nep-mac New Economics Papers
on Macroeconomics
Issue of 2021‒11‒22
sixty-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. A Temporary VAT Cut as Unconventional Fiscal Policy By Ruediger Bachmann; Benjamin Born; Olga Goldfayn-Frank; Georgi Kocharkov; Ralph Luetticke; Michael Weber; Michael Weber
  2. A Temporary VAT Cut as Unconventional Fiscal Policy By Ruediger Bachmann; Benjamin Born; Olga Goldfayn-Frank; Georgi Kocharkov; Ralph Luetticke; Michael Weber
  3. The Deflationary Bias of the ZLB and the FED’s Strategic Response By Adrian Penalver; Daniele Siena
  4. The Debt Capacity of a Government By Bernard Dumas; Paul Ehling; Chunyu Yang
  5. O Tell Me The Truth About Central Bank Digital Currency By Riccardo De Bonis; Giuseppe Ferrero
  6. Optimal Monetary Policy with the Risk-Taking Channel By Angela Abbate; Dominik Thaler
  7. Hitting the elusive inflation target By Bianchi, Francesco; Melosi, Leonardo; Rottner, Matthias
  8. Endogenous Growth, Downward Wage Rigidities and Optimal Inflation By Mr. Sebastian Weber; Mirko Abbritti; Agostino Consolo
  9. Do inflation expectations improve model-based inflation Forecasts? By Marta Bañbura; Danilo Leiva-León; Jan-Oliver Menz
  10. Budget-neutral capital tax cuts By Frédéric Dufourt; Lisa Kerdelhué; Océane Piétri
  11. Natural rate chimera and bond pricing reality By Brand, Claus; Goy, Gavin; Lemke, Wolfgang
  12. Identifying the external and internal drivers of exchange rate volatility in small open economies: Evidence from Jamaica By Uluc Aysun
  13. Nonlinearities and Workers’ Heterogeneity in Unemployment Dynamics By Adjemian, Stéphane; Karamé, Frédéric; Langot, François
  14. Creating an effective transparent banking and financial system in Ghana to promote foreign direct investment for the private sector development By Tweneboah Senzu, Emmanuel
  15. Ascendant altruism and asset price bubbles By Bosi, Stefano; Ha-Huy, Thai; Pham, Cao-Tung; Pham, Ngoc-Sang
  16. Are Bank Bailouts Welfare Improving? By Malik Shukayev; Alexander Ueberfeldt
  17. Stock Returns and Inflation Redux: An Explanation from Monetary Policy in Advanced and Emerging Markets By Mr. Zhongxia Zhang
  18. The Effects of Forward Guidance: Theory with Measured Expectations By Christopher Roth; Mirko Wiederholt; Johannes Wohlfart
  19. An automatic algorithm to date the reference cycle of the Spanish economy By Máximo Camacho; María Dolores Gadea; Ana Gómez Loscos
  20. Are Bank Bailouts Welfare Improving? By Shukayev, Malik; Ueberfeldt, Alexander
  21. The COVID-19 Consumption Game-Changer: Evidence from a Large-Scale Multi-Country Survey By Alexander Hodbod; Cars Hommes; Stefanie J. Huber; Isabelle Salle
  22. Bank Money Creation and the Payments System By Biagio Bossone
  23. Financial integration and the co-movement of economic activity: Evidence from U.S. states By Götz, Martin; Gozzi, Juan Carlos
  24. A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay By Christina D. Romer; David H. Romer
  25. Assessing Labour Market Slack for Monetary Policy By Erik Ens; Laurence Savoie-Chabot; Kurt See; Shu Lin Wee
  26. ICT Diffusion, Foreign Direct Investment and Inclusive Growth in Sub-Saharan Africa By Ofori, Isaac K.; Asongu, Simplice
  27. Quantitative easing, safe asset scarcity and bank lending By Tischer, Johannes
  28. What goes around comes around: How large are spillbacks from US monetary policy? By Breitenlechner, Max; Georgiadis, Georgios; Schumann, Ben
  30. Why Working from Home Will Stick By Barrero, Jose Maria; Bloom, Nicholas; Davis, Steven J.
  31. The Rise in Household Liquidity By Gianni La Cava; Lydia Wang
  32. Climate change, central banking and financial supervision: beyond the risk exposure approach By Yannis Dafermos
  33. Debt-Stabilizing Properties of GDP-Linked Securities: A Macro-Finance Perspective By Sarah Mouabbi; Jean-Paul Renne; Jean-Guillaume Sahuc
  34. "Potential Capital”, Working From Home, and Economic Resilience By Janice C. Eberly; Jonathan Haskel; Paul Mizen
  35. Do Higher Public Debt Levels Reduce Economic Growth? By Philipp Heimberger
  36. Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs By Ruediger Bachmann; Kai Carstensen; Stefan Lautenbacher; Martin Schneider
  37. "Welfare Costs of Exchange Rate Fluctuations: Evidence from the 1972 Okinawa Reversion" By Kazuko Kano; Takashi Kano
  38. Loose Financial Conditions, Rising Leverage, and Risks to Macro-Financial Stability By Yizhi Xu; Samuel Mann; Pierre Guérin; Ken Zhi Gan; Manchun Wang; Mr. Adolfo Barajas; Woon Gyu Choi
  39. La résilience des territoires français face à la crise. Une première évaluation de l’ampleur du choc By Lara Abdel Fattah; Mounir Amdaoud
  40. Conventional and Unconventional Monetary Policy Rate Uncertainty and Stock Market Volatility: A Forecasting Perspective By Ruipeng Liu; Rangan Gupta; Elie Bouri
  41. A Note on Migration, Diversity and Economic Growth: a Replication Study of Bove and Elia (World Development, 2017) By Ventura, Luigi
  42. Socioeconomic factors and shifts in ideological orientation among political parties: Parliamentary elections in Slovakia from 1998 to 2020 By Bačo, Tomáš; Baumöhl, Eduard
  43. Structural change revisited: The rise of manufacturing jobs in the service sector By Boddin, Dominik; Kroeger, Thilo
  44. Heterogeneous labour market response to monetary policy: small versus large firms By Singh, Aarti; Suda, Jacek; Zervou, Anastasia
  45. Pagos electrónicos y uso del efectivo en los comercios colombianos 2020 By Carlos A. Arango-Arango; Yanneth Rocío Betancourt-García; Manuela Restrepo-Bernal; Germán Zuluaga-Giraldo
  46. COVID Government-Aid Programs and Wealth Creation By Van, Germinal; Barbosa Valdiosera, Emilio
  47. What Drives Financial Sector Development in Africa? Insights from Machine Learning By Isaac K. Ofori; Christopher Quaidoo; Pamela E. Ofori
  48. Assessing the nexus between mobile financial service usage and inflation – evidence from Bangladesh By Ehsan, Zaeem-Al
  49. Safe asset shortage and collateral reuse By Jank, Stephan; Mönch, Emanuel; Schneider, Michael
  50. Estimating the elasticity of consumer prices to the exchange rate: an accounting approach By Hadrien Camatte; Guillaume Daudin; Violaine Faubert; Antoine Lalliard; Christine Rifflart
  51. The Financial Drivers of Populism in Europe By Luigi Guiso; Massimo Morelli; Tommaso Sonno; Helios Herrera
  52. Korea's Macroprudential Policies for Capital Flows: Accomplishments and Road to Improvement By An, Sungbae; Kang, Tae Soo; Kim, Kyunghun; Kang, Eunjung
  53. Towards net zero carbon emissions: carbon pricing strategies and the role of innovative technologies By Ojo, Marianne; Dierker, Theodore
  54. How Does Market Power Affect Fire-Sale Externalities? By Thomas M. Eisenbach; Gregory Phelan
  55. Who Cares? Attitudes Towards Redistribution and Fiscal Austerity By Sarah Brown; Alexandros Kontonikas; Alberto Montagnoli; Mirko Moro; Dafni Papoutsaki; Willem Sas
  56. Impacts of the COVID-19 pandemic on the residential market in Prague By Eduard Hromada
  57. Estimating the Prostitution Population in the Netherlands and Belgium: A Capture-Recapture Application to Online Data By Azam, Anahita; Hendrickx, Jef; Adriaenssens, Stef
  58. Licence to Dine: 007 and the Real Exchange Rate By Lee A. Craig; Julianne Treme; Thomas J. Weiss
  59. Europeanization and EU democratic conditionality process in Albania By Josif Gjani
  60. Population growth, immigration, and labour market dynamics By Elsby, Michael W.L.; Smith, Jennifer C.; Wadsworth, Jonathan
  61. Tracking the rise of robots: A survey of the IFR database and its applications By Klump, Rainer; Jurkat, Anne; Schneider, Florian

  1. By: Ruediger Bachmann; Benjamin Born; Olga Goldfayn-Frank; Georgi Kocharkov; Ralph Luetticke; Michael Weber; Michael Weber
    Abstract: We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros.
