nep-mac New Economics Papers
on Macroeconomics
Issue of 2022‒03‒07
eighty-two papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. The Matching Function and Nonlinear Business Cycles By Joshua Bernstein; Alexander W. Richter; Nathaniel A. Throckmorton
  3. Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth By Nittai Bergman; David A. Matsa; Michael Weber
  4. A Horse Race of Alternative Monetary Policy Regimes Under Bounded Rationality By Joel Wagner; Tudor Schlanger; Yang Zhang
  5. Monetary policy and endogenous financial crises By José Frederic Boissay; Fabrice Collard; Jordi Galí; Cristina Manea
  6. Financial Stability Considerations for Monetary Policy: Theoretical Mechanisms By Andrea Ajello; Nina Boyarchenko; François Gourio; Andrea Tambalotti
  7. Are government spending shocks inflationary at the zero lower bound? New evidence from daily data By Sangyup Choi; Junhyeok Shin; Seung Yong Yoo
  8. The Effects of Government Spending in the Eurozone By Duque Gabriel, Ricardo; Klein, Mathias; Pesso, Ana Sofia
  9. Money markets, collateral and monetary policy By Fiorella De Fiore; Marie Hoerova; Harald Uhlig
  10. A Simple Mapping from MPCs to MPXs By David Laibson; Peter Maxted; Benjamin Moll
  11. How Central Bank Mandates Influence Content and Tone of Communication Over Time By Martin T. Bohl; Dimitrios Kanelis; Pierre L. Siklos
  12. The Expected, Perceived, and Realized Inflation of U.S. Households before and during the COVID19 Pandemic By Michael Weber; Yuriy Gorodnichenko; Olivier Coibion
  13. Minimum Wage Shocks in an Estimated DSGE Model with Underreporting By Alisher Tolepbergen
  14. The Aggregate and Distributional Effects of Fiscal Stimuli By Paweł Kopiec
  15. Monetary policy expectation errors By Maik Schmeling; Andreas Schrimpf; Sigurd A. M. Steffensen
  16. Capital controls, domestic macroprudential policy and the bank lending channel of monetary policy By Andrea Fabiani; Martha López Piñeros; José-Luis Peydró; Paul E. Soto
  17. Financial Factors, Firm size and Firm Potential By Ferreira, M.; Haber, T.; Rörig, C.
  18. Pakistan: 2021 Article IV Consultation, Sixth Review Under the Extended Arrangement Under the Extended Fund Facility, and Requests for Waivers of Applicability and Nonobservance of Performance Criteria and Rephasing of Access-Press Release; Staff Report; and Statement by the Executive Director for Pakistan By International Monetary Fund
  19. Zombies on the brink: Evidence from Japan on the reversal of monetary policy effectiveness By Gee Hee Hong; Deniz Igan; Do Lee
  20. Mis-specified Forecasts and Myopia in an Estimated New Keynesian Model By Ina Hajdini
  21. Globalisation and financialisation in the Netherlands, 1995 - 2020 By Muysken, Joan; Meijers, Huub
  22. Detecting and Measuring Financial Cycles in Heterogeneous Agents Models: An Empirical Analysis By Filippo Gusella
  23. Monetary Policy Communication: Perspectives from Former Policy Makers at the ECB By Ehrmann, Michael; Holton, Sarah; Kedan, Danielle; Phelan, Gillian
  24. Economists in the 2008 Financial Crisis: Slow to See, Fast to Act By Daniel Levy; Tamir Mayer; Alon Raviv
  25. Firms' Inflation Expectations: New Evidence from France By Savignac, Frédérique; Gautier, Erwan; Gorodnichenko, Yuriy; Coibion, Olivier
  26. Household Spending Responses to the Economic Impact Payments of 2020: Evidence from the Consumer Expenditure Survey By Jonathan A. Parker; Jake Schild; Laura Erhard; David Johnson
  27. Exorbitant privilege? Quantitative easing and the bond market subsidy of prospective fallen angels By Viral V Acharya; Ryan Niladri; Matteo Crosignani; Tim Eisert; Renée Spigt
  28. Inequalities in the Times of a Pandemic By Stefanie Stantcheva
  29. Varför har arbetstagar- och arbetsgivarorganisationer olika förväntningar om lönetillväxt? By Kiss, Tamás; Kladivko, Kamil; Lunander, Anders; Österholm, Pär
  30. Information Frictions among Firms and Households By Link, Sebastian; Peichl, Andreas; Roth, Christopher; Wohlfart, Johannes
  31. Rigideces del mercado laboral en Colombia : tendencias, perspectivas y recomendaciones By Luis Fernando Mejía; Cristina Fernández
  32. Skill Heterogeneity and Aggregate Labor Market Dynamics By John R. Grigsby
  33. Islamic finance, growth, and stability By Hasan, Zubair
  34. Estimating growth at risk with skewed stochastic volatility models By Wolf, Elias
  35. Inflation Convergence over Time: Sector-Level Evidence within Europe By Hakan Yilmazkuday
  36. The Road of Federal Infrastructure Spending Passes Through the States By Sylvain Leduc; Daniel J. Wilson
  37. Central bank digital currencies (CBDCs) in Latin America and the Caribbean By Viviana Alfonso C; Steven Kamin; Fabrizio Zampolli
  38. On the Propagation Mechanism of International Real Interest Rate Spillovers: Evidence from More than 200 Years of Data By Juncal Cunado; David Gabauer; Rangan Gupta
  39. Fiscal Policy, Income Redistribution and Poverty Reduction in Argentina By Juan Cruz López del Valle; Caterina Brest López; Joaquín Campabadal; Julieta Ladronis; Nora Lustig; Valentina Martínez Pabón; Mariano Tommasi
  40. The Impact of Globalization and Digitalization on the Phillips Curve By Christian Friedrich; Peter Selcuk
  41. The Reallocation Effects of COVID-19: Evidence from Venture Capital Investments around the World By Andrea Bellucci; Alexander Borisov; Gianluca Gucciardi; Alberto Zazzaro
  42. Term premium dynamics and its determinants: the Mexican case By Ana Aguilar; María Diego-Fernández; Rocio Elizondo; Jessica Roldán-Peña
  43. The premia on state-contingent sovereign debt instruments By Deniz Igan; Taehoon Kim; Antoine Levy
  44. Financialisation as a (it’s-not-meant-to-make-sense) gigantic global joke By Palma, J. G.
  45. Is the grass really greener? Migrants' improvements in local labor market conditions and financial health By Stephan Whitaker
  46. Money Demand and Inflation: The relationship between money demand, inflation, and the risk premium By Sakib, S M Nazmuz
  47. High Inflation and the Outlook for Monetary Policy: a speech at the American Bankers Association Community Banking Conference, Palm Desert, California, February 21, 2022 By Michelle W. Bowman
  48. Zero-hours Contracts in a Frictional Labor Market By Juan J. Dolado; Ãtienne Lalé; Hélène Turon
  49. Can cryptocurrency tap the Indian market? Role of having robust monetary and fiscal policies By Palit, Biswajit; Mukherjee, Sakya
  50. The fiscal and welfare effects of policy responses to the Covid-19 school closures By Nicola Fuchs-Schündeln; Dirk Krueger; André Kurmann; Ãtienne Lalé; Irina Popova; Alexander Ludwig
  51. Lethal Unemployment Bonuses? Substitution and Income Effects on Substance Abuse, 2020-21 By Casey B. Mulligan
  52. Transitioning Monetary Policy By Loretta J. Mester
  53. Deep Learning Macroeconomics By Rafael R. S. Guimaraes
  54. Economic Effects of Five Illustrative Single-Payer Health Care Systems: Working Paper 2022-02 By Jaeger Nelson
  55. Has the Willingness to Work Fallen during the COVID Pandemic? By Faberman, Jason; Mueller, Andreas I.; Sahin, Aysegül
  56. Testing the Forecasting Power of Global Economic Conditions for the Volatility of International REITs using a GARCH-MIDAS Approach By Afees A. Salisu; Rangan Gupta; Elie Bouri
  57. Does IT help? Information technology in banking and entrepreneurship By Toni Ahnert; Sebastian Doerr; Nicola Pierri; Yannick Timmer
  58. The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates By Ole Agersnap; Owen Zidar
  59. Fiscal rules and international financial market access By Pegdéwendé Nestor Sawadogo
  60. Lifestyle Behaviors and Wealth-Health Gaps in Germany By Lukas Mahler; Minchul Yum
  61. Firm-level policy support during the crisis: So far, so good? By Harasztosi, Péter; Maurin, Laurent; Pál, Rozália; Revoltella, Debora; Van Der Wielen, Wouter
  62. Lessons of Keynes’s Economic Consequences in a Turbulent Century By Clavin, P.; Corsetti, G.; Obstfeld, M.; Tooze, A.
  63. La qualité de la dépense publique dans les pays en développement : mesure et déterminants By Grégoire Rota-Graziosi; Emilie Caldeira; Alou Adessé Dama; Hélène Djoufelkit; Hélène Ehrhart
  64. Modelling trade policy scenarios: Macroeconomic and trade effects of restrictions in cross border labour mobility By Donal Smith; Przemyslaw Kowalski; Frank van Tongeren
  65. Bullard: Mindful of inflation’s potential to "mess up economic performance" By James B. Bullard
  66. Minimum Wages, Efficiency and Welfare By David W. Berger; Kyle F. Herkenhoff; Simon Mongey
  67. Heterogeneous Effect of Uncertainty on Corporate Investment: Evidence from Listed Firms in the Republic of Korea By Kim, Cheonkoo; Park, Jungsoo; Park, Donghyun; Tian, Shu
  68. Unequal expenditure switching: Evidence from Switzerland By Raphael Auer; Ariel Burstein; Sarah M Lein; Jonathan Vogel
  69. The Impact of Inflation on Social Security Benefits By Alicia H. Munnell; Patrick Hubbard
  70. School Closures and Effective In-Person Learning during COVID-19: When, Where, and for Whom By André Kurmann; Ãtienne Lalé
  71. Estimation of Impulse-Response Functions with Dynamic Factor Models: A New Parametrization By Juho Koistinen; Bernd Funovits
  72. Expectations Data in Asset Pricing By Klaus Adam; Stefan Nagel
  73. Social Security’s Financial Outlook: The 2021 Update in Perspective By Alicia H. Munnell
  74. The Emerging Autonomy–Stability Choice for Stablecoins By Maarten van Oordt
  75. Globalisation increased trust in northern and western Europe between 2002 and 2018 By Verhoeven, Loesje; Ritzen, Jo
  76. Dynamic Mixture Vector Autoregressions with Score-Driven Weights By Alexander Georges Gretener; Matthias Neuenkirch; Dennis Umlandt
  77. La política fiscal con enfoque de género en países de América Latina By Almeida, María Dolores
  78. Financing the economy in debt times: the crucial role of public-private partnerships By Yawovi Mawussé Isaac Amedanou
  79. Capital flows and institutions By Deniz Igan; Alexandre R. Lauwers; Damien Puy
  80. Determinants of Urbanization in Pakistan: Empirical evidence from ARDL model By Sakib, S M Nazmuz
  81. A Flexible Predictive Density Combination Model for Large Financial Data Sets in Regular and Crisis Periods By Roberto Casarin; Stefano Grassi; Francesco Ravazzolo; Herman van Dijk
  82. Impuestos sobre el patrimonio neto en América Latina By Jorratt, Michel

  1. By: Joshua Bernstein; Alexander W. Richter; Nathaniel A. Throckmorton
    Abstract: The Cobb-Douglas matching function is ubiquitous in search and matching models, even though it imposes a constant matching elasticity that is unlikely to hold empirically. Using a general constant returns to scale matching function, this paper first derives analytical conditions that determine how the cyclicality of the matching elasticity amplifies or dampens the nonlinear dynamics of the job finding and unemployment rates. It then demonstrates that these effects are quantitatively significant and driven by plausible variation in the matching elasticity.
