nep-mac New Economics Papers
on Macroeconomics
Issue of 2021‒11‒15
eighty papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Is Military Spending Quantitatively Important for Business Cycle Fluctuations? By Aleksandar Vasilev
  2. Optimal Monetary Policy According to HANK By Sushant Acharya; Edouard Challe; Keshav Dogra
  3. Optimal monetary policy mix at the zero lower bound By Bonciani, Dario; Oh, Joonseok
  4. Precautionary saving and un-anchored expectations By Grimaud, Alex
  6. Stability and determinants of the public debt-to-GDP ratio: an Input Output – Stock Flow Consistent approach By Di Domenico, Lorenzo
  7. Globalisation and the Slope of the Phillips Curve By Emanuel Kohlscheen; Richhild Moessner
  8. Forecasting Inflation and Output Growth with Credit-Card-Augmented Divisia Monetary Aggregates By Barnett, William; Park, Sohee
  9. Financial Factors, Firm size and Firm Potential By Ferreira, M.; Haber, T.; Rörig, C.
  10. Optimal monetary policy in a two-country new Keynesian model with deep consumption habits By Okano, Mitsuhiro
  11. The simpler, the better: Measuring financial conditions for monetary policy and financial stability By Arrigoni, Simone; Bobasu, Alina; Venditti, Fabrizio
  12. Evaluating the Effects of Forward Guidance and Large-scale Asset Purchases By Xu Zhang
  13. Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area By Christian Bittner; Alexander Rodnyansky; Farzad Saidi; Yannick Timmer
  14. A Model for Central Bank Digital Currencies: Implications for Bank Funding and Monetary Policy By Schiller, Jonathan; Gross, Jonas
  15. Euro area time-varying cyclicality of fiscal policy By António Afonso; Francisco Tiago Carvalho
  16. The Mundellian Trilemma and Optimal Monetary Policy in a World of High Capital Mobility By Richard T. Froyen; Alfred V. Guender
  17. The Updated Okun Method for Estimation of Potential Output with Broad Measures of Labor Underutilization: An Empirical Analysis By Claudia Fontanari; Antonella Palumbo; Chiara Salvatori
  18. Mark my words: the transmission of central bank communication to the general public via the print media By Munday, Tim; Brookes, James
  19. Does money growth tell us anything about inflation? By Leonardo Cadamuro; Francesco Papadia
  20. Gender Roles and the Gender Expectations Gap By D'Acunto, Francesco; Malmendier, Ulrike; Weber, Michael
  21. Tests for jumps in yield spreads By Winkelmann, Lars; Yao, Wenying
  22. The ECB's Policy, the Recovery Fund and the Importance of Trust: The Case of Greece By Vasiliki Dimakopoulou; George Economides; Apostolis Philippopoulos
  23. Asymmetric Macroeconomic Stabilization And Fiscal Consolidation In The Oecd And The Euro Area By ​pierre Aldama; Jérôme Creel
  24. Chinese supply chain shocks By Khalil, Makram; Weber, Marc-Daniel
  25. Liquidity, Capital Pledgeability and Inflation Redistribution By Paola Boel; Julian Diaz; Daria Finocchiaro
  26. The interactions of monetary and fiscal policies on inflation dynamics: A case of Ghana By Leshoro, Temitope Lydia A
  27. Hey, Economist! Tell Us about the New Applied Macroeconomics and Econometrics Center By Marco Del Negro
  28. Monetary Policy and Racial Inequality By Bartscher, Alina Kristin; Kuhn, Moritz; Schularick, Moritz; Wachtel, Paul
  29. TLTROs and collateral availability in Italy By Paola Antilici; Annino Agnes; Gianluca Mosconi
  30. Эконометрическая оценка влияния шоков на рынке нефти на макроэкономические показатели Российской Федерации с помощью GVAR моделирования By Zubarev, Andrey; Kirillova, Maria
  31. Wealth and History: An Update By Daniel Waldenström
  32. Boosting Tax Revenues with Mixed-Frequency Data in the Aftermath of Covid-19: The Case of New York By Kajal Lahiri; Cheng Yang
  33. The asymmetric effects of monetary policy on stock price bubbles By Christophe Blot; Paul Hubert; Fabien Labondance
  34. An Econometric Analysis of the Impact of Structural Changes on the Aggregate Output of the United States By Germinal G. Van
  35. Economic growth induced by the increases of investment and demand By Krouglov, Alexei
  36. Who Truly Bears (Bank) Taxes? Evidence from Only Shifting Statutory Incidence By Jiménez, Gabriel; Martinez-Miera, David; Peydró, José-Luis
  37. Does the Turbulence of the Stock Market Terrify Consumers? Evidence from a Panel of U.S. States Using Pooled Mean Group Estimation By Esmaeil Ebadi
  38. Impact des chocs d'incertitude liés au Covid-19 sur l’économie marocaine By Azzouzi, asmae; Bousselhamia, Ahmed
  39. Central Bank Tone and the Dispersion of Views within Monetary Policy Committees By Paul Hubert; Fabien Labondance
  40. The Death of a Regulator: Strict Supervision, Bank Lending and Business Activity By Granja, João; Leuz, Christian
  41. Financial Variables as Predictors of Real Growth Vulnerability By Lucrezia Reichlin; Giovanni Ricco; Thomas Hasenzagl
  42. The Italian Geography of Regional Resilience: The Role of Cooperative Firms By Michele Costa; Flavio Delbono
  43. What Did Homeowners Do with Home Equity Borrowing? Contemporaneous and Long-term Effects By Sheng Guo
  44. Flexible Average Inflation Targeting and Prospects for U.S. Monetary Policy: a speech at the Symposium on Monetary Policy Frameworks, The Brookings Institution, Washington, D.C. (via webcast), November 8, 2021 By Richard H. Clarida
  45. Assessing COVID impacts, sustainable finance, current and future implications for banks and monetary policy: “Breaking the tragedy of the horizon, climate change and financial stability" By Ojo, Marianne
  46. A post Keynesian perspective on the eco zone project: Liquidity premia and external financial fragility in the West African Economic and Monetary Union, Ghana and Nigeria By Lampe, Florian; Löscher, Anne
  47. More or less public debt in France? By Xavier Ragot
  48. Market finance as a spare tyre? Corporate investment and access to bank credit in Europe By Maurin, Laurent; Andersson, Malin; Rusinova, Desislava
  49. The Existential Trilemma of EMU in a Model of Fiscal Target Zone By Pompeo Della Posta; Roberto Tamborini
  50. World Economy Autumn 2021 - Stumbling blocks on the road to recovery By Gern, Klaus-Jürgen; Hauber, Philipp; Kooths, Stefan; Stolzenburg, Ulrich
  51. The state-dependence of output revisions By Bruno Ducoudre; Paul Hubert; Guilhem Tabarly
  52. Democracy or Optimal Policy: Income Tax Decisions without Commitment By Jang, Youngsoo
  53. Democracy or Optimal Policy: Income Tax Decisions without Commitment By Jang, Youngsoo
  54. The relevance of including future healthcare costs in cost-effectiveness threshold calculations for the UK NHS By Perry-duxbury, Megan; Lomas, James; Asaria, Miqdad; Van Baal, Pieter
  55. Quantification of Economic Uncertainty: a deep learning approach By Gillmann, Niels; Kim, Alisa
  56. Financial Literacy and Consumer Financial Well-being in Ghana: Any Nexus with Economic Stability? By Matey, Juabin
  57. Going Cashless: Evidence from Japan’s Point Reward Program By Toshitaka Sekine; Toshiaki Shoji; Tsutomu Watanabe
  58. Diverse Policy Committees Can Reach Underrepresented Groups By D'Acunto, Francesco; Fuster, Andreas; Weber, Michael
  59. Thoughts on a review of the ECB's monetary policy strategy By Christophe Blot; Jérôme Creel; Paul Hubert
  60. Optimally Targeting Interventions in Networks during a Pandemic: Theory and Evidence from the Networks of Nursing Homes in the United States By Pongou, Roland; Tchuente, Guy; Tondji, Jean-Baptiste
  61. Energy Transition Metals By Boer, Lukas; Pescatori, Andrea; Stuermer, Martin
  62. Interdependencies between Mining Costs, Mining Rewards and Blockchain Security By Pavel Ciaian; d'Artis Kancs; Miroslava Rajcaniova
  63. Efficiency and Equity: A General Equilibrium Analysis of Rent-Seeking By Ben J. Heijdra; Pim Heijnen
  64. It's not always about the money, sometimes it's about sending a message: Evidence of Informational Content in Monetary Policy Announcements By Yong Cai; Santiago Camara; Nicholas Capel
  65. The Economics of Being LGBT. A Review: 2015-2020 By Drydakis, Nick
  66. Consistent Flexibility: Enforcement of Fiscal Rules Through Political Incentives By Janeba, Eckhard; Dotti, Valerio
  67. Working Paper 353 - Inequality and the role of macroeconomic and institutional forces in Africa By Batuo E. Michael; George Kararach; Issam Malki
  68. The Internationalization of Domestic Banks and the Credit Channel of Monetary Policy By Morales, Paola; Osorio, Daniel; Lemus, Juan S.; Sarmiento Paipilla, Miguel
  70. Weltwirtschaft im Herbst 2021 - Erholungspfad mit Stolpersteinen By Gern, Klaus-Jürgen; Hauber, Philipp; Kooths, Stefan; Stolzenburg, Ulrich
  71. Technological Diffusion and Productivity Convergence across European Regions: A Spatial Approach over the Period 2000-2015 By Fabio Manca; Giuseppe Piroli
  72. Unemployment in the Time of COVID-19: A Flow-Based Approach to Real-time Unemployment Projections By Aysegul Sahin; Murat Tasci; Jin Yan
  73. Examining the liquidity risk in the household sector and the policy implications By Kim, Young Il
  74. Income Assistance, Marriage, and Child Poverty: An Assessment of the Family Security Act By Ortigueira, Salvador; Siassi, Nawid
  75. The Great Transition: Kuznets Facts for Family-Economists By Jeremy Greenwood; Nezih Guner; Ricardo Marto
  76. Redistributing income through hierarchy By Fix, Blair
  77. Modelling the size, cost and health impacts of universal basic income: what can be done in advance of a trial? By Johnson, Matthew Thomas; Johnson, Elliott Aidan; Webber, Laura; Friebel, Rocco; Reed, Howard Robert; Lansley, Stewart; Wildman, John
  78. Did the Covid-19 local lockdowns reduce business activity? Evidence from UK SMEs By Hurley, James; Walker, Daniel
  79. Liquidity Creation Measures for Banks in Japan (Japanese) By GUNJI Hiroshi; ONO Arito; SHIZUME Masato; UCHIDA Hirofumi; YASUDA Yukihiro
  80. COVID-19, Income Shocks and Female Employment By Ishaan Bansal; Kanika Mahajan

  1. By: Aleksandar Vasilev
    Abstract: We introduce a military sector and external security considerations into a real-business-cycle setup with a public sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). We investigate the quantitative importance of the presence of a military sector and external threat considerations for the cyclical fluctuations in Bulgaria. We find the quantitative effect of such aspects to be very small, and thus not important for business cycle stabilization, or public finance issues, as in Bulgaria the spending on military is relatively small relative to the size of the economy.
