nep-mac New Economics Papers
on Macroeconomics
Issue of 2022‒03‒21
eighty-two papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Indebted Demand By Atif Mian; Ludwig Straub; Amir Sufi
  2. The Unemployment-Inflation Trade-off Revisited: The Phillips Curve in COVID Times By Richard K. Crump; Stefano Eusepi; Marc Giannoni; Ayşegül Şahin
  3. Labor Market and Fiscal Policy During and After the Coronavirus By Paul Gomme
  4. Inflation Expectations and Their Formation: Working Paper 2022-03 By Jeffrey Schafer
  5. Procyclical Productivity in New Keynesian Models By Zhesheng Qiu; José-Víctor Ríos-Rull
  6. Exchange Rate Pass-Through Conditional on Shocks and Monetary Policy Credibility. The Case of Uruguay By Fernanda Cuitiño; Juan Pablo Medina; Laura Zacheo
  7. Financial frictions in a commodity exporting small open economy: the Case of Kazakhstan By Erlan Konebayev
  8. Land Speculation and Wobbly Dynamics with Endogenous Phase Transitions By Tomohiro Hirano; Joseph E. Stiglitz
  9. Exorbitant Privilege? Quantitative Easing and the Bond Market Subsidy of Prospective Fallen Angels By Viral V. Acharya; Ryan Banerjee; Matteo Crosignani; Tim Eisert; Renée Spigt
  10. Post-COVID fiscal rules: a central bank perspective By Hauptmeier, Sebastian; Leiner-Killinger, Nadine; Muggenthaler, Philip; Haroutunian, Stephan
  11. Initial impacts of the pandemic on consumer behavior: Evidence from linked income, spending, and savings data By Natalie Cox; Peter Ganong; Pascal Noel; Joseph Vavra; Arlene Wong
  12. Bullard Discusses Economy, Balance Sheet Policy, Fiscal Policy, Inflation with WSJ By James B. Bullard
  13. Bullard Speaks with CNBC about Inflation, Monetary Policy By James B. Bullard
  14. Bullard Speaks with MarketWatch about Economic Outlook, Monetary Policy By James B. Bullard
  15. The Federal Funds Market, Pre- and Post-2008 By Eric T. Swanson
  16. Bullard Speaks with Bloomberg about Inflation, Monetary Policy By James B. Bullard
  17. Bullard Speaks with CNBC about Inflation, Tapering and U.S. Economy By James B. Bullard
  18. The post-Keynesian "crowding-in" policy meme: Government-Led Semi-Autonomous Demand growth By Brett Fiebinger
  19. The Saving Glut of the Rich By Atif Mian; Ludwig Straub; Amir Sufi
  20. Measuring monetary policy transparency in Uruguay By Cecilia Dassatti; Gerardo Licandro
  21. The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk By Federico Huneeus; Joseph P. Kaboski; Mauricio Larrain; Sergio L. Schmukler; Mario Vera
  22. Bullard Discusses Monetary Policy, U.S. Economy, Treasury Yields with Wharton By James B. Bullard
  23. Credit Booms, Financial Crises and Macroprudential Policy By Mark Gertler; Nobuhiro Kiyotaki; Andrea Prestipino
  24. Bullard Speaks with Bloomberg about Tapering, Inflation, Economy’s Progress By James B. Bullard
  25. Low Interest Rates, Market Power, and Productivity Growth By Ernest Liu; Atif Mian; Amir Sufi
  26. Effects of fiscal consolidation on income inequality By Dante Cardoso; Laura Carvalho
  27. A Safe Asset Perspective for an Integrated Policy Framework By Markus K. Brunnermeier; Sebastian Merkel; Yuliy Sannikov
  28. Bullard Speaks with Fox Business about Inflation, Tapering, Housing Market By James B. Bullard
  29. Bullard Speaks with CNBC about Inflation, the Labor Market and GDP Growth By James B. Bullard
  30. Un modelo estocástico de equilibrio general para la economía uruguaya con producción de commodities By Serafín Frache; Helena Rodríguez
  31. Is Fiscal Austerity Really Self-Defeating? By Piergallini, Alessandro
  32. Bullard Speaks with Washington Post about Inflation, Tapering By James B. Bullard
  33. Heterogeneous Paths of Industrialization By Federico Huneeus; Richard Rogerson
  34. Whatever happened to the 'Goodwin pattern'? By Mark Setterfield
  35. The role of value added across economic sectors in modulating the effects of FDI on TFP and economic growth dynamics By Simplice A. Asongu; Christelle Meniago; Raufhon Salahodjaev
  36. State Dependent Effects of Monetary Policy: the Refinancing Channel By Martin Eichenbaum; Sergio Rebelo; Arlene Wong
  37. Does demand noise matter? Identification and implications By Kenza Benhima; Céline Poilly
  38. An equilibrium model of the international price system By Mukhin, Dmitry
  39. Who Are the Hand-to-Mouth? By Mark Aguiar; Mark Bils; Corina Boar
  40. Who Are the Hand-to-Mouth? By Mark Aguiar; Mark Bils; Corina Boar
  41. Hours and Wages By Alexander Bick; Adam Blandin; Richard Rogerson
  42. Dampening General Equilibrium: Incomplete Information and Bounded Rationality By George-Marios Angeletos; Chen Lian
  43. Technology Boom, Labor Reallocation, and Human Capital Depreciation By Johan Hombert; Adrien Matray
  44. Belief-Dependent Pricing Decisions By Serafín Frache; Rodrigo Lluberas; Javier Turen
  45. Rethinking capacity utilization choice: the role of surrogate inventory and entry deterrence By Thomas I. Palley
  46. How Tight are U.S. Labor Markets? By Alex Domash; Lawrence H. Summers
  47. Has the Willingness to Work Fallen during the Covid Pandemic? By R. Jason Faberman; Andreas I. Mueller; Ayşegül Şahin
  48. The Dollar Debt of Companies in Latin America: the warning signs By Giraldo, Iader; Turner, Philip
  49. Lifecycle Earnings Risk and Insurance: New Evidence from Australia By Darapheak Tin; Chung Tran
  50. Retropolación para series de Cuentas Nacionales Trimestrales. Series de Producto Interno Bruto de Uruguay con frecuencia trimestral para el período 1997-2011 By Marcelo Álvez; Elizabeth Bucacos; Maximiliano Mateauda; Ernesto Pienika
  51. Bullard Speaks with CNN International about U.S. Economy, Inflation By James B. Bullard
  52. Interview With St. Louis Fed President James Bullard By James B. Bullard
  53. Bullard Speaks with CNBC about Inflation, the Minimum Wage and Digital Currency By James B. Bullard
  54. Bullard Speaks with Yahoo Finance about Inflation, Labor Markets By James B. Bullard
  55. Physical risks from climate change faced by Japan's financial institutions: Impact of floods on real economy, land prices, and FIs' financial conditions By Takuro Ashizawa; Kakuho Furukawa; Ryuichiro Hashimoto; Yoshiyasu Koide; Tomomi Naka; Kenji Nishizaki; Nao Sudo; Genichiro Suzuki
  56. Central Banks’ responses to the Covid-19 pandemic: The case of the Bank of Central African States By Simplice A. Asongu; Nathanael Ojong; Valentine B. Soumtang
  57. Endogenous Education and Long-Run Factor Shares By Gene M. Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
  58. Transparencia de la política monetaria en Uruguay, ¿cómo nos ven? By Elizabeth Bucacos; Cecilia Dassatti; Gerardo Licandro
