|
on Macroeconomics |
|
Issue of 2021‒09‒27
121 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Domenico Delli Gatti; Severin Reissl; Enrico Turco |
| Abstract: | We employ a new version of the ABC macro-epidemiological agent based model presented in Delli Gatti and Reissl (2020) to evaluate the effects of vaccinations and variants on the epidemic and macroeconomic outlook. Vaccination plays the role of a mitigating factor, reducing the frequency and the amplitude of contagion waves, while also significantly improving macroeconomic performance. The emergence of a variant, on the other hand, plays the role of an accelerating factor, increasing the volatility of epidemic curves and worsening the macroeconomic outlook. If a more contagious variant emerges after vaccination becomes available, therefore, the mitigating factor of the latter is at least partially offset by the former. A new and improved vaccine in turn can redress the situation. Vaccinations and variants, therefore, can be conceived of as drivers of an intertwined cycle impacting both epidemiological and macroeconomic developments. |
| Keywords: | agent-based models, epidemic, Covid, vaccination, variant |
| JEL: | E21 E22 E24 E27 I12 I15 I18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9291&r= |
| By: | Grégory Levieuge; Jean-Guillaume Sahuc |
| Abstract: | Empirical evidence suggests that bank lending rates are downward rigid: banks tend to adjust their rates more slowly and less completely to short-term market rates decreases than to increases. We investigate the macroeconomic consequences of this downward interest rate rigidity by introducing asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. Calibrating the model to the euro area economy, we find that the difference in the initial response of GDP to positive and negative economic shocks of similar amplitude can reach up to 25%. This means that a central bank would have to cut its policy rate much more to obtain a symmetric medium-run impact on GDP. We also show that downward interest rate rigidity is stronger when policy rates are stuck at their effective lower bound, further disrupting monetary policy transmission. These findings imply that neglecting asymmetry in retail interest rate adjustments may yield misguided monetary policy decisions. |
| Keywords: | Downward Interest Rate Rigidity, Asymmetric Adjustment Costs, Banking Sector, DSGE Model, Euro Area |
| JEL: | E32 E44 E5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:828&r= |
| By: | Francesco Furlanetto; Antoine Lepetit; Ørjan Robstad; Juan F. Rubio-Ramirez; Pål Ulvedal |
| Abstract: | In this paper we identify demand shocks that can have a permanent effect on output through hysteresis effects. We call these shocks permanent demand shocks. They are found to be quantitatively important in the United States, in particular when the Great Recession is included in the sample. Recessions driven by permanent demand shocks lead to a permanent decline in employment and investment, while output per worker is largely unaffected. We find strong evidence that hysteresis transmits through a rise in long-term unemployment and a decline in labor force participation and disproportionately affects the least productive workers. |
| Keywords: | Hysteresis; Structural vector autoregressions; Sign restrictions; Long-run restrictions; Employment; Labor productivity; Local projections |
| JEL: | C32 E24 E32 |
| Date: | 2021–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-59&r= |
| By: | Aeimit Lakdawala (Wake Forest University); Rajeswari Sengupta (Indira Gandhi Institute of Development Research) |
| Abstract: | We create new measures of monetary policy shocks for India using high-frequency derivatives data and study their transmission. These shocks capture two distinct dimensions of the Reserve Bank of India's (RBI) monetary policy announcements. In addition to reacting to surprise changes (or non-changes) in the RBI's policy rate, financial markets also infer substantial information about the future path of the policy rate from RBI's communication. We analyze official statements and the corresponding media narrative on prominent RBI announcement dates to help understand how markets use RBI communication to update their expectations. Overall, bond and stock markets react strongly to these monetary shocks, but exhibit notable heterogeneity across governor regimes. Finally, we use the monetary shocks as external instruments to identify the impact on macroeconomic variables in a structural vector autoregression. We find some evidence of the conventional transmission of monetary policy to prices but not to output. |
| Keywords: | monetary policy, Reserve Bank of India, event study, monetary transmission |
| JEL: | E44 E52 E58 G10 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2021-021&r= |
| By: | Robert Calvert Jump (University of Greenwich); Paul Levine (University of Surrey) |
| Abstract: | This paper introduces unemployment hysteresis into a tractable New Keynesian three equation model using an insider-outsider labour market. We demonstrate that strict inflation targeting can lead to a unit root in the unemployment rate, but dual mandate monetary policy can stabilise the economy around its efficient employment rate. |
| JEL: | E24 E31 E32 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0821&r= |
| By: | Simon Mongey |
| Abstract: | I study a general equilibrium menu cost model with a continuum of sectors, idiosyncratic and aggregate shocks, and the novel feature that each sector consists of strategically engaged firms. Compared to an economy with monopolistically competitive sectors—separately parameterized to match the same microdata on price flexibility—the oligopoly economy features a smaller response of inflation to monetary shocks and output responses that are more than twice as large. Under the same parameters, output responses are five times larger. An oligopoly economy also (i) requires smaller menu costs and idiosyncratic shocks to match the microdata, addressing a significant challenge for mechanisms that generate non-neutrality via strategic complementarities, (ii) implies four times larger welfare losses from same sized nominal rigidities, and (iii) provides a novel rationale for positive menu costs: in an oligopoly firms prefer a degree of rigidity to complete flexibility. Quantitatively, the estimated degree of nominal rigidity is found to be close to optimal, from firms’ perspective. |
| JEL: | E0 E31 E32 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29233&r= |
| By: | Narayana R. Kocherlakota |
| Abstract: | I reconsider the long-standing consensus view that macroeconomic stabilization should rely on monetary policy, not fiscal policy. I use an analytically tractable heterogeneous agent New Keynesian (HANK) model that is parameterized so as to admit a bubble in public debt. In this context, I show that it is possible to stabilize either inflation or output in response to aggregate shocks by varying only fiscal policy (that is, lump-sum uniform transfers). In contrast, when the public debt bubble is large, it is impossible to stabilize either inflation or output by varying only interest rates (monetary policy). The theoretical analysis implies that, in the presence of a large public debt bubble, fiscal policy is a more reliable stabilization tool than monetary policy. |
| JEL: | E58 E62 E63 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29226&r= |
| By: | Luca Fanelli; Antonio Marsi |
| Abstract: | High-frequency (HF) surprises of relevant asset prices around central bank meetings are extensively employed in the literature to identify the effects of conventional/unconventional monetary policy. This identification strategy assumes that these surprises reflect either a single unconventional ‘monetary shock’ or, as recently suggested, jointly an unconventional monetary shock and a central bank ‘information shock’. In this paper we show that monetary policy in the euro area after 2008 is best characterized by three shocks, not two. Besides the unconventional monetary shock and the information shock, we consider a third shock resulting from the ECB directly managing fragmentation risk in the sovereign bond market. We call this additional shock ‘spread shock’, and show that it permits to solve a puzzle we observe in HF comovement of long term risk free rates and sovereign spreads around press conferences. We identify the dynamic causal effects produced by the three shocks through a proxy-SVAR methodology which, using HF surprises of the euro area risk-free yield curve, stock prices and sovereign spreads, combines sign-restrictions with narrative restrictions and then extracts external variables (instruments) from an admissible identification set. Empirical results, obtained through a daily proxy-SVAR and Local Projections based on monthly data, reveal that the spread shock represents an important ingredient of the transmission mechanism of the monetary policy after the Global Financial Crisis. It reflects ECB’s attempt to offset self-fulling expectations of default in the euro area sovereign debt markets and behaves as a complement, not a substitute of the information shock. |
| JEL: | E43 E44 E52 E58 G10 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1164&r= |
| By: | Chanthol, Hay |
| Abstract: | Money supply in a highly dollarized Cambodian economy appears to be highly unstable because the composition of domestic currency in aggregate money supply is very small. During its transition towards a market economy, Cambodia embarked upon a path of disinflation through dollarization and stable exchange rate. In this paper, the trend and behavior of money supply, money demand and inflation are examined, and a model is developed to explain the determinants of inflation under dollarization and estimate it for Cambodia in the 2000s using a two-step procedure. This paper also shows that management of rice price, gasoline price with a restrictive monetary policy based on broadly defined money or total liquidity was essential for the Cambodian authorities to succeed in fighting inflation. This paper explain the behavior of inflation and the role that a central bank may play in its determination. |
| Keywords: | money demand, inflation, dollarization, exchange rate |
| JEL: | E31 E41 E52 |
| Date: | 2021–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109805&r= |
| By: | Cole, Stephen J. (Department of Economics Marquette University); Huh, Sungjun (Department of Economics Marquette University) |
| Abstract: | Housing markets are closely related to monetary policy. This paper studies the link between housing frictions and the effectiveness of forward guidance. A housing collateral constraint and forward guidance shocks are incorporated into a standard medium-scale New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. Our main results produce a number of important implications. First, financial frictions emanating from the housing market dampen the effectiveness of forward guidance on the economy. Second, forward guidance has asymmetric effects on the welfare of lenders and borrowers when housing frictions increase. Housing frictions also attenuate the effect of forward guidance at the zero lower bound. Finally, this article provides a solution to "forward guidance puzzle" of Del Negro et al. (2012). Thus, policymakers should consider housing frictions when examining the effects of forward guidance on the economy. |
| Keywords: | forward guidance, financial frictions, housing collateral, zero lower ground |
| JEL: | E32 E44 E52 R21 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:2021-07&r= |
| By: | Izryadnova Olga (Gaidar Institute for Economic Policy) |
| Abstract: | Internal epidemiological restrictions and external shocks have had a significant impact on economic growth in Russia. Unfavorable changes in the global market environment increased the impact of external factors on economic dynamic: starting from 2019, the scale of exports in terms of value and physical volume decreased; the decline in the contribution of net exports to GDP dynamics was partially offset by an increase in domestic demand on the back of the outstripping growth of manufacturing industry and the segment of paid services to the population. From the outset of the spread of coronavirus infection, there was a simultaneous reduction in demand and supply in the domestic market. The situation was complicated by a drop in demand and prices on the world market of hydrocarbons, which came amid a decline in the ruble exchange rate and an increase in the level of inflation. The negative effects of the uncertainty and potential risks of the pandemic affected the nature of business structures, consumer behavior, and led to changes in the structure of government spending, the corporate sector, households, and the demand for financial resources |
| Keywords: | Russian economy, fixed investment, GDP, inflation |
| JEL: | E20 E21 E22 E60 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gai:ppaper:ppaper-2021-1126&r= |
| By: | Rohan Kekre; Moritz Lenel |
| Abstract: | We study a business cycle model of the international monetary system featuring a time-varying demand for safe dollar bonds, greater risk-bearing capacity in the U.S. than the rest of the world, and nominal rigidities. A flight to safety generates a dollar appreciation and decline in global output. Dollar bonds thus command a negative risk premium and the U.S. holds a levered portfolio of capital financed in dollars. We quantify the effects of safety shocks and heterogeneity in risk-bearing capacity for global macroeconomic volatility; U.S. external adjustment; and the international transmission of monetary and fiscal policies, including dollar swap lines. |
| JEL: | E44 F44 G15 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29238&r= |
| By: | Raphael Auer (Swiss National Bank; Bank for International Settlements (BIS)); Alexandra Matyunina (University of Zurich; Swiss Finance Institute); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Do targeted macroprudential measures impact non-targeted sectors too? We answer this question by investigating the compositional changes in the supply of credit by Swiss banks, exploiting their differential exposure to the activation in 2013 of the countercyclical capital buffer (CCyB) which targeted banks’ exposure to residential mortgages. We find that the additional capital requirements stemming from the activation of the CCyB causes higher growth in banks’ commercial lending. While banks lend more to all categories of firms, including larger corporate borrowers in the syndicated loan market, smaller and riskier firms are the primary beneficiaries of the new macroprudential measure. However, the interest rates and other costs of obtaining credit for these firms increase as well. |
| Keywords: | macroprudential policy, spillovers, credit, bank capital, systemic risk, syndicated loan market |
| JEL: | E51 E58 E60 G01 G21 G28 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2166&r= |
| By: | Marcus Hagedorn |
| Abstract: | This paper proposes an equilibrium theory of nominal exchange rates, which offers a new perspective on various issues in open economy macroeconomics. The nominal exchange rate and portfolio choices are jointly determined in equilibrium, thus providing a new approach to overcoming the indeterminacy results in Kareken and Wallace (1981). The distinctive features of this theory are that the nominal exchange rate is determined in international financial markets, that the risk premium and UIP deviations are fully endogenous equilibrium objects and that the real exchange rate inherits its properties from the nominal exchange rate. In terms of policy, this novel theory implies that a country with an exchange rate peg and free asset mobility faces a tetralemma and not a trilemma, because it loses not only monetary policy independence but also fiscal policy independence. |
| Keywords: | exchange rate, determinacy, incomplete markets, monetary and fiscal policy, international asset flows |
| JEL: | D52 E31 E43 E52 E62 E63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9290&r= |
| By: | Hyunduk Suh (Inha University) |
| Abstract: | Housing cycles can vary significantly across regions. This study investigates the macroeconomic implications of regionally heterogeneous housing cycles and stabilization policies. The general equilibrium model includes two separate regions, idiosyncratic shocks in regional housing markets, and inter-regional housing investments by households. Counterfactual simulations suggest that regional housing cycles can be a source of economic inequality between regions and the level of financial status by affecting consumption, housing service, debt and welfare asymmetrically across agents. Region-specific stabilization policies such as property tax, countercyclical loan-to-value, and housing supply policies can mitigate regional housing cycles, but it takes large policy responses if the cycle is caused by housing exuberance (demand) shocks. Those policies also have asymmetric welfare effects, while housing supply policy is the most beneficial to agents in the region that experiences the cycle. Leaning against the wind monetary policy is relatively ineffective in stabilizing regional housing prices and higher interest rates during housing price appreciations lower the welfare of borrowers in all regions. |
| Keywords: | Regionally heterogeneous housing cycles, monetary policy, macroprudential policy, housing |
| JEL: | E32 R31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:inh:wpaper:2021-4&r= |
| By: | Julien Pinter (University of Minho, NIPE, Braga); Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Institute of Information Theory and Automation, Prague & CESifo, Munich & IOS, Regensburg) |
| Abstract: | We empirically investigate whether monetary policy announcements affect firms' and consumers' expectations by taking into account media treatments of monetary policy announcements. To identify exogenous changes in monetary policy stances, we use the standard financial monetary policy surprise measures in the euro area. We then analyze how a general newspaper and a financial newspaper (Le Monde and The Financial Times) report on announcements. We find that 87 % of monetary policy surprises are either not associated with the general newspaper reporting a change in the monetary policy stance to their readers or have a sign that is inconsistent with the media report of the announcement. When we use the raw monetary policy surprises variable as an independent variable in the link between monetary policy announcements and firms'/consumers' expectations, we mostly do not find, in line with several previous studies, any statistically significant association. When we take only monetary policy surprises that are consistent with the general newspaper report, in almost all cases we find that monetary policy surprises on the immediate monetary policy stance do affect expectations. Surprises related to future policy inclination and information shocks usually do not appear to matter. The results appear to be in line with rational inattention theories and highlight the need for caution in the use of monetary policy surprise measures for macroeconomic investigations. |
| Keywords: | firm expectations; consumer expectations; monetary policy surprises; European Central Bank; information effect |
| JEL: | D84 E02 E52 E31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_30&r= |
| By: | Eskelinen, Maria |
| Abstract: | In this paper I develop a New Keynesian dynamic stochastic general equilibrium model which features three different types of representative agents (THRANK): the poor hand-to-mouth, the wealthy hand-to-mouth and the non-hand-to mouth households. Compared to a full-scale HANK model, this model is easier to compute while reproducing many of the same monetary policy shock transmission channels. I show that monetary policy transmission takes place through a redistribution channel, as emphasised by Auclert (2019). In particular, the effects of a monetary policy shock are amplified as resources are redistributed from high-MPC households to low-MPC households. Monetary policy therefore becomes more effective compared to models with homogeneous MPC rates. Consumption inequality is countercyclical in this setting and a high degree of leverage amplifies the redistribution channel. These findings have important implications for understanding the effects of both monetary and macroprudential policy. JEL Classification: D31, E12, E21, E43, E52 |
| Keywords: | household heterogeneity, housing market, inequality, monetary policy |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212590&r= |
| By: | Joshua Bernstein (Indiana University); Rupal Kamdar (Indiana University) |
| Abstract: | This paper studies optimal monetary policy under rational inattention: the policy maker optimally chooses her information subject to a processing constraint. Our analytical results emphasize how the policy maker’s information choices shape her expectations and the dynamics of the macroeconomy. Paying attention to demand shocks lowers output volatility and causes untracked supply shocks to drive inflation. Because persistent supply shocks have a minor impact on interest rates under full information in the New Keynesian model, the policy maker should focus her limited attention on demand shocks. Improvements in information can explain a declining slope of the empirical Phillips curve. |
| Keywords: | optimal monetary policy, rational inattention, expectations |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2021003&r= |
| By: | Klaus Adam,; Erwan Gautier,; Sergio Santoro,; Henning Weber. |
| Abstract: | Using micro price data underlying the Harmonized Index of Consumer Prices in France, Germany and Italy, we estimate relative price trends over the product life cycle and show that minimizing price and mark-up distortions in the presence of these trends requires targeting a significantly positive inflation target. Relative price trends shift the optimal inflation target up from a level of zero percent, as suggested by the standard sticky price literature, to a range of 1.1%- 2.1% in France, 1.2%-2.0% in Germany, 0.8%-1.0% in Italy, and 1.1-1.7% in the Euro Area (three country average). Differences across countries emerge due to systematic differences in the strength of relative price trends. Other considerations not taken into account in the present paper may push up the optimal inflation targets further. The welfare costs associated with targeting zero inflation turn out to be substantial and range between 2.1% and 4.5% of consumption in present-value terms. |
