nep-mac New Economics Papers
on Macroeconomics
Issue of 2021‒04‒12
77 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Inflation? It's Import Prices and the Labor Share! By Lance Taylor; Nelson H. Barbosa-Filho
  2. Household debt, aggregate demand, and instability in a Stock-Flow model By Francesco Ruggeri
  3. How can household wealth be used to stimulate economic growth. The Italian example. By De Koning, Kees
  4. Corralling Expectations: The Role of Institutions in (Hyper)Inflation By Hartwell, Christopher A; Szybisz, Martin Andres
  5. Procyclical Leverage and Crisis Probability in a Macroeconomic Model of Bank Runs By Daisuke Ikeda; Hidehiko Matsumoto
  6. Pandemics and Aggregate Demand: a Framework for Policy Analysis By Peter Flaschel; Giorgos Galanis; Daniele Tavani; Roberto Veneziani
  7. Liquidity management and monetary transmission: Empirical analysis for India By Vikas Chamal; Ashima Goyal
  8. How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis By Yannis Dafermos; Maria Nikolaidi
  9. Monetary-Fiscal policies and stock market performance: Evidence from linear ARDL framework By Aref Emamian
  10. It's Worse than "Reverse" The Full Case Against Ultra Low and Negative Interest Rates By William White
  11. Debt-led growth and its financial fragility: an investigation into the dynamics of a supermultiplier model By Joana David Avritzer
  12. Accounting for Limited Commitment between Spouses When Estimating Labor-Supply Elasticities By Bredemeier, Christian; Gravert, Jan; Juessen, Falko
  13. The Voice of Monetary Policy By Yuriy Gorodnichenko; Tho Pham; Oleksandr Talavera
  14. Sectoral slowdowns in the UK: Evidence from transmission probabilities and economic linkages By Eva Janssens; Robin Lumsdaine
  15. The Effect of Macroeconomic Uncertainty on Household Spending By Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Geoff Kenny; Michael Weber
  16. Unit Cost Expectations and Uncertainty: Firms' Perspectives on Inflation By Brent Meyer; Nicholas B. Parker; Xuguang Sheng
  17. Five Years of Inflation Targeting Without Economic Growth: What Should Be Changed The Case of Russia By Gasanov, Oscar
  18. Inflation, endogenous quality increment, and economic growth By Zheng, Zhijie; Hu, Ruiyang; Yang, Yibai
  19. Unit Cost Expectations and Uncertainty: Firms' Perspectives on Inflation By Brent H. Meyer; Nicholas B. Parker; Xuguang Simon Sheng
  20. Policy Implications of Non-Linear Effects of Tax Changes on Output By Samara R. Gunter; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
  21. How do credit market frictions affect carbon cycles? an estimated DSGE model approach By Chan, Ying Tung; Zhao, Hong
  22. Влияние шоков мировой деловой активности, предложения нефти и спекулятивных нефтяных шоков на экономику РФ By Lomonosov, Daniil; Polbin, Andrey; Fokin, Nikita
  23. Dancing Alone or Together: The Dynamic Effects of Independent and Common Monetary Policies By Povilas Lastauskas; Julius Stakenas
  24. A Term Structure Interest Rate Model with the Exit Time from the Negative Interest Rate Policy By Kentaro Kikuchi
  25. Tributación en Colombia: Una aproximación teórica y empírica de la Curva de Laffer By Juan Pablo, Herrera Saavedra; Juan Camilo, Villar Otálora; Jacobo, Campo Robledo
  26. Can Covid-19 Induce Governments to Implement Tax Reforms in Developing Countries? By Sanjeev Gupta; João Tovar Jalles
  27. Global financial cycles and exchange rate forecast: A factor analysis By Raheem, Ibrahim
  28. How long does a generation last? Assessing the relationship between infinite and finite horizon dynamic models By Guerrazzi, Marco
  29. The Alpha Beta Gamma of the Labor Market By Victoria Gregory; Guido Menzio; David Wiczer
  30. Economic performance under different monetary policy frameworks By Cobham, David; Macmillan, Peter; Mason, Connor; Song, Mengdi
  31. Unleashing the full potential of the Turkish business sector By Dennis Dlugosch; Rauf Gönenç; Yusuf Kenan Bağır; Hüzeyfe Torun; Eun Jung Kim
  32. Economic policy uncertainty: are there regional and country correlation? By Ozili, Peterson Kitakogelu
  33. Welfare Consequences of Sustainable Finance By Harrison Hong; Neng Wang; Jinqiang Yang
  34. Stock exchange market activities and Economic Development: Evidence from the Nigerian economy By Adesanya, Babatunde Moses; Adediji, Adebisi Moses; Okenna, Nwabueze Prince
  35. Dispersion in Financing Costs and Development By Tiago V. Cavalcanti; Joseph P. Kaboski; Bruno S. Martins; Cezar Santos
  36. Mortgage Borrowing and the Boom-Bust Cycle in Consumption and Residential Investment By Xiaoqing Zhou
  37. From Mancession to Shecession: Women's Employment in Regular and Pandemic Recessions By Titan Alon; Sena Coskun; Matthias Doepke; David Koll; Michèle Tertilt
  38. Labor Rationing By Emily Breza; Supreet Kaur; Yogita Shamdasani
  39. The Money Value Problem: Convertibility & Stable Prices Revisited By Patterson, David
  40. The Science and Art of Communicating Fan Chart Uncertainty: The case of Inflation Outcome in Sierra Leone By Jackson, Emerson Abraham; Tamuke, Edmund
  41. 新型コロナの影響と政策対応への認識 : 個人サーベイに基づく観察 By 森川, 正之
  42. Ecological Fiscal Transfers and State-level Budgetary Spending in India: Analysing The Flypaper Effects in India. By Kaur, Amandeep; Mohanty, Ranjan Kumar; Chakraborty, Lekha; Rangan, Divy
  43. 電子商取引と企業パフォーマンス、経済のダイナミズム : 『経済センサス-活動調査』調査票情報による実証分析 By 金, 榮愨; 権, 赫旭; 深尾, 京司; 池内, 健太
  44. L’Economie Informelle en Algérie By BENABBOU, Hassiba; BELBACHIR, Gouraya; BELBACHIR, Hadjira
  45. A Global Joint Pricing Model of Stocks and Bonds Based on the Quadratic Gaussian Approach By Kentaro Kikuchi
  46. The Waning Pandemic and the U.S. Economy By James B. Bullard
  47. Bullard Discusses Economic Outlook, Federal Debt, Currency Competition By James B. Bullard
  48. Predicting Inflation with Neural Networks By Livia Paranhos
  49. Unconventional Monetary Policy and Bond Market Connectedness in the New Normal By Umut Akovali; Kamil Yilmaz
  50. Beliefs asymmetry and price stability in a cobweb model By Berardi, Michele
  51. When and how do business shutdowns work? Evidence from Italy’s first COVID-19 wave By Gabriele Ciminelli; Sílvia Garcia-Mandicó
  52. Assessing the Economic Impact of Lockdowns in Italy: A Computational Input-Output Approach By Severin Reissl; Alessandro Caiani; Francesco Lamperti; Mattia Guerini; Fabio Vanni; Giorgio Fagiolo; Tommaso Ferraresi; Leonardo Ghezzi; Mauro Napoletano; Andrea Roventini
  53. Internal Migration and Labor Market Outcomes in Indonesia By Tushar Bharati; Wina Yoman
  54. Can Pakistan Raise More External Debt? A Fiscal Reaction Approach By Mansoor, Sadia; Baig, Aqeel; Lal, Irfan
  55. Monetary Policy Spillover into a Developing Country When the US Federal Fund Rate Rises: Evidence on a Bank Lending Channel By Daiju Aiba
  56. The Economic Complexity Index (ECI) and Output Volatility: High vs Low Income Countries By Marthinus C. Breitenbach; Carolyn Chisadza; Matthew Clance
  57. Rethinking the Role of the Representativeness Heuristic in Macroeconomics and Finance Theory By Roman Frydman; Morten Nyboe Tabor
  58. Bank Supervisory Goals versus Monetary Policy Implementation By Larry D. Wall
  59. Effects o Fiscal Policy on Credit Markets By Auerbach, Alan J; Gorodnichenko, Yuriy; Murphy, Daniel
  60. Fiscal Stimulus of Last Resort By Alessandro Piergallini
  61. Small Business under the COVID-19 Crisis: Expected Short- and Medium-Run Effects of Anti-Contagion and Economic Policies By Kawaguchi, Kohei; Kodama, Naomi; Tanaka, Mari
  62. Who Pays What First? Debt Prioritization during the COVID Pandemic By William J. Arnesen; Jacob Conway; Matthew Plosser
  63. Sign Systems of Lust and Slavery. Money as the consecration of bread and wine By Hanappi, Hardy
  64. 新型コロナ危機と経済政策 By 森川, 正之
  65. A Balance-Sheet Approach to Fiscal Sustainability By Eduardo Levy Yeyati; Federico Sturzenegger
  66. What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies By Walter Paternesi Meloni; Antonella Stirati
  67. Pandemics, Incentives, and Economic Policy: A Dynamic Model By Roberto Chang; Humberto Martínez; Andrés Velasco
  68. Are close-knit networks good for employment? By María Paz Espinosa; Jaromír Kovárík
  69. The Macroeconomic Impacts of Entitlements By Ateeb Akhter Shah Syed; Kaneez Fatima; Riffat Arshad
  70. The Recovery from the Great Recession: Did the FOMC Learn the Right Lessons? By Hetzel, Robert
  71. Building an Awareness Model of Emergency Supplies Dispatching for Tropical Cyclone Disasters By Guoyou Yue
  72. The Technology and Knowledge Spillover Effects of FDI on Labour Productivity By Norhanishah Mohamad Yunus
  73. Fiscal Policies to Address Climate Change in Asia and the Pacific; Opportunities and Challenges By Era Dabla-Norris; James Daniel; Masahiro Nozaki; Cristian Alonso; Vybhavi Balasundharam; Matthieu Bellon; Chuling Chen; David Corvino; Joey Kilpatrick
  74. “Excess Savings” Are Not Excessive By ; Gauti B. Eggertsson; Giorgio E. Primiceri; Andrea Tambalotti
  75. A general methodology to measure labour market dynamics By Davide Fiaschi; Cristina Tealdi
  76. Optimal Product Design: Implications for Competition and Growth under Declining Search Frictions By Guido Menzio
  77. Drivers of the Tax Effort: Evidence from a Large Panel By Victor Barros; João Tovar Jalles; Joaquim Miranda Sarmento

  1. By: Lance Taylor (New School for Social Research); Nelson H. Barbosa-Filho (Getulio Vargas Foundation, Brazil)
    Abstract: Recognizing that inflation of the value of output and its costs of production must be equal, we focus on a cost-based macroeconomic structuralist approach in contrast to micro-oriented monetarist analysis. For decades the import and profit shares of cost have risen, while the wage share has declined to around 50% with money wage increases lagging the sum of growth rates of prices and productivity. Conflicting claims to income are the underlying source of inflationary pressure. Inflation affects income (labor's spending power) and wealth. Monetarist theory around 1900 concentrated on the latter (Bryan and the ''Cross of Gold)'' leading to the standard Laffer curve. It was replaced by the Friedman-Phelps model which has incorrect dynamics (labor payments do not fall during an expansion, they go up). Samuelson and Solow introduced a version of the Phillips curve that violates macroeconomic accounting. Rational expectations replaced Friedman but was immediately falsified by output drops after the Volcker shock treatment around 1980. There followed a complicated transition from rational expectations to inflation targeting, anchored by economists' misunderstanding of the physical meaning of ergodicity and ontological blindness. It did not help that the real balance effect is irrelevant because money makes up a small part of wealth. Rather than issuing veiled threats of disaster if its policy advice is not followed, the Fed now announces inflation targets which it cannot meet. Contemporary structuralist theory suggests that conflicting income claims set the inflation rate. Firms can mark up costs but workers have latent bargaining power over the labor share that they can exercise. Import costs and policy repercussions complicate the picture, but a simple vector error correction model and visual analysis suggest that money wages would have to grow one percentage point faster than prices plus productivity for several years if the Fed is to meet a three percent inflation target. The results pose a Biden policy trilemma: (i) the only path toward a more egalitarian size distribution of income is through a rising labor share (money wage growth exceeds price plus productivity growth), (ii) which would provoke faster inflation with feedback to rising interest rates, and (iii) the resulting asset price deflation likely facing political resistance from Wall Street and affluent households.