    Keywords: unconventional fiscal policy, value added tax, survey data, expectations, consumption, household data
    JEL: D12 E20 E21 E62 E65 H31
    Date: 2021
  2. By: Ruediger Bachmann; Benjamin Born; Olga Goldfayn-Frank; Georgi Kocharkov; Ralph Luetticke; Michael Weber
    Abstract: We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros.
    JEL: D12 E20 E21 E62 E65 H31
    Date: 2021–10
  3. By: Adrian Penalver; Daniele Siena
    Abstract: The paper shows, in a simple analytical framework, the existence of a deflationary bias in an economy with a low natural rate of interest, a Zero Lower Bound (ZLB) constraint on nominal interest rates and a discretionary Central Bank with an inflation mandate. The presence of the ZLB prevents the central bank from offsetting negative shocks to inflation whereas it can offset positive shocks. This asymmetry pushes average inflation below the target which in turn drags down inflation expectations and reinforces the likelihood of hitting the ZLB. We show that this deflationary bias is particularly relevant for a Central Bank with a symmetric dual mandate (i.e. minimizing deviations from inflation and employment), especially when facing demand shocks. But a strict inflation targeter cannot escape the suboptimal deflationary equilibrium either. The deflationary bias can be mitigated by targeting “shortfalls” instead of “deviations” from maximum employment and/or using flexible average inflation targeting. However, changing monetary policy strategy risks inflation expectations becoming entrenched above the target if the natural interest rate increases.
    Keywords: Monetary Policy Strategy, Inflation-Bias, Zero Lower Bound, Inflation Expectations.
    JEL: E52 E58
    Date: 2021
  4. By: Bernard Dumas; Paul Ehling; Chunyu Yang
    Abstract: In a deterministic overlapping-generations economy with production and physical capital, the price of debt can be positive without any budget surpluses being in the offing, because debt incorporates a rational bubble. Yet the dynamics of debt remain a function of the dynamics of the primary budget deficit. As a way to study their joint behavior, we endogenize a structural deficit in the form of an underfunded social-security scheme. We define debt capacity as the level of debt that can be just sustained without a change of policy all the way to an unstable steady state. When it starts below the capacity, the debt converges to a stable steady state, in which the bubble is sustained. Above capacity the bubble unravels and the deficit cannot be financed. In several realistic scenarios occurring in economies, we calculate the needed policy response, which is the true "fiscal cost" of exceeding debt capacity.
    JEL: E13 E43 E44 E50 E62 E63 H30 H62 H63 H68
    Date: 2021–10
  5. By: Riccardo De Bonis (Bank of Italy); Giuseppe Ferrero (Bank of Italy)
    Keywords: central bank digital euro, history of money, payment system, digitalization, digital euro
    JEL: E42 E58
    Date: 2021–11
  6. By: Angela Abbate (Swiss National Bank); Dominik Thaler (Banco de España)
    Abstract: Empirical research suggests that lower interest rates induce banks to take higher risks. We assess analytically what this risk-taking channel implies for optimal monetary policy in a tractable New Keynesian model. We show that this channel creates a motive for the planner to stabilize the real rate. This objective conflicts with the standard inflation stabilization objective. Optimal policy thus tolerates more inflation volatility. An inertial Taylor-type reaction function becomes optimal. We then quantify the significance of the risk-taking channel for monetary policy in an estimated medium-scale extension of the model. Ignoring the channel when designing policy entails non-negligible welfare costs (0.7% lifetime consumption equivalent).
    Keywords: risk-taking channel, optimal monetary policy, inertial policy rate
    JEL: E44 E52
    Date: 2021–10
  7. By: Bianchi, Francesco; Melosi, Leonardo; Rottner, Matthias
    Abstract: Since the 2001 recession, average core inflation has been below the Federal Reserve's 2% target. This deflationary bias is a predictable consequence of a symmetric monetary policy strategy that fails to recognize the risk of encountering the zero-lower-bound. An asymmetric rule according to which the central bank responds less aggressively to above-target inflation corrects the bias, improves welfare, and reduces the risk of deflationary spirals - a pathological situation in which inflation keeps falling indefinitely. This approach does not entail any history dependence or commitment to overshoot the inflation target and can be implemented with an asymmetric target range. A counterfactual simulation shows that a modest level of asymmetry would have removed the deflationary bias observed in the United States.
    Keywords: Asymmetric monetary policy,deflationary bias,deflationary spiral,target range,framework review
    JEL: E31 E52
    Date: 2021
  8. By: Mr. Sebastian Weber; Mirko Abbritti; Agostino Consolo
    Abstract: Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity (DWR) which challenges these results. The model features a non-vertical long-run Phillips curve between inflation and unemployment and a trade-off between price distortions and output hysteresis that change the welfare-maximizing inflation level. For a plausible set of parameters, the optimal inflation target is in excess of two percent, a target value commonly used across central banks. Deviations from the optimal target carry welfare costs multiple times higher than in traditional NK models. The main reason is that endogenous growth and DWR generate asymmetric and hysteresis effects on unemployment and output. Price level targeting or a Taylor-rule responding to the unemployment rate can handle better the asymmetric and hysteresis effects in our model and deliver significant welfare gains. Our results are robust to the inclusion of the effective lower bound on the monetary policy interest rate.
    Keywords: NK model; inflation level; invariance hypothesis; target value; target carry welfare cost; Inflation targeting; Inflation; Wage rigidity; Wages; Wage adjustments; Global
    Date: 2021–08–06
  9. By: Marta Bañbura (European Central Bank); Danilo Leiva-León (Banco de España); Jan-Oliver Menz (Deutsche Bundesbank)
    Abstract: Those of professional forecasters do. For a wide range of time series models for the euro area and its member states we find a higher average forecast accuracy of models that incorporate information on inflation expectations from the ECB’s SPF and Consensus Economics compared to their counterparts that do not. The gains in forecast accuracy from incorporating inflation expectations are typically not large but significant in some periods. Both short- and long-term expectations provide useful information. By contrast, incorporating expectations derived from financial market prices or those of firms and households does not lead to systematic improvements in forecast performance. Individual models we consider are typically better than univariate benchmarks but for the euro area the professional forecasters are more accurate, especially in recent years (not always for the countries). The analysis is undertaken for headline inflation and inflation excluding energy and food and both point and density forecast are evaluated using real-time data vintages over 2001-2019.
    Keywords: forecasting, inflation, inflation expectations, Phillips curve, bayesian VAR
    JEL: C53 E31 E37
    Date: 2021–10
  10. By: Frédéric Dufourt (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Lisa Kerdelhué; Océane Piétri
    Abstract: We revisit the canonical policy of eliminating capital taxation by increasing labor taxation in a endogenous-labor, heterogeneous-agent model with income and wealth heterogeneity, when the government is subject to a strict (per-period) balancedbudget constraint. By contrast with its non-budget neutral equivalent-associated with a constant tax rate over time and a permanent increase in the level of public debt-we show that the obtained endogenous path for the labor tax rate is sharply increasing in the initial period and decreasing over time. The policy then generates a deeper recession in the short-run and a greater expansion in the long-run, as well as a smaller decline in wealth inequality associated with a reduced incentive to save for precautionary motives. Overall, the policy still generates significant losses in average welfare.
    Keywords: fiscal policy, capital tax cut, tax composition, heterogeneous agents, wealth redistribution
    JEL: E21 E6 D31 H23
    Date: 2021–11
  11. By: Brand, Claus; Goy, Gavin; Lemke, Wolfgang
    Abstract: We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*), and term premia. Similar to Bauer and Rudebusch (2020, AER), π* and r* constitute a time-varying trend for the nominal short-term rate in our model, rendering estimated term premia more stable than standard yield curve models operating with time-invariant means. In line with the literature, our r* estimates display a distinct decline over the last four decades. JEL Classification: C11, C32, E43, G12, E44, E52
    Keywords: arbitrage-free Nelson-Siegel term structure model, Bayesian estimation, equilibrium real rate, natural rate of interest, r*, term premia, unobserved components
    Date: 2021–11
  12. By: Uluc Aysun (University of Central Florida, Orlando, FL)
    Abstract: This paper estimates a 3-country DSGE model to identify the drivers of exchange rate volatility in small open economies (SOE). In addition to the usual cross-country linkages through trade and asset holdings, the model features common shocks that a¤ect economies symmetrically. Using data from Jamaica, the US and the G-7 region (excluding the US), the paper finds that external financial shocks are the primary drivers of exchange rate fluctuations in the SOE. While domestic financial shocks are bigger contributors than US and G-7 specific shocks, shocks that are common across the US and the G-7 generally play the main role. Nonfinancial shocks, domestic and external, are inconsequential for exchange rate volatility. Inferences from a vector autoregressive model with exogenous variables are consistent with these results.
