nep-mac New Economics Papers
on Macroeconomics
Issue of 2021‒06‒28
174 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Monetary Policy and Bubbles in New Keynesian Model with Overlapping Generations By Galí, Jordi
  2. Monetary Policy with Opinionated Markets By Caballero, Ricardo; Simsek, Alp
  3. Monetary Policy, Redistribution, and Risk Premia By Rohan Kekre; Moritz Lenel
  4. Understanding a New Keynesian Model with Liquidity By Jia, Pengfei
  5. Effects of Covid-19 on Euro Area GDP and Inflation: Demand vs. Supply Disturbances By Kollmann, Robert
  6. Which Output Gap Estimates Are Stable in Real Time and Why? By Alessandro Barbarino; Travis J. Berge; Han Chen; Andrea Stella
  7. Unexpected Supply Effects of Quantitative Easing and Tightening By Stefania D'Amico; Tim Seida
  9. The Macroeconomic Effects of Government Spending Shocks in New Zealand By Yifei Lyu
  10. Inflation Dynamics and Forecast: Frequency Matters By Manuel M. F. Martins; Fabio Verona
  11. Constructing Divisia monetary aggregates for Singapore By Barnett, William A.; Nguyen, Van H.
  12. Constructing Divisia Monetary Aggregates for Singapore By William Barnett; Van H. Nguyen
  13. MMTの数理モデルについて By Tanaka, Yasuhito
  14. Evolving Monetary Policy in the Aftermath of the Great Recession By Aymeric Ortmans
  15. Risk Premia at the ZLB: A Macroeconomic Interpretation By Francois Gourio; Phuong Ngo
  16. Monetary Policy and Financial Stability By Isabel Cairó; Jae W. Sim
  17. Monetary and Fiscal Policies in Times of Large Debt: Unity is Strength By Francesco Bianchi; Renato Faccini; Leonardo Melosi
  18. Generational Distribution of Fiscal Burdens: A Positive Analysis By Uchida, Yuki; Ono, Tetsuo
  19. Leaning against the wind and crisis risk By Schularick, Moritz; Ter Steege, Lucas; Ward, Felix
  20. Redistribution and the Monetary–Fiscal Policy Mix By Saroj Bhattarai; Jae Won Lee; Choongryul Yang
  21. Deciphering the Macroeconomic Effects of Internal Devaluations in a Monetary Union By Andrés, Javier; Arce, Oscar; Fernández-Villaverde, Jesús; Hurtado, Samuel
  22. Chile: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile By International Monetary Fund
  24. Confinement et Chômage en France By Malak Kandoussi; François Langot
  25. Risk shocks, due loans, and policy options: When less is more! By José R. Maria; Paulo Júlio; Sílvia Santos
  26. Growth Forecasts vs. Realizations: The Role of Stimulus and Stringency Measures during the Pandemic By Gudum, Melis
  27. Institutional Arrangements and Inflation Bias: A Dynamic Heterogeneous Panel Approach By Diana Lima; Vasco Gabriel; Ioannis Lazopoulos
  28. The Ways the Cookie Crumbles: Education and the Margins of Cyclical Adjustment in the Labor Market By Cynthia L. Doniger
  29. Monetary Policy Effectiveness under the Ultra-Low Interest Rate Environment: Evidence from Yield Curve Dynamics in Japan By Shigenori Shiratsuka
  30. Is government debt good or bad for labor productivity? A dynamic panel analysis over 1972-2019 By Carvelli, Gianni; Trecroci, Carmine
  31. Bad Jobs and Low Inflation By Renato Faccini; Leonardo Melosi
  32. Impacts of the Fed Corporate Credit Facilities through the Lenses of ETFs and CDX By ; Stefania D'Amico; Stephen M. Lee
  33. The Emergence of Forward Guidance As a Monetary Policy Tool By Edward Nelson
  35. Fiscal regimes and the exchange rate By Enrique Alberola-Ila; Carlos Cantú; Paolo Cavallino; Nikola Mirkov
  36. Jumpstarting an International Currency By Bahaj, Saleem; Reis, Ricardo
  37. The Resilience of the U.S. Corporate Bond Market During Financial Crises By Bo Becker; Efraim Benmelech
  38. New Zealand: 2021 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for New Zealand By International Monetary Fund
  39. Dual labor market and the "Phillips curve puzzle" By Hideaki Aoyama; Corrado Di Guilmi; Yoshi Fujiwara; Hiroshi Yoshikawa
  40. Republic of Mozambique: Technical Assistance Report-Inflation Targeting and Model-based Monetary Policy Analysis By International Monetary Fund
  41. Impact of Covid-19 on global debt: a study of countries in the G-20 group By Srivastava, Dinesh Kumar; Kapur, Tarrung; Bharadwaj, Muralikrishna; Trehan, Ragini
  42. The Barnett Critique By Barnett, William A.; Park, Hyun; Park, Sohee
  43. Central Bank Policy and the Concentration of Risk: Empirical Estimates By Nuno Coimbra; Daisoon Kim; Hélène Rey
  44. Exchange Rates and Monetary Policy with Heterogeneous Agents: Sizing up the Real Income Channel By Adrien Auclert; Matthew Rognlie; Martin Souchier; Ludwig Straub
  45. Technological growth and hours in the long run: Theory and evidence By Reif, Magnus; Tesfaselassie, Mewael F.; Wolters, Maik H.
  46. Identification of Labour Market Shocks By Josué Diwambuena; Francesco Ravazzolo
  47. Business Cycle Fluctuations in Mirrlees Economies: The case of i.i.d. shocks​ By Marcelo Veracierto
  48. Effectives of Monetary Policy under the High and Low Economic Uncertainty States: Evidence from the Major Asian Economies By Balcilar, Mehmet; Ozdemir, Zeynel Abidin; Ozdemir, Huseyin; Aygun, Gurcan; Wohar, Mark E.
  49. Chile: Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Chile By International Monetary Fund
  50. Namibia: Request for Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for Namibia By International Monetary Fund
  51. Graphing And Measuring COVID’s First Wave Impact On The Bolivian Economy By Barja, Gover
  52. Heterogeneity and Aggregate Fluctuations By Minsu Chang; Xiaohong Chen; Frank Schorfheide
  53. Fiscal versus Monetary Policy in the 1960s By Friedman, Milton
  54. Forecasting US Inflation in Real Time By Chad Fulton; Kirstin Hubrich
  55. High-Frequency Estimates of the Natural Real Rate and Inflation Expectations By Alex Aronovich; Andrew C. Meldrum
  56. Pakistan: Second, Third, Fourth, and Fifth Reviews Under the Extended Arrangement Under the Extended Fund Facility and Request for Rephasing of Access-Press Release; Staff Report; Staff Supplement, and Statement by the Executive Director for Pakistan By International Monetary Fund
  57. The term structure of CIP violations By Augustin, Patrick; Chernov, Mikhail; Schmid, Lukas; Song, Dongo
  58. Wealth inequality: Opportunity or unfairness? By Haliassos, Michael; Jansson, Thomas; Karabulut, Yigitcan
  59. Computing Equilibria of Stochastic Heterogeneous Agent Models Using Decision Rule Histories By Marcelo Veracierto
  60. Effects of Covid-19 on Euro Area GDP and Inflation: Demand vs. Supply Disturbances By Robert Kollmann
  61. Economía formal y economía informal: un estudio sobre la dinámica del crecimiento económico en un modelo de inspiración clásica By Tobón, A
  62. Georgia: Eighth Review Under the Extended Fund Facility Arrangement-Press Release; and Staff Report By International Monetary Fund
  63. Republic of Slovenia: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Slovenia By International Monetary Fund
  64. Monetary policy implementation with an ample supply of reserves By Gara Afonso; Kyungmin Kim; Antoine Martin; Ed Nosal; Simon M. Potter; Sam Schulhofer-Wohl
  65. What Happened to the US Economy During the 1918 Influenza Pandemic? A View Through High-Frequency Data By Francois R. Velde
  66. Shocks, Institutions and Secular Changes in Employment of Older Individuals By Richard Rogerson; Johanna Wallenius
  67. Recycling Carbon Tax Revenue to Maximize Welfare By Stephie Fried; Kevin Novan; William B. Peterman
  68. Using the Retail Distribution of Sellers to Impute Expenditures Shares By Alexis Antoniades; Robert C. Feenstra; Mingzhi Xu
  69. Investment in OECD Countries: A Primer By Balazs Egert
  70. What Drives U.S. Treasury Re-use? By Sebastian Infante; Zack Saravay
  71. Thailand: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Thailand By International Monetary Fund
  72. Reforming the Individual Income Tax in Spain By Guner, Nezih; Lopez-Segovia, Javier; Ramos Magdaleno, Roberto
  73. Luxembourg: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg By International Monetary Fund
  74. El efecto transmisión de los valores públicos con fines de regulación monetaria en las operaciones de ruedo de la Bolsa Boliviana de Valores By Oscar Eduardo Machicado Mendoza
  75. GDP Growth Forecasts of the Reserve Bank of India – A Performance Assessment By Rajesh, Raj; Srivastava, Vineet
  76. Fiscal risks and their impact on banks’ capital buffers in South Africa By Konstantin Makrelov; Neryvia Pillay; Bojosi Morule
  77. Kenya: Requests for an Extended Arrangement Under the Extended Fund Facility and an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Kenya By International Monetary Fund
  78. Why Do Couples and Singles Save During Retirement? By Mariacristina De Nardi; Eric French; John Bailey Jones; Rory McGee
  79. Temptation and Incentives to Wealth Accumulation By Orazio Attanasio; Agnes Kovacs; Patrick Moran
  80. The first weeks of the coronavirus crisis: Who got hit, when and why? Evidence from Norway By Alstadsaeter, Annette; Bratsberg, Bernt; Eielsen, Gaute; Kopczuk, Wojciech; Markussen, Simen; Raaum, Oddbjørn; Røed, Knut
  81. Botswana: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Botswana By International Monetary Fund
  82. Do macroprudential measures increase inequality? Evidence from the euro area household survey By Georgescu, Oana-Maria; Martín, Diego Vila
  83. Vulnerabilidad económica y gasto de los hogares en Colombia: Elementos para una política pública en tiempos del COVID By Cortés, D; García-Suaza, A; Londoño, D
  84. Italy: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Italy By International Monetary Fund
  85. Measuring price selection in microdata: it’s not there By Karadi, Peter; Schoenle, Raphael; Wursten, Jesse
  86. Heterogeneity in the Marginal Propensity to Consume: Evidence from Covid-19 Stimulus Payments By Ezra Karger; Aastha Rajan
  87. The Macroeconomics of a Pandemic: A Minimalist Model By Céspedes, Luis Felipe; Chang, Roberto; Velasco, Andrés
  88. Efectos de corto plazo en el mercado laboral urbano By García-Suaza, A; Jaramillo, I; Londoño, D; Ortiz, S; Rodríguez-Lesmes, P
  89. Interest Rate Risk of Savings Accounts By Jiri Witzany; Martin Divis
  90. Kingdom of the Netherlands—Aruba: 2021 Article IV Consultation Discussions-Press Release; Staff Report; and Staff Supplement: 2021 Article IV Consultation Discussions-Press Release; Staff Report; and Staff Supplement By International Monetary Fund
  91. Ten Days Late and Billions of Dollars Short: The Employment Effects of Delays in Paycheck Protection Program Financing By Cynthia L. Doniger; Benjamin S. Kay
  92. The Neoclassical Growth Model with Time-Inconsistent Decision Making and Perfect Foresight By Borissov, Kirill; Pakhnin, Mikhail; Wendner, Ronald
  93. Republic of Uzbekistan: 2021 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund
  94. Growth, War, and Pandemics: Europe in the Very Long-run By Prados de la Escosura, Leandro; Rodríguez-Caballero, Carlos Vladimir
  95. Attitudes Toward Debt and Debt Behavior By Almenberg, Johan; Lusardi, Annamaria; Säve-Söderbergh, Jenny; Vestman, Roine
  96. Lower-Level Substitution Bias in the Japanese Consumer Price Index: Evidence from Government Micro Data By Shiratsuka, Shigenori
  97. Can Wealth Buy Health? A Model of Pecuniary and Non-Pecuniary Investments in Health By Margaris, Panagiotis; Wallenius, Johanna
  98. Determinantes del ciclo crediticio en Bolivia By Joab D. Valdivia C.
  99. Sudan: First Review Under the Staff-Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Sudan: First Review Under the Staff-Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Sudan By International Monetary Fund
  100. Détermination du PIB réel trimestriel du Québec et analyse du cycle économique, 1948-1980 By Mario Fortin; Marcelin Joanis; Philippe Kabore; Luc Savard
  101. Personal income distribution and the endogeneity of the demand regime By Tonni, Lorenzo
  102. A Social Recovery, Workplace Democracy and Security: COVID-19 and Labour Law By Ewan McGaughey
  103. Optimism Gone Bad? The Persistent Effects of Traumatic Experiences on Investment Decisions By Chi Hyun Kim
  104. Republic of the Marshall Islands: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Republic of the Marshall Islands By International Monetary Fund
  105. Mali: Second and Third Reviews Under the Extended Credit Facility Arrangement. Requests for Waivers of Nonobservance of Performance Criteria and Modification of Performance Criterion-Press Release; Staff Report; and Statement by the Executive Director for Mali By International Monetary Fund
  106. Banks' Liquidity Management During the COVID-19 Pandemic By Gounopoulos, Dimitrios; Luo, Kaisheng; Nicolae, Anamaria; Paltalidis, Nikos
  107. Business Cycle during Structural Change: Arthur Lewis' Theory from a Neoclassical Perspective By Storesletten, Kjetil; Zhao, Bo; Zilibotti, Fabrizio
  109. Republic of Madagascar: Request for a 40-Month Arrangement under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Republic of Madagascar By International Monetary Fund
  110. Assessment of the effectiveness of the macroprudential measures implemented in the context of the Covid-19 pandemic By Lucas Avezum; Vítor Oliveira; Diogo Serra
  111. The Heterogeneous Impact of Short-Time Work: From Saved Jobs to Windfall Effects By Pierre Cahuc; Francis Kramarz; Sandra Nevoux
  112. Trade Policy is Real News: Theory and Evidence By George A. Alessandria; Carter B. Mix
  113. The Heterogeneous Impact of Short-Time Work: From Saved Jobs to Windfall Effects By Pierre Cahuc; Francis Kramarz; Sandra Nevoux
  114. The Effect of the PPPLF on PPP Lending by Commercial Banks By Sriya Anbil; Mark A. Carlson; Mary-Frances Styczynski
  115. Entrepreneurship During the COVID-19 Pandemic: Evidence from the Business Formation Statistics By John C. Haltiwanger
  116. Governmental Risk Taking Under Market Imperfections: Working Paper 2021-07 By Michael Falkenheim
  117. International Yield Spillovers By Don H. Kim; Marcelo Ochoa
  118. No country is an island: international cooperation and climate change By Ferrari, Massimo; Pagliari, Maria Sole
  119. Transitory Income Changes and Consumption Smoothing: Evidence from Mexico By Angelucci, Manuela; Chiapa, Carlos; Prina, Silvia; Rojas, Irvin
  120. Do Stay-at-Home Orders Cause People to Stay at Home? Effects of Stay-at-Home Orders on Consumer Behavior By Diane Alexander; Ezra Karger
  121. The COVID-19 Crisis and the Federal Reserve's Policy Response By Richard H. Clarida; Burcu Duygan-Bump; Chiara Scotti
  122. Colocación de cartera y crecimiento sectorial By Joab D. Valdivia C.
  123. Resurrecting the UK Corporate Sector Accounts By Bill Martin
  124. The Real Effects of Financial Uncertainty Shocks: A Daily Identification Approach By Piergiorgio Alessandri; Andrea Gazzani; Alejandro Vicondoa
  125. The Internal Capital Markets of Global Dealer Banks By Arun Gupta
  126. Reallocating Liquidity to Resolve a Crisis: Evidence from the Panic of 1873 By Haelim Anderson; Kinda Cheryl Hachem; Simpson Zhang
  127. Voting right rotation, behavior of committee members and financial market reactions: evidence from the U.S. Federal Open Market Committee By Ehrmann, Michael; Tietz, Robin; Visser, Bauke
  128. Eastern Caribbean Currency Union: 2021 Discussion on Common Policies of Member Countries-Press Release; Staff Report; and Statement by the Executive Director for the Eastern Caribbean Currency Union By International Monetary Fund
  129. The Gold Standard and the International Dimension of the Great Depression. By Luca Pensieroso; Romain Restout
  130. "The Pandemic, the Stimulus, and the Future Prospects for the US Economy" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  131. Are Repo Markets Fragile? Evidence from September 2019 By Sriya Anbil; Alyssa G. Anderson; Zeynep Senyuz
  132. Growth, Endogenous Environmental Cycles, and Indeterminacy By Maxime MENUET; Alexandru MINEA; Patrick VILLIEU; Anastasios XEPAPADEAS
  133. Has Market Power of U.S. Firms Increased? By Mary Amiti; Sebastian Heise
  134. roductivity Slowdown and MNEs' Intangibles: where is productivity measured? By Jean-Charles Bricongne; Samuel Delpeuch; Margarita Lopez Forero
  135. On the design of labor market programs as stabilization policies By Euiyoung Jung
  136. Forward interest rates as predictors of future US and UK spot rates before and after the 2008 financial crisis By Wickens, Michael R.
  137. El carácter cíclico de la política monetaria en Bolivia By María Eugenia Carmona Morales
  138. Between communism and capitalism: long-term inequality in Poland, 1892–2015 By Bukowski, Pawel; Novokmet, Filip
  139. Productivity and Employment in APAC Economies: A Comparison with the EU Using Firm-Level Information By Mauro, Filippo di; Hoang, Minh Duy; Morgan, Peter
  140. Calidad del empleo agregado, formal e informal: un análisis para la economía colombiana en el periodo 2007 -2019 By Montoya, J; Jurado, A.
  141. This Time is Not so Different: Income Dynamics During the COVID-19 Recession By Brian D. Bell; Nicholas Bloom; Jack Blundell
  142. What Drives Bank Peformance? By Luca Guerrieri; James Collin Harkrader
  143. Sexual Orientation and Earnings. A Meta-Analysis 2012-2020 By Drydakis, Nick
  144. Republic of South Sudan: Staff-Monitored Program and Request for Disbursement under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for the Republic of South Sudan By International Monetary Fund
  145. Infectious disease and endogenous cycles: lockdown hits two birds with one stone. By David Desmarchelier; Magali Jaoul-Grammare; Guillaume Morel; Thi Kim Cuong Pham
  146. Politics and the Distribution of Federal Funds: Evidence from Federal Legislation in Response to COVID-19 By Jeffrey Clemens; Stan Veuger
  147. Fiscal Rule and Public Investment in Chile By J. Rodrigo Fuentes; Raimundo Soto; Klaus Schmidt-Hebbel
  148. Cabo Verde: Third Review Under the Policy Coordination Instrument-Press Release; and Staff Report By International Monetary Fund
  149. Real Estate and Rental Markets during Covid Times By Bertrand Achou; Hippolyte d'Albis; Eleni Iliopulos
  150. Explaining the Income and Consumption Effects of COVID in India By Arpit Gupta; Anup Malani; Bartek Woda
  151. Adaptation and the Cost of Rising Temperature for the U.S. economy By ; Francois Gourio
  152. Exits and bailouts in a monetary union By Michal Kobielarz
  153. From Mancession to Shecession: Women’s Employment in Regular and Pandemic Recessions By Titan Alon; Sena Coskun; Matthias Doepke; David Koll; Michèle Tertilt
  154. Economic Growth with Public and Foreign Investment in Vietnam By Ly Dai Hung
  155. Philippines: Financial System Stability Assessment-Press Release and Statement by the Executive Director for the Philippines By International Monetary Fund
  156. Positional Preferences and Efficiency in a Dynamic Economy By Aronsson, Thomas; Ghosh, Sugata; Wendner, Ronald
  157. Positional Preferences and Efficiency in a Dynamic Economy By Aronsson, Thomas; Ghosh, Sugata; Wendner, Ronald
  158. Economic Diversification Under Saudi Vision 2030 By David Havrlant; Abdulelah Darandary
  159. Online Appendix to "A fiscal theory of monetary policy with partially repaid long-term debt" By John Cochrane
  160. Search, matching and heterogeneity By Julien Pascal
  161. Capital-Reallocation Frictions and Trade Shocks By Lanteri, Andrea; Medina, Pamela; Tan, Eugene
  162. The Safety Net as a Springboard? A General Equilibrium based Policy Evaluation By Ferraro, Domenico; Jaimovich, Nir; Molinari, Francesca; Young, Cristobal
  163. Arbitrage Capital of Global Banks By Alyssa G. Anderson; Wenxin Du; Bernd Schlusche
  164. Exchange Rates and Asset Prices in a Global Demand System By Koijen, Ralph; Yogo, Motohiro
  165. Defying Gravity: The Economic Effects of Social Distancing By Alfredo D. Garcia; Christopher A. Hartwell; Mart\'in Andr\'es Szybisz
  166. The Palestine Currency Board: Its History and Currency By Berlin, Howard
  167. Good Day Sunshine By John C. Williams
  168. The relationship between the US broad money supply and US GDP for the time period 2001 to 2019 with that of the corresponding time series for US national property and stock market indices, using an information entropy methodology By Laurence Lacey
  169. Towards a Green New Deal: Scenarios for the US Transition to Renewable Energy and Green Infrastructure By Khan, Haider
  170. Individual Accountability in International Economy Policymaking after the Global Financial Crisis By Pagliari, Stefano; Kovras, Iosif
  171. Capital Fundamentalism and Structural Transformation By Tohari, Achmad; Parsons, Christopher; Rammohan, Anu
  172. Corporate taxation and firm-level investment in South Africa By Mashekwa Maboshe
  173. Five Facts about the UIP Premium By Ṣebnem Kalemli-Özcan; Liliana Varela
  174. Economics of Microcredit-From current crisis to new possibilities By Mitoko, Jeremiah

  1. By: Galí, Jordi
    Abstract: I analyze an extension of the New Keynesian model that features overlapping generations of finitely-lived agents and (stochastic) transitions to inactivity. In contrast with the standard model, the proposed framework allows for the existence of rational expectations equilibria with asset price bubbles. I study the conditions under which bubble-driven fluctuations may emerge and the type of monetary policy rules that may prevent them. I conclude by discussing some of the model's welfare implications.