    Keywords: Cost-based inflation, structuralist inflation, conflicting claims
    JEL: E31 E32
    Date: 2021–01–20
  2. By: Francesco Ruggeri (Department of Social Sciences and Economics, Sapienza University of Rome)
    Abstract: This paper aims to study the effect of the increase in households’ debt on the economy. Starting from some empirical facts we develop a theoretical model that tries to replicate some of the dynamics in place in Anglo-Saxon economies before the financial crisis. In the model, we emphasize the role played by changing behavioural attitudes towards consumption and demand for loans by households that have led to an increase in financial instability in some advanced economies. The model is able to show the Janus-like faces of households’ debt: borrowing to finance consumption increases the level of aggregate demand and income, as in the standard Keynesian model and the multiplier-accelerator model by Samuelson, but at the same time fresh borrowing increases the level of the stock of debt. The stock of debt puts contractionary pressure on the aggregate demand because the repayment affects money balances and transfers resources from the high propensity to spend agents, to the low propensity to spend agents. The interaction of these phenomena creates a “predator-prey” type model in which fresh borrowing increases income, which feeds the ability to borrow more and consume; at the same time, the stock of accumulated debt “preys” on income due to the contractionary forces of the repayment mechanism.
    Keywords: households’ debt, consumption, credit supply, financial instability.
    JEL: E02 E12 E21 E32
    Date: 2021–03
  3. By: De Koning, Kees
    Abstract: The Eurozone countries share a common currency: the Euro operated and managed by the European Central Bank (ECB). The implications are that savings and wealth levels are also denominated in the same currency. Does this mean that wealth factors like home equity and pension savings can be transferred between countries? The simple answer is that homes are located in a particular country and cannot be moved between countries. Savings for future pensions are also made in a particular country, but the investments can be spread over different categories of investments and over different countries. Money is mobile, but the saver usually is not. In developed countries, like Italy, home equity and pension savings represent a multiple of annual Government revenues. In 2019 pension savings in Italy were €656.6 billion and the country’s total home equity can be estimated at €4.3 trillion. With Italy’s government revenues in 2019 of €758 billion, the fact that nearly €5 trillion of wealth in aforementioned two categories combined, represents a multiple of 6.6 times the Italian government annual revenues. In 2019, Italy’s government revenues were 42.4% of GDP, ranking it as the fifth highest country out of 35 countries in the OECD ranking of government revenues compared to GDP. On the other hand, households mortgage borrowings were low and stood at 22% of GDP in 2019, or at nearly €390 billion. 72.4% of Italians own their home. The real question Italy might need to consider is: “How can the Italian economy be stimulated without continuing to rely on more government funding, especially when this funding, due to the corona crisis, has already reached the level of around 135% of GDP?” A possible answer lies in a different Quantitative Easing type: QEHE, which stands for “Quantitative Easing Home Equity”. This system does not need more government borrowing; instead it relies on homeowners to convert some of their home equity savings into cash on a temporary basis. It may need the European Central Bank to co-operate as the currency in use is the Euro. How such system of a: “Savings Release and a Savings Replace Method” could work will be set out in this paper.
    Keywords: Economic growth; Italy; Households; Turning savings into expenditure; Home equity; Quantitative Easing Home Equity QEHE; Government expenditure funding
    JEL: D1 D11 D12 D14 D19 E2 E21 E24 E5 E6
    Date: 2021–01–31
  4. By: Hartwell, Christopher A; Szybisz, Martin Andres
    Abstract: Changes in prices and especially in aggregate price levels are subjected to complex dynamics and extreme endogeneity, as expectations, current conditions, policies, and the rules of the game combine to form inflationary outcomes. This paper explores how inflationary expectations are set – and limited – via an exploration of the role of institutions in corralling expectations. Using a continuous time formulation of the second derivative of the price level, we introduce expectations and institutional related variables to understand how expectations can become unstable. Testing the model on monthly institutional and macroeconomic data for several countries, we find that one institution in particular, property rights, keeps inflationary expectations in check and stops high inflation from becoming hyperinflation. In a situation where property rights have broken down, however, expectations are allowed to roam free and quickly become unstable.
    Keywords: Institutions; property rights; expectations; inflation
    JEL: E02 E31 E42 E52
    Date: 2021–01–27
  5. By: Daisuke Ikeda (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:; Hidehiko Matsumoto (Economist, Institute for Monetary and Economic Studies, Bank of Japan (currently, Assistant Professor, National Graduate Institute for Policy Studies, E-mail:
    Abstract: A macroprudential perspective posits a link between bank fundamentals and the likelihood of banking crises. We articulate this link by developing a dynamic general equilibrium model that features bank runs in a global game framework. The model endogenizes the probability of bank runs as a function of bank fundamentals, leverage in particular. The model generates procyclical leverage and shows that credit growth tends to precede banking crises, replicating the empirical finding of Schularick and Taylor (2012). Countercyclical leverage restrictions can improve social welfare by reducing the crisis probability despite dampening economic activities in normal times.
    Keywords: Banking crises, global games, macroprudential policy
    JEL: E32 E44 G21 G28
    Date: 2021–03
  6. By: Peter Flaschel; Giorgos Galanis; Daniele Tavani; Roberto Veneziani
    Abstract: This paper studies the interaction between epidemiological dynamics and the dynamics of economic activity in a demand-driven model in the structuralist/post-Keynesian tradition. On the one hand, rising aggregate demand increases the contact rate and therefore the probability of exposure to a virus. On the other hand, rising infection lowers aggregate demand because of reduced household spending. The resulting framework is well-suited for policy analysis through numerical exercises. We show that, first, laissez-faire gives rise to sharp fluctuations in demand and infections before herd immunity is achieved. Second, absent any restrictions on economic activity, physical distancing measures have rather limited mitigating effects. Third, lockdowns are effective, especially at reducing death rates while buying time before a vaccine is available, at the cost of a slightly more pronounced downturn in economic activity compared with alternative policies. This casts some doubt on the so-called “lives versus livelihood” policy trade-off. However, we also highlight the importance of policies aimed at mitigating the effects of the epidemic on workers’ income.
    Keywords: pandemic, aggregate demand, distribution, public policy
    JEL: E12 E25 E60 H00 I10
    Date: 2021–01
  7. By: Vikas Chamal (Indira Gandhi Institute of Development Research); Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: A change in monetary operating procedures provides a natural experiment we use to evaluate first whether Indian monetary policy transmission is better when durable liquidity is in surplus or when it is in deficit; second is it better with interest rates as the policy instrument or quantity of money or a mixture of the two. After showing our period of analysis can be divided into two liquidity regimes, we estimate separate structural vector auto-regressions for the financial and real sector, as well as SVARs for the whole period with alternative operating instruments. Monetary transmission from the repo rate was better during the period the liquidity adjustment facility (LAF) was in surplus with the central bank in absorption mode denoting excess durable liquidity. Pass through was faster and the repo rate had a greater influence on other variables. The impact of the rate on output gap exceeds that on inflation. The weighted average call money rate was found to outperform others as the operating target. Monetary policy has evolved so that policy rates are more effective in transmission compared to money supply, but best results are when durable liquidity is also in surplus. The results suggest keeping the LAF in deficit mode over 2011-19 was not optimal.
    Keywords: Monetary transmission, liquidity deficit and surplus, repo rate, instrument, operating target
    JEL: E52 E58 E65
    Date: 2021–03
  8. By: Yannis Dafermos; Maria Nikolaidi
    Abstract: Using an ecological macrofinancial model, we explore the potential impact of the ‘green supporting factor’ (GSF) and the ‘dirty penalising factor’ (DPF) on climate-related financial risks. We identify the transmission channels by which these green differentiated capital requirements (GDCRs) can affect credit provision and loan spreads, and we analyse these channels within a dynamic framework in which climate and macrofinancial feedback effects play a key role. Our main findings are as follows. First, GDCRs can reduce the pace of global warming and decrease thereby the physical financial risks. This reduction is quantitatively small, but is enhanced when the GSF and the DPF are implemented simultaneously or in combination with green fiscal policies. Second, the DPF reduces banks' credit provision and leverage, making them less fragile. Third, both the DPF and the GSF generate some transition risks: the GSF increases bank leverage because it boosts green credit and the DPF increases loan defaults since it reduces economic activity. These effects are small in quantitative terms and are attenuated when there is a simultaneous implementation of the DPF and the GSF. Fourth, fiscal policies that boost green investment amplify the transition risks of the GSF and reduce the transition risks of the DPF; the combination of green fiscal policy with the DPF is thereby a potentially effective climate policy mix from a financial stability point of view.
    Keywords: : stock-flow consistent modelling, climate change, financial stability, green financial regulation
    JEL: E12 E44 G18 Q54
    Date: 2021–03
  9. By: Aref Emamian (School of Business and Economics, Universiti Putra Malaysia, UPM Serdang, 43400, Selangor, Malaysia Author-2-Name: Nur Syazwani Mazlan Author-2-Workplace-Name: School of Business and Economics, Universiti Putra Malaysia, UPM Serdang, 43400, Selangor, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - To explore the impacts of monetary and fiscal policies, the appropriateness of both policies and how the stock market is affected by their adoption and implementation in the United States (US). Hence, this study aims to determine the short and long run relationships between monetary and fiscal policies and stock market performance as well as establish potential factors and policies contributing to the highs and lows. Methodology/Technique - We use autoregressive distribution lag (ARDL) developed by Pesaran et al. (2001) to achieve the objective. In this study, annual time series data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, was used. Findings - The results show that both policies play a significant role in the stock market. We find a significant positive effect of real gross domestic product (RGDP) and the interest rate on the US stock market in the long run and significant negative relationship effect of the consumer price index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Novelty - As the US stock market heavily depends on the Tax Revenue in the short run, any changes in TR can impact on the US stock market considerably. Thus, shareholders can benefit from these results when they look at macroeconomic data in order to enhance their investment strategy. Type of Paper - Empirical.