    Keywords: Jamaica, exchange rates, DSGE, small open economy, G-7, Bayesian estimation.
    JEL: E32 E44 F33 F44
    Date: 2021–11
  13. By: Adjemian, Stéphane; Karamé, Frédéric; Langot, François
    Abstract: This study demonstrates that nonlinearities, coupled with worker heterogeneity, make it possible to reconcile the Diamond–Mortensen–Pissarides model with the labor market dynamics observed in the United States. Nonlinearities, induced by firings and downward real wage rigidities, magnify adjustments in quantities, whereas heterogeneity concentrates them on the low-paid workers’ submarkets. The model fits the job finding, job separation, and unemployment rates well. It also explains the Beveridge curve’s dynamics and the cyclicality of the involuntary component of separations. The estimated dynamics of the aggregate shock that allows generating the US labor market fluctuations has a correlation with unemployment that changes of sign during the 80s. We also show that the differences in adjustment between submarkets predicted by the model are consistent with the data of job flows by educational attainment.
    Keywords: search and matching; unemployment dynamics; nonlinearities; particle filter; maximum likelihood estimation
    JEL: C51 E24 E32
    Date: 2021–10
  14. By: Tweneboah Senzu, Emmanuel
    Abstract: It is a paper presented at the project finance conference 2019 in Accra-Ghana, with the article focus to propose structural innovations required to attract foreign direct investment for the current emerging market dynamics evolving around the formal and informal economy of Ghana with a special study focus to the small and medium scale enterprises towards its sustainable economic growth.
    Keywords: Banking & Finance, Financial Sector, Macroeconomics, Monetary Policy, Central Bank, Foreign Direct investment
    JEL: E22 E26 E5 G21 G28
    Date: 2019–11–13
  15. By: Bosi, Stefano; Ha-Huy, Thai; Pham, Cao-Tung; Pham, Ngoc-Sang
    Abstract: We consider an overlapping generations economy with altruism towards parents and a long-lived asset that delivers no dividends (pure bubble asset). We explore the role of ascendant altruism on the dynamics properties of equilibrium and rational bubbles in the cases of exogenous and endogenous growths.
    Keywords: Overlapping generations, ascendant altruism, capital accumulation, growth, rational bubbles
    JEL: D64 E44 G10
    Date: 2021–11–01
  16. By: Malik Shukayev; Alexander Ueberfeldt
    Abstract: The financial sector bailouts seen during the Great Recession generated substantial opposition and controversy. We assess the welfare benefits of government-funded emergency support to the financial sector, taking into account its effects on risk-taking incentives. In our quantitative general equilibrium model, the financial crisis probability depends on financial intermediaries’ balance sheet choices, influenced by capital adequacy constraints and ex ante known emergency support provisions. These policy tools interact to make financial sector bailouts welfare improving when capital adequacy constraints are consistent with the current Basel III regulation, but potentially welfare decreasing with looser capital adequacy regulation existing before the Great Recession.
    Keywords: Financial institutions; Financial stability; Financial system regulation and policies
    JEL: E44 D62 G01 E32
    Date: 2021–11
  17. By: Mr. Zhongxia Zhang
    Abstract: Classical theories of monetary economics predict that real stock returns are negatively correlated with inflation when monetary policy is countercyclical. Previous empirical studies mostly focus on a small group of developed countries or a few countries with hyperinflation. In this paper, I examine the stock return-inflation relation under different monetary policy regimes and conditions using an expanded dataset of 71 economies. Empirical evidence suggests that the stock return-inflation relation is partially driven by monetary policy. If a country’s monetary authority conducts a more countercyclical monetary policy, the stock return-inflation relation becomes more negative. In addition, the results differ by monetary policy framework. In exchange rate anchor countries, stock markets do not respond to monetary policy cyclicality. In inflation targeting countries, stock markets react more strongly to inflation. A key contribution of this paper is to classify inflation targeters by their behaviors, and illustrate that behavior matters in shaping market perceptions: markets react to inflation and monetary policy cyclicality when central banks are able to control inflation within their target bands. In this case markets are sensitive to inflation dynamics when inflation is above the announced target bands. Finally, when monetary policy is constrained by the Zero Lower Bound (ZLB), a structural break is introduced and real stock returns no longer respond to inflation and monetary policy cyclicality.
    Keywords: monetary policy cyclicality; stock return-inflation relation; countercyclical monetary policy; market perception; inflation targeting country; Inflation; Stocks; Emerging and frontier financial markets; Inflation targeting; Central bank policy rate; Global
    Date: 2021–08–20
  18. By: Christopher Roth (University of Cologne, ECONtribute, C-SEB, briq, CESifo, CEPR, CAGE); Mirko Wiederholt (LMU Munich and Sciences Po, CESifo, CEPR); Johannes Wohlfart (Department of Economics and CEBI, University of Copenhagen, CESifo, Danish Finance Institute)
    Abstract: We study the effects of forward guidance with an approach that combines theory with experimental estimates of counterfactual expectation adjustments. Guided by the model, we conduct experiments with representative samples of the US population to study how households adjust their expectations in response to changes in the Fed’s projections about future interest rates. Respondents significantly downward-adjust their inflation expectations in response to learning about an increase in the Fed’s pro-jection about the federal funds rate three years in the future, and they expect inflation to respond most strongly immediately after the announcement. By contrast, respon-dents do not adjust their nominal income expectations. Our model-based estimates highlight a small average consumption response to forward guidance due to oppos-ing effects from intertemporal substitution and changes in expected real income.
    Keywords: Expectation Formation, Information, Updating
    JEL: D12 D14 D83 D84 E32 G11
    Date: 2021–11
  19. By: Máximo Camacho (University of Murcia); María Dolores Gadea (University of Zaragoza); Ana Gómez Loscos (Banco de España)
    Abstract: This paper provides an accurate chronology of the Spanish reference business cycle by adapting the multiple change-point model proposed by Camacho, Gadea and Gómez Loscos (2021). In that approach, each individual pair of specific peaks and troughs from a set of indicators is viewed as a realization of a mixture of an unspecified number of separate bivariate Gaussian distributions, whose different means are the reference turning points and whose transitions are governed by a restricted Markov chain. In the empirical application, seven recessions in the period from 1970.2 to 2020.2 are identified, which are in high concordance with the timing of the turning point dates established by the Spanish Business Cycle Dating Committee (SBCDC)
    Keywords: business cycles, turning points, finite mixture models, Spain
    JEL: E32 C22 E27
    Date: 2021–11
  20. By: Shukayev, Malik (University of Alberta, Department of Economics); Ueberfeldt, Alexander (Bank of Canada)
    Abstract: The financial sector bailouts seen during the Great Recession generated substantial opposition and controversy. We assess the welfare benefits of government-funded emergency support to the financial sector, taking into account its effects on risk-taking incentives. In our quantitative general equilibrium model, the financial crisis probability depends on financial intermediaries' balance sheet choices, influenced by capital adequacy constraints and ex ante known emergency support provisions. These policy tools interact to make financial sector bailouts welfare improving when capital adequacy constraints are consistent with the current Basel III regulation, but potentially welfare decreasing with looser capital adequacy regulation existing before the Great Recession.
    Keywords: fire sales externality; short-term bank funding; endogenous financial crises; bank regulation; bailouts; government guarantees
    JEL: D62 E32 E44 G01
    Date: 2021–11–16
  21. By: Alexander Hodbod; Cars Hommes; Stefanie J. Huber; Isabelle Salle
    Abstract: Prospective economic developments depend on the behavior of consumer spending. A key question is whether private expenditures recover once social distancing restrictions are lifted or whether the COVID-19 crisis had a sustained impact on consumer confidence, preferences, and hence, spending. The elongated and profound experience of the COVID-19 crisis may durably affect consumer preferences. We conducted a representative consumer survey in five European countries in summer 2020 after the release of the first wave’s lockdown restrictions. We document the underlying reasons for households’ reduction in consumption in five key sectors: tourism, hospitality, services, retail, and public transports. We identify a large confidence shock in the Southern European countries and a shift in consumer preferences in the Northern European countries, particularly among high-income earners. We conclude that the COVID-19 experience has altered consumer behavior and that long-term sectoral consumption shifts may occur.