    Keywords: Asset Price Volatility; Economic Fluctuations; monetary policy rules; Stabilization policies
    JEL: E44 E52
    Date: 2020–06
  2. By: Caballero, Ricardo; Simsek, Alp
    Abstract: Central banks (the Fed) and markets (the market) often disagree about the path of interest rates. We develop a model where these different views stem from disagreements between the Fed and the market about future aggregate demand. We then study the implications of these disagreements for monetary policy, the term structure of interest rates, and economic activity. In our model, agents learn from the data but not from each other-they are opinionated. In this context, the market perceives monetary policy "mistakes" and the Fed partially accommodates the market's view to mitigate the impact of perceived "mistakes" on output and inflation. The Fed plans to implement its own view gradually, as it expects the market to receive more information and move closer to the Fed's belief. Disagreements about future demand, together with learning, translate into disagreements about future interest rates. Disagreements also provide a microfoundation for monetary policy shocks: after a surprise policy announcement, the market (partially) learns the Fed's belief and the extent of future "mistaken" interest rate changes. We categorize these shocks into three groups: Fed belief shocks, market reaction shocks, and tantrum shocks, and analyze their impact on forward interest rates and economic activity. Tantrum shocks are the most damaging, as they arise when the Fed fails to forecast the forward rates' reaction. These shocks motivate additional gradualism as well as communication policies that reveal the Fed's belief, not to persuade the market (which is opinionated) but to prevent a misinterpretation of the Fed's belief. Finally, we also find that disagreements affect inflation and create a policy trade-off between stabilizing output and inflation.
    Keywords: aggregate demand shocks; belief shocks; communication; confident disagreement; forward curve; Gradualism; monetary policy and shocks; taper tantrum; the Fed's dot plot; the term structure of interest rates
    JEL: E00 E12 E21 E32 E43 E44 G11 G12
    Date: 2020–05
  3. By: Rohan Kekre; Moritz Lenel
    Abstract: We study the transmission of monetary policy through risk premia in a heterogeneous agent New Keynesian environment. Heterogeneity in households' marginal propensity to take risk (MPR) summarizes differences in portfolio choice on the margin. An unexpected reduction in the nominal interest rate redistributes to households with high MPRs, lowering risk premia and amplifying the stimulus to the real economy. Quantitatively, this mechanism rationalizes the role of news about future excess returns in driving the stock market response to monetary policy shocks and amplifies their real effects by 1.3-1.5 times.
    JEL: E44 E52 G12
    Date: 2021–05
  4. By: Jia, Pengfei
    Abstract: The Global Financial Crisis of 2007--2009 and its aftermath have called for a rethink of the role of money in shaping business cycle fluctuations. To this end, this paper studies a New Keynesian model with money (liquidity). In the model, agents hold government money and other financial assets. However, there is a "short rate disconnect" (i.e., an interest rate spread) between the policy rate on money and the interest rate on household's savings. The paper shows that there exists a meaningful "liquidity effect" that is quantitatively significant for the macroeconomy. As the spread increases, so does the price of liquidity. In a model where consumption and money are complements, such an increase in the opportunity cost of money induces agents to consume less and work less. Both the effects imply that the real wage can fall, which in turn puts downward pressures on inflation via the New Keynesian Phillips curve. The fall in inflation makes the monetary authority cut the nominal interest rates by more, but at the cost of increasing the spread even further. In addition, the paper compares the dynamic responses to technology shocks and monetary policy shocks for the model with liquidity and the standard New Keynesian model. The results show that the responses can be quantitatively different for the two models. Finally, this paper studies the interaction between the liquidity effect and monetary policy, highlighting the liquidity effect that can play in business cycles.
    Keywords: Liquidity, Money, New Keynesian model, Business cycle fluctuations
    JEL: E32 E41 E51 E52 E62
    Date: 2021–06–14
  5. By: Kollmann, Robert
    Abstract: This paper analyzes the macroeconomic effects of the Covid-19 epidemic on Euro Area (EA) GDP and inflation, using a stylized New Keynesian model. Covid is interpreted as a combination of aggregate demand and aggregate supply disturbances. Offsetting aggregate demand and supply changes are shown to account for the stability of EA inflation, in the face of Covid. The evidence presented here indicates that Covid-induced aggregate demand and supply shifts were persistent. An aggregate supply contraction is identified as the dominant force driving the sharp fall of EA GDP in 2020.
    Keywords: Covid, real activity, inflation, aggregate demand, aggregate supply.
    JEL: E31 E32 E43 E52 E65
    Date: 2021–06–14
  6. By: Alessandro Barbarino; Travis J. Berge; Han Chen; Andrea Stella
    Abstract: Output gaps that are estimated in real time can differ substantially from those estimated after the fact. We aim to understand the real-time instability of output gap estimates by comparing a suite of reduced-form models. We propose a new statistical decomposition and find that including a Okun’s law relationship improves real-time stability by alleviating the end-point problem. Models that include the unemployment rate also produce output gaps with relevant economic content. However, we find that no model of the output gap is clearly superior to the others along each metric we consider.
    Keywords: Output gap; Real-time data; Trend-cycle decomposition; Unobserved components model
    JEL: E24 E32 E52
    Date: 2020–12–18
  7. By: Stefania D'Amico; Tim Seida
    Abstract: To analyze the evolution of quantitative easing’s (QE) and tightening’s (QT) effects across consecutive announcements, we focus on their unexpected component. Treasury yield sensitivities to QE and QT supply surprises do not fall monotonically over time, thus later announcements seemed to remain powerful; yield sensitivities to QT surprises are on average larger than sensitivities to QE surprises, implying supply effects did not diminish during periods of market calm amid economic expansion; finally, yield sensitivities are amplified by the amount of interest-rate uncertainty prevailing before the announcement, implying that turning points in the balance sheet policy tended to elicit larger reactions.
    Keywords: Balance sheet policy surprises; quantitative easing and tightening; asset supply effects
    JEL: E43 E44 E52 E58
    Date: 2020–07–31
  8. By: Solikin M. Juhro; Reza
    Abstract: This paper studies the role of macroprudential policy in the insulation properties of flexible exchangerates. To this end, we build a small open economy New Keynesian DSGE model with a bankingsector where, in the model economy, entrepreneurs may take foreign loans, and the exchange rateintervention is undertaken via a modified Taylor-rule. We also add a macroprudential measure,which limits the entrepreneurs’ foreign to domestic loan ratio. From the analysis, three significantresults emerge. First, the responses of aggregate output, consumption, investment, and inflation varywidely concerning the type of foreign shocks and the combinations of macroprudential policy andexchange rate intervention. Second, the flexible exchange rate’s insulation properties seem to dependon the foreign shock hitting the economy. Under a foreign interest rate shock, a higher exchange rateintervention destabilizes output. Whereas under a risk premium shock, it stabilizes output. Finally, under the foreign shocks, tightening the macroprudential measure does not necessarily stabilize output in the economy.
    Keywords: exchange rate, macroprudential policy, credit frictions, external shocks
    JEL: E30 E32 E44 E51 E52 G21 G28
    Date: 2020
  9. By: Yifei Lyu (The Treasury)
    Abstract: This paper estimates the macroeconomic effects of government spending shocks in New Zealand. Using a structural vector autoregression (SVAR) model, I find small output multipliers for government consumption but large multipliers for government investment. Importantly, the real exchange rate appreciates after positive government spending shocks, consistent with classic theory. Private consumption and private investment decrease after government consumption shocks, but increase after government investment shocks. I show that selecting the appropriate series for government investment is important to estimating its effects.
    Keywords: government consumption; government investment; New Zealand; multiplier; VAR
    JEL: C32 E32 E62 H30 H54
    Date: 2122–06
  10. By: Manuel M. F. Martins (Faculty of Economics, University of Porto and CEF.UP); Fabio Verona (Bank of Finland - Monetary Policy and Research Department and University of Porto - CEF.UP)
    Abstract: Policymakers and researchers see inflation characterized by cyclical fluctuations driven by changes in resource utilization and temporary shocks, around a trend influenced by inflation expectations. We study the in-sample inflation dynamics and forecast inflation out-of-sample by analyzing a New Keynesian Phillips Curve (NKPC) in the frequency domain. In-sample, while inflation expectations dominate medium-to-long-run cycles, energy prices dominate short cycles and business-to-medium cycles once expectations became anchored. While statistically significant, unemployment is not economically relevant for any cycle. Out-of-sample, forecasts from a low-frequency NKPC significantly outperform several benchmark models. The long-run component of unemployment is key for such remarkable forecasting performance.
    Keywords: Inflation dynamics; Inflation forecast; New Keynesian Phillips Curve; Frequency domain; Wavelets
    JEL: C53 E31 E37
    Date: 2021–06
  11. By: Barnett, William A.; Nguyen, Van H.
    Abstract: Since Barnett (1978) derived the user cost price of money, the economic theory of monetary services aggregation has been developed and extended into a field of its own with solid foundations in microeconomic theory. Divisia monetary aggregates have repeatedly been shown to be strictly preferred to their simple-sum counterparts, which have no competent foundations in microeconomic aggregation or index number theory. However, most central banks in the world, including that of Singapore, the Monetary Authority of Singapore (MAS), still report their monetary aggregates as simple summations. Recent DSGE macroeconomic models often ignore aggregate quantities of money as possible instruments or targets of monetary policy. In the case of a small open economy like Singapore’s, exchange rates are often targeted to achieve goals for inflation and output gap. See, e.g., McCallum (2006). Is that because quantities of money are irrelevant to economic activity? To examine the relevance of Divisia monetary aggregates in predicting real economy activity in Singapore, we construct monetary services indices for Singapore using the recent credit-card-augmented Divisia monetary aggregates formula. We produce those state-of-the-art monetary services indexes for Jan 1991 to Mar 2021. In future work, we plan to use our data to explore central bank policy in Singapore and to propose improvements in that policy. By making our data available to the public, we encourage others to do the same.
    Keywords: Divisia index, Divisia monetary aggregates, credit card augmented Divisia, open-economy macroeconomics, monetary policy analysis, Singapore
    JEL: E32 E40 E41 E47 E50 E51 E52 E58
    Date: 2021–06–22
  12. By: William Barnett (Department of Economics, University of Kansas and Center for Financial Stability, New York City); Van H. Nguyen (Department of Economics, The University of Kansas)
    Abstract: Since Barnett (1978) derived the user cost price of money, the economic theory of monetary services aggregation has been developed and extended into a field of its own with solid foundations in microeconomic theory. Divisia monetary aggregates have repeatedly been shown to be strictly preferred to their simple-sum counterparts, which have no competent foundations in microeconomic aggregation or index number theory. However, most central banks in the world, including that of Singapore, the Monetary Authority of Singapore (MAS), still report their monetary aggregates as simple summations. Recent DSGE macroeconomic models often ignore aggregate quantities of money as possible instruments or targets of monetary policy. In the case of a small open economy like Singapore’s, exchange rates are often targeted to achieve goals for inflation and output gap. See, e.g., McCallum (2006). Is that because quantities of money are irrelevant to economic activity? To examine the relevance of Divisia monetary aggregates in predicting real economy activity in Singapore, we construct monetary services indices for Singapore using the recent credit-card- augmented Divisia monetary aggregates formula. We produce those state-of-the-art monetary services indexes for Jan 1991 to Mar 2021. In future work, we plan to use our data to explore central bank policy in Singapore and to propose improvements in that policy. By making our data available to the public, we encourage others to do the same.
    Keywords: Divisia index, Divisia monetary aggregates, credit card augmented Divisia, open- economy macroeconomics, monetary policy analysis, Singapore.
    JEL: E32 E40 E41 E47 E50 E51 E52 E58
    Date: 2021–06
  13. By: Tanaka, Yasuhito
    Abstract: 近年MMT(Modern Monetary Theory,現代貨幣理論)と呼ばれる学派の主張が注目を集めているが,これまであまり理論的,あるいは数学的な分析がなされることはなかった。本稿は効用関数と予算制約式による消費者の効用最大化,独占的競争における企業の利潤最大化,財の需要・供給の均衡,などの新古典派的なミクロ経済学の枠組みの基本を維持しながら,MMTの主張の骨格をなすものを理論的に基礎づけることを目的とし,技術進歩による経済成長を含む単純な静学モデルを用いて以下の事柄を論証する。1) 経済が成長しているときに完全雇用を維持して行くためには継続的な財政赤字が必要であり,その財政赤字を将来の黒字によって埋め合わせる必要はない。2) 実際の財政赤字が完全雇用維持に必要・十分な水準を上回ることによってインフレーションが引き起こされる。さらなるインフレーションを起こさないためには安定的に一定の財政赤字を続ける必要がある。3) 財政赤字の不足は不況を招き非自発的失業を発生させる。そこから回復させるためには完 全雇用を維持して行くのに必要な水準を超える財政赤字が求められるが,完全雇用回復後 は継続的な財政赤字が必要なので,不況克服のために生じた赤字を将来の財政黒字によっ て埋め合わす必要はないし,そうしてはならない。
    Keywords: MMT,経済成長,財政赤字,インフレーション
    JEL: E12 E24
    Date: 2021–06–23
  14. By: Aymeric Ortmans (Université Paris-Saclay, Univ Evry, EPEE)
    Abstract: A Taylor-type monetary policy rule is estimated using a time-varying parameter vector autoregressive model to assess changes in central banks' behavior during and after the Great Recession. Based on US and euro area data, the results show that both the Fed and the ECB have changed their behavior after the 2008 crisis. Contemporaneous coefficients have increased with expansionary monetary policy at the ZLB. Althoughthey do not indicate clear evidence of significant changes inthe systematic component of monetary policy, estimated response coefficients suggest dramatic shifts in monetary policy shocks after the Global Financial Crisis. These departures from rule-based behavior - i.e. monetary policy discretion - are increasingly larger with the implementation of non-standard measures. Unconventional monetary policy shocks are shown to strongly affect the US macroeconomy and to contribute to the variance of inflation and output even more importantly when the Fed eased its monetary policy at the ZLB. This is not the case in the euro area, despite increasing monetary policy shocks in unconventional times. A counterfactual analysis shows however thatthe shift in the systematic component of monetary policy appears to be a key determinant of the level of inflation and output at the ZLB, especially in the euro area that would have suffered a continuous period of deflation from 2014:1 to 2018:1 without any change in ECB's behavior after the 2008 crisis.
    Keywords: Federal Reserve, European Central Bank, Taylor rule, Time-varying parameter VAR, Shadow rate, Zero lower bound
    JEL: C32 E31 E32 E37 E43 E44 E52 E58
    Date: 2020
  15. By: Francois Gourio; Phuong Ngo
    Abstract: Historically, inflation is negatively correlated with stock returns, leading investors to fear inflation. We document using a variety of measures that this association became positive in the U.S. during the 2008-2015 period. We then show how an off-the-shelf New Keynesian model can reproduce this change of association due to the binding zero lower bound (ZLB) on short-term nominal interest rates during this period: in the model, demand shocks become more important when the ZLB binds because the central bank cannot respond as effectively as when interest rates are positive. This changing correlation in turn reduces the term premium, and hence contributes to explaining the decline in long-term interest rates. We use the model to evaluate this mechanism quantitatively. Our results shed light on the validity of the New Keynesian ZLB model, a cornerstone of modern macroeconomic theory.
    Keywords: zero lower bound; liquidity trap; stock market; inflation premia; term premia; risk premia
    JEL: C61 E31 E52 E62
    Date: 2020–01–03
  16. By: Isabel Cairó; Jae W. Sim
    Abstract: The 2008 Global Financial Crisis called into question the narrow focus on price stability of inflation targeting regimes. This paper studies the relationship between price stability and financial stability by analyzing alternative monetary policy regimes for an economy that experiences endogenous financial crises due to excessive household sector leverage. We reach four conclusions. First, a central bank can improve both price stability and financial stability by adopting an aggressive inflation targeting regime, in the absence of the zero lower bound (ZLB) constraint on nominal interest rates. Second, in the presence of the ZLB constraint, an aggressive inflation targeting regime may undermine both price stability and financial stability. Third, an aggressive price-level targeting regime can improve both price stability and financial stability, regardless of the presence of the ZLB constraint. Finally, a leaning against the wind policy can be detrimental to both price stability and financial stability when the credit cycle is driven by countercyclical household sector leverage. In this environment, leaning with credit spreads can be more effective.
    Keywords: Inflation targeting; Financial crises; Zero lower bound
    JEL: E32 E52 G01
    Date: 2020–12–18
  17. By: Francesco Bianchi; Renato Faccini; Leonardo Melosi
    Abstract: The COVID pandemic hit the US economy at a time in which the ability of policymakers to react to adverse shocks is greatly limited. The current low interest rate environment limits the Federal Reserve's ability to stabilize the economy, while the large public debt curtails the efficacy of fiscal interventions by inducing expectations of costly fiscal adjustments. A solution to this impasse is a coordinated fiscal and monetary strategy aiming at creating a controlled rise of inflation to wear away a targeted fraction of debt. Under our coordinated strategy, the fiscal authority introduces an emergency budget with no provisions on how it will be balanced, while the monetary authority allows a temporary increase in inflation. The coordinated strategy enhances the efficacy of the fiscal stimulus planned in response to the COVID pandemic and allows the Federal Reserve to correct a prolonged period of below-target inflation. The strategy results in only moderate levels of inflation by separating long-run fiscal sustainability from a short-run policy intervention.
    Keywords: Monetary policy; fiscal policy; emergency budget; shock specific rule; COVID
    JEL: E30 E52 E62
    Date: 2020–05–12
  18. By: Uchida, Yuki; Ono, Tetsuo
    Abstract: This study presents a political economy model with overlapping generations to analyze the effects of population aging on fiscal policy formation and the resulting distribution of the fiscal burden across generations. The analysis focuses on the role of endogenous labor supply and shows that increased political weight of the old, arising from population aging, leads to an increase in the ratios of public debt and labor income tax revenue to GDP and an initial decrease followed by an increase in the ratio of capital income tax revenue to GDP. The result fits well with the evidence in OECD countries.
    Keywords: Generational burden; Overlapping generations; Political economy; Population aging; Public debt
    JEL: D70 E24 E62 H60
    Date: 2021–05–14
  19. By: Schularick, Moritz; Ter Steege, Lucas; Ward, Felix
    Abstract: Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial crisis risk. Based on the near-universe of advanced economy financial cycles since the 19th century, we show that discretionary leaning against the wind policies during credit and asset price booms are more likely to trigger crises than prevent them.
    Keywords: Financial Stability; local projections; monetary policy
    JEL: E44 E50 G01 G15 N10
    Date: 2020–05
  20. By: Saroj Bhattarai; Jae Won Lee; Choongryul Yang
    Abstract: We show that the effectiveness of redistribution policy in stimulating the economy and improving welfare is directly tied to how much inflation it generates, which in turn hinges on monetary-fiscal adjustments that ultimately finance the transfers. We compare two distinct types of monetary-fiscal adjustments: In the monetary regime, the government eventually raises taxes to finance transfers, while in the fiscal regime, inflation rises, effectively imposing inflation taxes on public debt holders. We show analytically in a simple model how the fiscal regime generates larger and more persistent inflation than the monetary regime. In a quantitative application, we use a two-sector, two-agent New Keynesian model, situate the model economy in a COVID-19 recession, and quantify the effects of the transfer components of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We find that the transfer multipliers are significantly larger under the fiscal regime—which results in a milder contraction—than under the monetary regime, primarily because inflationary pressures of this regime counteract the deflationary forces during the recession. Moreover, redistribution produces a Pareto improvement under the fiscal regime.
    Keywords: Household heterogeneity; Redistribution; Monetary-fiscal policy mix; Transfer multiplier; Welfare evaluation; COVID-19; CARES Act
    JEL: E53 E62 E63
    Date: 2021–03–01
  21. By: Andrés, Javier; Arce, Oscar; Fernández-Villaverde, Jesús; Hurtado, Samuel
    Abstract: We study the macroeconomic effects of internal devaluations undertaken by a periphery of countries belonging to a monetary union. We find that internal devaluations have large and positive output effects in the long run. Through an expectations channel, most of these effects carry over to the short run. Internal devaluations focused on goods markets reforms are generally more powerful in stimulating growth than reforms aimed at moderating wages, but the latter are less deflationary. For a monetary union with a periphery the size of the euro area's, the countries at the periphery benefit from internal devaluations even at the zero lower bound (ZLB) of the nominal interest rate. Nevertheless, when the ZLB binds, there is a case for a sequencing of reforms that prioritizes labor policies over goods markets reforms.
    Keywords: internal devaluation; monetary union; policy sequencing; Structural reforms; zero lower bound
    JEL: D42 E44 E63
    Date: 2020–05
  22. By: International Monetary Fund
    Abstract: The Chilean economy has been hit by the pandemic while recovering from the social unrest in late 2019, requiring substantial adjustment of economic policies and the appropriate use of existing policy buffers. Following a sharp decline in mid-2020, economic activity started recovering in 2020H2 in the wake of ample policy stimulus. Inflation remains near the policy target, with inflation expectations anchored, and the current account balance has improved amid a sharp drop in imports and relatively resilient exports. Fiscal and monetary policies remain guided by the structural fiscal balance rule and the inflation-targeting framework, respectively. Beyond the pandemic-related risks, there is uncertainty stemming from a series of elections and the outcome of a New Constitution process—scheduled to finish in mid-2022—which are expected to shape the public discourse and influence the policy agenda.
    Keywords: liability positions vis-à-vis nonresident; money market rate; inflation expectation; policy target; I. Policy response; COVID-19; Pension spending; Fiscal stance; Credit; Global
    Date: 2021–04–23
  23. By: Ferry Syarifuddin
    Abstract: This paper provides two empirical investigations concerning the macroeconomics of foreign exchange (FX) futures market. We first examine the macroeconomic consequences of FX futures market activities for selected emerging market economies that adopt inflation targeting framework (ITF). This paper then conducts comparative study investigating the effect of futures-based FX intervention on the exchange rate dynamics and exchange rate pass-through effect for the case ofBrazil and India. By utilizing the Bayesian Panel VAR, we find initial intention of market squeezing. However, it occurs only in small magnitudes and for short periods and, therefore, the FX futures rate, spot exchange rate, inflation rate, and economic growth would not fluctuate abnormally. For the second investigation, we utilize Autoregressive Distributed Lag model and show that the futures-based FX interventions in Brazil are effective, while it is not the case for India. These findings suggest that specific economic institutional aspects, which leads to the FX futures market deepening and robust financial-economic regulatory structures, are important inmitigating market manipulation and promoting an effective futures-based FX intervention.
    Keywords: foreign exchange futures market; futures-based FX intervention; exchange rate; pass-through.