    Keywords: ARDL; monetary policy; fiscal policy; the stock market in the United States.
    JEL: E52 E62 G18
    Date: 2021–03–31
  10. By: William White (Economic Development and Review Committee, OECD)
    Abstract: It is becoming increasingly accepted that lowering interest rates might at some point prove contractionary (the 'reversal interest rate') if lower lending margins cut the supply of bank loans. This paper argues that there are many other reasons to question reliance on monetary policy to provide economic stimulus, particularly over successive financial cycles. By encouraging the issue of debt, often for unproductive purposes, monetary stimulus becomes increasingly ineffective over time. Moreover, it threatens financial stability in a variety of ways, it leads to real resource misallocations that lower potential growth, and it finally produces a policy 'debt trap' that cannot be escaped without significant economic costs. Debt-deflation and high inflation are both plausible outcomes.
    Keywords: negative interest rates, yield curve control, financial stability, banking supervision, shadow banking.
    JEL: E40 E43 E44
    Date: 2021–03–05
  11. By: Joana David Avritzer (Department of Economics, Connecticut College and IRID-UFRJ)
    Abstract: This paper discusses the financial sustainability of demand-led growth models. We assume a supermultiplier growth model in which household consumption is the autonomous component of demand that drives growth and discuss the financial sustainability of such dynamics of growth from the perspective of the working households. We show that for positive rates of growth the model converges to an equilibrium where worker households are accumulating debt and not wealth. We also show that when the economy is growing at a rate that is positive, and between 2% and 4.4%, the dynamics of the model also implies that households will not be able to service their debt at the point of full long run equilibrium. We then conclude that this household debt-financed consumption pattern of economic growth generates an internal dynamic that leads to financial instability.
    Keywords: Household debt dynamics, debt-financed consumption, growth and financial fragility
    JEL: E11 E12 E21 O41
    Date: 2021–03
  12. By: Bredemeier, Christian (University of Wuppertal); Gravert, Jan (University of Wuppertal); Juessen, Falko (University of Wuppertal)
    Abstract: The Frisch elasticity of labor supply can be estimated by regressing hours worked on the hourly wage rate, controlling for consumption of the individual worker. However, most household panel surveys contain consumption information only at the household level. We show that proxying individual consumption by household consumption biases estimated Frisch elasticities downward as limited commitment in the household induces individual consumption to behave differently from household consumption. We develop an improved estimation approach that eliminates this bias by exploiting information on the composition of household consumption to infer its distribution. Using PSID data, we estimate Frisch elasticities of about 0.7.
    Keywords: labor-supply elasticity, limited commitment, intra-household decision making, couple households, consumption
    JEL: D13 D15 J12 J22 E21 E24
    Date: 2021–03
  13. By: Yuriy Gorodnichenko (University of California, Berkeley); Tho Pham (Department of Economics, University of Reading); Oleksandr Talavera (University of Birmingham)
    Abstract: We develop a deep learning model to detect emotions embedded in press conferences after the meetings of the Federal Open Market Committee and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Fed’s actions and the sentiment in policy texts, positive tone in the voices of Fed Chairs leads to statistically significant and economically large increases in share prices. In other words, how policy messages are communicated can move the stock market. In contrast, the bond market appears to take few vocal cues from the Chairs. Our results provide implications for improving the effectiveness of central bank communications.
    Keywords: monetary policy, communication, voice, emotion, text sentiment, stock market, bond market
    JEL: E31 E58 G12 D84
    Date: 2021–04–07
  14. By: Eva Janssens (University of Amsterdam); Robin Lumsdaine (Erasmus University Rotterdam)
    Abstract: This paper studies shock transmission across macroeconomic sectors in the UK, using data from the Bank of England's Flow of Funds statistics. We combine two different approaches to quantify the spread of shocks to assess whether sectors with large bilateral economic linkages as measured through network data have a greater statistical likelihood of shock transmission between them. The combination of both approaches reveals the Monetary Financial Institutions sector's role as shock absorber, and identifies the most important channels of shock transmission. The inferential discrepancies between network data and the actual spillovers highlight the contribution of the proposed methodology.
    Keywords: Flow of Funds, contagion, epidemiology, intersectoral networks, Gibbs sampling, Bayesian priors
    JEL: E37 E32 E01 G01
    Date: 2021–04–05
  15. By: Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Geoff Kenny; Michael Weber
    Abstract: Using a new survey of European households, we study how exogenous variation in the macroeconomic uncertainty perceived by households affects their spending decisions. We use randomized information treatments that provide different types of information about the first and/or second moments of future economic growth to generate exogenous changes in the perceived macroeconomic uncertainty of some households. The effects on their spending decisions relative to an untreated control group are measured in follow-up surveys. Higher macroeconomic uncertainty induces households to reduce their spending on non-durable goods and services in subsequent months as well as to engage in fewer purchases of larger items such as package holidays or luxury goods. Moreover, uncertainty reduces household propensity to invest in mutual funds. These results support the notion that macroeconomic uncertainty can impact household decisions and have large negative effects on economic outcomes.
    JEL: E21 E3 E4 E5
    Date: 2021–03
  16. By: Brent Meyer; Nicholas B. Parker; Xuguang Sheng
    Abstract: We rely on the Atlanta Fed's Business Inflation Expectations survey to draw inference about firms' inflation perceptions, expectations, and uncertainty through the lens of firms' unit (marginal) costs. Using methods grounded in the survey literature, we find evidence that the concept of "aggregate inflation" as measured through price statistics like the consumer price index hold very little relevance for business decision makers. This lack of relevance manifests itself through experiments (including randomized controlled trials) that show how researchers word questions to elicit inflation expectations and perceptions significantly changes firms' responses. Our results suggest firms have become rationally ignorant of the concept of inflation in a low-inflation environment. Instead, we find that unit (marginal) costs are the relevant lens with which to capture firms' views on the nominal side of the economy. We then investigate both firm-level (micro) and aggregated (macro) probabilistic unit cost expectations. On a firm level, unit costs are an important determinant of firms' price-setting behavior. Aggregating across firms' beliefs, firms' unit cost perceptions strongly comove with official aggregate price statistics, and, importantly, firms' expectations for the nominal side of the economy have little in common with the "prices in general" expectations of households. Rather, firms' aggregated beliefs strongly covary with the inflation expectations of professional forecasters and market participants.
    Keywords: bimodality; inflation expectations; probability distributions; randomized controlled trials; uncertainty; unit cost
    JEL: E31 E52
    Date: 2021–03–30
  17. By: Gasanov, Oscar
    Abstract: The article provides a review of approaches to assessing and analyzing the effectiveness of the interest rate and exchange rate policy of the Bank of Russia in the period 2015-2019. Despite the decrease in the rate of price growth, inflationary expectations of economic agents remain at a high level. Monetary policy continues to be tight. The stability of the exchange rate to external shocks, expected from the introduction of inflation targeting and a free floating rate, did not happen. The complex of conditions that have developed due to geopolitical factors, low growth rates and the global economic crisis caused by the coronavirus pandemic require the search for new targets, such as economic growth and exchange rate stability. To maintain the stability of the ruble exchange rate, it is recommended to sell foreign exchange reserves accumulated according to the "Budget rule" in an equivalent amount; to support the liquidity of banks during periods of an attack on the ruble, it should through foreign exchange REPO, and develop a derivatives market.
    Keywords: inflation targeting, consumer price index, exchange rate, monetary policy, Russian ruble, Bank of Russia
    JEL: E52 E58
    Date: 2020–10–20
  18. By: Zheng, Zhijie; Hu, Ruiyang; Yang, Yibai
    Abstract: This study explores the effects of monetary policy in a Schumpeterian growth model with endogenous quality increment and distinct cash-in-advance (CIA) constraints on consumption, manufacturing and R&D investment. Our results are summarized as follows. When the CIA constraint is solely on consumption expenditure, an increase in the nominal interest rate may stifle economic growth by lowering the arrival rate of innovation and stimulate it at the same time by raising the size of quality increment. An additional CIA constraint on manufacturing weakens the growth-retarding effect and enhances the growth-promoting effect, whereas an additional CIA constraint on R&D investment strengthens only the negative growth effect. The quantitative analysis finds that the relationship between inflation and growth can be either monotonically decreasing or hump-shaped, but the welfare effect of inflation is always negative.
    Keywords: Monetary Policy, Economic Growth, R&D, Endogenous Quality Increment
    JEL: E41 O30 O40
    Date: 2021–03–15
  19. By: Brent H. Meyer (Federal Reserve Bank of Atlanta); Nicholas B. Parker (Federal Reserve Bank of Atlanta); Xuguang Simon Sheng (American University)
    Abstract: We rely on the Atlanta Fed's Business Inflation Expectations Survey to draw inference about firm's inflation perceptions, expectations, and uncertainty through the lens of firms' unit (marginal) costs. Using methods grounded in the survey literature, we find evidence that the concept of “aggregate inflation" as measured through price statistics like the Consumer Price Index (CPI) hold very little relevance for business decision makers. This lack of relevance manifests itself through experiments (including randomized controlled trials) that show varying question wording researchers use to elicit inflation expectations and perceptions significantly changes firm's responses. Our results suggest firms have become rationally ignorant of the concept of inflation in a low inflation environment. Instead, we find that unit (marginal) costs are the relevant lens with which to capture firms' views on the nominal side of the economy. We then investigate both firm-level (micro) and aggregated (macro) probabilistic unit cost expectations. On a firm-level, unit costs are an important determinant of firms' price-setting behavior. Aggregating across firms' beliefs, firms' unit cost perceptions strongly co-move with official aggregate price statistics and, importantly, firms' expectations for the nominal side of the economy bear little in common with the \prices in general" expectations of households. Rather, firms' aggregated beliefs strongly covary with the inflation expectations of professional forecasters and market participants.
    Keywords: Bimodality, Inflation Expectations, Probability Distributions, Randomized Controlled Trials, Uncertainty, Unit Cost
    JEL: E31 E52
    Date: 2021–03
  20. By: Samara R. Gunter; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
    Abstract: In an earlier paper, titled "Non-linear effects of tax changes on output: The role of the initial level of taxation," we estimated tax multipliers using (i) a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014, and (ii) the so-called narrative approach developed by Romer and Romer (2010) to properly identify exogenous tax changes. The main finding is that, in line with existing theoretical distortionary and disincentive-based arguments, the effect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and more negative as the initial tax rate and the size of the change in the tax rate increase. This companion paper first shows that these findings have important policy implications, given that the initial level of taxes varies greatly across countries and thus so will the potential output effect of changing tax rates. The paper then turns to some specific policy applications. It focuses on the relevance of the arguments for revenue mobilization in countries with low levels of provision of public goods and social and infrastructure gaps, as well as in commodity-dependent countries. The paper then considers some practical implications for the standard debt sustainability analysis. Lastly, it evaluates the implications of the findings for the Laffer curve.