    Keywords: Business cycles, military spending, security considerations, external threats, Bulgaria
    JEL: E24 E32
    Date: 2021–01–03
  2. By: Sushant Acharya; Edouard Challe; Keshav Dogra
    Abstract: We study optimal monetary policy in an analytically tractable Heterogeneous Agent New Keynesian model with rich cross-sectional heterogeneity. Optimal policy differs from that in a representative agent model because monetary policy can affect consumption inequality by reducing both idiosyncratic consumption risk and the inequality that arises from households’ unequal exposures to aggregate shocks. Simple target criteria summarize the planner’s trade-off between consumption inequality, productive efficiency and price stability. Mitigating consumption inequality requires putting some weight on stabilizing the level of output and correspondingly reducing the weights on the output gap and the price level relative to an economy without inequality.
    Keywords: Economic models; Monetary policy
    JEL: E21 E30 E52 E63
    Date: 2021–11
  3. By: Bonciani, Dario (Bank of England); Oh, Joonseok (Freie Universität Berlin)
    Abstract: Long-term asset purchases carried out by central banks increase the consumption volatility of households holding long-term debt. For this reason, monetary authorities should not just aim at stabilising inflation and the output gap but also mitigate the volatility of their balance sheet. In response to negative demand shocks at the zero lower bound (ZLB), the optimal monetary policy consists of a mix of forward guidance and mild adjustments in the balance sheet. The presence of balance-sheet policies reduces the optimal ZLB duration and significantly improves social welfare. Mitigating the effectiveness of forward guidance calls for a more substantial balance-sheet expansion and a shorter ZLB duration. If a central bank only aims to stabilise inflation and the output gap, welfare losses are significantly larger than under the optimal policy and balance-sheet policies only improve welfare if the weight on output-gap stabilisation is relatively large. Last, simple implementable policy rules can achieve welfare outcomes close to those under the optimal policy.
    Keywords: Optimal monetary policy; unconventional monetary policy; quantitative easing; forward guidance
    JEL: E52 E58 E61
    Date: 2021–10–22
  4. By: Grimaud, Alex
    Abstract: This paper investigates monetary policy in a heterogeneous agent new Keynesian (HANK) model where agents face idiosyncratic income risk and use adaptive learning in order to form their expectations. Households experience different histories and observe different idiosyncratic variables. This gives rise to idiosyncratic learning processes, which naturally implies the existence of heterogeneous expectations. In HANK models, supply shocks generate precautionary saving. The learning setup amplifies this effect and can result in long-lasting disinflationary traps. Dovish Taylor rules focused on closing the output gap dampen the learning effects. Price level targeting improves the inflation and output stabilization trade-off by better anchoring expectations.
    Keywords: adaptive learning,precautionary saving,restricted perception equilibrium,heterogeneous expectations,heterogeneous agent
    JEL: E25 E31 E52 E70
    Date: 2021
  5. By: Azzouzi, asmae; Bousselhamia, Ahmed
    Abstract: The purpose of this paper is to analyze the dynamic response of a small subset of variables to exchange rate shocks by using a new method based on a set of theory-consistent sign restrictions for the purpose of identifying shocks over time (1995Q1–2019Q1) in the Moroccan economy. It is important to note that the current account presents the so-called “J-curve” phenomenon. Additionally, Morocco entered into a period of deeper and longer recession and higher inflation following the dirham’s depreciation. Following a real depreciation, the output has little effect on improving the current account balance. Our results suggest that the monetary authorities reacted immediately to exchange rate shocks by raising their interest rates to prevent the economy from falling into deflation.
    Keywords: Contractionary, Exchange rate shocks, Vector autoregression, Sign restrictions.
    JEL: E23 E27 E3 E30 E5 E50 F3 F4 F41
    Date: 2019–12–29
  6. By: Di Domenico, Lorenzo
    Abstract: The paper develops a dynamic Input Output - Stock Flow consistent model based on the Supermultiplier approach. This framework integrates the dimension of output determination with the system of relative prices. Through this model, we define the determinants of the public debt-to-GDP ratio and the conditions for its stability. The main results of the research show that: i) Given the interest rate, the saving rate, the tax rate, the industrial profit rate and the coefficients of production there exist a steady-state value of the public debt-to-GDP ratio ingrained in the economic system. This result calls into question the idea of imposing budgetary rules with threshold levels independently from the very specific features of each economic system; ii) Expansions in the level of public expenditure have a permanent effect on the public debt-to-GDP ratio only in the presence of the accelerator effect, that is, through an induced increase in the share of private indebtedness on GDP and aggregate debt. Because of the accelerator channel, the public debt-to-GDP ratio depends on the capital intensity of the aggregate production process and, thus, on the system of relative prices. With this respect, the capital intensity determines the elasticity of private indebtedness with respect to one-point change in public spending; iii) Conversely to the neoclassical argument, the relationship between the interest rate and public debt-to-GDP ratio goes from the first to the second. In particular, changes in the interest rate modify the public debt-to-GDP ratio through both variations in the quantitative and value dimension. Such variations have a puzzling effect on the steady-state value of the public debt-to-GDP ratio. For instance, the reverse capital deepening implies that an increase in the interest rate produces a decrease in the public debt-to-GDP ratio. Finally, we point out that, in contrast to the standard argument proposed by mainstream macroeconomics, the condition of fiscal balance jointly a positive differential between the growth rate of output and the interest rate has no relevance for the stability conditions of the public debt-to-GDP ratio. In this regard, we develop a taxonomy of the growth regimes depicted by the model deriving such conditions in each scenario. The necessary condition of stability is the absence of budgetary constraints, it becomes sufficient when one of the following is respected: the growth rate of primary public expenditure is higher than zero, the interest rate is higher than zero or the propensity to consume out of wealth is non-zero.
    Keywords: Fiscal policy, Monetary policy, Public debt-to-GDP ratio, SFC models, Input-Output
    JEL: E12 E17 E42 E43 E52 E62
    Date: 2021–09–29
  7. By: Emanuel Kohlscheen; Richhild Moessner
    Abstract: We study the effects of globalisation on the slope of the New Keynesian Phillips curve for CPI inflation, based on a broad panel of 35 countries and controlling for possibly non-linear exchange rate effects. We find that the output gap generally has a significant positive effect on inflation, but that this effect decreases as integration in the global economy increases. We conclude that the advance of globalisation has been a key force behind the flattening of price Phillips curves across the world.
    Keywords: inflation, globalisation, openness, output gap, Phillips curve
    JEL: E52 E58
    Date: 2021
  8. By: Barnett, William; Park, Sohee
    Abstract: This paper investigates the performance of the Credit-Card-Augmented Divisia monetary aggregates in forecasting U.S. inflation and output growth at the 12-month horizon. We compute recursive and rolling out-of-sample forecasts using an Autoregressive Distributed Lag (ADL) model based on Divisia monetary aggregates. We use the three available versions of those monetary aggregate indices, including the original Divisia aggregates, the credit card-augmented Divisia, and the credit-card-augmented Divisia inside money aggregates. The source of each is the Center for Financial Stability (CFS). We find that the smallest Root Mean Square Forecast Errors (RMSFE) are attained with the credit-card-augmented Divisia indices used as the forecast indicators. We also consider Bayesian vector autoregression (BVAR) for forecasting annual inflation and output growth.
    Keywords: Divisia, credit-card-augmented Divisia, monetary aggregates, forecasting, Bayesian vector autoregression, inflation, output growth.
    JEL: C32 C53 E31 E47 E51
    Date: 2021–10–19
  9. By: Ferreira, M.; Haber, T.; Rörig, C.
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firm size distribution, account for a larger total asset share compared to standard heterogeneous firms models, and exhibit a higher cyclical sensitivity, conditional on size. In light of these findings we reassess the importance of the firm distribution in shaping aggregate outcomes in the canonical model of heterogeneous firms with financial frictions. We augment the productivity process with ex-ante heterogeneity of firms, allowing us to match the distribution of constrained firms conditional on size. This, together with the fact that constrained firms have a higher capital elasticity, leads to up to four times larger aggregate fluctuations and capital misallocation.
    Keywords: Firm size, business cycle, financial accelerator
    JEL: E62 E22 E23
    Date: 2021–11–03
  10. By: Okano, Mitsuhiro
    Abstract: This study develops a two-country new Keynesian (NK) model that incorporates deep habits in consumption and investigates the macroeconomic dynamics under the optimal coordinated monetary policy. We show that in response to the structural shocks, the central bank changes the interest rate significantly in the two-country open economy model compared with the closed economy where the central bank is reluctant to move interest rates. When a deep consumption habit exists, the international central bank can exploit the terms of trade externalities. Habit formation might boost the expenditure switching effect, which differentiates the aggressiveness of the central bank between closed and open economies with deep habit. Moreover, we showed that the deviations from the law of one price, or the goods-specific real exchange rate, generated endogenously by the deep habit are significantly related to the degree of home bias. In particular, the deviations fully disappeared when there is no home bias.
    Keywords: Optimal monetary policy; Deep habit; Policy coordination; Commitment;
    JEL: E52 E58 F41
    Date: 2021–10–17
  11. By: Arrigoni, Simone; Bobasu, Alina; Venditti, Fabrizio
    Abstract: In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering about 70% of the world's GDP.We assess the performance of these indicators based on their ability to capture tail risk for economic activity and to predict banking and currency crises. We find that averaging across the indicators of interest, using judgmental but intuitive weights, produces financial condition indices that are not inferior to, and actually perform better than, those constructed with more sophisticated statistical methods. An indicator that gives more weight to measures of financial stress, which we term WA-FSI, emerges as the best indicator for anticipating banking crisis, and is therefore better suited for financial stability.
    Keywords: financial conditions,quantile regressions,banking crises,SVARs,spillovers
    JEL: E32 E44 C11 C55
    Date: 2021
  12. By: Xu Zhang
    Abstract: This paper evaluates the effects of forward guidance and large-scale asset purchases (LSAP) when the nominal interest rate reaches the zero lower bound. I investigate the effects of the two policies in a dynamic new Keynesian model with financial frictions adapted from Gertler and Karadi (2011, 2013), with changes implemented so that the framework delivers realistic predictions for the effects of each policy on the entire yield curve. I then match the change that the model predicts would arise from a linear combination of the two shocks with the observed change in the yield curve in a 30-minute window around Federal Reserve announcements, allowing me to identify the separate contributions of each shock to the effects of the announcement. My estimates imply that LSAP was more important in influencing output and inflation than forward guidance.