    JEL: E44 E52 E58 G23 G28
    Date: 2020
  24. By: Malak Kandoussi (Université Paris-Saclay, Université d'Evry (EPEE-TEPP)); François Langot (Université du Mans (Gains-TEPP & IRA), IUF, EEP, Cepremap, IZA)
    Abstract: Nous développons un modèle d'appariement multisectoriel qui reproduit l'impact du premier confinement sur le chômage français, en tenant compte de l'hétérogénéité entre les différents types d'emplois. Nous identifions l'ampleur des restrictions du confinement sur les ventes de chaque segment du marché du travail, ainsi que l'utilisation hétérogène des mesures de chômage partiel. Ces résultats sont obtenus grâce à un modèle d'appariement original intégrant(i)risques microéconomiques variant dans le temps,(ii)externalités de congestion dans le processus de recrutement et(iii)rigidités salariales. Ensuite,(i)nous comparons différents scénarios de confinement (court mais strict versus long mais souple),(ii)nous évaluons l'impact des mesures de chômage partiel sur les taux de chômage par diplôme et(iii)nous prévoyons l'impact du second confinement.
    Keywords: COVID-19, chômage, appariement, hétérogénéité des travaileurs
    JEL: E24 E32 J64
    Date: 2020
  25. By: José R. Maria; Paulo Júlio; Sílvia Santos
    Abstract: We use a dynamic stochastic general equilibrium model endowed with a complex banking system—in which due loans, occasionally binding credit restrictions, a cost of borrowing channel, and regulatory (capital and impairment) requirements coexist—to analyze the performance of various policy options impacting impairment recognition by banks. We discuss how looser or tighter policy designs affect output and welfare—both in the steady state and alongside dynamics—and the main driving forces that lie beneath the effects. The holding cost of due loans, restrictions to credit, dividend strategy, and the cure rate are key components of the driveshaft propelling policies to outcomes. We find that looser policies outperform tighter ones only if reflected into higher capital buffers (extra income is retained and not distributed as dividends) and for sufficiently low values of the holding cost. Higher cure rates increase the effectiveness of looser policies—they dominate for a wider range of holding costs—by raising the benefits of delaying impairment recognition. A policy targeting impairment recognition seems to take the upper edge due to its combined steady-state and business-cycle effects, but a policy that allows the regulatory impairment recognition to respond to the cycle is more effective from a business-cycle stabilization standpoint. Occasionally binding credit restrictions boost the effectiveness of looser policies during recessions due to its asymmetric effects over the cycle, pushing the mean output upwards.
    JEL: E32 E44 H62
    Date: 2021
  26. By: Gudum, Melis
    Abstract: This paper investigates the relationship between different institutions’ GDP growth forecasts for the year 2020 and the actual realized growth levels in the same year. To this end, we use data from the IMF and World Bank’s publications and show that on average, an economy has overperformed its expected growth rate when i) the sizes of announced fiscal and macro-financial stimulus measures are larger, ii) The extent of the government stringency measures is smaller, iii) the pre-pandemic level of GDP per capita is larger. Our results can be crucial for policy-makers when they design growth-oriented economic policies.
    Keywords: COVID-19 pandemic, fiscal stimulus, macro-financial measures, economic policy
    JEL: E60 E62 O40
    Date: 2021–06–24
  27. By: Diana Lima; Vasco Gabriel; Ioannis Lazopoulos
    Abstract: The paper investigates whether the institutional arrangements that determine the conduct of monetary policy and prudential regulation and supervision of the banking system influence policymakers’ actions in pursuing their designated mandates. Employing recently developed dynamic heterogeneous panel methods and using data for 25 industrialised countries from 1960 to 2018, we empirically assess whether central banks’ main objective of inflation stability is compromised when assigned with both policy mandates manifested as inflation bias. Our results show that, once we appropriately control for relevant policy and institutional factors, the separation of prudential policy and monetary policy does not have a significant effect on inflation outcomes.
    JEL: E21 E60 F40
    Date: 2021
  28. By: Cynthia L. Doniger
    Abstract: I document that less educated workers experience higher and more cyclically sensitive job separation rates. Meanwhile, workers with a bachelor's degree or more exhibit pro-cyclical wages while workers without a high school degree exhibit no statistically discernible cyclical pattern. Differences in the sensitivity are most stark when measurement of labor costs accounts for the value of the persistent effects of current macroeconomic conditions on future remitted wages. These findings suggest optimally differential implementation of self-enforcing implicit wage contracts in which educated workers and their employers leverage relative employment stability to smooth the effects of cyclical fluctuations over longer horizons. This margin of adjustment is less available to the less well educated, who have shorter expected employment durations. Furthermore, failure to account for the heterogeneities documented here leads to substantial underestimation of the welfare costs of business cycles.
    Keywords: User Cost of Labor; Implicit Contracts; Education and Wage Differentials; Tenure and Turnover; Turnover; Wage Differentials (Education and Tenure Based); Wage Rigidity
    JEL: E24 J31 J63 J41 M52 E52
    Date: 2021–03–19
  29. By: Shigenori Shiratsuka (Faculty of Economics, Keio University)
    Abstract: In this paper, I examine the effectiveness of monetary policy under the ultra-low interest rate environment in Japan through the lens of yield curve dynamics. To that end, I employ the dynamic Nelson-Siegel model with time-varying parameters, thereby computing indicators for tracing the easing effects of monetary policy. I show that the estimation performance of the yield curve models is sufficiently improved even under the ultra-low interest rate environment by extending the dynamic Nelson-Siegel model to allow a loading parameter to vary over time, in addition to three parameters of yield curve dynamics: level, slope, and curvature. However, I also demonstrate that the identification of the level and loading parameters is critical in assessing monetary policy effects based on the estimation results for the yield curve dynamics. I reveal that monetary easing effects under the Quantitative and Qualitative Monetary Easing (QQE) are produced by flattening the yield curve in the ultra-long-term maturities over 10-year while easing effects from maturities shorter than 10-year remain almost unchanged. I argue that monetary policy fails to produce sufficient easing effects within the time frame of the standard macroeconomic stabilization policy, even with the full-fledged implementation of unconventional monetary policy measures under the current ultra-low interest rate environment.
    Keywords: Yield curve, Dynamic Nelson-Siegel model, Loading parameter, Unconventional monetary policy, Monetary policy indicator
    JEL: E43 E52 E58 G12
    Date: 2021–06–12
  30. By: Carvelli, Gianni; Trecroci, Carmine
    Abstract: In this paper we provide new insights on the nexus between public debt and economic growth, focusing on the growth of debt rather than its level. By exploiting updated macroeconomic time series for 75 countries (37 OECD and 38 non-OECD) over the period 1972-2019 and using the system-GMM technique, we estimate the impact of the growth of public debt per worker on labor productivity growth. We find evidence of a significant adverse effect of the growth of public debt per worker on labor productivity growth, as proxied by the growth of output per worker. Similar results arise when we consider the growth of public debt per capita and the growth of real GDP per hours worked.
    Keywords: Public debt, Labor productivity, Growth.
    JEL: C33 E6 E62 H6 H63 O4 O47
    Date: 2021–06–16
  31. By: Renato Faccini; Leonardo Melosi
    Abstract: The low rate of inflation observed in the U.S. over the entire past decade is hard to reconcile with traditional measures of labor market slack. We show that an alternative notion of slack that encompasses workers' propensity to search on the job explains this missing inflation. We derive this novel concept of slack from a model in which a drop in the on-the-job search rate lowers the intensity of interfirm wage competition to retain or hire workers. The on-the-job search rate can be measured directly from aggregate labor-market flows and is countercyclical. Its recent drop is corroborated by micro data.
    Keywords: Missing inflation; on-the-job search; employment-to-employment rate; labor market slack; Phillips curve; cyclical misallocation; micro data; heterogeneous agents
    JEL: C32 E31 E37
    Date: 2020–03–05
  32. By: ; Stefania D'Amico; Stephen M. Lee
    Abstract: In this study, we use the liquid and efficient bond ETF prices and CDX spreads to quantify the effects of the announcements of the Primary and Secondary Market Corporate Credit Facilities on the underlying corporate bonds. We find that those announcements triggered: (i) large and positive jumps in the prices of directly-eligible ETFs as well as ETFs holding eligible bonds and their close substitutes; (ii) a discrete drop in the perceived credit risk of eligible bonds especially following the April 9th announcement; (iii) a roaring back of investment-grade issuance and a pick-up in high-yield issuance. Importantly, across all ETFs in our sample, the magnitude of their price response does not seem directly related to the size of the reduction in either credit risk or liquidity risk, but rather appears to reflect mostly the eligibility of the ETF and its underlying bonds at the Federal Reserve facilities. This leads us to believe that the main factor driving the reaction to the announcements might be the elimination of "disaster risk" for eligible issuers.
    Keywords: Balance Sheet Policy; Credit Easing; Corporate bond market
    JEL: E43 E44 E52 E58
    Date: 2020–05–19
  33. By: Edward Nelson
    Abstract: Forward guidance—the issuance by a central bank of public statements concerning the likely future settings of its policy instruments—is widely regarded as a new tool of monetary policy. The analysis in this paper shows that Federal Reserve policymakers from the 1950s onward actually accepted the premises of forward guidance: the notion that longer-term interest rates are key yields in aggregate spending decisions; and the proposition that indications of intentions regarding future short-term interest rate policy can affect longer-term rates. Over the same period, they were nevertheless wary about providing forward guidance regarding short-term interest rates, fearing that this could generate untoward market reactions or lock the Federal Open Market Committee into inappropriate rate settings. They concentrated on describing future policy in terms of achievement of economic objectives, with their commentary on interest-rate prospects usually confined to consideration of the longer-term factors affecting rates. Even in these years, however, there were infrequent occasions—notably in 1974 and 1982—when policymakers provided more explicit guidance regarding the path of short-term rates. In the 1990s, a consensus developed in U.S. policy circles that was more receptive toward the notion of guiding longer-term interest rates by providing indications of future FOMC actions. This consensus developed even before concerns about the lower bound on short-term rates became prevalent in U.S. policymaking. The new mindset, which stressed the stabilizing effects on the economy of communication of policy intentions, set the stage for the emergence of forward guidance as a monetary policy tool.
    Keywords: Forward guidance; Monetary policy tools; Monetary policy strategy; Interest-rate forecasts; Interest-rate lower bound; Federal Open Market Committee; Federal Reserve Board and Federal Reserve System; Federal Reserve
    JEL: E43 E58
    Date: 2021–05–17
  34. By: Olivier CARDI; Romain RESTOUT
    Abstract: Motivated by recent evidence pointing at an increase in the TFP following higher government spending, we explore how technology affects sectoral fiscal multipliers in open economy. Our estimates for eighteen OECD countries over 1970-2015 reveal that a government spending shock increases significantly the non-traded-goods-sector share of total hours worked while the response of the value added share of non-tradables (at constant prices) is muted at all horizon. The latter finding is puzzling as government spending shocks are strongly biased toward non-tradables. Our empirical findings show that the solution to this puzzle lies in technology which responds endogenously to the government spending shock. By offsetting the effect of the biasedness of the demand shock toward non-tradables, the rise in traded relative to non-traded TFP ensures that real GDP growth is uniformly distributed across sectors (i.e., in accordance with their value added share). Because a government spending shock also leads non-traded firms to bias technological change toward labor and traded firms to bias technological change toward capital, factor-augmenting technological change rationalizes the concentration of the rise in labor in the non-traded sector. Our quantitative analysis shows that a semi-small open economy model with tradables and non-tradables can reproduce the sectoral fiscal multipliers we document empirically once we let the decision on technology improvement vary across sectors and allow firms to change the mix of labor- and capital-augmenting efficiency over time.
    Keywords: Sector-biased government spending shocks; Endogenous technological change; Factor-augmenting efficiency; Open economy; Labor reallocation; CES production function; Labor income share.
    JEL: E25 E62 F11 F41 O33
    Date: 2021
  35. By: Enrique Alberola-Ila; Carlos Cantú; Paolo Cavallino; Nikola Mirkov
    Abstract: In this paper, we argue that the effect of monetary and fiscal policies on the exchange rate depends on the fiscal regime. A contractionary monetary (expansionary fiscal) shock can lead to a depreciation, rather than an appreciation, of the domestic currency if debt is not backed by future fiscal surpluses. We look at daily movements of the Brazilian real around policy announcements and find strong support for the existence of two regimes with opposite signs. The unconventional response of the exchange rate occurs when fiscal fundamentals are deteriorating and markets' concern about debt sustainability is rising. To rationalize these findings, we propose a model of sovereign default in which foreign investors are subject to higher haircuts and fiscal policy shifts between Ricardian and non-Ricardian regimes. In the latter, sovereign default risk drives the currency risk premium and affects how the exchange rate reacts to policy shocks.
    Keywords: exchange rate, monetary policy, fiscal policy, fiscal dominance, sovereign default
    JEL: E52 E62 E63 F31 F34 F41 G15
    Date: 2021–06
  36. By: Bahaj, Saleem; Reis, Ricardo
    Abstract: Monetary and financial policies that lower the cost of credit for working capital in a currency outside of its country can provide the impetus for that currency to be used in international trade. This paper shows this in theory, by exploring the complementarity in the currency used for financing working capital and the currency used for invoicing sales. Financial policies by a central bank can jump-start the use of its currency outside a country's borders. In the data, the creation of 38 swap lines by the People's Bank of China between 2009 and 2018 provides a test of the theory. Signing a swap line with a country is significantly associated with increases in the use of the RMB in payments to and from that country in the following months.
    JEL: E44 E58 F33 F41 G15
    Date: 2020–05
  37. By: Bo Becker; Efraim Benmelech
    Abstract: Corporate bond markets proved remarkably resilient against a sharp contraction caused by the 2020 Covid-19 pandemic. We document three important findings: (1) bond issuance increased immediately when the contraction hit, whereas, in contrast, syndicated loan issuance was low; (2) Federal Reserve interventions increased bond issuance, while loan issuance also increased, but to a lesser degree; and (3) bond issuance was concentrated in the investment-grade segment for large and profitable issuers. We compare these results to previous crises and recessions and document similar patterns. We conclude that the U.S. bond market is an important and resilient source of funding for corporations.
    JEL: E43 E44 E51 G01 G21 G23
    Date: 2021–05
  38. By: International Monetary Fund
    Abstract: New Zealand’s sound management of the COVID-19 crisis has been effective in bringing infection rates quickly under control. Decisive fiscal and monetary policy responses have been instrumental in cushioning the economic impact. Although economic activity was hit hard initially, it has recovered faster than expected. That said, the recovery has been uneven, with some sectors and workers disproportionately affected.
    Keywords: inflation outturn; consumer price inflation; amendment bill; stats NZ; elimination strategy; government agenda; Housing prices; Housing; COVID-19; Infrastructure; Income; Global
    Date: 2021–05–05
  39. By: Hideaki Aoyama; Corrado Di Guilmi; Yoshi Fujiwara; Hiroshi Yoshikawa
    Abstract: Low inflation was once a welcome to both policy makers and the public. However, Japan’s experience during the 1990’s changed the consensus view on price of economists and central banks around the world. Facing deflation and zero interest bound at the same time, Bank of Japan had difficulty in conducting effective monetary policy. It made Japan’s stagnation unusually prolonged. Too low inflation which annoys central banks today is translated into the “Phillips curve puzzle”. In the US and Japan, in the course of recovery from the Great Recession after the 2008 global financial crisis, the unemployment rate had steadily declined to the level which was commonly regarded as lower than the natural rate or NAIRU. And yet, inflation stayed low. In this paper, we consider a minimal model of dual labor market to jointly investigate how blue the different factors.
    Keywords: Phillips curve, bargaining power, secondary workers
    JEL: C60 E31
    Date: 2021–06
  40. By: International Monetary Fund
    Abstract: The purpose of the mission was to improve the understanding of the conduct of monetary policy in an inflation targeting (IT) central bank. During the September visit, the mission provided capacity building through daily morning seminars, giving an introduction to modern theory of monetary policy in small-open economies, and by performing monetary policy analyses based on BM’s quarterly projection model (QPM) in the afternoons.
    Keywords: MODEL-BASED monetary policy analysis; modernization program; forecasting team; f ramework; QPM model; monetary policy in an inflation targeting; Monetary policy frameworks; Inflation targeting; Nominal effective exchange rate; Exchange rates; Inflation; Africa; Sub-Saharan Africa
    Date: 2021–05–14
  41. By: Srivastava, Dinesh Kumar; Kapur, Tarrung; Bharadwaj, Muralikrishna; Trehan, Ragini
    Abstract: This paper highlights the prospect of a Covid-19 led upsurge in the government debt-GDP ratio of 19 countries in the G-20 group. Many of these countries have Fiscal Responsibility Legislations (FRLs) where government debt-GDP ratios have been tar-geted. A key policy implication of our findings is that most countries will find that the post-Covid slippage in their government debt-GDP ratio is so large as to call for major changes in their fiscal policy framework. In some cases, even a modification of their FRL may be warranted. The evolution of debt of these countries over the period 1996 to 2019 indicates that major economic crises have led to one-time upsurges in their debt-GDP ratios covering both government and private debt. These ratios tend to re-main at high levels well after the crises are over, showing downward rigidity. We esti-mate that Covid-19 induced increase in government debt-GDP ratio for the selected countries, would amount to 14.9% points on average which is more than 141% higher than the increase of 6.2% points resulting from the 2008 crisis. We propose a methodology to project the government debt-GDP ratio as a function of incremental borrowing relative to GDP, real GDP growth and GDP deflator-based infla-tion. We also estimate the relative contribution to the increase in government debt-GDP ratio, individually of these factors. We find that the upsurge in the Covid led government debt-GDP ratio is large because of the reversal of the role of the growth factor in explaining the change in the debt-GDP ratio between two successive years. In particular, instead of appearing with a negative sign, which is the case in a normal year, it appears with a positive sign in a crisis year. Further, the fiscal deficit-GDP ratio also increases due to large stimulus packages in a crisis year
    Keywords: Covid-19, government debt, private debt, growth, inflation, 2008 economic crisis
    JEL: E6 E62 H63 H68
    Date: 2020–11–06
  42. By: Barnett, William A.; Park, Hyun; Park, Sohee
    Abstract: The Barnett critique states that there is an internal inconsistency between the theory that is implied by simple sum monetary aggregation (perfect substitutability among components) and the economic theory that produces the models within which those aggregates are used. That inconsistency causes the appearance of unstable demand and supply for money. The incorrect inference of unstable money demand has caused serious harm to the field of monetary economics. The appearance of instability of the demand for money function disappears, if the relevant neoclassical microeconomic aggregation and index number theories are used to produce the monetary aggregates, which then would nest properly within the money demand functions. In fact, studies of the demand for money function using competently produced monetary aggregates and state-of-the-art demand system modeling methodology have found the demand for money function to be more stable and more easily modeled than the demand for most other consumer goods. See, e.g., Barnett and Serletis (2000, chapters 2, 7, 9, 16, 17, 18, 24), Barnett and Chauvet (2011, chapters 1, 4, 7), and Barnett (2012, pp. 92-110).
    Keywords: Divisia monetary aggregates; demand for money; Barnett critique; index number theory; aggregation theory.
    JEL: E4 E41 E5 E51
    Date: 2021–06–22
  43. By: Nuno Coimbra; Daisoon Kim; Hélène Rey
    Abstract: Before the 2008 crisis, the cross-sectional skewness of banks’ leverage went up and macro risk concentrated in the balance sheets of large banks. Using a model of profit-maximizing banks with heterogeneous Value-at-Risk constraints, we extract the distribution of banks’ risk-taking parameters from balance sheet data. The time series of these estimates allow us to understand systemic risk and its concentration in the banking sector over time. Counterfactual exercises show that (1) monetary policymakers confront the trade-off between stimulating the economy and financial stability, and (2) macroprudential policies can be effective tools to increase financial stability.
    JEL: E0 E5 F3 G01
    Date: 2021–06
  44. By: Adrien Auclert; Matthew Rognlie; Martin Souchier; Ludwig Straub
    Abstract: Introducing heterogeneous households to a New Keynesian small open economy model amplifies the real income channel of exchange rates: the rise in import prices from a depreciation lowers households’ real incomes, and leads them to cut back on spending. When the sum of import and export elasticities is one, this channel is offset by a larger Keynesian multiplier, heterogeneity is irrelevant, and expenditure switching drives the output response. With plausibly lower short-term elasticities, however, the real income channel dominates, and depreciation can be contractionary for output. This weakens monetary transmission and creates a dilemma for policymakers facing capital outflows. Delayed import price pass-through weakens the real income channel, while heterogeneous consumption baskets can strengthen it.
    JEL: E52 F32 F41
    Date: 2021–05
  45. By: Reif, Magnus; Tesfaselassie, Mewael F.; Wolters, Maik H.
    Abstract: Over the last decades, hours worked per capita have declined substantially in many OECD economies. Using the standard neoclassical growth model with endogenous work-leisure choice, we assess the role of trend growth slowdown in accounting for the decline in hours worked. In the model, a permanent reduction in technological growth decreases steady state hours worked by increasing the consumption-output ratio. Our empirical analysis exploits cross-country variation in the timing and the size of the decline in technological growth to show that technological growth has a highly significant positive effect on hours. A decline in the long-run trend of technological growth by one percentage point is associated with a decline in trend hours worked in the range of one to three percent. This result is robust to controlling for taxes, which have been found in previous studies to be an important determinant of hours. Our empirical finding is quantitatively in line with the one implied by a calibrated version of the model, though evidence for the model's implication that the effect on hours works via changes in the consumption-output ratio is rather mixed.
    Keywords: Productivity growth,technological growth,working hours,employment
    JEL: E24 O40
    Date: 2021
  46. By: Josué Diwambuena (Free University of Bozen-Bolzano, Italy); Francesco Ravazzolo (Free University of Bozen-Bolzano, Italy; CAMP, BI Norwegian Business School, Norway; RCEA)
    Abstract: We propose a structural VAR model using sign restriction identification to disentangle supply, demand, and shocks originating from the labour market, and to quantify their relevance for economic fluctuations. We estimate our model on Italy's data from 2000Q1 to 2018Q4 using Bayesian techniques. Our results are as follows. First, wage bargaining and labour supply shocks are among the largest drivers of output and labour market fluctuations both at short and long horizons. Second, matching efficiency and automation shocks are critical drivers of labour market fluctuations but they have limited relevance for business cycle fluctuations. Our results are robust across many alternative specifications including a large SVAR model using a factor-based sign restriction identification estimated with a computationally efficient algorithm recently proposed by Korobilis (2020). Given the burgeoning significance of labour market shocks, we suggest that policies aimed at improving the flexibility of Italy's labour market should be strengthened.