    JEL: E32 E62 H20
    Date: 2021–04
  21. By: Chan, Ying Tung; Zhao, Hong
    Abstract: Recessions associated with financial crises have become common in the US since 1990. This paper examines the importance of the financial frictions for US carbon emissions dynamics. Our empirical analysis reveals that financial market conditions have a substantial and nonlinear impact on carbon emissions dynamics. We build and estimate an environmental dynamic stochastic general equilibrium model that features financial frictions and a risk shock (a type of credit shock). The results show that: (i) the presence of financial frictions doubles the volatility of carbon emissions under positive TFP and government expenditure shocks; (ii) the risk shock generates counterfactual paths that can largely replicate the movements in emissions growth; (iii) the contribution share of the risk shock to emissions growth dynamics reaches a peak of around 50% after each recession; (iv) the optimal carbon tax rate response to shocks heavily depends on the Taylor rule specification.
    Keywords: Carbon tax; financial accelerator; business cycles
    JEL: E32 E44 Q51
    Date: 2019–08–16
  22. By: Lomonosov, Daniil; Polbin, Andrey; Fokin, Nikita
    Abstract: In this work we build a Bayesian vector autoregression model to estimate the impact of global economic activity shocks, supply shocks in the global oil market, as well as speculative oil shocks on key macroeconomic variables of the Russian economy: GDP, household consumption, fixed capital investment, import, export, real effective exchange rate, real wages and income, MIACR interest rate and GDP deflator. The model uses real oil prices, the index of global economic activity, oil production and oil inventories as exogenous variables. The model parameters are estimated for the period from Q1 1999 to Q4 2019. The dynamics of four exogenous variables is described using a separate external vector autoregression model, which is estimated over an extended time period from Q1 1974 to Q4 2019 in order to more accurately estimate its parameters and identify shocks. Shocks are identified based on the approach proposed in [Kilian, Murphy, 2014], which uses sign restrictions and restrictions on the price elasticities of oil demand and oil supply. According to estimates of impulse responses, such variables as real household consumption, imports, and the exchange rate respond positively and statistically significantly to all three shocks leading to an increase in oil prices. However, a shock to global economic activity has a stronger impact. With an increase in oil prices for real GDP, investment and exports a stable and statistically significant positive impact is observed only when this price increase is due to a shock to global economic activity. The work also estimates a forecast error variance decomposition and a historical decomposition of the domestic variables by shocks, which indicate the prevailing role of shocks in global economics activity in the dynamics of Russian macroeconomic variables.
    Keywords: Russian economy; oil prices; GDP; consumption; investment; exchange rate; export; global economic activity shock; oil supply shock; speculative oil demand shock
    JEL: C32 E32 F41 Q43
    Date: 2020–02–10
  23. By: Povilas Lastauskas (Bank of Lithuania, Vilnius University); Julius Stakenas (Vilnius University)
    Abstract: What would have been the hypothetical effect of monetary policy shocks had a country never joined the euro area, in cases where we know that the country in question actually did join the euro area? It is one thing to investigate the impact of joining a monetary union, but quite another to examine two things at once: joining the union and experiencing actual monetary policy shocks. We propose a methodology that combines synthetic control ideas with the impulse response functions to uncover dynamic response paths for treated and untreated units, controlling for common unobserved factors. Focusing on the largest euro area countries, Germany, France, and Italy, we find that an unexpected rise in interest rates depresses inflation and significantly appreciates exchange rate, whereas GDP fluctuations are less successfully controlled when a country belongs to the monetary union than would have been the case under the independent monetary policy. Importantly, Italy turns out to be the overall beneficiary, since all three channels – price, GDP, and exchange rate – deliver the desired results. We also find that stabilizing an economy within a union requires somewhat smaller policy changes than attempting to stabilize it individually, and therefore provides more policy space.
    Keywords: Dynamic causal effects; Monetary union; Price puzzle; Common factors
    JEL: C14 C32 C33 E52
    Date: 2021–03–26
  24. By: Kentaro Kikuchi (Faculty of Economics, Shiga University)
    Abstract: In the government bond markets in Japan and a number of European countries, neg-ative interest rates have been observed in recent years. Incorporating a negative lowerbound for interest rates into a term structure model makes it possible for the model toreplicate yield curves that include negative rates. In this study, we propose a new termstructure model with a stochastic lower bound where the short rate is de ned as the sumof the quadratic form of the Gaussian process and a negative lower bound for interestrates. The lower bound is characterized by a Brownian bridge with the random intervalpinned at zero at the starting time and the end time of a negative interest rate policy(NIRP). Under this setting, we derive a zero coupon bond price formula by imposing theno arbitrage condition. We calibrate our proposed model using Japanese yield curve dataand estimate the implied posterior distribution of the time to exit from the NIRP.
    Keywords: Yield curve, No arbitrage condition, Quadratic Gaussian term structuremodel, Brownian bridge, Negative interest rate policy.
    JEL: E43 E52 G12
  25. By: Juan Pablo, Herrera Saavedra; Juan Camilo, Villar Otálora; Jacobo, Campo Robledo
    Abstract: El documento presenta una estimación de la Curva de Laffer para la economía colombiana mediante la realización de un análisis de estática comparativa y un análisis de tipo econométrico. Respecto al primer análisis, partiendo de un modelo microeconómico se analiza el nivel de distorsión que se generaría al establecer un impuesto indirecto y las implicaciones que en materia de bienestar se originarían al maximizar el recaudo tributario en el mercado. Para el segundo análisis, utilizando datos del ingreso tributario real per cápita y la tasa impositiva, se estima un modelo econométrico con el fin de calcular la tasa impositiva de tributación óptima en Colombia. Los resultados muestran el cumplimiento de los postulados de Laffer, con una tasa impositiva óptima del 37% aproximadamente, y sugieren un espacio fiscal del Gobierno de aproximadamente 12 puntos porcentuales.
    Keywords: Curva de Laffer; Ingreso Fiscal; Impuesto Óptimo; Incidencia Fiscal en Mercados; Tasa Impositiva de Tributación.
    JEL: C23 D72 E13 E62 H20 H30
    Date: 2020
  26. By: Sanjeev Gupta; João Tovar Jalles
    Abstract: We estimate that the short to medium-term fiscal impact of previous pandemics has been significant in 170 countries (including low-income countries) during the 2000-2018 period. The impact has varied, with pandemics affecting government expenditures more than revenues in advanced economies, while the converse applies to developing countries. Using a subset of 45 developing countries for which tax reform data are available, we find that past pandemics have propelled countries to implement tax reforms, particularly in corporate income taxes, excises and property taxation. Pandemics do not drive revenue administration reforms.
    Keywords: fiscal policy; pandemics; local projection; impulse response functions; tax reforms; binary choice models
    JEL: C33 C36 D63 E32 E62 H20
    Date: 2021–03
  27. By: Raheem, Ibrahim
    Abstract: This study applies portfolio balance theory in forecasting exchange rate. The study further argues for the need to account for the role of Global Financial Cycle (GFCy). As such, the first stage of the analysis is estimate a GFCy model and obtain the idiosyncratic shock. Next, we use the results in the first stage as a predictor for exchange rate. The study builds dataset for 20 advanced and emerging countries from 1990Q1- 2017Q2. Among other things, there are three important results to note. First, our approach to forecast exchange rate is able to beat the benchmark random walk model. Second, the best prediction is made at short term forecasting horizons, i.e. 1 and 4 quarters forecast ahead. Third, the performance of the early sample size outweighs that of the late sample size.
    Keywords: Exchange rate; Factor models; Global financial cycle; Forecasting
    JEL: E3 E37 F31
    Date: 2020
  28. By: Guerrazzi, Marco
    Abstract: This paper aims at assessing the temporal relationship that exists between the time reference of dynamic models with infinite and finite horizon. Specifically, comparing the optimal inter-temporal plans arising from an infinite-horizon model and a 2-period overlapping generations model in their stationary equilibria, I offer a straightforward way to determine the number of time periods of the former that may form a unit of time of the latter. In this way, I show that the theoretical length of a generation is an increasing function of the discount factor of the optimizing agent and I provide an economic rationale for such a relationship grounded on consumption smoothing.
    Keywords: Infinite horizon; Overlapping generations; Consumption smoothing; Discount rate
    JEL: C61 C68 E21 E30
    Date: 2021–01–29
  29. By: Victoria Gregory; Guido Menzio; David Wiczer
    Abstract: Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α’s β’s and γ’s. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ’s. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.
    Keywords: Search frictions; Unemployment; Business Cycles
    JEL: E24 O40 R11
    Date: 2021–04–01
  30. By: Cobham, David; Macmillan, Peter; Mason, Connor; Song, Mengdi
    Abstract: We first outline the major trends in monetary policy frameworks, which are shifts towards inflation targeting and towards frameworks which offer higher degrees of monetary control. We then examine the economic performance (inflation and growth) associated with different frameworks, presenting unconditional and conditional analyses, running regressions weighted by GDP and population as well as by the number of countries, and using predictions of countries’ monetary policy framework choices to address the issue of endogeneity. We find some differences in performance associated with the different monetary policy frameworks, together with a general improvement over time which is explained in part by the trends towards inflation targeting and more precise monetary control but in part, and perhaps more strongly, reflects a more general trend towards better economic performance.
    Keywords: monetary policy framework, exchange rate targeting, inflation targeting, inflation, economic growth, weighted regressions
    JEL: E52 E61 F41
    Date: 2021–04–03
  31. By: Dennis Dlugosch; Rauf Gönenç; Yusuf Kenan Bağır; Hüzeyfe Torun; Eun Jung Kim
    Abstract: Productivity in Turkey has been growing stronger than in most peer countries since 2010 but has slowed down. Despite a remarkably entrepreneurial population, business dynamism has also been less vigorous in recent years. This working paper discusses the factors behind this slowdown and analyses a wide range of structural policies that would help to revive productivity growth and unleash the full potential of the Turkish business sector. The elevated number of informal, semi-formal and fully formal forms constitutes a key impediment to higher growth and more high-quality jobs. Structural reforms that allow more flexibility in labour markets, more competition in product markets and major progress with the quality of governance would foster productivity growth, job creation but also boost the digital transformation. Streamlining and simplifying the complex system of regulations and government support schemes would prevent firms from clustering around eligibility thresholds and thus remove obstacles to the upscaling of firms.
    Keywords: capital structure of the business sector, digitalization, informal labour markets, productivity, Turkey
    JEL: E22 E26 G30 G38 G21 J21 J11
    Date: 2021–04–13
  32. By: Ozili, Peterson Kitakogelu
    Abstract: This study examines the correlation of economic policy uncertainty (EPU) across countries and regions. Using correlation analysis, the findings reveal that some countries have a positive EPU correlation while other countries have a negative EPU correlation. The economic policy uncertainty index is positively correlated and jointly significant for EU member-countries. There is evidence of cross-regional positive correlation. Also, the EPU correlations are significant for Europe, non-EU countries and the region of the Americas during the global financial crisis, which suggest that financial crises are a contributory factor that drives the correlation of economic policy uncertainty in certain regions.
