cole; Daniel Neuhann; Guillermo Ordoñez
    Abstract: Using a novel data set containing all bids by all bidders for Mexican government bonds from 2001 to 2017, we demonstrate that asymmetric information about default risk is a key determinant of primary market bond yields. Empirically, large bidders do not pay more for bonds than the average bidder but their bids are accepted more frequently. We construct a model where investors may differ in wealth, risk aversion, market power and information, and find that only heterogeneous information can qualitatively account for these patterns. Moreover, asymmetric information about rare disasters can quantitatively match key moments of bids and yields, both within and across periods.
    JEL: E5 E6 H63 O23
    Date: 2021–02
  68. By: Alessandri, Piergiorgio; Bologna, Pierluigi; Galardo, Maddalena
    Abstract: The Basel III regulation explicitly prescribes the use of Hodrick-Prescott filters to estimate credit cycles and calibrate countercyclical capital buffers. However, the filter has been found to suffer from large ex-post revisions, raising concerns on its fitness for policy use. To investigate this problem we study credit cycles in a panel of 26 countries between 1971 and 2018. We reach two conclusions. The bad news is that the limitations of the one-side HP filter are serious and pervasive. The good news is that they can be easily mitigated. The filtering errors are persistent and hence predictable. This can be exploited to construct real-time estimates of the cycle that are less subject to ex-post revisions, forecast financial crises more reliably, and stimulate the build-up of bank capital before a crisis. JEL Classification: E32, G01, G21, G28
    Keywords: credit cycle, Hodrick-Prescott filter, macroprudential policy
    Date: 2021–02
  69. By: Dieckelmann, Daniel
    Abstract: Using new quarterly U.S. data for the past 120 years, I show that sudden reversals in equity and credit market sentiment approximated by several measures of corporate securities issuance are highly predictive of banking crises and recessions. Deviations in equity issuance from historical averages also help to explain economic activity over the business cycle. Crises and recessions often occur independently of domestic leverage, making the credit-to-GDP gap a deficient early-warning indicator historically. The fact that equity issuance reversals predict banking crises without elevated private credit levels, suggests that changes in investor sentiment can trigger financial crises even in the absence of underlying banking fragility.
    Keywords: Corporate securities issuance,market sentiment,nancial fragility,banking crises,recessions
    JEL: E32 G01 G32 G41 N11 N12
    Date: 2021
  70. By: Beames, Alexander; Kulish, Mariano; Yamout, Nadine
    Abstract: We set up and estimate a small open economy model with fi scal policy in which trend growth can permanently change. The magnitude and timing of the change in trend growth are estimated alongside the structural and fiscal policy rule parameters. Around 2003:Q3, trend growth in per capita output is estimated to have fallen from just over 2 per cent to 0.6 per cent annually. The slowdown brings about a lasting transition which in the short-run decreases consumption tax revenues but increases them in the long-run changing permanently the composition of tax revenues and temporarily increasing the government debt-to-output ratio..
    Keywords: Open economy, trend growth, scal policy, real business cycles, estimation, structural breaks
    Date: 2020–05
  71. By: ; ; ; ; Benjamin A. Malin
    Keywords: Researcher bias; Central banks
    JEL: A11 C13 E58
    Date: 2021–02–11
  72. By: Riza Demirer (Department of Economics & Finance, Southern Illinois University Edwardsville, Alumni Hall 3145, Edwardsville IL, 62026-1102, USA); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield, 0028, South Africa); He Li (School of International Economics and Politics, Liaoning University, Shenyang, Liaoning, China); Yu You (Li Anmin Advanced Institute of Finance and Economics, Liaoning University, Shenyang, Liaoning, China)
    Abstract: This paper establishes a predictive relationship between financial vulnerability and volatility in emerging stock markets. Focusing on China and India and utilizing GARCH-MIDAS models, we show that incorporating financial vulnerability can substantially improve the forecasting power of standard macroeconomic fundamentals (output growth, inflation and monetary policy interest rate) for stock market volatility. The findings have significant implications for investors to improve the accuracy of volatility forecasts.
    Keywords: Stock Market Volatility, Financial Vulnerability, GARCH-MIDAS, Emerging Markets
    JEL: C32 C53 G15 G17
    Date: 2021–02
  73. By: International Monetary Fund
    Abstract: After a long period of uninterrupted growth, Poland is experiencing a pandemic-induced recession, though strong policy actions have limited the damage. The economy rebounded strongly in the third quarter of 2020, but the second wave of the virus has delayed the recovery. A strong and effective policy response has supported economic activity and prevented destructive losses of employment and bankruptcies. Following the recession in 2020, Poland is well positioned for recovery. The pandemic will remain a constraint until the assumed administration of vaccines over the course of 2021. Resiliency in the corporate sector and labor markets, aided by strong policy support, should foster a strong rebound. Sizeable new EU grants would also facilitate an increase in investment and boost growth. The course of the pandemic and ultimate success of vaccines remains a fundamental risk.
    Date: 2021–02–08
  74. By: Ibrahim A. Adekunle (Liège, Belgium)
    Abstract: Africa remains the most affected by environmental degradation, thereby exacerbating the negative effect of climate change in the region. Little empirical credence has been leaned to the institutions-environmental sustainability relationship in Africa. This omission in the literature of environmental sustainability is abysmal, considering the role of institutions and government in ecological preservation. To inform policy and research on the subject matter, we estimated a balanced panel data of the indices of good governance and strong institutions to explain transformation to environmental sustainability using the dynamic system generalised method of moment estimator from 1996 through 2017. Findings suggested a positive relationship between the rule of law and regulatory quality and transformation to environmental sustainability. An inverse relationship between government effectiveness and environmental sustainability was established. We recommended concerted effort at an institutional level such that policy and punishment for violation of greenhouse strategies will be optimum.