| Keywords: | Optimal Inflation Target, Micro Price Trends, Welfare |
| JEL: | E31 E52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:825&r= |
| By: | Barnett, William; Bella, Giovanni; Ghosh, Taniya; Mattana, Paolo; Venturi, Beatrice |
| Abstract: | We study the stability properties and conditions for the onset of Shilnikov chaos in the UK New Keynesian macroeconomy, as well as the shifts in the equilibrium dynamics under various policy regimes. We find that Shilnikov chaos emerges for a restricted part of the free parameters space in the baseline rational expectations UK model with no regime switching. When the UK's central bank showed a weak response to inflation in the high inflation regime, the chaos did not occur at all. But Shilnikov chaos appears easily in the case of the low-inflation regime, which is associated with the Bank of England's use of aggressive monetary policy in recent years. Tightening the monetary policy interest-rate-feedback rule via the Taylor coefficient is one of the policy alternatives proposed by the local analysis for restoring uniqueness. We find that doing so accelerates the emergence of unanticipated phenomena such as Shilnikov's chaotic dynamics. Our results with UK data are thereby consistent with the results with US data by Barnett et al. (2021), who found that the adoption of an active interest rate feedback rule in recent years by the Federal Reserve produces Shilnikov chaos and unintentional downward drift in interest rates towards the lower bound. The source of the chaos and downward drift in interest rates is adoption of a myopic short-run interest-rate feedback rule without a terminal condition as long run anchor. A critical assumption of the results with US and UK data are existence of new Keynesian sticky prices. While the model’s parameters were calibrated with pre-Brexit data, we expect that our results will be highly relevant post-Brexit, as the needed data become available. Changes in the geometry of the Shilnikov fractal attractor set can be expected to be revealing about changes in the level and nature of UK economic risk following Brexit. |
| Keywords: | Shilnikov chaos criterion, long-term un-predictability, liquidity trap |
| JEL: | C61 C62 E12 E52 E63 |
| Date: | 2021–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109820&r= |
| By: | Rosero Sánchez, Andrés Mauricio |
| Abstract: | RESUMEN: El objeto de este estudio es contrastar la teoría austriaca del ciclo económico con la crisis económica colombiana de 1998-2003. Para ello, se recurre a la obra de Huerta de Soto (“Dinero, Crédito Bancario y Ciclos Económicos†, 2012), quien desglosa el ciclo económico en una secuencia de seis efectos macroeconómicos fácilmente contrastables con la evidencia empírica y que suelen ponerse en marcha tras una política monetaria expansiva. A lo largo del estudio, se cotejan cada uno de dichos efectos con la información estadística disponible y, mediante la revisión de las opiniones de expertos y análisis de estadística descriptiva, se muestra cómo cuatro de los seis efectos macroeconómicos que según Huerta de Soto (2012) componen el típico ciclo económico se hicieron patentes en la economía colombiana a fines del siglo XX. Adicionalmente, se encuentra verosimilitud entre la causa teórica del ciclo económico desde la perspectiva austriaca y las severas expansiones monetarias y crediticias efectuadas en Colombia entre 1992 y 1993. A grandes rasgos, la teoría austriaca del ciclo económico permite explicar la crisis colombiana de 1998-2003. Abstract: The purpose of this study is to make a contrast between the Austrian business cycle theory (ABCT) and the Colombian economic crisis of 1998-2003. For that, we resort to the work of Huerta de Soto (“Money, bank credit and economic cycle†, 2012), who breaks down the cycle in a sequence of six macroeconomic effects that are easily verifiable and set off after an expansionary monetary policy. Throughout the study, each effect is compared with the available statistical information and with the opinion of experts. We are able to demonstrate how four of the six macroeconomic effects described by Huerta de Soto (2012) are eventually present in the Colombian economy of the last decade of the twentieth century. In addition, we find that the Austrian theoretical cause of the cycle is consistent with the severe monetary and credit expansions observed in Colombia between 1992 and 1993. To sum up, the Colombian crisis of 1998-2003 can be roughly explained using the ABCT. |
| Keywords: | teoría austriaca del ciclo económico, crisis económica colombiana de 1999, burbuja inmobiliaria, efectos de la política monetaria, crisis financieras |
| JEL: | B53 E44 E58 G28 N26 |
| Date: | 2021–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:col:000196:019619&r= |
| By: | Cyril Couaillier; Valerio Scalone |
| Abstract: | In this work we present the Risk-to-Buffer: a new framework to jointly calibrate cyclical and structural capital buffers, based on the integration of a non-linear macroeconomic model with a Stress test model. The macroeconomic model generates scenarios whose severity depends on the level of cyclical risk. Risk-related scenarios feed into a banks' Stress test model. Banks' capital losses deriving from the reference-risk scenario are used to calibrate the structural buffer. Additional losses associated to the current-risk scenario are used to calibrate the cyclical buffer. |
| Keywords: | Financial Vulnerability, Macroprudential Policy, Non-linear Models, Macroprudential Space, Deb |
| JEL: | C32 E51 E58 G51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:830&r= |
| By: | Koester, Gerrit; Lis, Eliza; Nickel, Christiane; Osbat, Chiara; Smets, Frank |
| Abstract: | From 2013 up to the launch of the ECB’s strategy review in January 2020, inflation in the euro area was low and over-predicted. This low inflation during the years 2013-19 can be attributed to a combination of interconnected factors. Cyclical developments account for a substantial share of the fall in underlying inflation, mainly in the first part of the low inflation period. Additionally, there is evidence that an underestimation of the amount of economic slack and less well-anchored longer-term inflation expectations, in combination with monetary policy in the euro area being constrained by the effective lower bound, have played an important role in the long period of subdued inflation. Ongoing disinflationary structural trends (such as globalisation, digitalisation and demographic factors) are likely to have had a dampening effect on inflation over the last few decades, but were in themselves not the main drivers of low inflation in the euro area from 2013 to 2019. However, as they could not have been easily offset by interest rate policy in an effective lower bound environment, they might also have contributed to the more subdued inflation dynamics in the euro area from 2013 to 2019. JEL Classification: C51, E31, E32, E37, E52, F62, J11, J30 |
| Keywords: | effective lower bound, HICP inflation, low inflation, Monetary policy review, underlying inflation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021280&r= |
| By: | Dimitra Kontana (Department of Economics, University of Macedonia); Stilianos Fountas (Department of Economics, University of Macedonia) |
| Abstract: | This study investigates the long-run and short-run relationship between consumption, income, financial and housing wealth, and a long-term interest rate for the 50 US states. Using an updated set of quarterly data from 1975 to 2018, we perform panel cointegration analysis allowing for cross-sectional dependence. We obtain the following results. First, there is strong evidence for cointegration among consumption and its determinants. Second, estimates of the housing wealth and financial wealth elasticity of consumption range from 0.072 to 0.115 and 0.044 to 0.080, respectively. Finally, Granger causality tests show that there is a bidirectional short-term causality between per capita consumpti on, income, and financial wealth in the short run and between all the variables in the long run. |
| Keywords: | Consumption; Financial Wealth; Housing Wealth; Wealth effects; 10-year Treasury Constant Maturity Rate; Panel Cointegration; Granger Causality. |
| JEL: | E21 E44 R31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2021_10&r= |
| By: | Francesco D’Acunto; Andreas Fuster; Michael Weber |
| Abstract: | Increasing the diversity of policy committees has taken center stage worldwide, but whether and why diverse committees are more effective is still unclear. In a randomized control trial that varies the salience of female and minority representation on the Federal Reserve’s monetary policy committee, the FOMC, we test whether diversity affects how Fed information influences consumers’ subjective beliefs. Women and Black respondents form unemployment expectations more in line with FOMC forecasts and trust the Fed more after this intervention. Women are also more likely to acquire Fed-related information when associated with a female official. White men, who are overrepresented on the FOMC, do not react negatively. Heterogeneous taste for diversity can explain these patterns better than homophily. Our results suggest more diverse policy committees are better able to reach underrepresented groups without inducing negative reactions by others, thereby enhancing the effectiveness of policy communication and public trust in the institution. |
| JEL: | D84 E52 E58 E70 G53 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29275&r= |
| By: | Lloyd, Simon (Bank of England); Manuel, Ed (Bank of England); Panchev, Konstantin (University of Oxford) |
| Abstract: | We study how foreign financial developments influence the conditional distribution of domestic GDP growth. Within a quantile regression setup, we propose a method to parsimoniously account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks. Using a panel data set of advanced economies, we show that tighter foreign financial conditions and faster foreign credit-to-GDP growth are associated with a more severe left tail of domestic GDP growth, even when controlling for domestic indicators. The inclusion of foreign indicators significantly improves estimates of ‘GDP-at-Risk’, a summary measure of downside risks. In turn, this yields time-varying estimates of higher GDP growth moments that are interpretable and provide advanced warnings of crisis episodes. Decomposing historical estimates of GDP-at-Risk into domestic and foreign sources, we show that foreign shocks are a key driver of domestic macroeconomic tail risks. |
| Keywords: | Financial stability; GDP-at-Risk; international spillovers; local projections; quantile regression; tail risk |
| JEL: | E44 E58 F30 F41 F44 G01 |
| Date: | 2021–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0940&r= |
| By: | Christiane Baumeister |
| Abstract: | Asset prices are a valuable source of information about financial market participants.expectations about key macroeconomic variables. However, the presence of time-varying risk premia requires an adjustment of market prices to obtain the market’s rational assessment of future price and policy developments. This paper reviews empirical approaches for recovering market-based expectations. It starts by laying out the two canonical modeling frameworks that form the backbone for estimating risk premia and highlights the proliferation of risk pricing factors that result in a wide range of different asset-price-based expectation measures. It then describes a key methodological innovation to evaluate the empirical plausibility of risk premium estimates and to identify the most accurate market-based expectation measure. The usefulness of this general approach is illustrated for price expectations in the global oil market. Then, the paper provides an overview of the body of empirical evidence for monetary policy and inflation expectations with a special emphasis on market-specific characteristics that complicate the quest for the best possible market-based expectation measure. Finally, it discusses a number of economic applications where market expectations play a key role for evaluating economic models, guiding policy analysis, and deriving shock measures. |
| Keywords: | futures markets, risk premia, monetary policy, commodities, market expectations, financial markets, asset pricing, return regressions, affine term structure models, risk adjustment, model uncertainty, forecasting, expectational shocks |
| JEL: | C52 E31 E43 E52 G14 Q43 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9305&r= |
| By: | Christiane Baumeister (University of Notre Dame; University of Pretoria; NBER; CEPR) |
| Abstract: | Asset prices are a valuable source of information about financial market participants' expectations about key macroeconomic variables. However, the presence of time-varying risk premia requires an adjustment of market prices to obtain the market's rational assessment of future price and policy developments. This paper reviews empirical approaches for recovering market-based expectations. It starts by laying out the two canonical modeling frameworks that form the backbone for estimating risk premia and highlights the proliferation of risk pricing factors that result in a wide range of different asset-price-based expectation measures. It then describes a key methodological innovation to evaluate the empirical plausibility of risk premium estimates and to identify the most accurate market-based expectation measure. The usefulness of this general approach is illustrated for price expectations in the global oil market. Then, the paper provides an overview of the body of empirical evidence for monetary policy and inflation expectations with a special emphasis on market-specific characteristics that complicate the quest for the best possible market-based expectation measure. Finally, it discusses a number of economic applications where market expectations play a key role for evaluating economic models, guiding policy analysis, and deriving shock measures. |
| Keywords: | futures markets, risk premia, monetary policy, commodities, market expectations, financial markets, asset pricing, return regressions, affine term structure models, risk adjustment, model uncertainty, forecasting, expectational shocks |
| JEL: | C52 E31 E43 E52 G14 Q43 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202164&r= |
| By: | Maria Sole Pagliari |
| Abstract: | This paper aims at assessing the macroeconomic impact of unconventional monetary policies (UMPs) that the ECB has put in place in the euro area after the 2007 financial crisis. With this purpose, we first document how the relative importance of the main transmission channels of such measures has changed over time, with the portfolio rebalancing being generally more impactful than the signaling channel after the “Whatever it takes” speech in July 2012. However, we also provide evidence of a great degree of heterogeneity across core and peripheral economies, as well as over time. We then adopt a time-varying SVAR with stochastic volatility to account for such heterogeneity, by identifying UMP shocks via “dynamic” sign restrictions. By means of counterfactual experiments, we provide evidence of how a different stance on the part of the ECB would have led to a significantly different economic performance of euro area economies. For instance, if the ECB had not put in place the measures adopted between 2014 and 2017, annual output growth would have been, on average, 0.67 percentage points lower in peripheral countries. |
| Keywords: | : Time-varying Bayesian SVAR, Dynamic Restrictions, Unconventional Monetary policy, Eurozone |
| JEL: | C11 C32 E43 E52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:829&r= |
| By: | Christiane Baumeister |
| Abstract: | Asset prices are a valuable source of information about financial market participants' expectations about key macroeconomic variables. However, the presence of time-varying risk premia requires an adjustment of market prices to obtain the market's rational assessment of future price and policy developments. This paper reviews empirical approaches for recovering market-based expectations. It starts by laying out the two canonical modeling frameworks that form the backbone for estimating risk premia and highlights the proliferation of risk pricing factors that result in a wide range of different asset-price-based expectation measures. It then describes a key methodological innovation to evaluate the empirical plausibility of risk premium estimates and to identify the most accurate market-based expectation measure. The usefulness of this general approach is illustrated for price expectations in the global oil market. Then, the paper provides an overview of the body of empirical evidence for monetary policy and inflation expectations with a special emphasis on market-specific characteristics that complicate the quest for the best possible market-based expectation measure. Finally, it discusses a number of economic applications where market expectations play a key role for evaluating economic models, guiding policy analysis, and deriving shock measures. |
| JEL: | C52 E31 E43 E52 G14 Q43 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29232&r= |
| By: | Consolo, Agostino; Koester, Gerrit; Nickel, Christiane; Porqueddu, Mario; Smets, Frank |
| Abstract: | The existence of nominal rigidities and inflation differentials between countries offers two of the main rationales for an inflation buffer in a monetary union where monetary policy is oriented towards an area-wide inflation objective. Evidence accumulated since 2003 suggests that nominal rigidities remain a prevalent feature of the euro area, with some differences as regards prices and wages. Price setting may have become more flexible and there is no evidence for any especially strong downward rigidities in price setting. At the same time, persistent downward nominal wage rigidity (DWR) provides a strong argument for a positive inflation buffer to “grease the wheels” of the euro area economy – also in order to avoid the risk of macroeconomic adjustments being managed in terms of quantities (unemployment) rather than prices when DWR is binding and particularly when productivity growth is low. Inflation differentials across euro area countries have tended to be small but persistent. For inflation dispersion in the euro area, the across countries has been more important than across regions, confirming that an inflation buffer might be especially important in a monetary union of different countries. Overall, inflation differentials were due to the rise of economic and financial imbalances in the first decade of the euro and the subsequent need for adjustment. Balassa-Samuelson effects which were highlighted in the 2003 strategy review were only a minor factor. By and large, the ECB’s inflation objective seems to have provided a sufficient margin to prevent countries from having to live with prolonged periods of excessively low inflation rates in the period 1999-2019. There were some exceptions in the second decade of the euro (from 2009-2019), when inflation in the euro area was, overall, substantially lower than during the first decade. JEL Classification: E31, E52, E24 |
| Keywords: | HICP inflation, inflation differentials, Monetary policy strategy review, nominal rigidities |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021279&r= |
| By: | Altavilla, Carlo; Lemke, Wolfgang; Linzert, Tobias; Tapking, Jens; von Landesberger, Julian |
| Abstract: | This paper summarises the work done by Eurosystem staff in the context of the Strategy Review Seminar on Monetary Policy Instruments. More specifically, it focuses on the efficacy, efficiency and potential side effects of the key monetary policy instruments employed by the European Central Bank since 2014. The following main findings emerge from the analysis. First, instruments have been effective in easing financing conditions and supporting economic growth, employment and inflation. Second, considering the effective lower bound on policy rates, a combination of instruments is generally more efficient than relying on a single tool. Third, side effects have been generally contained so far, but they are found to vary over time and need to be closely monitored on an ongoing basis. Fourth, the monetary policy toolkit needs to remain innovative, diversified, and flexible, i.e. reviewed regularly to ensure that it remains fit for purpose against the backdrop of evolving financial and macroeconomic conditions. JEL Classification: E52, E58, E43, E44, E47 |
| Keywords: | monetary policy instruments, standard and non-standard measures |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021278&r= |
| By: | Simon Gilchrist; Bin Wei; Vivian Z Yue; Egon Zakrajšek |
| Abstract: | We evaluate the efficacy of the Secondary Market Corporate Credit Facility (SMCCF), a program designed to stabilize the U.S. corporate bond market during the Covid-19 pandemic. The Fed announced the SMCCF on March 23, 2020, and expanded the program on April 9. Our results show that the two announcements significantly lowered credit and bid-ask spreads, the former almost entirely through a reduction in credit risk premia. The announcements had a differential effect on the program-eligible bonds relative to their ineligible counterparts, but this difference is not due to program eligibility per se, according to our results. Rather, the announcements restored the "normal" upward-sloping profile of the term structure of credit spreads by substantially reducing spreads at the short end of the maturity spectrum relative to spreads at the long end. Using an IV approach, we also document important announcement-induced spillovers across all bonds outstanding for issuers whose bonds were likely to be purchased by the facility. Finally, we show that the Fed's actual purchases had negligible effects on credit and bid ask spreads. Our results highlight the extraordinary power of modern central banks: when markets have trust in the central bank's ability to deliver on its promise, as exemplified by the iconic "whatever it takes" remark by Mario Draghi, the central bank needs to do less (if anything) to deliver on its promise. |
| Keywords: | covid-19, credit market support facilities, diff-in-diff, event study, purchase effects |