  59. Reading Between the Lines : Objective Function Estimation using RBA Communications By Gao, Robert
  60. Venting Out: Exports During a Domestic Slump By Miguel Almunia; Pol Antrà s; David Lopez-Rodriguez; Eduardo Morales
  61. The decision to move house and aggregate housing-market dynamics By Ngai, L. Rachel; Sheedy, Kevin D.
  62. Una aplicación de la metodología Growth at Risk a Uruguay By María Victoria Landaberry; Rodrigo Lluberas; Micaela Vidal
  63. Ideology and monetary policy: the role of political parties’ stances in the ECB’s parliamentary hearings By Fraccaroli, Nicolò; Giovannini, Alessandro; Jamet, Jean-Francois; Persson, Eric
  64. Markups Across Space and Time By Eric Anderson; Sergio Rebelo; Arlene Wong
  65. A Neural Phillips Curve and a Deep Output Gap By Philippe Goulet Coulombe
  66. Addressing Unemployment Rate Forecast Errors in Relation to the Business Cycle By Bas Scheer
  67. Primary Dealers and the Demand for Government Debt By Jason Allen; Jakub Kastl; Milena Wittwer
  68. The World Uncertainty Index By Hites Ahir; Nicholas Bloom; Davide Furceri
  69. Interview With St. Louis Fed President James Bullard By James B. Bullard
  70. Unemployment Dynamics in the Nordics : Is there Heterogeneity in the Relative Importance of Ins and Outs? By Thorleifsson, Oskar
  71. Robert Triffin, Japan and the quest for Asian Monetary Union By Ivo Maes; Ilaria Pasotti
  72. Forbidden Fruits: The Political Economy of Science, Religion, and Growth By Roland Roland Bénabou; Davide Ticchi; Andrea Vindigni
  73. Unequal Expenditure Switching: Evidence from Switzerland By Raphael Auer; Ariel Burstein; Sarah M. Lein; Jonathan Vogel
  74. Monetary Architecture and the Green Transition By Murau, Steffen; Haas, Armin; Guter-Sandu, Andrei
  75. Patent Publication and Innovation By Deepak Hegde; Kyle F. Herkenhoff; Chenqi Zhu
  76. Full-Information Estimation of Heterogeneous Agent Models Using Macro and Micro Data By Laura Liu; Mikkel Plagborg-Møller
  77. Post-COVID-19 era and Fourth Industrial Revolution: Contemporary Trends in Labor Relations and Organizational Adaptation By Vlados, Charis; Koutroukis, Theodore; Chatzinikolaou, Dimos
  78. Do corporate tax cuts boost economic growth? By Sebastian Gechert; Philipp Heimberger
  79. Change Management, Organizational Adaptation, and Labor Market Restructuration: Notes for the Post-COVID-19 Era By Vlados, Charis; Koutroukis, Theodore; Chatzinikolaou, Dimos
  80. The Downward Spiral By Jeremy Greenwood; Nezih Guner; Karen A. Kopecky
  81. Impact Assessment of Investment Returns in Indian CPSEs: A Study at Aggregate Level in the Disinvestment Environment By Ghosh, Sudipta; Aithal, Sreeramana
  82. Uncooperative Society, Uncooperative Politics or Both? Trust, Polarisation, Populism and COVID-19 Deaths across European regions By Nicholas Charron; Victor Lapuente; Andres Rodriguez-Pose

  1. By: Atif Mian (Princeton University); Ludwig Straub (Harvard University); Amir Sufi (Chicago Booth and NBER)
    Abstract: We propose a theory of indebted demand, capturing the idea that large debt burdens by households and governments lower aggregate demand, and thus natural interest rates. At the core of the theory is the simple yet under-appreciated observation that borrowers and savers differ in their marginal propensities to save out of permanent income. Embedding this insight in a two-agent overlapping-generations model, we find that recent trends in income inequality and financial liberalization lead to indebted household demand, pushing down natural interest rates. Moreover, popular expansionary policies—such as accommodative monetary policy and deficit spending—generate a debt-financed short-run boom at the expense of indebted demand in the future. When demand is sufficiently indebted, the economy gets stuck in a debt-driven liquidity trap, or debt trap. Escaping a debt trap requires consideration of less standard macroeconomic policies, such as those focused on redistribution or those reducing the structural sources of high inequality.
    Keywords: aggregate demand, debt, interest rates, inequality, secular stagnation
    JEL: D31 E21 E32 E43 E44 E52 E62 G51
    Date: 2021–01
  2. By: Richard K. Crump; Stefano Eusepi; Marc Giannoni; Ayşegül Şahin
    Abstract: We estimate the natural rate of unemployment, often referred to as u*, in the United States using data on labor market flows, short-term and long-term inflation expectations and a forward-looking New-Keynesian Phillips curve for the 1960-2021 period. The natural rate of unemployment was at around 4.5% before the onset of the pandemic and increased to 5.9% by the end of 2021. This pronounced rise was primarily informed by strong wage growth rather than changes in inflation expectations. Despite the rise in the natural rate of unemployment, the secular trend of unemployment continued to fall and stands at around 4.2% reflecting ongoing secular developments which have been pushing down the unemployment rate over the last 30 years. Our model forecasts strong wage growth to moderate only sluggishly continuing to put upward pressure on inflation in the medium-run. We project underlying inflation to remain 0.5 percentage points above its long-run trend by the end of 2023 even if long-run inflation expectations remain well anchored. Given the importance of wage growth for the inflation outlook, we examine detailed micro data on job-filling rates, posted wages for vacant positions, and workers' reservation wages. In particular, we construct a composition-bias free measure of wage growth at the employer-job level using Burning Glass Technologies data and document strong wage growth for both teleworkable and non-teleworkable jobs. Moreover, we find that workers' reservation wages increased substantially after the pandemic. Our empirical analysis suggests that the strong wage growth is likely not a one-time adjustment of additional compensation for jobs that pose health risks to workers but rather reflects a tight labor market accompanied with a changing work-leisure trade-off.
    JEL: D84 E24 E31 E32 J11 J3
    Date: 2022–02
  3. By: Paul Gomme (Concordia University, CIREQ and CIRANO)
    Abstract: COVID-related government outlays will increase the level of government debt. A macroeconomic model, calibrated to the U.S., quantitatively assesses potential responses to this higher debt. In terms of economic welfare, reducing debt through capital incomes tax hikes is the least desirable option considered: the associated tax base is small, and anticipating such a tax increase reduces capital accumulation. There is little to choose between fiscal austerity through government spending cuts versus raising labor income tax rates. Accommodating higher government debt is welfare-improving, but still requires substantial fiscal austerity owing to higher debt servicing costs.
    Keywords: COVID-19, fiscal policy, government debt
    JEL: E62 H31 E24 H63 H62
    Date: 2021–05–05
  4. By: Jeffrey Schafer
    Abstract: This paper reviews theory and evidence on how consumers and firms form their expectations about inflation and how monetary policymakers might influence that process; both of those factors have implications for the Congressional Budget Office's baseline projections and policy analyses. Inflation expectations are important because they affect decisions that determine actual inflation. Surveys of consumers and business managers provide especially useful data for studying the process of forming expectations. Empirical evidence suggests that
    JEL: D83 D84 E17 E31 E37
    Date: 2022–03–15
  5. By: Zhesheng Qiu; José-Víctor Ríos-Rull
    Abstract: We propose an easy-to-use search friction in the goods markets in medium-sized New Keynesian models. This friction allows increases in measured productivity in response to increases in expenditures via higher search effort from households. As a result markups can become procyclical and labor share countercyclical. Unlike in models that pose variable capital utilization and fixed costs to generate procyclical productivity, firms do not have to spend more to achieve it. We estimate the model matching impulse responses with Bayesian techniques and show superior performance of models with search frictions relative to the state of the art alternative models in the literature. Our estimates also display low fixed costs of production and lower Frisch elasticities.
    JEL: E01 E32 E52
    Date: 2022–02
  6. By: Fernanda Cuitiño (Banco Central del Uruguay); Juan Pablo Medina (Business School, Universidad Adolfo Ibáñez, Chile); Laura Zacheo (Banco Central del Uruguay)
    Abstract: The estimation of exchange rate pass-through (ERPT) is critical for understanding and forecasting the inflation dynamics in open economies. In this work, we estimate a medium scale New-Keynesian model for the Uruguayan economy to analyze the ERPT. We compute the ERPT with the estimated model conditional on specific external shocks and on whether the monetary policy has perfect or imperfect credibility. The results show that the empirical fit is better under imperfect credibility. The estimated degree of imperfect credibility is quite significant and it shows substantial variation across shocks and over time. We find that the ERPT tends to be lower for a shock that has a higher offsetting effect in aggregate demand and when monetary policy is more credible in keeping the inflation target constant. Finally, adding the exchange rate stabilization in the monetary policy rule in the case of Uruguay has a stronger empirical role once we allow for imperfect credibility.
    Keywords: exchange rate pass-through, emerging economy, imperfect credibility, bayesian estimation
    JEL: E12 E58 F31 F41
    Date: 2021
  7. By: Erlan Konebayev (NAC Analytica, Nazarbayev University)
    Abstract: This paper adds the banking sector to a commodity-exporting small open economy DSGE model and estimates it using the data for Kazakhstan between 2001 and 2019. The resulting model produces one-step-ahead predictions that are a good fit for the banking sector variables. We find that the oil price and risk premium shocks are the drivers of much of the economic activity in Kazakhstan - they explain a large part of the variation in most of the macro variables considered. A comparison with the baseline model that has no banking sector shows that the influence of the risk premium shock on real variables can be overestimated when financial frictions are excluded. The above-mentioned two shocks, along with the fiscal policy shock, have also significantly contributed to historical fluctuations in real GDP growth, although with no particular trend in the direction or magnitude of their effects.