    Keywords: Institutions, Governance, Environmental Sustainability, system GMM, Africa
    JEL: E62 G13
    Date: 2020–01
  75. By: Dzingai Francis Chapfuwa (1 University of Johannesburg, Faculty of Economics and Econometrics, Johannesburg, South Africa); Peter Baur (Economics, University of Johannesburg, Faculty of Economics and Econometrics, Johannesburg, South Africa)
    Abstract: The paper analysed the interlinkages among institutions, FDI and economic growth. The paper analysed whether institutions play a role in determining the effect of FDI on economic growth and whether the existence of strategic natural resources matter. Dynamic Panel General Method of Moments Technique (GMM) model with Weidmeijer corrected errors and orthogonal deviations is applied for the period 1996 to 2016. The results show that the effect of FDI on economic growth is both negative and positive across the estimated models indicating the heterogeneity in terms of the initial host country conditions. The thesis found that institutions as a whole are weak for SADC countries hence a negative relationship between institutions and economic growth for the SADC countries. What is however key is that FDI on its own without institutional indicators can lead to an increase in economic growth for the SADC countries. The effect of institutions on FDI and hence economic growth was not significant in the full sample. However, after taking out countries endowed with strategic natural resources, good institutional indicators leads to an increase in economic growth eliminating the natural resource endowment bias.
    Keywords: FDI, Institutions, Economic growth, SADC, MNCs, GMM
    JEL: E E02
    Date: 2020–09
  76. By: International Monetary Fund
    Abstract: While Panama has been the most dynamic economy in Latin America over the last three decades (growing 6 percent on average), its strength is being tested by the COVID-19 global pandemic. Panama is a service-based economy that is highly integrated in the world economy and exposed to extreme shocks during the pandemic.
    Date: 2021–02–15
  77. By: Marie Briere; Ariane Szafarz
    Abstract: We examine the profitability of multifactor portfolios on the U.S. stock market. Using passive sector investing as the benchmark, we assess the performances of factor-based asset management strategies in good and bad times. When short selling is unrestricted, factor investing outperforms sector investing in all respects. For long-only portfolios, our results reveal a trade-off between the risk premia associated with factors and the diversification potential of sectors. Multifactor investing tends to be more profitable than the benchmark during good times but less attractive during bad times, when diversification is needed the most.
    Keywords: Portfolio management; asset allocation; factor; industry; sector; crisis
    JEL: G11 C61 E44 G01
    Date: 2021–02–10
  78. By: Nguyen-Huu, Thanh Tam; Pham, Ngoc-Sang
    Abstract: The paper investigates the country receiving FDI's optimal strategy in an optimal growth context. First, if the multinational enterprise has high productivity or the entry cost is high, no domestic firm enters the new industry. Still, the host economy's investment stock converges to a higher steady state than that of the closed economy. Second, if the old sector is strong enough and the domestic firm's productivity is high, the foreign firm will be dominated, even eliminated by the domestic one. Third, we show that if the host country invests in R\&D, its economy may grow without bounds. In this case, FDI helps the host country only at the first stages of its development process. We present empirical evidence that supports our theoretical findings.
    Keywords: Optimal growth, FDI, MNE, R\&D, fixed cost
    JEL: E2 F23 F4 O3 O4
    Date: 2021–01–16
  79. By: Linh, Nguyen Thuy
    Abstract: This study examines the effects of the Bank of Japan’s (BOJ’s) exchange traded fund (ETF) and corporate bond (CB) purchases on the capital structure of Japanese listed firms. The results suggest that following the expansion of ETF purchases, treatment firms actively issued more stocks and became less dependent on bond debt and bank loans than control firms, resulting in a lower level of leverage. In contrast, following the introduction of CB purchases, firms whose bonds were eligible for CB purchases issued more corporate bonds, while reducing long-term bank debt by a smaller extent, thus they have a higher leverage ratio than ineligible firms. Moreover, evidence further suggests the existence of an interaction between these two purchasing programs. These results indicate that the BOJ’s ETF and CB purchases have had a considerable impact, implying that the supply of capital plays an important role in determining firms’ capital structure.
    Keywords: Unconventional monetary policy, Risk asset purchases, Difference in differences, Capital structure, Supply-side effects
    JEL: E52 E58 G32
    Date: 2021–01
  80. By: International Monetary Fund
    Abstract: Russia entered the crisis with low potential growth but strong macroeconomic policy frameworks and significant buffers. Policy space allowed the authorities to mount a sizeable public health and countercyclical response to the crisis, which has helped limit the economic downturn. Nevertheless, the crisis is likely to leave some long-term scars.
    Date: 2021–02–09
  81. By: Mohammad Akbarpour (Stanford University - Graduate School of Business); Julien Combe (Ecole Polytechnique - Department of Economics; CREST); Yinghua He (Toulouse School of Economics; Rice University - Department of Economics); Victor Hiller (Université Paris 2); Robert Shimer (University of Chicago - Department of Economics; NBER); Olivier Tercieux (Paris School of Economics; CNRS)
    Abstract: For an incompatible patient-donor pair, kidney exchanges often forbid receipt-before-donation (the patient receives a kidney before the donor donates) and donation-before-receipt, causing a double-coincidence-of-wants problem. Our proposal, the Unpaired kidney exchange algorithm, uses “memory†as a medium of exchange to eliminate these timing constraints. In a dynamic matching model, we prove that Unpaired delivers a waiting time of patients close to optimal and substantially shorter than currently utilized state-of-the-art algorithms. Using a rich administrative dataset from France, we show that Unpaired achieves a match rate of 57 percent and an average waiting time of 440 days. The (infeasible) optimal algorithm is only slightly better (58 percent and 425 days); state-of-the-art algorithms deliver less than 34 percent and more than 695 days. We draw similar conclusions from the simulations of two large U.S. platforms. Lastly, we propose a range of solutions that can address the potential practical concerns of Unpaired.