    Keywords: Labour market shocks; SVAR; Sign restriction.
    JEL: C11 C32 E32
    Date: 2021–06
  47. By: Marcelo Veracierto
    Abstract: I consider a real business cycle model in which agents have private information about the i.i.d. realizations of their value of leisure. For the case of logarithmic preferences I provide an analytical characterization of the solution to the associated mechanism design problem. Moreover, I show a striking irrelevance result: That the stationary behavior of all aggregate variables are exactly the same in the private information economy as in the full information case. Numerical simulations indicate that the irrelevance result approximately holds for more general CRRA preferences.
    Keywords: business cycles; Mirrlees economies; mechanism design; aggregation
    JEL: D82 E32
    Date: 2020–02–18
  48. By: Balcilar, Mehmet (Eastern Mediterranean University); Ozdemir, Zeynel Abidin (Ankara HBV University); Ozdemir, Huseyin (Gazi University); Aygun, Gurcan (Gazi University); Wohar, Mark E. (University of Nebraska Omaha)
    Abstract: This study examines the monetary policy effectiveness of five major Asian countries (China, Hong Kong, India, Japan, and South Korea) using a quantile vector autoregression (QVAR) model-based spillover estimation approach of Balcilar et al. (2020b) at different quantile paths. To do this, we first obtain the spillover index from interest rate to industrial production and consumer price index under the high and low levels of uncertainty. The full sample results from our analysis provide partial supporting evidence for the economic theory, which asserts that monetary policy efficiency must fall during periods of high economic uncertainty. Furthermore, this approach also allows us to uncover asymmetric effects of economic policy uncertainty and lending rate on macroeconomic indicators. The impacts of interest rate and domestic and foreign (US, EU) uncertainty shocks on major Asian markets present significant asymmetric characteristics. Moreover, our time-varying results suggest that monetary policy shocks are more effective and potent on Asian economies during very low and very high uncertain times than normal economic periods.
    Keywords: economic policy uncertainty, monetary policy efficiency, quantile spillover, QVAR
    JEL: C32 E44 F42 G01
    Date: 2021–05
  49. By: International Monetary Fund
    Abstract: The pandemic hit the Chilean economy while it was recovering from the 2019 social unrest. The authorities’ swift and strong economic policy efforts and Chile’s very strong institutional frameworks helped buffer the economic and social consequences. The ongoing economic recovery continues to be supported by ample policy stimulus, a rapid vaccination process, well-anchored inflation expectations, a resilient export base, and continued market confidence.
    Keywords: FCL arrangement; FCL resource; FCL qualification; market confidence; Chilean economy; inflation expectation; COVID-19; Credit; Metal prices; Global
    Date: 2021–05–21
  50. By: International Monetary Fund
    Abstract: The COVID-19 pandemic has sharply deteriorated Namibia’s short-term macroeconomic outlook, giving rise to urgent balance of payments (BOP) and fiscal financing needs. After an initial outbreak peaked in August, a second wave hit in late 2020. Containment measures have negatively impacted domestic consumption and economic activity, weighing on tax revenues collection. Furthermore, worsening global conditions have hindered mining production and exports, tourism receipts, and investment inflows. The economy is expected to have sharply contracted by 7.2 percent in 2020, and the recovery is set to remain subdued in 2021.
    Keywords: health emergency; IMF disbursement; stepping-up emergency health; undertaking emergency health; Namibia investment promotion bill; COVID-19; Fiscal consolidation; Fiscal stance; Global
    Date: 2021–04–12
  51. By: Barja, Gover (Director of the Master’s Program in Public Policy and Administration, Maestrías para el Desarrollo, Universidad Católica Boliviana “San Pablo”)
    Abstract: The Bolivian monthly index of economic activity along with ARMA models are used in an attempt to graph and measure the impact of Covid’s pandemic on the Bolivian economy. The accumulated difference between the observed and counterfactual values show an overall 12.6% loss of economic activity in the 10 months from February to November 2020 of the first Covid wave, with a tilted W-shape short-run recovery just before the beginning of the second wave in December 2020. Break[1]down into the twelve Bolivian economic sectors show wide heterogeneity in depth of impact and speeds of recovery during the same period. Instituto de Investigaciones Socio-Económicas (IISEC) de la Universidad Católica Boliviana (UCB) "San Pablo".
    Keywords: COVID-19; Interrupted time series analysis; ARMA-GARCH models; Bolivia; Instituto de Investigaciones Socio-Economicas; IISEC.
    JEL: C22 E32 E37 O54 Y10
    Date: 2021–06–22
  52. By: Minsu Chang; Xiaohong Chen; Frank Schorfheide
    Abstract: We develop a state-space model with a state-transition equation that takes the form of a functional vector autoregression and stacks macroeconomic aggregates and a cross-sectional density. The measurement equation captures the error in estimating log densities from repeated cross-sectional samples. The log densities and the transition kernels in the law of motion of the states are approximated by sieves, which leads to a finite-dimensional representation in terms of macroeconomic aggregates and sieve coefficents. We use this model to study the joint dynamics of technology shocks, per capita GDP, employment rates, and the earnings distribution. We find that the estimated spillovers between aggregate and distributional dynamics are generally small, a positive technology shock tends to decrease inequality, and a shock that raises the inequality of earnings leads to a small but not significant increase in GDP.
    JEL: C11 C32 C52 E32
    Date: 2021–05
  53. By: Friedman, Milton (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: In this lecture, Milton Friedman reviews the role of fiscal and monetary policies on the course of the U.S. business cycle, during several episodes from 1961 to 1969. He relates these developments to shifts in contemporary popular and scientific opinion about the determinants of the business cycle. In each episode of expansion or contraction, he shows that monetary policy – in the sense of changes in the rate of growth of the quantity of money – decisively dominated over fiscal policy in determining the pace of economic activity and the rate of inflation. During the lecture, Friedman makes several digressions to explain the variability of the lag in effect of monetary policy, the reason why interest rates are a poor guide to the stance of monetary policy, and why the downward-sloping liquidity preference function is a poor model that fails to comport with the real world. He also explains why tax increases are not necessarily contractionary, and why tax decreases are not necessarily expansionary.
    Date: 2021–06–23
  54. By: Chad Fulton; Kirstin Hubrich
    Abstract: We perform a real-time forecasting exercise for US inflation, investigating whether and how additional information--additional macroeconomic variables, expert judgment, or forecast combination--can improve forecast accuracy and robustness. In our analysis we consider the pre-pandemic period including the Global Financial Crisis and the following expansion--the longest on record--featuring unemployment that fell to a rate not seen for nearly sixty years. Distinguishing features of our study include the use of published Federal Reserve Board staff forecasts contained in Tealbooks and a focus on forecasting performance before, during, and after the Global Financial Crisis, with relevance also for the current crisis and beyond. We find that while simple models remain hard to beat, the additional information that we consider can improve forecasts, especially in the post-crisis period. Our results show that (1) forecast combination approaches improve forecast accuracy over simpler models and robustify against bad forecasts, a particularly relevant feature in the current environment; (2) aggregating forecasts of inflation components can improve performance compared to forecasting the aggregate directly; (3) judgmental forecasts, which likely incorporate larger and more timely datasets, provide improved forecasts at short horizons.
    Keywords: Inflation; Survey forecasts; Forecast combination
    JEL: C53 E37 E30
    Date: 2021–03–04
  55. By: Alex Aronovich; Andrew C. Meldrum
    Abstract: We propose a new method of estimating the natural real rate and long-horizon inflation expectations, using nonlinear regressions of survey-based measures of short-term nominal interest rates and inflation expectations on U.S. Treasury yields. We find that the natural real rate was relatively stable during the 1990s and early 2000s, but declined steadily after the global financial crisis, before dropping more sharply to around 0 percent during the recent COVID-19 pandemic. Long-horizon inflation expectations declined steadily during the 1990s and have since been relatively stable at close to 2 percent. According to our method, the declines in both the natural real rate and long-horizon inflation expectations are clearly statistically significant. Our estimates are available at whatever frequency we observe bond yields, making them ideal for intraday event-study analysis--for example, we show that the natural real rate and long-horizon inflation expectations are not affected by temporary shocks to the stance of monetary policy.
    Keywords: Natural real rate; Term structure model; Nonlinear regression
    JEL: E43 G12
    Date: 2021–05–28
  56. By: International Monetary Fund
    Abstract: While the Covid-19 shock temporarily disrupted Pakistan’s progress under the program supported by the IMF’s Extended Fund Facility (EFF), the authorities’ policies have been critical in supporting the economy and saving lives and livelihoods. Aside from health-related containment measures, their response included a temporary fiscal stimulus, large expansion of social safety nets, monetary policy support, and targeted financial initiatives. These measures, supported by sizable emergency financing from the international community, including under an RFI, helped contain the first Covid-19 wave of cases and the impact on the economy. Growth slowed to –0.4 percent in FY 2020 (July–June), but is expected to recover to 1.5 percent in FY 2021. The external position improved, and inflation continued to decelerate through early 2021 despite supply-driven spikes in food prices. However, a second Covid-19 wave is unfolding, triggering exceptionally high uncertainty and downside risks.
    Date: 2021–04–08
  57. By: Augustin, Patrick; Chernov, Mikhail; Schmid, Lukas; Song, Dongo
    Abstract: We show theoretically that persistent deviations from covered interest parity (CIP) across multiple horizons imply simultaneous arbitrage opportunities only if uncollateralized interbank lending rates are riskless. In the absence of observable riskless discount rates, we extract them empirically from interest rate swaps using a simple no-arbitrage framework. They deliver novel quantitative benchmark that matches observed forward currency premiums and cross-currency basis swap rates well. We quantify that the no-arbitrage benchmark, which is consistent with intermediary-based asset pricing paradigms, accounts for about two thirds of the alleged CIP deviations. The residual pricing errors are associated with the limits-to-arbitrage framework.
    Keywords: Anomalies; CIP violations; Limits to Arbitrage; negative swap rates; no-arbitrage; Treasury basis
    JEL: C1 E43 E44 G12 H60
    Date: 2020–05
  58. By: Haliassos, Michael; Jansson, Thomas; Karabulut, Yigitcan
    Abstract: The authors present evidence of a new propagation mechanism for wealth inequality, based on differential responses, by education, to greater inequality at the start of economic life. The paper is motivated by a novel positive cross-country relationship between wealth inequality and perceptions of opportunity and fairness, which holds only for the more educated. Using unique administrative micro data and a quasi-field experiment of exogenous allocation of households, the authors find that exposure to a greater top 10% wealth share at the start of economic life in the country leads only the more educated placed in locations with above-median wealth mobility to attain higher wealth levels and position in the cohort-specific wealth distribution later on. Underlying this effect is greater participation in risky financial and real assets and in self-employment, with no evidence for a labor income, unemployment risk, or human capital investment channel. This differential response is robust to controlling for initial exposure to fixed or other time-varying local features, including income inequality, and consistent with self-fulfilling responses of the more educated to perceived opportunities, without evidence of imitation or learning from those at the top.
    Keywords: Household finance,wealth inequality,propagation of inequality,education,opportunity,refugees
    JEL: G5 E21 E44 D31 D1
    Date: 2021
  59. By: Marcelo Veracierto
    Abstract: This paper introduces a general method for computing equilibria with heterogeneous agents and aggregate shocks that is particularly suitable for economies with private information. Instead of the cross-sectional distribution of agents across individual states, the method uses as a state variable a vector of spline coefficients describing a long history of past individual decision rules. Applying the computational method to a Mirrlees RBC economy with known analytical solution recovers the solution perfectly well. This test provides considerable confidence on the accuracy of the method.
    Keywords: Computational methods; heterogeneous agents; business cycles; private information
    JEL: C63 D82 E32
    Date: 2020–02–18
  60. By: Robert Kollmann
    Abstract: This paper analyzes the macroeconomic effects of the Covid-19 epidemic on Euro Area (EA) GDP and inflation, using a stylized New Keynesian model. Covid is interpreted as a combination of aggregate demand and aggregate supply disturbances. Offsetting aggregate demand and supply changes are shown to account for the stability of EA inflation, in the face of Covid. The evidence presented here indicates that Covid-induced aggregate demand and supply shifts were persistent. An aggregate supply contraction is identified as the dominant force driving the sharp fall of EA GDP in 2020.
    Keywords: Covid, real activity, inflation, aggregate demand, aggregate supply
    Date: 2021–06
  61. By: Tobón, A
    Abstract: El objetivo de este documento de trabajo es mostrar las consecuencias de introducir el fenómeno de la informalidad en una modelo de inspiración clásica. La informalidad se introduce considerando un dualismo entre un sector formal que paga el impuesto sobre el beneficio bruto, y un sector informal que evade el pago de dicho impuesto, ante la incapacidad de enforcement por parte del gobierno. A medida que se imponen diferentes hipótesis sobre los impuestos, se puede estudiar la dinámica de la tasa de crecimiento de cada sector, de la tasa de beneficio de los empresarios y de los precios relativos de los bienes. Bajo ciertas condiciones, el modelo muestra una independencia entre las tasas de crecimiento sectoriales y la informalidad, razón por la cual un cambio en los impuestos no necesariamente altera la dinámica del crecimiento económico.
    Keywords: informalidad; sector informal; sector formal; impuestos; crecimientoeconómico
    JEL: E11 E26 E62 H26 H32
    Date: 2021–05–03
  62. By: International Monetary Fund
    Abstract: Georgia has emerged from its second lockdown that was imposed in November 2020 following a sharp increase in COVID-19 cases. Vaccinations commenced in March 2021 and the country is now entering a critical stage in overcoming the pandemic. The lockdowns drove a contraction of around 6.2 percent of GDP in 2020, and a recovery is expected to take hold in the second quarter of 2021.
    Keywords: Policy discussion; inflation targeting framework; EFF arrangement; inflation expectation; budget lending; COVID-19; Loans; Credit; Central Asia; Global
    Date: 2021–04–20
  63. By: International Monetary Fund
    Abstract: The pandemic is inflicting much suffering, which has been met with swift, substantial, and well-coordinated policy responses. The anti-crisis measures have helped preserve jobs, provide liquidity to companies and income support to the vulnerable groups. They averted a larger decline in output and kept unemployment under control. After contracting by 5.5 percent in 2020, real GDP is projected to grow by 3.9 percent in 2021 and 4.5 percent in 2022, as vaccinations help achieve herd immunity. However, risks to the outlook are large and tilted to the downside, given the epidemiological situation.
    Keywords: savings-investment gap; Policy discussion; money market rate; government finance statistic yearbook; liquidity position; COVID-19; Loans; Nonperforming loans; Government finance statistics; Global
    Date: 2021–05–25
  64. By: Gara Afonso; Kyungmin Kim; Antoine Martin; Ed Nosal; Simon M. Potter; Sam Schulhofer-Wohl
    Abstract: Methods of monetary policy implementation continue to change. The level of reserve supply—scarce, abundant, or somewhere in between—has implications for the efficiency and effectiveness of an implementation regime. The money market events of September 2019 highlight the need for an analytical framework to better understand implementation regimes. We discuss major issues relevant to the choice of an implementation regime, using a parsimonious framework and drawing from the experience in the United States since the 2007-2009 financial crisis. We find that the optimal level of reserve supply likely lies somewhere between scarce and abundant reserves, thus highlighting the benefits of implementation with what could be called “ample” reserves. The Federal Reserve’s announcement in October 2019 that it would maintain a level of reserve supply greater than the one that prevailed in early September is consistent with the implications of our framework.
    Keywords: federal funds market; monetary policy implementation; ample reserve supply
    JEL: E42 E58
    Date: 2020–01–18
  65. By: Francois R. Velde
    Abstract: Burns and Mitchell (1946, 109) found a recession of “exceptional brevity and moderate amplitude.” I confirm their judgment by examining a variety of high-frequency, aggregate and cross-sectional data. Industrial output fell sharply but rebounded within months. Retail seemed little affected and there is no evidence of increased business failures or stressed financial system. Cross-sectional data on manufacturing employment indicates that most of the recession, brief as it was, was due to the Armistice rather than the epidemic. Data from the nationwide coal industry documents the sharp but short-lived impact of the epidemic on labor supply and the lack of spill-overs on demand. City-level economic indicators show that the (brief) interventions to hinder the contagion reduced mortality at little economic cost because reduced infections mitigated the impact on the labor force.
    Keywords: 1918 influenza epidemic; US economy; business cycles; recession; non-pharmaceutical interventions
    JEL: E32 H12 I18 I19
    Date: 2020–04–15
  66. By: Richard Rogerson; Johanna Wallenius
    Abstract: Employment rates of males aged 55-64 have changed dramatically in the OECD over the last 5 decades. The average employment rate decreased by more than 15 percentage points between the mid-1970s and the mid-1990s, only to increase by roughly the same amount subsequently. One proposed explanation in the literature is that spousal non-working times are complements and that older males are working longer as a result of secular increases in labor supply of older females. In the first part of this paper we present evidence against this explanation. We then offer a new narrative to understand the employment rate changes for older individuals. We argue that the dramatic U-shaped pattern for older male employment rates should be understood as reflecting a mean reverting low frequency shock to labor market opportunities for all workers in combination with temporary country specific policy responses that incentivized older individuals to withdraw from market work.
    JEL: E24 J21 J26
    Date: 2021–06
  67. By: Stephie Fried; Kevin Novan; William B. Peterman
    Abstract: This paper explores how to recycle carbon tax revenue back to households to maximize welfare. Using a general equilibrium lifecycle model calibrated to reflect the heterogeneity in the U.S. economy, we find the optimal policy uses two thirds of carbon-tax revenue to reduce the distortionary tax on capital income while the remaining one third is used to increase the progressivity of the labor-income tax. The optimal policy attains higher welfare and more equality than the lump-sum rebate approach preferred by policymakers as well as the approach originally prescribed by economists -- which called exclusively for reductions in distortionary taxes.
    Keywords: Carbon tax; Overlapping generations; Revenue recycling
    JEL: E62 H21 H23
    Date: 2021–04–02
  68. By: Alexis Antoniades; Robert C. Feenstra; Mingzhi Xu
    Abstract: Many price indices must be constructed without quantity data at the elementary level. We show that for some consumer goods in the United States and other countries, one can approximate expenditure shares using weights derived from the retail distribution of sellers. These weights are based on the share of outlets selling an item, or the share of outlets adjusted by the total number of items sold in each. Relative to using no weights, we find that using such imputed weights substantially reduces bias in the frequency of price changes, in annual inflation, and in price comparisons across countries.
    JEL: C81 E01 E31
    Date: 2021–06
  69. By: Balazs Egert
    Abstract: Aggregate business investment is a major driver of long-term economic growth. It has been weak in many advanced economies over the last decade, partly due to cyclical demand-side effects. Nevertheless, a number of structural factors and policies interact with and have an effect on business investment. This paper provides a survey of the literature on the main policy drivers of business investment such as finance (including bank and market finance, venture capital and the debt bias in corporate taxation), tax policies, foreign direct investment, product and labour market and environmental regulations, the importance of an efficient insolvency regime, the negative impact of (regulatory) uncertainty and the role of infrastructure investment as a support for business investment.
    Keywords: aggregate investment, capital deepening, structural policy, product market regulation, labour market regulation, OECD
    JEL: E24 C13 C23 C51 L43 L51
    Date: 2021
  70. By: Sebastian Infante; Zack Saravay
    Abstract: We study what drives the re-use of U.S. Treasury securities in the financial system. Using confidential supervisory data, we estimate the degree of collateral re-use at the dealer level through their collateral multiplier : the ratio between a dealer's secured funding and their outright holdings. We find that Treasury re-use increases as the supply of available securities decreases, especially when supply declines due to Federal Reserve asset purchases. We also find that non-U.S. dealers' re-use increases when profits from intermediating cash are high, U.S. dealers' re-use increases when demand to source on-the-run Treasuries is high, and both types of dealers' re-use can alleviate safe asset scarcity. Finally, we document a sharp drop in Treasury re-use at the onset of the COVID-19 pandemic, with a subsequent reversal after the Federal Reserve's intervention to support market functioning.
    Keywords: Re-use; Repo; Treasury; Collateral; Rehypothecation
    JEL: E41 E51 E58 E63 G12 G24
    Date: 2020–12–18
  71. By: International Monetary Fund
    Abstract: A nascent recovery is underway in Thailand following the COVID-19 downturn. Ample policy buffers, underpinned by judicious management of public finances, allowed the authorities to implement a multipronged package of fiscal, monetary, and financial policies to mitigate the COVID-19 impact on households, businesses, and the financial system. This, together with rigorous containment measures, led to a successful flattening of the infection curve during most of 2020. Nevertheless, the pandemic has taken a large toll on the economy, potentially inducing long-term scarring and increasing inequality.
    Date: 2021–06–03
  72. By: Guner, Nezih; Lopez-Segovia, Javier; Ramos Magdaleno, Roberto
    Abstract: We study how much revenue can be generated by more progressive personal income taxes in Spain. We build a life-cycle economy with uninsurable labor productivity risk and endogenous labor supply. Individuals face progressive taxes on labor and capital incomes and proportional taxes that capture social security, corporate income, and consumption taxes. An increase (decrease) in labor income taxes for individuals who earn more (less) than the mean labor income generates a small additional revenue. The revenue from labor income taxes is maximized at an effective marginal tax rate of 51.6% (38.9%) for the richest 1% (5%) of individuals, versus 46.3% (34.7%) in the benchmark economy. The additional revenue from labor income taxes is only 0.82% higher, while the total tax revenue declines by 1.55%. The total tax revenue is higher if marginal taxes are raised only for the top earners. The increase, however, must be substantial and cover a large segment of top earners. The new tax collection from a 3 percentage points increase on the top 1% is just 0.09%. A 10 percentage points increase on the top 10% of earners (those who earn more than e41,699) raises the total taxes by 2.81%.
    Keywords: Labor Supply; Laffer Curve; progressivity; taxation; Top Earners
    JEL: E21 E6 H2 J2
    Date: 2020–05
  73. By: International Monetary Fund
    Abstract: The economic impact of the pandemic has been much milder than initially foreseen, still the outlook remains challenging. The economy, dominated by financial services, adapted quickly to telework and benefited from unprecedented policy support, both domestically and globally. Uncertainty is unusually high, dominated by the virus dynamics in the short term, with downside risks relating to a sharp rise in global risk premia, deglobalization trends, and changes in international taxation.