    Keywords: Business fluctuations and cycles; Central bank research; Econometric and statistical methods; Interest rates
    JEL: E5 G0
    Date: 2021–11
  13. By: Christian Bittner; Alexander Rodnyansky; Farzad Saidi; Yannick Timmer
    Abstract: In the presence of negative monetary-policy rates and a zero lower bound on deposit rates, banks that are more exposed to central banks’ asset-purchase programs reduce their lending to the real economy by more than their counterparts. When banks face a lower bound on customer deposit rates, an asset swap between securities and reserves reduces banks’ net worth as the cost of holding reserves cannot be matched with a reduction in their cost of funding. Exploiting euro-area syndicated lending data and the German credit registry, we provide evidence that deposit-reliant banks with relatively higher funding costs and greater exposure to large-scale asset purchases reduce corporate lending relatively more, have lower stock returns, and rebalance their interbank lending from safe to risky countries.
    Keywords: negative interest rates, quantitative easing, unconventional monetary policy, bank lending channel
    JEL: E52 E58 G21
    Date: 2021
  14. By: Schiller, Jonathan; Gross, Jonas
    JEL: E42
    Date: 2021
  15. By: António Afonso; Francisco Tiago Carvalho
    Abstract: We assess the cyclicality of fiscal policy in the 19 Euro area countries, notably during recessions, for the period 1995-2020. We use a time-varying measure of fiscal cyclicality to describe fiscal policy developments. The results suggest that during recessions discretionary fiscal policy becomes more pro-cyclical, but the overall budget balance becomes more counter-cyclical. Hence, pursuing a Ricardian fiscal regime by more indebted countries leads to higher counter-cyclicality of fiscal policy. Government size reduces counter-cyclicality, as well as trade openness, and financial development has a positive impact on counter-cyclicality.
    Keywords: Fiscal Policy; Cyclicality; Time-varying coefficient; Euro area.
    JEL: C23 E62 H30 H62
    Date: 2021–11
  16. By: Richard T. Froyen; Alfred V. Guender (University of Canterbury)
    Abstract: This paper proposes that the Mundellian Trilemma remains valid despite the emergence of a world financial cycle. A clear distinction must be made between monetary policy independence and insulation of an open economy’s financial system. A flexible exchange rate allows an optimizing central bank to chart an independent course but does not insulate the domestic economy from foreign monetary or financial shocks. The gains from a flexible exchange rate may be considerable and vary in accordance with the mandate of the central bank. The Mundellian Trilemma highlights the acute shortage of policy instruments and resulting tradeoffs among policy goals. We show that macroprudential policy in the form of an interest equalization tax, enhances the ability of an optimizing central bank to effectively stabilize domestic output and inflation in the presence of policy changes abroad and potentially destabilizing capital flows.
    Keywords: Mundellian Trilemma, policy independence, capital mobility, instrument shortage, capital controls
    JEL: E3 E5 F3
    Date: 2021–09–01
  17. By: Claudia Fontanari (Roma Tre University.); Antonella Palumbo (Roma Tre University.); Chiara Salvatori (Roma Tre University.)
    Abstract: This paper extends to different indicators of labor underutilization the Updated Okun Method (UOM) for estimation of potential output proposed in Fontanari et al (2020), which, from a demand-led growth perspective, regards potential output as an empirical approximation to full-employment output, as in A.M.Okun`s (1962) original method. Based on the apparent incapability of the official rate of unemployment to fully account for labor underutilization, in this paper we offer estimates of Okun`s law both with broad unemployment indicators and with an indicator of `standardized hours worked` which we propose as a novel measure of the labor input. The paper reflects on the possible different empirical measures of full employment. The various measures of potential output that we extract from our analysis show greater output gaps than those produced by standard methods, thus highlighting a systematic tendency of the latter to underestimate potential output. Output gaps that underestimate the size of the output loss or that tend to close too soon during recovery, may produce a bias towards untimely restriction.
    Keywords: potential output; alternative unemployment indicators; Okun`s law; demand-led growth
    JEL: E60 E24 O40 E12 C30
    Date: 2021–05–11
  18. By: Munday, Tim (University of Oxford); Brookes, James (Bank of England)
    Abstract: We ask how central banks can change their communication in order to receive greater newspaper coverage. We write down a model of news production and consumption in which news generation is endogenous because the central bank must draft its communication in such a way that newspapers choose to report it, while still retaining the message the central bank wishes to convey to the public. We use our model to show that standard econometric techniques that correlate central bank text with measures of news coverage in order to determine what causes central bank communication to be reported on will likely prove to be biased. We use techniques from computational linguistics combined with an event-study methodology to measure the extent of news coverage a central bank communication receives, and the textual features that might cause a communication to be more (or less) likely to be considered newsworthy. We consider the case of the Bank of England, and estimate the relationship between news coverage and central bank communication implied by our model. We find that the interaction between the state of the economy and the way in which the Bank of England writes its communication is important for determining news coverage. We provide concrete suggestions for ways in which central bank communication can increase its news coverage by improving readability in line with our results.
    Keywords: Central bank communication; print media; high-dimensional estimation; natural language processing
    JEL: C01 C55 C82 E43 E52 E58
    Date: 2021–10–27
  19. By: Leonardo Cadamuro; Francesco Papadia
    Abstract: Economists and central bankers no longer consider monetary aggregates relevant for inflation forecasts. We explain this neglect by advancing and testing the hypothesis that monetary aggregates are only relevant for inflation in unsettled monetary and inflationary conditions. When inflation is basically stable around the central bank target (1.9 percent), as it has been in most of the last two decades, there is no apparent relationship between monetary aggregates and inflation....
    Date: 2021–11
  20. By: D'Acunto, Francesco; Malmendier, Ulrike; Weber, Michael
    Abstract: Expectations about economic variables vary systematically across genders. In the domain of inflation, women have persistently higher expectations than men. We argue that traditional gender roles are a significant factor in generating this gender expectations gap as they expose women and men to different economic signals in their daily lives. Using unique data on the participation of men and women in household grocery chores, their resulting exposure to price signals, and their inflation expectations, we document a tight link between the gender expectations gap and the distribution of grocery shopping duties. Because grocery prices are highly volatile, and consumers focus disproportionally on positive price changes, frequent exposure to grocery prices increases perceptions of current inflation and expectations of future inflation. The gender expectations gap is largest in households whose female heads are solely responsible for grocery shopping, whereas no gap arises in households that split grocery chores equally between men and women. Our results indicate that gender differences in inflation expectations arise due to social conditioning rather than through differences in innate abilities, skills, or preferences.
    Keywords: Gender Gap,Expectations,Perceptions,Experiences,Social Conditioning
    JEL: C90 D14 D84 E31 E52 G11
    Date: 2021
  21. By: Winkelmann, Lars; Yao, Wenying
    Abstract: This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. We formalize the test as a sequential procedure in the context of an intersection union test in multiple testing and introduce a new bivariate jump test for pre-averaged intra-day returns. In an empirical application involving high-frequency data of U.S. government bonds, we contrast response patterns of term spreads and break-even in ation across monetary policy announcements, in ation, and employment news releases.
    Keywords: High-frequency data,sequential testing,news announcements,term spread,break-even inflation
    JEL: C58 C12 E43 E44
    Date: 2021
  22. By: Vasiliki Dimakopoulou; George Economides; Apostolis Philippopoulos
    Abstract: This paper, using a microfounded macroeconomic model that embeds the key features of the Greek economy, studies the efficacy of the various policy measures taken, at national and EU level, to cushion the economic effects of the pandemic shock. The paper attempts to give quantitative answers to questions like: What are the effects of these policies and, especially, what are the implications of the fiscal transfers and grants from the Recovery Fund and the quantitative policies of the ECB, like the PEPP, for the Greek economy? Do they help the real economy and, if yes, by how much? What would have happened had these measures not taken? How costly will be the re-emergence of the fear of debt default and risk premia?
    Keywords: central banking, fiscal policy, international lending, pandemic
    JEL: E50 E60 F30
    Date: 2021
  23. By: ​pierre Aldama (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Jérôme Creel (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: This paper presents empirical evidence of asymmetric fiscal policy along the business cycle, using a real-time panel data on 19 OECD countries. We estimate various specifications of fiscal policy rules, in which ex ante fiscal policy has two major objectives: macroeconomic stabilization and fiscal consolidation. First, we find that a symmetric fiscal policy rule may not be an accurate representation of real-time fiscal policy. We find evidence in favor of asymmetric fiscal policy, in particular regarding the response to output gap. Second, fiscal policy appears to be generally procyclical in downturns and a-cyclical in upturns, typically in the Euro Area and during the crisis. Third, we do not find significant evidence of a procyclical fiscal consolidation in the OECD and the Euro Area, although surplus-debt feedback coefficients are generally larger in downturns. Our results are robust to an alternative measure of business cycle and to country exclusion.
    Keywords: Fiscal policy rules,Real-time data,Asymmetric stabilization,Fiscal consolidation
    Date: 2020–03–01
  24. By: Khalil, Makram; Weber, Marc-Daniel
    Abstract: In structural vector autoregressive models of US and euro area manufacturing, we use sign restrictions to identify shocks that alter the frictions to Chinese supply chain trade. We find a quantitatively significant role of such shocks for the decline of US manufacturing output at the height of the Sino-American trade tensions in 2019. At the beginning of the Covid-19 pandemic in early 2020, the results point towards large spillovers from the shutdown in China to manufacturing in the US and the euro area. Moreover, during the recovery in 2020 and 2021, positive Chinese supply chain shocks related to the shift of preferences towards goods with a large China valued-added content played a role. Interestingly, the impact of China-specific trade shocks is not limited to manufacturing sectors that are highly exposed to China. Furthermore, negative Chinese supply chain shocks cause upward price pressure across the whole manufacturing industry.
    Keywords: Cross-border supply-chain disruptions, China, trade tensions, Covid-19 recession, US and euro area manufacturing.
    JEL: E32 F41 F62
    Date: 2021–10–25
  25. By: Paola Boel; Julian Diaz; Daria Finocchiaro
    Abstract: We study the redistributive effects of expected inflation in a microfounded monetary model with heterogeneous discount factors and collateral constraints. In equilibrium, this heterogeneity leads to borrowing and lending. Model assumptions also guarantee a tractable distribution of money and capital holdings. Several results emerge from our analysis. First, in this framework expected inflation is detrimental to capital accumulation. Second, expected inflation affects borrowing and lending when collateral constraints are present, thus also inducing redistributive effects through credit. Third, we find this channel to be regressive when we calibrate our model using US data. This is because the drop in borrowers’ capital caused by inflation is larger when capital is used as collateral.