    Keywords: Kidney exchange, medium of exchange, dynamic matching
    JEL: D47 C78 E00
    Date: 2020
  82. By: Fungáčová, Zuzana; Kerola, Eeva; Weill, Laurent
    Abstract: This work examines the impact of bank efficiency on the bank lending channel in China. Using a sample of 175 Chinese banks over the period 2006–2017, we investigate how the reaction of the loan supply to monetary policy actions depends on a bank’s efficiency. While bank efficiency does not exert an impact on the effectiveness of monetary policy transmission overall, it does favor the transmission of monetary policy for banks with low loan-to-deposit ratios. In addition, the expansion of shadow banking activities has been associated with a positive impact of bank efficiency on monetary policy transmission. These results suggest that bank efficiency may influence the bank lending channel in certain cases.
    JEL: E52 G21
    Date: 2021–02–08
  83. By: Christian Breuer (ZBW-Leibniz Information Centre for Economics)
    Abstract: The COVID-19 crisis has caused public debt to increase dramatically, which is why the German and European fiscal rules are currently suspended. In addition to the new assessment of the fiscal costs at low interest rates, the discussion on the reintroduction of fiscal rules in Germany and Europe should take into account the function of government bonds as a safe asset and an instrument to combat the liquidity trap as well as the net return on productive government investments. For practical reasons, the return to the classic Golden Rule, which aims to limit net debt and promote government investment in the interest of future generations, is recommendable.
    Keywords: Government Debt, Fiscal Rules, Low Interest Rates
    JEL: E62 H56 H63
    Date: 2020–02
  84. By: Fatih Karahan; Laura Pilossoph
    Abstract: The ongoing COVID-19 pandemic and the various measures put in place to contain it caused a rapid deterioration in labor market conditions for many workers and plunged the nation into recession. The unemployment rate increased dramatically during the COVID recession, rising from 3.5 percent in February to 14.8 percent in April, accompanied by an almost three percentage point decline in labor force participation. While the subsequent labor market recovery in the aggregate has exceeded even some of the most optimistic scenarios put forth soon after this dramatic rise, the recovery has been markedly weaker for the Black population. In this post, we document several striking differences in labor market outcomes by race and use Current Population Survey (CPS) data to better understand them.
    Keywords: pandemic; COVID-19; unemployment; labor force participation; race; heterogeneity
    JEL: E3 I14 J01 J20
    Date: 2021–02–09
  85. By: Wajid Ali (University of Perugia, Italy); Asmat Khan (University of Balochistan, Quetta); Asif Javed (Sustainable Development Policy Institute, Islamabad, Pakistan); Aamir Khan (Bureau of Emigration and Overseas Employment, Islamabad)
    Abstract: The aim of this study is to analyze the effectiveness of fiscal policy in Pakistan. Specifically, the study measured the potency of fiscal policy via the relationship between private saving and public saving as a share of Gross Domestic Product (GDP). For estimation purposes, the study used annual data over the period 1973-2018. The study utilized the threshold autoregression (TAR) model to determine the long-run relationship between policy variables in case if adjustment process is nonlinear and the Momentum threshold autoregression (M-TAR) in the case to adjust larger changes in the policy variables. The magnitude of offset coefficient (ranges between -0.51 to -0.63) between private and public saving is estimated through Ordinary Least Square (OLS), Dynamic Ordinary Least Square (DOLS), and Fully Modified Ordinary Least Square (FMOLS). Since the result suggests very small fiscal multiplier, therefore any effort of fiscal authority to run a surplus budget and raise public saving is impotent.
    Keywords: Fiscal policy, public saving, private saving, offset co-efficient
    JEL: E6 H6
    Date: 2020–12
  86. By: Nicolas Piluso (CERTOP - Centre d'Etude et de Recherche Travail Organisation Pouvoir - UT2J - Université Toulouse - Jean Jaurès - UT3 - Université Toulouse III - Paul Sabatier - Université Fédérale Toulouse Midi-Pyrénées - CNRS - Centre National de la Recherche Scientifique); Thomas Ruellou (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Paris 1 Panthéon-Sorbonne)
    Abstract: The purpose of this article is to show that from a history of economic thought perspective, the institutional hypothesis of asymmetry between entrepreneurs and employees, which implies that the employment level is determined by entrepreneurs alone, is particularly common. It would therefore constitute a standard, far from what orthodox economists and most economics textbooks suggest by presupposing that the level of employment would be jointly determined by supply and demand.
    Abstract: L'objet de cet article est de montrer que du point de vue de l'histoire de la pensée économique et des différents courants théoriques qui la composent, l'hypothèse institutionnelle d'asymétrie entre entrepreneurs et salariés, qui implique d'affirmer que le niveau d'emploi est déterminé par les seuls entrepreneurs, est particulièrement fréquente. Elle constituerait donc une norme, bien loin de ce que laissent penser les économistes orthodoxes et la plupart des manuels d'économie qui présentent l'hypothèse selon laquelle le niveau d'emploi est déterminé conjointement par l'offre et la demande comme normale.
    Keywords: unvoluntary unemployment,restricted Say law,wage,asymetric salary relationship.
    Date: 2020
  87. By: International Monetary Fund
    Abstract: Guinea Bissau is a fragile state with a long history of political instability. Poverty is high with about 67 percent of the population living below the poverty line of US$1.90 per day. The economy relies heavily on the production and exports of unprocessed cashew nuts, making most households highly vulnerable to cashew nut price shocks and climate change risks.