    Keywords: liability positions vis-à-vis nonresident; policy support; money market rate; support measure; IMF staff calculation; COVID-19; Credit; Public investment and public-private partnerships (PPP); Infrastructure; Public investment spending; Global; Europe
    Date: 2021–05–25
  74. By: Oscar Eduardo Machicado Mendoza (Banco Central de Bolivia)
    Abstract: En este trabajo se analiza el vínculo que hay en el nivel de las tasas con fines de regulación monetaria y el nivel de las mismas en las operaciones de ruedo de la Bolsa Boliviana de Valores (BBV). Se explora los temas relacionados en la literatura y, mediante un modelo GARCH, se muestra como la correlación condicional en el periodo comprendido entre 2010 y 2018, presentando una alta correlación en los periodos donde se tenía una mayor cantidad de títulos públicos en el mercado secundario de la BBV. Los resultados nos aportan una medida de relevancia del efecto de la política monetaria en el mercado de valores, la misma que disminuye a medida que el volumen de valores transados es menor, así como la adjudicación de valores públicos con plazos menores a un año.
    Keywords: GARCH, tasas de interés, operaciones de mercado abierto, mercado de valores
    JEL: C58 E52 E58 G10
    Date: 2019–07
  75. By: Rajesh, Raj; Srivastava, Vineet
    Abstract: This article evaluates the annual gross domestic product (GDP) growth projections of the Reserve Bank of India (RBI) against final official estimates of GDP, which are normally released with a lag of about three years. During 1998-99 to 2016-17, on an average, growth projections underestimated realised growth. Forecast errors, committed in both directions, were free of any systematic bias, and remained modest in a cross-country context.
    Keywords: Forecast error accuracy performance GDP growth India
    JEL: E0 E01 E59
    Date: 2020–07–01
  76. By: Konstantin Makrelov; Neryvia Pillay; Bojosi Morule
    Abstract: South Africa’s fiscal balances have deteriorated significantly over the last decade, while the economy has been recording disappointing economic growth rates even prior to the COVID-19 crisis. In this paper, we estimate a series of equations using the Arellano and Bond (1991) estimator to test how sovereign risk premia affect capital buffers, while controlling for variables identified in the literature, such as size of banks, the economic cycle, competition and equity prices. Unlike other studies, we use actual capital buffers provided by the South African Prudential Authority. We show that these are substantively different to the proxy buffers calculated using the common approach in the literature, indicating that results based on proxy measures should be interpreted with caution. Our overall results show a positive relationship between the sovereign risk premium and capital buffers, and the results are robust across different specifications. This suggests that banks are accumulating capital to mitigate against fiscal and other domestic policy risks, and the related financial stability issues. It is likely that this is contributing to higher lending rates.
    Keywords: fiscal policy, capital buffers, Financial Regulation, sovereign-bank nexus, South Africa
    JEL: C23 E62 H32 G28
    Date: 2021–06
  77. By: International Monetary Fund
    Abstract: Kenya has been hit hard by the COVID-19 pandemic. Despite a forceful policy response by the authorities, the socio-economic impact has been significant. The shock has also exacerbated the country’s pre-existing fiscal vulnerabilities, pushing Kenya into high risk of debt distress. While the economy is now recovering, fiscal and balance-of-payments financing needs remain sizable over the medium term.
    Keywords: ECF arrangement; financing strategy; debt vulnerability; financing package; support package; procurement information portal; Kenya's debt; development partner; COVID-19; Credit; Global
    Date: 2021–04–06
  78. By: Mariacristina De Nardi; Eric French; John Bailey Jones; Rory McGee
    Abstract: While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives.
    Keywords: Couples; Singles; Savings; Medical expenses; Bequest motives
    JEL: D15 D31 E21 H31
    Date: 2021–05–25
  79. By: Orazio Attanasio; Agnes Kovacs; Patrick Moran
    Abstract: We propose a rich model of household behavior to study the effect of two important policies: mortgage interest tax deduction and mandatory mortgage amortization. These policies have attracted some controversy, first because they are conceived to increase overall saving, an objective that the literature does not agree they can achieve, and second because they incentivize illiquid savings and may thus increase the share of ‘wealthy hand-to-mouth’ households. We build a life-cycle model where housing may act as a commitment device to counteract present biases arising from temptation. We show that the model matches several empirical facts, including the large share of wealthy hand-to-mouth households. We evaluate the effect of the two policies and find that they increase wealth accumulation by 7 and 10% respectively. Our results demonstrate that these policies not only induce portfolio re-balancing, as emphasized by the previous literature, but also increase savings by making commitment more accessible.
    JEL: D11 D14 D91 E21 R21
    Date: 2021–06
  80. By: Alstadsaeter, Annette; Bratsberg, Bernt; Eielsen, Gaute; Kopczuk, Wojciech; Markussen, Simen; Raaum, Oddbjørn; Røed, Knut
    Abstract: Using real-time register data we document the magnitude, dynamics and socio-economic characteristics of the crisis-induced temporary and permanent layoffs in Norway. We find evidence that the effects of social distancing measures quickly spread to industries that were not directly affected by policy. Close to 90\% of layoffs are temporary, although this classification may change as the crisis progresses. Still, there is suggestive evidence of immediate stress on a subset of firms that manifests itself in permanent rather than temporary layoffs. We find that the shock had a strong socio-economic gradient, hit a financially vulnerable population, and parents with younger children, and was driven by layoffs in smaller, less productive, and financially weaker firms. Consequently though, the rise in unemployment likely overstates the loss of output associated with the layoffs by about a third.
    JEL: E24 J6
    Date: 2020–05
  81. By: International Monetary Fund
    Abstract: Botswana entered the COVID-19 crisis with larger buffers than most countries, but significantly less than in the past. The country was contending with structural challenges, persistent negative external shocks and delays in adjustment that had already caused a significant weakening of international reserves coverage and the fiscal position amid high unemployment. The pandemic exacerbated these challenges causing a sharp GDP contraction, among the strongest in SSA and a widening in the current account deficit. Foreign exchange reserves dropped further, though still remaining well above adequate levels. The fiscal deficit widened significantly as the government sought to counter the economic impact of the COVID-19 crisis, and implemented a sizeable public wage increase agreed in 2019. The deficit was financed partially by drawing down on the Government Investment Account.
    Date: 2021–06–02
  82. By: Georgescu, Oana-Maria; Martín, Diego Vila
    Abstract: Borrower-based macroprudential (MP) policies - such as caps on loan-to-value (LTV) ratios and debt-service-to-income (DSTI) limits - contain the build-up of systemic risk by reducing the probability and conditional impact of a crisis. While LTV/DSTI limits can increase inequality at introduction, they can dampen the increase in inequality under adverse macroeconomic conditions. The relative size of these opposing effects is an empirical question. We conduct counterfactual simulations under different macroeconomic and macroprudential policy scenarios using granular income and wealth data from the Households Finance and Consumption Survey (HFCS) for Ireland, Italy, Netherlands and Portugal. Simulation results show that borrower-based measures have a moderate negative welfare impact in terms of wealth inequality and a negligible impact on income inequality. JEL Classification: G21, G28, G51
    Keywords: household debt, inequality, macroprudential policy
    Date: 2021–06
  83. By: Cortés, D; García-Suaza, A; Londoño, D
    Abstract: ¿Quiénes son los más vulnerables a una crisis generalizada como la del Covid? ¿Por qué son vulnerables y dónde están? ¿Cómo reaccionan las personas a las situaciones de crisis económica? Todas son preguntas que a la vez son difíciles de contestar y muy relevantes para la política pública. En este trabajo busca dar un inicio de respuesta a las anteriores preguntas. Para esto, se construye un modelo de elasticidad del gasto de los hogares para cuatro tipos de hogares Ocupados vulnerables, ocupados no vulnerables, desempleados e inactivos y pensionados y como estos responden a situaciones como la pérdida del ingreso por consecuencia de choques sobre la empleabilidad de alguno de los miembros del hogar.
    Keywords: Covid-19; vulnerabilidad económica; gasto de los hogares
    JEL: D10 E20 E21
    Date: 2021–04–08
  84. By: International Monetary Fund
    Abstract: The pandemic dealt a severe blow to the Italian people and their economy. GDP fell by nearly 9 percent in 2020, with much larger drops for contact-intensive services. Public and corporate debt increased strongly and preexisting vulnerabilities have likely worsened. The government is prioritizing resolving the health emergency and transforming the economy to lift productivity, improve social outcomes and strengthen resilience to future shocks and structural change. The large National Recovery and Resilience Plan—partly financed by sizable Next Generation EU resources—will be used to increase physical and social infrastructure. Outlook. GDP is expected to recover strongly in 2021–22 and to grow well-above trend over the medium term, supported by investment spending. Nonetheless, economic scarring could be sizable. The two-sided risks relate to how the pandemic progresses, the efficiency of investment spending and the extent of savings drawdown, with large costs associated with the downside.
    Date: 2021–06–02
  85. By: Karadi, Peter; Schoenle, Raphael; Wursten, Jesse
    Abstract: We use microdata to estimate the strength of price selection { a key metric for the effect of monetary policy on the real economy. We propose a product-level proxy for mispricing and assess whether products with larger mispricing respond with a higher probability to identified monetary and credit shocks. We find that they do not, suggesting selection is absent. Instead, we detect state-dependent adjustment on the gross extensive margin. Our results are broadly consistent with second-generation state-dependent pricing models and sizable effects of monetary policy on the real economy. JEL Classification: E31, E32, E52
    Keywords: identified credit and monetary policy shocks, monetary non-neutrality, PPI microdata, price-gap proxy, scanner data, state-dependent pricing
    Date: 2021–06
  86. By: Ezra Karger; Aastha Rajan
    Abstract: We identify 22,461 recipients of Covid-19 Economic Impact Payments in anonymized transaction-level bank account data from Facteus. We use an event study framework to show that in the two weeks following a $1,200 stimulus payment in April 2020, consumers increased spending by $546, implying a marginal propensity to consume of 46%. Consumers used an additional 10% of the stimulus payment to pay off debt. Consumer spending fell to normal levels after two weeks. Stimulus recipients who live paycheckto- paycheck spent 60% of the stimulus payment within two weeks, while recipients who save much of their monthly income spent only 24% of the stimulus payment within two weeks. Spending patterns are quite similar for the second round of stimulus payments in January, 2021, with consumers spending 39% of their stimulus payments within two weeks and using an additional 14% of their payment to pay off debt. Reweighting our data to match the U.S. population, ignoring equilibrium effects, and assuming a constant MPC for each person, we estimate that the CARES Act’s $296 billion of stimulus payments increased consumer spending by $130 billion (44% of total outlays) within two weeks of stimulus receipt. A stimulus bill targeted at individuals with the highest MPCs could have increased consumer spending and debt payments by the same amount at a cost of only $246 billion.
    Keywords: Covid-19; stimulus payments; high-frequency data; marginal propensity to consume
    JEL: D04 D12 E21
    Date: 2020–05–29
  87. By: Céspedes, Luis Felipe; Chang, Roberto; Velasco, Andrés
    Abstract: We build a minimalist model of the macroeconomics of a pandemic, with two essential components. The first is productivity-related: if the virus forces firms to shed labor beyond a certain threshold, productivity suffers. The second component is a credit market imperfection: because lenders cannot be sure a borrower will repay, they only lend against collateral. Expected productivity determines collateral value and, in turn, collateral value can limit borrowing and productivity. Adverse shocks can be subject to large magnification effects, in an unemployment and asset price deflation doom loop. Multiple equilibria may also occur, and pessimistic expectations can push the economy to a bad equilibrium with limited borrowing and low employment and productivity. The model helps select policies to fight the effects of the pandemic. Traditional expansionary fiscal policy has no beneficial effects, while cutting interest rates has a limited effect if the initial real interest rate is low. By contrast, several unconventional policies, including wage subsidies, helicopter drops of liquid assets, equity injections, and loan guarantees, can keep the economy in a full-employment, high-productivity equilibrium. But such policies are fiscally expensive, so their implementation is feasible only with ample fiscal space or emergency financing from abroad.
    Date: 2020–05
  88. By: García-Suaza, A; Jaramillo, I; Londoño, D; Ortiz, S; Rodríguez-Lesmes, P
    Abstract: La pandemia de COVID-19 ha registrado cambios en el mercado laboral sin precedentes en un lapso muy corto de tiempo. Durante 2020 se experimentó tanto el choque como una recuperación del empleo que puede terminar por generar una recomposición del mercado de laboral, y de nuevos patrones de desempleo que requieren políticas activas para reducir los impactos de la coyuntura. Considerando información de la encuesta de hogares, se realiza un estudio de los factores que marcaron una mayor vulnerabilidad del empleo, indagando en características como género, ocupación, condición de informalidad, entre otros. Los resultados obtenidos sugieren que las mujeres y el empleo no profesional han sufrido los mayores impactos. A esto se suma el hecho de que los empleos generados durante la recuperación presentan menores estándares de calidad. Por lo tanto, definen retos específicos a la agenda política pública del mercado de trabajo.
    Keywords: COVID-19; empleo; informalidad; empleo profesional
    JEL: E24 J24 J46
    Date: 2021–04–01
  89. By: Jiri Witzany (Faculty of Finance and Accounting, Prague University of Business and Economics, Czech Republic,); Martin Divis (Faculty of Finance and Accounting, Prague University of Business and Economics, Czech Republic)
    Abstract: Interest rate risk measurement and management of non-maturity deposit balances presents a challenge for practitioners and academic researchers as well. The paper provides a review of several methodological approaches focusing on the area of savings accounts rate sensitivity modeling and estimation. The proposed models are tested on a Czech banking sector dataset providing mixed results regarding the cointegration type models generally recommended in the literature. On the other hand, the analysis shows that simpler regression models may provide more robust results if the cointegration tests between the saving accounts rate and the market rate series fail.
    Keywords: Interest rate risk, savings accounts, non-maturity deposits, cointegration, pass through rate
    JEL: C32 E43 E58 G21
    Date: 2021–06
  90. By: International Monetary Fund
    Abstract: Aruba managed to contain the pandemic in the first months of the outbreak but experienced a resurgence of new infections in the summer. The economic impact of COVID-19 is particularly severe given Aruba’s high dependency on tourism. While the authorities’ swift response has helped contain the human and economic damage, it could not avoid a severe GDP contraction.
    Keywords: staff appraisal; budget proposal; staff analysis; tranche of financial support; debt sustainability risk; COVID-19; Tourism; Caribbean
    Date: 2021–04–21
  91. By: Cynthia L. Doniger; Benjamin S. Kay
    Abstract: Delay in the provision of Paycheck Protection Program (PPP) loans due to insufficient initial funding under the CARES Act substantially and persistently reduced employment. Delayed loans increased job losses in May and persistently reduced recalls throughout the summer. The magnitude and heterogeneity of effects suggest significant barriers to obtaining external financing, particularly among small firms. Effects are inequitably distributed: larger among the self-employed, less well paid, less well educated and--importantly for the design of future programs--in very small firms. Our estimates imply the PPP saved millions of jobs but larger initial funding could have saved millions more, particularly if it had been directed toward the smallest firms. About half of the jobs lost to insufficient PPP funding are lost in firms with fewer than 10 employees, despite such firms accounting for less than 20 percent of employment.
    Keywords: Paycheck Protection Program; CARES Act; Countercyclical Fiscal Policy; Covid-19; Kurzarbeit; Income Support; Small Business Lending; Small and Medium Enterprises (SMEs); Financial Frictions
    JEL: E24 H81 J21 G32
    Date: 2021–01–15
  92. By: Borissov, Kirill; Pakhnin, Mikhail; Wendner, Ronald
    Abstract: In this paper, we propose an approach to describe the behavior of naive agents with quasi-hyperbolic discounting in the neoclassical growth model. To study time-inconsistent decision making of an agent who cannot commit to future actions, we introduce the notion of sliding equilibrium and dis- tinguish between pseudo-perfect foresight and perfect foresight. The agent with pseudo-perfect foresight revises both the consumption path and expec- tations about prices; the agent with perfect foresight correctly foresees prices in a sliding equilibrium and is naive only about their time inconsistency. We prove the existence of sliding equilibria for the class of isoelastic utility func- tions and show that generically consumption paths are not the same under quasi-hyperbolic and exponential discounting. Observational equivalence only holds in the well-known cases of a constant interest rate or logarithmic utility. Our results suggest that perfect foresight implies a higher long-run capital stock and consumption level than pseudo-perfect foresight.
    Keywords: Quasi-hyperbolic discounting; Observational equivalence; Time inconsistency; Naive agents; Sliding equilibrium; Perfect foresight
    JEL: D14 D91 E21 O40
    Date: 2021–01
  93. By: International Monetary Fund
    Abstract: Uzbekistan embarked on an ambitious reform path in 2017, starting to liberalize its economy after years of state control. Incomes are still relatively low compared to other emerging economies. Uzbekistan entered the COVID-19 crisis with relatively strong macro-economic fundamentals.
    Keywords: Policy discussion; government transparency; Policy recommendation; IMF's transparency policy; macro-economic policies; Budget planning and preparation; Public and publicly-guaranteed external debt; COVID-19; Global
    Date: 2021–04–26
  94. By: Prados de la Escosura, Leandro; Rodríguez-Caballero, Carlos Vladimir
    Abstract: This paper contributes to the debate on the origins of modern economic growth in Europe from a very long-run perspective using econometric techniques that allow for a long-range dependence approach. Different regimes, defined by endogenously estimated structural shocks, coincided with episodes of pandemics and war. The most persistent shocks occurred at the time of the Black Death and the twentieth century's world wars. Our findings confirm that the Black Death often resulted in higher income levels, but reject the view of a uniform long-term response to the Plague while evidence a negative reaction in non-Malthusian economies. Positive trend growth in output per head and population took place in the North Sea Area (Britain and the Netherlands) since the Plague. A gap between the North Sea Area and the rest of Europe, the Little Divergence, emerged between the early seventeenth century and the Napoleonic Wars lending support to Broadberry-van Zanden's interpretation.
    Keywords: little divergence; Long-run Growth; Malthusian; Pandemics; war
    JEL: E01 N10 N30 N40 O10 O47
    Date: 2020–05
  95. By: Almenberg, Johan; Lusardi, Annamaria; Säve-Söderbergh, Jenny; Vestman, Roine
    Abstract: We introduce a novel survey measure of attitude toward debt. Matching our survey results with panel data on Swedish household balance sheets from registry data, we show that our debt attitude measure helps explain individual variation in indebtedness as well as debt build-up and spending behavior in the period 2004â??2007. As an explanatory variable, debt attitude compares well to a number of other determinants of debt, including education, risk-taking, and financial literacy. We also provide evidence that suggests that debt attitude is passed down along family lines and has a cultural element.
    Keywords: Attitude Survey; Household borrowing decisions; Intergenerational transmission; personal finance; spending
    JEL: D14 D91 E21 G51
    Date: 2020–05
  96. By: Shiratsuka, Shigenori
    Abstract: This paper explores measurement errors in the Japanese Consumer Price Index (CPI) stemming from lower-level substitution within items. The CPI is widely used as a measure for inflation or the cost of living. The Japanese CPI employs the one-specification for one-item policy in surveying individual prices. The policy specifies a few most popular specifications for each item and continuously surveys their prices at specific outlets. As a result, the price homogeneity is generally maintained, limiting the impact of the differences in the elementary aggregation formulas, which corresponds to the narrow definition of the lower-level substitution bias. In contrast, the price representativeness becomes difficult to be maintained for highly heterogeneous and differentiated products. That is another aspect of the lower-level substitution bias particular to the Japanese CPI, encompassed by the broad definition of the lower-level substitution bias. However, quantitative assessments on the lower-level substitution bias in the Japanese CPI are very limited since the detailed CPI data at individual price observations was not readily available for a long time. This paper is the first trial on a quantitative assessment of the lower-level substitution bias using the micro data for the Retail Price Survey (RPS), which is the primary source data for the Japanese CPI. Empirical evidence confirms that the lower-level substitution bias in the Japanese CPI differs from that for the U.S. CPI. On the one hand, the one-specification for one-item policy in the price survey succeeds in keeping price observations homogeneous, limiting the elementary aggregation bias. On the other hand, the policy also weakens price representativeness, which requires additional quantitative assessments using alternative data sources, such as scanner data and web-scraping data.
    Keywords: Consumer Price Index, Measurement Errors, Substitution Effects, Elementary Aggregation Formula, Price Representativeness, Price Survey Method
    JEL: C43 E31
    Date: 2021–06
  97. By: Margaris, Panagiotis; Wallenius, Johanna
    Abstract: In this paper we develop and estimate a life cycle model that features pecuniary and non-pecuniary investments in health, along with a cognitive ability gradient associated with said investments, in order to rationalize the socioeconomic gradients in health and life expectancy in the United States. Agents accumulate health capital, which affects the level of utility, labor productivity, the distribution of medical spending shocks and life expectancy. We find that the cognitive ability gradient to health investments and the differences in lifetime income account for the lion's share of the observed life expectancy gap. Providing universal health insurance coverage has heterogeneous effects, depending on the progressivity of the financing mechanism, and at best results in a modest decrease in the life expectancy gap.
    Keywords: health; inequality; Life Cycle; time use
    JEL: D31 E21 I14
    Date: 2020–05
  98. By: Joab D. Valdivia C. (Banco Central de Bolivia)
    Abstract: El ciclo crediticio o financiero en economías en desarrollo tiene un importante rol en la sostenibilidad del crecimiento en el mediano y largo plazo. La sincronización del ciclo crediticio con el económico influye en la duración del periodo expansivo o contractivo de la actividad real. Los episodios de riesgo sistémico ayudan a identificar variables deterioradas para la aplicación de políticas contracíclicas. A partir de la metodología de Holló et al. (2012) y en combinación con cuasi-correlaciones cruzadas se construyó un Indicador Compuesto de Stress Sistémico (ICSS). La descomposición del ICSS en el último periodo indica que la liquidez, crecimiento del crédito, el spread en moneda extranjera y el ciclo de precio de vivienda determinan, en mayor cuantía, el comportamiento del indicador creado, evidenciando escenarios de estrés sistémico.