    Keywords: economic policy uncertainty, European Union, uncertainty, economic policy, financial crisis, correlation, Asia, Europe, EPU index.
    JEL: E5 E52 K00
    Date: 2021
  33. By: Harrison Hong; Neng Wang; Jinqiang Yang
    Abstract: In lieu of carbon taxes to address global warming, sustainable investment mandates are proposed to incentivize firms to achieve net-zero emissions. With underspending on mitigation due to externalities, we model the welfare consequences of these investments in firms that qualify by spending enough on decarbonization technologies. Our dynamic stochastic general equilibrium model generates several testable predictions. A cost-of- capital wedge between qualified and unqualified firms equals firm mitigation divided by its Tobin's q. Given projections of global warming and cost of decarbonization technologies, we calculate the mandate size and cost-of-capital wedge needed to meet net-zero targets.
    JEL: E20 G12 G30 H50
    Date: 2021–03
  34. By: Adesanya, Babatunde Moses; Adediji, Adebisi Moses; Okenna, Nwabueze Prince
    Abstract: The study examined the impact of stock exchange market activities on economic development in Nigerian economy. The study employs multiple regressions as a technique to measure the effect of stock exchange market development on the Nigerian economy. The Secondary Data used were into market capitalization (CAP), all share index (ALLSHARE) and total volume of transaction (TNOV) and were sourced from the Central Bank of Nigeria (CBN) statistical bulletin, 2019. The technique of data analysis used was the ordinary least square (OLS) method of estimation. Findings reveals that the market capitalization (CAP) had a positive relationship with GDP, with the relationship being statistically insignificant. ALLSHARE has a positive and significant relationship with GDP. TNOV has a positive and significant relationship with GDP. Therefore, it was recommended that Government should help to restore confidence to the market through regulatory authorities which will portray transparency, fair trading transactions and dealing in the stock exchange and consequently improve economic development. The SEC and NSE should put a very good advocacy programme in place to encourage and awaken Nigerians’ interest in the capital market as this will boost local participation in the market and as well enable local investors to absorb shares offloaded by foreign investors any time there was perceived economic instability.
    Keywords: stock exchange market, economic development, ordinary least square (OLS)
    JEL: E44 G10
    Date: 2020–12–02
  35. By: Tiago V. Cavalcanti; Joseph P. Kaboski; Bruno S. Martins; Cezar Santos
    Abstract: Most aggregate theories of financial frictions model credit available at a single cost of financing but rationed. However, using a comprehensive firm-level credit registry, we document both high levels and high dispersion in credit spreads to Brazilian firms. We develop a quantitative dynamic general equilibrium model in which dispersion in spreads arises from intermediation costs and market power. Calibrating to the Brazilian data, we show that, for equivalent levels of external financing, dispersion has more profound impacts on aggregate development than single-price credit rationing and yields firm dynamics that are more consistent with observed patterns.
    JEL: E44 O11 O16
    Date: 2021–04
  36. By: Xiaoqing Zhou
    Abstract: This paper studies the transmission of the major shocks in the U.S. housing market in the 2000s to consumption and residential investment. Using geographically disaggregated data, I show that residential investment is more responsive to these shocks than consumption, as measured by elasticities and the implied contributions to GDP growth. I develop a structural life-cycle model featuring multiple types of housing investment to understand the large responses of residential investment. Consistent with the microdata, the model generates lumpy debt accumulation, lumpy housing investment and a strong correlation between mortgage borrowing and housing investment at the early stage of the life cycle. In the model, households move up the property ladder by increasing their mortgage debt after they have accumulated enough home equity. Since liquidity constraints and fixed costs prevent especially young homeowners from acquiring their desired home, shocks to their borrowing capacity have a large impact on residential investment.
    Keywords: Mortgage borrowing; Consumption; Residential investment; House price; Mortgage rate; Credit supply; Business cycle
    JEL: D1 E2 E3
    Date: 2021–03–24
  37. By: Titan Alon; Sena Coskun; Matthias Doepke; David Koll; Michèle Tertilt
    Abstract: We examine the impact of the global recession triggered by the Covid-19 pandemic on women's versus men's employment. Whereas recent recessions in advanced economies usually had a disproportionate impact on men's employment, giving rise to the moniker "mancessions," we show that the pandemic recession of 2020 was a "shecession" in most countries with larger employment declines among women. We examine the causes behind this pattern using micro data from several national labor force surveys, and show that both the composition of women's employment across industries and occupations as well as increased childcare needs during closures of schools and daycare centers made important contributions. While many countries exhibit similar patterns, we also emphasize how policy choices such as furloughing policies and the extent of school closures shape the pandemic's impact on the labor market. Another notable finding is the central role of telecommuting: gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. Nevertheless, among telecommuters a different kind of gender gap arises: women working from home during the pandemic spent more work time also doing childcare and experienced greater productivity reductions than men. We discuss what our findings imply for gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting.
    JEL: D13 E32 J16 J20
    Date: 2021–04
  38. By: Emily Breza; Supreet Kaur; Yogita Shamdasani
    Abstract: This paper measures excess labor supply in equilibrium. We examine hiring shocks—which employ 24% of the labor force in external month-long jobs—in Indian local labor markets. In peak months, wages increase instantaneously and local aggregate employment declines. In lean months, consistent with severe labor rationing, wages and aggregate employment are unchanged, with positive employment spillovers on remaining workers—indicating that over a quarter of labor supply is rationed. At least 24% of lean self-employment among casual workers occurs because they cannot find jobs. Consequently, traditional survey approaches mismeasure labor market slack. Rationing has broad implications for labor market analysis.
    JEL: E24 J2 J6 O10 O17
    Date: 2021–04
  39. By: Patterson, David (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: We could benefit from a radically new approach to the money value problem, by re-engaging an old one. With the loss of gold as value standard, in favor of the “cost of living”, physical convertibility was lost as a value-conforming mechanism, but modern financial markets and the particular device of the REPO (collateralized loan in asset exchange form) could be employed to deliver its equivalent effects: value enforceable by the individual currency holder (or ower) and conformance of its value in the market generally. Such a modern form of convertibility could enforce a standard of choice. Technological advance is steadily eroding the foundations of the “cost-of-living” index. As consumption mutates with invention, the sensible cost to target becomes that of the American standard of living, in the form of a per capita share of total consumption spending, not so different, upon examination, from the share commanded by a resource of stable relative scarcity (such as gold), and superior in some ways to nominal GDP as target. Convertibility to such a standard would resolve multiple policy issues, including the “duality” of the statutory mandate and the challenges of negative interest. The “zero lower bound” would be eliminated, and “economic stability” disentangled from “financial stability”, to the advantage of both. Fiat convertibility, as we may call it, could be adopted discretionarily by the Fed, but there are strong arguments for a rule of law. We may need one to deal with deteriorating national finances. In the bargain we could reconsider the merits of a central bureaucracy “managing the economy.”
    Date: 2021–04
  40. By: Jackson, Emerson Abraham; Tamuke, Edmund
    Abstract: The use of macro-econometric modelling technique has become a norm for policy decisions in central banks and in particular, the Bank of Sierra Leone. This study has leveraged on the technicalities of scientific and artistic approaches of assessing risks around point / baseline forecast; this in general makes it more convincing for probability confidence bands to be used in explaining uncertainty that surround point forecast in particular. In the case of this study, the use of the Box-Jenkins ARIMAX model has made it possible to highlight the relevance of Composite Leading Indicator (CLI) like Exchange Rate in alerting signals about early turning point of inflation outcome, both in terms of the uncertainty and risks surrounding its projections. With the derived (scientific) probability distribution of risks (30%, 60% and 90%), it was possible for the study outcome to unearth vast amount of information from the Inflation Fan Chart, particularly with respect to the art of providing balanced assessment of policy framework needed to communicate the BSL’s price stability objective. While the use of Fan Chart is hailed as a very relevant tool, the paper also recommend the use of other model approaches like Scenario and Sensitivity analysis, also considered relevant in providing leading evidence of balancing risks surrounding macroeconomic outlook.
    Keywords: Fan Chart; Normal Distribution; Forecast uncertainty; Balanced Risks
    JEL: C15 C52 C81 E37 E59
    Date: 2021–01–02
  41. By: 森川, 正之
    Abstract: 本稿は、新型コロナウイルス感染症の脅威や政策対応への国民の見方を、2020年6月 に行った個人サーベイに基づいて概観する。調査結果によれば、第一に、新型コロナに感 染・重症化する主観的リスクは高く、強い社会的離隔措置を支持する人が多い。第二に、 新型コロナの終息まで今後2年ほど要するというのが国民の平均的な見方である。第三に 、新型コロナ及び自粛措置の消費支出への負の影響は高所得層において顕著であり、選択 的支出への影響が大きかったことを示唆している。第四に、個人特性を問わず特別定額給 付金を支持する人は多いが、新型コロナの影響で仕事を失った人や低所得者など資金制約 の影響が強い人にとって便益が大きかった。
    Keywords: 新型コロナウイルス感染症, 社会的離隔, マスク, 給付金, 消費, 資金制約
    JEL: D12 D14 D84 E21 H24 I12
    Date: 2020–07
  42. By: Kaur, Amandeep (National Institute of Public Finance and Policy); Mohanty, Ranjan Kumar (National Institute of Public Finance and Policy); Chakraborty, Lekha (National Istitute of Public Finance and Policy); Rangan, Divy (National Institute of Public Finance and Policy)
    Abstract: This paper examines the empirical evidence of flypaper effects in the ecological fiscal spending in India. Using the panel data models, we analyse whether the intergovernmental fiscal transfers, or the states' own income determine the expenditure commitments on ecology at the State level. The econometric results show that the intergovernmental fiscal transfers rather than the states' own income determines ecological expenditure at subnational levels in India. The results hold, when the models are controlled for ecological outcomes and demographic variables.