    Keywords: Matching Function; Matching Elasticity; Nonlinear; Finding Rate; Unemployment
    JEL: E24 E32 E37 J63 J64
    Date: 2022–02–09
  2. By: Arnita Rishanty (Bank Indonesia Institute, Bank Indonesia); Sekar Utami Setiastuti (Department of Economics, Universitas Gadjah Mada.); Nur M. Adhi Purwanto (Bank Indonesia)
    Abstract: This study aims to develop an environmental dynamic stochastic general equilibrium (E-DSGE) model with heterogeneous production sectors and evaluate possible central bank and fiscal policies towards green and sustainable production. We estimate the model for the Indonesian economy and assess the effects of macroeconomic uncertainty in terms of productivity, monetary, macroprudential, fiscal policy, and financial shocks in a setup that includes policies supporting green firms. We find that aggregate output, consumption, and investment react negatively to a positive monetary policy and government spending shock. Further, we show that emission tax may dampen the contraction of green output due to contractionary monetary and fiscal policy. The effect of green financing subsidy, however, looks trivial
    Keywords: DSGE model, Bayesian estimation, Monetary policy, Fiscal policy, Environ- mental policy
    JEL: E32 E50 Q58
  3. By: Nittai Bergman; David A. Matsa; Michael Weber
    Abstract: This paper analyzes the heterogeneous effects of monetary policy on workers with differing levels of labor force attachment. Exploiting variation in labor market tightness across metropolitan areas, we show that the employment of populations with lower labor force attachment—Blacks, high school dropouts, and women—is more responsive to expansionary monetary policy in tighter labor markets. The effect builds up over time and is long lasting. We develop a New Keynesian model with heterogeneous workers that rationalizes these results. The model shows that expansionary monetary shocks lead to larger increases in the employment of less attached workers when the central bank follows an average inflation targeting rule and when the Phillips curve is flatter. These findings suggest that, by tightening labor markets, the Federal Reserve's recent move from a strict to an average inflation targeting framework especially benefits workers with lower labor force attachment.
    JEL: E12 E24 E31 E43 E52 E58 J24
    Date: 2022–01
  4. By: Joel Wagner; Tudor Schlanger; Yang Zhang
    Abstract: We introduce bounded rationality, along the lines of Gabaix (2020), in a canonical New Keynesian model calibrated to match Canadian macroeconomic data since Canada’s adoption of inflation targeting. We use the model to provide a quantitative assessment of the macroeconomic impact of flexible inflation targeting and some alternative m2netary policy regimes. These alternative monetary policy regimes are average-inflation targeting, price-level targeting and nominal gross domestic product level targeting. We consider these regimes’ performance with and without an effective lower bound constraint. Our results suggest that the performance of history-dependent frameworks is sensitive to departures from rational expectations. The benefits of adopting history-dependent frameworks over flexible inflation targeting gradually diminish with a greater degree of bounded rationality. This finding is in line with laboratory experiments that show flexible inflation targeting remains a robust framework to stabilize macroeconomic fluctuations.
    Keywords: Central bank research; Economic models; Monetary policy framework; Monetary policy transmission
    JEL: E E27 E3 E4 E58
    Date: 2022–02
  5. By: José Frederic Boissay; Fabrice Collard; Jordi Galí; Cristina Manea
    Abstract: We study whether a central bank should deviate from its objective of price stability to promote financial stability. We tackle this question within a textbook New Keynesian model augmented with capital accumulation and microfounded endogenous financial crises. We compare several interest rate rules, under which the central bank responds more or less forcefully to inflation and aggregate output. Our main findings are threefold. First, monetary policy affects the probability of a crisis both in the short run (through aggregate demand) and in the medium run (through savings and capital accumulation). Second, a central bank can both reduce the probability of a crisis and increase welfare by departing from strict inflation targeting and responding systematically to fluctuations in output. Third, financial crises may occur after a long period of unexpectedly loose monetary policy as the central bank abruptly reverses course.
    Keywords: financial crisis, monetary policy.
    JEL: E1 E3 E6 G01
    Date: 2022–01
  6. By: Andrea Ajello; Nina Boyarchenko; François Gourio; Andrea Tambalotti
    Abstract: This paper reviews the theoretical literature at the intersection of macroeconomics and finance to draw lessons on the connection between vulnerabilities in the financial system and the macroeconomy, and on how monetary policy affects that connection. This literature finds that financial vulnerabilities are inherent to financial systems and tend to be procyclical. Moreover, financial vulnerabilities amplify the effects of adverse shocks to the economy, so that even a small shock to fundamentals or a small revision of beliefs can create a self-reinforcing feedback loop that impairs credit provision, lowers asset prices, and depresses economic activity and inflation. Finally, monetary policy may affect the buildup of vulnerabilities, but the sign of the impact along some of its transmission channels is theoretically ambiguous and may vary with the state of the economy.
    Keywords: Monetary policy; Asset prices; Financial stability; Financial crises; Credit; Leverage; Liquidity
    JEL: E44 E52 E58 G20
    Date: 2022–02–15
  7. By: Sangyup Choi; Junhyeok Shin; Seung Yong Yoo
    Abstract: Are government spending shocks inflationary at the zero lower bound (ZLB)? Despite the importance of the inflation channel in amplifying government spending multipliers at the ZLB, empirical studies have not provided a clear answer to this question. Exploiting newly constructed high-frequency data on government spending and the price index of the U.S. economy, we find that prices decline in response to positive government spending shock at the ZLB. Government spending shocks are also more deflationary at the ZLB than during normal times. While our finding is difficult to reconcile with standard New Keynesian models, which predict a larger fiscal multiplier following fiscal expansion at the ZLB - driven by rising inflation and a falling real interest rate - a model with credit constraints can explain this anomaly.
    Keywords: Zero lower bound, High-frequency data, Government spending, Online price index, New Keynesian model, Credit constraints
    JEL: E31 E32 E62 F31 F41
    Date: 2022–02
  8. By: Duque Gabriel, Ricardo (Bonn Graduate School); Klein, Mathias (Research Department, Central Bank of Sweden); Pesso, Ana Sofia (University of Bonn)
    Abstract: Using a novel rich dataset at the regional level, this paper provides new empirical evidence on the fiscal transmission mechanism in the Eurozone. Our baseline estimates reveal a government spending relative output multiplier of 2.9, an employment multiplier of 1.9, and a cost per job created of €24,000. Moreover, we find that a regional fiscal stimulus leads to a significant increase in private investment, productivity, durable consumption, and real wages together with a significant rise in total hours worked driven by changes in the extensive margin (total employment), whereas the intensive margin (hours per worker) barely reacts. We estimate only small regional fiscal spillovers but detect notable state dependencies. Regional fiscal multipliers are larger in economic recessions, during fiscal consolidations, and in the core countries of the Eurozone.
    Keywords: Fiscal policy; Regional government spending multipliers; Eurozone; ARDECO
    JEL: E32 E62 R12
    Date: 2020–12–01
  9. By: Fiorella De Fiore; Marie Hoerova; Harald Uhlig
    Abstract: Interbank money markets have been subject to substantial impairments in the recent decade, such as a decline in unsecured lending and substantial increases in haircuts on posted collateral. This paper seeks to understand the implications of these developments for the broader economy and monetary policy. To that end, we develop a novel general equilibrium model featuring heterogeneous banks, interbank markets for both secured and unsecured credit, and a central bank. The model features a number of occasionally binding constraints. The interactions between these constraints - in particular leverage and liquidity constraints - are key in determining macroeconomic outcomes. We find that both secured and unsecured money market frictions force banks to either divert resources into unproductive but liquid assets or to de-lever, which leads to less lending and output. If the liquidity constraint is very tight, the leverage constraint may turn slack. In this case, there are large declines in lending and output. We show how central bank policies which increase the size of the central bank balance sheet can attenuate this decline.
    Keywords: money markets, collateral, monetary policy, balance sheet policies.
    JEL: E44 E52 E58
    Date: 2022–02
  10. By: David Laibson; Peter Maxted; Benjamin Moll
    Abstract: Standard consumption models assume a notional consumption flow that does not distinguish between nondurable and durable consumption. Such notional-consumption models generate notional marginal propensities to consume (MPC). By contrast, empirical work and policy discussions often highlight marginal propensities for expenditure (MPX), which incorporate spending on a durable stock. We compare the notional-consumption model to an isomorphic model with a durable stock, and map notional MPCs into MPXs. The mapping is especially simple for a one-period horizon: MPX = (1 - s + s/(r+d)) x MPC, with durable share s, real interest rate r, and durable depreciation rate d.
    JEL: C82 D11 D15 E21 E60 E62 G50 H31
    Date: 2022–01
  11. By: Martin T. Bohl; Dimitrios Kanelis; Pierre L. Siklos
    Abstract: In this paper, we analyze the relevance of central bank mandates on the content and tone of communication via speeches. Comparing this communication channel for mandate-related objectives between the Federal Reserve and the European Central Bank reveals similarities before the Great Financial Crisis, while notable differences emerge afterward. Furthermore, we propose a study design to examine how hawkish the tone of speeches becomes in light of current versus expected macroeconomic developments. We find that, since the GFC, expectations of unemployment drive the tone of FED speeches while inflation expectations influence the tone of ECB speeches.
    Keywords: ECB, Expectations, FED, Inflation, Central Bank Mandates, Speeches, Structural Topic Model, Unemployment
    JEL: E50 E52 E58
    Date: 2022–02
  12. By: Michael Weber; Yuriy Gorodnichenko; Olivier Coibion
    Abstract: As the pandemic spread across the U.S., disagreement among U.S. households about inflation expectations surged along with the mean perceived and expected level of inflation. Simultaneously, the inflation experienced by households became more dispersed. Using matched micro data on spending of households and their macroeconomic expectations, we study the link between the inflation experienced by households in their daily shopping and their perceived and expected levels of inflation both before and during the pandemic. In normal times, realized inflation barely differs across observable dimensions but low income, low education, and Black households experienced a larger increase in realized inflation than other households did. Dispersion in realized and perceived inflation explains a large share of the rise in dispersion in inflation expectations.
    JEL: E2 E3
    Date: 2022–01
  13. By: Alisher Tolepbergen (NAC Analytica, Nazarbayev University)
    Abstract: We build and estimate a New Keynesian DSGE model to analyze the macroeconomic effects of minimum wage shocks in an economy characterized by a high degree of wage underreporting. The estimation results suggest that the effect of the minimum wage shocks to all economic aggregates but employment is not significant. The impulse response analysis shows that a higher degree of underreporting results in less responsive dynamics to the minimum wage shocks. In addition, the magnitude of the responses is also affected by the share of Non-Ricardian households in the economy. Overall, we find that an increase in the minimum wage in the economy with a high degree of underreporting does not significantly affect the dynamics of macroeconomic variables.
    Keywords: DSGE; Minimum Wage; Underreporting; Non-Ricardian; Bayesian Estimation.
    JEL: C11 E24 E26 E64
    Date: 2021–10
  14. By: Paweł Kopiec
    Abstract: This paper compares the aggregate and distributional effects of three fiscal policy instruments: government expenditures, unemployment benefits and transfers. To this end, the Diamond-Mortensen-Pissarides model of frictional labor market is embedded into an otherwise standard Heterogeneous Agent New Keynesian framework. The model calibrated to match the moments characterizing the US economy successfully replicates the empirical distributions of households across: disposable income, consumption expenditures and net worth. The solution method developed by Reiter (2009) is applied to quantify the aggregate and distributional responses to changes in the analyzed fiscal measures. Moreover, the stabilizing role of government expenditures, unemployment benefits and transfers is assessed.
    Keywords: Heterogeneous Agents, Frictional Markets, Fiscal Stimulus
    JEL: D30 E62 H23 H30 H31
    Date: 2022–01
  15. By: Maik Schmeling; Andreas Schrimpf; Sigurd A. M. Steffensen
    Abstract: How are financial markets pricing the monetary policy outlook? We use survey expectations to decompose excess returns on money market instruments into term premia and expectation errors. We find excess returns to be driven primarily by expectation errors, whereas term premia are negligible. Our findings point to challenges faced by investors in learning about the Federal Reserve's response to large, but infrequent, negative shocks in real-time. Rather than reflecting risk compensation, excess returns stem from investors underestimating by how much the central bank has eased in response to such rare shocks. We document similar results in an international sample.