    Keywords: money; heterogeneity; collateral constraint; welfare cost of inflation
    JEL: E40 E50
    Date: 2021–11–10
  26. By: Leshoro, Temitope Lydia A
    Abstract: Ghana is the second African country to adopt the inflation targeting framework, after South Africa. The country experienced persistently high levels of inflation, exceeding 100 percent in the early 1980s. The inflation rate has, however, fallen and remained below 20 percent since the adoption of the inflation targeting regime in 2007, and it was as low as one digit in some years. Given the importance of the interaction of monetary policy and fiscal policy in achieving price stability and economic growth of any economy, this study therefore examines whether the monetary or fiscal policy is effective in determining the inflation dynamics in Ghana, using annual data over the period 1980 to 2020. The study adopted the vector error correction mechanism (VECM) and the innovation accounting technique of the impulse response function (IRF) and the variance decomposition (VD), which analyses the dynamic relationship among variables. The results obtained shows that fiscal policy is ineffective and insignificant in determining inflation dynamics in Ghana, while monetary policy appears to be effective, more dominant and highly statistically significant. The importance of the adoption of the inflation targeting was also highlighted. Policy recommendations were provided based on the findings of this study.
    Keywords: monetary policy, fiscal policy, inflation, vector error correction mechanism, impulse response function, variance decomposition, Ghana.
    Date: 2021–10
  27. By: Marco Del Negro
    Abstract: Marco Del Negro is the director of the Federal Reserve Bank of New York’s new research center, AMEC, which stands for the Applied Macroeconomics and Econometrics Center. Ahead of hosting its first symposium, “Heterogeneity in Macroeconomics: Implications for Policy,” Liberty Street Economics caught up with Del Negro to learn more about his vision for AMEC.
    Keywords: macroeconomics; econometrics; Del Negro; inequality
    JEL: E2
    Date: 2021–11–05
  28. By: Bartscher, Alina Kristin; Kuhn, Moritz; Schularick, Moritz; Wachtel, Paul
    Abstract: This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own less financial assets that appreciate in value. Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects. We conclude that there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods.
    Keywords: monetary policy,racial inequality,income distribution,wealth distribution,wealth effects
    JEL: E40 E52 J15
    Date: 2021
  29. By: Paola Antilici (Bank of Italy); Annino Agnes (Bank of Italy); Gianluca Mosconi (Bank of Italy)
    Abstract: In response to the Covid-19 pandemic, the ECB has adopted a broad set of measures aimed at ensuring that banks maintain wide access to central bank liquidity. In an environment where refinancing operations are conducted under a full allotment regime, it is important to analyse whether collateral scarcity might have influenced participation in the TLTRO-III operations and the contribution made by collateral easing measures. The analysis shows that the collateral availability of the Italian banking system proved to be adequate and it allowed Italian banks to benefit from the favorable conditions introduced under the TLTRO-III programme. For almost all the banks, the absence of collateral easing measures would not have been a restricting factor on a full TLTRO-III take-up. Such interventions have allowed banks to increase the usage of non-marketable assets as collateral and have reduced their reliance on more liquid assets. Empirical evidence suggests that the monetary policy package, together with the fiscal measures adopted by the government, have helped to support bank lending to the real economy.
    Keywords: TLTRO, central bank collateral, collateral easing, central bank credit operations.
    JEL: E52 E58
    Date: 2021–11
  30. By: Zubarev, Andrey; Kirillova, Maria
    Abstract: In this paper we use a global vector autoregression (GVAR) model to study the response of Russian macroeconomic indicators to external shocks. The model includes individual models for the world's largest economies and a model for the oil market. Our specification takes into account the peculiarities of the Russian economy and the persistence of variables in the oil market. We also obtained the impulse response functions to the oil supply shock in Saudi Arabia.
    Keywords: global vector autoregression, GVAR, oil prices, GDP, oil production, impulse response function
    JEL: C32 E17 F47
    Date: 2021–10–30
  31. By: Daniel Waldenström
    Abstract: This paper analyzes new evidence on long-run trends in aggregate wealth accumulation and wealth inequality in Western countries. The new findings suggest that wealth-income ratios were lower before World War I than previously claimed, that wealth concentration fell over the past century and has remained low in Europe but increased in the United States, that wealth has changed from being dominated by elite-owned fortunes to consist mainly of popular wealth, and that capital shares in national income have been relatively stable over time, especially in the postwar era. These findings cast doubt on claims that a low-tax, low-regulation capitalism will generate extreme capital accumulation, and that persistent wealth equalization requires large shocks to capital coming from wars or progressive taxation. Instead, institutions that promote household wealth accumulation from below appear to be key for understanding the long-run evolution of wealth in Western societies.
    Keywords: wealth-income ratios, wealth inequality, capital share, economic history
    JEL: D30 E21 N30
    Date: 2021
  32. By: Kajal Lahiri; Cheng Yang
    Abstract: We forecast New York state tax revenues with a mixed-frequency model using a number of machine learning techniques. We found boosting with two dynamic factors extracted from a select list of New York and U.S. leading indicators did best in terms of correctly updating revenues for the fiscal year in direct multi-step out-of-sample forecasts. These forecasts were found to be informationally efficient over 18 monthly horizons. In addition to boosting with factors, we also studied the advisability of restricting boosting to select the most recent macro variables to capture abrupt structural changes. Since the COVID-19 pandemic upended all government budgets, our boosted forecasts were used to monitor revenues in real time for the fiscal year 2021. Our estimates showed a drastic year-over-year decline in real revenues by over 16% in May 2020, followed by several upward nowcast revisions that led to a recovery to -1% in March 2021, which was close to the actual annual value of -1.6%.
    Keywords: revenue forecasting, machine learning, real time forecasting, mixed frequency, fiscal policy
    JEL: C22 C32 C50 C53 E62
    Date: 2021
  33. By: Christophe Blot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Fabien Labondance (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Is the effect of US monetary policy on stock price bubbles asymmetric? We use a range of measures of excessive stock price variations that are unrelated to business cycle fluctuations. We find that the effects of monetary policy are asymmetric so responses to restrictive and expansionary shocks must be differentiated. The effects of restrictive monetary policy are more powerful than the effects of expansionary policies. We also find evidence that the asymmetric effect of monetary policy is state-contingent and depends on monetary, credit and business cycles as well as stock price boom-bust dynamics.
    Keywords: Non-linearity,Equity,Booms and busts,Federal reserve
    Date: 2020–04–01
  34. By: Germinal G. Van
    Abstract: Structural changes play an essential role in the economic development of a country. They represent the evolution of economic dynamics within the macroeconomy. As we know, the economic sectors of a country do not affect the whole economy equally and their level of output generates economic fluctuations. The purpose of this paper is to analyze the impact of the three major economic sectors on the aggregate production of the United States since the 1990s. This paper essentially argues that the service sector is the sector that has contributed the most to the development of the U.S. economy since the 2000s because technological progress increased the rapid changes in the structure of the macroeconomy. Through the use of several econometric methods, we aim to rigorously analyze how the economic policy of each sector impacted economic growth.
    Keywords: Econometrics, Economic Policy, Statistical Methods, Macroeconomics, Structural Change.
    JEL: C33 C49 E22 O43 N27
    Date: 2021–04–04
  35. By: Krouglov, Alexei
    Abstract: Presented here is a simplified mathematical model exploring dynamic factors of the economic growth. In particular, it examines two factors affecting the economic growth – first factor is an increase of the rates of product investment and another factor is an increase of the rates of product demand. Economic growth is presented through an increase of the rates of monetary demand. If the rates of monetary demand evolve there is an economic growth. If the rates of monetary demand decrease there is an economic decline. Both an increase of the product investment and increase of the product demand have similar effects with regard to equilibrium between the product supply and product demand. For investment and demand increases the model explores scenarios of constant-rate and constant-accelerated product amendments.
    Keywords: economic growth; investment increase; demand increase
    JEL: C61 E32 O42
    Date: 2021–10–21
  36. By: Jiménez, Gabriel; Martinez-Miera, David; Peydró, José-Luis
    Abstract: We show strong overall and heterogeneous economic incidence effects, as well as distortionary effects, of only shifting statutory incidence (i.e., the agent on which taxes are levied), without any tax rate change. For identification, we exploit a tax change and administrative data from the credit market: (i) a policy change in 2018 in Spain shifting an existing mortgage tax from being levied on borrowers to being levied on banks; (ii) some areas, for historical reasons, were exempt from paying this tax (or have different tax rates); and (iii) an exhaustive matched credit register. We find the following robust results: First, after the policy change, the average mortgage rate increases consistently with a strong - but not complete - tax pass-through. Second, there is a large heterogeneity in such pass-through: larger for borrowers with lower income, a smaller number of lending relationships, not working for the lender, or facing less banks in their zip-code, thereby suggesting a bargaining power mechanism at work. Third, despite no variation in the tax rate, and consistent with the non-full tax pass-through, the tax shift increases banks' risk-taking. More affected banks reduce costly mortgage insurance in case of loan default (especially so if banks have weaker ex-ante balance sheets) and expand into non-affected but (much) ex-ante riskier consumer lending, experiencing even higher ex-post defaults within consumer loans.
    Keywords: taxes,incidence,banks,inequality,risk-taking,mortgages
    JEL: E51 G21 G28 G51 H22
    Date: 2020
  37. By: Esmaeil Ebadi
    Abstract: This paper elucidates the influence of stock market volatility on U.S. consumption using pooled mean group (PMG) estimation of 46 states over the period from 1998 to 2017. The findings confirm that the PMG estimates of the effect of stock market volatility on consumption are robust to the lag order, lag selection criteria, and outliers compared with the mean group (MG) and the dynamic fixed effect (DFE) methods. I find that stock market volatility reduces total consumption, nondurables, services, and durables consumption. However, durables consumption responds to stock market volatility to a greater degree than nondurables and services consumption, and adjusts more quickly to market disequilibria. Although Romer (1999) identified the adverse effect of stock market volatility on durables consumption during the Great Depression, the current investigation reveals that the stability of the stock market plays a critical role in redressing market disequilibria and influences not only durables consumption but also nondurables and services consumption. In addition, the data provides evidence to reject the null of no cointegration among the models’ variables, which contrasts with the pervasive view concerning the consumption function. Since the short-run income elasticities are far less than the long-run ones, I reconfirm that the permanent income hypothesis (PIH) is valid in the US. As a result, the short-run efficacy of macroeconomic policies in terms of resolving market disequilibria is limited, as it takes time for consumers to build confidence in the permanency of their income.
    Keywords: Stock market volatility; Consumption; Uncertainty hypothesis; Permanent income hypothesis; Panel cointegration.