    Keywords: Coronavirus disease (COVID-19); Domestic demand and components; Firm dynamics; Fiscal policy; Recent economic and financial developments
    JEL: D12 D81 D84 E21 E60 E71
    Date: 2021–11
  22. By: Biagio Bossone
    Abstract: This article investigates how the role that banks play in the payment system space affects their money creation power and process. In particular, the article analyzes how the payments market share of each bank affects its money creation power and how payment settlement technologies and rules determine the banks’ demand for funding and, hence, their money creation power. Also, as the power to create money enables money creators to extract extra-profits or rents ("seigniorage") from the economy, the article evaluates analytically how banks extract seigniorage through money creation and how bank seigniorage differs from profits from pure financial intermediation. By showing the central role that payment systems play in the context of such an important economics topic as money creation, the article seeks to emphasize the relevance of payment system analysis for macroeconomic theory and practice and points to the need for achieving better integration of the two disciplines.
    Keywords: Bank; Bank money creation; Central bank policy; Demand deposits; Financial intermediaries; Funding; Lending; Payment and settlement systems
    JEL: E51 E58 G21
    Date: 2021–11
  23. By: Götz, Martin; Gozzi, Juan Carlos
    Abstract: We analyze the effect of the geographic expansion of banks across U.S. states on the co-movement of economic activity between states. Exploiting the removal of interstate banking restrictions to construct time-varying instrumental variables at the state-pair level, we find that bilateral banking integration increases output co-movement between states. The effect of financial integration depends on the nature of the idiosyncratic shocks faced by states and is stronger for financially dependent industries. Finally, we show that integration increases the similarity of bank lending fluctuations between states and contributes to the transmission of deposit shocks across states.
    Keywords: banking integration,synchronization,financial deregulation,business cycles
    JEL: E32 F36 F44 G21
    Date: 2021
  24. By: Christina D. Romer; David H. Romer
    Abstract: This paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance against pandemic income losses that people would like to have had. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implications of the social insurance framework were followed. In the case of hazard pay, we find that the proposal for a national program (the never-implemented HEROES Act) was both broader and more generous than a social insurance perspective would call for. We suggest that the social insurance perspective on fiscal policy is likely to become increasingly relevant as pandemics and climate-related natural disasters become more common causes of unemployment and recessions.
    JEL: E62 E65 H21 H31 I18
    Date: 2021–10
  25. By: Erik Ens; Laurence Savoie-Chabot; Kurt See; Shu Lin Wee
    Abstract: We assess how rising exports of US liquefied natural gas (LNG) affect the convergence of natural gas prices worldwide. Using standard principal component analysis and cointegrating techniques, we show that the degree of co-movement between global benchmark prices for natural gas has strengthened since the United States began the large-scale export of LNG in 2016. At the same time, we find that global natural gas prices do not yet adhere to the relative law of one price. Our results also suggest that issues related to storage access in Alberta between 2017 and 2019 have limited price co-movements between major benchmarks for natural gas in the United States and Canada. In addition, we use vector error correction models to show that natural gas prices in Europe and Asia respond negatively to increased exports of US LNG. These results may have implications for the development of future LNG export capacity in Canada.
    Keywords: Business fluctuations and cycles; Coronavirus disease (COVID-19); Econometric and statistical methods; Labour markets, Monetary policy
    JEL: E24 J21 J6
    Date: 2021–10
  26. By: Ofori, Isaac K.; Asongu, Simplice
    Abstract: This study examines the joint effects of ICT diffusion (composed of access, usage and skills), and foreign direct investment (FDI) on inclusive growth in sub-Saharan Africa (SSA). The study draws on data from the World Bank’s World Development Indicators, and the Global Consumption and Income Project for the period 1980–2019 for the analysis. The study provides evidence robust to several specifications from ordinary least squares and dynamic system GMM estimation techniques to show that: (1) FDI and ICT diffusion and corresponding components (ICT access, usage, skills) induce inclusive growth in SSA; (2) compared to its direct effect, FDI is remarkable in fostering shared growth in SSA in the presence of greater ICT diffusion, and (3) compared to ICT access and usage, ICT skills are more effective in driving inclusive growth in SSA. Overall FDI modulates ICT dynamics to engender positive synergy effects on inclusive growth. Policy recommendations are provided in line with the implementation of the African Continental Free Trade Area (AfCFTA) Agreement and the projected rise in FDI in SSA from 2022.
    Keywords: FDI; ICT Access; ICT Diffusion; ICT Skills; ICT Usage; Inclusive Growth; sub- Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2021–01
  27. By: Tischer, Johannes
    Abstract: The Eurosystem's Public Sector Purchase Programme (PSPP) increased the scarcity of safe assets, which caused significant declines and substantial dispersion in European repo rates. However, banks holding these safe assets benefited from this development: First, using the German security register, this paper shows that scarcity affects bank funding costs, as their collateral supply is determined by their ex ante securities holdings and repo rates. Second, it makes use of the German credit register to show that asset scarcity had real effects: Banks more exposed to asset scarcity increased their credit supply.
    Keywords: Quantitative easing,safe asset scarcity,repo rates,bank lending,monetary transmission
    JEL: E51 E58 G11 G21
    Date: 2021
  28. By: Breitenlechner, Max; Georgiadis, Georgios; Schumann, Ben
    Abstract: We quantify spillbacks from US monetary policy based on structural scenario analysis and minimum relative entropy methods applied in a Bayesian proxy structural vector-autoregressive model estimated on data for the time period from 1990 to 2019. We find that spillbacks account for a non-trivial share of the overall slowdown in domestic real activity in response to a contractionary US monetary policy shock. Our analysis suggests that spillbacks materialise as Tobin’s q/cash flow and stock market wealth effects impinge on US investment and consumption. Contractionary US monetary policy depresses foreign sales of US firms, which reduces their valuations/cash flows and thereby induces cutbacks in investment. Similarly, as contractionary US monetary policy depresses US and foreign equity prices, the value of US households’ portfolios is reduced, which triggers a drop in consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and imports similarly. Finally, spillbacks materialise through advanced rather than emerging market economies, consistent with their relative importance in US firms’ foreign demand and US foreign equity holdings. JEL Classification: F42, E52, C50
    Keywords: Bayesian proxy structural VAR models, spillbacks, spillovers, US monetary policy
    Date: 2021–11
  29. By: Ephrem Habtemichael Redda (North-West University)
    Abstract: This study seeks to provide an overview of South Africa?s fiscal outlook amidst the Covid-19 pandemic. To achieve this, the study will explicate the discrepancies between general government revenue and expenditure, and between government debt and budget deficit in light of South Africa?s low economic growth. The study utilised publicly available secondary data (2000-2020), and it employed a descriptive research design and quantitative research method. The results indicate that the biggest discrepancy between government revenue and expenditure yet recorded is in 2020, evidenced by the 12.25% budget deficit. The outlook and expected recovery do not appear positive, and it may last for years, as is the case with crises of this magnitude. The results further demonstrate that even before the pandemic in 2019, the debt-to-GDP ratio was beyond the 60% threshold, and is already displaying unfavourable trends with the pandemic?s effects beginning in 2020. For fiscal sustainability, ensuring the debt-to-GDP ratio is in check over the medium term by limiting expenditures and stimulating investment should be considered.
    Keywords: Fiscal outlook, debt-to-GDP ratio, budget deficit, tax revenue, expenditure
    JEL: E60 E00 E27
    Date: 2021–10
  30. By: Barrero, Jose Maria (Instituto Tecnologico Autonomo de Mexico); Bloom, Nicholas (Stanford University); Davis, Steven J. (University of Chicago)
    Abstract: COVID-19 drove a mass social experiment in working from home. We survey more than 30,000 Americans over multiple waves to investigate whether WFH will stick, and why. Our data say that 20 percent of full workdays will be supplied from home after the pandemic ends, compared with just five percent before. We develop evidence on five reasons for this large shift: better-than-expected WFH experiences, new investments in physical and human capital that enable WFH, greatly diminished stigma associated with WFH, lingering concerns about crowds and contagion risks, and a pandemic-driven surge in technological innovations that support WFH. We also use our survey data to project three consequences: First, employees will enjoy large benefits from greater remote work, especially those with higher earnings. Second, the shift to WFH will directly reduce spending in major city centers by at least five to ten percent relative to the pre-pandemic situation. Third, our data on employer plans and the relative productivity of WFH imply a five percent productivity boost in the post-pandemic economy due to re-optimized working arrangements. Only one-fifth of this productivity gain will show up in conventional productivity measures, because they do not capture the time savings from less commuting.