    Keywords: DSGE; Bayesian analysis; small open economy; Kazakhstan
    JEL: C11 E30 E32 E37
    Date: 2021–12
  8. By: Tomohiro Hirano; Joseph E. Stiglitz
    Abstract: This paper examines the global macro-dynamics of an OLG model with capital and land with rational expectations. Through the interactions between capital accumulation and land prices, the economy experiences phase transitions, endogenously moving back and forth from situations with unique and multiple momentary equilibria. Consequently, there can be a plethora of rational expectation equilibria trajectories, without any smooth convergence properties, neither converging to a steady state or even to a limit cycle—what we call “wobbly” macro-dynamics. The price of land and other key macro variables (wages, interest rates, output, consumption, wealth, capital stock) endogenously fluctuate within a well-identified range with repeated boom-bust cycles. The key disturbance to the economy is endogenous; even with rational expectations, there can be real estate booms, with increasing land prices increasingly crowding out productive investments; but such unsustainable land price booms inevitably are followed by a crash. We analyze the set of parameter values for which wobbly fluctuations occur, show that with some parameter values, the only r.e. trajectories involve such wobbly dynamics, demonstrate how changes in parameters affect global macro-dynamics, and show how policy interventions can affect stability and social welfare.
    JEL: C61 E22 E32 G12 G18 H21 O11
    Date: 2022–02
  9. By: Viral V. Acharya; Ryan Banerjee; 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 fi rms just above the IG rating cutoff -- enjoyed subsidized bond fi nancing since 2009, especially when the scale of QE purchases peaked and from IG-focused investors that held more securities purchased in QE programs. The bene fiting fi rms used this privilege to fund risky acquisitions and increase market share, exploiting the sluggish adjustment of credit ratings in downgrading after M&A and adversely affecting competitors' employment and investment. Eventually, these fi rms suffered more severe downgrades at the onset of the pandemic.
    JEL: E44 E52 E58 G01 G20
    Date: 2022–02
  10. By: Hauptmeier, Sebastian; Leiner-Killinger, Nadine; Muggenthaler, Philip; Haroutunian, Stephan
    Abstract: Regarding a prospective reform of the European Stability and Growth Pact (SGP) it seems rather consensual that a simplified framework should take account of the prevailing macroeconomic context and enhance the balancing of sustainability and stabilisation considerations. This paper provides simulation analysis for the euro area and individual countries with a view to assessing the short- and longer-term budgetary and macroeconomic implications of a move to a two-tier system with an expenditure growth rule as single operational indicator linked to a debt anchor. Compared to the status quo, our analysis suggests that expenditure growth targets which take account of the ECB’s symmetric 2% inflation target can improve the cyclical properties of the framework. Fiscal policy would be tighter when inflation is above the target but looser when inflation is below target, resulting in a better synchronisation of fiscal and monetary policies. Providing additional fiscal accommodation in a low inflation environment would enable monetary policy to operate more effectively especially in the vicinity of the effective lower bound. The link to a longer-term debt anchor at the same time ensures a transition towards the Treaty’s debt reference level. JEL Classification: E63, H50, H60
    Keywords: debt sustainability, European fiscal rules, monetary and fiscal policy interactions
    Date: 2022–03
  11. By: Natalie Cox (Princeton Unviersity); Peter Ganong (University of Chicago); Pascal Noel (University of Chicago); Joseph Vavra (University of Chicago); Arlene Wong (Princeton University)
    Abstract: We use U.S. household-level bank account data to investigate the heterogeneous effects of the pandemic on spending and savings. Households across the income distribution all cut spending from March to early April. Since mid April, spending has rebounded most rapidly for low-income households. We find large increases in liquid asset balances for households throughout the income distribution. However, lower-income households contribute disproportionately to the aggregate increase in balances, relative to their pre-pandemic shares. Taken together, our results suggest that spending declines in the initial months of the recession were primarily caused by direct effects of the pandemic, rather than resulting from labor market disruptions. The sizable growth in liquid assets we observe for low-income households suggests that stimulus and insurance programs during this period likely played an important role in limiting the effects of labor market disruptions on spending.
    Keywords: U.S., Northern America, Consumer, Distribution, Households, Income, Income Distribution, Recession, Saving, Pandemic
    JEL: D12 D31 E21 E32 E62 G51 I12
    Date: 2020–07
  12. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed the U.S. economic outlook, monetary policy, fiscal policy and inflation during a Wall Street Journal Newsmakers Live Q&A.
    Keywords: balance sheet policy; fiscal policy; inflation
    Date: 2021–01–12
  13. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed expectations for U.S. economic growth and inflation and his views on U.S. monetary policy during an appearance on CNBC.
    Keywords: economic outlook; inflation; monetary policy
    Date: 2021–06–18
  14. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard shared his outlook for U.S. economic growth and inflation during a MarketWatch interview and Barron’s Live event. He also discussed monetary policy, including his view that the Federal Open Market Committee should get going on tapering the Fed’s asset purchases.
    Keywords: economic outlook; inflation; monetary policy; tapering
    Date: 2021–08–18
  15. By: Eric T. Swanson
    Abstract: This chapter provides an overview of the federal funds market and how the equilibrium federal fund rate is determined. I devote particular attention to comparing and contrasting the federal funds market before and after 2008, since there were several dramatic changes around that time that completely changed the market and the way in which the equilibrium federal funds rate is determined. The size of this structural break is arguably as large and important as the period of reserves targeting under Fed Chairman Paul Volcker from 1979–82. Finally, I discuss the relationship between the federal funds rate and other short-term interest rates in the U.S. and the outlook for the federal funds market going forward.
    JEL: E43 E52 E58
    Date: 2022–02
  16. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed his expectations for economic growth and inflation in 2021. He also discussed various aspects of U.S. monetary policy during an appearance on Bloomberg Radio and TV.
    Keywords: economic outlook; inflation; monetary policy
    Date: 2021–04–12
  17. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed inflation, tapering the Fed’s asset purchases and his expectations for the U.S. economy during a CNBC interview.
    Keywords: inflation; tapering; economic outlook
    Date: 2021–08–26
  18. By: Brett Fiebinger
    Abstract: A recent literature has explored the role of semi-autonomous demand growth. This paper builds on the literature by incorporating a Lernerian government semi-autonomous demand function and an endogenous supply-side. Our main purpose is threefold. First, we wish to contribute to the case for crowding-in effects, especially in the long-run. Second, we confirm the Keynesian/Kaleckian pedigree of the capital stock adjustment principle. Third, we contrast core post-Keynesian ideas on demand-led supply-side endogeneity with the alternative neo-Marxian neo-Harrodian proposition of an exogenously-given natural growth rate, and find the latter lacking.
    Keywords: Fiscal policy, Crowding-in, Semi-autonomous demand, Capital stock adjustment principle
    JEL: B22 B50 E11 E20 E60 O42
    Date: 2021
  19. By: Atif Mian (Princeton University); Ludwig Straub (Harvard University); Amir Sufi (Chicago Booth)
    Abstract: Rising income inequality since the 1980s in the United States has generated a substantial increase in saving by the top of the income distribution, which we call the saving glut of the rich. The saving glut of the rich has been as large as the global saving glut, and it has not been associated with an increase in investment. Instead, the saving glut of the rich has been linked to the substantial dissaving and large accumulation of debt by the non-rich. Analysis using variation across states shows that the rise in top income shares can explain almost all of the accumulation of household debt held as a financial asset by the household sector. Since the Great Recession, the saving glut of the rich has been financing government deficits to a greater degree.
    Keywords: Saving, Household Debt
    JEL: D31 E21 E44 G51
    Date: 2021–02
  20. By: Cecilia Dassatti (Banco Central del Uruguay); Gerardo Licandro (Banco Central del Uruguay)
    Abstract: The adoption of inflation targeting regimes has led central banks to devote considerable efforts to improve their transparency. Following this trend, several authors have developed tools to measure and compare the levels of transparency of central banks. This paper seeks to carry out this task for the Central Bank of Uruguay applying two different transparency indices. The first one was designed in the mid 2000s and has been applied in a sample with a significant number of countries. The second index is based on a new approach that seeks to reflect the best practices of the most advanced inflation-forecast targeting regimes.