    JEL: E21
    Date: 2021–06–06
  38. By: Azzouzi, asmae; Bousselhamia, Ahmed
    Abstract: The purpose of this paper is to consider the impact of covid-19 uncertainty shocks on the Moroccan economy that focuses on two main dimensions: first, it provides estimates of the impact of uncertainty shocks in the different sectors of activity in Morocco; second, it allows us to estimate the uncertainty related to global time-varying shocks and to measure the impact of this uncertainty on a large number of variables while monitoring the effect of idiosyncratic uncertainty shocks. In order to measure macroeconomic uncertainty, we propose a dynamic factor augmented (FAVAR) model. Empirical results suggest that the impact of uncertainty shocks on the different sectors of activity is heterogeneous. We find that the most affected sectors are those that are dependent on external demand, due to the substantial decline in demand for Morocco, plus the sanitary measures imposed...In addition, the Moroccan economy is struggling in posing and laying the foundations for economic recovery in the hotel and restaurant, mechanical engineering, electrical and metal industries, transportation, and textile industries. In addition, the shock of uncertainty has a lesser impact on the value added of education, health and social action next to financial and insurance activities.
    Keywords: Covid-19, FAVAR, Uncertainty shocks, Moroccan economy, Sectors of activity.
    JEL: E0 L6 L60 L7 L70 L80 L9 L90 O4 O41
    Date: 2021–05–18
  39. By: Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Fabien Labondance (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Does policymakers' choice of words matter? We explore empirically whether central bank tone conveyed in FOMC statements contains useful information for financial market participants. We quantify central bank tone using computational linguistics and identify exogenous shocks to central bank tone orthogonal to the state of the economy. Using an ARCH model and a high-frequency approach, we find that positive central bank tone increases interest rates at the 1-year maturity. We therefore investigate which potential pieces of information could be revealed by central bank tone. Our tests suggest that it relates to the dispersion of views among FOMC members. This information may be useful to financial markets to understand current and future policy decisions. Finally, we show that central bank tone helps predicting future policy decisions.
    Keywords: Optimism,FOMC,Dissent,Interest rate expectations,ECB
    Date: 2020–01–01
  40. By: Granja, João; Leuz, Christian
    Abstract: An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage loans. Estimating such effects is challenging. We exploit the extinction of the thrift regulator (OTS) to analyze economic links between strict supervision, bank lending and business activity. We first show that the OTS replacement indeed resulted in stricter supervision of former OTS banks. Next, we analyze the ensuing lending effects. We show that former OTS banks increase small business lending by roughly 10 percent. This increase is concentrated in well-capitalized banks, those more affected by the new regime, and cannot be fully explained by a reallocation from mortgage to small business lending after the crisis. These findings suggest that stricter supervision operates not only through capital but can also correct deficiencies in bank management and lending practices, leading to more lending and a reallocation of loans.
    Keywords: Bank regulation,Enforcement,Loan losses,Aggregate outcomes,Prudential oversight,Business lending,Entry and exit
    JEL: E44 E51 G21 G28 G31 G38 K22 K23 L51 M41 M48
    Date: 2020
  41. By: Lucrezia Reichlin (London Business School); Giovanni Ricco (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Thomas Hasenzagl
    Abstract: We evaluate the role of financial conditions as predictors of macroeconomic risk first in the quantile regression framework of Adrian et al. (2019b), which allows for non-linearities, and then in a novel linear semi-structural model as proposed by Hasenzagl et al. (2018). We distinguish between price variables such as credit spreads and stock variables such as leverage. We find that (i) although the spreads correlate with the left tail of the conditional distribution of GDP growth, they provide limited advanced information on growth vulnerability; (ii) nonfinancial leverage provides a leading signal for the left quantile of the GDP growth distribution in the 2008 recession; (iii) measures of excess leverage conceptually similar to the Basel gap, but cleaned from business cycle dynamics via the lenses of the semi-structural model, point to two peaks of accumulation of risks – the eighties and the first eight years of the new millennium, with an unstable relationship with business cycle chronology.
    Keywords: Financial cycle,Business cycle,Credit,Financial crises,Downside risk,Entropy,Quantile regressions
    Date: 2020–01–01
  42. By: Michele Costa; Flavio Delbono
    Abstract: We investigate the economic resilience of the Italian regions between 2008 and 2019. We then calculate some indices of resistance as well as recovery for both real GDP per capita and employment. We show that during (and after) recessions such indices follow different patterns and the Southern regions perform worse than the rest of the country. Then we try to detect if and how the composition of employment relates to regional resilience. We show that the size of the cooperative employment improves the overall resilience of regional employment, especially during recoveries. We also show and explain that this is not the case with cooperative added value as related to the resilience of regional GDP. Overall, the cooperative movement seems to positively contribute to the resilience of regional economies, supporting an inclusive growth especially through the employment channel.
    JEL: E32 J54 L21 R11
    Date: 2021–10
  43. By: Sheng Guo (Department of Economics, Florida International University)
    Abstract: Using a panel sample from the Panel Study Income Dynamics (1999-2015), I find that homeowners’ contemporaneous spending and nonhome wealth increased with home equity withdrawals, but their longer-term spending and wealth declined if their home equity was extracted during the housing boom period. Following Hurst and Stafford’s (2004) definition of liquidity constraint, I find that the constrained homeowners' contemporaneous spending increased less, while their financial wealth increased more than those of the unconstrained. Unconstrained homeowners invested more than constrained homeowners in nonhome real estate and businesses. In the long run, the consumption spending of both groups persistently declined, while their wealth recovered from initial declines.
    Keywords: Consumption, Liquidity constraint, Housing market, Home equity, Mortgage
    JEL: D91 D14 E21 G21 G02
    Date: 2021–11
  44. By: Richard H. Clarida
    Date: 2021–11–08
  45. By: Ojo, Marianne
    Abstract: As well as considering the current implications of measures that have been instigated to address the impacts of the pandemic, drawing from past and current lessons from selected jurisdictions, this paper also considers why the transition to a net zero carbon economy may prove more challenging than may first appear. However, jurisdictional differences and historical developments will play a part in determining how sustainable certain implemented policies and measures are – as well as in facilitating a transition to normality. The paper also aims to highlight not only the growing importance of the roles of central banks in financial stability, in particular with reference to the management of risks associated with climate risks, in managing financial stability risks, but also place an emphasis on longer term perspectives and a need to incorporate greater uncertainty elements, particularly consequential of COVID impacts, in monetary policy setting instruments. In respect of longer term perspectives, the relevance and importance of other financial sector regulators, namely the insurance and securities sectors, in managing other forms of risks, namely, liability risks, will be considered. The paper adopts a predominantly qualitative based and interdisciplinary approach to the study. Reasons for adopting this approach will be highlighted later in the paper. As a result, the literature review section will focus on conceptual and theoretical aspects – as opposed to predominantly empirical related data. In consolidating on those conceptual aspects of the framework already introduced under the literature review section, namely definitions ascribed to physical and transition risks, the next section illustrates how the above primary source related categories extend to a far reaching third category which presents fundamental relevance, not only in terms of climate risks, but also in respect of uncertainty, third party liability – and particularly for non common law jurisdictions which do not recognize principles of tort law which deals exclusively with related principles and concepts of remoteness of damage, foreseeability and the neighbor principle introduced through the leading case of Donoghue v Stevenson. These principles are linked to liability risks whereby the insurance sector will increasingly have an important role to play, in respect of addressing climate risks, in years to come. In highlighting and illustrating the issues and arguments, particularly those relating to sustainable finance, monetary policies and climate risks, as well as the links between monetary policy responsibilities and the need to mitigate financial stability risks attributed to climate risks, reference will be made to evidence and discussions, as well as analyses and results obtained from the “Climate Risk Europe Virtual Week”, September 2021, as well as other reports and analyses documented in the manuscript and highlighted in the references section of this paper. This paper is also unique because it highlights the need for interaction with legal disciplines, as well as an interdisciplinary approach to addressing economic issues. The pandemic is indeed also unique since it is not merely a financial and economic pandemic, but also a medical pandemic. As such, a mere economic perspective, cannot resolve all issues at hand. It will demonstrate that depending on the structure of financial regulation which operates in different jurisdictions, as well as whether common law principles of tort law apply in these jurisdictions in addressing liability risks, it will be feasible, realistic and possible to break the tragedy of the horizon.
    Keywords: EU Green Deal; sustainable finance; interest rates; inflation; pandemic asset purchase program (PEPP); APP asset purchase program; longer term financing operations; transition risks; financial stability; CBDCs
    JEL: E50 E58 F18 F64 K2
    Date: 2021–10
  46. By: Lampe, Florian; Löscher, Anne
    Abstract: The paper treats the eco currency union project in West Africa and its implications for monetary policies against the backdrop of the international monetary order from a post-Keynesian perspective. The eco zone project envisions a common monetary union of the West African Economic and Monetary Union (WAEMU), i.e. the independent Western subzone of the CFA franc union, and the remaining non-CFA countries of the Economic Community of West African States (ECOWAS) with Nigeria and Ghana as the economically most important member states. The literature on the international currency hierarchy developed by Latin-American structuralists and the post-Keynesian Berlin School of thought focuses on the notion of a currency-specific liquidity premium that structurally determines the interest rate level in the corresponding currency areas. Based on this set of literature, we conduct a comparison between the liquidity premia of the Western CFA-franc, the Nigerian naira and the Ghanaian cedi to make conjectures about what implications a common ECOWAS currency union would have regarding monetary policy space. Being a non-pecuniary variable, the liquidity premium cannot be observed directly. We therefore approximate the liquidity premium by calculating differences in interest rates such as the central bank's base rate, the coupon rate on T-bills and bonds and the interest rate spread between Eurobonds and bonds denominated in local currency. Besides, we use balance of payment data to identify external financial fragilities that might become a crucial factor for monetary policy due to an increasing financialisation in West African economies. We find that investors demand structurally higher yields on bonds originating in Ghana and Nigeria than in the CFA-franc zone. One could interpret this as the CFA-franc conveying over a higher liquidity premium because it has to have lower yields rates to compensate for liquidity-differences to financial assets denominated in the US dollar or euro. However, another explanation is that expectations about the future developments of the cedi's and naira's exchange value by investors are more pessimistic in comparison to that of the CFA-franc. This is rooted in two major factors: Firstly, under the current arrangement, France still has leeway in monetary policy making and acts as exchange rate stabiliser by pushing for restrictive monetary policies and guaranteeing foreign exchange reserve provision. Secondly, the estimation of external financial fragility in the CFA-franc zone and Nigeria shows that the naira implies a greater risk of sudden devaluation due to a higher exposure to mobile liabilities vis-à-vis its asset endowments.