    Date: 2021–02–01
  88. By: Konrad Gunesch (American University in the Emirates, College of Media and Mass Communication, Dubai, United Arab Emirates)
    Abstract: Abundance Economics, also called post-scarcity economics, increasingly attracts attention in macroeconomic research as well as in policy practice, with its relevance predicted to be ever growing. After a historical overview, this article traces that research attention, shows the need and motivation for this investigation, and then predefines and differentiates the concept. Conceptually, abundance and post-scarcity economics is discussed within the frameworks of heterodox and postKeynesian economics, before examining how writings on abundance economics confront and overcome the scarcity paradigm within economics. Hence the first conceptual contribution of this research is the systematization of abundance economics within classical, heterodox and postKeynesian economics in a concise yet comprehensive form that does not yet exist in macroeconomic literature. The second conceptual contribution is the investigation of abundance economics as a macroeconomic paradigm shift, together with this paradigm shift’s pragmatic advantages in today’s world. The third conceptual contribution is the precise definition, itemization and scrutiny of abundance economics within the global macroeconomic system, in a form also not yet existing in the literature. Methodologically, this research evaluates a range of suggested disciplines contributing to, and benefitting from abundance economics, before studying the arguments for their use and introducing its own multidisciplinary approach. Hence its methodological contribution is the consideration, combination and practical application of a coherent multidisciplinary framework for evaluating the macroeconomic potential of abundance economics in 21st century scenarios. Its final and overall contribution is the synthesis, analysis and discussion of eight distinct yet relatable solutions for conceiving and using abundance economics in economic, social, political, ecological and cultural sustainability reflections and recommendations for local practice and global policy.
    Keywords: Abundance Economics, Post-Scarcity Economics, Post-Keynesian Economics, Heterodox Economics, Wealth and Welfare.
    JEL: B55 E12 E71 O35 P46
    Date: 2019–06
  89. By: Shagufta Sultana (Pakistan Institute of Development Economics, Pakistan)
    Abstract: Pakistan receives huge amount of aid flows every year like other developing countries but still stagnant and aid dependent. This reality forced a vigorous debate on effectiveness of aid. The objective of present study is to examine the effectiveness of foreign aid and other variables such as (bilateral aid, multilateral aid, inflation, trade openness, US aid, UK aid and Japanese aid) on economic growth of Pakistan over the period 1972-2014. When we disaggregate aid in terms of bilateral aid, multilateral aid, aid from United States, aid from UK and aid from Japan, all the aid sources showed insignificant relationship with the economic growth of Pakistan in the short run. Bounds test for Cointegration accepts the hypothesis that no long run relationship exists between the variables. So in the absence of long run relationship study takes the analysis towards short run relationship by using multivariate Granger Causality test. The causality test results showed that total foreign aid, bilateral aid, aid from United States and aid from UK does not causes economic growth significantly in Pakistan over the period 1972-2014. On the other hand multilateral aid and Japanese aid significantly causes growth. Granger Causality test results showsbi-directional causality between multilateral aid and economic growth. The study is useful for policy implications because results show that multilateral aid have significant relationship with economic growth in Granger Causality test. So authorities should give priority to multilateral aid over bilateral aid
    Keywords: Economic Growth, Bilateral aid, Multilateral aid, Inflation, Trade openness, ARDL, ADF, Granger Causality
    JEL: E31 O40 B22
    Date: 2019–12
  90. By: Le Van, Cuong; Pham, Ngoc-Sang
    Abstract: Productivity is a key concept in economics and crucial for economic growth. By using different theoretical models, we show the role of several kinds of productivity, including total factor productivity (TFP) and labor productivity.
    Keywords: Productivity, TFP, labor productivity, competitiveness, growth.
    JEL: E2 O4
    Date: 2021–01–06
  91. By: Claudius Graebner (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; ZOE Institute for future-fit Economies, Bonn, Germany); Philipp Heimberger (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; Vienna Institute for International Economic Studies (wiiw), Vienna, Austria); Jakob Kapeller (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Michael Landesmann (Department of Economics, Johannes Kepler University Linz, Austria; Vienna Institute for International Economic Studies (wiiw), Vienna, Austria); Bernhard Schuetz (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: This paper analyses the emergence of internal debtor-creditor relationships within a monetary union. Developing a stock-flow consistent model consisting of three regions - North, South, and the Rest of the World (RoW), where North and South form a monetary union - it shows how the simultaneous presence of investment booms, declining export performance and mercantilist policies within a monetary union can interact in order to create Minsky-type boom-bust cycles. Fiscal policy and an internal lender of last resort can help sustain economic life under existing structural imbalances, though without eliminating the root causes of boom-bust patterns.
    Date: 2021–01
  92. By: Max Breitenlechner; Georgios Georgiadis; Ben Schumann
    Abstract: We quantify spillbacks from US monetary policy based on structural scenario analysis and minimum relative entropy methods applied in a Bayesian proxy structural vector-autoregressive model for the time period from 1990 to 2019. We find that spillbacks account for up to half of the overall slowdown in domestic real activity in response to a contractionary US monetary policy shock. Moreover, spillbacks materialise as stock market wealth effects impinge on US consumption, and as Tobin's q effects impinge on US investment. In particular, a contractionary US monetary policy shock depresses global equity prices, weighing on the value of US households' portfolios; and it depresses earnings of US firms through declines in foreign sales inducing them to cut back investment. Net trade does not contribute to spillbacks because US monetary policy shocks affect exports and imports similarly. Finally, spillbacks materialise through advanced rather than through emerging market economies, consistent with their relative importance in US foreign equity holdings and US firms' foreign demand.
    Keywords: US monetary policy, spillovers, spillbacks, Bayesian proxy structural VAR models
    JEL: F42 E52 C50
    Date: 2021–05
  93. By: Bouarar, Ahmed Chemseddine; Mouloudj, kamel
    Abstract: Predicting behaviors is particularly important in the field of environmental management because the environment is greatly influenced by human behavior. This paper aims to contribute to the development of an extended theory of planned behavior (TPB) and to gain some insight into the motives for employees' intentions to implement green practices in Algeria as a developing country. Data were collected from the convenience sample of 182 employees in three Algerian cities using a questionnaire survey. The results indicated that attitude toward behavior, subjective norms and environmental knowledge is positively and significantly affect employee's intention to implement green practices. The results also suggested that perceived behavior control had no significant effect. It is expected that the results of this paper can aid policymakers and stakeholders in drafting and implementing sustainable environmental regulations in the workplace.
    Keywords: Attitude; Environmental Knowledge; Perceived Behavior Control; Subjective Norms; Workplace.