    Keywords: expectation formation, monetary policy, federal funds futures, overnight index swaps, uncertainty.
    JEL: E43 E44 G12 G15
    Date: 2022–01
  16. By: Andrea Fabiani; Martha López Piñeros; José-Luis Peydró; Paul E. Soto
    Abstract: We study how capital controls and domestic macroprudential policy tame credit supply booms, respectively targeting foreign and domestic bank debt. For identification, we exploit the simultaneous introduction of capital controls on foreign exchange (FX) debt inflows and an increase of reserve requirements on domestic bank deposits in Colombia during a strong credit boom, as well as credit registry and bank balance sheet data. Our results suggest that first, an increase in the local monetary policy rate, raising the interest rate spread with the United States, allows more FX-indebted banks to carry trade cheap FX funds with more expensive peso lending, especially toward riskier, opaque firms. Capital controls tax FX debt and break the carry trade. Second, the increase in reserve requirements on domestic deposits directly reduces credit supply, and more so for riskier, opaque firms, rather than enhances the transmission of monetary rates on credit supply. Importantly, different banks finance credit in the boom with either domestic or foreign (FX) financing. Hence, capital controls and domestic macroprudential policy complementarily mitigate the boom and the associated risk-taking through two distinct channels.
    Keywords: Capital controls; macroprudential and monetary policy; carry trade; credit supply; risk-taking
    JEL: E52 E58 F34 F38 G21 G28
    Date: 2022–02
  17. 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
  18. By: International Monetary Fund
    Abstract: Economic activity has rebounded strongly on the back of waning COVID-19 infections and expansionary fiscal and monetary policies. However, strong import growth—fueled by the macroeconomic policy mix, higher international commodity prices, and credit growth—have led to a marked deterioration of the external position. The current account deficit has widened, the rupee depreciated markedly, and inflation remains persistently high.
    Date: 2022–02–04
  19. By: Gee Hee Hong; Deniz Igan; Do Lee
    Abstract: How does unconventional monetary policy affect corporate capital structure and investment decisions? We study the transmission channel of quantitative easing and its potential diminishing returns on investment from a corporate finance perspective. Using a rich bankfirm matched data of Japanese firms with information on corporate debt and investment, we study how firms adjust their capital structure in response to the changes in term premia. Investment responds positively to a reduction in the term premium on average. However, there is a significant degree of cross-sectional variation in firm response: healthier firms increase capital spending and cash holdings, while financially vulnerable firms take advantage of lower long-term yields to refinance without increasing investment.
    Keywords: transmission of unconventional monetary policy, quantitative easing, reversal rate, zombie firms, corporate balance sheet, term premium, corporate investment
    JEL: E2 E5 G3
    Date: 2022–01
  20. By: Ina Hajdini
    Abstract: The paper considers a New Keynesian framework in which agents form expectations based on a combination of mis-specified forecasts and myopia. The proposed expectations formation process is found to be consistent with all three empirical facts on consensus inflation forecasts, namely, that forecasters under-react to ex-ante forecast revisions, that forecasters over-react to recent events, and that the response of forecast errors to a shock initially under-shoots but then over-shoots. The paper then derives the general equilibrium solution consistent with the proposed expectations formation process and estimates the model with likelihood-based Bayesian methods, yielding three novel results: (i) The data strongly prefer the combination of autoregressive mis-specified forecasting rules and myopia over other alternatives; (ii) The best fitting expectations formation process for both households and firms is characterized by high degrees of myopia and simple AR(1) forecasting rules; (iii) Frictions such as habit in consumption, which are typically necessary for models with Full-information Rational Expectations, are significantly less important, because the proposed expectations generate substantial internal persistence and amplification to exogenous shocks. Simulated inflation expectations data from the estimated general equilibrium model reflect the three empirical facts on forecasting data.
    Keywords: Myopia; Survey of Professional Forecasters; Bayesian Estimation; Internal Propagation
    JEL: C11 C53 D84 E13 E30 E50 E70 E52
    Date: 2022–02–16
  21. By: Muysken, Joan (UNU-MERIT, SBE Maastricht University, and CofFEE-Europe); Meijers, Huub (UNU-MERIT, SBE Maastricht University)
    Abstract: The Dutch economy is a small open economy. Due to its persistent large current account surplus, the Dutch net foreign assets have been increasing over time. The financial sector is dominated by special purpose vehicles created for tax reasons. The financial assets and liabilities of these vehicles are issued or held abroad, amounting to around 500 per cent of GDP. The remaining part of the financial sector has almost doubled in size relative to GDP over the past 25 years. While the growth of the banking sector stagnated since the financial crisis, the financial sector continued to grow because of the presence of a funded pension system. We analyse these developments using insights from stock flow consistent models for the Dutch economy that we have developed earlier. This analysis also enables us to highlight the role monetary policy played in facilitating and stimulating the growth of financialisation.
    Keywords: globalisation, financialisation, quantitative easing, stock-flow consistent modelling
    JEL: E44 B5 E6 F45 G21 G32
    Date: 2022–02–17
  22. By: Filippo Gusella
    Abstract: This paper proposes a macroeconometric analysis to depict and measure possible financial cycles that emerge due to the dynamic interaction between heterogeneous market participants. We consider 2-type heterogeneous speculative agents: Trend followers tend to follow the price trend while contrarians go against the wind. As agents' beliefs are unobserved variables, we construct a state-space model where heuristics are considered as unobserved state components and from which the conditions for endogenous cycles can be mathematically derived and empirically tested. Further, we specifically measure the length of endogenous financial cycles. The model is estimated using the equity price index for the 1960–2020 period for the UK, France, Germany, and the USA. We find empirical evidence of endogenous financial cycles for all four countries, with the highest frequencies in the USA and the UK.
    Keywords: Heterogeneous Agent Models, Heterogeneous Expectations, Endogenous Cycles, State Space Model, Period of Cycles
    JEL: C13 C32 G10 G12 E32
    Date: 2022
  23. By: Ehrmann, Michael (European Central Bank and CEPR); Holton, Sarah (European Central Bank); Kedan, Danielle (European Central Bank); Phelan, Gillian (Central Bank of Ireland)
    Abstract: This paper reports the results of a survey of former members of the Governing Council of the European Central Bank, which sought their views on monetary policy communication practices, the related challenges and the road ahead. Pronounced differences across the respondent groups are rare, suggesting that there is broad consensus on the various issues. Respondents view enhancing credibility and trust as the most important objective of central bank communication. They judge communication with financial markets and experts as extremely important and adequate, but see substantial room for improvement in the communication with the general public. The central bank objective is widely seen as the most important topic for monetary policy communication, and several respondents perceived a need for clarification of the ECB’s inflation aim, citing the ambiguity of the “below, but close to, 2%” formulation that was in place at the time of the survey.
    Keywords: monetary policy, central bank communication, survey
    JEL: E52 E58
    Date: 2022–01
  24. By: Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, US; ICEA, Wilfrid Laurier University, Canada; Rimini Centre for Economic Analysis; ISET, TSU, Georgia); Tamir Mayer (Graduate School of Business Administration, Bar-Ilan University, Israel); Alon Raviv (Graduate School of Business Administration, Bar-Ilan University, Israel)
    Abstract: We study the economics and finance scholars' reaction to the 2008 financial crisis using machine learning language analyses methods of Latent Dirichlet Allocation and dynamic topic modelling algorithms, to analyze the texts of 14,270 NBER working papers covering the 1999–2016 period. We find that academic scholars as a group were insufficiently engaged in crises' studies before 2008. As the crisis unraveled, however, they switched their focus to studying the crisis, its causes, and consequences. Thus, the scholars were “slow-to-see,” but they were “fast-to-act.” Their initial response to the ongoing Covid-19 crisis is consistent with these conclusions.
    Keywords: Financial crisis, Economic Crisis, Great recession, NBER working papers, LDA textual analysis, Topic modeling, Dynamic Topic Modeling, Machine learning
    JEL: E32 E44 E50 F30 G01 G20
    Date: 2022–02
  25. By: Savignac, Frédérique (Banque de France); Gautier, Erwan (Banque de France); Gorodnichenko, Yuriy (University of California, Berkeley); Coibion, Olivier (University of Texas at Austin)
    Abstract: Using a new survey of firms' inflation expectations in France, we provide novel evidence about the measurement and formation of inflation expectations on the part of firms. First, French firms report inflation expectations with a smaller, but still positive, bias than households and display less disagreement. Second, we characterize the extent and manner in which the wording of questions matters for the measurement of firms' inflation expectations. Third, we document whether and how the position of the respondent within the firm affects the provided responses. Fourth, because our survey measures firms' expectations about aggregate and firmlevel wage growth along with their inflation expectations, we are able to show that expectations about wages are even more condensed than firms' inflation expectations and almost completely uncorrelated with them, indicating that firms perceive little link between price and wage inflation. Finally, an experimental treatment indicates that an exogenous change in firms' inflation expectations has no effect on their aggregate wage expectations.
    Keywords: expectations, rational inattention, surveys, firms
    JEL: E2 E3 E4
    Date: 2022–02
  26. By: Jonathan A. Parker; Jake Schild; Laura Erhard; David Johnson
    Abstract: Using the Consumer Expenditure Survey and variation in amount, receipt, and timing of receipt of Economic Impact Payments (EIPs) authorized by the CARES Act, this paper estimates that people spent less of their EIPs in the few months following arrival than in similar previous policy episodes and than estimated by existing studies using other types of data. Accounting for volatility during the pandemic and comparing the consumer spending behavior of broadly similar households, people spent roughly 10 percent (standard error 3.4) of their EIPs on non-durable goods and services in the three months of arrival, with little evidence of additional spending in the subsequent three months or on durable goods. People who report mostly spending their EIPs spent 14.3\% (3.7) of their EIPs compared to 5.9\% (8.3) and -1.6\% (5.0) for those who report mostly paying off debt and saving respectively. People with low liquid wealth and people receiving their EIPs on debit cards spent at higher rates: 21.7\% (6.4) and 36.8\% (24.6) respectively, with economically larger estimates for total spending.
    JEL: D14 D15 E21 E62 G5 H31
    Date: 2022–01
  27. By: Viral V Acharya; Ryan Niladri; Matteo Crosignani; Tim Eisert; Renée Spigt
    Abstract: We document capital misallocation in the U.S. investment-grade (IG) corporate bond market, driven by quantitative easing (QE). Prospective fallen angels – risky firms just above the IG rating cutoff – enjoyed subsidised bond financing since 2009, especially when the scale of QE purchases peaked and from IG-focused investors that held more securities purchased in QE programs. The benefiting firms used this privilege to fund risky acquisitions and increase market share, exploiting the reluctance of credit rating agencies to downgrade post-M&A and adversely affecting competitors' employment and investment. Eventually, these firms suffered more severe downgrades at the onset of the pandemic.
    Keywords: corporate bond market, investment-grade bonds, large-scale asset purchases (LSAP), credit ratings, credit ratings inflation.
    JEL: E31 E44 G21
    Date: 2022–02
  28. By: Stefanie Stantcheva
    Abstract: This paper summarizes the research on some of the major inequalities that have been exacerbated by the COVID-19 pandemic across OECD countries. It reviews findings related to inequalities across the income distribution, sectors and regions, gender, and inequalities in education inputs for children from different socioeconomic backgrounds.
    JEL: E24 E3 H20 J24 J6 J81
    Date: 2022–01
  29. By: Kiss, Tamás (Örebro University School of Business); Kladivko, Kamil (Örebro University School of Business); Lunander, Anders (Örebro University School of Business); Österholm, Pär (Örebro University School of Business)
    Abstract: Arbetstagarorganisationernas förväntningar på lönetillväxten ligger systematiskt högre än arbetsgivarorganisationernas i den så kallade Prospera-enkäten. I denna artikel analyseras dessa skillnader ekonometriskt. Genom att beakta respondenternas förväntningar rörande inflation och BNP-tillväxt undersöks om ekonomiska samband kan motivera skillnaden. Vi diskuterar även huruvida den observerade skillnaden i förväntningarna kan bero på andra faktorer, såsom strategiskt agerande av prognosmakarna.