    Keywords: Riesgo sistémico, ciclo crediticio o financiero, correlaciones cruzadas, modelo MarkovSwitching
    JEL: G01 G10 G20 E44
    Date: 2019–11
  99. By: International Monetary Fund
    Abstract: The transitional government embarked on an IMF-supported Staff-Monitored Program (SMP) in 2020 to help address major macroeconomic imbalances caused by decades of mismanagement, lay the groundwork for inclusive growth, and establish a track record of sound policies required for eventual HIPC debt relief. The challenges facing the authorities remain significant, but there have been improvements in both the domestic and external environment. International efforts to support Sudan have gained momentum and were bolstered by the removal of Sudan from the U.S. list of State Sponsors of Terrorism (SSTL), and the identification of bridge financiers for Sudan’s arrears clearance to IDA and the African Development Bank (AfDB). Meanwhile, the government has moved forward on important structural reforms, and on February 8, 2021 the signatories to the October peace agreement were brought into a newly formed cabinet which reaffirmed its commitment to the economic reform program.
    Keywords: government securities market; Sudan's Staff-Monitored Program; reform implementation; B. Policy coordination; economic situation in Sudan; Exchange rate unification; Exchange rates; Currencies; Market exchange rates; Commercial banks; Global;Monetary base
    Date: 2021–04–21
  100. By: Mario Fortin; Marcelin Joanis; Philippe Kabore; Luc Savard
    Abstract: This study aims to consolidate the economic history of Quebec over the period from 1948 to 1980. Unlike previous economic studies relating to this period, we identify the chronology of the economic cycle of Quebec by estimating the real quarterly GDP by using the method of Ginsburgh (1973) as modified by De Carufel and Lizotte (1982). Our analysis of the duration and intensity of recessions confirms the presence of regional cycles in Canada. Il shows also that the business cycle of Quebec is more strongly correlated with the US cycle than with the cycle in the rest of Canada. Cette étude vise à affermir notre compréhension de l’histoire économique du Québec sur la période allant de 1948 à 1980. À la différence des études économiques antérieures portant sur cette période, nous identifions la chronologie du cycle économique du Québec en estimant le PIB réel trimestriel à l’aide de la méthode de Ginsburgh (1973) telle que modifiée par De Carufel et Lizotte (1982). Notre analyse de la durée et de l’intensité des récessions confirme la présence de cycles régionaux au Canada. Elle montre aussi que le cycle du Québec est plus fortement corrélé avec le cycle américain qu’avec le cycle du reste du Canada.
    Keywords: GDP,quarterlyization,business cycle,Ginsburgh method,1948-1980, PIB,trimestrialisation,cycle économique,méthode de Ginsburgh,1948-1980
    JEL: B22 B23 C13
    Date: 2021–06–17
  101. By: Tonni, Lorenzo
    Abstract: This paper deals with two intrinsically linked issues: the endogeneity of the demand regime and the personal distribution impact on aggregate demand. By microfounding the savings function, the aggregate savings rate is an increasing function of the Gini index, which in turn is decomposed as a function of the functional income distribution and the Gini indices for wages and profits. By assuming that saving is a function of personal rather than functional income distribution, an increase of the labour share is effective in boosting consumption and aggregate demand, not per se, but only as long as it reduces personal inequality. As the labour share increases, depending on the distribution of wages and profits, both the demand regime type – the sign of the slope of the demand schedule - and its strength- the size of the slope of the demand schedule - can endogenously change. Concerning the former, there can be a threshold value for the wage share beyond which there is a shift from wage-led to profit-led demand. The analysis shows that, unlike most Kaleckian models, profit inequality is just as important as wage inequality in determining the demand regime type and its strength.
    Keywords: Personal distribution, functional distribution, wage-led, profit-led, non-linear demand, endogenous demand regime
    JEL: B50 D31 D33 E11 E12
    Date: 2021–06
  102. By: Ewan McGaughey
    Abstract: The COVID-19 pandemic has shown the painful consequences of poor job security and workplace democracy. The UK government’s initial flirt with ‘herd immunity’, the delay in lockdown, and the absence of a work strategy that prioritised safety after the summer of 2020, caused among the most appalling death rates in the world, worse than Trump’s America. However, a swift change in the job security policy stemmed mass unemployment, after initial reports of 2.1 million people claiming unemployment benefits. The ‘Coronavirus Job Retention Scheme’ eventually meant that the unemployment statistics (as opposed to claimant count) showed only a modest jobless rise. Comparison with the US where there are effectively no rights, and other countries with strong rights, shows that universal social security and workplace democracy are at the core of successful economic performance. This paper explains the UK’s health and safety rights, how the job retention scheme was unfurled with extension to employed and self-employed, and the connection between votes at work and employment. It shows how reality discredits the minority views of economic theorists who oppose labour rights, and suggests the legal reforms we can undertake to achieve a social recovery.
    Keywords: COVID-19, coronavirus, labour law, labor law, employment law, health, education, university, pandemic, Coronavirus Job Retention Scheme, health and safety, social security, workplace democracy
    JEL: K10 K31 K32 K34 I10 I13 I14 D01 D21 D22 E01 E24
    Date: 2021–04
  103. By: Chi Hyun Kim
    Abstract: Do memories of highly emotional stock market crashes permanently affect the investment decisions of households? The Initial Public Offerings of Deutsche Telekom during 1996- 2000 provide an optimal base to address this question, as it is known for its emotional character and is reputedly “the last time Germans invested in stocks.” Using Socio-Economic Panel (SOEP) household survey data, I show that having experienced this event leads to persistently lower stock market participation in the future. In addition, this effect is greater for households that had directly invested in Telekom shares, those being more likely to have high emotional experiences. Finally, I also show that such traumatic experiences on investment decisions have intergenerational consequences, significantly affecting how the next generation invests in the financial market.
    Keywords: Household finance, stock market participation, financial crises
    JEL: D14 G01 G11 E21
    Date: 2021
  104. By: International Monetary Fund
    Abstract: Strong and timely containment measures have successfully prevented a domestic COVID-19 outbreak but have also weighed on economic activity. The real GDP is estimated to have contracted by 3.3 percent in FY2020 and is projected to further decline by another 1.5 percent in FY 2021 due to continued travel restrictions. Economic activity is expected to pick up in FY2022, as COVID-related restrictions will be relaxed gradually. The government is currently negotiating the renewal of Compact of Free Association (COFA) financial provisions with the United States, but terms remain uncertain. The government is considering to repeal the SOV Act and a bill on establishing a Digital Economic Zone was submitted to the Parliament recently.
    Date: 2021–05–27
  105. By: International Monetary Fund
    Abstract: Against the background of the pandemic shock, a coup d’état on August 18, 2020 led to a period of international disengagement with Mali and an economic blockade by ECOWAS until the appointment of a transitional government in October. Fund engagement was also put on hold during this period, delaying the resumption of discussions under the 2nd and 3rd reviews of the ECF. The transitional government, which will be in place for 18 months until general elections, announced its full adherence to the international obligations and commitments of the previous government, including the reform agenda under the ECF.
    Keywords: ECF arrangement; action program; response plan; Executive Board discussion; IMF's Board; economic reform program; COVID-19; Debt sustainability analysis; West Africa; Sub-Saharan Africa
    Date: 2021–03–30
  106. By: Gounopoulos, Dimitrios; Luo, Kaisheng; Nicolae, Anamaria; Paltalidis, Nikos
    Abstract: How banks managed the COVID-19 pandemic shock? The eruption of the financial crisis in 2007 evolved to a crisis of banks as liquidity providers (Acharya and Mora, 2015). The COVID-19 pandemic shock was associated with a surge in households’ deposits and a subsequent liquidity injection by the Federal Reserve. We show how the pandemic affected banks’ liquidity management and therefore by extension, the creation of new loans. We empirically evaluate the creation and management of banks’ liquidity through three well established mechanisms: market discipline (supply-side), internal capital markets (demand-side), and the balance-sheet mechanism which captures banks’ exposure to liquidity demand risk. We provide novel empirical evidence showing that households increased savings as a precaution against future declines in their income. Also, depositors did not discipline riskier banks, and the internal capital market mechanism was not in work during the pandemic. Hence, weakly-capitalized banks were not forced to offer higher deposit rates to stem deposit outflows. Furthermore, weakly-capitalized banks increased lending in the first phase of the pandemic, while in the midst of the pandemic, they cut back new lending origination and increased their exposure to Fed’s liquidity facilities. Well-capitalized banks on the other hand, increased lending in line with the increase in their deposits. Banks with higher exposure to liquidity risk were vulnerable to deposit outflows and increased their exposure in Fed’s liquidity facilities significantly more than low-commitments exposed banks.
    Keywords: Financial Institutions; Liquidity Risk; Bank Lending; COVID-19; Monetary Policy
    JEL: E51 E58 G21
    Date: 2021–05–26
  107. By: Storesletten, Kjetil; Zhao, Bo; Zilibotti, Fabrizio
    Abstract: We document that business cycles change during the process of development. In countries with large declining agricultural sectors, aggregate employment is uncorrelated with GDP. During booms, agricultural employment declines even though agricultural labor productivity increases relative to other sectors. We construct a unified theory of business cycles and structural change consistent with the stylized facts. The theory focuses on the simultaneous decline and modernization of agriculture. As capital accumulates, agriculture becomes increasingly capital intensive as traditional agriculture is crowded out. We estimate the model and show that it accounts well for both structural transformation and business cycle fluctuations in China.
    Date: 2020–06
  108. By: Arief A. Yusuf; Reza Anglingkusumo; Andy Sumner; Putri R. Halim; Anggita C.M. Kusuma
    Abstract: This paper tests whether employment of a particular group of workers (distinct by demographic-skills-region characteristics) with comparative advantage in certain tasks (such as routine and non-routine) has increased relative to others during 2001-2015 in Indonesia. With this we aim to establish evidence in support of routinization hypothesis (or Routine-biased Technical Change/RBTC) that occurs in a particular time period that coincides with rising inequality in Indonesia. To do this we analyze a series of nationally representative labor force surveys of Indonesia (SAKERNAS) and combine them with the task-data from the O*NET database. We constructed a pseudo-panel data from this combined dataset and implemented a fixedeffect regression analysis linking employment and task-specific comparative advantage, controlling for macroeconomic trend and heterogeneity in demographic-skills-region composition. We find that the employment of demographic and skill groups that have comparative advantage (in the initial period) in abstract task (non-routine cognitive, analytical and personal) relative to those with comparative advantage in the manual (non-routine physical manual) task -- the omitted group --, has increased much faster thanother groups, particularly demographic and skill groups that have comparative advantage in routine task. Therefore, this paper establishes an evidence that routinization, or routine-biased technical change, has played a role in the changing composition of labor force in Indonesia during the period of rising inequality in Indonesia (2001-2015).
    Keywords: routine-biased technical change, routinization, job polarization, technological change, Indonesia
    JEL: D31 E24 J21 J24 J31
    Date: 2020
  109. By: International Monetary Fund
    Abstract: The COVID-19 pandemic has hit Madagascar hard, reversing recent progress in per capita income and poverty reduction. GDP is estimated to have contracted by 4.2 percent in 2020. Two RCF disbursements approved on April 3 and July 30 (totaling 2.4 percent of GDP) helped close short-term financing gaps, supported mitigation measures, and contributed to catalyzing donor budget support. The authorities are seeking renewed Fund assistance to help the country face protracted balance of payment needs aggravated by the impact of the pandemic and support the authorities’ reform agenda summarized in the Plan Emergence Madagascar (PEM).
    Keywords: ECF arrangement; financing gap; reform strategy; financing needs; frontloaded disbursement; COVID-19; Credit; Global
    Date: 2021–04–09
  110. By: Lucas Avezum; Vítor Oliveira; Diogo Serra
    Abstract: In this paper we assess the effectiveness of the macroprudential capital buffers’ release on loans granted to households, implemented in the context of the Covid-19 pandemic. We obtain causal estimates by exploring differences in the availability of regulatory buffers prior to the pandemic shock among European countries and accounting for the time-varying effect of unobservable confounding variables with the synthetic control method. We find evidence that the buffers releases contributed, on average, to mitigate the procyclicality of credit to households, specifically for house purchase and for small businesses purposes. For the aggregate household lending, we find that the average treatment effect for both the release of the CCyB and that of the SyRB were positive. However, the results suggest that, for credit associated to small businesses purposes, only the release of the CCyB had an effect.
    JEL: E51 G28 H12
    Date: 2021
  111. By: Pierre Cahuc (Département d'économie); Francis Kramarz (ENSAE ParisTech (ENSAE)); Sandra Nevoux (Banque de France)
    Abstract: To understand which firms take-up short-time work and which workers they enroll in this program, we provide a model which shows that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. Using detailed data on the administration of the program covering the universe of French establishments in the 2008-2009 Great Recession, we find that short-time work did indeed save jobs and increase hours of work in firms faced with large negative shocks. These firms have been able to recover rapidly in the aftermath of the Recession thanks to short-time work. We also provide evidence of large windfall effects which significantly increased the cost of the policy per job saved; yet we also find that short-time work remains more cost-efficient at saving jobs than wage subsidies.
    Keywords: Short-time Work; Unemployement; Hours of work
    JEL: E24 J22 J65
    Date: 2021–05
  112. By: George A. Alessandria; Carter B. Mix
    Abstract: We evaluate the aggregate effects of changes in trade barriers when these changes can be implemented slowly over time and trade responds gradually to changes in trade barriers because firm-level trade costs make exporting a dynamic decision. Our model shows how expectations of changes in trade barriers affect the economy. We find that while decreases in trade barriers increase economic activity, expectations of lower future trade barriers temporarily decrease investment, hours worked, and output. Further-more, canceling an expected decline in future trade barriers raises investment and output in the short run but substantially lowers medium-run growth. These effects are larger when the expected reform is bigger. In the data, we find that countries with more trade growth after the General Agreement on Tariffs and Trade (GATT) rounds decreased investment and hours worked in the years leading to the tariff cuts, as predicted by our model.
    JEL: E3 F1 F4
    Date: 2021–06
  113. By: Pierre Cahuc (Département d'économie); Francis Kramarz (ENSAE ParisTech (ENSAE)); Sandra Nevoux (Banque de France)
    Abstract: To understand which firms take-up short-time work and which workers they enroll in this program, we provide a model which shows that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. Using detailed data on the administration of the program covering the universe of French establishments in the 2008-2009 Great Recession, we find that short-time work did indeed save jobs and increase hours of work in firms faced with large negative shocks. These firms have been able to recover rapidly in the aftermath of the Recession thanks to short-time work. We also provide evidence of large windfall effects which significantly increased the cost of the policy per job saved; yet we also find that short-time work remains more cost-efficient at saving jobs than wage subsidies.
    Keywords: Short-time Work; Unemployement; Hours of work
    JEL: E24 J22 J65
    Date: 2021–05
  114. By: Sriya Anbil; Mark A. Carlson; Mary-Frances Styczynski
    Abstract: We analyze whether the Federal Reserve's Paycheck Protection Program Liquidity Facility (PPPLF) was successful in bolstering the ability of commercial banks to provide credit to small businesses under the Small Business Administration's Paycheck Protection Program (PPP). Using an instrumental variables approach, we find a causal effect of the facility boosting PPP lending. On average, commercial banks that used the PPPLF extended over twice as many PPP loans, relative to their total assets, as banks that did not use the PPPLF. Our instrument is a measure of banks' familiarity with the operation of the Federal Reserve’s discount window; this measure is strongly related to both the propensity to sign up for and to utilize the PPPLF. Further, using a similar instrumental variables approach, we find evidence that the availability of the facility as a backstop source of funds may also have supported bank PPP lending, especially for larger banks.
    Keywords: COVID-19; PPP; PPPLF; Federal Reserve; Central bank lending
    JEL: E58 G21 H81
    Date: 2021–05–05
  115. By: John C. Haltiwanger
    Abstract: Applications for new businesses from the U.S. Census Bureau’s monthly and weekly Business Formation Statistics (BFS) fell substantially in the early stages of the pandemic but then surged in the second half of 2020. This surge has continued through May 2021. The pace of applications since mid-2020 is the highest on record (earliest data available is 2004). The large increase in applications is for both likely new employers and nonemployers. These patterns contrast sharply with those in the Great Recession when applications for likely new employer businesses and in turn actual startups of employer businesses declined sharply and persistently. The surge in new business applications has been uneven across sectors. Ten 3-digit NAICS industries account for 75% of the surge. Dominant industries include Nonstore Retail (alone accounting for 33% of the surge), Professional, Scientific and Technical Services, Truck Transportation, and Accommodation and Food Services. Given that existing small businesses in Retail Trade and Accommodation and Food Services have suffered especially large declines in the pandemic, these patterns are consistent with restructuring induced by the pandemic.
    JEL: E32 L25 L26
    Date: 2021–06
  116. By: Michael Falkenheim
    Abstract: An extensive literature debates whether market prices should be used to measure the benefits and costs of risk in government activities or whether the government should be treated as risk neutral. This paper explores the benefits and costs of governmental risk taking in formal models of market imperfections, in which the government serves as an intermediary between different stakeholders in its finances. Some stakeholders cannot participate in markets, either because they belong to future generations or because they have no funds to invest and face borrowing constraints.
    JEL: E32 G10 G12 G18 H50 H83
    Date: 2021–06–16
  117. By: Don H. Kim; Marcelo Ochoa
    Abstract: This paper investigates spillovers from foreign economies to the U.S. through changes in longterm Treasury yields. We document a decline in the contribution of U.S. domestic news to the variance of long-term Treasury yields and an increased importance of overnight yield changes—a rough proxy for the contribution of foreign shocks to U.S. yields—over the past decades. Using a model that identifies U.S., Euro area, and U.K. shocks that move global yields, we estimate that foreign (non-U.S.) shocks account for at least 20 percent of the daily variation in long-term U.S. yields in recent years. We argue that spillovers occur in large part through bond term premia by showing that a low level of foreign yields relative to U.S. yields predicts a decline in distant forward U.S. yields and higher returns on a strategy that is long on a long-term Treasury security and short on a long-term foreign bond.
    Keywords: Bond risk premia; Foreign spillovers; Event study; Identification by heteroskedasticity; Predictability
    JEL: E52 F37 G12 G15
    Date: 2021–01–11
  118. By: Ferrari, Massimo; Pagliari, Maria Sole
    Abstract: In this paper we explore the cross-country implications of climate-related mitigation policies. Specifically, we set up a two-country, two-sector (brown vs green) DSGE model with negative production externalities stemming from carbon-dioxide emissions. We estimate the model using US and euro area data and we characterize welfare-enhancing equilibria under alternative containment policies. Three main policy implications emerge: i) fiscal policy should focus on reducing emissions by levying taxes on polluting production activities; ii) monetary policy should look through environmental objectives while standing ready to support the economy when the costs of the environmental transition materialize; iii) international cooperation is crucial to obtain a Pareto improvement under the proposed policies. We finally find that the objective of reducing emissions by 50%, which is compatible with the Paris agreement's goal of limiting global warming to below 2 degrees Celsius with respect to pre-industrial levels, would not be attainable in absence of international cooperation even with the support of monetary policy. JEL Classification: F42, E50, E60, F30
    Keywords: climate modelling, DSGE model, open-economy macroeconomics, optimal policies
    Date: 2021–06
  119. By: Angelucci, Manuela (University of Texas at Austin); Chiapa, Carlos (Analysis Group); Prina, Silvia (Northwestern University); Rojas, Irvin (Centro de Investigación y Docencia Económicas)
    Abstract: We study how 3,534 beneficiaries of PROSPERA, Mexico's cash transfer program, smooth food consumption around the transfer payday, an anticipated and transitory income shock. We find that food consumption and food security do not change around the transfer payday, including for recipients with impatient or time-inconsistent preferences and households with higher than median transfer dependence. Conversely, health and employment shocks (unexpected and less transitory income changes) reduce food security. The transfer's relative illiquidity may act as a commitment device, helping time-inconsistent and less experienced debit card holders smooth consumption.
    Keywords: consumption smoothing, permanent income hypothesis, payday
    JEL: D12 D91 E21 I12 I38
    Date: 2021–06
  120. By: Diane Alexander; Ezra Karger
    Abstract: We link the county-level rollout of stay-at-home orders during the Covid-19 pandemic to anonymized cell phone records and consumer spending data. We document three patterns. First, stay-at-home orders caused people to stay home: county-level measures of mobility declined 7–8% within two days of when the stay-at-home order went into effect. Second, stay-at-home orders caused large reductions in spending in sectors associated with mobility: small businesses and large retail chains. Third, we estimate fairly uniform responses to stay-at-home orders across the country; effects do not vary by county-level income, political leanings, or urban/rural status.
    Keywords: Covid-19; stay-at-home orders; consumer spending; high-frequency data
    JEL: A19 E21 I12 R20 R50
    Date: 2020–04–17
  121. By: Richard H. Clarida; Burcu Duygan-Bump; Chiara Scotti
    Abstract: The COVID-19 pandemic and the mitigation efforts put in place to contain it delivered the most severe blow to the U.S. economy since the Great Depression. In this paper, we argue that the Federal Reserve acted decisively and with dispatch to deploy all the tools in its conventional kit and to design, develop, and launch within weeks a series of innovative facilities to support the flow of credit to households and businesses. These measures, taken together, provided crucial support to the economy in 2020 and are continuing to contribute to what is expected to be a robust economic recovery in 2021.
    Keywords: Monetary policy; Forward guidance; Asset purchases; Section 13(3) facilities
    JEL: E40 E50
    Date: 2021–06–03
  122. By: Joab D. Valdivia C. (Banco Central de Bolivia)
    Abstract: La presente investigación examina la relación entre crecimiento sectorial y el crédito destinado al sector productivo en Bolivia. La naturaleza de los datos es de corte longitudinal, por lo cual se optó por la metodología de Efectos Fijos y Vectores Auto-Regresivos en datos de panel (PVAR). Asimismo, se realizó la versión recursiva de ambas metodologías para observar la evolución del impacto en el tiempo de colocación de cartera – PIB sectorial. Bajo la estimación de Efectos Fijos la colocación de cartera afecta positivamente al PIB sectorial en 0,12%; los resultados del modelo PVAR muestran que shocks del financiamiento al producto representan 0,51%; en la tasa de interés el efecto es contractivo (0,05%) y los efectos de la Ley de Servicios Financieros alcanzan a 0,02%. La versión recursiva de ambas metodologías devela un comportamiento similar en la evolución de las elasticidades y las funciones impulso respuesta.