    Keywords: Intergovernmental Transfers ; Flypaper effect ; Environmental Economics ; Macroeconomic Policy ; National Government Expenditure
    JEL: E6 H5 H7 Q5
    Date: 2021–03
  43. By: 金, 榮愨; 権, 赫旭; 深尾, 京司; 池内, 健太
    Abstract: 電子商取引の導入と企業パフォーマンスに関する先行研究のほとんどはサンプル調査によ るもので、範囲も限られる。本研究は、主に『経済センサス-活動調査』を用いることに より、日本企業全体をカバーするデータによって、日本企業の電子商取引導入とパフォー マンスの関係、近接産業や地域経済への波及効果およびダイナミズムを分析する分析結果 によれば、電子商取引を導入する企業は生産性が高く、全要素生産性(TFP)の上昇率 も有意に高い。これらをもたらすのはB2Cではなく、主にB2Bである。また、自社の 電子商取引導入は自社の雇用を増やし、賃金を押し上げる。しかし、同産業もしくは同産 業・県で電子商取引導入が進んでも雇用の減少は確認されない。地域・産業の電子商取引 導入率が高いほど、賃金は高くなることが確認できる。一方、産業・県での電子商取引導 入率が高い場合、属する企業の退出の確率が高まり、市場集中度(HHI)が高いことが 確認された。これは競争の激化によって、生産性全体は上がるが、退出の確率も同時に上 がるためであると考えられる。ただし、マークアップに関連しては電子商取引の有意な影 響は確認されなかった。商業に限った分析では、電子商取引の生産性への影響が売上規模 に大きく左右され、売上高の大きい企業のメリットが大きい反面、中小規模以下の企業の メリットはない可能性があることが分かった。商業、特に卸売業での電子商取引の導入率 の低下の一部はこれによって説明できる。
    Keywords: 電子商取引(E-commerce), factor productivity, TFP, 経済センサス, B2B, B2C
    JEL: O47 L81 E24
    Date: 2021–03
  44. By: BENABBOU, Hassiba; BELBACHIR, Gouraya; BELBACHIR, Hadjira
    Abstract: The globalization of many countries is largely the informal economy in Algeria. Although there is a gap between the different estimated studies, their integration into the formal economy seems obvious, so it remains necessary to find the applicable strategy for their participation in growth indicators after the fall in oil prices. A profit with an increase in GDP, which reached 25.41% of gross domestic product.
    Keywords: Economy, Formal Economy, Informal Economy, Algeria
    JEL: E22 E26
    Date: 2021–01–14
  45. By: Kentaro Kikuchi (Faculty of Economics, Shiga University)
    Abstract: A Global Joint Pricing Model of Stocks and BondsBased on the Quadratic Gaussian Approach*Kentaro KikuchiAbstractThis work presents a joint model for bond prices, stock prices, and exchangerates within multi-currency economies. The model includes three types of la-tent factors: systematic factors that determine the domestic and foreign interestrates, stock-speci c factors, and currency-speci c factors. By incorporating thestochastic discount factor re ecting these three risk factors, we derive an analyt-ical formula for bond prices and stock prices, and exchange rates based on thequadratic Gaussian approach studied primarily in term structure modeling. Ourmodel has the distinctive feature of capturing market rates in a low interest rateenvironment. Furthermore, the model not only enables a simultaneous estimationof bond, equity and currency risk premiums but also provides a foundation forsolving an investment problem re ecting realistic market conditions.
    Keywords: Stochastic discount factor, No arbitrage condition, Quadratic Gaus-sian term structure model, Algebraic Riccati equation
    JEL: E43 F31 G10 G12
  46. By: James B. Bullard
    Abstract: During a virtual presentation for Georgia State University’s Economic Forecasting Center, St. Louis Fed President James Bullard said that the COVID-19 pandemic’s intensity has moderated in the U.S. and Europe in recent weeks, and ongoing vaccinations suggest the health crisis will wane in the months ahead. He said that U.S. monetary and fiscal policies during the crisis continue to be exceptionally effective in mitigating macroeconomic damage. He noted that forecasts suggest very strong U.S. real GDP growth for 2021. But he cautioned that downside risk remains, and continued execution of a granular, risk-based health policy will be critical to maintain economic momentum.
    Keywords: COVID-19; monetary polic; fiscal policy; GDP growth
    Date: 2020–02–25
  47. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard shared his views on the policy responses to the pandemic, the U.S. economic outlook, debt-to-GDP ratios and currency competition. He spoke during a moderated panel discussion at the National Association for Business Economics (NABE) Economic Policy Conference.
    Keywords: COVID-19; monetary policy; fiscal policy; economic recovery; GDP growth; economic outlook
    Date: 2020–03–23
  48. By: Livia Paranhos
    Abstract: This paper applies neural network models to forecast inflation. The use of a particular recurrent neural network, the long-short term memory model, or LSTM, that summarizes macroeconomic information into common components is a major contribution of the paper. Results from an exercise with US data indicate that the estimated neural nets usually present better forecasting performance than standard benchmarks, especially at long horizons. The LSTM in particular is found to outperform the traditional feed-forward network at long horizons, suggesting an advantage of the recurrent model in capturing the long-term trend of inflation. This finding can be rationalized by the so called long memory of the LSTM that incorporates relatively old information in the forecast as long as accuracy is improved, while economizing in the number of estimated parameters. Interestingly, the neural nets containing macroeconomic information capture well the features of inflation during and after the Great Recession, possibly indicating a role for nonlinearities and macro information in this episode. The estimated common components used in the forecast seem able to capture the business cycle dynamics, as well as information on prices.
    Date: 2021–04
  49. By: Umut Akovali (Koc University); Kamil Yilmaz (Koc University)
    Abstract: Since the global financial crisis, major central banks gradually switched to unconventional monetary policies (UMPs) as part of their efforts to directly influence the long-term interest rates. This study analyzes the impact of conventional/unconventional monetary policies on sovereign bond return spillovers across countries and maturities since February 2007. Following the Taper Tantrum of mid-2013 and the ECB’s policy convergence to other major central banks in 2015, the long-term return connectedness across countries increased, overtaking the short-term connectedness and lowering the dispersion of connectedness measures across maturities. Over the same period, net connectedness from short- to long-term maturities weakens, while net connectedness from medium- to long-term maturities stays strong. Finally, panel regression results show that UMPs in the form of higher central bank asset ratios led to higher pairwise long-term return connectedness even when the control variables such as trade and portfolio investment flows and the distance between pairs of countries are included in regression analysis.
    Keywords: Unconventional monetary policy, quantitative easing, yield curve, vector autoregression, variance decomposition, elastic net.
    JEL: F34 G15 C32 G23
    Date: 2021–03
  50. By: Berardi, Michele
    Abstract: This work analyses the role of asymmetry in beliefs for price dynamics in a cobweb model with heterogeneous expectations and evolutionary selection of predictors. While heterogeneous but symmetric beliefs result in the rational expectations equilibrium price, the effect of asymmetry depends on whether predictors on one side or the other of rationality have a larger support. A support skewed towards predictors that are anchored to past prices can be destabilizing, and the interaction with the evolutionary selection mechanism can lead to complex dynamics in prices; a support skewed towards predictors that overshoot price changes leads instead to price stability, irrespective of the underlying evolutionary dynamics. The design of the set of beliefs allowed to compete on the market is thus crucial for the possible outcomes of the model. One could interpret a skewed support in terms of sentiments, intended as one-sided systematic biases in expectations.
    Keywords: expectations; heterogeneity; evolutionary learning; sentiments.
    JEL: C62 D83 D84 E32
    Date: 2021–03–31
  51. By: Gabriele Ciminelli; Sílvia Garcia-Mandicó
    Abstract: Governments around the world have adopted unprecedented policies to deal with COVID-19. This paper zooms in on business shutdowns and investigates their effectiveness in reducing mortality. We leverage highly granular death registry data for almost 5,000 Italian municipalities in a diff-in-diff approach that allows us to mitigate endogeneity concerns credibly. Our results, which are robust to controlling for a host of co-factors, offer strong evidence that business shutdowns are very effective in reducing mortality. We calculate that the death toll from the first wave of COVID-19 in Italy may have been about twice as high in their absence. Our findings also highlight that timeliness is key – by acting one week earlier, the death toll may have been reduced by up to an additional 25%. Finally, shutdowns should be targeted. Closing service activities with a high degree of interpersonal contact saves the most lives. Shutting down production activities – while substantially reducing mobility – only has mild effects on mortality.
    Keywords: business shutdowns, COVID-19, Italy
    JEL: E02 E25 E63 J31 J61
    Date: 2021–04–13
  52. By: Severin Reissl (IUSS Pavia); Alessandro Caiani (IUSS Pavia); Francesco Lamperti (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna; RFF-CMCC European Institute on Economics and the Environment); Mattia Guerini (Université Côte d'Azur, CNRS, GREDEG, France; Sant'Anna School of Advanced Studies; Sciences Po., OFCE); Fabio Vanni (Sciences Po, OFCE); Giorgio Fagiolo (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna); Tommaso Ferraresi (Istituto Regionale per la Programmazione Economica della Toscana); Leonardo Ghezzi (Istituto Regionale per la Programmazione Economica della Toscana); Mauro Napoletano (OFCE Sciences-Po; SKEMA Business School); Andrea Roventini (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna; Sciences Po, OFCE)
    Abstract: We build a novel computational input-output model to estimate the economic impact of lockdowns in Italy. The key advantage of our framework is to integrate the regional and sectoral dimensions of economic production in a very parsimonious numerical simulation framework. Lockdowns are treated as shocks to available labor supply and they are calibrated on regional and sectoral employment data coupled with the prescriptions of government decrees. We show that when estimated on data from the first "hard" lock-down, our model closely reproduces the observed economic dynamics during spring 2020. In addition, we show that the model delivers a good out-of-sample forecasting performance. We also analyze the e ects of the second "mild" lockdown in fall of 2020 which delivered a much more moderate negative impact on production compared to both the spring 2020 lockdown and to a hypothetical second "hard" lockdown.
    Keywords: Input-output, Covid-19, Lockdown, Italy
    JEL: C63 C67 D57 E17 I18 R15
    Date: 2021–04
  53. By: Tushar Bharati (Business School, The University of Western Australia); Wina Yoman (Bain & Company)
    Abstract: We study the labor market effects of domestic migration in Indonesia on the employment outcomes of the natives and the migrants. To address the endogeneity of migrants’ settlement decisions, we use the information on the historical migration patterns from the Indonesian censuses to construct an internal migration version of the Bartik shift-share instrument. The instrument, used widely in the study of international migration, is based on the observation that even within countries, migrants tend to move to regions with a large migrant population from their region of origin. However, if the migration patterns are unchanged over time, past migration may affect current labor market outcomes directly, violating the exclusion restriction. To overcome this, we use a multi-instrument approach that lets us account for the long-term effects of migration separately. We find that internal migration is associated with an increase in migrant employment and a decrease in native employment. Less-educated natives in loweducation regencies are most-affected. The findings suggest that policies aiming to minimize the adverse effects of internal migration should aim at improving the human capital of natives.