    Keywords: Enkätdata; Prognoser; Prospera
    JEL: E24 E30 J50
    Date: 2022–02–22
  30. By: Link, Sebastian (Ifo Institute for Economic Research); Peichl, Andreas (Ludwig-Maximilians-Universität München); Roth, Christopher (University of Cologne); Wohlfart, Johannes (European Central Bank)
    Abstract: We survey samples of German firms and households to document novel stylized facts about the extent of information frictions among the two groups. First, firms' expectations about macroeconomic variables are closer to expert forecasts and less dispersed than households', consistent with higher information frictions among households. Second, the degree of dispersion and the distance from expert forecasts varies more across groups of households than across groups of firms. Third, firms update their policy rate expectations less than households when provided with an expert forecast, consistent with holding stronger priors. Our results have implications for modeling choices, macroeconomic dynamics, and policies.
    Keywords: information frictions, expectation formation, firms, households, interest rates
    JEL: D83 D84 E71
    Date: 2022–02
  31. By: Luis Fernando Mejía; Cristina Fernández
    Abstract: El presente capítulo se estructura de la siguiente manera: la segunda sección realiza una radiografía del mercado laboral colombiano y los principales cambios sufridos con la crisis del covid-19, la tercera sección presenta las principales rigideces de la legislación y las instituciones laborales en Colombia, la cuarta sección formula algunas proyecciones de los indicadores laborales a futuro, y la última sección presenta algunos insumos y recomendaciones para la discusión de política pública sobre reformas al mercado laboral.
    Keywords: Mercado Laboral, EmpleoCOVID-19, Instituciones Laborales, Política Pública, Indicadores Laborales, Colombia
    JEL: J21 E24 J48 O54
    Date: 2021–04–01
  32. By: John R. Grigsby (Princeton University)
    Abstract: Shifts in the composition of the workforce meaningfully affect the cyclicality of average wages. This paper argues that such shifts manifest as a representative agent shock to either labor supply or the labor wedge, which are known to be crucial for labor market fluctuations. I develop a tractable model with multidimensional skill heterogeneity and heterogeneous industries to study when composition bias materially impacts aggregate wages. The aggregate impact of sectoral labor demand shocks is mediated by the level and transferability of its workers’ skills. Wages are flexible and the only shock in the model is to labor demand; nevertheless, the model replicates the fact that average wages rose during the Great Recession even as employment collapsed. Reduced form composition-adjustment methods recover positive comovements between employment and wages in recent periods suggesting an increasing role for composition effects through time, which the model rationalizes through changes in the skill distribution and composition of sectoral shocks.
    Keywords: Labor, Employment, Labor Market
    JEL: E24 J24
    Date: 2021–11
  33. By: Hasan, Zubair
    Abstract: Economists regard the financial and the real sectors of an economy as complementary; the two sides of the same coin. Islamic finance conceives of these sectors differently, albeit not independent of each other. Islamic approach is distinct in that it shuns interest, speculation and indeterminacy. At the same time, it is not independent because Islam allows a time value for money, and maintains of asset liquidity plus system stability as its guiding business principles. The discussion n the subject is scanty. This paper seeks to fill the gap. A diversion briefly discusses debt versus equity as sources for financing growth bringing in technology.
    Keywords: Islam; finance; Stability, Profit sharing; Debt; Equity; Technology Islam; finance; Stability, Profit sharing; Debt; Equity; Technology Islam; Finance; Growth, Stability; Technology
    JEL: E1 E6
    Date: 2021–08
  34. By: Wolf, Elias
    Abstract: This paper proposes a Skewed Stochastic Volatility (SSV) model to model time varying, asymmetric forecast distributions to estimate Growth at Risk as introduced in Adrian, Boyarchenko, and Giannone's (2019) seminal paper "Vulnerable Growth". In contrary to their semi-parametric approach, the SSV model enables researchers to capture the evolution of the densities parametrically to conduct statistical tests and compare different models. The SSV-model forms a non-linear, non-gaussian state space model that can be estimated using Particle Filtering and MCMC algorithms. To remedy drawbacks of standard Bootstrap Particle Filters, I modify the Tempered Particle Filter of Herbst and Schorfheide's (2019) to account for stochastic volatility and asymmetric measurement densities. Estimating the model based on US data yields conditional forecast densities that closely resemble the findings by Adrian et al. (2019). Exploiting the advantages of the proposed model, I find that the estimated parameter values for the effect of financial conditions on the variance and skewness of the conditional distributions are statistically significant and in line with the intuition of the results found in the existing literature.
    Keywords: Growth at Risk,Macro Finance,Bayesian Econometrics,Particle Filters
    JEL: C10 E32 E58 G01
    Date: 2022
  35. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: This paper investigates inflation convergence among European countries by using sector-level data for the period between 1997:M1 and 2019:M12. Panel unit root tests at the country-sector level are conducted by using moving windows, which is useful for analyzing changes in inflation convergence and the corresponding speed of convergence over time. The results suggest that there is evidence for inflation convergence for the majority of sectors within Europe, although certain countries have experienced disruptions, especially during the 2008 financial crisis. Regarding the speed of inflation convergence, the average half-life across European countries decreased from about 15 months to about 8 months during the sample period. Important sector-level implications follow for European Union (EU) candidate countries and non-euro EU member countries in regard to the Maastricht Treaty.
    Keywords: Inflation Convergence, Half-Life, Sector-Level Analysis, European Union, Euro Area
    JEL: C32 E31 E58 F45
    Date: 2022–02
  36. By: Sylvain Leduc; Daniel J. Wilson
    Abstract: Because federal infrastructure spending largely takes the form of grants to state governments, the macroeconomic impact of such packages depends on the share of federal grants that “passes through” to actual infrastructure spending done by states. A low degree of pass-through would tend to mute the economic impact from federal grants, reflecting a crowd-out effect on state spending. We first revisit Knight’s (2002) influential finding of near-zero pass-through (perfect crowd out) of federal highway grants. That result is found to be specification-sensitive and is reversed completely in a longer sample, with estimates implying dollar-for-dollar pass-through of grants to spending. We then extend the analysis to allow for dynamics. We find a contemporaneous pass-through effect of about 1 and a longer-run cumulative effect of around 1.3. In the parlance of public finance, the flypaper effect is strong.
    Keywords: infrastructure; spending; states; fiscal policy; federal grants
    JEL: H77 H54 E62
    Date: 2022–02–01
  37. By: Viviana Alfonso C; Steven Kamin; Fabrizio Zampolli
    Abstract: The pros and cons of CBDCs have been examined in numerous writings. However, much less research has focused on the benefits, costs and implementation issues of CBDCs in specific economies or regions. This paper attempts to fill that gap for the Latin American and Caribbean (LAC) economies. It first examines the views of central banks in the region toward CBDCs, drawing on their responses to a survey conducted by the BIS in late 2020 and early 2021. Second, it examines whether the engagement of LAC central banks with CBDCs can be explained by the structural characteristics of their economies. Third, it reviews the long list of potential benefits, costs and risks of CBDCs, focusing on their relevance to the LAC economies. Finally, the paper reviews the design choices that central banks face and the actual choices made by a number of central banks in the region.
    Keywords: central bank digital currency, CBDC, payment systems, central banking, digital currency
    JEL: E42 E51 F31 G21 G28 O32 O38
    Date: 2022–01
  38. By: Juncal Cunado (University of Navarra, School of Economics, Pamplona, Spain); David Gabauer (Data Analysis Systems, Software Competence Center Hagenberg, Austria); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)
    Abstract: This paper analyzes the real interest rate transmission mechanism across the United States, Japan, France, Germany, Holland, Italy, Spain and the United Kingdom during a period of more than 200 years. Based on a time-varying parameter vector autoregressive (TVP-VAR) connectedness methodology, the empirical results suggest that the magnitude of these international spillovers ranges between 30% and 75% across the sample period. Furthermore, it is shown that international interest rate spillovers increase during crisis periods, such as the two World Wars, the Great Depression of 1929, the 1980 and 1990 recessions, and the Great Financial Crisis of 2009. More interestingly, our findings illustrate the position of each of these eight countries as net transmitters or receivers of monetary policy shocks over time. Our analysis contributes to the debate on whether the conduct of monetary policy in a country should consider its international spillovers.
    Keywords: TVP-VAR, dynamic connectedness, extended joint connectedness, real interest rate dynamics
    JEL: C32 C52 E52
    Date: 2022–02
  39. By: Juan Cruz López del Valle (Departamento de Economía, Universidad de San Andrés); Caterina Brest López (Departamento de Economía, Universidad de San Andrés); Joaquín Campabadal (Departamento de Economía, Universidad de San Andrés); Julieta Ladronis (International Monetary Fund); Nora Lustig (Department of Economics and Commitment to Equity Institute, Tulane University); Valentina Martínez Pabón (Department of Economics and Commitment to Equity Institute, Tulane University); Mariano Tommasi (Departamento de Economía, Universidad de San Andrés)
    Abstract: We implement a fiscal incidence analysis for Argentina with data from the 2017 national household survey. We find that Argentina’s fiscal system reduces inequality and poverty more than it is the case in many other comparable countries. This result is driven more by the size of the state (as measured by social spending to GDP) than by the progressivity of the fiscal system. While there are spending items that are quite progressive and even pro-poor, taxes are unequalizing and a number of subsidies benefit disproportionately the rich.
    Keywords: Fiscal policy, inequality, poverty, incidence, public economics
    JEL: E62 D6 H22 H23 I14 I24 I32
    Date: 2021–08
  40. By: Christian Friedrich; Peter Selcuk
    Abstract: In this paper, we examine the impact of globalization and digitalization on the Phillips curve in a sample of 18 advanced economies over two decades. Using industry-level data from the World and EU KLEMS databases, we first estimate country-industry-specific Phillips curves for each decade by relating the growth rate of output prices to lagged inflation and an employment gap. We then assess the relative impact of globalization and digitalization on the slope coefficients of these Phillips curves, which represent the sensitivity of inflation to economic slack. We measure globalization by increases in trade and financial integration and digitalization by the use of industrial robots as a share of a country’s population. We find that globalization significantly reduces the slope of the Phillips curve, while digitalization has the opposite effect. We also find some evidence that globalization decreases the intercept of the Phillips curve and that digitalization increases it. Evidence for the impact of both trends on employment is less conclusive. When investigating the associated transmission channels for both trends in the context of our slope analysis, we find that the negative impact of globalization on the slope coefficient of the Phillips curve is muted in industries that experience a high growth rate of total factor productivity and that the positive impact of digitalization is muted in industries that have seen high investments in IT capital in the past.
    Keywords: Business fluctuations and cycles; Inflation and prices; International topics; Labour markets; Recent economic and financial developments; Trade integration
    JEL: E32 F6
    Date: 2022–02
  41. By: Andrea Bellucci (Università degli Studi dell’Insubria, European Commission, Joint Research Centre (JRC), and MoFiR); Alexander Borisov (Lindner College of Business, University of Cincinnati and MoFiR); Gianluca Gucciardi (European Commission, Joint Research Centre (JRC)); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR.)
    Abstract: We examine possible reallocation effects generated by the COVID-19 outbreak by analyzing the patterns of venture capital (VC) investments around the globe. Using transaction-level data and exploiting the staggered nature of the spread of the virus, we document a shift in VC portfolios towards firms developing technologies relevant to an environment of social distancing and health pandemic concerns. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such areas. We show heterogenous effects related to the experience of VC investors, as well as their size and organizational form.
    Keywords: Venture Capital, Investment, COVID-19, Healthcare, Pandemic.