    JEL: D13 D23 E24 G18 J22 M54 R3
    Date: 2021–04
  31. By: Gianni La Cava (Reserve Bank of Australia); Lydia Wang (Reserve Bank of Australia)
    Abstract: It is well documented that household wealth has risen significantly in recent decades and that both sides of the household balance sheet – assets and liabilities – have expanded. We document a less well-known phenomenon: household liquid assets (such as cash, deposits and equities) have also risen strongly relative to income over the same period. This is true for Australia and for most advanced economies. We explore the determinants of liquidity across households and over time, using a range of household surveys for Australia. We find that household liquidity is strongly associated with life cycle factors, such as age and housing tenure. The increase in liquidity over recent decades has been broad based across households, though strongest amongst those with mortgage debt. Consistent with this, the share of liquidity-constrained households has declined significantly. The growth in liquidity is closely connected to developments in the housing market. First, higher housing prices have lifted the deposit requirement for potential home buyers, encouraging such households to save more in liquid assets. Second, higher mortgage debt has increased the repayment risks associated with future income declines, leading indebted home owners to save more for precautionary reasons, partly through paying down debt ahead of schedule. The process of building wealth and liquidity through debt amortisation has been supported by the trend decline in interest rates and unique financial innovations such as mortgage offset and redraw accounts that have made housing wealth more liquid. Overall, the rise in household liquidity appears to have increased the financial resilience of the household sector.
    Keywords: household liquidity; mortgage debt; housing prices; liquidity constraints; amortisation
    JEL: B22 E13 E20 E40 E50 E7 G51 R21
    Date: 2021–11
  32. By: Yannis Dafermos (Department of Economics, SOAS University of London)
    Abstract: It is now increasingly accepted that central banks and financial supervisors can no longer ignore climate change. However, there is no consensus on how they should address climate issues. On the one hand, there is a view that central banks and financial supervisors should mainly contribute to the assessment of the exposure of the financial system to climate-related financial risks, considering at the same time the possibility of incorporating climate risks into monetary policy and financial supervision and regulation. On the other hand, it is argued that central banks and financial supervisors need to take action such that they contribute directly to the decarbonisation of our economies and the prevention of climate systemic risks. In this paper, I analyse the main premises and implications of these two approaches and I explain why a systemic risk approach is necessary in the age of climate emergency. I also discuss the challenges involved in a policy agenda aiming at the reduction of climate systemic risks and I outline how these challenges can be tackled.
    Keywords: climate change, central banking, financial supervision, macroprudential regulation, systemic risk
    JEL: E5 E12 G18 Q54 Q57
    Date: 2021–09
  33. By: Sarah Mouabbi; Jean-Paul Renne; Jean-Guillaume Sahuc
    Abstract: We study the debt-stabilizing properties of indexing debt to GDP using a consumption-based macrofinance model. Three results stand out. First, GDP-linked bond prices would embed sizeable and timevarying risk premiums of about 40 basis points. Second, for a fixed budget surplus, issuing GDPlinked securities does not necessarily imply more beneficial debt-to-GDP ratios in the medium- to long-run. Third, the debt-stabilizing budget surplus is more predictable under such issuances at the expense of being higher on average. Our findings call into question the view that GDP-linked securities tame debt.
    Keywords: GDP-linked securities, term structure, consumption-based model, debt stabilization.
    JEL: E43 G12 G18 H63
    Date: 2021
  34. By: Janice C. Eberly; Jonathan Haskel; Paul Mizen
    Abstract: The impact of an economic shock depends both on its severity and the resilience of the economic response. Resilience can include the ability to relocate factors, for example, even when new technologies or skills are not yet at the ready. This resilience per se buffers production and has an economic value, which we estimate. The COVID-19 pandemic caused a widespread decline in recorded GDP. Yet, as catastrophic as the collapse was, it was buffered by an unprecedented and spontaneous deployment of what we call “Potential Capital,” the dwelling/residential capital and connective technologies used alongside working from home. Together potential capital and labor working from home provided additional output margins and capacity. We estimate the contribution of this capital, and the remote work that it facilitated, to have roughly halved the decline in GDP in the US reducing the fall in GDP to 9.4 log points in 2020Q2 at the trough of the recession. Similar effects are seen in the 6 OECD countries for which data are available, output fell by 14 log points, but would have fallen by 26 log points had only workplace inputs been available. Accounting for the contribution of “Potential Capital” also revises downwards estimated total productivity gains in the business sector during the pandemic from 8 log points to 5 log points in 2020Q2. We also find an output elasticity of domestic non-dwellings capital to be similar to that of workplace ICT capital, reflecting its role as productive capital. Turning to the future, changes in working from home depend upon relative costs, relative technologies and, crucially, the elasticity of substitution between home and work tasks. We estimate that that elasticity to be more than unity, meaning that the growth of ICT will raise the share of work done remotely.
    JEL: E01 E22 O47
    Date: 2021–10
  35. By: Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: While the effect of higher public debt levels on economic growth has received much attention, the literature partly points to contradictory results. This paper applies meta-regression methods to 826 estimates from 48 primary studies. The unweighted mean of the reported results suggests a 10 percentage points increase in public-debt-to-GDP is associated with a decline in annual growth rates by 0.14 percentage points, with a 95% confidence interval from 0.10 to 0.18 percentage points. However, we cannot reject a zero effect after correcting for publication bias. Furthermore, the meta-regression analysis shows that tackling endogeneity between public debt and growth makes estimates lean less towards the negative side. In testing for non-linear effects, our results do not point to a universal public-debt-to-GDP threshold beyond which growth slows threshold estimates are sensitive to data and econometric choices. These findings imply a lack of evidence of a consistently negative growth effect of higher public-debt-to-GDP.
    Keywords: Public debt; economic growth; meta-analysis
    JEL: E62 F34 O11 O47
    Date: 2021–11
  36. By: Ruediger Bachmann; Kai Carstensen; Stefan Lautenbacher; Martin Schneider
    Abstract: This paper studies how managers plan under uncertainty. In a new survey panel on German manufacturing firms, we show that uncertainty reflects change: Planning incorporates higher subjective uncertainty about future sales growth when the firm has just experienced unusual growth, and more so if the experience was negative. At the quarterly frequency, subjective uncertainty closely tracks conditional volatility of shocks: Both exhibit an asymmetric V-shaped relationship with past growth. In the cross section of firms, however, subjective uncertainty differs from conditional volatility: planning in successful firms—either large or fast-growing—reflects lower subjective uncertainty than in unsuccessful firms even when the size of the shocks is the same.
    JEL: C83 D22 E20 E23
    Date: 2021–10
  37. By: Kazuko Kano (School of Commerce, Waseda University); Takashi Kano (Graduate School of Economics, Hitotsubashi University and CIRJE, Faculty of Economics, The University of Tokyo)
    Abstract: The main tenet of the New Keynesian (NK) paradigm is that price dispersion caused by nominal price stickiness is the primary source of allocative inefficiency. This study empirically evaluates the welfare implications of NK models by observing how internal and external price dispersion responds to two types of large aggregate shocks: high inflation and sharp currency depreciation. For this purpose, we consider the history of US military deployment on a small southern island in Japan called Okinawa following the Pacific War. We investigate unique data variations in micro-level retail prices surveyed in Okinawa and mainland Japan before and after the Okinawan reversion to Japanese sovereignty in May of 1972. By considering the Okinawan experience of three currency regimes during the high inflation period of the early 1970s as valid quasi-natural experiments, we identify statistically significant deteriorations of currency misalignment associated with the sudden exogenous large USD depreciation versus the JPY following the Nixon Shock. Furthermore, we observe that these massive aggregate shocks left the average absolute size of price changes mostly unchanged, but significantly increased the average frequency of price changes in Okinawa. Because a calibrated small open-economy menu cost model fits these empirical findings better than the Calvo model, the welfare costs of exchange rate fluctuations may be more elusive than suggested by the open-economy NK literature.
    Date: 2021–11
  38. By: Yizhi Xu; Samuel Mann; Pierre Guérin; Ken Zhi Gan; Manchun Wang; Mr. Adolfo Barajas; Woon Gyu Choi
    Abstract: After a steady increase following the global financial crisis, private nonfinancial sector leverage rose further during the COVID-19 on the back of easy financial conditions induced by unprecedented policy support. We investigate the empirical relationships between increased leverage, financial conditions, and macro-financial stability in a sample of major advanced and emerging market economies. We find that loose financial conditions contribute to leverage buildups and generate an intertemporal tradeoff: financial stability risk is lessened in the near term but exacerbated in the medium term. The tradeoff is amplified during credit booms, when debt service burdens are particularly high, or when the share of foreign currency debt is high in emerging markets. Selected macroprudential tools can arrest leverage buildups and mitigate the tradeoff.