    Keywords: Efectos fijos, efectos aleatorios, panel VAR, estimación recursiva, tasa de interés
    JEL: C50 E51 E52
    Date: 2019–11
  123. By: Bill Martin
    Abstract: This paper develops what is believed to be a novel method of resurrecting UK national accounts corporate sector data before 1987, the date prior to which fully comprehensive sectoral data are not provided by the Office for National Statistics. A distinction is drawn between the sectors comprising private non-financial corporations (PNFC), on the one hand, and financial corporations, which include some state-controlled enterprises, on the other hand. The resurrected PNFC dataset runs in detail from 1960. A much more limited set of reconstructed data is available for financial corporations. The resurrected data include the savings – broadly speaking, the "retained profits" – and the financial balances – the difference between retained profits and capital spending – of both corporate sectors. Economists collaborating with the UK Economic Statistics Centre of Excellence describe an exercise of this kind as "especially difficult". My method of reconstruction relies on archived, out-of-date, too frequently unreliable national accounts datasets, the scrutiny of those data to remove mistakes, and a detailed examination of a subset of an otherwise overwhelming number of national accounts revisions confined to those having a material and enduring impact in the historic period before 1987. This "bottom-up" method of data reconstruction differs from the “top-down” method of resurrecting the accounts of the public, the rest-of-the-world and the “private” sectors, and the separation of the household sector from the aggregate corporate sector, described in a previous paper: Martin (2019). The combination of the two methods, one bottom-up, the other largely top-down, risks the creation of a dustbin into which data inconsistencies are unwittingly poured. A number of robustness tests provides reassurance that the differently derived historic data for sectoral saving make sense. Comparable tests of household and corporate sectors’ financial balance data are not possible, but the hypothesis that different vintages of PNFC financial balance data are isomorphic representations of the same economic variable is not rejected. The combination of the two methods has allowed improvements to be made to the resurrected household sector series that begin in 1946. Subject to the resolution of outstanding problems with official national accounts data, notably for gross fixed capital formation before 1960, and additional scrutiny and comment, it is the intention to make the complete resurrected sectoral dataset publicly available.
    Keywords: National accounts, private non-financial corporations, macroeconomics, UK statistics
    JEL: C82 E01 N1
    Date: 2020–06
  124. By: Piergiorgio Alessandri; Andrea Gazzani; Alejandro Vicondoa
    Abstract: Isolating financial uncertainty shocks is difficult because financial markets rapidly price changes in several economic fundamentals. To bypass this difficulty, we identify uncertainty shocks using daily data and use their monthly averages as an instrument in a VAR. We show that this novel approach is theoretically appealing and has dramatic implications for leading empirical studies on financial uncertainty. Daily interactions between equity returns, bond spreads and expected volatility cause previous identification schemes to fail at the monthly frequency. Once these interactions are explicitly modeled, the impact of uncertainty shocks on output and inflation is significant and similar across specifications.
    Date: 2021
  125. By: Arun Gupta
    Abstract: This study uncovers the existence of a trillion-dollar internal capital market that played a central role in the financing of dealer banks during the 2008 Global Financial Crisis. Hand-collecting a novel set of dealer microdata at the subsidiary level, I present the first set of facts on the evolution of interaffiliate loans between U.S. primary dealers and their (primarily foreign) siblings. First, the aggregate size of these dealer internal capital markets quadrupled from $335 billion in 2001 to $1.2 trillion by 2007. Second, 25 percent of total repurchase agreements and 61 percent of total securities lending reported on U.S. primary dealer balance sheets were sourced internally from sibling dealers by year-end 2007. Third, internal securities lending collapsed by 55 percent during the 2008 crisis. These facts suggest that incorporating internal capital market dynamics may be fruitful for future research on dealer behavior and market liquidity.
    Keywords: Global financial institutions; Broker-dealers; Internal capital markets; Shadow banking; Securities lending
    JEL: E44 F23 G01 G20 G23 G24
    Date: 2021–06–03
  126. By: Haelim Anderson; Kinda Cheryl Hachem; Simpson Zhang
    Abstract: We study financial stability with constraints on central bank intervention. We show that a forced reallocation of liquidity across banks can achieve fewer bank failures than a decentralized market for interbank loans, reflecting a pecuniary externality in the decentralized equilibrium. Importantly, this reallocation can be implemented through the issuance of clearinghouse loan certificates, such as those issued in New York City during the Panic of 1873. With a new dataset constructed from archival records, we demonstrate that the New York Clearinghouse issued loan certificates to member banks in the way our model suggests would have helped resolve the panic.
    JEL: D53 D62 E42 E50 G01 N21
    Date: 2021–05
  127. By: Ehrmann, Michael; Tietz, Robin; Visser, Bauke
    Abstract: Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior. JEL Classification: D71, D72, E58
    Keywords: central bank communication, financial market response, FOMC, monetary policy committee, voting right rotation
    Date: 2021–06
  128. By: International Monetary Fund
    Abstract: The fallout from the COVID-19 crisis is hitting ECCU economies hard. Tourism receipts (accounting for nearly 40 percent of GDP) have dried up, as tourist arrivals have come to a grinding halt. The authorities successfully contained the spread of the virus at the onset of the pandemic by largely closing the borders, but a reopening of the economies since the summer has led to a surge in COVID cases. The ECCU economy is projected to contract by 16 percent in 2020 and by a further near ½ percent in 2021. Fiscal positions have deteriorated sharply, and public debt is projected to reach near 90 percent of GDP in 2021 and remain at an elevated level for years to come. Headline indicators suggest the financial system is relatively sound with ample liquidity buffers, but nonperforming loans are expected to rise significantly. The outlook is clouded by exceptionally high risks, including from the uncertainty concerning the evolution of the pandemic.
    Keywords: ECCU economy; ECCU member states; ECCU country; ECCU price aggregate; headline indicator; COVID-19; Loans; Nonperforming loans; Tourism; Caribbean; Global
    Date: 2021–05–04
  129. By: Luca Pensieroso; Romain Restout
    Abstract: Was the Gold Standard a major determinant of the onset and protracted character of the Great Depression of the 1930s in the United States and worldwide? In this paper, we model the ‘Gold-Standard hypothesis’ in an open-economy, dynamic general equilibrium framework. We show that encompassing the international and monetary dimensions of the Great Depression is important to understand the turmoil of the 1930s, especially outside the United States. Contrary to what is often maintained in the literature, our results suggest that the vague of successive nominal exchange rate devaluations coupled with the monetary policy implemented in the United States did not act as a relief. On the contrary, they made the Depression worse.
    Keywords: Great Depression, Gold Standard, Open Macroeconomics, Dynamic General Equilibrium.
    JEL: N10 E13 N01
    Date: 2021
  130. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: In this report, Institute President Dimitri B. Papadimitriou and Research Scholars Michalis Nikiforos and Gennaro Zezza analyze how the US economy was affected by the pandemic and its prospects for recovery. Their baseline simulation using the Institute's stock-flow macroeconometric model shows a significant pickup in the growth rate in 2021 as a result of the American Rescue Plan Act. The report includes two additional scenarios simulated on top of the baseline, finding that President Biden's infrastructure and families plans--whether paired with offsetting tax increases on high-earners or "deficit financed"--would have positive macroeconomic effects. Additionally, Papadimitriou, Nikiforos, and Zezza warn that if US policymakers do not prioritize decreasing the trade deficit, maintaining growth will require either continuous and very high government deficits or the private sector once again becoming a net borrower. Finally, they argue that concerns about a sharp increase in inflation spurred by the fiscal stimulus are unwarranted: the US economy was not close to full employment or full utilization of resources before the pandemic, and the propagation mechanisms that could lead to accelerating inflation are not in place.
    Date: 2021–06
  131. By: Sriya Anbil; Alyssa G. Anderson; Zeynep Senyuz
    Abstract: We show that the segmented structure of the U.S. Treasury repo market, in which some participants have limited access across the segments, leads to rate dispersion, even in this essentially riskless market. Using confidential data on repo trading, we demonstrate how the rate dispersion between the centrally cleared and over-the-counter (OTC) segments of the Treasury repo market was exacerbated during the stress episode of September 2019. Our results highlight that, while segmentation can increase fragility in the repo market, the presence of strong trading relationships in the OTC segment helps mitigate it by reducing rate dispersion.
    Keywords: Repo market; OTC market; CCP; Segmentation; Financial stability
    JEL: E52 G10 E43 G23
    Date: 2021–04–30
  132. By: Maxime MENUET; Alexandru MINEA; Patrick VILLIEU; Anastasios XEPAPADEAS
    Keywords: , Growth, Environment, Pollution, Poverty Traps, Endogenous Cycles
    Date: 2021
  133. By: Mary Amiti; Sebastian Heise
    Abstract: A number of studies have documented that market concentration among U.S. firms has increased over the last decades, as large firms have grown more dominant. In a new study, we examine whether this rising domestic concentration means that large U.S. firms have more market power in the manufacturing sector. Our research argues that increasing foreign competition over the last few decades has in fact reduced U.S. firms’ market power in manufacturing.
    Keywords: market concentration; markups; import competition
    JEL: E2
    Date: 2021–06–21
  134. By: Jean-Charles Bricongne (Banque de France); Samuel Delpeuch (SciencesPo); Margarita Lopez Forero (Evry University/Paris-Saclay)
    Abstract: Based on French firm-level data over 15 years we evaluate the contribution of the microlevel profit shifting -through tax haven foreign direct investments (FDI), may it be in or outward- to the aggregate productivity slowdown in France and the role that intangible investments play in this relation. We show that firm productivity in France experiences a decline over the immediate years following the establishment in a tax haven, with an average estimated drop by 3.5% in labor productivity. We argue that this productivity decline, following a presence in a tax haven, is most likely explained by MNEs' fiscal optimization, where domestic productivity is underestimated as profits are not recorded anymore in the home country. The fall in productivity is especially strong for firms that are intensive in intangible capital and is equivalent to 4.1% (versus 2.7% for low intangible intensive firms), reflecting the fact that these types of assets are more easily transferred across countries and facilitate fiscal optimization. Our results additionally suggest that the mismeasurement has strong dynamic effects, as the decline becomes more important the longer the firm remains in a tax haven. Due to possible attenuation biases, we argue that our estimates provide a lower bound of the productivity mismeasurement. Finally, given these firms' weight in the economy, our results imply an 8% loss at the aggregate in terms of the level of the labor productivity throughout the whole sample period, which is equivalent to an annual loss of 9.7% in terms of the aggregate annual labor productivity growth.
    Keywords: Tax Havens, Profit shifting FDI, Productivity slowdown, Productivity mismeasurement, Intangible capital
    JEL: D33 F23 H26 H87 O47
    Date: 2021
  135. By: Euiyoung Jung (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper analyzes the optimal cyclical behavior of labor market policies in an economy with asset and labor market frictions. The policies of interest include unemployment insurance (UI) and employment protection (EP). In addition to their supply-side effects, labor market policies affect the aggregate demand via earning risk and redistribution channels. Under bilateral wage bargaining, I find that procyclical UI and countercyclical EP deliver superior welfare outcomes through stabilization via both supply and demand channels.
    Keywords: new keynesian,uncertainty,unemployment,incomplete markets,labor market policy New Keynesian,Uncertainty,Unemployment,Incomplete markets,Labor market policy JEL Classification: E12,E21,E24,E29,E32,E61,E69,J68,J65
    Date: 2021–05
  136. By: Wickens, Michael R.
    Abstract: A feature of the financial crisis rarely mentioned in the academic literature is that forward interest rates remained persistently higher than future spot rates. Yet according to the expectations hypothesis forward interest rates are unbiased predictors of future spot rates. More general theories attribute the forecast errors to term premia. This paper examines whether these theories can explain data for the US and UK that spans the financial crisis and whether alternative approaches provide better forecasts. The main findings are that these theories break down after the financial crisis and, not unexpectedly, that the forecast errors are due mainly to monetary policy.
    Date: 2020–05
  137. By: María Eugenia Carmona Morales (Banco Central de Bolivia)
    Abstract: La política monetaria en Bolivia se ha caracterizado por su enfoque heterodoxo y orientación contracíclica. En los últimos años, la caída persistente de los términos de intercambio exacerbó el dilema de política monetaria en varios países de la región donde, a diferencia de Bolivia, se aplicaron políticas monetarias procíclicas. La evidencia presentada en este documento señala que el carácter cíclico de la política monetaria en Bolivia pasó de ser procíclico, aunque estadísticamente no significativo antes de 2006, a ser contracíclico y significativo después de 2006. Entre los factores que han contribuido a este proceso se encuentran la credibilidad de la política monetaria, los espacios monetarios, la bolivianización financiera y el uso de un amplio conjunto de instrumentos. En este contexto, el desempeño del país, en términos de crecimiento e inflación en años recientes, fue uno de los más destacados, asociándose también a la contraciclicidad de la política monetaria, una menor volatilidad del producto.
    Keywords: Política monetaria, políticas contracíclicas
    JEL: E52 F41
    Date: 2019–12
  138. By: Bukowski, Pawel; Novokmet, Filip
    Abstract: We construct the first consistent series on the long-term distribution of income in Poland by combining tax, household survey and national accounts data. We document a U-shaped evolution of inequalities from the end of the 19th century until today: (i) inequality was high before WWII; (ii) abruptly fell after the introduction of communism in 1947 and stagnated at low levels during the whole communist period; (iii) experienced a sharp rise with the return to capitalism in 1989. We find that official survey-based measures strongly under-estimate the rise in inequality since 1989. Our results highlight the prominent role of capital income in driving the U-shaped evolution of top income shares. The unique inequality history of Poland speaks to the central role of institutions and policies in shaping inequality in the long run.
    Keywords: income inequality; transformation; Poland
    JEL: D31 E01 N34
    Date: 2021–06–02
  139. By: Mauro, Filippo di (Asian Development Bank Institute); Hoang, Minh Duy (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute)
    Abstract: We provide an overview of productivity development and other related indicators in Asia and Pacific (APAC) countries, with comparisons with the Europe region. We use the seventh vintage firm-level data from the Productivity Research Network in the APAC region and CompNet in Europe for our study. The overall results show that the productivity growth in developed APAC countries (Australia, New Zealand, and the Republic of Korea) is significantly ahead of the growth in developing APAC countries (India and the People’s Republic of China) and on par with the EU’s growth. There is an ongoing process of bottom firms catching up with top firms in the Republic of Korea and the richest EU countries. Regarding employment and labor skills, employment growth has generally been quite stagnant in all regions. Labor skills, for which we use the wage premium as a proxy, are quite similar across most regions, with the richest EU countries showing a higher premium than the rest. Our test of the productivity–employment link indicates that the size of employment tends to have a greater impact on productivity in APAC countries, while labor skills have greater emphasis in the EU.
    Keywords: productivity; firm-level; employment; labor costs; labor skills; wage premium; TFP dispersion; firm concentration; financial constraint; Filippo di Mauro; Minh Duy Hoang; Peter Morgan
    JEL: D24 E24 J21 J24 P52
    Date: 2021–05–21
  140. By: Montoya, J; Jurado, A.
    Abstract: Este trabajo presenta una medida alternativa del nivel de empleo agregado, formal e informal para la economía colombiana entre 2007 y 2019, la cual permite obtener una medida alternativa de capital humano que es llamada calidad laboral. Uno de los principales resultados es que el nivel educativo tiene un impacto altamente positivo sobre la calidad laboral agregada y por sectores. En segundo lugar, se observan importantes diferencias en la calidad laboral entre los sectores formal e informal, las cuales aumentaron durante el periodo estudiado. En tercer lugar, se evidencia que la caída en la tasa de informalidad que se ha dado en el país ha tenido efectos positivos en la calidad laboral. Finalmente, se presenta una estimación de la Productividad total de factores (PTF), considerando esta medida alternativa del empleo.
    Keywords: Calidad laboral; Nivel de empleo agregado; Informalidad laboral; Ã ndice deDivisa; Contabilidad del crecimiento económico
    JEL: C43 E25 J24 O47
    Date: 2021–04–26
  141. By: Brian D. Bell; Nicholas Bloom; Jack Blundell
    Abstract: We use a UK employer-employee administrative earnings dataset to investigate the response of earnings and hours to business cycles. Exploiting our long panel of data from 1975 to 2020 we find wide heterogeneity in the exposure of different types of workers to aggregate shocks. Employees who are younger, male, lower-skilled, non-union, and working in smaller private sector firms show the largest earnings response to recessions. The qualitative patterns of earnings changes across workers observed in the COVID-19 recession are broadly as predicted using the previously estimated exposures and size of the GDP shock. This suggests the COVID-19 recession in terms of its impact responses was relatively similar to those that have gone before, but the GDP shock was far larger in absolute size. Compared to aggregate shocks, we find a relatively small role of firm-specific shocks, suggesting macro shocks play an outsized role in individual earnings dynamics.
    JEL: J0
    Date: 2021–05
  142. By: Luca Guerrieri; James Collin Harkrader
    Abstract: Focusing on some key metrics of bank performance, such as revenues and loan charge-off rates, we estimate the fraction of the observed variation in these metrics that can be attributed to changes in economic conditions. Macroeconomic factors can explain the preponderance of the fluctuations in charge-off rates. By contrast, bank-specific, idiosyncratic factors account for a sizable share of the variation in bank revenues. These results point to importance of bank-specific business models as a driver of performance.
    Keywords: Pre-provision net revenues; Backcasting; Banking factors; Charge-offs; Macroeconomic factors; Principal components
    JEL: E30 G21
    Date: 2021–02–16
  143. By: Drydakis, Nick
    Abstract: This meta-analysis utilizes 24 papers published between 2012-2020 that focus on earnings differences by sexual orientation. The papers cover the period between 1991 and 2018, and countries in Europe, North America and Australia. The meta-analysis indicates that gay men earned less than heterosexual men. Lesbian women earned more than heterosexual women, while bisexual men earned less than heterosexual men. Bisexual women earned less than heterosexual women. According to the meta-analysis, in data sets after 2010, gay men and bisexual men and women continue to experience earnings penalties, while lesbian women continue to experience earnings premiums. Τhe meta-regression estimates indicate relationships between study characteristics and the estimated earnings effects for sexual minorities. For instance, regions, sexual minority data set sizes, and earnings classifications influence the outcomes. The persistence of earnings penalties for gay men and bisexual men and women in the face of anti-discrimination policies represents a cause for concern and indicates the need for comprehensive legislation and workplace guidelines to guarantee that people receive fair pay and not experience any form of workplace inequality simply because of their sexual orientation.
    Keywords: Sexual Orientation,Discrimination,Earnings
    JEL: C93 E24 J15 J16 J71
    Date: 2021
  144. By: International Monetary Fund
    Abstract: South Sudan is a very fragile post-conflict country. After five years of civil conflict, the warring parties came to an agreement for power-sharing in September 2018 and formed a unity government in February 2020. However, peace remains fragile in the face of difficult humanitarian and economic conditions. Already very high levels of poverty and food insecurity have been exacerbated by severe flooding in recent months. The floods (the worst in 60 years) have killed livestock, destroyed food stocks, and damaged crops ahead of the main harvest season. South Sudan’s economy has been hit hard by lower international oil prices following the COVID-19 pandemic.
    Keywords: oil price shock; financing gap; SMP policy; IMF's emergency financing; emergency financing under the Rapid Credit; Oil prices; Oil; Global
    Date: 2021–04–02
  145. By: David Desmarchelier; Magali Jaoul-Grammare; Guillaume Morel; Thi Kim Cuong Pham
    Abstract: This paper develops a competitive Ramsey-Cass-Koopmans framework in which an infectious disease evolves according to a simple SIS model. It aims at examining how the lockdown a§ects infectious disease persistence, individual welfare, and economic dynamics. In contrast to the existing literature, two types of infectives are introduced: (1) symptomatics and (2) asymptomatics. While the former is assumed to be too ill to work, the latter supply their labour and spread the disease. The government imposes a lockdown as an instrument to control the disease spread. In the long run, when the contamination rate of the disease is relatively high and the share of asymptomatics is low enough, the lockdown is welfare improving regardless of the degree of household empathy toward infectives. Moreover, a stable limit cycle can emerge near the endemic steady-state, through a Hopf bifurcation, when the share of infectives increases sufficiently the marginal utility of consumption. Particularly, we prove that it is possible to tune the lockdown to simultaneously obtain the limit cycle disappearance and the disease eradication (Bogdanov-Takens bifurcation). In this sense, the lockdown allows hitting two birds with one stone.
    Keywords: Bogdanov-Takens bifurcation, Hopf bifurcation, Lockdown, Ramsey model, SIS model.
    JEL: C61 E13 I18 O41
    Date: 2021
  146. By: Jeffrey Clemens; Stan Veuger
    Abstract: COVID-19 relief legislation offers a unique setting to study how political representation shapes the distribution of federal assistance to state and local governments. We provide evidence of a substantial small-state bias: an additional Senator or Representative per million residents predicts an additional $670 dollars in aid per capita across the four relief packages. Alignment with the Democratic party predicts increases in states’ allocations through legislation designed after the January 2021 political transition. This benefit of partisan alignment operates through the American Rescue Plan Act’s sheer size, as well as the formulas through which it distributed transportation and general relief funds.
    JEL: E62 H12 H71 H72 H77
    Date: 2021–05
  147. By: J. Rodrigo Fuentes; Raimundo Soto; Klaus Schmidt-Hebbel
    Abstract: We use three different approaches --narrative approach, counterfactual synthetic control method, and DSGE model--to assess the design and operation of the Chilean fiscal rule and its impact on public investment. We acknowledge the substantial progress in building a modern institutional framework for fiscal policy made during the past 30 years. Nevertheless, we find that the rule is incomplete in at least two dimensions: it lacks an escape clause and it needs supplementing the budget balance rule with a debt rule. The former was made patent with the breaching of the rule in 2009 and the subsequent inability of the authorities to steer fiscal accounts back to its long-term sustainable path. The latter showed in the speedy built up of the public debt in the last decade as a result of the need to finance fiscal deficits. We propose a number of reforms to existing fiscal institutions, including improving on the transparency and accountability of the institutional framework, a reformulation of the rule to consider a multi-year horizon planning of public finance (including investment plans, balance sheet management), escape clauses, and a debt anchor among others. This will complement the actual fiscal framework, especially nowadays when the fiscal stance has deteriorated significantly and is expected to worsen as a result of the Coronavirus pandemics.
    Date: 2020
  148. By: International Monetary Fund
    Abstract: The Cabo Verdean economy is in recession as a result of the economic impact of the pandemic that has shut down the tourism and transport sectors and significantly affected the rest of the economy. The number of COVID-19 cases continues to rise with concentration in the largest island, though the recovery rate is high. The economic outlook remains highly uncertain and dependent upon the duration of the pandemic, the global economic recovery, and the authorities’ ability to support the expected economic recovery through the appropriate policies and reforms. Legislative and presidential elections are scheduled for April and October, respectively.