    JEL: G24 F21 D81 E22 E44
    Date: 2022–02–16
  42. By: Ana Aguilar; María Diego-Fernández; Rocio Elizondo; Jessica Roldán-Peña
    Abstract: We estimate the term premium implicit in 10-year Mexican government bonds from 2004 to 2019, and analyze the main determinants explaining its dynamics. To do so, we decompose the long-term interest rate into its two components: the expected shortterm interest rate and the term premium. The first component is obtained using different methodologies, two affine models and data on interest rate swaps. The second component is computed as the difference between long-term interest rates and such short-term rate. The Mexican term premium is represented by the average of the three estimations. We find that the Mexican term premium increased considerably during three episodes compared to the entire dynamics of said premium: i) the Global Financial Crisis of 2008; ii) the Taper Tantrum of 2013; and iii) the U.S. presidential election of 2016. In contrast, we find that the Mexican term premium decreased, to historically low levels, during the U.S. Quantitative Easing and Operation Twist programs. Additionally, in order to identify the main determinants that explain the behavior of this premium, we run a time varying parameters regression. In this analysis, we find that the main determinants that explain the dynamics of the premium are the compensation for FX risk (as a proxy of inflationary risk premium), the real compensation, and the U.S. term premium (as a global factor).
    Keywords: term premium, short-term interest rate expectation, affine model.
    JEL: G12 E43 C12 C53
    Date: 2022–01
  43. By: Deniz Igan; Taehoon Kim; Antoine Levy
    Abstract: State-contingent debt instruments such as GDP-linked warrants have garnered attention as a potential tool to help debt-stressed economies smooth repayments over business cycles, yet very few studies of the empirical properties of these instruments exist. This paper develops a general framework to estimate the time-varying risk premium of a state-contingent sovereign debt instrument. Our estimation framework applied to GDP-linked warrants issued by Argentina, Greece, and Ukraine reveals three stylized facts: (i) the risk premium in state-contingent instruments is high and persistent; (ii) the risk premium exhibits a pro-cyclical pattern; and (iii) the liquidity premium is higher and more volatile than that for plain-vanilla government bonds issued by the same sovereign. We then present a model in which investors fear ambiguity and that can account for the cyclical properties of the risk premium.
    Keywords: state-contingent debt instruments, GDP-linked warrants, risk premia, procyclicality
    JEL: H63 G13 E44
    Date: 2022–01
  44. By: Palma, J. G.
    Abstract: This paper analyses events in financial markets since the 2008 financial crisis in both the developed and the developing worlds, giving especial attention to the processes of ‘financialisation’; that is, to the combined effect of the growing size and dominance of the financial sector relative to the non-financial sector, and the diversification towards financial activities in non-financial corporations. The main conclusion is that we are paying the price (and a huge one) for two related phenomena; one belongs to the realm of ideology and knowledge, the other to ‘power play’.
    Keywords: manias, panics, financialisation, QE, excess liquidity, ‘disconnect’ between the financial and the real worlds, emerging markets, Latin America, Asia, Keynes, Kindleberger, Minsky, Buchanan
    JEL: E22 D70 D81 E51 F02 F21 F32 F40 F63 G15 G20 G30 L51 N20 O16
    Date: 2022–02–11
  45. By: Stephan Whitaker
    Abstract: This paper documents several facts about internal migrants in the US that underlie substantial areas of economic research and policy making, but are rarely directly published. Using a large-sample, 23-year panel, the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, I estimate the distribution of changes in local labor market conditions experienced by people who move to a different labor market. Net migration favors local labor markets with lower unemployment and faster job growth, but gross flows toward weaker labor markets are almost as large as the flows toward stronger labor markets. During recessions, net flows temporarily favor weaker labor markets. Migrants frequently choose destinations with similar labor market conditions rather than moving to the markets with the highest growth or lowest unemployment at the time of their move. A hypothesis that personal financial health improves for people moving to tight local labor markets (or deteriorates for migrants to slack labor markets) is only partially supported in the data. Migrants to low-unemployment and high-employment growth regions have higher homeownership rates after they move. However, there are not clear advantages or disadvantages for migrants to strong or weak labor market regions as measured by credit scores, consumption, bankruptcy, or foreclosure.
    Keywords: Internal migration; local labor market conditions; unemployment; employment growth; consumer credit; financial health
    JEL: J61 E24 R11 D14
    Date: 2022–02–22
  46. By: Sakib, S M Nazmuz
    Abstract: In varied economics laws, inflation and interest rates are a standard reference of the economy. to place it merely, once interest rates fall, a lot of people and establishments will borrow extra money from banks and alternative lenders. Rising and rising interest rates push customers into saving mode as a result of the next come on savings. This leaves customers with less financial gain to pay that slows the economy and, as a result, lowers inflation. This relationship shapes up to date financial policies associated is that the most powerful consider the direction of an economy. this suggests that variable interest rates and inflation have a linear combination which will be shapely as economic potency.
    Date: 2021–10–31
  47. By: Michelle W. Bowman
    Date: 2022–02–21
  48. By: Juan J. Dolado; Ãtienne Lalé; Hélène Turon
    Abstract: We propose a model to evaluate the U.K.’s zero-hours contract (ZHC) – a contract that exempts employers from the requirement to provide any minimum working hours, and allows workers to decline any workload. We find quantitatively mixed welfare effects of ZHCs. On one hand they unlock job creation among firms that face highly volatile business conditions and increase labor force participation of individuals who prefer flexible work schedules. On the other hand, the use of ZHCs by less volatile firms, where jobs are otherwise viable under regular contracts, reduces welfare and likely explains negative employee reactions to this contract. To quote this document Dolado, J. J., Lalé, E. and Turon, H. (2022). Zero-hours Contracts in a Frictional Labor Market (2022s-04). Nous proposons un modèle pour évaluer le contrat zéro-heures (ZHC) du Royaume-Uni - un contrat qui exempte les employeurs de l'obligation de fournir des heures de travail minimales et qui permet aux travailleurs de refuser toute charge de travail. Nous constatons que les effets quantitatifs des ZHC sur le bien-être sont mitigés. D'une part, ils permettent aux entreprises confrontées à une demande plus volatile de créer des emplois, et ils favorisent la participation au marché du travail des personnes qui préfèrent des horaires de travail flexibles. D'autre part, le recours au ZHC dans les entreprises moins volatiles, où les emplois sont viables dans le cadre de contrats réguliers, réduit le bien-être et explique probablement les réactions négatives des employés vis-à-vis du contrat zéro-heures. Pour citer ce document Dolado, J. J., Lalé, E. and Turon, H. (2022). Zero-hours Contracts in a Frictional Labor Market (2022s-04).
    Keywords: Zero-hours contracts,Working hours,Gig economy,Flexibility, Contrats zéro-heures,Heures de travail,Gig economy,Flexibilité
    JEL: E24 J22 J23 J63 L84
    Date: 2022–01–24
  49. By: Palit, Biswajit; Mukherjee, Sakya
    Abstract: The growing debate and discussions about legalizing digital currency- raises a significant question does the market have the withstanding power to include people from all segments of society for its usage. In such a nexus, India, when compared to its Asian counterparts is endowed with a booming crypto industry. However, due to many macro-economic and regulatory reasons which come parallel with the crypto trade, the Government of India is taking cognizance of regulating and rationing cryptocurrency trade. Cryptocurrency not only has prospects but at the very moment is enveloped with lots of apprehensions. Countries around the world are using blockchain technology to manoeuvre their development, coupled with swift payment modus operandi, low transaction fees absence of a mediator during transactions make the brighter side of this rapid digital currency. At the same time, unlike other currencies, cryptos are famously detached from any central banks or financial institutions and thereby received a completely decentralized status. On one side, this can free the investors from being beholden by the institution but on the flip side, there arise legal complications. Exposure to too much volatility and severe cases of fraudulent activities are prone to make investors apprehensive of this practice. We find, having a robust financial inclusion system, backed by proper monetary and fiscal policies is one of the necessary conditions to ensure that cryptocurrency taps the Indian market. By dissecting market phases into Accumulation, Pure Buy, Distribution and Pure Sell, we employ Robust Regression to test our proposition. Therefore, for crypto to finely blend in the Indian market and cause endogenous growth, the financial backbone of the economy needs to have a tremendous withstanding potential which comes when the country has vigorous financial inclusions and institutions.
    Keywords: Cryptocurrency, Regulatory Measures, Financial Inclusion.
    JEL: E2 E4 G1
    Date: 2022–02–05
  50. By: Nicola Fuchs-Schündeln; Dirk Krueger; André Kurmann; Ãtienne Lalé; Irina Popova; Alexander Ludwig
    Abstract: Using a structural life-cycle model and data on school visits from Safegraph and school closures from Burbio, we quantify the heterogeneous impact of school closures during the Corona crisis on children affected at different ages and coming from households with different parental characteristics. Our data suggests that secondary schools were closed for in-person learning for longer periods than elementary schools (implying that younger children experienced less school closures than older children), and that private schools experienced shorter closures than public schools, and schools in poorer U.S. counties experienced shorter school closures. We then extend the structural life cycle model of private and public schooling investments studied in Fuchs-Schündeln, Krueger, Ludwig, and Popova (2021) to include the choice of parents whether to send their children to private schools, empirically discipline it with data on parental investments from the PSID, and then feed into the model the school closure measures from our empirical analysis to quantify the long-run consequences of the Covid-19 school closures on the cohorts of children currently in school. Future earnings- and welfare losses are largest for children that started public secondary schools at the onset of the Covid-19 crisis. Comparing children from the topto children from the bottom quartile of the income distribution, welfare losses are ca. 0.8 percentage points larger for the poorer children if school closures were unrelated to income. Accounting for the longer school closures in richer counties reduces this gap by about 1/3. A policy intervention that extends schools by 3 months (6 weeks in the next two summers) generates signicant welfare gains for the children and raises future tax revenues approximately sufficient to pay for the cost of this schooling expansion. À l'aide d'un modèle structurel de cycle de vie et de données sur les visites d'écoles provenant de Safegraph et sur les fermetures d'écoles provenant de Burbio, nous quantifions l'impact hétérogène des fermetures d'écoles pendant la crise de la COVID-19 sur les enfants affectés à différents âges et provenant de ménages ayant des caractéristiques parentales différentes. Nos données suggèrent que les écoles secondaires ont été fermées pendant des périodes plus longues que les écoles élémentaires (ce qui implique que les enfants plus jeunes ont reçu davantage d’enseignement en présentiel que les enfants plus âgés), et que les écoles privées ont connu des fermetures plus courtes que les écoles publiques, et que les écoles des comtés américains plus pauvres ont connu des fermetures d'écoles plus courtes. Nous étendons ensuite le modèle structurel du cycle de vie des investissements dans l'enseignement privé et public étudié par Fuchs Schundeln, Krueger, Ludwig et Popova (2021) pour inclure le choix des parents d'envoyer ou non leurs enfants dans des écoles privées ; nous le disciplinons empiriquement avec des données sur les investissements parentaux provenant du PSID ; puis nous introduisons dans le modèle les mesures de fermeture d'écoles de notre analyse empirique afin de quantifier les conséquences à long terme des fermetures d'écoles sur les cohortes d'enfants scolarisés pendant la pandémie de la COVID-19. Les pertes futures de revenus et de bien-être sont les plus importantes pour les enfants qui ont commencé l'école secondaire publique au début de la crise de la COVID-19. Si l'on compare les enfants du quartile supérieur aux enfants du quartile inférieur de la distribution des revenus, les pertes de bien-être sont d'environ 0,8 point de pourcentage supérieures pour les enfants les plus pauvres. La prise en compte des fermetures d'écoles plus longues dans les comtés plus riches réduit cet écart d'environ 1/3. Une intervention politique qui prolongerait la scolarité de 3 mois (6 semaines au cours des deux étés à venir) génère des gains de bien-être significatifs pour les enfants et dégage des recettes fiscales futures qui permettraient approximativement de financer cette extension de la scolarité.