| JEL: | E44 E58 G12 G14 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:963&r= |
| By: | Adesoji O. Farayibi (University of Ibadan, Nigeria); Oludele Folarin (University of Ibadan, Nigeria) |
| Abstract: | The human capital crisis, reflected in the weak global competitiveness of African education, has questioned the effectiveness of public spending in increasing educational outcomes in the continent. Thus, this article examines the impact of government education expenditure on educational outcomes in 31 sub-Saharan African (SSA) countries from 2000-2019 based on a Generalized Method of Moments (GMM). The study sheds light on the priorities of government education spending in the continent. Findings showed that the effect of government education spending on educational outcomes in SSA was driven by the measure of educational outcome used. Government spending in Africa had focused mainly on primary and secondary education to the detriment of tertiary education because it is convenient and generates political gains. Due to institutional rigidities which emanate from the governance structure, the inequitable allocation of government funding had made higher education in Africa less responsive to the changes in global knowledge and labour market demands. Therefore, the following policy agenda becomes imperative in the SSA: (i) government education spending should equitably target all education levels to improve the aggregate human capital development indicators in the region. (ii) There is a need to enhance government institutions' capacity to increase their level of effectiveness and performance. |
| Keywords: | Government Education Expenditure; Educational Outcomes Higher Education; System GMM; sub-Saharan Africa |
| JEL: | E24 E52 E62 J17 J21 J24 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/048&r= |
| By: | Gómez Múñoz, Wilman Arturo; Posada Posada, Carlos Esteban; Rhenals Monterrosa, Remberto |
| Abstract: | RESUMEN: La tendencia observada desde 1998 a la desinflación mundial y a que las inflaciones nacionales se estabilicen en niveles bajos obedece al comportamiento de la inflación de Estados Unidos. Esto es lo que podemos decir a la luz de resultados econométricos con cifras de frecuencia trimestral de Estados Unidos y de otros 30 países de varios continentes. En efecto, estos resultados son favorables a tal hipótesis y desfavorables a hipótesis alternativas que harían énfasis en las políticas monetarias nacionales o choques deflacionistas de origen “real†(no monetario). Adicionalmente, la evidencia empírica indica que, en general, las políticas monetarias nacionales han sido laxas, en el siguiente sentido: los hacedores de la política monetaria han aprovechado las fuerzas desinflacionarias (o deflacionarias) provenientes de Estados Unidos para ejecutar políticas laxas previendo algunos beneficios de esto (sobre la actividad económica u otros) sin temer que se haga evidente su costo en términos de una mayor inflación. ABSTRACT: The trend observed since 1998 towards global disinflation and for national inflation rates to stabilize at low levels is due to the behavior of inflation in the United States according to the econometric exercises reported in this paper with a quarterly frequency data from the United States and 30 other countries. Additionally, the empirical evidence indicates that, in general, national monetary policies have been lax, in the following sense: monetary policy makers have taken advantage of disinflationary (or deflationary) forces coming from the United States to execute lax policies anticipating some benefits from those without fearing that its cost in terms of higher inflation will become evident. |
| Keywords: | inflación, convergencia, economía abierta, política monetaria, modelo decointegración con datos en panel |
| JEL: | C12 C23 E31 E52 E65 F41 |
| Date: | 2021–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:col:000196:019618&r= |
| By: | George Hondroyiannis (Bank of Greece and Harokopio University); Dimitrios Papaoikonomou (Bank of Greece) |
| Abstract: | We investigate the effect of Eurosystem Asset Purchase Programmes (APP) on the monthly yields of 10-year sovereign bonds for 11 euro area sovereigns during January-December 2020. The analysis is based on time-varying coefficient methods applied to monthly panel data covering the period 2004m09 to 2020m12. During 2020 APP contributed to an average decline in yields estimated in the range of 58-76 bps. In December 2020 the effect per EUR trillion ranged between 34 bps in Germany and 159 bps in Greece. Stronger effects generally display diminishing returns. Our findings suggest that a sharp decline in the size of the APP in the aftermath of the COVID-19 crisis could lead to very sharp increases in bond yields, particularly in peripheral countries. The analysis additionally reveals a differential response to global risks between core and peripheral countries, with the former enjoying safe-haven benefits. Markets’ perceptions of risk are found to be significantly affected by credit ratings, which is in line with recent evidence based on constant parameter methods. |
| Keywords: | Euro area;asset purchase programmes; sovereign bond yields; time-varying parameters. |
| JEL: | C33 E44 E52 E58 F34 G15 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:bog:wpaper:291&r= |
| By: | Blagov, Boris; Müller, Henrik; Jentsch, Carsten; Schmidt, Torsten |
| Abstract: | Corporate investment in Germany has been relatively weak for a prolonged period after the financial crisis. This was remarkable given that interest rates and overall economic activity, important determinants of corporate investment, developed quite favourably during that time. These developments highlight the fact that the dynamics of business cycles varies over time: each cycle is somewhat different. A promising new line of research to identify the driving factors of business cycles is the use of narratives (Shiller 2017, 2020). Widely shared stories capture expectations and beliefs about the workings of the economy that may influence economic behavior, such as investment decisions. In this paper, we use Latent Dirichlet Allocation (LDA) to identify topics from news (text) data related to corporate investment in Germany and to construct suitable indicators. Furthermore, we focus on isolating those investment narratives that show the potential to lead to substantial improvement of the forecasting performance of econometric models. In our analysis, we demonstrate the benefit of using media-based indicators to improve econometric forecasts of business equipment investment. Newspaper data carries important information both on the future developments of investment (forecasting) as well as on current developments (nowcasting). Moreover, the identified investment narrative enables the researcher to improve her/his understanding of the investment process in general and allows to incorporate exogenous developments as well as economic sentiment, news and other relevant events to the analysis. |
| Keywords: | narrative economics,mixed-frequency,nowcasting via media data |
| JEL: | C53 C82 E32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:921&r= |
| By: | Kelesego Mmolainyane (Botswana Institute for Development Policy Analysis) |
| Abstract: | In her quest to further graduate to the high-income status, Botswana seeks to invest more in infrastructure development for both productive and social use. An efficient and effective infrastructure provision is fundamental to excellent public service delivery and access. Sadly, Botswana, like many other world economies, has a challenge of having an infrastructure financing gap. One of the innovative ways to fill this gap is through public private partnerships (PPPs) with the capital market that has excess liquidity. Infrastructure PPPs are complex and capital intensive projects that require project finance experts to advise parties involved regarding returns and risks associated with each project. Various project-financing models can be designed to suit project specifications and they cannot be over-generalised for all PPP projects. Nevertheless, given the tight fiscal space, Botswana now, more than ever, should consider issuing PPP bonds and applying user changes model to finance economic PPP infrastructure for sustainable and inclusive economic growth. |
| Keywords: | PPPs; Capital market; Project financing; Botswana |
| JEL: | E44 E47 E62 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bid:wpaper:75&r= |
| By: | Huang, Chien-Yu; Wu, Youchang; Yang, Yibai; Zheng, Zhijie |
| Abstract: | We explore the growth and welfare effects of monetary policy in a two-sector Schumpeterian economy with cash-in-advance (CIA) constrained R&D investment in both sectors. We show that a nominal interest rate increase generates two effects on equilibrium labor allocation: a manufacturing-R&D-reallocation effect and a cross-R&D-sector effect. The former reduces economic growth by shifting labor from R&D to production, whereas the latter can enhance it by shifting labor from the less productive R&D sector to the more productive one. Unless the high productivity R&D sector is severely more CIA-constrained than the low productivity one, aggregate R&D overinvestment is sufficient but not necessary for the Friedman rule of monetary policy to be suboptimal. Our benchmark parameterization suggests that a positive nominal interest rate is optimal despite that it exacerbates the aggregate R&D underinvestment problem. |
| Keywords: | CIA constraint, Endogenous growth; Monetary policy; R&D; Creative destruction. |
| JEL: | E41 O30 O40 |
| Date: | 2021–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109780&r= |
| By: | Holm-Hadulla, Fédéric; Musso, Alberto; Rodriguez, Diego; Vlassopoulos, Thomas |
| Abstract: | This paper discusses the role of economic and monetary analysis in the monetary policy strategy of the European Central Bank (ECB). Both areas of analysis have evolved since the 2003 strategy review. Economic analysis has assigned an increasingly relevant role to the Eurosystem and ECB staff macroeconomic projections in forming a view on the medium-term outlook for economic activity and inflation. Furthermore, its focus has strengthened with regard to structural trends in shaping key economic relationships. Similarly, monetary analysis has shifted in focus: while the 2003 review emphasised the information value of monetary dynamics for detecting risks to price stability over medium-term to longer-term horizons, the focus of monetary analysis has increasingly been redirected to the assessment of monetary policy transmission. This evolution has opened a gap between the formal description of the strategy following the 2003 review and the practice of economic and monetary analysis in informing the ECB’s policy deliberations. This paper concludes by presenting options for closing this gap and aligning the strategy formulation with the evolved role of economic and monetary analysis. JEL Classification: E32, E37, E44, E47, E51, E52, E58 |
| Keywords: | ECB two-pillar framework, Economic analysis, monetary analysis |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021277&r= |
| By: | Adrien Bilal |
| Abstract: | Unemployment rates differ widely across local labor markets. I offer new empirical evidence that high local unemployment emerges because of elevated local job losing rates. Local employers, rather than local workers, account for most of spatial gaps in job stability. I then propose a theory in which spatial differences in job loss arise endogenously, due to the spatial sorting of heterogeneous employers across local labor markets. Labor market frictions induce productive employers to over-value locating close to each other. The optimal policy incentivizes them to relocate to areas with high job losing rates, providing a rationale for commonly used place-based policies. I estimate the model using French administrative data. The estimated model accounts for over three fourths of the cross-sectional dispersion in unemployment rates, as well as for the respective contributions of job losing and job finding rates. Employers' inefficient location choices amplify spatial unemployment differentials five-fold. Both real-world and optimal place-based policies can yield sizable local and aggregate welfare gains. |
| JEL: | E20 E24 E60 F16 H21 J42 J61 J63 J64 R13 R23 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29269&r= |
| By: | Sergi Basco (Universitat de Barcelona); David López-Rodríguez (Banco de España); Enrique Moral-Benito (Banco de España) |
| Abstract: | This paper empirically investigates the impact of local house price booms on capital misallocation within manufacturing industries. Using the geographic variation provided by the salient Spanish housing boom (2003-2007), we show that manufacturing firms exposed to positive local house price shocks received more credit from banks and their investment grew more intensively when they had a larger proportion of collateralizable real estate assets. We exploit the geographical variation in both house prices and pre-boom urban land supply at municipality level to document that this collateral channel was exacerbated for firms located in urban land-constrained geographical areas where real estate appreciation was larger. The interaction of geographical conditions, that led to heterogeneous housing booms, with the collateral channel on investment resulted in an increasing dispersion of the capital-labor ratio within industries. A simple counterfactual calculation suggests that the misallocation generated by the collateral channel on investment could account for between one-quarter and half of the fall in TFP experienced in the Spanish manufacturing sector over the housing boom. |
| Keywords: | housing boom, misallocation, collateral channel, productivity |
| JEL: | E22 E44 O16 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2135&r= |
| By: | Baumann, Ursel; Darracq Pariès, Matthieu; Westermann, Thomas; Riggi, Marianna; Bobeica, Elena; Meyler, Aidan; Böninghausen, Benjamin; Fritzer, Friedrich; Trezzi, Riccardo; Jonckheere, Jana; Kulikov, Dmitry; Popova, Dilyana; Pert, Sulev; Michail, Nektarios; Paloviita, Maritta; Brázdik, František; Pönkä, Harri; Bess, Mikkel; Vilmi, Lauri; Jørgensen, Casper; Robert, Pierre-Antoine; Al-Haschimi, Alexander; Gmehling, Philipp; Bańbura, Marta; Hartmann, Matthias; Charalampakis, Evangelos; Menz, Jan-Oliver; Hartwig, Benny; Schupp, Fabian; Hutchinson, John; Speck, Christian; Paredes, Joan; Volz, Ute; Reiche, Lovisa; Bragoudakis, Zacharias; Tirpák, Marcel; Kasimati, Evangelia; Tengely, Veronika; Łyziak, Tomasz; Tagliabracci, Alex; Stanisławska, Ewa; Bessonovs, Andrejs; Iskrev, Nikolay; Krasnopjorovs, Olegs; Gavura, Miroslav; Reichenbachas, Tomas; Damjanović, Milan; Colavecchio, Roberta; Maletic, Matjaz; Galati, Gabriele; Leiva, Danilo; Kearney, Ide; Stockhammar, Pär |
| Abstract: | This paper summarises the findings of the Eurosystem’s Expert Group on Inflation Expectations (EGIE), which was one of the 13 work streams conducting analysis that fed into the ECB’s monetary policy strategy review. The EGIE was tasked with (i) reviewing the nature and behaviour of inflation expectations, with a focus on the degree of anchoring, and (ii) exploring the role that measures of expectations can play in forecasting inflation. While it is households’ and firms’ inflation expectations that ultimately matter in the expectations channel, data limitations have meant that in practice the focus of analysis has been on surveys of professional forecasters and on market-based indicators. Regarding the anchoring of inflation expectations, this paper considers a number of metrics: the level of inflation expectations, the responsiveness of longer-term inflation expectations to shorter-term developments, and the degree of uncertainty. Different metrics can provide conflicting signals about the scale and timing of potential unanchoring, which underscores the importance of considering all of them. Overall, however, these metrics suggest that in the period since the global financial and European debt crises, longer-term inflation expectations in the euro area have become less well anchored. Regarding the role measures of inflation expectations can play in forecasting inflation, this paper finds that they are indicative for future inflationary developments. When it comes to their predictive power, both market-based and survey-based measures are found to be more accurate than statistical benchmarks, but do not systematically outperform each other. Beyond their role as standalone forecasts, inflation expectations bring forecast gains when included in forecasting models and can also inform scenario and risk analysis in projection exercises performed using structural models. ... JEL Classification: D84, E31, E37, E52 |
| Keywords: | anchoring, forecasting, Inflation expectations, macroeconomics, monetary policy |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021264&r= |
| By: | Ding Dong; Zheng Liu; Pengfei Wang |
| Abstract: | Recessions are associated with sharp increases in turbulence that reshuffles firms' productivity rankings. To study the business cycle implications of turbulence shocks, we use Compustat data to construct a measure of turbulence based on the (inverse of) Spearman correlations of firms' productivity rankings between adjacent years. We document evidence that turbulence rises in recessions, reallocating labor and capital from high-to low-productivity firms and reducing aggregate TFP and the stock market value of firms. A real business cycle model with heterogeneous firms and financial frictions can generate the observed macroeconomic and reallocation effects of turbulence. In the model, increased turbulence makes high-productivity firms less likely to remain productive, reducing their expected equity values and tightening their borrowing constraints relative to low-productivity firms. Thus, labor and capital are reallocated to low-productivity firms, reducing aggregate TFP and generating a recession with synchronized declines in aggregate output, consumption, investment, and labor hours, in line with empirical evidence. |
| Date: | 2021–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:93061&r= |
| By: | Cecion, Martina; Coenen, Günter; Gerke, Rafael; Le Bihan, Hervé; Motto, Roberto; Aguilar, Pablo; Ajevskis, Viktors; Giesen, Sebastian; Albertazzi, Ugo; Gilbert, Niels; Al-Haschimi, Alexander; Gomes, Sandra; Bornemann, Friederike; Goy, Gavin; Brand, Claus; Grasso, Adriana; Carboni, Giacomo; Grosse-Steffen, Christoph; Cecioni, Martina; Haavio, Markus; Cleanthous, Lena; Hammermann, Felix; Hoffmann, Mathias; Consolo, Agostino; Hölz, Jonas; Corbisiero, Giuseppe; Hurtado, Samuel; Dedola, Luca; Hürtgen, Patrick; Andreeva, Desislava; Hutchinson, John; Dobrew, Michael; Ioannidis, Michael; Dupraz, Stéphane; Kenny, Geoff; Ehrmann, Michael; Kho, Stephen; Fahr, Stephan; Kienzler, Daniel; Gautier, Erwan; Knüppel, Malte; Georgarakos, Dimitris; Kok, Christoffer; Kontulainen, Jarmo; Rannenberg, Ansgar; Kortelainen, Mika; Ristiniem, Annukka; Röttger, Joost; Lima, Ana Isabel; Saint-Guilhem, Arthur; Locarno, Alberto; Santoro, Sergio; Lojschová, Adriana; Scheer, Alexander; Maletic, Matjaz; Schmidt, Sebastian; Martin, Alberto; Schneider, Jan David; Matheron, Julien; Schultefrankenfeld, Guido; Marx, Magali; Skotida, Ifigeneia; Mazelis, Falk; Soudan, Michel; Meyler, Aidan; Stevens, Arnoud; Mönch, Emanuel; Sturm, Michael; Montes-Galdón, Carlos; Thaler, Dominik; Tosato, Andrea Giorgio; Nikolov, Kalin; Tristani, Oreste; Nuño, Galo; Valderrama, Maria Teresa; Papageorgiou, Dimitris; Weber, Henning; Pavlova, Lora; Wouters, Raf; Penalver, Adrian; Zev, Giordano; Pisani, Massimiliano |
| Abstract: | The ECB’s price stability mandate has been defined by the Treaty. But the Treaty has not spelled out what price stability precisely means. To make the mandate operational, the Governing Council has provided a quantitative definition in 1998 and a clarification in 2003. The landscape has changed notably compared to the time the strategy review was originally designed. At the time, the main concern of the Governing Council was to anchor inflation at low levels in face of the inflationary history of the previous decades. Over the last decade economic conditions have changed dramatically: the persistent low-inflation environment has created the concrete risk of de-anchoring of longer-term inflation expectations. Addressing low inflation is different from addressing high inflation. The ability of the ECB (and central banks globally) to provide the necessary accommodation to maintain price stability has been tested by the lower bound on nominal interest rates in the context of the secular decline in the equilibrium real interest rate. Against this backdrop, this report analyses: the ECB’s performance as measured against its formulation of price stability; whether it is possible to identify a preferred level of steady-state inflation on the basis of optimality considerations; advantages and disadvantages of formulating the objective in terms of a focal point or a range, or having both; whether the medium-term orientation of the ECB’s policy can serve as a mechanism to cater for other considerations; how to strengthen, in the presence of the lower bound, the ECB’s leverage on private-sector expectations for inflation and the ECB’s future policy actions so that expectations can act as ‘automatic stabilisers’ and work alongside the central bank. JEL Classification: E31, E52, E58 |
| Keywords: | effective lower bound, euro area, European Central Bank, monetary policy strategy, price stability |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021269&r= |
| By: | Aberg, Pontus; Corsi, Marco; Grossmann-Wirth, Vincent; Hudepohl, Tom; Mudde, Yvo; Rosolin, Tiziana; Schobert, Franziska |
| Abstract: | This paper discusses commercial banks’ demand for central bank reserves under two alternative monetary policy framework configurations, namely: (i) an interest rate corridor system with scarce liquidity, and (ii) a floor system with ample liquidity. It outlines the interaction between the monetary implementation framework used to steer short-term market interest rates and banks’ demand for reserves. We find that by implementing a floor system, the Eurosystem has eliminated the opportunity costs of holding reserves and enabled banks to hold relatively large buffers of reserves compared with the corridor system. Additionally, the demand for reserves may have increased endogenously, as the environment of ample liquidity conditions has incentivised many banks to adapt their business models. In parallel, the demand for reserves has also increased for more exogenous reasons such as post-global financial crisis liquidity regulation and increased liquidity concentration. Our estimates indicate an increase, over recent years, in the level of excess liquidity required in the euro area to avoid a rise in short-term market rates. Moreover, the dependency on the adopted monetary policy instruments and the external environment highlights the increased uncertainty in estimating future levels of required reserves JEL Classification: E41, E44, E50, E51, E58 |