    Keywords: West African Economic and Monetary Union,CFA franc,eco zone,international currency hierarchy,external financial fragility
    JEL: E12 F33 F41 G11 O57
    Date: 2021
  47. By: Xavier Ragot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: ◆ The purpose of this Policy brief is to present an estimate of the fiscal space for a new stimulus plan in France that takes fully into account the impact of the low interest rate environment. ◆ Negative rates should lead to a different way to measure the public debt, a method that complements the Maastricht measurement. An alternative measure of the cost of the debt should take stock of the low interest rates and the repurchase of public debt by the central banks. ◆ The public debate is marked by some harmful confusion about the redistributive effects of public debt. First of all, it involves redistribution within each generation. An increase in public debt does not constitute a debt to future generations. ◆ The low interest rates are the result of an increase in the global savings rate, with no medium-term factors apparent that could push this back down. The Covid-19 crisis, which pushed up French savings by 89 billion euros in 2020, will increase the excess of savings over investment. ◆ The fall in real interest rates over the past several years reflects that demand for public debt has risen more than supply. The shortage of public debt is not being offset by a rise in private net debt. We are experiencing a shortage of secure savings vehicles. ◆ A conservative estimate points to a fiscal space of 5 GDP points, i.e. around 100 billion euros for an additional stimulus plan. This fiscal space is elaborated on the basis of a prudent level of debt service amounting to no more than 2 GDP points and an apparent interest rate on public debt of less than 1%. ◆ In drawing up a new recovery plan, concerns around managing the risks of rate hikes and future crises, as well as the European framework, should lead to promoting public investment. ◆ This recovery plan must be understood as complementary to the European recovery plan and accompanied by a possible Europe-wide mutualizing of part of the public debt inherited from the Covid-19 crisis. ◆ Finally, this estimate shows that the low interest rate environment provides substantial room for fiscal maneuvering and that a cancellation of the public debt held by the central banks could deprive us of this environment due to the loss of confidence it could engender.
    Keywords: public debt,fiscal space,interest rates,central banks,public debate,recovery plan
    Date: 2021–03–09
  48. By: Maurin, Laurent; Andersson, Malin; Rusinova, Desislava
    Abstract: We estimate a FAVAR with Bayesian techniques in order to investigate the impact of loan supply conditions on euro area corporate investment and its financing structure. We identify shocks to overall demand and loan supply with sign and impact restrictions. Although tightened financial conditions have adversely impacted corporate investment during and after the sovereign debt crisis, the resulting impediments in loan supply, illustrated by lower loan volumes and higher spreads, have been partly alleviated by strengthened corporate debt issuance. We show that (1) part of the protracted increase in debt to loan ratio since the crisis reflects bottlenecks in the provision of bank credit and (2) the tightened loan supply has been more adverse for small corporations with limited market access. Overall, our analysis of macro-financial developments suggests the need for policy actions to deepen the European corporate debt market and enhance market access for smaller corporates.
    Keywords: financing structure,small and medium size corporates,size spread,corporate debt issuance,FAVAR model
    JEL: E22 E66 G21
    Date: 2021
  49. By: Pompeo Della Posta; Roberto Tamborini
    Abstract: The lesson of the sovereign debt crises of the 2010s, and of the outbreak of the COVID- 19 pandemic is that EMU irreversibility, if not to remain a wishful statement in the founding treaties, necessitates to be completed by carefully designed ramparts for extraordinary times beside regulations for ordinary times. In this paper we wish to contribute to this line of thought in two points. First, we highlight that when exposed to large, systemic shocks the EMU faces a trilemma: its integrity can only be saved by relaxing either monetary orthodoxy, or fiscal orthodoxy, or both. We elaborate this concept by means of a fiscal target-zone model, where EMU member governments are willing to abide with the commitment to debt stability under the no-bailout clause only up to an upper bound of their feasible fiscal effort. Second, we show that EMU completion means providing a monetary and/or fiscal emergency backstop to the irreversibility principle. Drawing on the target-zone literature, we show how these devices can be designed in a consistent manner that minimises their extension and mitigates the moral hazard concerns. The alternative to these devices is not retaining both the EMU irreversibility and the twin orthodoxies, but reformulating the treaties with explicit and regulated exit procedures
    Date: 2021
  50. By: Gern, Klaus-Jürgen; Hauber, Philipp; Kooths, Stefan; Stolzenburg, Ulrich
    Abstract: The German economy is picking up speed again. After the resurgence of the Covid-19 pandemic had interrupted the economic recovery in the winter half-year, GDP will expand at a fast pace in the further course of the year and exceed its pre-crisis level again. With the removal of the pandemic-related restrictions, activity will rebound, especially in those areas that were previously particularly burdened. Retail trade and contact-intensive services in particular are likely to benefit from the rebound in private household consumption. For the time being, however, the recovery will be delayed in the manufacturing industry. The strong global recovery has brought with it multi-layered supply bottlenecks that are noticeably hampering production in many firms. Despite the very good order situation, production in the manufacturing industry will therefore probably only gradually return to its recovery path in the second half of the year, provided that the supply bottlenecks then gradually ease. With the supply bottlenecks, price pressures have also increased, especially as economic momentum is high worldwide. Thus, prices for raw materials, intermediate goods and transport services have recently been on a broad upward trend. All in all, GDP is expected to grow by 3.9 percent this year and by 4.8 percent in 2022. Consumer prices will rise at a much faster rate of probably 2.6 percent this year and by around 2 percent in 2022.
    Keywords: advanced economies,emerging economies,monetary policy,COVID19
    Date: 2021
  51. By: Bruno Ducoudre (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Guilhem Tabarly (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres)
    Abstract: This paper investigates whether economic activity dynamics predict GDP revisions using panel data from 15 OECD countries. We find that economic activity predicts GDP revisions: early releases tend to overestimate GDP growth during slowdowns –and vice-versa. We also find that the source of the predictability could be related to the sampling of information collection. Finally, the predictability comes from short-term economic activity dynamics rather than business cycle position.
    Keywords: National accounts,Revision analysis,Gross domestic product
    Date: 2020–01–01
  52. By: Jang, Youngsoo
    Abstract: How do differences in the government’s political and commitment structure affect the aggregate economy, inequality, and welfare? I analyze this question, using a calibrated Aiyagari’s (1994) economy with wealth effects of labor supply wherein a flat tax rate and transfers are endogenously determined according to its political and commitment structure. I compare four economies: a baseline economy, an economy with the optimal tax with commitment in all steady states, an economy with the optimal tax without commitment, and a political economy with sequential voting. I obtain two main findings. First, the commitment structure shifts the government’s weighting between redistribution and efficiency. A lack of commitment leads the government to pursue a more redistributive policy at the expense of efficiency. Second, given a lack of commitment, the political economy with voting yields greater welfare than the economy with the time-consistent optimal policy. In the latter case, a lack of commitment hinders the government from implementing a more frugal policy desirable in the long run; instead, it cares more for low-income and wealth households, resulting in a substantial efficient loss. However, in the political economy with voting, the government considers only the interests of the median voter, who is middle class and reluctant to bear larger distortions from a higher tax rate and larger transfers. These findings imply that in terms of welfare, policies targeting the middle class would possibly be better than those exquisitely designed for the general public.
    Keywords: Commitment, Time-Consistent Policy, Political Economy, Voting
    JEL: E61 H11 P16
    Date: 2021–10
  53. By: Jang, Youngsoo
    Abstract: How do differences in the government’s political and commitment structure affect the aggregate economy, inequality, and welfare? I analyze this question, using a calibrated Aiyagari’s (1994) economy with wealth effects of labor supply wherein a flat tax rate and transfers are endogenously determined according to its political and commitment structure. I compare four economies: a baseline economy, an economy with the optimal tax with commitment in all steady states, an economy with the optimal tax without commitment, and a political economy with sequential voting. I obtain two main findings. First, the commitment structure shifts the government’s weighting between redistribution and efficiency. A lack of commitment leads the government to pursue a more redistributive policy at the expense of efficiency. Second, given a lack of commitment, the political economy with voting yields greater welfare than the economy with the time-consistent optimal policy. In the latter case, a lack of commitment hinders the government from implementing a more frugal policy desirable in the long run; instead, it cares more for low-income and wealth households, resulting in a substantial efficient loss. However, in the political economy with voting, the government considers only the interests of the median voter, who is middle class and reluctant to bear larger distortions from a higher tax rate and larger transfers. These findings imply that in terms of welfare, policies targeting the middle class would possibly be better than those exquisitely designed for the general public.
    Keywords: Commitment, Time-Consistent Policy, Political Economy, Voting
    JEL: E61 H11 P16
    Date: 2021–10
  54. By: Perry-duxbury, Megan; Lomas, James; Asaria, Miqdad; Van Baal, Pieter
    Abstract: Background and Objective The supply-side threshold for the UK National Health Service has been empirically estimated as the marginal returns to healthcare spending on health outcomes. These estimates implicitly exclude future healthcare costs, which is inconsistent with the objective of making the most efficient use of healthcare resources. This paper illustrates how empirical estimates of the threshold within healthcare can be adjusted to account for future healthcare costs. Methods Using cause-deleted life tables and previous work on future costs in England and Wales, we illustrate how such estimates can be adjusted. Results While the effect of including future healthcare costs can have substantial effects on incremental cost-effectiveness ratios of specific life-extending interventions, we find that including future costs has relatively little impact (an increase of £743 per quality-adjusted life-year) on the threshold estimate. Conclusions For some life-extending interventions the impact of including future costs on whether an intervention is deemed cost effective may be considerable.
    JEL: E6
    Date: 2021
  55. By: Gillmann, Niels; Kim, Alisa
    JEL: E00
    Date: 2021
  56. By: Matey, Juabin
    Abstract: Despite persistent efforts to deal with life's economic challenges, most Ghanaians are financially insecure, making the pursuit of lifelong goals more difficult. Given these realities, financial literacy and consumer financial stability appear viable strategies for promoting economic stability. This is because financial literacy can serve as a conduit for informed financial decisions at both the household and macroeconomic levels. A high human development index is an indication of a better welfare of the citizenry in the country. As a result, linking household decisions to broader policy outcomes is inevitable. In this work, efforts are made to establish a link between financial literacy and consumer financial stability and their relationships with macroeconomic stability. One relevant finding is that financial literacy has a significant positive association with economic stability as measured by citizens' welfare. This discovery has several ramifications for national financial literacy initiatives. There appears to be an insignificant relationship between consumer well-being and economic stability, although positive. Nonetheless, it demonstrates how a financially secure consumer can boost aggregate demand by spending more, impacting job creation and macroeconomic growth. The Probit-Regression method facilitated data analysis using a participant population of 960 across eight studied regions in Ghana. Reasoning from these findings, national governments should take advantage of the favourable relationship between financial literacy and consumer financial stability on one hand, and national economic stability on the other seriously, as aggregate consumption volatility is lower in countries with a high level of financial literacy, which is reflected in individual saving and investment behaviour. As such, policy efforts should consider the relationship between microeconomic actions and macroeconomic outcomes since the former influences the latter.