    Keywords: shift-share instrument, internal migration, employment, natives
    JEL: C36 E24 J61 O15 R23
    Date: 2021
  54. By: Mansoor, Sadia; Baig, Aqeel; Lal, Irfan
    Abstract: This study has assessed the role of existing policies in determining the state of debt sus-tainability for the Pakistan economy (1980- June 2019) through fiscal reaction function. This study adds to the literature in two aspects. First, a policy index has been constructed to formu-late a debt-policy interactive term that implies whether or not existing macroeconomic policies contribute in making external debt sustainable in Pakistan. Second, this study has gauged the potential sustainable external debt through in-sample forecast method. The estimated results obtained by the ARDL method show that Pakistan has just entered into a phase of unsustainable debt burden in the long run as fiscal reaction analysis exhibits the weak significant negative relationship between primary balance and external debt to GDP ratio. Moreover, existing mac-roeconomic policies also show a negative association with the primary balance that implies the ineffectiveness of policies in making external debt sustainable for Pakistan. This study suggests that an increase in foreign inflows through remittances or export earnings may improve the debt sustainability state in Pakistan
    Keywords: External debt sustainability, fiscal reaction function, Autoregressive distributed lag model, macroeconomic policies, primary balance
    JEL: F32 O11 O19
    Date: 2020–12–01
  55. By: Daiju Aiba
    Abstract: Banks in developing countries are highly dependent on funding sources from abroad, and such high dependency on external funding could cause vulnerability to the sector by channeling the effects of foreign monetary policies to domestic bank lending. In this paper, we study the international transmission of monetary policy of US and banks’ major shareholders’ home countries into bank lending in Cambodia, using data on banks’ loan disbursement and balance sheets from 2013Q1 to 2019Q2. Cambodia is one of the least developed countries in the south-east Asian region, while its economy is highly dollarized and capital movement is free. This environment is likely to allow banks to transmit financial shocks into domestic lending. As a result, we find that US monetary policy affected domestic lending through the channel of foreign funding exposure, suggesting that Cambodian banks with foreign funding exposure are likely to reduce lending when there is a rise in the cost of funding from abroad. We also find that an increase in the US monetary policy rate is associated with increases in loan disbursements in secured loans, USD currency loans, and retail loans, suggesting the monetary transmission also affected loan reallocations by changing risk-taking behavior in bank lending. In addition, we find that these results are robust for US monetary policy effects, but weak and not robust for monetary policies of banks’ major shareholders’ home countries.
    Keywords: Bank Lending Channel, International Monetary Policy Transmission, Capital Inflow, Developing Countries, Dollarization, Cambodia
    Date: 2020–08–11
  56. By: Marthinus C. Breitenbach (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Carolyn Chisadza (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Matthew Clance (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)
    Abstract: In this study we explore whether more complex economies are better shielded against exogenous shocks. We contribute to the empirical literature on determinants of output volatility by introducing a relatively new index on productive capabilities of export goods, the Economic Complexity Index (ECI), developed by Hausmann et al. (2014). The ECI measures the productive capabilities of countries by explaining the knowledge accumulated in a population based on the goods they produce and export and to which countries they export. As such, not only does this measure capture diversification but also the technology embedded in the products. Using panel data analysis for a cross section of countries from 1984 to 2016, we find variations in the effects of ECI on output volatility between high and low income countries. For high income countries, increases in ECI reduce output volatility in the short to medium term (under 3 years), whereas we observe a longer delay in output volatility moderation for low income countries. The findings suggest that low income countries have less diversified and less complex export goods which leave them open to external shocks and reduce their ability to adjust quickly to the shocks. Furthermore, disaggregation by regions reveals that economic complexity in Asia is relatively more effective at reducing output volatility than in Africa. The difference between the two regions could be due to Africa’s primary production and exports being in relatively homogenous goods with no differentiation and subject to the volatility of world markets.
    Keywords: output volatility, export diversification, economic complexity, panel data, high vs low income countries, fixed effects model, ECI
    JEL: E32 F10 C23 O57
    Date: 2021–03
  57. By: Roman Frydman (Department of Economics, New York University); Morten Nyboe Tabor (Institute for New Economic Thinking (INET))
    Abstract: We propose a novel interpretation and formalization of Kahneman and Tversky's findings in the Linda experiment which implies that subjects are rational in the sense of Muth's hypothesis and provides an approach to specifying rational assessment of uncertainty in macroeconomic models. Behavioral-finance theorists have appealed to Kahneman and Tversky's findings as an empirical foundation for a general approach replacing rational expectations. We show that behavioral models' specifications of participants' irrational forecasts and predictable errors are incompatible with Kahneman and Tversky's findings. Our interpretation of Kahneman and Tversky's findings is supportive of Lucas's compelling critique of inconsistent macroeconomic models.
    Keywords: Uncertainty in Economic Models; Kahneman and Tversky's Experimental Findings; Behavioral Finance; Muth's Hypothesis; REH.
    JEL: B41 D80 D81 D91 E71 G41
    Date: 2020–12–14
  58. By: Larry D. Wall
    Abstract: The global financial crisis of 2007–09 revealed substantial weaknesses in large banks' capital adequacy and liquidity. Bank regulators responded with a variety of prudential measures intended to strengthen both. However, these prudential measures resulted in conflicts with the implementation of monetary policy that helped alter the way the Federal Reserve conducts monetary policy. I review three such conflicts: regulation inhibiting interest on excess reserves arbitrage starting in 2008, regulation inhibiting banks' operations in the repo market in 2019, and regulation inhibiting their operations in the Treasury securities market in 2020. The article concludes with a discussion of the issues associated with changing specific banking regulations and some more general suggestions for dealing with these types of conflicts.
    Keywords: banking regulation; capital adequacy; bank liquidity regulation; interest on reserves; Treasury market; repo market
    JEL: E52 E58 G28
    Date: 2021–03–29
  59. By: Auerbach, Alan J; Gorodnichenko, Yuriy; Murphy, Daniel
    Abstract: Credit markets typically freeze in recessions: access to credit declines, and the cost of credit increases. A conventional policy response is to rely on monetary tools to saturate financial markets with liquidity. Given limited space for monetary policy in the current economic conditions, we study how fiscal stimulus can influence local credit markets. Using rich geographical variation in US federal government contracts, we document that, in a local economy, interest rates on consumer loans decrease in response to an expansionary government spending shock.
    Date: 2020–05–01
  60. By: Alessandro Piergallini
    Abstract: I examine global dynamics in a monetary model with overlapping generations of finite-horizon agents and a binding lower bound on nominal interest rates. Debt targeting rules exacerbate the possibility of self-fulfilling liquidity traps, for agents expect austerity following deflationary slumps. Conversely, activist but sustainable fiscal policy regimes - implementing intertemporally balanced tax cuts and/or transfer increases in response to disinflationary trajectories - are capable of escaping liquidity traps and embarking inflation into a globally stable path that converges to the target. Should fiscal stimulus of last resort be overly aggressive, however, spiral dynamics around the liquidity-trap steady state exist, causing global indeterminacy.
    Date: 2021–04
  61. By: Kawaguchi, Kohei; Kodama, Naomi; Tanaka, Mari
    Abstract: This study makes a causal inference on the effects of anti-contagion and economic policies on small business by conducting a survey on Japanese small business managers’ expectations about the pandemic, policies, and firm performance. We first find the business suspension request decreased targeted firms’ sales by 10 percentage points on top of the baseline 8 percentage points decline due to COVID-19. Second, using a discontinuity in the eligibility criteria, we find lump-sum subsidies improved firms’ prospects of survival by 19 percentage points. Third, the medium-run recovery of firms’ performance is expected to depend crucially on when infections would end, indicating that stringent anti-contagion policies could complement longer-run economic goals.
    Keywords: COVID-19, Causal inference, Manager’s expectation, Business performance, Subsidy, Small business, Regression Discontinuity Design, Randomized controlled trial, Difference-in-Difference, Pandemic, Infection, Anti-contagion policies, Lockdown, Survey
    JEL: D22 D80 D84 E17 E32 E66 I18 L50
    Date: 2020–11
  62. By: William J. Arnesen; Jacob Conway; Matthew Plosser
    Abstract: Since the depths of the Great Recession, household debt has increased from a low of $11 trillion in 2013 to more than $14 trillion in 2020 (see the New York Fed Household Debt and Credit Report). In this post, we examine how consumers’ repayment priorities have evolved over that time. Specifically, we seek to answer the following question: When consumers repay some but not all of their loans, which types do they choose to keep paying and which do they fall behind on?
    Keywords: household debt; COVID-19
    JEL: E5
    Date: 2021–03–29
  63. By: Hanappi, Hardy
    Abstract: Money is real. Few other objects are perceived with comparable attention. At the same time its content, its mystery, evaporates behind its physical form. For every commodity producing human society money has been a steady companion since it emerged . Money forms, the way in which money took on its material cloth, have changed a lot. Money forms, the blood running through almost all social interaction, have been a mirror, a reflection of the essence of a society’s working. This paper is an attempt to look behind the veil that money forms as sign systems for social value produce. Thus two concepts are the starting point for the investigation: Sign systems and social value. Sign systems are directly coupled to the perceptions of human individuals. More precisely, they are connected to a society’s communication processes, including self-communication, i.e. personal thought. The mystic force of money forms, its resemblance to sexual attraction, derives from its root in direct and blunt relevance for each human individual in a fully developed commodity producing society. It can be redemption, it can be disgust. ‘Money speaks, wealth whispers’ expresses this interface between individual and society, distinguishes how the force of the money form is transmitted . The first part of the paper will develop a sketch of a theory of this interface, of sign systems as social systems. The second part will then focus on the concept ‘social value’. The perspective will be changed: What is beneficial from the point of view of the species will be the starting point for a discussion on how it materializes in certain money forms. It turns out that money forms follow an evolutionary trajectory , leading through alternating stages of contributing to the stabilization of a mode of production and then actively destroying it in revolutionary turning points – just to give birth to a new form of representation of social value . Finally, a third part shall provide ideas on the connection between the first two parts. How is desire and pain injected in personal perceptions by the interference of social value loaded money forms; and how are vice versa these passions and grievances shaping the potential constellation of social value regulating institutionalized forms in revolutionary times? In conclusion this part will also present some immediate consequences of the theoretical results on contemporary global economic policy.
    Keywords: Money, Sign Systems, Political Economy, Individual Perception
    JEL: B40 B51 E4 Z1
    Date: 2021–01–03
  64. By: 森川, 正之
    Abstract: 新型コロナウイルス感染症というショックの経済的影響、望ましい政策対応に関する研究 が進んでいる。本稿は、コロナ危機に関する経済分析を通じてわかってきたことを概観す るとともに、経済政策への含意を考察する。感染拡大の疫学モデルと経済モデルを融合し たシミュレーション・モデルが開発されるなど文理融合型の研究や、高頻度のビッグデー タを利用した実証研究が急速に進んでいる。ただし、データの制約から感染率をはじめ政 策シミュレーションに使用される重要なパラメーターの不確実性は大きい。また、日本の 人口当たり感染者数・死亡者数が主要国に比べてはるかに少ない理由など未解明のことも 多い。
    Keywords: 新型コロナウイルス, 外部性, 不確実性, 経済政策
    JEL: E60 H12 I10 J65 O40
    Date: 2020–05
  65. By: Eduardo Levy Yeyati (Universidad Di Tella); Federico Sturzenegger (Universidad de San Andres and Harvard Kennedy School)
    Abstract: This paper proposes a new methodology to assess fiscal sustainability. Our approach relies on computing both government´s assets and liabilities as opposed to focuting only on explicity liabilities. Assets are primarily the present discounted value of taxes, while liablities are primarily the present discounted value of expenditures in addition to explicit liabilities. By looking at the government´s balance sheet we can compute the net worth of government, as well as evaluate it´s response to growth, commodity prices or real exchange rate shocks. We show that the implications for fiscal sustainability may be different from those obtained by focusing only on explicit liabilities as in the traditional approaches.