| Keywords: | central bank reserves, ECB, Eurosystem, liquidity management, monetary policy implementation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021282&r= |
| By: | Albertazzi, Ugo; Martin, Alberto; Assouan, Emmanuelle; Tristani, Oreste; Galati, Gabriele; Vlassopoulos, Thomas; Adolf, Petra; Kok, Christoffer; Altavilla, Carlo; Lewis, Vivien; Andreeva, Desislava; Lima, Diana; Brand, Claus; Musso, Alberto; Bussière, Matthieu; Nikolov, Kalin; Fahr, Stephan; Patriček, Matic; Fourel, Valère; Prieto, Esteban; Heider, Florian; Rodriguez-Moreno, Maria; Idier, Julien; Signoretti, Federico; Aban, Jorge; Busch, Ulrike; Ambrocio, Gene; Cassar, Alan; Balfoussia, Hiona; Chalamandaris, Dimitrios; Bonatti, Guido; Cuciniello, Vincenzo; Bonfim, Diana; Eller, Markus; Bouchinha, Miguel; Falagiarda, Matteo; Fernandez, Luis; Maddaloni, Angela; Garabedian, Garo; Mazelis, Falk; Geiger, Felix; Miettinen, Pavo; Grassi, Alberto; Nakov, Anton; Hristov, Nikolay; Obradovic, Goran; Ibas, Pelin; Papageorghiou, Maria; Ioannidis, Michael; Pogulis, Armands; Jan, Jansen David; Redak, Vanessa; Jovanovic, Mario; Velez, Anatoli Segura; Kakes, Jan; Tapking, Jens; Kempf, Alina; Valderrama, Maria; Klein, Melanie; Weigert, Benjamin; Licak, Marek |
| Abstract: | Since the European Central Bank’s (ECB’s) 2003 strategy review, the importance of macro-financial amplification channels for monetary policy has increasingly gained recognition. This paper takes stock of this evolution and discusses the desirability of further incremental enhancements in the role of financial stability considerations in the ECB’s monetary policy strategy. The paper starts with the premise that macroprudential policy, along with microprudential supervision, is the first line of defence against the build-up of financial imbalances. It also recognises that the pursuit of price stability through monetary policy, and of financial stability through macroprudential policy, are to a large extent complementary. Nevertheless, macroprudential policy may not be able to ensure financial stability independently of monetary policy, because of spillovers originating from the common transmission channels through which the two policies produce their effects. For example, a low interest rate environment can create incentives to engage in more risk-taking, or can adversely impact the profitability of financial intermediaries and hence their capacity to absorb shocks. The paper argues that the existence of such spillovers creates a conceptual case for monetary policy to take financial stability considerations into account. It then goes on to discuss what this conclusion might imply in practice for the ECB. One option would be to exploit the flexible length of the medium-term horizon over which price stability is to be achieved. Longer deviations from price stability could occasionally be tolerated, if they resulted in materially lower risks for financial stability and, ultimately, for future price stability. ... JEL Classification: E3, E44, G01, G21 |
| Keywords: | financial frictions, Monetary policy, systemic risk |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021272&r= |
| By: | Debrun, Xavier; Masuch, Klaus; Ferrero, Guiseppe; Vansteenkiste, Isabel; Ferdinandusse, Marien; von Thadden, Leopold; Hauptmeier, Sebastian; Alloza, Mario; Derouen, Chloé; Bańkowski, Krzysztof; Domingues Semeano, João; Barthélemy, Jean; Eisenschmidt, Jens; Bletzinger, Tilman; Faria, Thomas; Bonam, Dennis; Freier, Maximilian; Bouabdallah, Othman; Galati, Gabriele; Burriel, Pablo; Garcia, José; Campos, Maria; Gardó, Sándor; da Costa, José Cardoso; Gerke, Rafael; Checherita-Westphal, Cristina; Hammermann, Felix; Chmelar, Bernadette; Haroutunian, Stephan; Cimadomo, Jacopo; Hartung, Benjamin; Christoffe, Kai; Jacquinot, Pascal; Kamps, Christophe; Poelhekke, Steven; Kataryniuk, Ivan; Pool, Sebastiaan; Körding, Julia; Prammer, Doris; Kostka, Tommy; Romanelli, Marzia; Maćkowiak, Bartosz; Röttger, Joost; Mazelis, Falk; Sauer, Stephan; Marrazzo, Marco; Schmidt, Katja; Montes-Galdón, Carlos; Schmidt, Sebastian; Muggenthaler, Philip; Schupp, Fabian; Nerlich, Carolin; Setzer, Ralph; Nuño, Galo; Slawinska, Kamila; Ozden, Talga; Trzcinska, Agnieszka; Paulus, Alari; Valenta, Vilém; Penciu, Alexandru; Vladu, Andreea; Piloiu, Anamaria; Wolswijk, Guido; Pisani, Massimiliano |
| Abstract: | The last review of the ECB’s monetary policy strategy in 2003 followed a period of predominantly upside risks to price stability. Experience following the 2008 financial crisis has focused renewed attention on the question of how monetary and fiscal policy should best interact, in particular in an environment of structurally low interest rates and persistent downside risks to price stability. This debate has been further intensified by the economic impact of the coronavirus (COVID-19) pandemic. In the euro area, the unique architecture of a monetary union consisting of sovereign Member States, with cross-country heterogeneities and weaknesses in its overall construction, poses important challenges. Against this background, this report revisits monetary-fiscal policy interactions in the euro area from a monetary policy perspective and with a focus on the ramifications for price stability and maintaining central bank independence and credibility. The report consists of three parts. The first chapter presents a conceptual framework for thinking about monetary-fiscal policy interactions, thereby setting the stage for a discussion of specifically euro area aspects and challenges in subsequent parts of the report. In particular, it reviews the main ingredients of the pre-global financial crisis consensus on monetary-fiscal policy interactions and addresses significant new insights and refinements which have gained prominence since 2003. In doing so, the chapter distinguishes between general conceptual aspects – i.e. those aspects that pertain to an environment characterised by a single central bank and a single fiscal authority and those aspects that pertain to an environment characterised by a single central bank and many fiscal authorities (a multi-country monetary union). ... JEL Classification: E52, E58, E62, E63, F45 |
| Keywords: | Fiscal Policy, Monetary Policy, Monetary Union |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021273&r= |
| By: | Daniel Spiro |
| Abstract: | What is a good reduced-form representation of Ramsey-Cass-Koopmans. (RCK) model? Solow’s model (despite non-optimizing agents) provides predictions largely consistent with a closed-economy RCK but fundamentally differs regarding open-economy income convergence. Where RCK predicts partial income and consumption convergence between open economies Solow predicts full convergence. This paper presents, by a small modification of the savings behavior in the Solow model, a framework that matches RCK’s properties in closed and open economies. The model, labeled rSolow, is analytically tractable, allowing closed-form solutions of all variables, thus makes several explicit and novel predictions. This includes how income and inequality depend on country size; that income growth will be a U-shaped function of initial income thus creating differentiated convergence; and that poor countries bene.t from higher saving but rich countries may not. |
| Keywords: | convergence, Ramsey, Solow, inequality, growth |
| JEL: | E10 E21 F21 F43 O11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9293&r= |
| By: | Brand, Claus; Obstbaum, Meri; Coenen, Günter; Sondermann, David; Lydon, Reamonn; Ajevskis, Viktors; Hammermann, Felix; Angino, Siria; Hernborg, Nils; Basso, Henrique; Hertweck, Matthias; Bijnens, Gert; Hutchinson, John; Bobeica, Elena; Jacquinot, Pascal; Bodnár, Katalin; Kanutin, Andrew; Botelho, Vasco; Karsay, Alex; Colciago, Andrea; Kienzler, Daniel; Consolo, Agostino; Kolndrekaj, Aleksandra; De Philippis, Marta; Lhuissier, Stéphane; Da Silva, António Dias; Le Roux, Julien; Dossche, Maarten; Lozej, Matija; Dupraz, Stéphane; Martins, Fernando; Falath, Juraj; Mazelis, Falk; Ferrari, Alessandro; Mongelli, Francesco; Gomes, Sandra; Montero, José; Salvador, Ramon Gomez; Motto, Roberto; Goy, Gavin; Nakov, Anton; Grasso, Adriana; Osterloh, Steffen; Guglielminetti, Elisa; Pidkuyko, Myroslav; Haavio, Markus; Piton, Celine; Ploj, Gasper; Slacalek, Jirka; Polemidiotis, Marios; Sokol, Andrej; Propst, Maximilian; Soudan, Michel; Neves, Pedro Luis Rebelo; Szörfi, Béla; Ristiniemi, Annukka; Thaler, Dominik; Pereira, Manuel Bernado Rodrigues; Vanhala, Juuso; Saint-Guilhem, Arthur; Warne, Anders; Justo, Ana Seco; Zhutova, Anastasia; Seward, Domingos |
| Abstract: | This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across countries, and documents the flatness of the Phillips curve in the euro area. In this context, it is stressed that labour market structures and trend labour market outcomes are primarily determined by national economic policies. The report then recalls that, in many circumstances, inflation and employment move together and pursuing price stability is conducive to supporting employment. However, in response to economic shocks that give rise to a temporary trade-off between employment and inflation stabilisation, the ECB’s medium-term orientation in pursuing price stability is shown to provide flexibility to contribute to the achievement of the EU’s full employment objective. Regarding the conduct of monetary policy in a low interest rate environment, model-based simulations suggest that history-dependent policy approaches − which have been proposed to overcome lasting shortfalls of inflation due to the effective lower bound on nominal interest rates by a more persistent policy response to disinflationary shocks − can help to bring employment closer to full employment, even though their effectiveness depends on the strength of the postulated expectations channels. Finally, the importance of employment income and wealth inequality in the transmission of monetary policy strengthens the case for more persistent or forceful easing policies (in pursuit of price stability) when interest rates are constrained by their lower bound. JEL Classification: E52, E24 |
| Keywords: | Employment, inequality, monetary policy |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021275&r= |
| By: | Juan Cruz Lopez Del Valle; Caterina Brest López; Joaquín Campabadal; Julieta Ladronis; Nora Lustig; Valentina Martínez Pabón; Mariano Tommasi |
| Abstract: | We implement a fiscal incidence analysis for Argentina with data from the 2017 national household survey. We find that Argentina’s fiscal system reduces inequality and poverty more than it is the case in many other comparable countries. This result is driven more by the size of the state (as measured by social spending to GDP) than by the progressivity of the fiscal system. While there are spending items that are quite progressive and even pro-poor, taxes are unequalizing and a number of subsidies benefit disproportionately the rich. |
| Keywords: | Fiscal policy, inequality, poverty, incidence, public economics |
| JEL: | E62 D6 H22 H23 I14 I24 I32 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:tul:ceqwps:111&r= |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This study examines the joint effects of ICT diffusion (composed of access, usage and skills), and foreign direct investment (FDI) on inclusive growth in sub-Saharan Africa (SSA). The study draws on data from the World Bank’s World Development Indicators, and the Global Consumption and Income Project for the period 1980–2019 for the analysis. The study provides evidence robust to several specifications from ordinary least squares and dynamic system GMM estimation techniques to show that: (1) FDI and ICT diffusion and corresponding components (ICT access, usage, skills) induce inclusive growth in SSA; (2) compared to its direct effect, FDI is remarkable in fostering shared growth in SSA in the presence of greater ICT diffusion, and (3) compared to ICT access and usage, ICT skills are more effective in driving inclusive growth in SSA. Overall FDI modulates ICT dynamics to engender positive synergy effects on inclusive growth. Policy recommendations are provided in line with the implementation of the African Continental Free Trade Area (AfCFTA) Agreement and the projected rise in FDI in SSA from 2022. |
| Keywords: | FDI; ICT Access; ICT Diffusion; ICT Skills; ICT Usage; Inclusive Growth; sub- Saharan Africa |
| JEL: | E23 F21 F30 L96 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/029&r= |
| By: | Assenmacher, Katrin; Glöckler, Gabriel; Holton, Sarah; Trautmann, Peter; Ioannou, Demosthenes; Mee, Simon; Alonso, Conception; Argiri, Eleni; Arigoni, Filippo; Bakk-Simon, Klára; Bergbauer, Stephanie; Bitterlich, Marie Therese; Byron, Jennifer; Carvalho, Alexandre; Catenaro, Marco; Charalampakis, Evangelos; Deroose, Marjolein; Ehrmann, Michael; Fernandez, Ricardo; Ferreira, Clodomiro; Ferrero, Giuseppe; Gardt, Marius; Georgarakos, Dimitris; Gertler, Pavel; Giovannini, Alessandro; Goldfayn-Frank, Olga; Goodhead, Robert; Grandia, Roel; Hellström, Jenni; Hernborg, Nils; Herrala, Niko; Hoffmann, Mathias; Huertgen, Patrick; Ioannidis, Michael; Istrefi, Klodiana; Kalnberzina, Krista; Kedan, Danielle; Kenny, Geoff; Kocharkov, Georgi; Linzert, Tobias; Manrique, Marta; Márquez, Víctor; Mestre, Ricardo; Meyer, Justus; Mönch, Emanuel; Nardelli, Stefano; Newby, Elisa; Nomm, Nele; Pavlova, Lora; Penalver, Adrian; Reedik, Reet; Rieder, Kilian; Ruhe, Corina; Samarina, Anna; Šanta, Martin; Schupp, Fabian; Schultefrankenfeld, Guido; Sciot, Geert; Silgoner, Maria; Skotida, Ifigeneia; Stylianou, Aliki; Taylor, Eva; Tischer, Johannes; Tiseno, Andrea; Weber, Michael; Winkler, Bernhard |
| Abstract: | This paper examines the importance of central bank communication in ensuring the effectiveness of monetary policy and in underpinning the credibility, accountability and legitimacy of independent central banks. It documents how communication has become a monetary policy tool in itself; one example of this being forward guidance, given its impact on inflation expectations, economic behaviour and inflation. The paper explains why and how consistent, clear and effective communication to expert and non-expert audiences is essential in an environment of an ever-increasing need by central banks to reach these audiences. Central banks must also meet the demand for more understandable information about policies and tools, while at the same time overcoming the challenge posed by the wider public’s rational inattention. Since the European Central Bank was established, the communications landscape has changed dramatically and continues to evolve. This paper outlines how better communication, including greater engagement with the wider public, could help boost people’s understanding of and trust in the Eurosystem. JEL Classification: E43, E52, E58 |
| Keywords: | accountability, central bank, forward guidance, transparency, trust |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021274&r= |
| By: | Christoph Görtz; Danny McGowan; Mallory Yeromonahos |
| Abstract: | We study how furlough affects household financial distress during the COVID-19 pandemic. Furlough increases the probability of late housing and bill payments by 30% and 9%, respectively. The effects exist for individuals who rent their home, but not mortgagees who can mitigate financial distress by reducing expenditure during furlough by deferring mortgage payments though the Mortgage Holiday Scheme. Furloughed individuals significantly reduce expenditure and spend their savings to offset furlough-induced income reductions. This creates wealth inequality but lowers the probability a furloughed worker experiences financial distress after returning to work. Estimates show an 80% government contribution to furloughed workers’ wages minimizes the incidence of financial distress at the lowest cost to taxpayers. |
| Keywords: | furlough, short-time work, Coronavirus job retention scheme, Covid-19 pandemic, financial distress, automatic stabilizers, inequality |
| JEL: | D14 D31 E24 G51 H24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9285&r= |
| By: | Raphael A. Auer; David Tercero-Lucas |
| Abstract: | Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods. |
| Keywords: | digital currencies, cryptocurrencies, distributed ledger technology, blockchain, payments, digitalisation, banking, household finance, money, bitcoin, ether, xrp, bitcoin cash, litecoin, stellar, eos |
| JEL: | D14 D91 E42 G11 G12 G28 O33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9287&r= |
| By: | Drudi, Francesco; Moench, Emanuel; Holthausen, Cornelia; Weber, Pierre-François; Ferrucci, Gianluigi; Setzer, Ralph; Adao, Bernardino; Dées, Stéphane; Alogoskoufis, Spyros; Téllez, Mar Delgado; Andersson, Malin; Di Nino, Virginia; Aubrechtova, Jana; Diez-Caballero, Arturo; Avgousti, Aris; Duarte, Claudia; Barbiero, Francesca; Estrada, Ángel; Boneva, Lena; Faccia, Donata; Breitenfellner, Andreas; Faiella, Ivan; Bua, Giovanna; Farkas, Mátyás; Bun, Maurice; Ferrari, Alessandro; Caprioli, Francesco; Fornari, Fabio; Ciccarelli, Matteo; Mendoza, Alberto Fuertes; Darracq Pariès, Matthieu; Garcia-Sanchez, Pablo; Giovannini, Alessandro; Papadopoulou, Niki; Grüning, Patrick; Parker, Miles; Guarda, Paolo; Petroulakis, Filippos; Hebbink, Gerbert; Piloiu, Anamaria; Murphy, Sarah Jane Hlásková; Ploj, Gasper; Ioannidis, Michael; Pointner, Wolfgang; Isgro, Lorenzo; Popov, Alexander; Kapp, Daniel; Prammer, Doris; Kashama, Mélissa Kasongo; Queiroz, Ricardo; Lopez-Garcia, Paloma; Rachedi, Omar; Lozej, Matija; Rognone, Lavinia; Lydon, Reamonn; Röhe, Oke; Manninen, Otso; Roos, Madelaine; Manzanares, Andrés; Russo, Simone; McInerney, Niall; Santabárbara, Daniel; Meinerding, Christoph; Schotten, Guido; Mikkonen, Katri; Sotomayor, Beatriz; Mistretta, Alessandro; Stracca, Livio; Mongelli, Francesco Paolo; Tamburrini, Fabio; Montes-Galdón, Carlos; Theofilakou, Anastasia; Müller, Georg; Tsalaporta, Pinelopi; Nerlich, Carolin; van den End, Jan Willem; Osiewicz, Malgorzata; Cruz, Lia Vaz; Osorno-Torres, Boris; Weth, Mark Andreas; Ouvrard, Jean-François; Gomez, Gonzalo Yebes; Page, Adrian |
| Abstract: | This paper analyses the implications of climate change for the conduct of monetary policy in the euro area. It first investigates macroeconomic and financial risks stemming from climate change and from policies aimed at climate mitigation and adaptation, as well as the regulatory and fiscal effects of reducing carbon emissions. In this context, it assesses the need to adapt macroeconomic models and the Eurosystem/ECB staff economic projections underlying the monetary policy decisions. It further considers the implications of climate change for the conduct of monetary policy, in particular the implications for the transmission of monetary policy, the natural rate of interest and the correct identification of shocks. Model simulations using the ECB’s New Area-Wide Model (NAWM) illustrate how the interactions of climate change, financial and fiscal fragilities could significantly restrict the ability of monetary policy to respond to standard business cycle fluctuations. The paper concludes with an analysis of a set of potential monetary policy measures to address climate risks, insofar as they are in line with the ECB’s mandate. JEL Classification: E52, E58, Q54 |
| Keywords: | climate change, environmental economics, green finance, monetary policy, sustainable growth economics |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021271&r= |
| By: | M. Ayhan Kose; Franziska L. Ohnsorge; Carmen M. Reinhart; Kenneth S. Rogoff |
| Abstract: | Debt in emerging market and developing economies (EMDEs) is at its highest level in half a century. In about nine out of 10 EMDEs, debt is higher now than it was in 2010 and, in half of the EMDEs, debt is more than 30 percentage points of gross domestic product higher. Historically, elevated debt levels increased the incidence of debt distress, particularly in EMDEs and particularly when financial market conditions turned less benign. This paper reviews an encompassing menu of options that have, in the past, helped lower debt burdens. Specifically, it examines orthodox options (enhancing growth, fiscal consolidation, privatization, and wealth taxation) and heterodox options (inflation, financial repression, debt default and restructuring). The mix of feasible options depends on country characteristics and the type of debt. However, none of these options comes without political, economic, and social costs. Some options may ultimately be ineffective unless vigorously implemented. Policy reversals in difficult times have been common. The challenges associated with debt reduction raise questions of global governance, including to what extent advanced economies can cast their net wider to cushion prospective shocks to EMDEs. |
| JEL: | E32 E63 F34 F44 F62 H6 H63 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29266&r= |
| By: | Consolo, Agostino; Cette, Gilbert; Bergeaud, Antonin; Labhard, Vincent; Osbat, Chiara; Kosekova, Stanimira; Anyfantaki, Sofia; Basso, Gaetano; Basso, Henrique; Bobeica, Elena; Ciapanna, Emanuela; Dedola, Luca; Foroni, Claudia; Freystatter, Hanna; Gautier, Erwan; Giron, Celestino; Hartwig, Benny; Peinado, Mario Izquierdo; Jarvis, Valerie; Maqui, Eduardo; Mohr, Matthias; Morris, Richard; Motyovszki, Gergő; Nakov, Anton; Petroulakis, Filippos; Rubene, Ieva; Trezzi, Riccardo; Vivian, Lara; Weber, Henning; Wieland, Elisabeth; Neves, Pedro |