    Keywords: leverage buildup; A. Macroprudential policy; loose financial conditions; Policy implication; B. Macroprudential policy; Credit booms; Macroprudential policy; Central bank policy rate; Macroprudential policy instruments; Financial sector stability; Global
    Date: 2021–08–20
  39. By: Lara Abdel Fattah; Mounir Amdaoud
    Abstract: This article seeks to measure the impact of the Covid-19 outbreak on local employment in metropolitan France. Based on an extensive literature on economic resilience and the first available local data on the number of job losses, we highlight, on the one hand, the differences in the resilience of employment areas in the face of the crisis and, on the other hand, the key explanatory factors behind these disparities. The first econometric results show a significant influence of the density, the level of employment in the industry, the productive structure and the entrepreneurial dynamics of the territory.However, no relationship was found between employment areas with high levels of excess mortality and those that exhibit large job losses.
    Keywords: Covid-19, economic resilience, employment, employment areas
    JEL: R11 R12 E24
    Date: 2021
  40. By: Ruipeng Liu (Department of Finance, Deakin Business School, Deakin University, Melbourne, VIC 3125, Australia); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Elie Bouri (School of Business, Lebanese American University, Lebanon)
    Abstract: Theory suggests the existence of a bi-directional relationship between stock market volatility and monetary policy rate uncertainty. In light of this, we forecast volatilities of equity markets and shadow short rates (SSR) - a common metric of both conventional and unconventional monetary policy decisions, by applying a bivariate Markov-switching multifractal (MSM) model. Using daily data of eight advanced economies (Australia, Canada, Euro area, Japan, New Zealand, Switzerland, the UK, and the US) over the period of January, 1995 to March, 2021, we find that the bivariate MSM model outperforms, in a statistically significant manner, not only the benchmark historical volatility and the univariate MSM models, but also the Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) framework, particularly at longer forecast horizons. This finding confirms the bi-directional relationship between stock market volatility and uncertainty surrounding conventional and unconventional monetary policies, which in turn has important implications for academics, investors and policymakers.
    Keywords: Shadow short rate uncertainty, Stock market volatility, Markov-switching multifractal model (MSM), Forecasting
    JEL: C22 C32 C53 D80 E52 G15
    Date: 2021–11
  41. By: Ventura, Luigi
    Abstract: A recent paper (Bove and Elia (2017)) argues that migrants' diversity, as captured by the indexes of both fractionalization and polarization, exerts a posive effect on GDP growth. In fact, by using the same dataset and method- ology, it can easily be shown that the impact of diversity cannot be distinguished from that of migration itself, due to the very high correlation among the corresponding variables. Also, if one disentangles migration from diversity, following Alesina et al. (2016), only migration maintains a positive impact on growth while diversity, as captured by fractionalization, turns out to be weakly and positively associated to growth, but limitedly to the 1980-2010 time span. Polarization, on the other hand, does not seem to exert any effect on growth. The question as to whether diversity is more or less beneficial in terms of economic growth remains therefore an intriguing one, and calls for more theoretical and empirical analyses, possibly based on less (geographically) aggregated data.
    Keywords: Diversity, economic growth, migration.
    JEL: C23 C51 E21 F36
    Date: 2021–05–06
  42. By: Bačo, Tomáš; Baumöhl, Eduard
    Abstract: We analyze the election results of political parties and ideological blocs in parliamentary elections held in the Slovak Republic from 1998 to 2020 across 79 districts (LAU 1 level). Interestingly, correlations among parties’ election results between consecutive elections are very high across all elections from 1998 until 2016, meaning that any increase or decrease in electoral support was almost uniform across all districts from one election to another. The last elections disrupted this trend, and in line with the significantly lower degree of correlation with prior elections for all ideological groups, we observe territorially heterogeneous voting behavior. Especially in districts with left-wing support, the electorate shifted toward what we refer to as ideologically vague parties. Within a seemingly unrelated regression (SUR) framework, we show that systematic influence of economic variables on the election results is present only for right-wing parties. For other ideological blocs, age and population density appear to be more influential factors. The “economically rational” right-wing election camp, however, has exhibited a decline in electoral support.
    Keywords: Economic voting,Elections,Popularity,Government support,Populism
    JEL: D72 E24 E61 P20
    Date: 2021
  43. By: Boddin, Dominik; Kroeger, Thilo
    Abstract: This paper reconsiders the labor market consequences of structural change over the past 43 years. Taking two different ways of defining manufacturing and service employment as point of departure - according to the industry classification of firms or establishments and according to the occupation and hence the tasks of the workers - we show that structural change is far less pronounced than generally perceived. Manufacturing and service employment numbers based on the occupations of workers deviate markedly from the employment numbers based on the industry classification of employers. The decline in manufacturing jobs in Germany is far lower if the measurement of employment is based on the occupation of the worker. About 52% of manufacturing jobs that were lost in manufacturing industries between 1975 and 2017 are offset by new manufacturing jobs in service industries. This also has important implications for empirical applications. By way of example, we reestimate the effect of international trade on manufacturing employment based on the occupation of the worker. Contrary to previously identified negative effects, we cannot identify significant effects of import exposure on employment in manufacturing occupations. Using detailed, comprehensive German social security data, we show at the worker level that the service sector increasingly acts as a valuable alternative employment option for workers with manufacturing occupations. We estimate the causal effects of a switch to the service sector on employment outcomes by following workers over time after mass layoffs. The results reinforce our claim that structural change is less pronounced than perceived, as workers who retain their initial occupation and switch to employment in the service sector experience no significant differences in future employment trajectories compared to workers who manage to stay in the manufacturing sector.
    Keywords: Employment Structure,Structural Change,Organization of Production,Occupations,Within-Firm Adjustments,Germany
    JEL: J21 J24 L23 E24 D22 F61
    Date: 2021
  44. By: Singh, Aarti; Suda, Jacek; Zervou, Anastasia
    Abstract: We study the effects of monetary policy shocks on the growth rates of hiring, employment and earnings of new hires across firms of different sizes. We find that contractionary and expansionary monetary policy shocks have different effects on hiring and employment growth for small and large firms. Relative to large firms, small firms are less responsive to contractionary monetary policy shocks while they are more responsive to expansionary shocks. We also find that, as a consequence of monetary policy shocks, the earnings of new hires changes, and this wage effect depends on the sign of the shock and the size of the firms. We use a heterogeneous firm model with a working capital constraint, an upward sloping marginal cost curve and a financial accelerator effect, and augment it with the wage effect. We find that our empirical results are consistent with the model as long as the combined effect due to varying steepness of the marginal cost curve and the wage effect is stronger than the financial accelerator channel.
    Keywords: Heterogeneous firms, financing constraints, labour market, monetary policy
    Date: 2021–10
  45. By: Carlos A. Arango-Arango; Yanneth Rocío Betancourt-García; Manuela Restrepo-Bernal; Germán Zuluaga-Giraldo
    Abstract: Con el fin de estudiar la dinámica reciente de los pagos electrónicos en Colombia, el Banco de la República llevó a cabo en el año 2020 una encuesta al sector comercio en donde se analizan diferentes aspectos de la aceptación y uso de distintos instrumentos de pago. La encuesta revela altos niveles de aceptación de instrumentos de pago electrónicos frente a estudios anteriores, alcanzando el 50% de los comercios encuestados. Se destaca en particular una superación de barreras en la informalidad pues, uno de cada dos comercios informales acepta hoy en día alguna forma de pago electrónico. Dado el contexto en el que se llevó a cabo la encuesta, se realizó un módulo de preguntas relacionadas con el período de pandemia asociada al COVID-19, observándose que ésta ha favorecido la adopción de instrumentos y canales electrónicos por parte de los establecimientos de comercio para facilitar los pagos de los clientes, especialmente los no presenciales. A pesar de la creciente disponibilidad y aceptación de instrumentos y canales de pago electrónicos, el efectivo sigue dominando los pagos en las ventas de los comercios, principalmente por el bajo uso de estos medios electrónicos por parte de los consumidores. Por su parte, los comercios encuestados reportaron que el 77% de sus gastos de funcionamiento se hacen en efectivo y que las transferencias bancarias dominan los pagos electrónicos; siendo los micro comercios los que tienen la mayor dependencia del efectivo (95,7%), principalmente para hacer sus pagos de nómina. De esta manera, los resultados señalan que los pagos electrónicos siguen siendo bajos, a pesar de la creciente adopción de servicios de pago electrónicos. **** ABSTRACT: To study the recent dynamics of electronic payments in Colombia, Banco de la República carried out in 2020 a survey of the commerce sector on acceptance and usage of different payment instruments. The survey reveals merchants´ high levels of acceptance of electronic payment instruments compared to previous studies, reaching 50% of the businesses surveyed. Overcoming informality barriers stands out, since one out of every two informal businesses now accept electronic payments. Given the context in which the survey was carried out, it included a set of questions related to the COVID-19 pandemic. The results show that the pandemic has favored the adoption of electronic instruments and channels by merchants, facilitating customer payments, especially remote ones. Despite the increasing availability and acceptance of electronic payment instruments and channels, cash continues to dominate merchants´ sales, mainly due to the low use of electronic payment methods by consumers. On the other hand, the surveyed businesses reported that 77% of their operating expenses are made in cash and that bank transfers dominate their electronic payments. Micro-businesses have the greatest dependence on cash (95.7%) for their operational expenses like payroll. The results indicate that electronic payments remain low, despite the growing adoption of electronic payment services by merchants.