    Keywords: monetary policy, central bank, transparency
    JEL: E0 E4
    Date: 2021
  21. By: Federico Huneeus; Joseph P. Kaboski; Mauricio Larrain; Sergio L. Schmukler; Mario Vera
    Abstract: We study the distribution of credit during crisis times and its impact on firm indebtedness and macroeconomic risk. Whereas policies can help firms in need of financing, they can lead to adverse selection from riskier firms and higher default risk. We analyze a large-scale program of public credit guarantees in Chile during the COVID-19 pandemic using unique transaction-level data of demand and supply of credit, matched with administrative tax data, for the universe of banks and firms. Credit demand channels loans toward riskier firms, distributing 4.6% of GDP and increasing firm leverage. Despite increased lending to riskier firms at the micro level, macroeconomic risks remain small. Several factors mitigate aggregate risk: the small weight of riskier firms, the exclusion of the riskiest firms, bank screening, contained expected defaults, and the government absorption of tail risk. We quantitatively confirm our empirical findings with a model of heterogeneous firms and endogenous default.
    JEL: E44 E5 G01
    Date: 2022–02
  22. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard shared his views on monetary policy and various aspects of the U.S. economy during an interview with Jeremy Siegel and Jeremy Schwartz on Behind the Markets, a Business Radio program from the Wharton School.
    Keywords: monetary policy; treasury yields
    Date: 2021–03–05
  23. By: Mark Gertler (New York University); Nobuhiro Kiyotaki (Princeton University); Andrea Prestipino (Federal Reserve Board)
    Abstract: We develop a model of banking crises which Is consistent with two important features of the data: First, banking crises are usually preceded by credit booms. Second, credit booms often do not result in a crisis. That is, there are “good†booms as well as “bad†booms in the language of Gorton and Ordonez (2019). We then consider how the optimal macroprudential policy weighs the benefits of preventing a crisis against the costs of stopping a good boom. We show that countercyclical capital buffers are a critical feature of a successful macropudential policy.
    Keywords: banking crisis, credit booms
    JEL: E00 G21
    Date: 2020–03
  24. By: James B. Bullard
    Abstract: In an interview on Bloomberg TV, St. Louis Fed President James Bullard spoke about tapering the Fed’s $120 billion a month of bond purchases, staying flexible to address inflation, and the growing economy.
    Keywords: tapering; inflation; economic outlook
    Date: 2021–07–15
  25. By: Ernest Liu (Princeton University); Atif Mian (Princeton University); Amir Sufi (University of Chicago Booth School of Business)
    Abstract: This study provides a new theoretical result that a decline in the long-term interest rate can trigger a stronger investment response by market leaders relative to market followers, thereby leading to more concentrated markets, higher profits, and lower aggregate productivity growth. This strategic effect of lower interest rates on market concentration implies that aggregate productivity growth declines as the interest rate approaches zero. The framework is relevant for anti-trust policy in a low interest rate environment, and it provides a unified explanation for rising market concentration and falling productivity growth as interest rates in the economy have fallen to extremely low levels.
    Keywords: Interest rates, investment
    JEL: E20 E22 G01 G12
    Date: 2020–08
  26. By: Dante Cardoso (University of Sao Paulo); Laura Carvalho (University of Sao Paulo)
    Abstract: Based on a narrative dataset constructed by David and Leigh (2018) that covers nine South American economies in the period 1982-2017, this paper estimates dynamic effects of fiscal consolidations on income inequality from Jordá (2005)'s local projections method. Results suggest that fiscal consolidations lead to a rise in income inequality in all specifications and data panels. When decomposing fiscal shocks, spending-based fiscal consolidations appear to significantly increase the Gini index, while tax-based fiscal consolidations do not show statistically significant effects on income inequality. The rise in the Gini index for disposable income caused by a spending-based fiscal adjustment of 1% of GDP varies between 1.74 and 3.22% in five years depending on the selected data panel (country-years). The magnitude of this effect is higher than in most of the previous studies carried out for OECD countries.
    Keywords: income inequality; fiscal consolidation; fiscal austerity; South America; local projections
    JEL: D30 D63 E60 E62
    Date: 2021
  27. By: Markus K. Brunnermeier (Princeton University); Sebastian Merkel (Princeton University); Yuliy Sannikov (Stanford University)
    Abstract: Borrowing from Brunnermeier and Sannikov (2016, 2019) this policy paper sketches a policy framework for emerging market economies by mapping out the roles and interactions of monetary policy, macroprudential policies, foreign exchange interventions, and capital controls. Safe assets are central in a world in which financial frictions, distribution of risk, and risk premia are important elements. The paper also proposes a global safe asset for a more self-stabilizing global financial architecture.
    Keywords: Safe asset, bubbles, international capital flows, capital controls, monetary policy, macroprudential policy, FX interventions
    JEL: E52 F38
    Date: 2020–05
  28. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard shared his views on the state of the U.S. economy, upside risks to inflation, the discussion on tapering the Fed’s bond purchases, and the booming housing market during an appearance on Fox Business.
    Keywords: inflation; tapering; housing market
    Date: 2021–07–01
  29. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed his expectations for inflation, the most recent jobs data and his assessment of GDP growth during an appearance on CNBC’s “Closing Bell.”
    Keywords: inflation; labor market; GDP growth
    Date: 2021–05–11
  30. By: Serafín Frache (Universidad de Montevideo, Facultad de Ciencias Empresariales y Economía); Helena Rodríguez (Banco Central del Uruguay)
    Abstract: In this paper we analyze the main results obtained in the estimation of a DSGE model with commodity production, which was constructed as an extension of the baseline model used in the Central Bank of Uruguay. We model the production for three relevant sectors in the Uruguayan economy such as pulp, agricultural and dairy and meat production. In the baseline model these sectors are introduced as endowments that evolve exogenously over time and thus are not able to capture in a satisfactory way the real effects of some shocks. With this extension we try to adjust the baseline model in order to obtain better impulse-response functions that improve the description of the transmission mechanisms of the sectoral shocks to the rest of the economy.
    Keywords: DSGE, monetary policy, commodity prices, Uruguay
    JEL: E52 F41
    Date: 2021
  31. By: Piergallini, Alessandro
    Abstract: This paper analyzes local and global equilibrium dynamics in an optimizing endogenous growth model under expenditure-based fiscal austerity feedback policies expressed relative to the private capital stock — prescribing spending cuts in reaction to public debt accumulation. Because the present value of equilibrium primary surpluses turns to be a nonlinear function of debt, two steady state equilibria are shown to emerge, one exhibiting low debt and high growth, one exhibiting high debt and low growth. Local analysis reveals that the low-debt/high-growth steady state is saddle-path stable while the high-debt/low-growth steady state is unstable — the latter thus indicating the possibility of self-defeating austerity, characterized by off-equilibrium upward spirals in debt because of persistent policy-induced adverse effects on growth dividends and fiscal revenues. However, when global nonlinear dynamics are taken into account, it is demonstrated that the two steady states are endogenously connected. In particular, global analysis reveals that even if the high-debt/low-growth steady state is locally unstable, there exists a unique and possibly non-monotonic saddle connection making the economy converge to the low-debt/high-growth steady state. The existence of the saddle connection guarantees global determinacy of perfect foresight equilibrium should the high-debt/low-growth steady state be a node, ruling out multiple explosive paths incompatible with the government's intertemporal budget constraint and the private agents' transversality condition. The foregoing results are robust with respect to the adoption of an output-based — rather than a capital-based — policy function as long as the rule is nonlinear and sufficiently reactive to debt changes.
    Keywords: Fiscal Austerity; Feedback Policy Rules; Endogenous Growth; Multiple Equilibria; Local Dynamics; Global Dynamics.
    JEL: C62 E62 H63 O40
    Date: 2020–11–14
  32. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard gave his perspective on the U.S. economy, inflation risks and tapering the Fed’s bond purchases, during an appearance on Washington Post Live.
    Keywords: economic outlook; inflation; tapering
    Date: 2021–08–04
  33. By: Federico Huneeus (Yale University); Richard Rogerson (Princeton University)
    Abstract: Industrialization experiences differ significantly across countries. We use a bench-mark model of structural change to shed light on the sources of this heterogeneity and, in particular, the phenomenon of premature deindustrialization. Our analysis leads to three key findings. First, benchmark models of structural change robustly generate hump-shaped patterns for the evolution of the manufacturing sector. Second, heterogeneous patterns of catch-up in sectoral productivities across countries can generate variation in industrialization experiences similar to those found in the data, including premature deindustrialization. Third, differences in the rate of agricultural productivity growth across economies can account for a large share of the variation in peak manufacturing employment shares.