    JEL: E24 M12 Q56
    Date: 2021–02–19
  94. By: Germinal G. Van
    Abstract: The purpose of this paper is to establish a positive correlation between property rights and economic freedom. It seeks to demonstrate that property rights lead to economic freedom. From a purely theoretical perspective, it has been assumed that greater access to property rights leads to economic freedom, consequently to a sustainable economic growth. To establish this correlation in the case of Africa, we applied the use of statistical tools to substantiate the validity of our economic theory. We mainly used a simple linear regression to ascertain our hypothesis.
    Keywords: Economic freedom, property rights, econometrics, macroeconomics, development economics, economic growth
    JEL: C33 C49 E22 O43 N27
    Date: 2020–10–10
  95. By: Chaoran Chen; Diego Restuccia; Raul Santaeulalia-Llopis
    Abstract: We assess the effects of land markets on misallocation and productivity both empirically and quantitatively. Exploiting variation from a land certification reform across time and space in Ethiopia, we find that certification facilitates rentals and improves agricultural productivity. We calibrate a quantitative macroeconomic model with heterogeneous household farms facing institutional costs to land markets using the micro panel data. The effect of a counterfactual reallocation from no rentals to efficient rentals increases zone-level agricultural productivity by 43 percent on average. While our estimated institutional costs are strongly associated with land certification across zones, there are nontrivial residual frictions to rental market activity, implying that land certification only partially captures the overall effects of rentals. A full certification reform accounts for just one-fourth of the overall productivity gains from land rentals. This result highlights the importance of comprehensive reforms alleviating frictions to land transactions beyond the granting of certificates.
    Keywords: Land, Markets, Rentals, Misallocation, Productivity, Inequality, Panel Data.
    JEL: E02 O10 O11 O13 O43 O55 Q15 Q18 Q24
    Date: 2021–02–06
  96. By: Simplice A. Asongu (Yaounde, Cameroon); Yann Nounamo (University of Douala, Cameroon); Henri Njangang (University of Dschang , Cameroon); Sosson Tadadjeu (University of Dschang , Cameroon)
    Abstract: The study examines how financial stability modulates the effect of inclusive intermediary education on female employment in the industry for the period 2008-2018 in Sub-Saharan Africa. The empirical evidence is based on Tobit, Ordinary Least Squares (OLS) and Quantile regressions. There are positive interactive or conditional effects between inclusive intermediary education and financial stability in the Tobit, OLS and bottom quantiles estimations. A net positive (negative) effect is apparent in the 10th quantitle (median) of female employment in the industry distribution. Implications are discussed.
    Keywords: inclusive education; financial sustainability, gender economic inclusion
    JEL: E23 F21 F30 L96 O55
    Date: 2021–02
  97. By: Paz-Pardo, Gonzalo
    Abstract: Earnings are riskier and more unequal for households born in the 1960s and 1980s than for those born in the 1940s. Despite the improvements in financial conditions, younger generations are less likely to be living in their own homes than older generations at the same age. By using a life-cycle model with housing and portfolio choice that includes flexible earnings risk and aggregate asset price risk, I show that changes in earnings dynamics account for a large part of the reduction in homeownership across generations. Lower-income households find it harder to buy housing, and as a result accumulate less wealth. JEL Classification: D31, E21, E24, G11, J31
    Keywords: earnings risk, housing demand, intergenerational inequality, wealth accumulation
    Date: 2021–02
  98. By: ; ; Benjamin S. Kay
    Abstract: We use credit card data from the Federal Reserve Board's FR Y-14M reports to study the impact of the COVID-19 shock on the use and availability of consumer credit across borrower types from March through August 2020. We document an initial sharp decrease in credit card transactions and outstanding balances in March and April. While spending starts to recover by May, especially for risky borrowers, balances remain depressed overall. We find a strong negative impact of local pandemic severity on credit use, which becomes smaller over time, consistent with pandemic fatigue. Restrictive public health interventions also negatively affect credit use, but the pandemic itself is the main driver. We further document a large reduction in credit card originations, especially to risky borrowers. Consistent with a tightening of credit supply and a flight-to-safety response of banks, we find an increase in interest rates of newly issued credit cards to less creditworthy borrowers.
    Keywords: COVID-19; Bank lending; Consumer credit; Credit cards; Credit supply; Household spending
    JEL: E21 G21 G51 I18
    Date: 2021–02–02
  99. By: Dave Altig (Federal Reserve Bank of Atlanta); Scott Baker (Northwestern University - Kellogg School of Management); Jose Maria Barrero (Stanford University - Department of Economics); Nick Bloom (Stanford University - Graduate School of Business); Phil Bunn (Bank of England); Scarlet Chen (Stanford University - Department of Economics); Steven J. Davis (University of Chicago - Booth School of Business); Brent Meyer (Federal Reserve Bank of Atlanta); Emil Mihaylov (Federal Reserve Bank of Atlanta); Paul Mizen (University of Nottingham - School of Economics); Nick Parker (Federal Reserve Bank of Atlanta); Thomas Renault (University Paris 1 Panthéon-Sorbonne); Pawel Smietanka (Bank of England); Greg Thwaites (University of Nottingham - School of Economics)
    Abstract: We consider several economic uncertainty indicators for the US and UK before and during the COVID-19 pandemic: implied stock market volatility, newspaper-based economic policy uncertainty, twitter chatter about economic uncertainty, subjective uncertainty about future business growth, and disagreement among professional forecasters about future GDP growth. Three results emerge. First, all indicators show huge uncertainty jumps in reaction to the pandemic and its economic fallout. Indeed, most indicators reach their highest values on record. Second, peak amplitudes differ greatly – from an 80 percent rise (relative to January 2020) in two-year implied volatility on the S&P 500 to a 20-fold rise in forecaster disagreement about UK growth. Third, time paths also differ: Implied volatility rose rapidly from late February, peaked in mid-March, and fell back by late March as stock prices began to recover. In contrast, broader measures of uncertainty peaked later and then plateaued, as job losses mounted, highlighting the difference in uncertainty measures between Wall Street and Main Street.