| Abstract: | The digitalisation workstream report analyses the degree of digital adoption across the euro area and EU countries and the implications of digitalisation for measurement, productivity, labour markets and inflation, as well as more recent developments during the coronavirus (COVID-19) pandemic and their implications. Analysis of these key issues and variables is aimed at improving our understanding of the implications of digitalisation for monetary policy and its transmission. The degree of digital adoption differs across the euro area/EU, implying heterogeneous impacts, with most EU economies currently lagging behind the United States and Japan. Rising digitalisation has rendered price measurement more challenging, owing to, among other things, faster changes in products and product quality, but also new ways of price setting, e.g. dynamic or customised pricing, and services that were previously payable but are now “free”. Despite the spread of digital technologies, aggregate productivity growth has decreased in most advanced economies since the 1970s. However, it is likely that without the spread of digital technologies the productivity slowdown would have been even more pronounced, and the recent acceleration in digitalisation is likely to boost future productivity gains from digitalisation. Digitalisation has spurred greater automation, with temporary labour market disruptions, albeit unevenly across sectors. The long-run employment effects of digitalisation can be benign, but its effects on wages and labour share depend on the structure of the economy and its labour market institutions. The pandemic has accelerated the use of teleworking: roughly every third job in the euro area/EU is teleworkable, although there are differences across countries. ... JEL Classification: E24, E31, E32, O33, O57 |
| Keywords: | COVID-19, inflation, labour markets, measurement, productivity |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021266&r= |
| By: | Felix Kapfhammer; Vegard H. Larsen; Leif Anders Thorsrud |
| Abstract: | The positive relationship between real exchange rates and natural resource income is well understood and studied. However, climate change and the transition to a lower-carbon economy now challenges this relationship. We document this by proposing a novel news media-based measure of climate change transition risk and show that when such risk is high, major commodity currencies experience a persistent depreciation and the relationship between commodity price fluctuations and currencies tends to become weaker. |
| Keywords: | exchange rates, climate, risk, commodities |
| JEL: | C11 C53 D83 D84 E13 E31 E37 |
| Date: | 2020–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2020_18&r= |
| By: | Asongu, Simplice; Nounamo, Yann; Njangang, Henri; Tadadjeu, Sosson |
| Abstract: | The study examines how financial stability modulates the effect of inclusive intermediary education on female employment in the industry for the period 2008-2018 in Sub-Saharan Africa. The empirical evidence is based on Tobit, Ordinary Least Squares (OLS) and Quantile regressions. There are positive interactive or conditional effects between inclusive intermediary education and financial stability in the Tobit, OLS and bottom quantiles estimations. A net positive (negative) effect is apparent in the 10th quantitle (median) of female employment in the industry distribution. Implications are discussed. |
| Keywords: | inclusive education; financial sustainability, gender economic inclusion |
| JEL: | E23 F21 F30 L96 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109848&r= |
| By: | Guglielmo Maria Caporale; Woo-Young Kang; Fabio Spagnolo; Nicola Spagnolo |
| Abstract: | This paper analyses the impact of the Covid-19 pandemic on stock market returns and their volatility in the case of the G20 countries. In contrast to the existing empirical literature, which typically focuses only on either Covid-19 deaths or lockdown policies, our analysis is based on a comprehensive dynamic panel model accounting for the effects of both the epidemiological situation and restrictive measures as well as of fiscal and monetary responses; moreover, instead of Covid-19 deaths it uses a far more sophisticated Covid-19 index based on a Balanced Worth (BW) methodology, and it also takes into account heterogeneity by providing additional estimates for the G7 and the remaining countries (non-G7) separately. We find that the stock markets of the G7 are affected negatively by government restrictions more than the Covid-19 pandemic itself. By contrast, in the non-G7 countries both variables have a negative impact. Further, lockdowns during periods with particularly severe Covid-19 conditions decrease returns in the non-G7 countries whilst increase volatility in the G7 ones. Fiscal and monetary policy (the latter measured by the shadow short rate) have positive and negative effects, respectively, on the stock markets of the G7 countries but not of non-G7 ones. In brief, our evidence suggests that restrictions and other policy measures play a more important role in the G7 countries whilst the Covid-19 pandemic itself is a key determinant in the case the non-G7 stock markets. |
| Keywords: | Covid-19 pandemic, stringency index, Covid-19 index, fiscal policy, shadow rates, stock markets |
| JEL: | C33 G15 E52 E62 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9299&r= |
| By: | Tsukhlo Sergey (Gaidar Institute for Economic Policy) |
| Abstract: | The slow slowdown in demand that commenced in late 2019 forced the industrial sector to hold back output growth in early 2020. Furthermore, in January, the expectations (plans) and forecasts of enterprises maintained a stable level of optimism. And the shortage of personnel forced businessmen to make every effort to retain workers and to plan to expand hiring. |
| Keywords: | Russian economy, industrial sector, industrial output |
| JEL: | C53 E37 L21 L52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gai:ppaper:ppaper-2021-1125&r= |
| By: | Darracq Pariès, Matthieu; Notarpietro, Alessandro; Kilponen, Juha; Papadopoulou, Niki; Zimic, Srečko; Aldama, Pierre; Langenus, Geert; Alvarez, Luis Julian; Lemoine, Matthieu; Angelini, Elena; Lozej, Matija; Berben, Robert-Paul; Marotta, Fulvia; Carroy, Alice; Matheron, Julien; Christoffel, Kai; Montes-Galdón, Carlos; Ciccarelli, Matteo; Paredes, Joan; Consolo, Agostino; Pisani, Massimiliano; Cova, Pietro; Schmöller, Michaela; Damjanović, Milan; Smadu, Andra; de Walque, Gregory; Szörfi, Béla; Dupraz, Stéphane; Turunen, Harri; Gumiel, José Emilio; Verona, Fabio; Haertel, Thomas; Vetlov, Igor; Hurtado, Samuel; Warne, Anders; Júlio, Paulo; Zhutova, Anastasia; Kühl, Michael |
| Abstract: | This paper provides an assessment of the macroeconomic models regularly used for forecasting and policy analysis in the Eurosystem. These include semi-structural, structural and time-series models covering specific jurisdictions and the euro area within a closed economy, small open economy, multi-country or global setting. Models are used as analytical frameworks for building baseline projections and for supporting the preparation of monetary policy decisions. The paper delivers four main contributions. First, it provides a survey of the macroeconomic modelling portfolios currently used or under development within the Eurosystem. Second, it explores the analytical gaps in the Eurosystem models and investigates the scope for further enhancement of the main projection and policy models, and the creation of new models. Third, it reviews current practices in model-based analysis for monetary policy preparation and forecasting and provides recommendations and suggestions for improvement. Finally, it reviews existing cooperation modalities on model development and proposes alternative sourcing and organisational strategies to remedy any knowledge or analytical gaps identified. JEL Classification: C5, E47, E52, E58, F4 |
| Keywords: | central banking., econometric modelling, forecasting and simulation, monetary policy |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021267&r= |
| By: | Miroslav Gabrovski; Victor Ortego-Marti (Department of Economics, University of California Riverside) |
| Abstract: | The co-movement of buyers and vacancies, i.e. the Beveridge Curve, is a key determinant of the cyclical properties of the housing market, as it determines the sign of the correlation between prices and key measures of liquidity such as vacancies (i.e.\ houses for sale), sales, and time-to-sell. As recent work has shown, to account for the core stylized facts of the housing market, search and matching models must be consistent with a positively correlated co-movement of buyers and vacancies, i.e.\ with an upward-sloping Beveridge Curve. This paper provides evidence that buyers and vacancies are positively correlated along the housing cycle, i.e. the Beveridge Curve on the housing market is upward sloping. Using data on vacancies and time-to-sell, we construct a series for buyers and estimate the slope of the Beveridge Curve. This approach requires only one minimal structural assumption: the existence of a matching function. Our findings confirm the positive relationship between buyers and vacancies over the business cycle, i.e. an upward sloping Beveridge Curve. In addition, we provide an estimate of the elasticity of vacancies with respect to buyers. We find that a one percent increase in vacancies is associated with around a two percent increase in buyers, confirming recent findings that buyers are more volatile than houses for sale. We hope that this estimate will help future researchers in this area. |
| Keywords: | Housing market; Search and matching; Beveridge Curve; Housing liquidity |
| JEL: | E2 E32 R21 R31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ucr:wpaper:202113&r= |
| By: | Asongu, Simplice; Odhiambo, Nicholas |
| Abstract: | This research assesses the relevance of enhancing remittances on value added across economic sectors in sub-Saharan Africa for the period 1980 to 2014 using the Generalised Method of Moments. First, no significant net effects on added value to the agricultural sector are apparent. Second, enhancing remittances engenders a positive net effect on added value to the manufacturing sector. Third, there are negative net effects on added value to the service sector. Given that the unfavourable net incidence of remittances to the service sector is associated with a positive marginal or conditional effect, the analysis is extended by computing thresholds at which remittances induce net positive effects on added value to the service sector. The extended analysis shows that a remittance threshold of 48.5% of GDP is the critical mass needed for further enhancement of remittances to engender positive net effects on value added to the service sector. |
| Keywords: | Economic Output; Remitances; Sub-Saharan Africa |
| JEL: | E23 F24 F30 O16 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109835&r= |
| By: | Minho Kim; Munseob Lee; Yongseok Shin |
| Abstract: | Does industrial policy work? This is a subject of long-standing debates among economists and policymakers. Using newly digitized microdata, we evaluate the Korean government's policy that promoted heavy and chemical industries between 1973 and 1979 by cutting taxes and building new industrial complexes for them. We show that output, input use, and labor productivity of the targeted industries and regions grew significantly faster than those of non-targeted ones. While the plant-level total factor productivity also grew faster in targeted industries and regions, the misallocation of resources within them got significantly worse, especially among the entrants, so that the total factor productivity at the industry-region level did not increase relative to the non-targeted industries and regions. In addition, we provide new evidence on how industrial policy reshapes the economy: (i) The establishment size distribution of targeted industries and regions shifted to the right with thicker tails due to the entry of large establishments and (ii) the targeted industries became more important in the economy's input-output structure in the sense that their output multipliers increased significantly more. |
| JEL: | E24 O14 O25 O53 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29252&r= |
| By: | Hanming Fang; Dirk Krueger |
| Abstract: | The Affordable Care Act (ACA) is one of the most important reforms of the US health insurance system since the introduction of Medicare. Since employment is a main source of health insurance for the working age population in the United States, this sweeping health insurance reform also has important implications for the labor market and the macro economy. In this paper, we survey the prototype models that are used in the macro and labor literature, extended to integrate health and health insurance, to study the short- and long-run consequences of the ACA. We also suggest open areas for future research. |
| JEL: | E62 H51 I1 I13 I18 J33 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29240&r= |
| By: | Seth G. Benzell; Laurence J. Kotlikoff; Guillermo LaGarda; Victor Yifan Ye |
| Abstract: | This paper develops a 17-region, 3-skill group, overlapping generations, computable general equilibrium model to evaluate the global consequences of automation. Automation, modeled as capital- and high-skill biased technological change, is endogenous with regions adopting new technologies when profitable. Our approach captures and quantifies key macro implications of a range of foundational models of automation. In our baseline scenario, automation has a moderate effect on regional outputs and a small effect on world interest rates. However, it has a major impact on inequality, both wage inequality within regions and per capita GDP inequality across regions. We examine two policy responses to technological change -- mandating use of the advanced technology and providing universal basic income to share gains from automation. The former policy can raise a region's output, but at a welfare cost. The latter policy can transform automation into a win-win for all generations in a region. |
| JEL: | E1 E23 F43 O31 O33 O4 O41 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29220&r= |
| By: | TANSEL, AYSIT; ÖZTÜRK, CEYHAN; ERDIL, ERKAN |
| Abstract: | We examine the relationship between wealth and health through prominent growth indicators and cognitive ability. Cognitive ability is represented by nutritional status. The proxy variable for nutritional status is BMI. We use the reduced form equation in the cubic specification of time preference rate, strongly related to cognitive ability, to estimate this relationship. The growth indicators utilized are GDP per capita, schooling, overall and manufacturing productivities, and savings. We estimate our models using the FE, GMM estimators, and long difference OLS and IV estimation through balanced panel data for the 1980-2009 period. We conclude that the relationship between all prominent growth indicators and BMI is inverse U-shaped. In other words, cognitive ability has a significant potential to progress growth and economic development only in a healthy status. |
| Keywords: | Cognitive ability, time preference rate, BMI, productivity, health, schooling, growth, economic development |
| JEL: | E21 I15 I25 J24 Q11 Q18 |
| Date: | 2021–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109738&r= |
| By: | Nickel, Christiane; Fröhling, Annette; Álvarez, Luis J.; Willeke, Caroline; Zevi, Giordano; Osbat, Chiara; Ganoulis, Ioannis; Koester, Gerrit; Lis, Eliza; Peronaci, Romana; Hahn, Elke; Henkel, Lukas; Costain, James; Hoeberichts, Marco; Eiglsperger, Martin; Jonckheere, Jana; Kapatais, Demetris; Gautier, Erwan; Goldhammer, Bernhard; Rumler, Fabio; Kouvavas, Omiros; Krasnopjorovs, Olegs; Strasser, Georg; Lünnemann, Patrick; Trezzi, Riccardo; Martins, Fernando; Vilmi, Lauri; Vlad, Aurelian; O'Brien, Derry; Westermann, Thomas; Popova, Dilyana; Wintr, Ladislav; Porqueddu, Mario; Zekaite, Zivile; Roma, Moreno; Kondelis, Evripides; Knetsch, Thomas; Conflitti, Cristina; Kalantzis, Yannick; Herzberg, Julika; Beka, Jan; van Overbeek, Fons; Schwind, Patrick; Sosič, Nika; Messner, Teresa; Wauters, Joris; Mociunaite, Laura; Weinand, Sebastian |
| Abstract: | This paper – which takes into consideration overall experience with the Harmonised Index of Consumer Prices (HICP) as well as the improvements made to this measure of inflation since 2003 – finds that the HICP continues to fulfil the prerequisites for the index underlying the ECB’s definition of price stability. Nonetheless, there is scope for enhancing the HICP, especially by including owner-occupied housing (OOH) using the net acquisitions approach. Filling this long-standing gap is of utmost importance to increase the coverage and cross-country comparability of the HICP. In addition to integrating OOH into the HICP, further improvements would be welcome in harmonisation, especially regarding the treatment of product replacement and quality adjustment. Such measures may also help reduce the measurement bias that still exists in the HICP. Overall, a knowledge gap concerning the exact size of the measurement bias of the HICP remains, which calls for further research. More generally, the paper also finds that auxiliary inflation measures can play an important role in the ECB’s economic and monetary analyses. This applies not only to analytical series including OOH, but also to measures of underlying inflation or a cost of living index. JEL Classification: C43, C52, C82, E31, E52 |
| Keywords: | HICP inflation, inflation measurement, measurement bias, Monetary policy review, owner-occupied housing, underlying inflation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021265&r= |
| By: | Hajime Tomura (Faculty of Political Science and Economics, Waseda University, 1-6-1 Nishiwaseda, Shinjyuku-ku, Tokyo, 169-8050, Japan.) |
| Abstract: | Daily estimates of the effective reproduction number for new coronavirus based on reporting dates are regressed on real household expenditures per household on eating out, traveling, and apparel shopping, as well as mobility in public transportation, using publicly available daily nationwide data from February 15, 2020, to February 1, 2021 in Japan. The effects of absolute humidity, the declaration of states of emergency, and the year-end and new-year holiday period are controlled through dummy variables. The lagged infectious effect of economic activities due to incubation periods is also taken into account. Estimated regression coeffcients indicate that real household ex- penditures for cafe and bar had larger effects on the effective reproduction number per value of spending than the other types of household expenditures in explanatory vari- ables during the sample period. Thus, a loss of aggregate demand is minimized if the effective reproduction number is lowered by restricting only household consumption of cafe and bar. The posterior means of simulations based on the estimated regression coeffcients, however, imply that even if a self-restraint on packaged domestic travels and an endogenous decline in mobility are taken into account, it will be necessary to cut household consumption of cafe and bar by more than 80% of the 2019 level, in order to keep the e ective reproduction number below one on average. |
| Keywords: | new coronavirus; effective reproduction number; consumption; mobility. |
| JEL: | E21 I18 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2107&r= |
| By: | Cappiello, Lorenzo; Holm-Hadulla, Fédéric; Maddaloni, Angela; Mayordomo, Sergio; Unger, Robert; Arts, Laura; Meme, Nicolas; Asimakopoulos, Ioannis; Migiakis, Petros; Behrens, Caterina; Moura, Alban; Corradin, Stefano; Nicoletti, Giulio; Ferrando, Annalisa; Niemelä, Juha; Giuzio, Margherita; Petersen, Annelie; Golden, Brian; Pierrard, Olivier; Guazzarotti, Giovanni; Ratnovski, Lev; Gulan, Adam; Schober-Rhomberg, Alexandra; Hertkorn, Andreas; Sigmund, Michael; Kaufmann, Christoph; Soares, Carla; Avakian, Lucía Kazarian; Stupariu, Patricia; Koskinen, Kimmo; Taboga, Marco; Sédillot, Franck; Tavares, Luis Miguel; Matilainen, Jani; Boom, Emme Van den; Mazelis, Falk; Zaghini, Andrea; McCarthy, Barra |
| Abstract: | The financing structure of the euro area economy has evolved since the global financial crisis with non-bank financial intermediation taking a more prominent role. This shift affects the transmission of monetary policy. Compared with banks, non-bank financial intermediaries are more responsive to monetary policy measures that influence longer-term interest rates, such as asset purchases. The increasing role of debt securities in the financing structure of firms also leads to a stronger transmission of long-rate shocks. At the same time, short-term policy rates remain an effective tool to steer economic outcomes in the euro area, which is still highly reliant on bank loans. Amid a low interest rate environment, the growth of market-based finance has been accompanied by increased credit, liquidity and duration risk in the non-bank sector. Interconnections in the financial system can amplify contagion and impair the smooth transmission of monetary policy in periods of market distress. The growing importance of non-bank financial intermediaries has implications for the functioning of financial market segments relevant for monetary policy transmission, in particular the money markets and the bond markets. JEL Classification: E4, E5, G2, G38 |
| Keywords: | Asset purchases, Financial markets stress, Low interest rates, Monetary policy transmission, Non-bank intermediation, Risk-taking |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021270&r= |
| By: | Lodge, David; Pérez, Javier J.; Albrizio, Silvia; Everett, Mary; De Bandt, Olivier; Georgiadis, Georgios; Ca' Zorzi, Michele; Lastauskas, Povilas; Carluccio, Juan; Parrága, Susana; Carvalho, Daniel; Venditti, Fabrizio; Cova, Pietro; Attinasi, Maria Grazia; Fontagné, Lionel; Mozzanica, Mirco Balatti; Giron, Celestino; Banerjee, Biswajit; Gunnella, Vanessa; Baumann, Ursel; Hemmerlé, Yannick; Bricongne, Jean-Charles; Jochem, Axel; Chiacchio, Francesco; Karjanlahti, Kristiina; Coimbra, Nuno; Kataryniuk, Ivan; Del Giudice, Davide; Korhonen, Iikka; De Luigi, Clara; Kühnlenz, Markus; Dimitropoulou, Dimitra; Labhard, Vincent; Di Nino, Virginia; Le Mezo, Helena; Dorrucci, Ettore; Meinen, Philipp; Eichler, Eric; Mattias, Nilsson; Feldkircher, Martin; Osbat, Chiara; Felettigh, Alberto; Quaglietti, Lucia; Reininger, Thomas; Stumpner, Sebastian; Schmidt, Julia; Van Schaik, Ilona; Schmitz, Martin; Wacket, Helmut; Serafini, Roberta; Zumer, Tina; Siena, Daniele |