    Keywords: Structural transformation, Productivity growth, Industrialization
    JEL: E24 O11
    Date: 2020–07
  34. By: Mark Setterfield (New School for Social Research)
    Abstract: The 'Goodwin pattern' - an anti-clockwise rotation in real activity x wage share space recurring at intervals that correspond roughly to the duration of business cycles - is an enduring feature of high-frequency dynamics in capitalist economies. It is well known that the centre or focus of this rotation shifts over time. More recently, however, the Goodwin pattern seems to have broken down, the wage share no longer increasing as the real economy improves over the course of short-term booms. In this paper, the breakdown of the Goodwin pattern is associated with the consolidation of an `incomes policy based on fear' that is part-and-parcel of neoliberalism. As a result of this incomes policy based on fear, the institutional structure of the labour market disciplines labour at any rate of unemployment. This decouples wage-share dynamics from the state of the real economy, with the result that as recently witnessed, the wage share is rendered invariant to tightening of the labour market in the course of short-term cyclical booms.
    Keywords: Goodwin pattern, distributional conflict, worker insecurity, incomes policy based on fear
    JEL: E11 E12 E25 E64
    Date: 2021
  35. By: Simplice A. Asongu (Yaounde, Cameroon); Christelle Meniago (Sol Plaatje University, South Africa); Raufhon Salahodjaev (Tashkent, Uzbekistan)
    Abstract: This study investigates: (i) the effect of foreign direct investment (FDI) on total factor productivity (TFP) and economic growth dynamics, and (ii) the relevance of value added from three economic sectors in modulating the established effect of FDI on TFP and economic growth dynamics. The geographical and temporal scopes are respectively 25 Sub-Saharan African countries and the period 1980–2014. The empirical evidence is based on non-interactive and interactive Generalised Method of Moments. The following main findings are established. First, FDI has a positive effect on GDP growth, GDP per capita and welfare real TFP. Second, the effect of FDI is negative on real GDP and TFP, while the impact is insignificant on real TFP growth and welfare TFP. Third, values added to the three economic sectors largely modulate FDI to produce negative net effects on TFP and growth dynamics. Policy implications are discussed with particular emphasis on the need to complement added value across various economic sectors in order to leverage on the benefits of FDI in TFP and economic growth. To the best of knowledge, this is the first study to assess how value added from various economic sectors affect the relevance of FDI on macroeconomic outcomes.
    Keywords: Economic output, total factor productivity, foreign investment, agricultural sector, manufacturing sector, service sector, sub-Saharan Africa
    JEL: E23 F21 F30 F43 O55
    Date: 2021–01
  36. By: Martin Eichenbaum (Northwestern University); Sergio Rebelo (Northwestern University); Arlene Wong (Princeton University)
    Abstract: This paper studies how the impact of monetary policy depends on the distribution of savings from refinancing mortgages. We show that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. We construct a quantitative dynamic lifecycle model that accounts for our findings and use it to study how the response of consumption to a change in mortgage rates depends on the distribution of savings from refinancing. These effects are strongly state dependent. We also use the model to study the impact of a long period of low interest rates on the potency of monetary policy. We find that this potency is substantially reduced both during the period and for a substantial amount of time after interest rates renormalize.
    Keywords: monetary policy, state dependency, refinancing
    JEL: E52 G21
    Date: 2020–08
  37. By: Kenza Benhima (UNIL - Université de Lausanne, CEPR - Center for Economic Policy Research - CEPR); Céline Poilly (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We assess the role of demand noise (excessive optimism or pessimism about demand) together with supply noise (excessive optimism or pessimism about supply). To do so, we propose a methodology to decompose business cycles into supply, demand, supply noise and demand noise shocks, using a structural vector autoregression model. Key to our identification of both supply noise and demand noise is the use of sign restrictions on survey expectation errors about output growth and about inflation. We show that demand-related noise shocks have a negative effect on output and contribute substantially to its fluctuations. Monetary policy and private information seem to play a key role in the transmission of demand noise shocks.
    Keywords: business cycle,information friction,noise shock,SVAR with sign restriction
    Date: 2021–01
  38. By: Mukhin, Dmitry
    Abstract: What explains the central role of the dollar in world trade? Will the U.S. currency retain its dominant status in the future? This paper develops a quantitative general equilibrium framework with endogenous currency choice that can address these questions. Complementarities in price setting and input-output linkages across rms generate complementarities in currency choice making exporters coordinate on the same currency of invoicing. The dollar is more likely to play this role because of the large size of the U.S. economy, a widespread peg to the dollar, and the history dependence in currency choice. Calibrated using the world input-output tables and exchange rate moments, the model can successfully replicate the key empirical facts about the use of currencies at the global level, across countries, and over time. According to the counterfactual analysis, the peg to the dollar in other economies ensures that the U.S. currency is unlikely to lose its global status because of the falling U.S. share in the world economy, but can be replaced by the renminbi in case of a negative shock in the U.S. economy. If the peg is abandoned, the world is likely to move to a new equilibrium with multiple regional currencies.
    Keywords: International Economics Section; Cowles Foundation
    JEL: D21 E31 E42 F14 F31 F33
    Date: 2022–02–01
  39. By: Mark Aguiar (Princeton University); Mark Bils (University of Rochester); Corina Boar (New York University)
    Abstract: Many households hold little wealth, especially liquid wealth. In precautionary savings models, absent preference heterogeneity, these households should display not only higher marginal propensities to consume (MPC's), but also lower average propensities to consume (APC's) and higher future consumption growth. We see from the PSID that such "hand-to-mouth" households actually display higher APCs and no faster spending growth. They also adjust spending to a greater extent through the number of categories consumed. Consistent with a role for preference heterogeneity, the panel data show that it is propensity to be hand-to-mouth, not current assets, that predicts high APC, low consumption growth, and other spending differences for the hand-to-mouth. To identify the role of preference heterogeneity, we consider the model of Kaplan and Violante (2014) with both liquid and illiquid assets, but allow heterogeneity in preferences. To match the data, the vast majority of poor hand-to-mouth must be impatient and have high IES. The richer, but illiquid, hand-to-mouth are disproportionately high IES, though not impatient. Thus a high IES is a key determinant of assets for households typically viewed as hand-to-mouth. The model additionally shows that preferences play a prominent role in differences in MPC's across consumers.
    Keywords: household wealth, household consumption
    JEL: E21
    Date: 2020–10
  40. By: Mark Aguiar (Princeton University); Mark Bils (University of Rochester); Corina Boar (New York University)
    Abstract: Many households hold little wealth, especially liquid wealth. In precautionary savings models, absent preference heterogeneity, these households should display not only higher marginal propensities to consume (MPC's), but also lower average propensities to consume (APC's) and higher future consumption growth. We see from the PSID that such "hand-to-mouth" households actually display higher APCs and no faster spending growth. They also adjust spending to a greater extent through the number of categories consumed. Consistent with a role for preference heterogeneity, the panel data show that it is propensity to be hand-to-mouth, not current assets, that predicts high APC, low consumption growth, and other spending differences for the hand-to-mouth. To identify the role of preference heterogeneity, we consider the model of Kaplan and Violante (2014) with both liquid and illiquid assets, but allow heterogeneity in preferences. To match the data, the vast majority of poor hand-to-mouth must be impatient and have high IES. The richer, but illiquid, hand-to-mouth are disproportionately high IES, though not impatient. Thus a high IES is a key determinant of assets for households typically viewed as hand-to-mouth. The model additionally shows that preferences play a prominent role in differences in MPC's across consumers.
    Keywords: household wealth, household consumption
    JEL: E21
    Date: 2020–10
  41. By: Alexander Bick (Arizona State University); Adam Blandin (Virginia Commonwealth University); Richard Rogerson (Princeton University)
    Abstract: We develop and estimate a static model of labor supply that can account for two robust features of the cross-sectional distribution of usual weekly hours and hourly wages. First, usual weekly hours are heavily concentrated around 40 hours, while at the same time a substantial share of total hours come from individuals who work more than 50 hours. Second, mean hourly wages are non-monotonic across the usual hours distribution, with a peak for those working 50 hours. The novel feature of the model is that earnings are non-linear in hours and the nature of the nonlinearity varies over the hours distribution. We estimate the model on a sample of older males for whom human capital considerations are plausibly not of first order importance. Our estimates imply that an individual who chooses to work either less than 40 hours or more than 40 hours faces a wage penalty. As a consequence, individuals working typically 40 hours are not very responsive to variation in productivity. This has significant implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous agent-incomplete markets model and for strategies designed to estimate the intertemporal elasticity of substitution.