    Keywords: , Covid-19,fermetures d'écoles,inégalité,persistance intergénérationnelle
    JEL: D15 D31 E24 I24
    Date: 2021–11–12
  51. By: Casey B. Mulligan
    Abstract: Marginal prices fell, and disposable incomes increased, for drug and alcohol consumers during the pandemic. Most of the amount, timing, and composition of the 240,000 deaths involving alcohol and drugs since early 2020 can be explained by income effects and category-specific price changes. For alcohol, the pandemic shifted consumption from bars and restaurants to homes, where marginal money prices are lower. For more dangerous illegal drugs like fentanyl and methamphetamine, the full price of consumption also significantly fell whenever employment became financially less attractive, as it was while unemployment bonuses were elevated. Both the wage effect and income effects further reduced marginal opioid prices by inducing shifts toward cheap fentanyl. Drug mortality dipped in the months between the $600 and $300 bonuses, especially for age groups participating most in UI. A corollary to this analysis is that national employment rates will be slow to recover due to the increased prevalence of alcohol and, especially, drug addiction.
    JEL: E24 I18 L51
    Date: 2022–02
  52. By: Loretta J. Mester
    Abstract: This year will be one of transition for monetary policy. We will be transitioning away from the extraordinarily accommodative monetary policy that was needed earlier in the pandemic and recalibrating policy to today’s economic challenges. The FOMC is taking steps to begin that process. Our main policy tool is the federal funds rate. Since March 2020, the FOMC has maintained the target range of the fed funds rate at 0 to 1/4 percent to support the economy. At our January meeting, the Committee announced that it will soon be appropriate to raise the target range.
    Keywords: Monetary Policy
    Date: 2022–02–17
  53. By: Rafael R. S. Guimaraes
    Abstract: Limited datasets and complex nonlinear relationships are among the challenges that may emerge when applying econometrics to macroeconomic problems. This research proposes deep learning as an approach to transfer learning in the former case and to map relationships between variables in the latter case. Although macroeconomists already apply transfer learning when assuming a given a priori distribution in a Bayesian context, estimating a structural VAR with signal restriction and calibrating parameters based on results observed in other models, to name a few examples, advance in a more systematic transfer learning strategy in applied macroeconomics is the innovation we are introducing. We explore the proposed strategy empirically, showing that data from different but related domains, a type of transfer learning, helps identify the business cycle phases when there is no business cycle dating committee and to quick estimate a economic-based output gap. Next, since deep learning methods are a way of learning representations, those that are formed by the composition of multiple non-linear transformations, to yield more abstract representations, we apply deep learning for mapping low-frequency from high-frequency variables. The results obtained show the suitability of deep learning models applied to macroeconomic problems. First, models learned to classify United States business cycles correctly. Then, applying transfer learning, they were able to identify the business cycles of out-of-sample Brazilian and European data. Along the same lines, the models learned to estimate the output gap based on the U.S. data and obtained good performance when faced with Brazilian data. Additionally, deep learning proved adequate for mapping low-frequency variables from high-frequency data to interpolate, distribute, and extrapolate time series by related series.
    Date: 2022–01
  54. By: Jaeger Nelson
    Abstract: This paper builds on previous studies published by the Congressional Budget Office about single-payer health care systems. It uses a general-equilibrium, overlapping-generations model to analyze the economic and distributional implications of five illustrative single-payer health care systems. The systems vary by their payment rates to providers, degree of cost sharing, and inclusion of benefits for long-term services and supports (LTSS). The economic effects of financing a single-payer system are beyond the scope of this paper. However, the results can be paired with some
    JEL: E62 H31 I10
    Date: 2022–02–23
  55. By: Faberman, Jason (Federal Reserve Bank of Chicago); Mueller, Andreas I. (University of Texas at Austin); Sahin, Aysegül (University of Texas at Austin)
    Abstract: We examine the effect of the Covid pandemic on willingness to work along both the extensive and intensive margins of labor supply. Special survey questions in the Job Search Supplement of the Survey of Consumer Expectations (SCE) allow us to elicit information about individuals' desired work hours for the 2013-2021 period. Using these questions, along with workers' actual labor market participation, we construct a labor market underutilization measure, the Aggregate Hours Gap (AHG), following Faberman et al. (2020). The AHG captures changes in labor market underutilization for the full population along both the extensive and intensive margins using data on desired work hours as a measure of their potential labor supply. We find that the sharp increase in the AHG during the Covid pandemic essentially disappeared by the end of 2021. We also document a sharp decline in desired work hours during the pandemic that persists through the end of 2021 and is roughly double the drop in the labor force participation rate. Ignoring the decline in desired hours overstates the degree of underutilization by 2.5 percentage points (12.5%). Our findings suggest that, as of 2021Q4, the labor market is tighter than suggested by the unemployment rate and the adverse labor supply effect of the pandemic is more pronounced than implied by the labor force participation rate. These discrepancies underscore the importance of taking into account the intensive margin for both labor market underutilization and potential labor supply.
    Keywords: labor market slack, COVID-19, desired work hours, potential labor supply
    JEL: E24 J21 J60
    Date: 2022–02
  56. By: Afees A. Salisu (Centre for Econometric and Allied Research, University of Ibadan, Ibadan, Nigeria; Department of Economics, University of Pretoria, Private Bag X20, Hatfield, 0028, South Africa); 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: We examine the power of global economic conditions (GECON) in forecasting the daily return volatility of various international Real Estate Investment Trusts (REITs) indices. To this end, we use the GARCH-MIDAS framework due to the mixed frequencies of the variables under study and given its merit of circumventing the problems of information loss due to data aggregation and biases through data disaggregation. The results show evidence of forecast gains in the model that accommodates GECON, and significant in-sample forecastability where improvements in global economic conditions lower the risk associated with the international REITs particularly in the US and emerging markets. Further analysis shows the possibility of gaining higher returns on REITs by exploiting the information contents of GECON. A robustness analysis indicates that other measures of global economic conditions such as Global Weakness Index (GWI) and Global Intensity Index (GII) contain lower forecasting power than GECON but with significant improvements in their forecast outcomes when combined with the latter using the principal components analysis. Consequently, monitoring the global economic dynamics via GECON as well as other indices (GWI and GII) is crucial for optimal investment decisions.
    Keywords: REITs volatility, global economic conditions, mixed data analysis, GARCH-MIDAS model, forecasting
    JEL: C32 C53 E32 R30
    Date: 2022–02
  57. By: Toni Ahnert; Sebastian Doerr; Nicola Pierri; Yannick Timmer
    Abstract: This paper analyzes the importance of information technology (IT) in banking for entrepreneurship. To guide our analysis, we build a parsimonious model of bank screening and lending that predicts that IT in banking can spur entrepreneurship by making it easier for startups to borrow against collateral. We then empirical show that job creation by young firms is stronger in US counties that are more exposed to IT-intensive banks. Consistent with a strengthened collateral lending channel, entrepreneurship increases by more in IT-exposed counties when house prices rise. In line with the model's implications, higher startup activity does not diminish startup quality. Instrumental variable regressions at the bank level further show that IT makes banks' credit supply more responsive to changes in local house prices, and weakens the importance of geographical distance between borrowers and lenders. These results suggest that banks' IT adoption can increase dynamism by improving startups' access to finance.
    Keywords: technology in banking, entrepreneurship, information technology, collateral, screening.
    JEL: G21 G14 E44 D82 D83
    Date: 2022–02
  58. By: Ole Agersnap (Princeton University); Owen Zidar (Princeton University)
    Abstract: This paper uses a direct-projections approach to estimate the effect of capital gains taxation on realizations at the state level and then develops a framework for determining revenue-maximizing rates at the federal level. We find that the elasticity of revenues with respect to the tax rate over a 10-year period is −0.5 to −0.3, indicating that capital gains tax cuts do not pay for themselves and that a 5 percentage point rate increase would yield $18 to $30 billion in annual federal tax revenue. Our long-run estimates yield revenue-maximizing capital gains tax rates of 38 to 47 percent.
    Keywords: U.S., Northern America, Revenue, Tax, Taxation
    JEL: E62 H25 H71
    Date: 2021–12
  59. By: Pegdéwendé Nestor Sawadogo (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: Fiscal policy is a powerful instrument to regulate the economic activity in order to address many development challenges and promote sound macroeconomic conditions in developing countries. A large literature examines the role of fiscal rules in improving fiscal outcomes. Fiscal rules impose numerical limits on budgetary aggregates. However, few studies investigate the link between fiscal rules and financial market access. This paper aims to explore the effects of various types of fiscal rules and their interactions on financial market access in developing countries. Our findings confirm that the adoption of fiscal rules is an instrument for policy makers to improve developing countries' financial market access.
    Abstract: La politique budgétaire est un instrument puissant pour réguler l'activité économique afin de faire face aux nombreux défis de développement et promouvoir des conditions macroéconomiques saines dans les pays en développement. Une vaste littérature examine le rôle de l'adoption des règles budgétaires dans l'amélioration des performances budgétaires. On entend par règles budgétaires des contraintes numériques sur les agrégats comme le déficit ou la dette publique. Cependant, très peu d'études ont exploré le lien entre l'adoption de règles budgétaires et l'accès aux marchés financiers internationaux. Cet article entend explorer à la fois les effets de l'adoption de différents types de règles budgétaires ainsi que leurs interactions sur l'accès aux marchés financiers par les pays en développement. Nos résultats montrent que l'adoption et la bonne mise en œuvre des règles budgétaires est un instrument permettant un meilleur accès aux marchés financiers internationaux.
    Keywords: Règles fiscales
    Date: 2020–06
  60. By: Lukas Mahler; Minchul Yum
    Abstract: We document significant gaps in wealth across health status over the life cycle in Germany—a country with a universal healthcare system and negligible out-of-pocket medical expenses. To investigate the underlying sources of the empirical patterns in wealth-health gaps, we build a heterogeneous-agent life-cycle model in which health and wealth evolve endogenously. In the model, agents exert efforts to lead a healthy lifestyle, which helps maintain good health status in the future. Effort choices, or lifestyle behaviors, are subject to adjustment costs to capture various aspects of micro-level effort adjustment behaviors in the data. We find that our calibrated model generates around half of the wealth gaps by health observed in the German micro data, and that variations in health-related lifetime outcomes are largely explained by uncertainty realizations over the life cycle, rather than initial conditions at age 25. Our counterfactual experiments indicate that variations in individual health efforts account for over half of the model-generated wealth gaps by health status. Their importance is due not only to the fact that they affect labor income and savings rates, both of which influence wealth accumulation, but also because they act as an amplification device since richer households exert relatively more efforts to maintain a healthy lifestyle.
    Keywords: Health Inequality, Wealth Inequality, Healthy Lifestyle, Germany
    JEL: E2 D3 I1
    Date: 2022–02
  61. By: Harasztosi, Péter; Maurin, Laurent; Pál, Rozália; Revoltella, Debora; Van Der Wielen, Wouter
    Abstract: We use the 2021 vintage of the EIB Investment Survey (EIBIS) which contains a detailed set of questions regarding the nature of the policy support to firms during the COVID-19 crisis. Matched with hard data on the balance sheets and Profit and Loss (P&L) statements of corporations, the survey enables to disentangle the drivers of policy allotment and the impact of the policy support during the investment recovery.First, we focus on the distribution of the policy support and show that it has been allotted mostly owing to the sales losses during the crisis, going to firms most affected during the crisis. We do not find evidence that the support was tilted towards firms already weak before the crisis. Second, we show that the firms that have benefitted from the policysupport tend to be more optimistic regarding their investment plans. The impact is especially pronounced for investment in digital technologies.
    Keywords: EIBIS,COVID-19 Policy support in the EU,Economic rebound
    JEL: E22 D22 H0
    Date: 2022
  62. By: Clavin, P.; Corsetti, G.; Obstfeld, M.; Tooze, A.
    Abstract: Just over a century old, John Maynard Keynes’s The Economic Consequences of the Peace (1919) remains a seminal document of the twentieth century. At the time, the book was a prescient analysis of political events to come. In the decades that followed, this still controversial text became an essential ingredient in the unfolding of history. In this essay, we review the arc of experience since 1919 from the perspective of Keynes’s influence and his changing understanding of economics, politics, and geopolitics. We identify how he, his ideas, and this text became key reference points during times of turbulence as actors sought to manage a range of shocks. Near the end of his life, Keynes would play a central role in planning the world economy’s reconstruction after World War II. We argue that the “global order†that evolved since then, marked by increasingly polarized societies, leaves the community of nations ill prepared to provide key global public goods or to counter critical collective threats.