    Keywords: Financial literacy, Consumer financial stability, Economic stability, Household theory. Macroeconomic-level Microeconomic-level
    JEL: D1 D11 D12 D14 I3 I31
    Date: 2021–10–23
  57. By: Toshitaka Sekine (Hitotsubashi University); Toshiaki Shoji (Seikei University); Tsutomu Watanabe (University of Tokyo)
    Abstract: In October 2019, the Japanese government started a unique program that offered points (discounts) for cashless payments. Using credit card transaction data, we compare credit card usage at restaurants that participated in this program and those that did not. Our main findings are as follows. First, the number of card users was 9- 12 percent higher in participating than in non-participating restaurants. Second, the positive impact of the program on the number of card users persisted even after the program ended in June 2020, indicating that the program had a lasting effect to promote cashless payments. Third, the impact of the program was significantly larger at restaurants that started accepting credit cards more recently, since the share of cash users at those restaurants was larger just before the program started. Finally, two-thirds of the difference between participating and non-participating restaurants disappeared during the first surge of COVID-19 in April 2020, suggesting that customers switched from cash to cashless payments to reduce the risk of infection both at participating and non-participating restaurants, but the extent to which customers switched was larger at non-participating restaurants with a larger share of cash users just before the pandemic.
    Keywords: Cash and cashless payments, technology adoption, promotion program, COVID-19
    JEL: E42 O33 O38
    Date: 2021–11
  58. By: D'Acunto, Francesco; Fuster, Andreas; Weber, Michael
    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.
    Date: 2021
  59. By: Christophe Blot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Jérôme Creel (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Time is ripe for a review of the ECB strategy: the economic context and the audience for communication have changed, and the tools for policy decisions and for analysing the environment have expanded. The definition of the inflation target, the twopillar strategy and the use of "non-standard" policy measures need discussion. A change in the ECB mandate is also worth discussing for it would permit to evaluate the current strategy and mandate against an alternative. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.
    Keywords: Monetary policy strategy,ECB mandate
    Date: 2019–12–01
  60. By: Pongou, Roland; Tchuente, Guy; Tondji, Jean-Baptiste
    Abstract: This study develops an economic model for a social planner who prioritizes health over short- term wealth accumulation during a pandemic. Agents are connected through a weighted undirected network of contacts, and the planner's objective is to determine the policy that contains the spread of infection below a tolerable incidence level, and that maximizes the present discounted value of real income, in that order of priority. The optimal unique policy depends both on the configuration of the contact network and the tolerable infection incidence. Comparative statics analyses are conducted: (i) they reveal the tradeoff between the economic cost of the pandemic and the infection incidence allowed; and (ii) they suggest a correlation between different measures of network centrality and individual lockdown probability with the correlation increasing with the tolerable infection incidence level. Using unique data on the networks of nursing and long-term homes in the U.S., we calibrate our model at the state level and estimate the tolerable COVID-19 infection incidence level. We find that laissez-faire (more tolerance to the virus spread) pandemic policy is associated with an increased number of deaths in nursing homes and higher state GDP growth. In terms of the death count, laissez-faire is more harmful to nursing homes than more peripheral in the networks, those located in deprived counties, and those who work for a profit. We also find that U.S. states with a Republican governor have a higher level of tolerable incidence, but policies tend to converge with high death count.
    Keywords: COVID-19,health-vs-wealth prioritization,economic cost,weighted networks,network centrality,nursing homes,optimally targeted lockdown policy
    JEL: D85 E61 H12 I18 J15
    Date: 2021
  61. By: Boer, Lukas; Pescatori, Andrea; Stuermer, Martin
    Abstract: The energy transition requires substantial amounts of metals, including copper, nickel, cobalt, and lithium. Are these metals a key bottleneck? We identify metal-specific demand shocks with an ``anchor'' variable, estimate supply elasticities, and pin down the price impact of the energy transition in a structural scenario analysis. Metal prices would reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario. The total production value of these four metals alone would rise more than four-fold to USD 13 trillion for the period 2021 to 2040, rivaling the estimated total value of crude oil production. These metals could potentially become as important to the global economy as crude oil.
    Keywords: Conditional forecasts, structural vector autoregression, structural scenario analysis, energy transition, metals, fossil fuels, prices, climate change
    JEL: C32 C53 E37 L72 Q3 Q4 Q5
    Date: 2021–10–24
  62. By: Pavel Ciaian; d'Artis Kancs; Miroslava Rajcaniova
    Abstract: This paper studies to what extent the cost of operating a proof-of-work blockchain is intrinsically linked to the cost of preventing attacks, and to what extent the underlying digital ledger’s security budgets are correlated with the cryptocurrency market outcomes. We theoretically derive an equilibrium relationship between the cryptocurrency price, mining rewards and mining costs, and blockchain security outcomes. Using daily crypto market data for 2014–2021 and employing the autoregressive distributed lag approach – that allows treating all the relevant moments of the blockchain series as potentially endogenous – we provide empirical evidence of cryptocurrency price and mining rewards indeed being intrinsically linked to blockchain security outcomes.
    Keywords: Cryptocurrency, ARDL, blockchain, proof-of-work, security budget, institutional governance technology, network externalities
    JEL: D82 E42 G12 G15 G18 G29
    Date: 2021–02–02
  63. By: Ben J. Heijdra; Pim Heijnen
    Abstract: We study the rent-seeking phenomenon using a simple, static general equilibrium model. The economy consists of two sectors, both employing a constant returns-to-scale technology with labor as its sole input. One of the sectors is a monopoly, where a continuum of agents compete for a share of monopoly profits (i.e. rent). Agents are heterogeneous in labor productivity and rent-seeking ability: they face a choice between engaging in (productive) work or vying for a share of the rent (i.e. a contest against other rent-seekers). At the aggregate level, rent-seeking reduces the available amount of labor in the economy and thereby lowers output and welfare (rent-seeking is inefficient). At the individual level, rent-seeking shifts income towards rent-seekers. Consequently, an economy with few rent-seekers tends to have high income inequality: an effect that is exacerbated by the fact that rent is decreasing in the number of rent-seekers (low levels of rent-seeking increase inequity). This tradeoff between efficiency and equity is the primary focus of this paper. We investigate how the distribution of rent-seeking ability and the correlation between labor productivity and rent-seeking ability shape this tradeoff.
    Keywords: rent-seeking, economic waste, inequality, monopolization, contest
    JEL: D62 D63 D72 E13
    Date: 2021
  64. By: Yong Cai; Santiago Camara; Nicholas Capel
    Abstract: This paper introduces a transparent framework to identify the informational content of FOMC announcements. We do so by modelling the expectations of the FOMC and private sector agents using state of the art computational linguistic tools on both FOMC statements and New York Times articles. We identify the informational content of FOMC announcements as the projection of high frequency movements in financial assets onto differences in expectations. Our recovered series is intuitively reasonable and shows that information disclosure has a significant impact on the yields of short-term government bonds.
    Date: 2021–11
  65. By: Drydakis, Nick
    Abstract: This paper reviews studies on LGBT workplace outcomes published between 2015 and 2020. In terms of earnings differences, in the US, Canada, Europe, and Australia, gay men were found to experience earnings penalties of 7% in comparison to heterosexual men, bisexual men experienced earnings penalties of 9% in comparison to heterosexual men, and bisexual women faced earnings penalties of 5% in comparison to heterosexual women. In the same regions, lesbian women experienced an earnings premium of 7% in comparison to heterosexual women. Trans women, in the US and Europe, faced earnings penalties ranging from 4% to 20%. In terms of job satisfaction, in the US, Canada, and Europe, gay men, and lesbian women experienced 15% and 12%, respectively lower job satisfaction than their heterosexual counterparts. Additionally, bullying against sexual minorities has persisted. In the UK, sexual minorities who experienced frequent school-age bullying faced a 32% chance of experiencing frequent workplace bullying. In relation to job exclusions, in OECD countries, gay men and lesbian women were found to experience 39% and 32%, respectively lower access to occupations than comparable heterosexual men and women. For trans men and women in Europe, comparable patterns are in evidence. Given these patterns, it is not of surprise that LGBT people in the US and the UK experience higher poverty rates than heterosexual and cis people. However, in these two regions, anti-discrimination laws and positive actions in the workplace helped reduce the earnings penalties for gay men, enhance trans people's self-esteem, spur innovation and firms' performance, and boost marketing capability, corporate profiles, and customer satisfaction. The evidence indicated that LGBT inclusion and positive economic outcomes mutually reinforced each other.
    Keywords: Sexual Orientation,Gender Identity,Discrimination,Earnings,Poverty,Bullying,Job Satisfaction,Inclusivity
    JEL: C93 E24 J15 J16 J71
    Date: 2021
  66. By: Janeba, Eckhard; Dotti, Valerio
    JEL: H2
    Date: 2021
  67. By: Batuo E. Michael (Westminster Business School, University of Westminster); George Kararach (African Development Bank); Issam Malki (Westminster Business School, University of Westminster)
    Abstract: This paper attempts to offer an empirical assessment of the main macroeconomic and institutional drivers of inequality in Africa. We also propose a two-step econometric methodology to account for the distributional properties of income per capita of economies in our sample. We employ panel data models and data sets encompassing 52 African countries. spanning the years 1980–2017. The findings suggest that (i) income per capita in Africa is divergent and there exist groups or “clubs” of convergence, (ii) the Kuznets’s curve relationship holds only for economies at the bottom of the income distribution, and (iii) macroeconomic and institutional factors play a limited role across African economies. This last finding shows that the distributional property of income may offer insight into which economic forces could help to reduce inequality in Africa.
    Keywords: Income convergence and distribution, income inequality, macroeconomics and institutional effects, Africa JEL classification: C33, O4, F15, D63
    Date: 2021–10–12
  68. By: Morales, Paola; Osorio, Daniel; Lemus, Juan S.; Sarmiento Paipilla, Miguel (Tilburg University, School of Economics and Management)
    Date: 2021
  69. By: Paolo Piacentini
    Abstract: : The prospects for the present-day ‘post-pandemic’ era are metaphorically confronted with the ‘post-war’ experience of one century ago, in the years after WWI. Labour and public debt aspects are considered; for the latter, the question is posed, whether the high post-pandemic debt may sometimes evoke the catastrophic experiences of the 1920’s.