    Date: 2021–03
  66. By: Walter Paternesi Meloni; Antonella Stirati
    Abstract: The drop in the labor share experienced in high-income countries in the last three to four decades testifies to a general divergence in the growth rates of labor productivity and average wages. In this respect, we first quantify the magnitude of this decoupling; second, we inquire into the factors that prevented wage growth from keeping pace with productivity. We endorse a ‘political economy’ approach – a line of inquiry which has been recently fueled and followed by the post-Keynesian literature – focusing on the effects on wage dynamics of some macroeconomic and institutional factors in a panel of 22 OECD economies for the post-1970 period. We find that, on average and over the cycle, only 50% of increased productivity went to workers. Our empirics indicate that labor market slack and the weakening of pro-labor institutions have acted as wage-squeezing factors; a negative effect is also found for globalization, specifically for trade openness and international capital mobility. Other aspects of the process of financialization, such as market capitalization and the dynamics of the real interest rate, seem not to have exerted a substantial impact on real wage growth.
    Keywords: political economy; income distribution; labor market institutions; labor market slack; globalization; financialization
    JEL: E25 J30 P16
    Date: 2021–03
  67. By: Roberto Chang; Humberto Martínez; Andrés Velasco
    Abstract: The advent of a pandemic is an exogenous shock, but the dynamics of contagion are very much endogenous --and depend on choices that individuals make in response to incentives. In such an episode, economic policy can make a difference not just by alleviating economic losses but also via incentives that affect the trajectory of the pandemic itself. We develop this idea in a dynamic equilibrium model of an economy subject to a pandemic. Just as in conventional SIR models, infection rates depend on how much time people spend at home versus working outside the home. But in our model, whether to go out to work is a decision made by individuals who trade off higher pay from working outside the home today versus a higher risk of infection and expected future economic and health-related losses. As a result, pandemic dynamics depend on factors that have no relevance in conventional models. In particular, expectations and forward-looking behavior are crucial and can result in multiplicity of equilibria with different levels of economic activity, infection, and deaths. The analysis yields novel policy lessons. For example, incentives embedded in a fiscal package resembling the U.S. CARES Act can result in two waves of infection.
    JEL: E6 F4 H3 I3
    Date: 2021–04
  68. By: María Paz Espinosa (Universidad del País Vasco); Jaromír Kovárík (Universidad del País Vasco)
    Abstract: How do short network cycles–the building component of close-knit network neighborhoods–affect diffusion? We study this issue in labor markets by explicitly modeling the flow of information about vacancies in social networks. We show that short network cycles induce stochastic affiliation in the transmission of job information, generating diffusion inefficiencies with important short- and long-run micro- and macroeconomic consequences. Short network cycles affect employment and inequality patterns within and across networked societies. In particular, they organize employment probabilities in the sense of the first-order stochastic dominance. People in close-knit neighborhoods and dense networks exhibit worse labor-market outcomes. Since dense, overlapping neighborhoods is one aspect of strong relationships, this uncovers an alternative mechanism behind the strength of weak ties (Granovetter, 1973). Moreover, short network cycles reinforce spatial and temporal correlations in employment status, shaping labor-market transition rates and aggregate employment fluctuations.
    Keywords: (stochastic) affiliation, clustering, inequality, information transmission, labor markets, network cycles, networks, unemployment, wages.
    JEL: A14 D85 J60 J30
    Date: 2021
  69. By: Ateeb Akhter Shah Syed; Kaneez Fatima; Riffat Arshad
    Abstract: The worries expressed by Alan Greenspan that the long run economic growth of the United States will fade away due to increasing burden of entitlements motivated us to empirically investigate the impact of entitlements of key macroeconomic variables. To examine this contemporary issue, we estimate a vector error-correction model is used to analyze the impact of entitlements on the price level, real output, and the long-term interest rate. The results show that a shock to entitlements leads to decrease in output and lends support to the assertion made by Alan Greenspan. Several robustness checks are conducted and the results of the model qualitatively remains unchanged.
    Date: 2021–02
  70. By: Hetzel, Robert (Mercury Publication)
    Abstract: Abstract not available.
    Date: 2021–02–18
  71. By: Guoyou Yue (Faculty of Logistics and Digital Supply Chain, Naresuan University, Thailand Author-2-Name: Boonsub Panichakarn Author-2-Workplace-Name: Faculty of Logistics and Digital Supply Chain, Naresuan University, Thailand Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - The research objective of this paper is to establish an efficient awareness model of emergency supplies dispatching for tropical cyclone disasters, so as to timely deliver emergency supplies to each disaster area at the lowest cost. Methodology/Technique - Taking the disaster caused by super typhoon No.1409 "Rammasun" to cities and counties in Guangxi as an example, 24 counties (districts) belonging to 7 prefecture-level cities with more than 1000 people in need of emergency transfer and resettlement are selected as the research objects. Findings - The linear programming method is used to establish two kinds of emergency supplies dispatching models: level-by-level centralized dispatching model and unified dispatching model of provincial emergency management center. By comparing the calculation results of the two models, it is found that the level-by-level centralized dispatching model adopted by Guangxi government departments is relatively high in cost although it is simple and convenient. Novelty - The total cost of the improved unified dispatching model of provincial emergency management center is 31.72% less than that of the level-by-level centralized dispatching model, which has greater promotion value. The research results can provide a better reference for the government departments at all levels in Guangxi to formulate the emergency supplies dispatching scheme for tropical cyclone disasters. Type of Paper - Empirical.
    Keywords: Emergency Logistics; Tropical Cyclone Disasters; Emergency Supplies Dispatching; Transportation Problem; Transshipment Problem; Linear Programming Model; Guangxi
    JEL: E24 J16
    Date: 2021–03–31
  72. By: Norhanishah Mohamad Yunus (School of Distance Education, Universiti Sains Malaysia, Malaysia Author-2-Name: Noraida Abdul Wahob Author-2-Workplace-Name: Unit Peneraju Agenda Bumiputera, Prime Minister's Department,47810, Petaling Jaya, Selangor, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - The purpose of this study is to investigate both "technology" and "knowledge" effects of foreign direct investment (FDI) on labour productivity in the medium-high manufacturing industries' classification in Malaysia. Methodology/Technique - This study employs a Seemingly Unrelated Regression (SUR) estimator. Findings - The results conclude that diffusion of knowledge, which increases labour productivity, is greater via "learning effects" as compared to the investor countries' capital investments in the medium-high manufacturing industries. Novelty - This study expands the body of knowledge about the benefits of FDI spillovers on labour productivity according to specific investor countries, however, are rarely researched particularly in developing countries and at the industry level. Type of Paper - Empirical.
    Keywords: Foreign Direct Investment; Labour Productivity; Technology Spillovers; Knowledge Spillovers
    JEL: E60 J24
    Date: 2021–03–31
  73. By: Era Dabla-Norris; James Daniel; Masahiro Nozaki; Cristian Alonso; Vybhavi Balasundharam; Matthieu Bellon; Chuling Chen; David Corvino; Joey Kilpatrick
    Abstract: Climate change is one of the greatest challenges facing policymakers worldwide, and the stakes are particularly high for Asia and the Pacific. This paper analyzes how fiscal policy can address challenges from climate change in Asia and the Pacific. It aims to answer how policymakers can best promote mitigation, adaptation, and the transition to a low-carbon economy, emphasizing the economic and social implications of reforms, potential policy trade-offs, and country circumstances. The recommendations are grounded in quantitative analysis using country-specific estimates, and granular household, industry, and firm-level data.
    Keywords: Climate change;Fiscal policy;Environmental taxes;Climate policy;Asia and Pacific;Fiscal policy;Climate change;Environmental taxes;Green economy;Climate change mitigation;Climate change adaptation;Asia and the Pacific
    Date: 2021–03–24
  74. By: ; Gauti B. Eggertsson; Giorgio E. Primiceri; Andrea Tambalotti
    Abstract: How will the U.S. economy emerge from the ongoing COVID-19 pandemic? Will it struggle to return to prior levels of employment and activity, or will it come roaring back as soon as vaccinations are widespread and Americans feel comfortable travelling and eating out? Part of the answer to these questions hinges on what will happen to the large amount of “excess savings” that U.S. households have accumulated since last March. According to most estimates, these savings are around $1.6 trillion and counting. Some economists have expressed the concern that, if a considerable fraction of these accumulated funds is spent as soon as the economy re-opens, the ensuing rush of demand might be destabilizing. This post argues that these savings are not that excessive, when considered against the backdrop of the unprecedented government interventions adopted over the past year in support of households and that they are unlikely to generate a surge in demand post-pandemic.
    Keywords: personal saving; government saving; marginal propensity to consume; COVID-19
    JEL: D14 E2
    Date: 2021–04–05
  75. By: Davide Fiaschi; Cristina Tealdi
    Abstract: We propose a general methodology to measure labour market dynamics, inspired by the search and matching framework, based on the estimate of the transition rates between labour market states. We show how to estimate instantaneous transition rates starting from discrete time observations provided in longitudinal datasets, allowing for any number of states. We illustrate the potential of such methodology using Italian labour market data. First, we decompose the unemployment rate fluctuations into inflow and outflow driven components; then, we evaluate the impact of the implementation of a labour market reform, which substantially changed the regulations of temporary contracts.
    Date: 2021–04
  76. By: Guido Menzio
    Abstract: As search frictions become smaller in the market for a consumer product, buyers are able to locate and access more sellers per unit of time. In response, sellers choose to design varieties of the product that are more specialized in order to exploit differences in the buyers' preferences. I find mild conditions on the fundamentals under which the decline in search frictions and the increase in specialization have exactly offsetting effects on the extent of competition in the market. Under these conditions, price dispersion remains constant over time even though search frictions are vanishing. Buyer's surplus and seller's profit, however, grow at a constant endogenous rate, as the endogenous increase in specialization allows sellers to cater better and better to the heterogeneous desires of buyers.
    JEL: D43 E23 L13 O40
    Date: 2021–04
  77. By: Victor Barros; João Tovar Jalles; Joaquim Miranda Sarmento
    Abstract: This paper extends previous literature by assessing the drivers of tax effort in a large panel of 122 countries over the period 1980 to 2017 and refining the analysis to regions, periods, income group, and economic development level. Our focus is on five blocks of determinants, namely: economic, fiscal, openness, structural, and political. We find that tax effort is influenced by all blocks, although results differ per income group. Tax effort in advanced economies is driven by all blocks of drivers, except political variables, while openness, structural, and political blocks prevail in developing economies. There is no consistency regarding the determinants across the four regions (Latin America, Africa, Europe and Asia). We also find that during the first two decades under analysis, tax effort is mainly associated with both higher levels of countries’ tax revenues and the role of the agricultural sector in the economy, while from 1999 onwards the determinants are mainly driven by left-wing ruling governments and the economic and fiscal blocks of variables. Our results are robust for a battery of sensitivity and robustness tests. Taken all together, our findings suggest the existence of heterogeneous impacts, which implies that policies resulting in improvements in the level of tax effort can affect countries in different ways.
    Keywords: tax effort; fiscal policy; economic development
    JEL: H21 O10 O40
    Date: 2021–04

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