    Keywords: Keynes, World War I, Versailles, interwar period, League of Nations, World War II, Bretton Woods, Cold War, multilateralism, global order
    JEL: B30 E10 E30 F30 F40 N10 N20
    Date: 2021–10–05
  63. By: Grégoire Rota-Graziosi (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Emilie Caldeira (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Alou Adessé Dama (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Hélène Djoufelkit (AFD - Agence française de développement); Hélène Ehrhart (AFD - Agence française de développement)
    Abstract: A partir d'une base de données concernant 192 pays de 1990 à 2015, l'analyse empirique menée vise à mesurer la qualité de la dépense publique dans les pays en développement. La méthodologie proposée ici comprend trois étapes : (1) la construction et le calcul d'un indicateur unidimensionnel de résultats des dépenses publiques, (2) la mesure de l'efficience des dépenses publiques fondée sur une approche à frontières stochastiques et utilisant l'indicateur unidimensionnel de résultats comme output dans l'estimation et (3) une analyse de quelques effets de certains facteurs sur les scores d'efficience obtenus, avec une attention particulière portée à l'endettement. Une application en ligne a été élaborée, disponible à l'adresse : Elle permet de télécharger les données, répliquer les résultats et d'en développer d'autres en modifiant certaines pondérations, la période ou les pays étudiés ou en intégrant des données complémentaires. L'Afrique et l'Asie du Sud accusent un certain retard avec respectivement des scores d'efficience de 0,55 et 0,66, tandis que l'efficience moyenne sur la période est de 0,71. L'Asie du Sud, le Moyen Orient et l'Amérique latine sont au même niveau tandis que le classement est dominé par des pays européens et d'Amérique du Nord. L'analyse par niveau de revenu montre une amélioration de l'efficience à mesure que le niveau de revenu du pays augmente : les pays à faible revenu sont ceux qui ont le niveau d'efficience les plus faibles. Les pays de l'OCDE sont caractérisés par une dispersion faible en général. Les pays à revenu élevé non-membre de l'OCDE ont également de bons scores mais sont caractérisés par une plus grande hétérogénéité, en particulier pour les pays du Moyen Orient, de l'Amérique Latine et des Caraïbes. Dans toutes les régions du monde et quel que soit le niveau de revenu, l'indicateur de résultats s'est amélioré depuis 1990.
    Keywords: Dépenses publiques,Macroéconomie,Politiques fiscales,Politique monétaire,Analyse économique,Pays en developpement
    Date: 2021–02
  64. By: Donal Smith; Przemyslaw Kowalski; Frank van Tongeren
    Abstract: COVID-19 has drawn renewed attention to the economic importance of cross border mobility. Frictions in cross border mobility of labour can substantially impact the economy and international trade, by causing a long-term decrease in net migration that would alter the labour supply in many economies. To capture these macro-economic and trade effects, a global macroeconomic model (NiGEM) and a general equilibrium trade model (METRO) were used to simulate a stylised scenario equivalent to a 20% reduction in net-migration accumulated over the past ten years for all economies and regions. In OECD countries, this would translate into a reduction of the overall labour supply, and this shock would shift some economic activity towards non-OECD countries. At the sectoral level, exports of labour intensive manufacturing activities in OECD countries would contract, with electronics (13% of the total reduction of exports in the long term), automobiles (12%) and pharmaceuticals (9%) among the most affected.
    Keywords: Computable general equilibrium model, International labour mobility, International trade, METRO model, NIGEM macroeconometric model, Sectoral economic effects
    JEL: F22 F47 C63 E10 N10
    Date: 2022–02–23
  65. By: James B. Bullard
    Abstract: St. Louis Fed president on studying the cost of inflation as an economist and applying those insights as a policymaker.
    Keywords: inflation
    Date: 2022–02–08
  66. By: David W. Berger; Kyle F. Herkenhoff; Simon Mongey
    Abstract: It has long been argued that a minimum wage could alleviate efficiency losses from monopsony power. In a general equilibrium framework that quantitatively replicates results from recent empirical studies, we find higher minimum wages can improve welfare, but most welfare gains stem from redistribution rather than efficiency. Our model features oligopsonistic labor markets with heterogeneous workers and firms and yields analytical expressions that characterize the mechanisms by which minimum wages can improve efficiency, and how these deteriorate at higher minimum wages. We provide a method to separate welfare gains into two channels: efficiency and redistribution. Under both channels and Utilitarian social welfare weights the optimal minimum wage is $15, but alternative weights can rationalize anything from $0 to $31. Under only the efficiency channel, the optimal minimum wage is narrowly around $8, robust to social welfare weights, and generates small welfare gains that recover only 2 percent of the efficiency losses from monopsony power.
    JEL: E2 J2 J42
    Date: 2022–01
  67. By: Kim, Cheonkoo (Korea Chamber of Commerce and Industry); Park, Jungsoo (Sogang University); Park, Donghyun (Asian Development Bank); Tian, Shu (Asian Development Bank)
    Abstract: In this paper, we analyze the effect of financial uncertainty on corporate investment using firm-level panel data from the Republic of Korea. We find that financial uncertainty has a significant negative effect on corporate investment, and that the effect is heterogeneous across firms of different sizes. Small firms and large firms are more exposed to the negative effect of uncertainty than are medium-sized firms. The negative effect of uncertainty on large firms slightly declined after the global financial crisis, but it increased for small and medium-sized enterprises (SMEs). Financial constraints and investment irreversibility amplify the negative effect of uncertainty. The inverted U-shaped curve of the uncertainty effect along the firm-size spectrum can be understood as follows: Small firms are more financially constrained and large firms’ investments are more irreversible in nature. Lastly, contrary to widespread belief, uncertainty has waned since 1990, dampening the trend of declining investment ratios. To counter the negative effect of uncertainty on SMEs, policies need to be directed toward the development of capital markets and bond markets for SMEs. Furthermore, SME policies should be redirected to target competitiveness, not protection.
    Keywords: uncertainty; corporate investment; financial constraints; investment irreversibility
    JEL: E22 G31
    Date: 2022–02–21
  68. By: Raphael Auer; Ariel Burstein; Sarah M Lein; Jonathan Vogel
    Abstract: What are the unequal effects of changes in consumer prices on the cost of living? In the context of changes in import prices, most analyses focus on variation across households in initial expenditure shares on imported goods. However, the unequal welfare effects of non-marginal foreign price changes also depend on differences in how consumers substitute between imported and domestic goods, on which there is scant evidence. Using data from Switzerland surrounding the 2015 appreciation of the Swiss franc, we provide evidence that lower income households have higher price elasticities. These differences in elasticities contribute significantly to the unequal welfare effects of large import price changes.
    Keywords: expenditure switching, large exchange rate shocks, gains from trade.
    JEL: E3 F1 F41
    Date: 2022–02
  69. By: Alicia H. Munnell; Patrick Hubbard
    Abstract: This fall, the U.S. Social Security Administration is likely to announce that benefits will be increased by around 6 percent beginning January 1, 2022. This cost-of-living-adjustment (COLA), which would be the largest in 40 years, is an important reminder that keeping pace with inflation is one of the attributes that makes Social Security benefits such a unique source of retirement income. A spurt in inflation, however, affects two other factors that determine the net amount that retirees receive from Social Security. The first is the Medicare premiums for Part B, which are deducted automatically from Social Security benefits. To the extent that premiums rise faster than the COLA, the net benefit will not keep pace with inflation. The second issue pertains to taxation under the personal income tax. Because taxes are levied on Social Security benefits only for households with income above certain thresholds ($25,000 for single taxpayers and $32,000 for joint returns) and the thresholds are not adjusted for wage growth or inflation, rising benefit levels subject more benefits to taxation – again reducing the net benefit. This brief explores the interaction of inflation and Social Security benefits. The first section describes the nature of the COLA. The second section looks at the interaction of Medicare premiums and the COLA. The third section explores how inflation affects the taxation of benefits. The final section concludes that, while the inflation adjustment in Social Security is extremely valuable, the rise in Medicare premiums and the extension of taxation under the personal income tax limits the ability of beneficiaries to fully maintain their purchasing power.
    Date: 2021–08
  70. By: André Kurmann; Ãtienne Lalé
    Abstract: We combine cell phone data on foot-traffic to a highly representative sample of almost 70,000 schools in the U.S. with information on school learning modes to estimate a measure of effective in-person learning (EIPL) during the COVID-19 pandemic. We then match the data with various administrative records to document differences in EIPL over time, across regions, and by individual school characteristics. We find three main results. First, while EIPL dropped to below 20% of its pre-pandemic level across all regions of the U.S. during Spring 2020, EIPL varied widely during the 2020-21 school year, ranging from less than 20% in some cities on the West Coast to more than 80% in some cities in the South. Second, a substantial part of this variation is accounted for by observable school characteristics: (i) public schools provided on average less EIPL than private schools; (ii) schools in more affluent and educated localities and schools with a larger share of non-white students provided on average lower EIPL; and (iii) public schools with higher pre-pandemic spending per student, higher district-level Elementary and Secondary School Emergency Relief (ESSER) funding per student, and larger student enrollment provided on average lower EIPL. Third, the negative association of EIPL with affluence, education and pre-pandemic school spending is driven in large part by systematic regional differences that are correlated with political preferences. In contrast, the negative association of EIPL with a school’s share of non-white students and ESSER funding persists even within counties and controlling for local affluence and education. These patterns are important for our understanding of the factors that led to the large disparities in school closures and the impact of in-person learning loss during the pandemic on future educational attainment, income inequality, and economic growth. Nous apparions des données de mobilité obtenus à partir de téléphones portables à un échantillon représentatif de près de 70 000 écoles aux États-Unis, et combinons ces données avec des informations sur les modes d'apprentissage scolaire pour construire une mesure de l'apprentissage effectivement réalisé en présentiel (EIPL) pendant la pandémie de COVID-19. Nous augmentons ensuite ces données avec plusieurs bases de données administratives afin de documenter les différences d'EIPL dans le temps, selon les régions et en fonction des caractéristiques individuelles des écoles. Nous obtenons trois résultats principaux. Premièrement, alors que l'EIPL a chuté en deçà de 20 % par rapport à son niveau pré-pandémique au printemps 2020 dans toutes les régions des États-Unis, l'EIPL a ensuite fortement varié au cours de l'année scolaire 2020-2021, atteignant plus de 80 % dans certaines villes du sud alors qu’il se maintenait en deçà de 20 % dans certaines villes de la côte ouest. Deuxièmement, une part substantielle de cette variation est expliquée par les caractéristiques observables des écoles : (i) les écoles publiques ont fourni en moyenne moins d'EIPL que les écoles privées ; (ii) les écoles situées dans des localités plus riches et plus instruites et les écoles comptant une plus grande proportion d'élèves non blancs ont fourni en moyenne moins d'EIPL ; et (iii) les écoles publiques ayant des dépenses par élève plus élevées avant la pandémie, ayant reçu un montant d'aide d'urgence aux écoles élémentaires et secondaires (ESSER) par élève plus importante, et les écoles ayant un plus grand nombre d'élèves ont fourni en moyenne moins d'EIPL. Troisièmement, l'association négative de l'EIPL avec la richesse, l'éducation et les dépenses scolaires pré-pandémiques est due en grande partie à des différences régionales systématiques qui sont corrélées aux préférences politiques. En revanche, l'association négative de l'EIPL avec la part d'élèves non blancs d'une école et le financement ESSER persiste au sein même des comtés et en contrôlant la richesse et l'éducation locales. Ces tendances sont importantes pour comprendre les facteurs qui ont conduit aux disparités dans les fermetures d'écoles et pour évaluer l'impact de la perte d'apprentissage en présentiel pendant la pandémie sur le niveau d'éducation futur, les inégalités des revenus et la croissance économique.