    Keywords: Efectivo, instrumentos de pago, pagos electrónicos, tarjetas de pago, comercios, Cash, payment instruments, electronic payments, payment cards, merchants
    JEL: C81 C83 D23 E41 E42 E58
    Date: 2021–11
  46. By: Van, Germinal; Barbosa Valdiosera, Emilio
    Abstract: The purpose of this study is to investigate the impact of COVID government-aid programs on wealth creation. When the pandemic spread to the US, the economy shut down. The lockdown compelled state governments across the United States to enforce shelter-in-place policies. As a result, unemployment surged, and many government-aid programs were created to help working-class families survive through the lockdown since the economy was at a standstill. Those whose political leanings favor the Democratic Party and Progressive Movements have argued that the COVID government-aid programs contributed to creating wealth, increased GDP growth, and increased the consumers’ income and consumption. Those more sympathetic to the Free-Market view argue that these relief programs did not contribute much to the creation of wealth but only increased government spending. In testing this hypothesis, to whether know if COVID government-aid programs contributed or not to the creation of wealth, we found that the impact of these programs on wealth creation was statistically significant but only a weak percentage of the variation of these COVID government programs could explain the variation in wealth creation, which lead us to infer that the impact of COVID government-aid programs only had a very minor role in the creation of wealth. We, therefore, concluded that the COVID government-aid programs did contribute more to guarantee a safety net for the working-class rather than creating wealth from which everyone could benefit.
    Keywords: Econometrics, Economic Analysis, Statistical Modeling, Regression Analysis, Applied Economics, Multiple Regression
    JEL: C10 C2 C21 E21
    Date: 2021–11–09
  47. By: Isaac K. Ofori (University of Insubria, Varese, Italy); Christopher Quaidoo (University of Professional Studies, Accra, Ghana); Pamela E. Ofori (University of Insubria, Varese, Italy)
    Abstract: This study uses machine learning techniques to identify the key drivers of financial development in Africa. To this end, four regularization techniques— the Standard lasso, Adaptive lasso, the minimum Schwarz Bayesian information criterion lasso, and the Elasticnet are trained based on a dataset containing 86 covariates of financial development for the period 1990 – 2019. The results show that variables such as cell phones, economic globalisation, institutional effectiveness, and literacy are crucial for financial sector development in Africa. Evidence from the Partialing-out lasso instrumental variable regression reveals that while inflation and agricultural sector employment suppress financial sector development, cell phones and institutional effectiveness are remarkable in spurring financial sector development in Africa. Policy recommendations are provided in line with the rise in globalisation, and technological progress in Africa.
    Keywords: Africa, Elasticnet, Financial Development, Financial Inclusion, Lasso, Regularization, Variable Selection
    JEL: C01 C14 C52 C53 C55 E5 O55
    Date: 2021–01
  48. By: Ehsan, Zaeem-Al
    Abstract: This paper set out to uncover the nexus between the propensity of mobile financial service (MFS) usage and inflation in Bangladesh, if any. This paper hypothesizes that the usage of MFS will lead to an increase in the velocity of money, i.e., the ease of using MFS in lieu of cash will lead to money transferring ownership quicker. All things constant, this will lead to inflation—as stipulated by the quantity theory of money. To this end, monthly data pertaining to the general price index, number of MFS agents, number of average daily MFS transactions, number of MFS clients and number of banks supporting MFS transactions have been used ranging from FY16 to FY20, subject to availability. The objective of the paper was to understand the relationship between usage of MFS and inflation, if any. To this end, two models were developed and subsequently tested. Upon undertaking a Johannsen co-integration test, it was found that there is indeed one long run equilibrium relationship between the variables used as per the second model. The use of the Vector Auto Regression (VAR) on model 1 failed to upholster the hypothesis of the paper. The subsequent use of a Vector-Error Correction model (VECM) on model 2 to capture the nexus between the propensity of MFS usage and inflation in Bangladesh also failed to diagnose a statistically significant relationship between MFS velocity and inflation in Bangladesh.
    Keywords: Inflation, MFS, VAR, VECM
    JEL: D4 E51
    Date: 2021–11–01
  49. By: Jank, Stephan; Mönch, Emanuel; Schneider, Michael
    Abstract: The reuse of collateral can support the efficient allocation of assets in the financial system. Exploiting a novel dataset, we quantify banks' collateral reuse at the security level. We show that banks substantially increase their reuse of collateral in response to scarcity induced by central bank asset purchases. Repo rates are less sensitive to purchase-induced scarcity at low levels of reuse, when the banking system can easily supply collateral through reuse. Repo rates are more sensitive to scarcity and more volatile at high levels of reuse, highlighting the trade-off between the shock absorption and shock amplification effects of collateral reuse.
    Keywords: safe assets,government bonds,collateral reuse,rehypothecation,repo market,securities lending
    JEL: E4 E5 G1 G2
    Date: 2021
  50. By: Hadrien Camatte; Guillaume Daudin (DIAL - Développement, institutions et analyses de long terme, OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); Violaine Faubert; Antoine Lalliard; Christine Rifflart (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: We analyse the elasticity of the household consumption expenditure (HCE) deflator to the exchange rate, using world input-output tables (WIOT) from 1995 to 2019. In line with the existing literature, we find a modest output-weighted elasticity of around 0.1. This elasticity is stable over time but heterogeneous across countries, ranging from 0.05 to 0.22. Such heterogeneity mainly reflects differences in foreign product content of consumption and intermediate products. Direct effects through imported consumption and intermediate products entering domestic production explain most of the transmission of an exchange rate appreciation to domestic prices. By contrast, indirect effects linked to participation in global value chains play a limited role. Our results are robust to using four different WIOT datasets. As WIOT are data-demanding and available with a lag of several years, we extrapolate a reliable estimate of the HCE deflator elasticity from 2015 onwards using trade data and GDP statistics.
    Keywords: Global value chains,Spillovers,Input-output linkages,Cost-push inflation
    Date: 2021–11–02
  51. By: Luigi Guiso (Einaudi Institute for Economics and Finance and CEPR); Massimo Morelli (Bocconi University, IGIER, PERICLES and CEPR); Tommaso Sonno (University of Bologna and CEP (LSE)); Helios Herrera (Warwick University and CEPR)
    Abstract: This paper argues that the financial crisis was a watershed in the burst of populism both on the demand side (voters behaviour) and on the supply side (political parties behaviour). On the demand side, we provide novel results on the causal effect of the financial crisis on trust, turnout and voting choices via its effects on voters economic insecurity. Economic insecurity peaks during the financial crisis and extends to segments of the population untouched by the globalization and robotization shocks. To establish causality, we use a pseudo-panel analysis and instrument the economic insecurity of different cohorts leveraging on a new methodology designed to highlight the different sensitivity to financial constraints for people in different occupations. On the supply side, we trace from manifestos the policy positions of old and new parties showing that the supply of populism had the largest jump right after the financial crisis. The size of the jump is largest in countries with low fiscal space and for parties on the left of the political spectrum. We provide a formal rationalization for the key role of fiscal space, showing how the pre-financial crisis shocks enter the picture as sources of a shrinking fiscal space.
    Date: 2021
  52. By: An, Sungbae (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kang, Tae Soo (Korea Advanced Institute of Science and Technology (KAIST)); Kim, Kyunghun (Hongik University); Kang, Eunjung (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP))
    Abstract: In 2010, Korea's authorities announced foreign exchange-related macroprudential measures (MPMs) aimed at building resilience against external financial shocks. These measures have greatly contributed to limit systemic risk by curbing excessive capital inflows. Twelve years have passed since the global financial crisis started and ten years after the introduction of Korea's FX-related macro-prudential policy measures. Accordingly, this study check the performance and effectiveness of these policies and discuss how to improve macroprudential measures in response to emerging external risks.