    Keywords: Forward-looking uncertainty measures, volatility, COVID-19, coronavirus
    JEL: D80 E22 E66 G18 L50
    Date: 2020
  100. By: Guilhem Cassan; Daniel Keniston; Tatjana Kleineberg
    Abstract: Workers' social identity affects their choice of occupation, and therefore the structure and prosperity of the aggregate economy. We study this phenomenon in a setting where work and identity are particularly intertwined: the Indian caste system. Using a new dataset that combines information on caste, occupation, wages, and historical evidence of subcastes’ traditional occupations, we show that caste members are still greatly overrepresented in their traditional occupations. To quantify the effects of caste-level distortions on aggregate and distributional outcomes, we develop a general equilibrium Roy model of occupational choice. We structurally estimate the model and evaluate counterfactuals in which we remove castes' ties to their traditional occupations: both through their direct preferences, and also via their parental occupations and social networks. We find that the share of workers employed in their traditional occupation decreases substantially. However, effects on aggregate output and productivity are very small–and in some counterfactuals even negative–because gains from a more efficient human capital allocation are offset by productivity losses from weaker caste networks and reduced learning across generations. Our findings emphasize the importance of caste identity in coordinating workers into occupational networks which enable productivity spillovers.
    JEL: E24 E71 J21 J62 O15
    Date: 2021–02
  101. By: Alan M. M. Leal (UFMG); Stefan D'Amato (UFMG); Igor V. M. Viveiros (UFMG)
    Abstract: This works aims at investigating the possible cointegration of the difference between the Brazilian and American real interest rates and the Brazilian capital netflows. Our main methodology is that of cointegrating processes, using spectral analysis. A cointegration process in the frequency domain allows us to test whether two series are of the same order of integration, even if this order is not 1, and given the lower order of the residuals of one series over the other, to affirm that a couple of series are cointegrated. We use those tests and we find that there is indeed cointegration between these two series and they also move similarly in the short-run.
    Keywords: capital netflows, interest rates, cointegration, spectral analysis.
    JEL: C22 E44 F32
    Date: 2021–02
  102. By: Park , Cyn-Young (Asian Development Bank); Tian , Shu (Asian Development Bank); Zhao , Bo (Asian Development Bank)
    Abstract: Since the launch of Bitcoin in 2009, the spectacular rise and fall of cryptocurrencies and the underlying blockchain technology have attracted global attention. While the application of distributed ledger technology presents great economic and business potential, significant volatility and speculative trading of cryptocurrencies have raised concerns over investor and consumer protection and prompted government interventions within their respective jurisdictions. This study focuses on the six Bitcoin trading markets comprising 99% of global trading volume as of February 2018. Adopting the event study methodology to newly compiled information about local regulation events, we find that the effect of government regulations on the Bitcoin price is only short-lived, but regulations discourage trading activities for a longer term in local markets. Interestingly, however, the repressive effect of domestic regulations on trading activities can be mitigated by the domestic financial market openness. Together, these findings are consistent with the view that Bitcoin markets are globally integrated and that, to uphold market integrity, international cooperation would be essential.
    Keywords: Bitcoin; cryptocurrency; financial market openness; international cooperation; regulation
    JEL: E61 G10 G14 G18
    Date: 2020–01–23
  103. By: Dietrich, Andreas; Eiglsperger, Martin; Mehrhoff, Jens; Wieland, Elisabeth
    Abstract: Consumer price inflation, as measured by the year-on-year increase in the Harmonised Index of Consumer Prices (HICP), is used by the European Central Bank (ECB) for assessing its monetary policy. The European Statistical System regularly introduces methodological improvements into this chain-linked price index in the linking month (December). If the outcome of such changes is a new series with a very different profile in December – either due to changed seasonality or one-off (sampling) effects – significant statistical distortions may arise when the new index series is chain-linked to the existing series. This paper explains the mechanism behind statistical distortions due to chain linking and provides some recent examples from European price statistics. Several alternative chain-linking practices, as well as recommendations for data users on how to deal with such statistical breaks in the HICP, are presented. JEL Classification: C43, E31
    Keywords: central bank communication, chain linking, Consumer prices, index aggregation methods, seasonality
    Date: 2021–02
  104. By: Simona Malovana; Martin Hodula; Zuzana Rakovska
    Abstract: We build two unique data sets describing research in central banks in Europe and the United States. These data sets offer a novel insight into central banks' research activities, the research topics covered, collaborations between central banks and with other institutions, gender diversity and research popularization, among other things. We identify significant heterogeneity among central banks from different regions. Nevertheless, we are also able to identify several important stylized facts. First, following the Global Financial Crisis, financial stability surpassed monetary policy as the leading research topic. Second, we document a substantial decline in papers with single authors, from 40% in 2000 to less than 20% in 2019. Still, research in central banks is highly concentrated, as the top 10% of authors contribute to about 50% of all central banks' research publications. Third, while central banks form enormous research networks, we find that most of this research collaboration is region-specific. Fourth, we document an increasing representation of women in research teams, but the gender gap persists and is closing only slowly. In this respect, small central banks are found to employ more female researchers than large ones. Fifth, major central banks with a well-established research tradition achieve the highest average impact factor, with a few research papers contributing the most to this average.
    Keywords: Central banking, collaboration, gender diversity, impact factor, network analysis, research, topic analysis
    JEL: A1 A3 D85 E58 O31
    Date: 2020–12
  105. By: Mahammad Allazov (Azerbaijan State Economics University, Faculty of Finance and Financial Institutions, Baku, Azerbaijan)
    Abstract: The paper assesses the impact of financial instruments in Azerbaijan on the stock market and joint stock companies and determines the effect of the stock market capitalization level on budget revenues and expenditures and the optimal threshold. A significant part of financial resources for investment purposes arises in the securities market, especially in the corporate securities sector. The main factor in improving the efficiency of the securities market should be increasing the volume of trading operations and creation of favorable conditions for this, increasing the variety and use of capital instruments, the issuance of new financial instruments. Based on the correlation between budget expenditures and budget revenues and the level of capitalization of the stock market with the application of economic-mathematical methods, the optimal level of capitalization of the stock market was determined. Based on the elasticity coefficient, it was determined that budget revenues and budget expenditures will change by 0.17% due to a 1% change in the capitalization level of the stock market in Azerbaijan. As a result of economic-mathematical methods, it was determined that a 1% increase in the capitalization level of the stock market in Azerbaijan results in a 0.17% increase in GDP.