    Keywords: Cabo Verde's Policy Coordination Instrument; development partner; response plan; risk threshold; Cabo Verdean authorities; Cabo Verde escudo; COVID-19; Credit; Fiscal stance; Global
    Date: 2021–04–02
  149. By: Bertrand Achou (Retirement and Savings Institute HEC Montréal); Hippolyte d'Albis (CNRS and Paris School of Economics); Eleni Iliopulos (EPEE, University of Evry, Univ. Paris-Saclay and Cepremap.)
    Abstract: In this work we introduce a general equilibrium model with landlords, indebted owner-occupiers and renters to study housing markets' dynamics. We estimate it by using standard Bayesian methods and match the US data of the last decades. This framework is particularly suited to explain current trends on housing markets. We highlight the crucial relationship between interest rates, house prices and rents, and argue that it helps understanding the main driving forces. Our analysis suggests that current developments on housing markets can play a role for a recovery from the Covid pandemic as they have an expansionary effect on aggregate output. Moreover, we account for the heterogeneous impact of crisis-induced policies depending on agents' status on the housing market. We show how, despite an increase in housing prices, the welfare of landlords has been negatively hit. This is associated to the joint decrease in returns on housing and financial assets that reduces their financial incomes.
    Keywords: Housing, Rental Markets, Collateral Constraints, Financial Frictions, HANK Models
    JEL: E3 G1 C1 I3
    Date: 2021
  150. By: Arpit Gupta; Anup Malani; Bartek Woda
    Abstract: The COVID-19 pandemic led to stark reductions in economic activity in India. We employ CMIE's Consumer Pyramids Household Survey to examine the timing, distribution, and mechanism of the impacts from this shock on income and consumption through December 2020. First, we estimate large and heterogeneous drops in income, with ambiguous effects on inequality. While incomes of salaried workers fell 35%; incomes of daily laborers fell 75%. At the same time, we observe that income fell more for individuals from households in the highest income quartile. Second, we document an increase in effort to buffer income shocks by switching occupations. We employ a Roy Model to estimate the gains from occupation churn and find, surprisingly, that reservation wages fell, implying that the risk of COVID did not reduce the value of employment. Third, we find that consumption fell less than income, suggesting households were able to smooth the idiosyncratic components of the COVID shock as well as they did before COVID. Finally, consumption of food and fuel fell less than consumption of durables such as clothing and appliances. Following Costa (2001) and Hamilton (2001), we estimate Engel curves and find that changes in consumption reflect large price shocks (rather than a retreat to subsistence) in sectors other than food and fuel/power. In the food sector, it appear that lockdown successfully distinguished essential and non-essential services, at least to the extent that it did not increase the relative price of food. There is some suggestive evidence that the price shocks outside the food sector were larger in places with greater COVID-19 cases, even during the lockdown.
    JEL: E2 O1 O53
    Date: 2021–06
  151. By: ; Francois Gourio
    Abstract: How costly will rising temperature due to climate change be for the U.S. economy? Recent research has used the well-identified response of output to weather to estimate this cost. But agents may adapt to the new climate. We propose a methodology to infer adaptation technology from the heterogeneous responses of output to weather observed currently across the U.S. Our model estimates how much each region has adapted already, and can predict how much each will adapt further after climate change. The size and distribution of losses from climate change vary substantially once adaptation is taken into account.
    Keywords: Climate Change; Adaptation; Temperature; Income
    JEL: R12 Q54 E23
    Date: 2020–03–05
  152. By: Michal Kobielarz
    Abstract: This paper analyzes country bailouts in a monetary union within a framework where sovereign default and exit from the union are two separate decisions. The lack of exit precedent creates uncertainty about the exit cost, which might prevent countries from exiting. The first exit can resolve the uncertainty, which is why the union might bail out a troubled country. As the bailout is meant to prevent an exit from the union, it does not exclude subsequent defaults. The model motivates the occurrence of large fiscal transfers within the Eurozone, and explains why they were insufficient to resolve the debt crisis.
    Keywords: monetary union, bailouts, fiscal transfers, exit, sovereign debt
    Date: 2021
  153. 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 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” with larger employment declines among women in most countries. 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. Gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. 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 identify two key challenges for future research. First, why is the pandemic gender gap pervasive, i.e., why did women experience larger employment reductions than men even after accounting for industry/occupation and childcare effects? Second, how will the pandemic shape gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting?
    Date: 2021–06
  154. By: Ly Dai Hung (Vietnam Institute of Economics, Hanoi, Vietnam)
    Abstract: We analyze the economic growth under impact of public and foreign investment by a vector autogressive model (VAR) on a quarterly sample of Vietnam economy over 2008-2020. The method stresses the role of exchange rate and liquidity supply on context of open economy. The evidence records that there exists a synergy of public and foreign investment on raising economic growth, reducing inflation and evaluating domestic currency. Moreover, the public investment is crucial to combat economic recession, especially during the current pandemic Covid-19.
    Keywords: Economic Growth,Public Investment,Foreign Investment,Vector Autoregression (VAR) model
    Date: 2021–05
  155. By: International Monetary Fund
    Abstract: GDP contracted by 9½ percent in 2020—a much steeper decline than during the Asian Financial Crisis (AFC)—but it is now recovering with the easing of containment measures and economic policy support. Banks are closely connected to the corporate sector through high credit exposures and conglomerate ownership linkages. The Financial Action Task Force (FATF) may list the Philippines as a jurisdiction with serious Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) deficiencies in 2021. The country is also vulnerable to climate change (physical) risks, especially the destruction of physical capital from typhoons.
    Keywords: bank secrecy law; BSP charter; bridge bank authority; secrecy law; government financial institutions; Financial sector stability; Loans; Anti-money laundering and combating the financing of terrorism (AML/CFT); Financial Sector Assessment Program; Global; Asia and Pacific
    Date: 2021–04–09
  156. By: Aronsson, Thomas; Ghosh, Sugata; Wendner, Ronald
    Abstract: Based on an endogenous growth model, this paper characterizes the conditions under which positional preferences do not give rise to intertemporal distortions as well as derives an optimal tax policy response in cases where these conditions are not satisfied. In our model, individuals can be positional both in terms of their consumption and wealth, the relative concerns partly reflect comparisons with people in other countries, and we distinguish between a (conventional) welfarist government and a paternalist government that does not respect positional preferences. We also extend the analysis to a multi-country framework and show that Nash-competition among local paternalist governments leads to a global social optimum, whereas Nash-competition among local welfarist governments does not.
    Keywords: Positional preferences, efficiency, intertemporal distortions, welfarist government, paternalist government, endogenous growth
    JEL: D62 E61 H11 O43
    Date: 2020–01–30
  157. By: Aronsson, Thomas; Ghosh, Sugata; Wendner, Ronald
    Abstract: In an endogenous growth model, we characterize the conditions under which positional preferences for consumption and wealth do not cause inefficiency and derive an optimal tax policy response in cases where these condi- tions are not satisfied. The concerns for relative consumption and relative wealth partly emanate from social comparisons with people in other coun- tries. We distinguish between a (conventional) welfarist government and a non-welfarist government that does not attach any social value to rela- tive concerns. We also compare the outcome of Nash-competition among local/national governments with the resource allocation implied by a global social optimum both under welfarism and non-welfarism.
    Keywords: Positional preferences, endogenous growth, wealth, intertemporal distor- tion, welfarism, non-welfarism, inter-country externalities, Pigouvian taxation
    JEL: D62 E61 H11 O43
    Date: 2021–04–03
  158. By: David Havrlant; Abdulelah Darandary (King Abdullah Petroleum Studies and Research Center)
    Abstract: The last decade has brought a row of substantial changes that have profound implications for the hydrocarbon resource-rich economies. The general answer to a changing environment is: Adapt! From the macroeconomic perspective, this means diversifying the economy to broaden the income base and reduce the dependence on oil revenues. This discussion paper examines the preferred diversification paths for the Saudi economy, with a focus on the foreseen adjustments in the sectoral composition along with broader macroeconomic shifts. The evaluation of the expected diversification impacts is based on the updated Vision 2030 Input-Output Table that maps the changing economic structure over the coming decade. The advances in economic diversification are measured by applying the Shannon-Weaver index to sectoral GDP and household income. We also conduct a sensitivity analysis to examine the effects of the foreseen diversification on the resilience of the Saudi economy to external shocks.
    Keywords: Economic Diversification
    Date: 2021–04–14
  159. By: John Cochrane (Stanford University)
    Abstract: Online appendix for the Review of Economic Dynamics article
    Date: 2021
  160. By: Julien Pascal (Département d'économie)
    Abstract: Cette thèse est constituée de trois chapitres. Le dénominateur commun de ces chapitres est l'analyse des marchés frictionnels, c'est à dire les marchés pour lesquels le processus de tâtonnement walrasien ne permet pas à l'offre et à la demande de s'équilibrer instantanément. Le premier chapitre s'intéresse aux origines des fluctuations du revenu du travail au cours du cycle économique. En particulier, ce premier chapitre revisite la question de la persistance des chocs de revenu du travail, aussi appelée l'effet scarification des récessions. Je revisite la question des fluctuations du revenu du travail au cours du cycle en développant et en estimant un modèle d'appariement du marché du travail, avec une incertitude sur le niveau de la productivité agrégée des travailleurs. Le second chapitre analyse le lien causal entre une baisse du coût des transports en commun et les dynamiques d'emploi local. Mon argumentation se base sur la discontinuité créée par la réforme de la tarification du forfait Navigo en septembre 2015. Cette réforme a égalisé le coût des transports en commun en Île-de-France. J'estime l'impact causal d'une baisse du coûts des transports en commun sur les dynamiques d'emploi local en utilisant une méthode des doubles différences. Le troisième chapitre se focalise sur un autre marché frictionnel d'importance capitale : le marché immobilier. L'analyse de ce chapitre repose sur une base de données collectées via des méthodes de web scraping. Combinant l'information sur les logements et les locataires potentiels, je montre que le marché locatif de la région parisienne est bien décrit par un modèle d’appariement directionnel.
    Keywords: Effet scarification, dynamiques d'emploi, marché locatif, recherche directionnelle; Scarring effects of recessions, employment dynamics, rental housing market, directed search
    Date: 2020–06–30
  161. By: Lanteri, Andrea; Medina, Pamela; Tan, Eugene
    Abstract: What are the short- and medium-term effects of an import-competition shock on firm dynamics and aggregate productivity? We address this question by combining detailed data on investment dynamics of Peruvian manufacturing firms, data on trade flows from China, and a quantitative general-equilibrium model with heterogeneous firms subject to idiosyncratic shocks. In the data, we find evidence of substantial frictions that slow capital reallocation, by rendering disinvestment and firm exit costly. In our model, these frictions shape the transitional dynamics after a trade shock. On impact, a drop in output prices due to import competition induces a spike in inaction, and exit of some productive firms, consistent with our empirical evidence. These effects expand the aggregate productivity wedge relative to a frictionless benchmark. Overall, productivity gains materialize slowly over time, whereas welfare gains emerge early in the transition.
    Keywords: capital reallocation; Firm Dynamics; Investment Irreversibility; Trade Shocks
    Date: 2020–05
  162. By: Ferraro, Domenico; Jaimovich, Nir; Molinari, Francesca; Young, Cristobal
    Abstract: We develop a search-and-matching model where the magnitude of unemployment insurance benefits affects the likelihood that unemployed actually engage in active job search. To quan- titively discipline this relation we use administrative data of unemployed search audits. We use the model to quantify the effects of unemployment reforms. For small benefits' increases, the policymaker faces a trade-off between an uptick in the measure of unemployed actually searching and a fall in the unemployment exit-rate conditional on searching. For larger bene- fits' increases, an active search margin magnifies the benefits' disincentives, leading to a bigger drop in the employment rate than previously thought.
    Date: 2020–05
  163. By: Alyssa G. Anderson; Wenxin Du; Bernd Schlusche
    Abstract: We show that the role of unsecured, short-term wholesale funding for global banks has changed significantly in the post-financial-crisis regulatory environment. Global banks mainly use such funding to finance liquid, near risk-free arbitrage positions---in particular, the interest on excess reserves arbitrage and the covered interest rate parity arbitrage. In this environment, we examine the response of global banks to a large negative wholesale funding shock as a result of the U.S. money market mutual fund reform implemented in 2016. In contrast to past episodes of wholesale funding dry-ups, we find that the primary response of global banks to the reform was a cutback in arbitrage positions that relied on unsecured funding, rather than a reduction in loan provision.
    Keywords: Money market mutual funds; Wholesale funding; Arbitrage
    JEL: G20 F30 E40
    Date: 2021–05–14
  164. By: Koijen, Ralph; Yogo, Motohiro
    Abstract: Using international holdings data, we estimate a demand system for financial assets across 36 countries. The demand system provides a unified framework for decomposing variation in exchange rates, long-term yields, and stock prices; interpreting major economic events such as the European sovereign debt crisis; and estimating the convenience yield on US assets. Macro variables and policy variables (i.e., short-term rates, debt quantities, and foreign exchange reserves) account for 55 percent of the variation in exchange rates, 57 percent of long-term yields, and 69 percent of stock prices. The average convenience yield is 2.15 percent on US long-term debt and 1.70 on US equity.
    Date: 2020–06
  165. By: Alfredo D. Garcia; Christopher A. Hartwell; Mart\'in Andr\'es Szybisz
    Abstract: The COVID-19 pandemic has forced changes in production and especially in human interaction, with "social distancing" a standard prescription for slowing transmission of the disease. This paper examines the economic effects of social distancing at the aggregate level, weighing both the benefits and costs to prolonged distancing. Specifically we fashion a model of economic recovery when the productive capacity of factors of production is restricted by social distancing, building a system of equations where output growth and social distance changes are interdependent. The model attempts to show the complex interactions between output levels and social distancing, developing cycle paths for both variables. Ultimately, however, defying gravity via prolonged social distancing shows that a lower growth path is inevitable as a result.
    Date: 2021–06
  166. By: Berlin, Howard (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: When the British defeated the Ottoman Turks and the armistice was signed on October 31, 1918, Palestine, part of the defeated Ottoman Empire, was administratively divided into the Mutasarrifate (a sub province) of Jerusalem and the Vilayets (a major administrative district or province) of Beirut and Damascus. Palestine was then governed by the British, first as a military occupation, and then as a Mandate granted to them as a Trust by the League of Nations. Prior to 1927, Palestine had no currency that was solely its own, but rather coins and banknotes of many other countries that were used in Palestine. These were mostly those of Turkey, Egypt, France, Great Britain, India, Germany, Russia, Austria, and the United States. The author of this working paper traces the need for a Palestine currency and the formation of the Palestine Currency Board, which remained in effect until March 31, 1952, nearly four years after the State of Israel was established on May 14, 1948. Parts of this working paper was adapted from the author’s book: The Coins and Banknotes of Palestine Under the British Mandate, 1927-1947, McFarland & Company, Inc. (2001) and is built on the writings of numismatic researchers Jack H. Fisher, Esq. (deceased) and Raphael Dabbah, both of whom the author has had the pleasure of knowing for many years. Where verbatim passages are taken from British sources, the British spellings have been retained. Unless credited otherwise, all images of coins and currency notes were from the author’s collection.
    Keywords: Palestine Mandate; currency board; coins; currency notes
    JEL: E58 N15
    Date: 2021–06–18
  167. By: John C. Williams
    Abstract: Remarks at Midsize Bank Coalition of America (delivered via videoconference).
    Keywords: inflation; demand; LIBOR; economy; prices; pandemic; FOMC; labor market
    Date: 2021–06–21
  168. By: Laurence Lacey
    Abstract: The primary objective of this paper was to investigate whether the growth in the major US asset indices could be a function of the US broad money supply and/or US GDP, over the time period 2001 to 2019, using an information entropy methodology. The four US asset indices investigated were: (1) US National Property index; (2) Russell 2000 index; (3) S&P 500 index; and (4) NASDAQ index. Notwithstanding the financial crisis of 2007-2008, US real GDP increased exponentially over the period 2001 to 2019, with an average annual growth rate of approximately 2%. However, over this time period, the average annual rate of growth of US GDP was considerably lower than the average annual rate of growth of the US broad money supply (5.7%). The main determinant of the average growth rate for all four US asset indices studied would appear to be the growth rate in the US broad money supply. In addition, the growth rate in the US Russell 2000 stock index and the NASDAQ index would appear to be a function of the combined positive effects of both the growth rate in the US Broad Money Supply and the growth rate of US GDP.
    Date: 2021–06
  169. By: Khan, Haider
    Abstract: ABSTRACT With the election of Biden as the next US President and Harris as his Vice President, hopes regarding mitigating global climate change through renewable energy transitions have received a new impetus. Using data from the 2019 input-output table, a set of multipliers are computed for the US. Three different scenarios for transition to renewable energy are computed and analyzed using two different methodologies. It turns out that even modest changes in the direction of renewable energy transitions will help both mitigation of global warming and create new decent jobs in many sectors. Under the first methodology, the study found that with a 0.5% of GDP investment (107.15 billion), uniformly distributed across all sectors of the economy, a total of 388,089 jobs will be created in the renewable energy sector, the number doubles and quadruples to of 776,178 and 1,552,355 accordingly for 1% and 2% of GDP investments. Even under the second methodology, which only focuses on job-growth in the energy-intensive sectors, 1,406,466 would be created in the low assessment, 2,812,933 in the medium, and 5,625,866 jobs will be generated in the high assessment scenarios. Similar trends are seen output growth as well. Thus, there can be a double dividend from a set of renewable energy production and investment policies.
    Keywords: Keywords: Renewable energy, GDP, Biden, Harris
    JEL: A1 E0
    Date: 2020–11–02
  170. By: Pagliari, Stefano; Kovras, Iosif
    Abstract: In the aftermath of the global financial crisis, the design of accountability mechanisms has taken on renewed importance in academic and policy debates. Calls for holding individuals whose actions and omissions contributed to the meltdown accountable have gained traction in a number of countries after the crisis. Yet, individual accountability norms are seemingly absent from the international economic agenda in response to crisis. In this paper we address this puzzle by exploring the evolution of two major international organisations, the IMF and the FSB, in bringing accountability following financial crises. Our analysis reveals how these institutions have increasingly incorporated in their toolkit policy recommendations related to the unethical or illegal conduct by government officials of individuals in the financial industry, but these tools were geared almost exclusively towards forward-looking policies designed to deter the reoccurrence of illegal or unethical behavior rather than punishing or scrutinizing past wrongdoing. We argue that the extent to which individual accountability norms permeate the international economic agenda is mediated by the institutional characteristics of the organizations that comprise the international financial regime.
    Date: 2021–05–24
  171. By: Tohari, Achmad (University of Western Australia); Parsons, Christopher (University of Western Australia); Rammohan, Anu (University of Western Australia)
    Abstract: We revisit the role of Capital Fundamentalism, in the context of the Government of Indonesia's Inpres Desa Tertinggal (IDT or Left Behind Village) Program, which injected capital into poor village economies. We evaluate the impact of the program on village welfare and structural transformation adopting a (fuzzy) regression discontinuity design, which exploits village eligibility for identification. Welfare increased in rural as opposed to urban villages in Java, Sumatra and Bali and Nusa Tenggara, as households exited agriculture in favor of more productive activities in construction, industry and trade. We find no evidence that the program affected structural transformation or welfare in Kalimantan, Sulawesi or Papua, which suggests that structural transformation is a necessary condition for capital injections to foster village development.
    Keywords: capital fundamentalism, structural transformation, government intervention, welfare
    JEL: L16 H53 H54 E22 O10 O18 I38
    Date: 2021–06
  172. By: Mashekwa Maboshe
    Abstract: This paper investigates the responsiveness of firm-level investment to corporate tax changes in South Africa over the period 1999 to 2012. The study exploits rare changes in corporate tax policy to assess the responsiveness of firm-level investment among Johannesburg Stock Exchange listed non-financial firms. Our estimation of a neoclassical investment model using GMM techniques shows that although changes in corporate tax policy reduced the tax-adjusted marginal cost of capital over time, the reductions did not translate into significant investments in fixed assets. We speculate that the well-documented financial frictions in the capital markets could explain the failure of neoclassical investment theory in South Africa. Our findings are similar to those in other developing countries and crucially suggest that investment policies should look beyond the use of corporate tax incentives.
    Keywords: corporate taxation, capital investment, user cost of capital
    JEL: E22 H32 C23
    Date: 2021–06
  173. By: Ṣebnem Kalemli-Özcan; Liliana Varela
    Abstract: We document five novel facts about Uncovered Interest Parity (UIP) deviations vis-à-vis the U.S. dollar for 34 currencies of advanced economies and emerging markets. First, the UIP premium co-moves with global risk aversion (VIX) for all currencies, whereas only for emerging market currencies there is a negative comovement between the UIP premium and capital inflows. Second, the comovement of the UIP premium and the VIX is explained by changes in interest rate differentials in emerging markets, and by expected changes in exchange rates in advanced countries. Third, country risk measured by the degree of policy uncertainty can explain both the negative comovement of the UIP premium with capital inflows and the positive comovement of the UIP premium with VIX going through interest rate differentials in emerging markets. Fourth, there are no overshooting and predictability reversal puzzles—for any currency—when using exchange rate expectations to calculate the UIP premium. Fifth, the classical Fama puzzle disappears in advanced economies in expectations, but it remains for emerging markets. As a result, while global investors expect zero excess returns and earn positive returns in the short-run and negative returns in the long-run by investing in advanced country currencies, the same global investors always expect and earn positive excess returns from emerging market currencies. These results imply that in advanced countries the UIP premium is largely due to deviations from rational expectations and full information, whereas in emerging markets, the UIP premium is a risk premium. Global investors charge an “excess” premium to compensate for policy uncertainty in emerging markets —a premium that is over and above the expected and actual depreciation of these currencies.
    JEL: E0 F0
    Date: 2021–06
  174. By: Mitoko, Jeremiah
    Abstract: Following the United Nations declaration of 2005 as the International Year of Microcredit, international organizations began to promote a tighter regulatory and supervisory framework for the microcredit industry. In this paper, I review the theoretical basis of this development considering recent empirical findings that microcredit programs tend to have initial success yet demonstrate few significant benefits beyond two years. I utilize an agent-based simulation as an ex-ante policy assessment tool to examine a tighter regulatory strategy. My findings for Kenya, with possible application to other developing countries and regions, suggest that a less rigid regulatory framework is more likely to lead to more sustained positive impacts than this emulation strategy.
    Keywords: Microcredit Financial Development Agent-based Models Financial Crises – Causes of Financial Crises – Research Government Policy and Regulation
    JEL: E5 F63 G01 G21 O23 O55
    Date: 2021–06–21

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