    Keywords: employment, wages, labor supply
    JEL: E24 J22
    Date: 2021–06
  42. By: George-Marios Angeletos; Chen Lian
    Abstract: We review how realistic frictions in information and/or rationality arrest general equilibrium (GE) feedbacks. In one specification, we maintain rational expectations but remove common knowledge of aggregate shocks. In another, we replace rational expectations with Level-k Thinking or a smooth variant thereof. Two other approaches, heterogeneous priors and cognitive discounting, capture the same essence while offering a gain in tractability. Relative to the full-information rational-expectation (FIRE) benchmark, all these modifications amount to attenuation of GE effects, especially in the short run. This in turn translates to either under- or over-reaction in aggregate outcomes, depending on whether GE feedbacks are positive or negative in the first place. We review a few applications, with emphasis on monetary and fiscal policy. We finally discuss how the available evidence on expectations, along with other considerations, can help guide the choice among the various alternatives, as well as between them and FIRE.
    JEL: D8 E1 E3 E7
    Date: 2022–02
  43. By: Johan Hombert (HEC Paris); Adrien Matray (Princeton University)
    Abstract: During the late 1990s boom, one-third of skilled labor market entrants joined the Information and Communication Technology (ICT) sector. We use French linked employer-employee data to study their wage dynamics. Despite starting with 5% higher wages, these workers experience lower wage growth and end up with 6% lower wages fifteen years out, relative to similar workers who started in other sectors. The long-run wage discount is not explained by selection, job losses or persistently low demand for ICT services. It is concentrated in STEM occupations, consistent with obsolescence of technical skills accelerating during a technological boom.
    Keywords: Labor, Employment, France
    JEL: E24 J24 O33
    Date: 2021–12
  44. By: Serafín Frache (Universidad de Montevideo, Facultad de Ciencias Empresariales y Economía); Rodrigo Lluberas (Banco Central del Uruguay); Javier Turen (Pontificia Universidad Católica de Chile)
    Abstract: This paper studies the effects of inflation and idiosyncratic cost expectations on firms’ price-adjusting decisions. Evidence of price-settings frictions using micro data has been studied through the lens of both time-dependent and state-dependent models. Using data from a unique survey, we argue that priceadjustment decisions are also belief-dependent. While controlling for time- and state- ependent factors, we find that, for the extensive margin of price-changes, expectations of inflation do not play any role, but firms’ beliefs about their overall costs do. The expectation channel is, however, heterogeneous across firms, driven exclusively by large companies, and operates with a delay. Nonetheless, when looking at firms’ beliefs about the intensive margin of price-changes, besides costs, the relevance of current inflation expectations is recovered. Our evidence supports the presence of price rigidities at the firm level but is also consistent with theories of limited attention.
    Keywords: inflation expectations, cost expectations, firm surveys, price adjustments
    JEL: D22 D84 E31
    Date: 2021
  45. By: Thomas I. Palley
    Abstract: This paper presents a macroeconomics-friendly Post Keynesian model of the firm describing both an inventory theoretic approach and an entry deterrence approach to choice of excess capacity. The model explains why firms may rationally choose to have excess capacity. It also shows the two approaches are complementary and reinforcing of each other. Analytically, the paper makes three principal contributions. First, it provides a simple framework for understanding the microeconomics of capacity utilization choice. Second, it reframes the Post Keynesian discussion of capacity utilization by making excess capacity choice the key to understanding normal capacity utilization. Third, it implicitly challenges Neo-Kaleckian wage-led growth theory as the model shows choice of the optimal excess capacity rate is independent of the level of demand.
    Keywords: Capacity utilization, excess capacity, surrogate inventory, entry deterrence, wage-led growth
    JEL: D21 D24 E12
    Date: 2021
  46. By: Alex Domash; Lawrence H. Summers
    Abstract: Since the outset of the Covid-19 pandemic, labor market indicators that traditionally move together have been sending different signals about the degree of slack in the U.S. labor market. While some indicators on the supply-side, such as the prime-age employment-to-population ratio, suggest that there is still some slack in the labor market, other indicators on the demand-side, such as the job vacancy rate and the quits rate, imply that the labor market is already very tight. In light of these divergent signals, this paper compares alternative labor market indicators as predictors of wage inflation. Using national time series and state cross-section data, we find (i) unemployment is a better predictor of wage inflation than non-employment and (ii) vacancy rates and quit rates have substantial predictive power for wage inflation. We highlight the fact that vacancy and quit rates currently experienced in the United States correspond to a degree of labor market tightness previously associated with sub-2 percent unemployment rates. Finally, we show that predicted firm-side unemployment has dominant explanatory power with respect to subsequent inflation. Our results, along with a cursory analysis of labor force participation information, suggest that labor market tightness is likely to contribute significantly to inflationary pressure in the United States for some time to come.
    JEL: E24 J2 J23 J3
    Date: 2022–02
  47. By: R. Jason Faberman; Andreas I. Mueller; Ayşegül Şahin
    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.
    JEL: E24 J21 J60
    Date: 2022–02
  48. By: Giraldo, Iader; Turner, Philip
    Abstract: A decade of low interest rates in the major currencies and failings in the regulatory oversight of international bond markets have led investors to take more and more risk in their search for higher yields. Non-financial corporations (NFC's) in Latin America have taken full advantage, and their dollar indebtedness is now heavier than for corporations in most other emerging market regions. This paper documents the many warning signs of macroeconomic and financial instability in the region from such indebtedness. Macroeconomic data show that the NFC sector has become much more leveraged and faces increased currency mismatches. Microeconomic data drawn from a sample of more than 160 companies confirm that several balance sheet indicators have deteriorated for firms in both the tradable and the non-tradable sectors. As dollar debts were rising, profits were declining, capital expenditures falling and solvency risk rising. This situation warrants careful and continuous monitoring by the authorities in the region. Macroprudential policies in Latin America need to address with urgency the vulnerabilities created by international market-based finance and ensure that local banks remain resilient to external financial shocks. Interest rates will rise and, given the recent warnings of the Bank for International Settlements (BIS) and the Financial Stability Board (FSB), some regulatory tightening affecting bond markets is likely.
    Keywords: Non-financial corporate debt, Latin America, currency mismatches, global liquidity, corporate balance sheets, FSB, IMF, BIS
    JEL: D25 E44 F30 F34 F65 G15 G18 G28
    Date: 2022–03
  49. By: Darapheak Tin; Chung Tran
    Abstract: We study the nature of lifecycle earnings dynamics by documenting higher-order moments of earnings shocks over the lifecycle, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001-2020. Similar to other countries (e.g. see Guvenen et al. (2021) and De Nardi et al. (2021)), the distribution of earnings shocks in Australia displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. However, the sources of fluctuations and the role of family and government insurance are quite different. Wages account more for the dispersion of earnings shocks (second-order risk), while hours drive the negative skewness and excess kurtosis (third- and fourth-order risks, respectively). Wage changes are strongly associated with earnings changes, whereas hour changes are largely absent in upward movement and relatively small in downward movement of earnings changes. Family insurance via pooling income of family members and adjusting labor market activities of secondary earners, and government insurance embedded in the progressive tax and transfer system play distinct roles in reducing risks over age and by income group. Government insurance is more important in mitigating the dispersion of earnings shocks; meanwhile, family insurance is more dominant in mitigating the magnitude and likelihood of extreme and rare shocks. Family insurance interacts with government insurance; however, their joint forces fail to eliminate the non-Gaussian and non-linear features. Furthermore, comparison between groups reveals: (i) the risk equalizing effect of government insurance, and (ii) the persistent nature of risks for certain demographics such as female heads of household and non-parents. Hence, our findings shed new insights into the complexity of earnings dynamics and the importance of family and government insurance.
    Keywords: Income dynamics; Earnings risk; Higher-order moments; Non-Gaussian shocks; Family insurance; Government insurance; Inequality
    JEL: E24 H24 H31 J31
    Date: 2022–03
  50. By: Marcelo Álvez (Banco Central del Uruguay); Elizabeth Bucacos (Banco Central del Uruguay); Maximiliano Mateauda (Banco Central del Uruguay); Ernesto Pienika (Banco Central del Uruguay)
    Abstract: The latest statistical and methodological structure for Uruguay's National Accounts is defined with 2012 as the reference year. This change allowed to update the Quarterly National Accounts (QNA) series for the period 2016-2020, taking 2016 as the base year. This paper presents the backcasting for the Uruguayan GDP with annual and quarterly frequency from 1997 to 2011, wich is consistent with the new QNA Basis 2016 and the backcasted time series for the Uruguayan GDP from 2012 to 2015. We use Supply and Use Tables (COU, in Spanish) Basis 2005 for the years 1997 and 2005, and Basis 2016 for the year 2012. Unlike the new series that cover from 2016 onwards, the backcasted time series for the period 1997-2011 cannot be consider a compilation of National Accounts because of its heavy reliance on statistical techniques.