    Keywords: : Financial markets, stock markets, financial instruments, stock market efficiency
    JEL: D53 E44 G15
    Date: 2020–09
  106. By: ; Tom Phelan
    Abstract: In this paper we explore some of the benefits of using the finite-state Markov chain approximation (MCA) method of Kushner and Dupuis (2001) to solve continuous-time optimal control problems. We first show that the implicit finite-difference scheme of Achdou et al. (2017) amounts to a limiting form of the MCA method for a certain choice of approximating chains and policy function iteration for the resulting system of equations. We then illustrate the benefits of departing from policy function iteration by showing that using variations of modified policy function iteration to solve income fluctuation problems in two and three dimensions can lead to an increase in the speed of convergence of more than an order of magnitude. We then show that the MCA method is also well-suited to solving portfolio problems with highly correlated state variables, a setting that commonly occurs within general equilibrium models with financial frictions and for which it is difficult to construct monotone (and hence convergent) finite-difference schemes.
    Keywords: Dynamic programming; financial frictions
    JEL: C63 E00 G11
    Date: 2021–02–10
  107. By: Dzingai Francis Chapfuwa (University of Johannesburg, Faculty of Economics and Econometrics, Johannesburg, South Africa)
    Abstract: The aim of this study is to examine the role of institutions in determining Foreign Direct Investment (FDI) flows into the Southern African Development Community (SADC) region. Given the financing gap within SADC and the role of FDI in covering the gap, there is a need for the region to attract more FDI. Traditionally, the most popular instrument for attracting FDI is through fiscal incentives. However, over the years this has failed to attract or deliver the expected levels of FDI inflows into the SADC region. The study applies a panel modelling approach (Fixed Effects Model) for all the SADC countries using annual data from 1996 to 2016. However, to deal with the problem of endogeneity, the study further applies the 2 Stage Least Squares (2SLS) methodology. For robustness check, Dynamic General Method of Moments Technique (GMM) is applied. The results of the model indicated that institutions are important in determining the flow of FDI into the SADC region. However, where the host countries have got natural strategic resources, the role of institutions is overshadowed. The market size was also found to be insignificant. Furthermore, the institutional variables affect FDI inflows differently and one of the major findings is that democratic accountability does not matter in influencing the flow of FDI into the SADC region.
    Keywords: Foreign Direct Investment, Institutions, SADC, MNCs
    JEL: E E02
    Date: 2020–06
  108. By: Christopher Blattman; Gustavo Duncan; Benjamin Lessing; Santiago Tobón
    Abstract: Gangs govern millions worldwide. Why rule? And how do they respond to states? Many argue that criminal rule provides protection when states do not, and that increasing state services could crowd gangs out. We began by interviewing leaders from 30 criminal groups in Medellín. The conventional view overlooks gangs’ indirect incentives to rule: governing keeps police out and fosters civilian loyalty, protecting other business lines. We present a model of duopolistic competition with returns to loyalty and show under what conditions exogenous changes to state protection causes gangs to change governance levels. We run the first gang-level field experiment, intensifying city governance in select neighborhoods for two years. We see no decrease in gang rule. We also examine a quasi-experiment. New borders in Medellín created discontinuities in access to government services for 30 years. Gangs responded to greater state rule by governing more. We propose alternatives for countering criminal governance.
    JEL: C93 E26 H11 K42 O17
    Date: 2021–02
  109. By: Bruno de Menna (IEP Toulouse - Sciences Po Toulouse - Institut d'études politiques de Toulouse, LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT1 - Université Toulouse 1 Capitole - UT2J - Université Toulouse - Jean Jaurès - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville)
    Abstract: Financial theory indicates that low interest rates hamper credit risk and profitability, two interrelated components of banks' balance sheets. Using a simultaneous equations framework, we investigate the effects of euro area monetary easing on cooperative banks' performance depending on their commitment to relationship lending. First, we find no evidence of a risk-taking channel of monetary policy for consolidated cooperative banks. Further, the profitability of relationship-based cooperative banks is more severely hit in a low interest rate environment than that of consolidated cooperative banks. This raises issues about the middle-term durability of relationship lending when rates hold "low-for-long". Finally, non-cooperative banks and relationship-based cooperative banks both increase credit risk under accommodating monetary policy. However, we suggest that these similarities do not occur for the same reasons: while non-cooperative banks prioritize profitability through higher credit risk when interest rates fall, relationship-based cooperative banks instead increase their capital buffers to ensure credit access to their customers, which mainly comprise small businesses and high-risk firms.
    Keywords: Monetary policy,Credit risk,Profitability,Cooperative banks,Relationship lending
    Date: 2021–02–11
  110. By: Ole Winckler Andersen; Henrik Hansen; John Rand
    Abstract: This paper clarifies the various definitions of additionality currently in use, and explores the relationship between additionality and key evaluation terms, such as impact and causality. It concludes that additionality should be assessed both ex ante and ex post, and that the presence of additionality will depend on institutional structures and on how different public and private interests are addressed. The paper further argues that the relevance of evaluation methods will depend not only on the applied financial and non-financial instruments but also on the types and dimensions of additionality to be evaluated. Several examples of different approaches to assessing additionality are analysed.The analysis provides a useful foundation for thinking through these issues, and will be of interest to both evaluation and blended finance actors.This paper is the second in a series of three working papers from the OECD/DAC EvalNet Working Group on Evaluating Blended Finance.