| Abstract: | This paper assesses how globalisation has shaped the economic environment in which the ECB operates and discusses whether this warrants adjustments to the monetary policy strategy. The paper first looks at how trade and financial integration have evolved since the last strategy review in 2003. It then examines the effects of these developments on global productivity growth, the natural interest rate (r*), inflation trends and monetary transmission. While trade globalisation initially boosted productivity growth, this effect may be waning as trade integration slows and market contestability promotes a winner-takes-all environment. The impact of globalisation on r* has been ambiguous: downward pressures, fuelled by global demand for safe assets and an increase in the propensity to save against a background of rising inequality, are counteracted by upward pressures, from the boost to global productivity associated with greater trade integration. Headline inflation rates have become more synchronised globally, largely because commodity prices are increasingly determined by global factors. Meanwhile, core inflation rates show a lower degree of commonality. Globalisation has made a rather modest contribution to the synchronised fall in trend inflation across countries and contributed only moderately to the reduction in the responsiveness of inflation to changes in activity. Regarding monetary transmission, globalisation has made the role of the exchange rate more complex by introducing new mechanisms through which it affects financial conditions, real activity and price dynamics. Against the background of this discussion, the paper then examines the implications for the ECB’s monetary policy strategy. In doing so, it asks two questions. How is the ECB’s economic and monetary analysis affected by globalisation? And how does globalisation influence the choice of the ECB’s monetary policy objective and instruments? ... JEL Classification: E58, F42, F44, F62, F65 |
| Keywords: | Globalisation, inflation, monetary policy strategy, productivity, r* |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021263&r= |
| By: | Cuciniello, Vincenzo; di Iasio, Nicola |
| Abstract: | Using loan-level data covering almost all loans to households and businesses from banks in Italy over the past 20 years, we offer new empirical evidence that credit declines during a recession primarily because of the reduction in the net creation of borrowers. We then build on a flow approach to decompose the net creation of borrowers into gross flows across three statuses: (i) borrower, (ii) applicant and (iii) neither borrower nor applicant (i.e. inactive firms or households in the bank credit market). Along the macroeconomic dimension of these gross flows, we document four cyclical facts. First, fluctuations in the number of new borrowers (inflows) account for the bulk of volatility in the net creation of borrowers. Second, the volatility of borrower inflows is two times as large as the volatility of obligors exiting from the credit market (outflows). Third, borrower inflows are highly procyclical and tend to lead the business cycle. Fourth, decreases in the probability of a match between borrower and lender during recessions are a leading explanation for the role of borrower inflows. JEL Classification: E51, E32, E44 |
| Keywords: | Borrower flows, business cycles, credit cycles, credit market participation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkwps:2021125&r= |
| By: | Laczó, Ferenc |
| Abstract: | In this study the concept of commodities is formulated according to the utility theory; following the principle of price elasticity of demand, differences of uncompensated and compensated price changes will be clearly interpreted; as the uncompensated and compensated price changes have different averaging properties, so two different CPI formulas need to be defined; arbitrary price changes are broken down into uncompensated and compensated price change to obtain a complete, dual CPI formula. |
| Keywords: | Economic Value of a Commodity; Uncompensated vs. Compensated Price Change; Common Units in Measurements; Dual CPI Formula; Supply-Driven and Demand-Driven Economy |
| JEL: | E31 |
| Date: | 2021–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109810&r= |
| By: | Datta, Soumya (South Asian University, New Delhi); C. Saratchand (Satyawati College, University of Delhi) |
| Abstract: | We set up a macroeconomic epidemiological (SIR) model to evaluate the role of vaccination in the interactive dynamics of COVID-19 and the economy. We analytically examine the existence and local stability properties of the four steady states and find strong support for a locally stable interior equilibrium where the economy grows in the continued presence of the pandemic. We also find that it might be possible to attain a pandemic-free economic revival only if the rate of recovery from infection is faster than a threshold level. We examine, both analytically and numerically, the impact of various types of policy interventions, including non-pharmaceutical interventions involving restrictions on economic activities (like lockdowns and travel restrictions) as well as speeding up the rate of vaccination. We find that under reasonable parameter configurations, a combination of large-scale vaccination as well as non-pharmaceutical interventions are required to meet the twin objectives of controlling the pandemic and reviving the economy. |
| Keywords: | COVID-19 ; health ; stability ; vaccination ; non pharmaceutical intervention |
| JEL: | E10 E61 I10 I18 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:21/352&r= |
| By: | Anastasios Evgenidis (Newcastle University); Masashige Hamano (Waseda University); Wessel N. Vermeulen (Newcastle University) |
| Abstract: | We apply a Bayesian Panel VAR (BPVAR) and DSGE approach to study the regional effects of the 2011 Great East Japan Earthquake. We disentangle the persistent fall in electricity supply following the Fukushima accident, from the immediate but more temporary production shock attributable to the natural disaster. Specifically, we estimate the contribution of the electricity fall on the regions economic recovery. First, we estimate a BPVAR with regional-level data on industrial production, prices, and trade, to obtain impulse responses of the natural disaster shock. We find that all regions experienced a strong and persistent decline in trade, and long-lasting disruptions on production. Inflationary pressures were strong but short-lived. Second, we present a DSGE model that can capture key observations from this empirical model, and provide theoretical impulse response functions that distinguish the immediate production shock, from the persistent electricity supply shock. Thirdly, in line with the predictions from the theoretical model, counterfactual analysis via conditional forecasts based on our BPVAR reveals that the Japanese regional economies, particularly the hit regions, did experience a loss in production and trade due to the persistent fall in electricity supply. |
| Keywords: | Social Choice natural disasters; Bayesian Panel VAR; DSGE; regional spill-overs; counterfactual analysis |
| JEL: | E3 E6 Q54 R1 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2111&r= |
| By: | Roth, Felix; Sen, Ali |
| Abstract: | This contribution analyzes the impact of intangible capital on labor productivity growth across countries at the aggregate and sectoral levels by employing an econometric growth-accounting approach. First, our results show that intangible capital deepening accounts for around 40 percent of labor productivity growth at both the aggregate and sectoral level. Second, we find that this positive impact of intangible capital on productivity growth at both levels of aggregation is driven by investments in economic competencies, the only intangible group not covered in the national accounts. Third, our results reveal deep sectoral heterogeneities regarding investments and productivity effects of different intangible types. These findings have important implications for future EU industrial policies and are directly relevant to the EU's efforts to close its productivity gap with the US. |
| Keywords: | intangible capital,labor productivity growth,cross-country sectoral panel analysis,manufacturing,market services,EU |
| JEL: | C23 E22 L16 L60 L80 O47 O52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:uhhhdp:10&r= |
| By: | Laura Leal; Haaris Mateen; Makoto Nirei; José A. Scheinkman |
| Abstract: | Nirei and Scheinkman (2021) proposed an equilibrium model of price adjustments with menu-costs with a finite number of firms and derived a “reproduction number” for repricing and a limit functional form for the distribution of the number of simultaneously price-adjusting firms. We show that the distribution of price-changes in data from the Billion Prices Project is well fitted by this functional form and exhibits a reproduction number that is close to unity, indicating that complementarity in price-changes plays a major role in repricings. |
| JEL: | E31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29236&r= |
| By: | Tandon, Anjali |
| Abstract: | The Budget 2020-21 can be considered as transitional in nature as it seems to direct money flows to business through reforms on corporate tax. Apparently, the government is commanding a model of investment driven economic growth for long-term sustainability. However, under current crisis with regard to jobs, unemployment, demand depression and low consumption, the economy requires immediate stimulus package, which is absent in the budget. There seems to be an attempt to energise consumption through tax benefits on dis-saving. This however dis-regards the link between savings and consumption, as the former are used to finance consumer durables such as cars, electronics and real estate purchase. The importance of savings cannot be overstated in an economy where there are no provisions for universal healthcare, social security, and unemployment allowances. |
| Keywords: | Disinvestment, Subsidy, Tax Reform, Union Budget, India |
| JEL: | E6 H6 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104427&r= |
| By: | Cesar Salinas (Indiana University) |
| Abstract: | Developing countries are facing the Covid-19 epidemic with particular challenges, such as their economic and labor force composition. In this research I will extend the so-called SIR-macro model with demand and supply effects to study how the size of the informal sector impact the ability of these countries to respond to the epidemic. Lockdown policies are useful to control the health crisis but these are less effective in informal markets. As a result, infection and death rates will not decrease as expected, and since informal activities are not counted in the calculation of the GDP, this would exacerbate the size of the recession. Finally, in order to generate similar results to an economy with only formal markets, the economy with informal markets has to implement more severe containment policies. |
| Keywords: | COVID-19, informality, recessions, SIR macro model |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2021-002&r= |
| By: | Edgar Caicedo-García; Ramón Hernández-Ortega; Nicolás Martínez-Cortés |
| Abstract: | Este documento ofrece un ejercicio que cuantifica el máximo impacto posible, en términos contables, que tendrían sobre el nivel del IPC algunos alivios de precios decretados por el Gobierno de Colombia al inicio de la pandemia del Covid-19. Dicho impacto no necesariamente coincidiría con las cifras oficiales del IPC debido a la presencia de múltiples factores que también inciden sobre estos precios y a algunos supuestos realizados. La mayoría de estos alivios se encuentran vigentes y expirarán entre agosto de este año y finales del año 2022. El ejercicio implica estimar el nivel de impuestos indirectos cobrados en la canasta del consumidor y supone que los alivios contemplados se transmiten plenamente al IPC. Por otro lado, esta misma metodología se aplica para intentar cuantificar el efecto de los días sin IVA. Los resultados sugieren que los alivios contemplados tienen un efecto máximo cercano al 1,9% sobre el nivel del IPC total y que el impacto inflacionario del día sin IVA es pequeño, bajo el supuesto de que la toma de precios por parte del DANE es de alta frecuencia. **** ABSTRACT: This document offers an exercise that quantifies on the Colombia CPI the máximum possible impact in accounting terms of some price reliefs decreed by the national government. This impact would not necessarily coincide with the official CPI figures, due to the presence of multiple factors that also affect these prices and some assumptions. Most of these reliefs will expire between August of 2020 and the end of 2022. The exercise involves approximations of the tax level of the consumer basket and assumes that the reliefs are fully transmitted to the CPI. On the other hand, this same methodology was applied to quantify the effect of “day without VAT” events. The results suggest that the reliefs sum a máximum effect close to 1,9% on the total CPI. On the other hand, we found that the influence of the day without VAT is small, under the assumption that DANE collects prices with high frequency in the month. |
| Keywords: | Inflación, alivios sobre precios, Covid-19, Inflation, price reliefs, Covid-19 |
| JEL: | E31 E37 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1172&r= |
| By: | Svartzman Romain,; Espagne Etienne,; Gauthey Julien,; Hadji-Lazaro Paul,; Salin Mathilde,; Allen Thomas,; Berger Joshua,; Calas Julien,; Godin Antoine,; Vallier Antoine |
| Abstract: | This paper contributes to an emerging literature aimed at uncovering the linkages between biodiversity loss and financial instability, by exploring biodiversity-related financial risks (BRFR) in France. We first build on previous studies and propose an analytical framework to understand BRFR, emphasizing the complexity involved and the limited substitutability of natural capital. We then provide quantitative estimates of dependencies and impacts of the French financial system on biodiversity. We find that 42% of the value of securities held by French financial institutions comes from issuers that are highly or very highly dependent on one or more ecosystem services. We also find that the accumulated terrestrial biodiversity footprint of these securities is comparable to the loss of at least 130,000 km² of “pristine” nature, which corresponds to the complete artificialization of 24% of the area of metropolitan France. Finally, we suggest avenues for future research through which these estimates could feed into future assessments of physical and transition risks. |
| Keywords: | Biodiversity; Financial stability; Environmental risks; Scenario analysis; Financial markets and the macroeconomy; Valuation of ecosystem services. |
| JEL: | C67 D81 E44 G32 Q51 Q57 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:826&r= |
| By: | Bart Hobijn; Ayşegül Şahin |
| Abstract: | We investigate the source, magnitude, and unevenness of the procyclical forces that shape labor force participation, i.e., the participation cycle, which are important for the implementation of the maximum employment mandate. We show that these forces can be analyzed in real time using a flow decomposition of the changes in the labor force participation rate. The decomposition reveals that the source of the participation cycle is fluctuations in job-loss and job-finding rates, rather than cyclical movements in labor force entry and exit rates. The magnitude of the participation cycle is large. Cyclical downward pressures on employment from participation are two-thirds that of unemployment. Moreover, the participation cycle delays the recovery in employment because it lags the unemployment cycle. It also amplifies the unevenness of the impact of recessions. Groups that see large increases in their unemployment rates also experience more pronounced participation cycles. Despite differences in their magnitudes, the source of the participation cycle is the same for all groups. Application of our method to the COVID-19 Recession suggests that, as of June 2021, the bulk of the drop in the participation rate since the onset of the pandemic is cyclical and that the cyclical recovery in participation likely will trail that of the unemployment rate. |
| JEL: | J20 J6 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29222&r= |
| By: | Solomon H. Tarlin |
| Abstract: | In many advanced economies around the world, the share of transactions conducted using cash payments has been falling over the past several years. This change has likely been because of a combination of shifting consumer tastes, improvements in payment technology (specifically credit and debit cards), and the rapid growth of online transactions. As the decline in the cash share has led to some businesses choosing not to accept cash payments, many policymakers have discussed interventions to ensure access to the modern economy for consumers who prefer to pay in cash. Despite the reduced use of cash as a means of payment, currency in circulation has continued to increase in many countries, including the United States. This increase suggests that cash is still providing utility as a store of value. This paper surveys literature and data on the use of cash as a means of payment and discusses how and why the cash share is falling in the United States and around the world. Furthermore, it also discusses the opportunities and challenges of a transition away from cash for consumers, businesses, and society. |
| Keywords: | cashless society; cash payments; electronic payments |
| JEL: | E42 G20 G21 |
| Date: | 2021–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpcd:93058&r= |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy); Camara K. Obeng (University of Cape Coast, Cape Coast, Ghana); Peter Y. Mwinlaaru (University of Cape Coast, Cape Coast, Ghana) |
| Abstract: | Efforts to spur growth in sub-Sahara Africa have been intensified amid structural and institutional constraints. Tax revenue, the chief source of funding for developmental purposes in SSA remains low and unstable. In fact, the SSA sub-region finds it difficult generating tax revenue up to 20 per cent of GDP. One factor that has not caught the attention of policymakers in terms of its impact on tax revenue performance is exchange rate volatility. Using macrodata spanning 1984 to 2017 for 21 countries, we provide empirical evidence from a panel autoregressive distributed lag technique to show that exchange rate volatility is directly harmful to tax revenue performance, and indirectly through trade openness. |
| Keywords: | Cointegration, Exchange Rate Volatility, GARCH, Sub-Sahara Africa, Tax Revenue |
| JEL: | E5 H2 H7 F6 O4 Q55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/031&r= |
| By: | Sakib, Mohammad Nazmus; pande, Saikat; kumar, Rimon; Arif, Dr. Kazi mostafa |
| Abstract: | The main objective of this study was to find out the impact of Chinese FDI on the economic growth of Bangladesh where yearly time series data is used over a period from 1997 to 2020. To obtain those objectives, this study implies the Johansen Co-integration test and vector error correction model as statistical techniques. This study explores that there is a positive and significant long-run relationship among Chinese FDI, Total FDI, Openness of trade, and economic growth of Bangladesh but those variables have no impact on Bangladesh economic growth in the short run. These results also identify there is a long-term granger causality occurring from Chinese FDI, TFDI, and trade openness to the GDP of Bangladesh. Our estimating error correction results is -.72 which conclude that in the long run, the economy is restored around .72 percent of the previous year's disequilibrium within the model and normalized co-integrating coefficient forecast a one percent increase in CFDI and one percent increase in TFDI elicit 0.04% and 0.17% increase in GDP respectively. So that, for enhancing GDP and economic development of Bangladesh our government should influence to bring out the Chinese FDI in our country and make effective policy that can create a strong long-run relationship between two countries. |
| Keywords: | Chinese FDI, Cointegration, error correction model, Bangladesh economic growth |
| JEL: | E22 E27 O1 |
| Date: | 2021–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109654&r= |
| By: | Patrick Fève (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Pablo Garcia Sanchez (Unknown); Alban Moura (Unknown); Olivier Pierrard (Unknown) |
| Abstract: | We augment a simple Real Business Cycle model with financial intermediaries that may default on their liabilities and a financial friction generating social costs of default. We derive a closed-form solution for the general equilibrium of the economy, providing analytical results. Endogenous default generates a negative skew for aggregate variables and a positive skew for credit spreads, as documented in the empirical literature. Larger financial frictions strengthen asymmetry, which amplifies the welfare cost of fluctuations. Macro-prudential regulation alleviates both the cost of fluctuations and business-cycle asymmetry, at the expense of a steady-state distortion. Finally, we prove analytically the existence of an optimal level of regulation, which increases with the size of the financial friction. |
| Keywords: | Real Business Cycle model,Default,Financial frictions,Asymmetry,Optimal regulation |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03346173&r= |
| By: | Matheus R. Grasselli; Alexander Lipton |
| Abstract: | We review different classes of cryptocurrencies with emphasis on their economic properties. Pure-asset coins such as Bitcoin, Ethereum and Ripple are characterized by not being a liability of any economic agent and most resemble commodities such as gold. Central bank digital currencies, at the other end of the economic spectrum, are liabilities of a Central Bank and most resemble cash. In between, there exist a range of so-called stable coins, with varying degrees of economic complexity. We use balance sheet operations to highlight the properties of each class of cryptocurrency and their potential uses. In addition, we propose the basic structure for a macroeconomic model incorporating all the different types of cryptocurrencies under consideration. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.10177&r= |
| By: | Knut Are Aastveit; Tuva Marie Fastbø; Eleonora Granziera; Kenneth Sæterhagen Paulsen; Kjersti Næss Torstensen |