    Keywords: quarterly national accounts, national accounts, backcasting, gross domestic product, time series
    JEL: C1 C8 E01 Y10
    Date: 2021
  51. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed the U.S. economic outlook, the increase in the 10-year Treasury yield in recent months, and the prospect of higher inflation. He spoke during an interview on CNN International.
    Keywords: economic outlook; treasury yield; inflation
    Date: 2021–04–01
  52. By: James B. Bullard
    Abstract: Last week’s jobs report demonstrated the ongoing strength of the U.S. economy and underscored the need for the Federal Reserve to rein in its stimulus efforts, a Fed official said Tuesday. St. Louis Federal Reserve Bank President James Bullard said that Friday’s report, which showed a healthy gain of 943,000 jobs last month, means the economy is making sufficient progress to start reducing, or tapering, the Fed’s $120 billion in monthly bond purchases. Those purchases, which began last March during the pandemic recession, are intended to lower longer-term interest rates and bolster the economy.
    Keywords: tapering; economic outlook
    Date: 2021–08–10
  53. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed inflation, digital currency and a proposed increase in the federal minimum wage. He spoke during an appearance on CNBC’s “Squawk Box.”
    Keywords: inflation; digital currency; minimum wage
    Date: 2021–02–16
  54. By: James B. Bullard
    Abstract: St. Louis Fed President James Bullard discussed his expectations for inflation 2021 and 2022. He also discussed the labor market, wages, cryptocurrencies and other topics during an appearance on Yahoo Finance.
    Keywords: inflation; labor market; wages; cryptocurrency
    Date: 2021–05–24
  55. By: Takuro Ashizawa (Bank of Japan); Kakuho Furukawa (Bank of Japan); Ryuichiro Hashimoto (Bank of Japan); Yoshiyasu Koide (Bank of Japan); Tomomi Naka (Bank of Japan); Kenji Nishizaki (Bank of Japan); Nao Sudo (Bank of Japan); Genichiro Suzuki (Bank of Japan)
    Abstract: This article overviews implications of physical risks from climate change to Japan's financial institutions (FIs), focusing on the impacts of floods on the real economy, land prices and FIs' financial conditions. Floods cause massive direct damage to human lives and material resources. The empirical analyses using Japan's data suggest that the indirect effect of such damage on the real economy, land prices, and FIs' financial conditions has not been sizable over the analysis period, as the effect diminishes over time with the progress of reconstruction. The long-term simulation using a medium-scale macroeconomic model that takes into consideration possible climate changes and increases in flood damage in the future, however, suggests that the indirect effect can have a non-negligible impact on real GDP and FIs' net worth going forward. The outlook for the physical risks is extremely uncertain, varying depending on multiple factors including the pace of transition to a de-carbonized economy and interactions between the global average temperature and the frequency and scale of disasters, as well as productivity of the economy.
    Keywords: Climate change; Natural disaster; Physical risk; Financial stability
    JEL: E37 G21 Q54 R30
    Date: 2022–03–14
  56. By: Simplice A. Asongu (Yaounde, Cameroon); Nathanael Ojong (York University, Toronto, Canada); Valentine B. Soumtang (Yaoundé, Cameroon)
    Abstract: This study explores the responses to the COVID-19 pandemic by the Bank of Central African States (BEAC), which is the central bank for countries in the Central African Economic and Monetary Community (CEMAC), that is, Cameroon, Chad, Gabon, Equatorial Guinea, Central African Republic, and the Republic of Congo. While hitherto, BEAC had fundamentally focused on fighting inflation and promoting monetary integration and financial stability in its member states, the COVID-19 pandemic, among other factors, has motivated it to also shift its policies towards targeted credit programmes and more economic growth. This study sheds light on four core aspects: (i) the socio-economic context of the CEMAC region prior to the COVID-19 pandemic, (ii) BEAC as a lender of last resort, (iii) historical, contemporary, and future insights surrounding targeted credit programmes, and (iv), suggestions for the path forward in terms of reforms, with emphasis on inclusive growth and monitoring economic development at the regional level.
    Keywords: Covid-19 pandemic; monetary policy; central bank responses; CEMAC, BEAC
    Date: 2021–08
  57. By: Gene M. Grossman (Princeton University); Elhanan Helpman (Harvard University); Ezra Oberfield (Princeton University); Thomas Sampson (London School of Economics)
    Abstract: We study the determinants of factor shares in a neoclassical environment with capital skill complementarity and endogenous education. When more physical capital raises the marginal product of skills relative to that of raw labor, an increase in a broad measure of embodied human capital raises the capital share in national income for any given rental rate. When education is chosen optimally, a dynamic equilibrium is characterized by an inverse relationship between the level of human capital and both the rental rate on capital and the difference between the interest rate and the growth rate of wages. As a consequence, estimates of the elasticity of substitution that fail to account for levels of human capital will be biased upward. We develop a model with overlapping generations, ongoing increases in educational attainment, and technology-driven neoclassical growth, and show that for a class of production functions with capital-skill complementarity, a balanced growth path exists and is characterized by an inverse relationship between the rates of capital- and labor-augmenting technological progress and the capital share in national income.
    Keywords: neoclassical growth, balanced growth, human capital, education, technological progress, capital-skill complementarity, labor share, capital share
    JEL: D33 E25 J24 O33
    Date: 2020–09
  58. By: Elizabeth Bucacos (Banco Central del Uruguay); Cecilia Dassatti (Banco Central del Uruguay); Gerardo Licandro (Banco Central del Uruguay)
    Abstract: En las últimas décadas se ha observado un creciente interés en lo que refiere a la transparencia y la rendición de cuentas de los bancos centrales, al ser éstos dos elementos que contribuyen a mantener la independencia y la eficacia de la política monetaria. El presente trabajo, en cambio, busca evaluar el nivel de transparencia del Banco Central del Uruguay desde la visión que los profesionales externos a la Institución tienen al respecto. Una de las riquezas de este enfoque es que permite evaluar si la visión del BCU con respecto a lo que sería una política monetaria transparente está siendo efectivamente percibida como tal o si es necesario ajustar la comunicación de la misma.
    Keywords: transparencia, política monetaria, banco central
    JEL: E0 E4
    Date: 2021
  59. By: Gao, Robert (Monash University)
    Abstract: We use a dictionary based natural language processing approach to quantify the sentiment of RBA communications. This measure of sentiment is then used as a proxy for loss in the estimation of the RBA’s objective function. We find that RBA communications imply a target for average inflation between 2.4% to 2.7% for short run horizons of up to one year ahead, consistent with the RBA’s medium term inflation target band of 2-3%. This result is robust to different forms of communication, forecast horizons, and allowing for asymmetric preferences. We also find that the RBA’s loss improves with rising output growth, commodity prices and stock market returns, as well as an appreciating exchange rate and falling unemployment.
    Keywords: central bank ; natural language processing ; objective function ; Reserve Bank of Australia ; text analysis JEL Classification: E58 ; E5
    Date: 2021
  60. By: Miguel Almunia (CUNEF); Pol Antrà s (Harvard University); David Lopez-Rodriguez (Banco de España); Eduardo Morales (Princeton University)
    Abstract: We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called ‘Spanish export miracle’) over the period 2009-13.
    Keywords: Spain, Europe, Exports, Manufacturing, Recession
    JEL: D22 E32 F14 L60
    Date: 2021–01
  61. By: Ngai, L. Rachel; Sheedy, Kevin D.
    Abstract: Using data on house sales and inventories, this paper shows that housing transactions are driven mainly by listings and less so by transaction speed, thus the decision to move house is key to understanding the housing market. The paper builds a model where moving house is essentially an investment in match quality, implying that moving depends on macroeconomic developments and housing-market conditions. The number of transactions has implications for welfare because each transaction reduces mismatch for homeowners. The quantitative importance of the decision to move house is shown in understanding the U.S. housing-market boom during 1995–2003.