    Keywords: additionality, assesment, blended finance, evaluation methods, impact, ODA, private finance
    JEL: E43 O16 Q01
    Date: 2021–02–17
  111. By: David R. Agrawal (University of Kentucky, Martin School of Public Policy & CESifo); Dirk Foremny (Universitat de Barcelona & IEB & CESifo); Clara Martínez-Toledano (Columbia Business School)
    Abstract: This paper analyzes the effect of wealth taxation on mobility and the consequences for tax revenue and wealth inequality. We exploit the unique decentralization of the Spanish wealth tax system in 2011—after which all regions levied positive tax rates except for Madrid—using linked administrative wealth and income tax records. We find that five years after the reform, the stock of wealthy individuals in the region of Madrid increases by 10% relative to other regions, while smaller tax differentials between other regions do not matter for mobility. We rationalize our findings with a theoretical model of evasion and migration, which suggests that evasion is the mechanism most consistent with all of the mobility response being driven by the paraíso fiscal. Combining new subnational wealth inequality series with our estimated elasticities, we show that Madrid’s status as a tax haven reduces the effectiveness of raising tax revenue and exacerbates regional wealth inequalities.
    Keywords: Wealth Taxes, Mobility, Inequality, Enforcement, Fiscal Decentralization, Tax Havens, Evasion
    JEL: E21 H24 H31 H73 J61 R23
    Date: 2020
  112. By: Weshah Razzak; E. M. Bentour
    Abstract: We depart from the empirical literature on testing the finance led growth. Instead of regression analysis, we use a semi-endogenous growth model, which identifies two productivity growth paths: a steady state and a transitional path. Steady state growth is anchored by population growth. In the transitional dynamic, productivity growth depends on the typical factors growth rates, and excess knowledge, which is the deviation of TFP in the financial sector from steady state growth. TFP is endogenous. It is an increasing function of global research efforts, which is driven by the proportion of population in developed countries that is engaged in research in finance, and the stock of human capital. We find positive evidence for this theory of TFP in the data of ten developed European countries and the United States. We also found some evidence for finance-led-growth, albeit weaker after the past Global Financial Crisis.
    Keywords: Semi endogenous growth, finance, productivity growth
    JEL: O40 E10
    Date: 2020–05–05
  113. By: Michaël Assous (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique, UL2 UFR SEG - Université Lumière - Lyon 2 - UFR de Sciences économiques et de gestion - UL2 - Université Lumière - Lyon 2); Vincent Carret (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique, UL2 UFR SEG - Université Lumière - Lyon 2 - UFR de Sciences économiques et de gestion - UL2 - Université Lumière - Lyon 2)
    Abstract: "This article provides a comprehensive view of Tinbergen's macrodynamic models during the 1930s and early 1940s, to show how the economist's concerns evolved from problems of instability to the idea of reaching higher positions of equilibria. Starting from the ideas developed around the first meetings of the Econometric Society, we show that Tinbergen built his own macrodynamic model with the aim to consider several problems of economic policy, in particular the effects of public expenditures and changes in money wages. One of the possibilities that Tinbergen underlined throughout his models was the threat of complete or partial collapse stemming from the presence of multiple equilibria. From the mid-1930s, Tinbergen gained confidence in the power of economic policies to stabilize the economy, and his attention shifted to the final position of equilibrium, and the policies that could improve it. His most well-known models developed for the League of Nations addressed that issue and showed how the final equilibrium may be shifted by "permanent" policies. We argue that Tinbergen also considered the case that the economy could be lifted by temporary policies in the presence of multiple equilibria. Based on papers published by Tinbergen in Dutch, French and German that for the most part have never been translated, this article offers a new perspective to the development of early macrodynamic modeling. From this literature the originality, breadth and pioneering ideas of Tinbergen clearly come out and explain many of his sometimes paradoxical policy positions."
    Keywords: economic policy,Tinbergen,equilibria,macrodynamics,stability
    Date: 2021–02–05
  114. By: Grégoire Rota-Graziosi (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Emilie Caldeira (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Alou Adessé Dama (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Hélène Djoufelkit (AFD - Agence française de développement); Hélène Ehrhart (AFD - Agence française de développement)
    Abstract: A partir d'une base de données concernant 192 pays de 1990 à 2015, l'analyse empirique menée vise à mesurer la qualité de la dépense publique dans les pays en développement. La méthodologie proposée ici comprend trois étapes : (1) la construction et le calcul d'un indicateur unidimensionnel de résultats des dépenses publiques, (2) la mesure de l'efficience des dépenses publiques fondée sur une approche à frontières stochastiques et utilisant l'indicateur unidimensionnel de résultats comme output dans l'estimation et (3) une analyse de quelques effets de certains facteurs sur les scores d'efficience obtenus, avec une attention particulière portée à l'endettement. Une application en ligne a été élaborée, disponible à l'adresse : Elle permet de télécharger les données, répliquer les résultats et d'en développer d'autres en modifiant certaines pondérations, la période ou les pays étudiés ou en intégrant des données complémentaires. L'Afrique et l'Asie du Sud accusent un certain retard avec respectivement des scores d'efficience de 0,55 et 0,66, tandis que l'efficience moyenne sur la période est de 0,71. L'Asie du Sud, le Moyen Orient et l'Amérique latine sont au même niveau tandis que le classement est dominé par des pays européens et d'Amérique du Nord. L'analyse par niveau de revenu montre une amélioration de l'efficience à mesure que le niveau de revenu du pays augmente : les pays à faible revenu sont ceux qui ont le niveau d'efficience les plus faibles. Les pays de l'OCDE sont caractérisés par une dispersion faible en général. Les pays à revenu élevé non-membre de l'OCDE ont également de bons scores mais sont caractérisés par une plus grande hétérogénéité, en particulier pour les pays du Moyen Orient, de l'Amérique Latine et des Caraïbes. Dans toutes les régions du monde et quel que soit le niveau de revenu, l'indicateur de résultats s'est amélioré depuis 1990.
    Keywords: Dépenses publiques,Macroéconomie,Politiques fiscales,Politique monétaire,Analyse économique,Pays en developpement
    Date: 2021–02

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