| Abstract: | We use a novel data set covering all domestic debit card transactions in physical terminals by Norwegian households, to nowcast quarterly Norwegian household consumption. These card payments data are free of sampling errors and are available weekly without delays, providing a valuable early indicator of household spending. To account for mixed-frequency data, we estimate various mixed-data sampling (MIDAS) regressions using predictors sampled at monthly and weekly frequency. We evaluate both point and density forecasting performance over the sample 2011Q4-2020Q1. Our results show that MIDAS regressions with debit card transactions data improve both point and density forecast accuracy over competitive standard benchmark models that use alternative high-frequency predictors. Finally, we illustrate the beneï¬ ts of using the card payments data by obtaining a timely and relatively accurate now cast of the ï¬ rst quarter of 2020, a quarter characterized by heightened uncertainty due to the COVID-19 pandemic. |
| Keywords: | debit card transaction data, nowcasting, forecast evaluation, COVID-19 |
| JEL: | C22 C52 C53 E27 |
| Date: | 2020–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2020_17&r= |
| By: | Awolaja, Oladapo G.; Yaya, OlaOluwa S; Vo, Xuan Vinh; Ogbonna, Ahamuefula; Joseph, Solomon O. |
| Abstract: | Unemployment hysteresis of the Middle East and North African (MENA) countries is investigated under a battery of unit root testing frameworks in the extant literature, including a recently proposed Panel SUR Dickey-Fuller-like unit root test with Fourier and Exponential Smooth Transition Regression (ESTR) nonlinearities. The Fourier function allows for smooth nonlinear breaks, while the ESTR nonlinearity allows for instantaneous breaks. The two nonlinearity types make the recent approach quite appealing. It has, however, been scarcely applied to empirically test unemployment hysteresis hypothesis. Although we find conflicting stances from ADF, FADF and ADF-SB testing frameworks, evidence of unemployment hysteresis effect in Lebanon is consistent across all three tests. The ADF and FADF tests confirm the hysteresis hypothesis in Kuwait and Lebanon, while FADF-SB rejects the unemployment hysteresis hypothesis across all the 19 MENA countries. The results from the KSS and FKSS unit root testing frameworks consistently affirmed the hysteresis effect in Oman and Turkey, while there are mixed stances for Kuwait and Lebanon. The results from SURADF and SURKSS only support the hysteresis hypothesis in Turkey, while the same is confirmed only for Bahrain under the SURFADF and SURFKSS testing frameworks. Unemployment hysteresis hypothesis is confirmed for 12 (about 63.15% of the total number considered) MENA economies. |
| Keywords: | Unemployment rate; MENA countries; Fourier function; Seemingly Unrelated Regression; Panel data; Unit root test |
| JEL: | C22 C23 E24 J64 |
| Date: | 2021–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109831&r= |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy) |
| Abstract: | The debate on the need for Sub-Saharan African (SSA) countries to foster inclusive growth has intensified following the coming into force of the African Continental Free Trade Area (AfCFTA), and the emergence of the coronavirus pandemic. A conspicuous lacuna in the literature is a lack of rigorous empirical work(s) exploring: (1) the joint effect of economic integration and resource allocation, and (2) social equity policies on inclusive growth in SSA. Using data from the World Bank’s World Development Indicators and the Global Consumption and Income Project (1980–2019) for 43 SSA countries, I provide evidence robust to several econometric techniques the fixed-effect, random-effect, and the system generalized method of moments estimators to show that: (1) though economic integration induces inclusive growth, the effect is higher in the presence of greater financial deepening and productive government expenditure; (2) relative to economic integration, social equity policies are rather remarkable in enhancing inclusive growth. Policy recommendations are provided in line with the AfCFTA and the reversals of welfare gains due to the coronavirus pandemic. |
| Keywords: | AfCFTA, Economic Integration, Financial Deepening, Globalisation, Inclusive Growth, Sub-Saharan Africa, Social Protection, Social Inclusion |
| JEL: | E6 F14 F15 F6 H5 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/045&r= |
| By: | Caselli, Francesco; Koren, Miklos; Lisicky, Milan; Tenreyro, Silvana |
| Abstract: | A widely held view is that openness to international trade leads to higher income volatility, as trade increases specialization and hence exposure to sector-specific shocks. Contrary to this common wisdom, we argue that when country-wide shocks are important, openness to international trade can lower income volatility by reducing exposure to domestic shocks and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and show that in recent decades international trade has reduced economic volatility for most countries. |
| Keywords: | 313164; 240852 |
| JEL: | E32 F41 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101615&r= |
| By: | Tasso Adamopoulos; Loren Brandt; Jessica Leight; Diego Restuccia |
| Abstract: | We use household-level panel data from China and a quantitative framework to document the extent and consequences of factor misallocation in agriculture. We find that there are substantial within-village frictions in both the land and capital markets linked to land institutions in rural China that disproportionately constrain the more productive farmers. These frictions reduce aggregate agricultural productivity by affecting two key margins: (1) the allocation of resources across farmers (misallocation) and (2) the allocation of workers across sectors, in particular the type of farmers who operate in agriculture (selection). Selection substantially amplifies the productivity effect of distortionary policies by affecting occupational choices that worsen average ability in agriculture. |
| Keywords: | agriculture, misallocation, selection, productivity, China |
| JEL: | O11 O14 O4 E02 Q1 |
| Date: | 2021–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-707&r= |
| By: | Fernando Arias-Rodríguez; Julián A. Parra-Polanía |
| Abstract: | Analizamos los efectos que tendría el envejecimiento poblacional en las próximas décadas sobre el sistema pensional colombiano y sobre diferentes variables macroeconómicas. También consideramos el impacto de implementar gradualmente algunas reformas (aumento en la edad de pensión, reducción en la tasa de reemplazo y aumento de la porción de vida laboral considerada para el cálculo de la pensión del régimen de reparto). La disminución en la tasa de crecimiento poblacional afectaría considerablemente los retornos reales del régimen de reparto y, por tanto, para mantener las condiciones actuales de pensión de ese régimen se requeriría un incremento significativo en el cobro de impuestos. En contraste, con la implementación de las reformas analizadas, poco a poco se irían reduciendo los subsidios otorgados en el régimen de reparto. La consecuente disminución de impuestos y el aumento del ahorro en la economía, y por tanto del nivel de capital, incrementarían la productividad del trabajo y producirían tanto una subida del salario real como una caída de la tasa de interés real. Como consecuencia de las reformas y sus efectos se reducirían en gran medida las diferencias de bienestar entre regímenes pensionales y aumentaría, en el largo plazo, el bienestar de todos los individuos, tanto en el régimen de ahorro como en el de reparto. **** ABSTRACT: We analyze the effects of population aging in the next decades on the Colombian pension system and on several macroeconomic variables. We also consider the impact of several reforms that are gradually implemented in the economy (increasing the retirement age, reducing the replacement rate, and increasing the number of years considered in calculating pensions in the Pay-As-You-Go regime (PAYG)). A diminishing population growth rate would considerably affect the real returns of the PAYG; therefore, in maintaining the current pension conditions under such a regime, significant increases on taxes would be required. Conversely, with the implementation of the parametric reforms considered, the subsidies granted under PAYG regime would slowly be reduced. The resulting lower tax rates and greater savings in the economy, hence a greater capital stock, would increase the labor productivity as well as the real salary. It would also decrease the real interest rate. The welfare gap between pensión regimes could shrink because of the reforms and their effects. In the long run, the welfare of all individuals, irrespective of their pension regime choice, would increase. |
| Keywords: | pensiones, reforma pensional, análisis macroeconómico, envejecimiento poblacional, régimen de reparto, régimen de ahorro, pensions, pension reform, macroeconomic analysis, population aging, PAYG regime, Fully Funded regime |
| JEL: | H55 E60 J11 J26 C68 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1173&r= |
| By: | Federico Guglielmo Morelli; Karl Naumann-Woleske; Michael Benzaquen; Marco Tarzia; Jean-Philippe Bouchaud |
| Abstract: | In the General Theory, Keynes remarked that the economy's state depends on expectations, and that these expectations can be subject to sudden swings. In this work, we develop a multiple equilibria behavioural business cycle model that can account for demand or supply collapses due to abrupt drops in consumer confidence, which affect both consumption propensity and investment. We show that, depending on the model parameters, four qualitatively different outcomes can emerge, characterised by the frequency of capital scarcity and/or demand crises. In the absence of policy measures, the duration of such crises can increase by orders of magnitude when parameters are varied, as a result of the "paradox of thrift". Our model suggests policy recommendations that prevent the economy from getting trapped in extended stretches of low output, low investment and high unemployment. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.09386&r= |
| By: | Matej Bajgar (Center for Economic Research and Graduate Education - Economics Institute); Chiara Criscuolo (OECD); Jonathan Timmis (The World Bank) |
| Abstract: | This paper presents new evidence on the growing scale of big businesses in the United States, Japan, and Europe. It finds broad evidence of rising industry concentration across the majority of countries and sectors over the period 2002 to 2014. Rising concentration is strongly associated with intensive investment in intangibles, particularly innovative assets, software, and data. This relationship appears to be stronger in more globalised and digital-intensive industries. The results are consistent with intangibles disproportionately benefiting large firms and enabling them to scale up and increase market shares. We find nuanced implications of these new business models for competition – rising markups and reduced churning amongst the top firms, but falling industry prices. |
| Keywords: | Competition, Industry and entrepreneurship, Innovation |
| JEL: | E22 L1 L25 |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2021/12-en&r= |
| By: | Afees A. Salisu (Centre for Econometric & Allied Research, University of Ibadan, Ibadan, Nigeria; Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Riza Demirer (Department of Economics and Finance, Southern Illinois University Edwardsville, Edwardsville, IL 62026-1102, USA); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | This paper adds a novel perspective to the literature by exploring the predictive performance of two relatively unexplored indicators of financial conditions, i.e. financial turbulence and systemic risk, over stock market volatility in a sample of seven emerging and advanced economies. The two financial indicators that we utilize in our predictive setting provide a unique perspective to market conditions as they directly relate to portfolio performance metrics from both a volatility and co-movement perspective and, unlike other macro-financial indicators of uncertainty or risk, can be integrated into diversification models within a forecasting and portfolio design setting. Since the two predictors are available at weekly frequency, and we want to provide forecast at the daily level, we use the generalized autoregressive conditional heteroskedasticity-mixed data sampling (GARCH-MIDAS) approach. The results suggest that incorporating the two financial indicators (singly and jointly) indeed improves the out-of-sample predictive performance of stock market volatility models across both the short and long horizons. We observe that the financial turbulence indicator that captures asset price deviations from historical patterns does a better job when it comes to the out-of-sample prediction of future returns compared to the measure of systemic risk, captured by the absorption ratio. The outperformance of the financial turbulence indicator implies that unusual deviations in not only asset returns, but also correlation patterns clearly play a role in the persistence of return volatility. Overall, the findings provide an interesting opening for portfolio design purposes in that financial indicators that are directly associated with portfolio diversification performance metrics can also be utilized for forecasting purposes with significant implications for dynamic portfolio allocation strategies. |
| Keywords: | Systemic risk, Financial turbulence, Stock market, MIDAS models |
| JEL: | C32 D8 E32 G15 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202162&r= |
| By: | Michelangeli, Valentina; Peydró, José-Luis; Sette, Enrico |
| Abstract: | We identify the relative importance for lending of borrower (demand) versus bank (supply) factors. We submit thousands of fictitious mortgage applications, changing one borrower-level factor at time, to the major Italian online mortgage platform. Each application goes to all banks. We find that borrower and bank factors are equally strong in causing and explaining loan acceptance. For pricing, borrower factors are instead stronger. Moreover, banks supplying less credit accept riskier borrowers. Exploiting the administrative credit register, we show borrower-lender assortative matching, and that the bank-level strength measure, estimated on the experimental data, determines credit supply and risk-taking to real firms. |
| Keywords: | credit,banks,mortgages,SMEs,risk-taking |
| JEL: | G21 G51 E51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:242124&r= |
| By: | Giese, Julia (Bank of England); Joyce, Michael (Bank of England); Meaning, Jack (Bank of England); Worlidge, Jack (Bank of England) |
| Abstract: | Most tests of preferred habitat theory are indirect; they infer the existence of preferred habitat behaviour in financial markets by examining the behaviour of asset prices. We instead identify preferred habitat behaviour directly from whether investors show a preference towards a particular duration habitat. We do so by making use of a newly available and highly granular data set on the UK government bond (gilt) market, which allows us to examine investors’ gilt transactions and their daily stock of gilt holdings during 2016 and 2017. Using cluster analysis, we find that investors can be classified into distinct groups, some of which more closely display the behavioural properties that theory associates with preferred habitat investors. We find that these groups of investors are less sensitive to price movements than other investor groups and include institutional investors, like life insurers and pension funds, which are typically associated with preferred habitat behaviour. Evidence from the Bank of England’s QE4 purchase programme during August 2016 to March 2017 suggests that these investor groups sold relatively more of their gilt holdings to the Bank than other groups of investors. |
| Keywords: | Preferred habitat; gilt market; yield curve; cluster analysis |
| JEL: | E43 E52 G11 G12 |
| Date: | 2021–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0939&r= |
| By: | Ajayi, Temitope Abraham |
| Abstract: | Diversification of the Nigerian economy from oil-based to other non-oil sectors has become a recurrent economic solution to the growing challenges associated with the Nigerian economy. For the past 20 years of uninterrupted democratic government in Nigeria, the successive federal governments have focused on the development of the agricultural sector as a credible option for diversification, partly for the past positive roles of the agricultural sector in the Nigerian economy before the discovery of oil. Using the multivariate vector autoregressive (VAR) model on the data obtained from 1999 to 2019, this study applied the vector error correction (VEC) model to determine the impacts of diversification of the Nigerian economy on economic growth, focusing on the manufacturing and the agricultural sectors. To determine the underlying impact of the democratic experience in Nigeria with diversification, we utilised the political rights of the population as a proxy variable. The empirical results showed that there exists cointegration among the variables used to represent the manufacturing and the agricultural sectors, political rights, and per capita gross domestic product (GDP) growth rate within the Nigerian economy. The manufacturing sector has a positive impact on the growth of the Nigerian economy; however, the agricultural sector and the political rights of the Nigerian people have adverse effects on the real GDP growth rate, in the short run. The Granger Causality tests found no evidence of causality among the variables. This study concludes that the diversification policy of the Nigerian government should be multi-faceted and that the political rights of the population are essential for the realisation of the diversification goal. |
| Keywords: | Diversification, Nigeria, GDP, Cointegration. |
| JEL: | O1 O11 O14 O17 Q1 Q11 Q13 Q15 Q17 Q18 |
| Date: | 2020–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109271&r= |
| By: | Ila Patnaik (National Institute of Public Finance and Policy); Rajeswari Sengupta (Indira Gandhi Institute of Development Research) |
| Abstract: | We analyse India's exchange rate regime through the prism of exchange market pressure. We estimate the various regimes that India's exchange rate has been through during the period from 2000 to 2020. We find four specific regimes of the Indian rupee differentiated by the degree of flexibility. We document the manner in which EMP in India has either been resisted through foreign exchange market intervention, or relieved through exchange rate change, across these four exchange rate regimes. We find that in only one of the four regimes the rupee-dollar exchange rate was relatively more flexible and the share of exchange rate in EMP absorption was the highest. This regime corresponded with the aftermath of the 2008 global crisis. In contrast, after 2013 the exchange rate was actively managed using spot as well as forward market intervention. We also find that the RBI has been intervening in the foreign exchange market in an asymmetric fashion to prevent the rupee from appreciating. |
| Keywords: | Exchange rate regime, Forex intervention, Reserves, Exchange market pressure, Structural change |
| JEL: | E58 F31 F41 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2021-022&r= |
| By: | Donato Masciandaro; Romano Vincenzo Tarsia |
| Abstract: | This paper proposes an index for evaluating central bank activism in addressing climate-change issues. Consistent with a principal-agent approach, this metric assumes that the central bank’s sensibility on climate change depends on both economic and political drivers. The index has been created to include not only actual policies but also participation in green networks and initiatives that signal central bank activism on climate change. |
| Keywords: | Climate change, central banking, principal-agent, political pressure, monetary policy, financial stability |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp20167&r= |
| By: | Mbuyi Allegra Kabamba (UNIKIN - Université de Kinshasa); T. Kojack Kondolo |
| Abstract: | La présente étude évalue l'impact de la coordination des politiques monétaire et budgétaire sur la stabilité du niveau général des prix dans le contexte de la République Démocratique du Congo de 1990 à 2019. Notre investigation empirique porte sur la RDC entre 1990 et 2019, et fait appel au modèle VAR. Les résultats ont montré l'existence de cette coordination durant quelques années. Aussi, cette coordination présente des effets positifs sur la stabilité du niveau général des prix. Ces preuves suggèrent que la Banque Centrale du Congo (BCC) doit travailler d'arrache-pied avec le gouvernement congolais pour assurer la stabilité du niveau général des prix. |
| Keywords: | DRC,VAR model,monetary policy,fiscal policy,Policy mix coordination |
| Date: | 2021–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03346458&r= |
| By: | Patnaik, Ila (National Institute of Public Finance and Policy); Sengupta, Rajeswari (Indira Gandhi Institute of Development and Research (IGIDR) Mumbai) |
| Abstract: | We analyse India's exchange rate regime through the prism of exchange market pressure. We estimate the various regimes that India's de-facto exchange rate has been through during the period from 2000 to 2020. We find four specific regimes of the Indian rupee differentiated by the degree of flexibility of the exchange rate. We document the manner in which EMP in India has either been resisted through foreign exchange market intervention, or relieved through exchange rate change, across these four de-facto exchange rate regimes. In particular, we find that after the 2008 global financial crisis the rupee-dollar exchange rate was relatively more flexible and the share of exchange rate in EMP absorption was the highest. After 2013 there was a change in the way the EMP was absorbed. The exchange rate was actively managed using spot as well as forward market intervention. We also find that the response of the RBI to EMP has been asymmetric. When there is pressure to appreciate, the RBI has typically responded by purchasing reserves. On the other hand, in the periods in which there has been pressure to depreciate, only a tiny fraction of reserves are used for resisting the pressure. Such pressure is absorbed by rupee depreciation. |
| Keywords: | Exchange rate regime ; Forex intervention ; Reserves ; Exchangen market pressure ; Structural change |
| JEL: | E58 F31 F41 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:21/353&r= |