    Keywords: Korea; capital flow; macroprudential; policy; risk
    Date: 2021–03–03
  53. By: Ojo, Marianne; Dierker, Theodore
    Abstract: The 2021 COP 26 Summit held in Glasgow, has resulted, not only in groundbreaking agreements, but also the involvement of private sector investment, the participation of formidable alliances such as the Global Energy Alliance – and for the first time, the engagement of indigenous communities. Whilst ongoing negotiations and outcomes from the Summit appear promising, there are still concerns in relation to the lack of enforceability of agreements. This paper, not only aims to highlight the rationales underlying such concerns, but also consider the merits and applicability of innovative techniques and technologies – as well as notable progress and developments made during the ongoing Summit. The engagement of several economies in the asset purchasing programs and uncertainty in decision making by some in respect of when, how or whether to commence winding up activities, also bears several monetary policy implications. This could in turn, impact outcomes – both intended and unintended, in relation to carbon, and more specifically, oil pricing strategies – which are ideally targeted at mitigating carbon emissions, whilst fostering climate goals and objectives. Given the demands and pressures of governments and economies in deploying funds to households, businesses; central bank engagements in deciding how and when to wind down asset purchase programs, and the need by governments to focus on more urgent and pressing matters such as those related to health, education, in the light of ongoing global developments, how ready and willing are governments able to commit to environmental issues? Herein lies a role for the private sector and private sector investment.
    Keywords: COP 26; double counting; fossil fuels; renewable energy; oil pricing; monetary policy; inflation; innovative techniques; Article 6 of the Paris Agreement; transparency; disclosure; emissions gap; NDCs
    JEL: D8 F6 F64 G3 K2
    Date: 2021–11
  54. By: Thomas M. Eisenbach; Gregory Phelan
    Abstract: An important role of capital and liquidity regulations for financial institutions is to counteract inefficiencies associated with “fire-sale externalities,” such as the tendency of institutions to lever up and hold illiquid assets to the extent that their collective actions increase financial vulnerabilities. However, theoretical models that study such externalities commonly assume perfect competition among financial institutions, in spite of high (and increasing) financial sector concentration. In this post, which is based on our forthcoming article, we consider instead how the effects of fire-sale externalities change when financial institutions have market power.
    Keywords: financial institution; fire sale; concentration; market power
    JEL: G1 G2 E2
    Date: 2021–11–10
  55. By: Sarah Brown; Alexandros Kontonikas; Alberto Montagnoli; Mirko Moro; Dafni Papoutsaki; Willem Sas
    Abstract: We present new evidence showing that fiscal austerity strengthens support for redistribution, especially for the relatively well-off. Our theoretical model proposes two mechanisms to explain this heterogeneity in support for redistribution: ‘altruism’ and ‘appreciation’. We test our theoretical model’s predictions by matching attitudes reported in the British Social Attitudes Survey with local area-level spending cuts in England over the period 2010 to 2015. We exploit the spatial and temporal variation in spending cuts at the Local Authority level to compute a plausibly exogenous measure of the austerity shock. We find evidence for these two channels.
    Keywords: austerity, fiscal consolidation, fiscal policy, redistribution, political attitudes, altruism, appreciation
    JEL: D30 D64 E62 H20 H30 H60
    Date: 2021
  56. By: Eduard Hromada (Czech Technical University in Prague, Faculty of Civil Engineering)
    Abstract: The paper describes the changes in the residential market in individual city districts in Prague due to the COVID-19 pandemic. In Prague, there is a significant decrease in the use of short-term rental of apartments through Airbnb and Booking services. Due to the impossibility of renting an apartment to tourists, the owners offered their apartments on the market of long-term rentals. There is an increase in the supply side, which has an impact on falling rental prices. The biggest changes are taking place in the centre of Prague. On the other hand, there is a significant increase in the selling prices of flats, which is mainly related to the monetary policy of the central bank, low mortgage interest rates and citizens' fears of rising inflation. The paper compares the price development in individual city districts of Prague for the period 2018 to June 2021.To describe the development of the residential market in Prague, the EVAL software is used. The EVAL software collects, analyses and evaluates real estate advertising in the Czech Republic.
    Keywords: Real estate market, data mining, data analysis, Prague
    JEL: E10 C30 R30
    Date: 2021–10
  57. By: Azam, Anahita; Hendrickx, Jef; Adriaenssens, Stef
    Abstract: Evidence-based risk-prevention policies for people involved in prostitution require that reliable population estimates are built. This study proposes a methodological framework and novel data source for measuring their population in regions where the internet plays a predominant role in the industry. We derive single registration capture-recapture population estimates using the Zelterman approach. The resulting estimates for the Netherlands and Belgium are lower than previous rough estimates. We find that relative to the overall population of the two countries, the proportion of sex workers are roughly identical despite differing legal environments.
    Keywords: Hidden population, Sex worker population, Population size estimation, Capture-recapture, Internet data
    JEL: E26 I18 J16 Z13
    Date: 2021–10–17
  58. By: Lee A. Craig; Julianne Treme; Thomas J. Weiss
    Abstract: We constructed a time series of menu prices for the identifiable restaurants at which James Bond dined in France and the UK that yields one of the few international price series representing luxury services. This series enabled us to calculate a real exchange rate based on prices pertinent to international travelers. We also compiled a time series on the salary of workers in the British Civil Service at Grade 7, like Bond, from 1953 to 2019. Our results indicate that French restaurant prices increased faster than Grade 7 salaries over the entire period and changes in the British exchange rate were not favorable for British travelers. To dine weekly in France, during the 1950s and 1960s, Bond would have spent 18 percent of his salary; whereas over the course of the Euro era the same basket of luxury services would have required on average 26 percent of his salary. Finally, our data indicate a likely violation of the law of one price during both the Pound-Franc and Pound-Euro eras.
    JEL: D4 E3 F2 N10 N14 Z3
    Date: 2021–10
  59. By: Josif Gjani (Faculty of Economics, University of Tirana)
    Abstract: Albania and the European Union (EU) signed the Stabilization and Association Agreement (SAA) in June 2006, which entered into force in April 2009. The main aim of the paper is to discuss on the EU democratic conditionality process in Albania and its relations to ?Europeanization? concept. Aside from Europeanization, the paper examines the opinions of several high EU representatives and local experts regarding the integration process and its political and economic conditionality. It tries to make an analysis also on the present progress and future challenges. European integration, through its democratic conditioning, is a new option for Albania, and it is impacting the internal local governance with new instruments, models and policies.
    Keywords: Europeanization, Albania, EU integration, IPA, European Commission
    JEL: A10 E60
    Date: 2021–10
  60. By: Elsby, Michael W.L. (University of Edinburgh); Smith, Jennifer C. (University of Warwick, CAGE, Migration Advisory Committee); Wadsworth, Jonathan (Centre for Economic Performance at the LSE, CReAM at UCL and IZA Bonn)
    Abstract: This paper examines the role of population flows on labour market dynamics across immigrant and native-born populations in the United Kingdom. Population flows are large, and cyclical, driven first by the maturation of baby boom cohorts in the 1980s, and latterly by immigration in the 2000s. New measures of labour market flows by migrant status uncover both the flow origins of disparities in the levels and cyclicalities of immigrant and native labour market outcomes, as well as their more recent convergence. A novel dynamic accounting framework reveals that population flows have played a non-trivial role in the volatility of labour markets among both the UK-born and, especially, immigrants.
    Keywords: Immigration ; worker flows ; labour market dynamics JEL Classification: E24 ; J6
    Date: 2021
  61. By: Klump, Rainer; Jurkat, Anne; Schneider, Florian
    Abstract: Robots are continuously transforming industrial production worldwide and thereby also inducing changes in a variety of production-related economic and social relations. While some observers call this transformation an unprecedented "revolution", others regard it as a common pattern of capitalist development. This paper contributes to the literature on the effects of the rise of industrial robots in three ways. Firstly, we describe the historic evolution and organizational structure of the International Federation of Robotics (IFR), which collects data on the international distribution of industrial robots by country, industry, and application from industrial robot suppliers worldwide since 1993. Secondly, we extensively analyze this IFR dataset on industrial robots and point out its specificities and limitations. We develop a correspondence table between the IFR industry classification and the International Standard Industrial Classification (ISIC) Revision 4 and shed some light on the price development of industrial robots by compiling data on robot price indices. We further compute implicit depreciation rates inherent to the operational stocks of robots in the IFR dataset and find an average depreciation rate of aggregate robot stocks between 4% and 7% per year between 1993 and 2019. Moreover, tracking the share of industrial robots that are not classified to any industry or application we find that their share in total robot stocks has sharply declined after 2005. We also compare IFR data with other data sources such as UN Comtrade data on net imports and unit prices of industrial robots or data on robot adoption from firm-level surveys in selected countries. Thirdly, we provide a comprehensive overview of the empirical research on industrial robots that is based on the IFR dataset. We identify four important strands of research on the rise of robots: (i) patterns of robot adoption and industrial organization, (ii) productivity and growth effect of robot adoption, (iii) its impact on employment and wages, and (iv) its influence on demographics, health, and politics.
    Keywords: Robots, productivity, growth, employment, industry classification, depreciation rates, IFR
    JEL: C23 E1 J2 J24 O3 O33 O4 O47
    Date: 2021

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