    Keywords: pandemics,macroeconomy, employment, debt crisis
    JEL: E02 E63
    Date: 2021–10
  70. By: Gern, Klaus-Jürgen; Hauber, Philipp; Kooths, Stefan; Stolzenburg, Ulrich
    Abstract: Die Dynamik der weltweiten Konjunkturerholung hat sich im ersten Halbjahr 2021 als Folge von neuen Covid-19-Schüben und Problemen in den Lieferketten deutlich verlangsamt. Die Bremsfaktoren bleiben zwar vorerst wirksam, die Weltproduktion steigt nach dem historischen Einbruch im vergangenen Jahr dennoch kräftig. Allerdings haben wir unsere Erwartung für den Zuwachs der Weltproduktion in diesem Jahr (auf Basis von Kaufkraftparitäten) von 6,7 Prozent auf 5,9 Prozent reduziert. Den Produktionsanstieg im Jahr 2022 haben wir demgegenüber um 0,2 Prozentpunkte auf 5,0 Prozent hochrevidiert. Auch im Jahr 2023 wird die weltwirtschaftliche Aktivität mit 3,8 Prozent voraussichtlich nochmals recht kräftig zunehmen. Die Inflation auf der Verbraucherebene hat im laufenden Jahr weltweit stark angezogen. Maßgeblich dafür waren aber wohl vor allem temporäre Faktoren, so dass der Preisauftrieb im Verlauf des kommenden Jahres wieder zurückgehen dürfte und eine ausgeprägte Straffung der Geldpolitik im Prognosezeitraum nicht zu erwarten ist. Es gibt aber preistreibende Faktoren wie die Anspannungen an den Produktmärkten und in den Logistiknetzen oder die hohe aufgestaute Kaufkraft, die sich als stärker und nachhaltiger herausstellen könnten als erwartet und damit das Risiko, dass sich die Inflation verfestigt. In dem Fall wäre ein restriktiver geldpolitischer Kurs angezeigt, mit negativen Folgen für die Konjunktur
    Keywords: Fortgeschrittene Volkswirtschaften,Schwellenländer,monetary policy,COVID19
    Date: 2021
  71. By: Fabio Manca; Giuseppe Piroli
    Abstract: What are the drivers of growth and convergence in productivity at regional level? Differences in the stock of human capital across regions are hypothesized to be the major cause of differences in the speed by which following regions converge and catch-up with the most advanced ones. In addition, we test the role played by R&D expenditures and institutions exploiting a database covering European regions from 1995 to 2015, which includes regional total factor productivity (TFP) computed by the conventional residual approach. We find robust empirical evidence for these hypotheses in terms of both model specifications and sectoral disaggregation.
    Keywords: Regional Studies, European Regions, Catching-up, Total Factor Productivity
    JEL: P48 D24 J24 E02 C31 C33
    Date: 2021–10–07
  72. By: Aysegul Sahin; Murat Tasci; Jin Yan
    Abstract: This paper presents a flow-based methodology for real-time unemployment rate projections and shows that this approach performed considerably better at the onset of the COVID-19 recession in spring 2020 in predicting the peak unemployment rate as well as its rapid decline over the year. It presents an alternative scenario analysis for 2021 based on this methodology and argues that the unemployment rate is likely to end slightly below 5 percent by the end of 2021. The predictive power of the methodology comes from its combined use of real-time data with the flow approach.
    Keywords: E32; E24; D21; J6; R1
    Date: 2021–11–09
  73. By: Kim, Young Il
    Abstract: In the wake of an unprecedented health crisis, households who lack liquid assets that could tackle their growing deficit (=income-expenditure) will endure severe financial difficulties. The share of households facing liquidity risk will increase as incomes fall by bigger margins and exposure to the shock intensifies. The liquidity risk resulting from COVID-19 will be even more pronounced among the economically vulnerable; specifically, those in the bottom quintile in terms of income and net assets, and temporary and daily wage workers. Households at liquidity risk are particularly concentrated in the low income quintile. As such, a short-term income support program offering even a small amount of aid (e.g. 1 million won) could greatly help to reduce their liquidity risk. In terms of support for at-liquidity-risk households, a selective approach which focuses the income support on the economically vulnerable and provides credit support in the form of collateral loans to asset-owning households will be more effective in easing the liquidity risk and the government's fiscal burden.
    Date: 2020
  74. By: Ortigueira, Salvador; Siassi, Nawid
    Abstract: The Covid-19 pandemic has brought about changes in key income support programs, reigniting a debate about the design of nancial aid to low-income households with children. In this study we assess the Family Security Act|a proposal presented by Senator Mitt Romney (R-UT) on February 4, 2021 to reform the tax/transfer system|in terms of its e cacy to achieve the stated objectives of increasing marriage rates and cutting child poverty at no cost to the government. The assessment is carried out through a structural microsimulation approach, using a dynamic model of savings, labor supply, household formation, and marital status. We nd that while the plan would be highly e ective at increasing marriage, it would reduce child poverty at the expense of increasing poverty among single-mother families and child deep poverty. Furthermore, the plan would entail a substantial cost to taxpayers.
    Keywords: Income Support,household decisions,cohabitation and marriage,poverty
    JEL: E21 H24 H31 J12
    Date: 2021
  75. By: Jeremy Greenwood (University of Pennsylvania); Nezih Guner (CEMFI); Ricardo Marto
    Abstract: The 20th century beheld a dramatic transformation of the family. Some Kuznets style facts regarding structural change in the family are presented. Over the course of the 20th century in the United States fertility declined, educational attainment waxed, housework fell, leisure increased, jobs shifted from blue to white collar, and marriage waned. These trends are also observed in the cross-country data. A model is developed, and then calibrated, to address the trends in the US data. The calibration procedure is closely connected to the underlying economic logic. Three drivers of the great transition are considered: neutral technological progress, skill-biased technological change, and drops in the price of labor-saving household durables.
    Keywords: average weekly hours, blue-collar jobs, college premium, fertility, housework, leisure, Marriage, neutral technological progress, price of labor-saving household durables, skill-biased technological change, theory-based identification, user guide, white-collar jobs
    JEL: D10 E13 J10 O10
    Date: 2021–11
  76. By: Fix, Blair
    Abstract: Although the determinants of income are complex, the results are surprisingly uniform. To a first approximation, top incomes follow a power-law distribution, and the redistribution of income corresponds to a change in the power-law exponent. Given the messiness of the struggle for resources, why is the outcome so simple? This paper explores the idea that the (re)distribution of top incomes is uniform because it is shaped by a ubiquitous feature of social life, namely hierarchy. Using a model first developed by Herbert Simon and Harold Lydall, I show that hierarchy can explain the power-law distribution of top incomes, including how income gets redistributed as the rich get richer.
    Keywords: corporation,despotism,government,hierarchy,income,distribution,inequality,power
    JEL: E13 C01 O47
    Date: 2021
  77. By: Johnson, Matthew Thomas; Johnson, Elliott Aidan; Webber, Laura; Friebel, Rocco; Reed, Howard Robert; Lansley, Stewart; Wildman, John
    Abstract: Opposition to Universal Basic Income (UBI) is encapsulated by Martinelli’s claim that ‘an affordable basic income would be inadequate, and an adequate basic income would be unaffordable’. In this article, we present a model of health impact that transforms that assumption. We argue that UBI can affect higher level social determinants of health down to individual determinants of health and on to improvements in public health that lead to a number of economic returns on investment. Given that no trial has been designed and deployed with that impact in mind, we present a methodological framework for assessing prospective costs and returns on investment through modelling to make the case for that trial. We begin by outlining the pathways to health in our model of change in order to present criteria for establishing the size of transfer capable of promoting health. We then consider approaches to calculating cost in a UK context to estimate budgetary burdens that need to be met by the state. Next, we suggest means of modelling the prospective impact of UBI on health before asserting means of costing that impact, using a microsimulation approach. We then outline a set of fiscal options for funding any shortfall in returns. Finally, we suggest that fiscal strategy can be designed specifically with health impact in mind by modelling the impact of reform on health and feeding that data cyclically back into tax transfer module of the microsimulation.
    Keywords: health impact; modelling; social determinants; tax; Universal Basic Income
    JEL: N0 E6
    Date: 2021–12–01
  78. By: Hurley, James (Bank of England); Walker, Daniel (Bank of England)
    Abstract: This paper analyses the local lockdown measures introduced to contain the spread of Covid-19 in the UK. We use a spatial regression discontinuity design to assess whether the fall in business activity during the lockdowns was driven by the policy measures or by other factors, such as voluntary social distancing. We conclude that the local lockdowns did causally reduce business activity but that activity would have probably fallen substantially even in the absence of the lockdowns. During the local lockdowns, the average turnover growth for SMEs in the UK was around -20%. SMEs that were up to two kilometres inside the lockdown boundaries had 8 percentage points lower turnover growth than those up to two kilometres outside. This implies that the local lockdowns accounted for two fifths of the overall drop in business activity at most. The estimates are largest for restaurants and non-food retail (eg clothes shops), which were directly targeted by the restrictions. Costs fell by much less than turnover, reducing cash flow.
    Keywords: Covid-19; small and medium-sized enterprises (SMEs); public health measures
    JEL: D22 E65 G30
    Date: 2021–10–15
  79. By: GUNJI Hiroshi; ONO Arito; SHIZUME Masato; UCHIDA Hirofumi; YASUDA Yukihiro
    Abstract: The aim of this paper is to examine how to appropriately obtain the liquidity creation measures (LCM) proposed by Berger and Bouwman (2009) for banks in Japan, and to calculate its actual values. We obtain the LCM in terms of monetary amount and the LCM ratio that standardize the LCM by gross total assets. We find that the LCM is on balance increasing throughout our sample period from 1949 to 2019, that asset items contribute much to the change in the LCM ratio over the long term, but the contribution of liability items is recently increasing to the same or a larger extent, and that the LCM ratios by bank type after 2000 is increasing for the regional and the second-regional banks, while it is decreasing for city banks.
    Date: 2021–09
  80. By: Ishaan Bansal (IDInsight); Kanika Mahajan (Ashoka University)
    Abstract: Existing evidence shows that the Covid-19 pandemic has led to employed women witnessing larger losses in the labor market in India. We examine the heterogeneity that underlie these trends by studying the impact of Covid-19 induced income shocks on female employment. Using individual level panel data and a difference-in-differences strategy that exploits lockdown timing (April 2020) and accounts for seasonal employment trends, we find that women in households facing a hundred percent reduction in household male income during the lockdown were 1.5 pp (25%) more likely to take up work during the "unlockdown" months (June-August 2020). We also find these results to be predominant in poorer and less educated households. However, these positive employment trends are only transitory in nature with a reversal in female employment in these households from September 2020 onwards. These findings underscore the use of women's labor as insurance during low-income periods by poorer households.
    Keywords: Employment, COVID-19, income shocks, gender, India
    Date: 2021–11

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