    Keywords: COVID-19,School closures and reopenings,Effective in-person learning,Inequality, COVID-19,Fermetures et réouvertures d'écoles,Apprentissage efficace en présentiel,Inégalité
    JEL: E24 I24
    Date: 2021–11–18
  71. By: Juho Koistinen; Bernd Funovits
    Abstract: We propose a new parametrization for the estimation and identification of the impulse-response functions (IRFs) of dynamic factor models (DFMs). The theoretical contribution of this paper concerns the problem of observational equivalence between different IRFs, which implies non-identification of the IRF parameters without further restrictions. We show how the minimal identification conditions proposed by Bai and Wang (2015) are nested in the proposed framework and can be further augmented with overidentifying restrictions leading to efficiency gains. The current standard practice for the IRF estimation of DFMs is based on principal components, compared to which the new parametrization is less restrictive and allows for modelling richer dynamics. As the empirical contribution of the paper, we develop an estimation method based on the EM algorithm, which incorporates the proposed identification restrictions. In the empirical application, we use a standard high-dimensional macroeconomic dataset to estimate the effects of a monetary policy shock. We estimate a strong reaction of the macroeconomic variables, while the benchmark models appear to give qualitatively counterintuitive results. The estimation methods are implemented in the accompanying R package.
    Date: 2022–02
  72. By: Klaus Adam; Stefan Nagel
    Abstract: Asset prices reflect investors' subjective beliefs about future cash flows and prices. In this chapter, we review recent research on the formation of these beliefs and their role in asset pricing. Return ex- pectations of individual and professional investors in surveys differ markedly from those implied by rational expectations models. Vari- ation in subjective expectations of future cash flows and price lev- els appear to account for much of aggregate stock market volatility. Mapping the survey evidence into agent expectations in asset pricing models is complicated by measurement errors and belief heterogene- ity. Recent e¤orts to build asset pricing models that match the survey evidence on subjective belief dynamics include various forms of learn- ing about payout or price dynamics, extrapolative expectations, and diagnostic expectations. Challenges for future research include the exploration of subjective risk perceptions, aggregation of measured beliefs, and links between asset market expectations and the macro- economy.
    Keywords: Investor beliefs, survey forecasts, return expectations, cash flow expectations, belief formation, asset price dynamics
    JEL: G12 G41 E71
    Date: 2022–02
  73. By: Alicia H. Munnell
    Abstract: The 2021 Trustees Report, which typically comes out in the spring, emerged in the last week in August. That’s not surprising given a new Administration and a somewhat more complicated story than usual. Although the Trustees assert that COVID-19 and the ensuing recession had “significant effects” on Social Security’s finances, it is hard to see much of an impact in the report. In the short term, employment, earnings, interest rates, and Gross Domestic Product (GDP) – all of which dropped substantially in 2020 – are expected to return to their pre-COVID levels by 2023, and births delayed in 2020-22 are assumed to be deferred to 2024-26. The increase in deaths due to COVID actually improves the system’s finances. As a result, the depletion date for the trust fund moved up by only one year from 2035 to 2034. For the 75-year projection, given the uncertainty about the long-run impact of COVID, the Trustees assume that the pandemic and recession would have no effect on the 75-year assumptions. The three changes they did make to the ultimate assumptions – raising the total fertility rate, lowering the rate of mortality improvement, and lowering the unemployment rate – all improve the outlook substantially. Yet, the 75-year deficit increased from 3.21 to 3.54 percent of taxable payrolls. The biggest movers were: 1) fewer births than expected in 2020 and recognition that women will continue to delay childbearing; 2) a 1-percent decline in the level of potential GDP due to COVID and the accompanying recession; 3) updates to projections of initial benefits; and 4) moving the valuation period ahead one year. This brief updates the numbers for 2021 and puts the current report in perspective. It also examines the moving pieces in the fertility assumptions and their impact on the 75-year projections and takes a quick look at the cost-of-living adjustment payable in January 2022 and at the projected depletion of the trust fund in 2034. The bottom line is the 75-year deficit has increased, and it is not primarily due to COVID. At the same time, Social Security has once again demonstrated its worth during these tumultuous times, when – in the face of economic collapse – it continued to provide steady income to retirees and those with disabilities. To maintain confidence in this valuable program and avoid precipitous cuts in 2034, Congress needs to address the program’s 75-year deficit.
    Date: 2021–09
  74. By: Maarten van Oordt (Vrije Universiteit Amsterdam)
    Abstract: Lawmakers have called for better stablecoin regulation, but authorities tend to have little control over the global operators of distributed ledgers that process stablecoin transactions. This chapter illustrates how peg deviations may occur when the issuer of a fiat-backed stablecoin loses its access to the traditional payment system of the jurisdiction that issues the relevant fiat currency. The need for reliable access to the traditional payment system in order to maintain a stable peg provides an important foothold for regulators to exercise control over fiat-backed stablecoins. Conditional upon regulators having little control over the operators of some distributed ledgers, an autonomy–stability choice may emerge where users of stablecoins ultimately face a choice between regulated stablecoins with a stable value but little autonomy and alternative stablecoin arrangements with more autonomy but a less stable value.
    Keywords: Stablecoins, Cryptocurrency, Exchange rate, Distributed ledgers, Regulation
    JEL: E42 G23 G28
    Date: 2022–02–15
  75. By: Verhoeven, Loesje (UNU-MERIT, Maastricht University); Ritzen, Jo (UNU-MERIT, Maastricht University)
    Abstract: Institutional trust and interpersonal trust are supposedly threatened by globalisation. In a case study of twelve countries in Northern- and Western Europe, however, we show that the substantial globalisation of the first two decades of the 21st century has contributed to institutional trust and - less significant - to interpersonal trust. This relation is non-linear. The "usual suspects" of income inequality and diversity have decreased institutional and interpersonal trust. Only specific Government expenditures (education and culture) have contributed to trust, more so in combination with high quality of institutions. High trusting countries (compared to Austria) turn out to be: France, Germany, Sweden, Switzerland and the UK. The positive effect of globalization on trust is "carried" by the higher educated and those with higher incomes.
    Keywords: Globalisation, Social Cohesion, Institutional Trust, Interpersonal trust, Diversity, Inequality, Government Expenditure, Government Intervention
    JEL: F15 F68 D31 D78 E61 H5 O24 O52
    Date: 2022–02–01
  76. By: Alexander Georges Gretener; Matthias Neuenkirch; Dennis Umlandt
    Abstract: We propose a novel dynamic mixture vector autoregressive (VAR) model in which time-varying mixture weights are driven by the predictive likelihood score. Intuitively, the state weight of the k-th component VAR model in the subsequent period is increased if the current observation is more likely to be drawn from this particular state. The model is not limited to a specific distributional assumption and allows for straightforward likelihood-based estimation and inference. We conduct a Monte Carlo study and find that the score-driven mixture VAR model is able to adequately filter the mixture dynamics from a variety of different data generating processes which most other observation-driven dynamic mixture VAR models cannot appropriately cope with. Finally, we illustrate our approach by an application where we model the conditional joint distribution of economic and financial conditions and derive generalized impulse responses.
    Keywords: Dynamic Mixture Models; Generalized Autoregressive Score Models; Macro-Financial Linkages; Nonlinear VAR
    JEL: C32 C34 G17
    Date: 2022
  77. By: Almeida, María Dolores
    Abstract: Tradicionalmente, cuando se diseñan e implementan decisiones de política fiscal, solo se analizan sus resultados en relación con los grandes agregados macroeconómicos y, en el mejor de los casos, se evalúa su efecto redistributivo en la población en general. Sin embargo, la política fiscal no es neutra y tiene impactos diferenciados en hombres y mujeres, dados los roles y responsabilidades socialmente asignados a ellos. Además, que pueden contribuir a incrementar o a reducir las brechas de género. En los últimos años está situación se ha empezado a revertir. El presente documento proporciona elementos conceptuales, sistematiza los principales compromisos internacionales y documenta experiencias positivas en países de América Latina y el Caribe relacionadas con la incorporación del enfoque de género en la política fiscal.
    Date: 2021–09–02
  78. By: Yawovi Mawussé Isaac Amedanou (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper aims to show that there is a great interest for countries to rely on Public-Private Partnerships (PPPs) as a tool for financing the economy, especially in times of debt. First, we conceptualize through game theory a better risk management between the public and private sectors in case of co-investment. Second, building on Iossa & Martimort (2009), we demonstrate that PPPs investments produce greater economic and social gains than pure public investments by providing incentives and transferring risks to the private sector. The implications of the model are diverse: financing the provision of public infrastructure through PPPs allows for sharing the associated risks, improves the quality and reduce the costs of the provision of public goods. The model has been empirically tested on 14 Sub-Saharan African countries over the period 1990 − 2017. The impact of PPP investments is significantly higher than that of pure public investments. The evidence also shows that the positive impact of PPP investments strengthens economic growth as the public debt grows to a point where there is no longer any significant pro-growth impact.
    Keywords: Public-private partnership,Pure public investment,Cooperatie game,Risk management,Economic growth,Public debt,Fiscal constraints
    Date: 2022–01
  79. By: Deniz Igan; Alexandre R. Lauwers; Damien Puy
    Abstract: Does foreign capital improve the quality of domestic institutions? Consistent with an institutional quality channel of capital flows, we show that industries that are more dependent on "good" institutions to operate grow more than others after foreign capital flows into the private sector. The effects are stronger in countries that are further away from the institutional frontier (e.g., emerging markets), but they disappear and even turn negative in countries with very low initial institutional quality, suggesting that foreign capital inflows can exacerbate the ex-ante institutional deficit. We also find that institution-dependent industries grow less when capital flows to the official sector. Our findings support the view that foreign investors can be, under certain conditions, a catalyst for institutional reform and that the relaxation of government budget constraints generally weakens structural reform incentives.
    Keywords: capital flows, institutions, manufacturing, institutional dependence.
    JEL: F33 F60 G15 E02 O43
    Date: 2022–01
  80. By: Sakib, S M Nazmuz
    Abstract: This paper is intended to investigate the determinants of urbanization in Pakistan using the annual time series data from 1973 to 2018. Our aim with this paper is to analyze the short run and long run relationship between urbanization and its key determinants. We employed the ARDL (Autoregressive Distributed Lag) model for estimation purpose. We applied a cointegration approach i.e., the ARDL bounds test to confirm the relationship between urbanization (dependent variable) and other independent variables including GDP per capita growth, unemployment, literacy rate and energy demand. Diagnostic tests ensured the statistical soundness and validity of model. This study concluded that, in short run, the GDP per capita growth, literacy rate and energy demand positively influence the urbanization, while unemployment in urban areas is negatively associated with urbanization. Some policy implications are drawn, and some suggestions are given to deal with the substantial challenges of urbanization.
    Date: 2021–08–09
  81. By: Roberto Casarin (University of Ca' Foscari of Venice); Stefano Grassi (University of Rome Tor Vergata); Francesco Ravazzolo (BI Norwegian Business School); Herman van Dijk (Erasmus University Rotterdam)
    Abstract: A flexible predictive density combination model is introduced for large financial data sets which allows for dynamic weight learning and model set incompleteness. Dimension reduction procedures allocate the large sets of predictive densities and combination weights to relatively small sets. Given the representation of the probability model in extended nonlinear state-space form, efficient simulation-based Bayesian inference is proposed using parallel sequential clustering as well as nonlinear filtering, implemented on graphics processing units. The approach is applied to combine predictive densities based on a large number of individual stock returns of daily observations over a period that includes the Covid-19 crisis period. Evidence on the quantification of predictive accuracy, uncertainty and risk, in particular, in the tails, may provide useful information for investment fund management. Information on dynamic cluster composition, weight patterns and model set incompleteness give also valuable signals for improved modelling and policy specification.
    Keywords: Density Combination, Large Set of Predictive Densities, Dynamic Factor Models, Nonlinear state-space, Bayesian Inference
    JEL: C11 C15 C53 E37
    Date: 2022–02–14
  82. By: Jorratt, Michel
    Abstract: El propósito de este estudio es analizar el impuesto sobre el patrimonio neto y los gravámenes patrimoniales existentes en la región, con el fin de ofrecer una conceptualización de este tipo de impuestos, que podrían ser considerados como un elemento progresivo que contribuya a fortalecer los ingresos públicos para hacer frente a las demandas de gasto en la pospandemia.
    Date: 2021–10–15

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