| By: | Allegra Kabamba Mbuyi (UNIKIN - Université de Kinshasa); Kondolo Kojack |
| Abstract: | This study assesses the impact of monetary and fiscal policy coordination on the stability of the general price level in the context of the Democratic Republic of Congo from 1990 to 2019. Our empirical investigation focuses on the DRC between 1990 and 2019, and uses the VAR model. The results show the existence of this coordination for a few years. In addition, this coordination has positive effects on the stability of the general price level. This evidence suggests that the Central Bank of Congo (BCC) must work hard with the Congolese government to ensure general price level stability. |
| Abstract: | La présente étude évalue l'impact de la coordination des politiques monétaire et budgétaire sur la stabilité du niveau général des prix dans le contexte de la République Démocratique du Congo de 1990 à 2019. Notre investigation empirique porte sur la RDC entre 1990 et 2019, et fait appel au modèle VAR. Les résultats ont montré l'existence de cette coordination durant quelques années. Aussi, cette coordination présente des effets positifs sur la stabilité du niveau général des prix. Ces preuves suggèrent que la Banque Centrale du Congo (BCC) doit travailler d'arrache-pied avec le gouvernement congolais pour assurer la stabilité du niveau général des prix. |
| Keywords: | "Policy mix coordination","fiscal policy","monetary policy","VAR model","DRC","Coordination du Policy mix","Politique budgétaire","Politique monétaire","modèle VAR","RDC". |
| Date: | 2021–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03341814&r= |
| By: | Akbal, Can |
| Abstract: | In this paper, we investigate the empirical relationship between entrepreneurship and the shadow economy size. To this end, we use cross-country data and most-frequently-used measure of the entrepreneurial activity, i.e., Global Entrepreneurship Index (GEI), as well as its subindices, and calculate correlations of these indices with the size of the informal sector and its major determinants. Our analysis indicates that there are significant correlations between the variables involved. |
| Keywords: | Entrepreneurship, shadow economy, cross-country data |
| JEL: | E00 H00 |
| Date: | 2021–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109739&r= |
| By: | Asongu, Simplice; Nting, Rexon |
| Abstract: | This study investigates direct and indirect linkages between financial development and inclusive human development in data panels for African countries. It employs a battery of estimation techniques, notably: Two-Stage Least Squares, Fixed Effects, Generalized Method of Moments and Tobit regressions. The dependent variable is the inequality adjusted human development index. All dimensions of the Financial Development and Structure Database (FDSD) of the World Bank are considered. The main finding is that financial dynamics of depth, activity and size improve inclusive human development, whereas the inability of banks to transform mobilized deposits into credit for financial access negatively affects inclusive human development. Policies should be tailored to improve mechanisms by which credit facilities can be provided to both households and business operators. Surplus liquidity issues resulting from the inability of banks to transform mobilized deposits into credit can be resolved by enhancing the introduction of information sharing offices (like public credit registries and private credit bureaus) that would reduce information asymmetry between lenders and borrowers. This study complements the extant literature by assessing the nexus between financial development and inclusive human development in Africa. |
| Keywords: | Banking; human development; Africa |
| JEL: | E0 G20 I00 O10 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109846&r= |
| By: | Bertrand Achou; Hippolyte d'Albis; Eleni Iliopulo |
| Abstract: | In this work we introduce rental markets in a general equilibrium model with borrowing constraints and infinitely lived agents. We estimate our model using standard Bayesian methods and match US data on recent decades. We highlight a crucial relationship that strongly links interest rates, house prices, and rents. It represents agents’ arbitrage when choosing their degree of participation in the housing market (i.e., their real estate holdings). This framework is particularly well suited for explaining recent trends in housing markets. It also allows us to parsimoniously track the unequal impact of shocks on agents’ decisions and welfare, depending on their housing status. |
| Keywords: | Housing, Rental Markets, Collateral Constraints, Financial Frictions |
| JEL: | E3 G1 C1 I3 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:rsi:irersi:6&r= |
| By: | Zubov Sergey (Gaidar Institute for Economic Policy) |
| Abstract: | As of end 2020, there were 406 credit institutions in Russia against 442 a year earlier. Over the year, the number of operating credit institutions decreased by 36 (in 2019 – by 42). At the end of the year, he number of banks with a universal license came to 248 (at the beginning of the year – 266), with a basic one - 118 (at the beginning of the year – 136). In 2020, the number of non-bank credit institutions did not change and amounted to 40 (Fig. 65). At the end of the year, there were 379 credit institutions subject to liquidation procedures. |
| Keywords: | Russian economy, banking sector, profit, capital, corporate loans, retail lending |
| JEL: | E41 E51 G28 G21 G24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gai:ppaper:ppaper-2021-1121&r= |
| By: | Castrillón, C. C.; Gómez, W. A.; Montoya, J. A. |
| Abstract: | El tamaño del sector informal es posiblemente una de las variables económicas más esquivas en su medición y polémicas en su interpretación y concepción. Si a lo anterior le sumamos los incentivos que poseen las unidades económicas de ocultar información y eludir la normatividad, nos encontramos con un hecho irrefutable: solo podríamos aproximarnos con cierto grado de precisión a una variable que es bastante difusa y que, en algunos casos, podría ser tratada a lo sumo como una variable latente. Este trabajo hace una revisión de las principales estrategias para aproximarse a la medición del sector informal, clasificando estas medidas en dos tipos: directas e indirectas. En el caso del primer tipo, las mediciones corresponden a agregaciones a partir de observaciones individuales, mientras que en el segundo tipo la informalidad es tratada como una estimación a partir de las relaciones entre diferentes variables macroeconómicas. De acuerdo a esta revisión, se puede concluir que existe una amplia heterogeneidad en las mediciones y que cada una de ellas solo permite comprender una fracción de lo que es la economía informal. |
| Keywords: | Economía informal; economía subterránea; mercados laborales informales; sectoresformales e informales; economía sumergida, arreglos institucionales. |
| JEL: | E26 J46 |
| Date: | 2021–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:col:000561:019590&r= |
| By: | Théophile Azomahou (AERC - African Economic Research Consortium); Njuguna Ndung'U (AERC - African Economic Research Consortium); Mahamady Ouedraogo (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne) |
| Abstract: | Oil-dependent countries face a twin-shock: in addition to the COVID-19 outbreak, they are facing an oil price collapse. In this paper, we study the impact of this dual shock on the forecasted GDP growth in Africa using the COVID-19 outbreak as a natural experiment. We use the IMF World Economic Outlook's GDP growth forecasts before and after the outbreak. We find that COVID-19 related deaths result in -2.75 percentage points forecasted GDP growth loss in the all sample while oil-dependence induces -7.6 percentage points loss. We document that the joint shock entails higher forecasted growth loss in oil-dependent economies (-10.75 percentage points). Based on oil price forecasts and our empirical findings, we identify five recovery policies with high potential: social safety net policy, economic diversification, innovation and technological transformation, fiscal discipline, and climate-friendly recovery policy. |
| Keywords: | Africa,growth forecast,oil-dependence,COVID-19 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03344118&r= |
| By: | Dinh, Cong Khai; Ngo, Quang Thanh; Nguyen, Trung Thanh |
| Abstract: | Sustaining economic growth while reducing dependence on fossil fuels remains a challenge for our world to fight against climate change and therefore finding a way to promote economic growth and increase renewable energy use is needed. This paper uses a 22-year panel dataset (1994– 2015) of 9 countries in the Association of Southeast Asian Nations provided by the World Bank World Development Indicators to examine the impact of medium- and high-tech export on renewable energy use. We employ a fixed-effects regression model with the Driscoll–Kraay nonparametric covariance matrix estimator to account for sectoral and temporal dependence. We also control for inflation, employment, population growth, and gross domestic product per capita in our estimations. Our results demonstrate a U-shaped association between medium- and high-tech export and renewable energy consumption of these economies. The results propose that enhancing medium- and high-tech export could be a feasible solution for promoting renewable energy consumption. |
| Keywords: | renewable energy; medium- and high-tech export; economic growth; employment; inflation; ASEAN |
| JEL: | E0 |
| Date: | 2021–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109669&r= |
| By: | Abhin Kakkad; Arnab K. Ray |
| Abstract: | We use the logistic equation to model the dynamics of the GDP and the trade of the six countries with the highest GDP in the world, namely, USA, China, Japan, Germany, UK and India. From the modelling of the economic data, which are made available by the World Bank, we predict the maximum values of the growth of GDP and trade, as well as the duration over which exponential growth can be sustained. We set up the correlated growth of GDP and trade as the phase solutions of an autonomous second-order dynamical system. GDP and trade are related to each other by a power law, whose exponent differentiates the six national economies into two types. Under conducive conditions for economic growth, our conclusions have general validity. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.05262&r= |
| By: | Jean-Charles Bricongne; Baptiste Meunier; Sylvain Pouget |
| Abstract: | While official statistics provide lagged and aggregate information on the housing market, extensive information is available publicly on real-estate websites. By web scraping them for the UK on a daily basis, this paper extracts a large database from which we build timelier and highly granular indicators. One originality of the dataset is to provide the sellers’ perspective, allowing to compute innovative indicators of the housing market such as the number of new posted offers or how prices fluctuate over time for existing offers. Matching selling prices in our dataset with transacted prices from the notarial database using machine learning techniques allows us to measure the negotiation margin of buyers – an innovation to the literature. During the Covid-19 crisis, these indicators demonstrate the freezing of the market and the “wait-and-see” behaviour of sellers. They also show that prices have been increasing in rural regions after the lockdown but experienced a continued decline in London. |
| Keywords: | Housing, Real-time, Big Data, Web Scraping, High Frequency, United Kingdom |
| JEL: | E01 R30 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:827&r= |
| By: | Wu, Xueying; Sadiq, Muhammad; Chien, Fengsheng; Ngo, Quang-Thanh; Nguyen, Anh-Tuan; Trinh, The-Truyen |
| Abstract: | The study estimates the long-run dynamics of a cleaner environment in promoting the gross domestic product of E7 and G7 countries. The recent study intends to estimate the climate change mitigation factor for a cleaner environment with the GDP of E7 countries and G7 countries from 2010 to 2018. For long-run estimation, second-generation panel data techniques including augmented Dickey-Fuller (ADF), Phillip-Peron technique and fully modified ordinary least square (FMOLS) techniques are applied to draw the long-run inference. The results of the study are robust with VECM technique. The outcomes of the study revealed that climate change mitigation indicators significantly affect the GDP of G7 countries than that of E7 countries. The GDP of both E7 and G7 countries is found depleting due to less clean environment. However, green financing techniques helps to clean the environment and reinforce the confidence of policymakers on the elevation of green economic growth in G7 and E7 countries. Furthermore, study results shown that a 1% rise in green financing index improves the environmental quality by 0.375% in G7 countries, while it purifies 0.3920% environment in E7 countries. There is a need to reduce environmental pollution, shift energy generation sources towards alternative, innovative and green sources. The study also provides different policy implications for the stakeholders guiding to actively promote financial hedging for green financing. So that climate change and environmental pollution reduction could be achieved effectively. The novelty of the study lies in study framework. |
| Keywords: | Cleaner environment; Green financing; Climate change; E7 countries; G7 countries |
| JEL: | E0 |
| Date: | 2021–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109675&r= |
| By: | Chien, Fengsheng; Ananzeh, Mohammed; Mirza, Farhan; Bakar, Abou; Vu, Hieu Minh; Ngo, Thanh Quang |
| Abstract: | This study aims to examine the nexus between green growth and carbon neutrality targets in the context of the USA while observing the role of ecological innovation, environmental taxes, and green energy. For this purpose, data were collected from 1970 to 2015 for all the variables of interest. This research utilized the quantile autoregressive distributed lag (QARDL) method due to its various benefits, such as depicting the causality patterns based on different quantiles for different variables like green growth, ecological innovation, environmental taxes, and renewable energy. The findings through the QARDL method showed that the error correction coefficient was significant and negative with the expected negative sign for the different quantiles. The findings showed a significant and negative impact of green growth, square of green growth, ecological innovation, and environmental taxes in determining the carbon dioxide (CO2) emissions for the USA’s economy under the long-run estimation. Meanwhile, the outcome for the short-term estimation confirmed that the past and lagged values of CO2 emission were significantly and negatively linked with the current and lagged values of CO2 emission. On the other hand, it was found that green growth and square of green growth, ecological innovation, environmental taxes, and renewable energy played their vital role in reducing haze pollution like PM2.5. Besides, this research also covers the limitations and policy implications. |
| Keywords: | CO2 emission; Ecological innovation; Environmental pollution; Green growth; USA |
| JEL: | E0 |
| Date: | 2021–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109664&r= |
| By: | Li, Weiqing; Chien, Fengsheng; Ngo, Quang-Thanh; Nguyen, Tien-Dung; Iqbal, Sajid; Bilal, Ahmad Raza |
| Abstract: | The economic and environmental aspects of energy production have become important due to the increasing complexity energy sector and environmental pollution, warranting to test the connection between financial imbalances, energy prices and carbon emission. The study aims to test the impact of vertical fiscal imbalances (VFI) on energy prices and carbon emission trends by considering the dual-perspectives of environmental regulation and industrial structure. The empirical outcomes indicated that vertical fiscal imbalances limited the environmental quality of Pakistan. Furthermore, VFI also caused environmental degradation by affecting industrial structure. VFI inhibits the intensity of environmental regulation, promotes the upgrade of industrial structures, both of which cause additional carbon emissions. The study suggest to energy ministries and energy regulation offices to revisit the mechanism of energy prices determination and revised mechanism should provide a user-friendly assessment to understand the actual costs associated with the rising concern of environmental pollution. By this, environmental protection maximization and optimal energy conservation is expected to increase. Based on empirical findings, the study extends the suggestion that vertical fiscal imbalances should be considered an active indicator by the key policy makers and other stakeholders for energy prices determination and environmental quality upgradation. |
| Keywords: | Vertical financial disparity; Energy prices; Carbon emissions; Environmental regulation; Industrial structure |
| JEL: | E0 |
| Date: | 2021–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109672&r= |
| By: | Asongu, Simplice; Adegboye, Alex; Ejemeyovwi, Jeremiah; Umukoro, Olaoluwa |
| Abstract: | This study assesses the relevance of mobile phone technology in complementing gender inclusive education (i.e. primary, secondary and tertiary) to promote public accountability (i.e. involving horizontal, vertical and diagonal accountability dynamics). The study utilizes the generalized method of moments (GMM) technique to establish the empirical evidence based on 48 Sub-Saharan African countries for the period 2005-2018. The following findings are documented from the linkages between mobile phone technology, inclusive education and public accountability. First, the interactions between mobile phone technology and inclusive education promote public accountability. Second, with regard to net effects, while unexpected negative signs are established, the corresponding positive interactive effects indicate that enhancing the penetration of mobile phone technology beyond some critical thresholds ensures positive net effects. Hence, policy makers should ensure that mobile phone technology penetration exceeds the established thresholds in order for gender inclusive education to positively affect public accountability. |
| Keywords: | Mobile phone technology, educational quality, public accountability, Africa |
| JEL: | E0 L96 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109847&r= |
| By: | Jonas Van der Slycken; Brent Bleys (-) |
| Abstract: | This paper is the first to calculate economic welfare for the EU-15 countries in a standardized and comparable way. This paper does so by building on a case study for Belgium by Van der Slycken and Bleys (2021) that puts forward a “2.0 methodology” and two distinct welfare measures that deal with cross-time and cross-boundary issues. Both welfare and GDP per capita improved in the EU-15 between 1995 and 2018. Yet, there is an important divergence between welfare and GDP: over time experiential welfare per capita and the per capita benefits and costs of present activities improved by respectively 10.5% and 14%, while GDP per capita grew by 32.4%. These trends in per capita welfare are mainly driven by individual consumption growth, the shadow economy and the welfare losses from income inequality, which compensated about half of the welfare gains of the former two categories.The gap between welfare and GDP diverges especially after the financial crisis when welfare starts stagnating. At the end of the studied period, the EU-15 had already recovered from the financial crisis from a GDP perspective, but it has not from a welfare view. Since the welfare levels in 2018 are less than 2% lower than the period-maximum, there is no conclusive evidence in favor of the threshold hypothesis at the level of the EU-15. The fact the welfare level in nine individual countries is more than 5% lower than its the peak value, however, signals a clear threshold for these countries. Yet, welfare levels could be increased beyond previous peak levels with effective social and environmental welfare policies in place that focus on redistributing and respecting environmental boundaries our economies instead of promoting economic growth. |
| Keywords: | Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), costshifting, beyond GDP, threshold hypothesis, postgrowth |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:21/1027&r= |
| By: | Hsu, Ching-Chi; Ngo, Quang-Thanh; Chien, FengSheng; Li, Li; Mohsin, Muhammad |
| Abstract: | This research measures the relationship between green innovation and the performance of financial development by using an econometric estimation during the year of 2000 to 2018 in 28 Chinese provinces. It is intended to explore the relative role of green technological innovation in driving green financial development in the west and central China, as well as how it influences economic growth in these regions. Ordinary least square (OLS) framework was utilized in mainland China to perform empirical studies by using an econometric estimation. This study claims that China has adopted research-based education system, while those for economic growth and expenditure in the regions while the innovation parts results shows that the tertiary education were 12.42% and 13.53% versus the 10.50% and 10.6% in the eastern area. The research-based education increases the patents in green innovation and boosts the environmental policy. The financial development led to green technological development and innovation. Green innovation and financial development decrease the emissions, and it is apparent that as environmental regulations stimulate technical development, the superiority of human resources increases. The findings indicate that green financing reduces short-term lending, thus limiting clean energy overinvestment, while the long-term loans have little impact on renewable energy overinvestment, and the intermediary effect is unmaintainable. Meanwhile, the green financial growth will reduce renewable energy overinvestment and increase renewable energy investment productivity to certain amount. |
| Keywords: | Financial development; Environmental regulation; Green economic performance; GMM; Econometric estimation |
| JEL: | E0 |
| Date: | 2021–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109671&r= |