    Keywords: housing market; search and matching; endogenous moving; match quality investment; mismatch
    JEL: D83 E22 R31
    Date: 2020–10–01
  62. By: María Victoria Landaberry (Banco Central del Uruguay); Rodrigo Lluberas (Banco Central del Uruguay); Micaela Vidal (Banco Central del Uruguay)
    Abstract: Este trabajo presenta la aplicación de la metodología Growth at Risk (GaR) para la economía uruguaya con datos trimestrales entre junio de 1999 y diciembre de 2019. De acuerdo a los resultados obtenidos, el Índice de Inestabilidad Financiera contiene información relevante sobre los riesgos a la baja y al alza en el crecimiento económico. El modelo presenta un buen desempeño en la proyección del crecimiento económico en el horizonte de un año, una vez que se incorpora la información correspondiente al primer trimestre, a la vez que permite analizar los efectos sobre la distribución de probabilidad del crecimiento de distintos escenarios de riesgo, por lo que sería una herramienta útil para adicionar al monitoreo de la estabilidad financiera en Uruguay.
    Keywords: condiciones financieras, regresión por cuantiles, vulnerabilidad financiera, estabilidad financiera
    JEL: E44 G01 G1 B26
    Date: 2021
  63. By: Fraccaroli, Nicolò; Giovannini, Alessandro; Jamet, Jean-Francois; Persson, Eric
    Abstract: We investigate whether ideology drives the sentiments of parliamentarians when they speak to the central bank they hold accountable. To this end, we collect textual data on the quarterly hearings of the ECB President before the European Parliament from 1999 to 2019. We apply sentiment analysis to more than 1,900 speeches of individual Members of the European Parliament (MEPs) from 128 parties. We find robust evidence that MEPs’ sentiments toward the ECB are correlated with the ideological stance predominantly on a pro-/anti-European dimension rather than on a left-right dimension. JEL Classification: E02, E52, E58
    Keywords: Central Bank Accountability, Central Bank Independence, Party Ideology, Sentiment Analysis
    Date: 2022–03
  64. By: Eric Anderson (Northwestern University); Sergio Rebelo (Northwestern University); Arlene Wong (Princeton University)
    Abstract: In this paper, we provide direct evidence on the behavior of markups in the retail sector across space and time. Markups are measured using gross margins. We consider three levels of aggregation: the retail sector as a whole, the firm level, and the product level. We find that: (1) markups are relatively stable over time and mildly procyclical; (2) there is large regional dispersion in markups; (3) there is positive cross-sectional correlation between local income and local markups; and (4) differences in markups across regions are explained by differences in assortment within each goods category, not by deviations from uniform pricing. We propose an endogenous assortment model consistent with these facts.
    Keywords: Gross margins, prices, marginal costs, business cycles
    JEL: E30
    Date: 2020–11
  65. By: Philippe Goulet Coulombe
    Abstract: Many problems plague the estimation of Phillips curves. Among them is the hurdle that the two key components, inflation expectations and the output gap, are both unobserved. Traditional remedies include creating reasonable proxies for the notable absentees or extracting them via some form of assumptions-heavy filtering procedure. I propose an alternative route: a Hemisphere Neural Network (HNN) whose peculiar architecture yields a final layer where components can be interpreted as latent states within a Neural Phillips Curve. There are benefits. First, HNN conducts the supervised estimation of nonlinearities that arise when translating a high-dimensional set of observed regressors into latent states. Second, computations are fast. Third, forecasts are economically interpretable. Fourth, inflation volatility can also be predicted by merely adding a hemisphere to the model. Among other findings, the contribution of real activity to inflation appears severely underestimated in traditional econometric specifications. Also, HNN captures out-of-sample the 2021 upswing in inflation and attributes it first to an abrupt and sizable disanchoring of the expectations component, followed by a wildly positive gap starting from late 2020. HNN's gap unique path comes from dispensing with unemployment and GDP in favor of an amalgam of nonlinearly processed alternative tightness indicators -- some of which are skyrocketing as of early 2022.
    Date: 2022–02
  66. By: Bas Scheer (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: In this paper we show that the prediction errors for unemployment vary over the business cycle. We initially use a macroeconomic data for the United States, because these data are available for a longer period than for the Netherlands. The dataset for the United States covers the 60s of the last century up to the COVID-crisis. We find that forecast errors are greatest in recession periods, but they are also relatively large in recovery periods. The forecasting errors are smaller in the periods between. All forecasting models show this error pattern, but interestingly, they don't all show it to the same extent. Some models perform relatively well during recessions, others during recovery periods, and still others during the periods in between. As a result, the choice of the best model depends on the weight that is assigned to prediction errors in recovery and recession periods. These findings are relevant to the forecasting models used by the CPB that support the bureau-wide unemployment forecast. We carried out the same analysis on Dutch data, which provided comparable results. For the Dutch unemployment estimate, too, the choice of the best model depends on the weights for recovery and recession periods.
    JEL: L26
    Date: 2022–03
  67. By: Jason Allen (Bank of Canada); Jakub Kastl (Princeton University); Milena Wittwer (Stanford University)
    Abstract: Leveraging the fact that in many primary debt issuance markets securities of varying maturities are sold simultaneously, we recover participants' full demand systems by generalizing methods for estimating individual demands from bidding data. The estimated preference parameters allow us to partition primary dealers into two main classes. For the first class, which largely coincides with the largest money market players, we find significant complementarities in their demand for Treasury bills in primary markets, while for the second class, the patterns in their willingness to pay are mixed and time-varying. We present a dealer-client model that captures the interplay between the primary and secondary market to provide a rationale for our findings. We argue that the complementarity likely arises from the large dealers "making markets," and hence requiring to hold inventory of all securities. Our results are useful both for minimizing the cost of financing of government debt and for optimally implementing financial regulation that is based upon partitioning financial institutions according to their downstream business strategies.
    Keywords: Treasury bills, multi-unit auctions, structural estimation, market segmentation, cross-price elasticities
    JEL: D44 C14 E58 G12
    Date: 2020–07
  68. By: Hites Ahir; Nicholas Bloom; Davide Furceri
    Abstract: We construct the World Uncertainty Index (WUI) for an unbalanced panel of 143 individual countries on a quarterly basis from 1952. This is the frequency of the word “uncertainty” in the quarterly Economist Intelligence Unit country reports. Globally, the Index spikes around major events like the Gulf War, the Euro debt crisis, the Brexit vote and the COVID pandemic. The level of uncertainty is higher in developing countries but is more synchronized across advanced economies with their tighter trade and financial linkages. In a panel vector autoregressive setting we find that innovations in the WUI foreshadow significant declines in output. This effect is larger and more persistent in countries with lower institutional quality, and in sectors with greater financial constraints.
    JEL: E0
    Date: 2022–02
  69. By: James B. Bullard
    Abstract: Federal Reserve Bank of St. Louis President James Bullard said in an interview Monday with Michael S. Derby of The Wall Street Journal that he is ready for the U.S. central bank to pull back on its asset buying as soon as his colleagues are, and that he is worried that form of Fed aid might be adding fuel to the hot housing market. Mr. Bullard also said he is optimistic about the economic recovery and expects to see around 7% growth this year.
    Keywords: economic outlook; housing market
    Date: 2021–07–13
  70. By: Thorleifsson, Oskar (University of Warwick)
    Abstract: Unemployment by sub-group differs in terms of cyclical fluctuations. I examine whether there is heterogeneity in the relative contributions of the inflow and outflow rate to cyclical unemployment variations in the Nordics. The aggregate results suggest that fluctuations in the job-finding rate are a key driver of cyclical unemployment variations, excluding Norway. Despite notable differences in cyclical unemployment by gender, the contributions of ins and outs are roughly similar. However, evidence from Sweden and Denmark suggests that the separation rate is slightly more important for males compared to females. Substantially lower turnover for older workers makes comparison by age less reliable. Evidence from Sweden suggests notable differences by education level and between native- and foreign-born workers.
    Keywords: Unemployment dynamics ; job-finding rate ; job-separation rate ; worker heterogeneity JEL Classification: E24 ; E32 ; J63 ; J64
    Date: 2021
  71. By: Ivo Maes (Robert Triffin Chair, University of Louvain and Ichec Brussels Management School); Ilaria Pasotti (Consultant at the Intesa Sanpaolo Group Historical Archives)
    Abstract: Especially with the Asian financial crisis of 1997-1998, Asian countries have advocated a profound reform of the international financial architecture. Their proposals focused on two main axes: a reform of the global financial system and stronger regional monetary integration in Asia. There are here significant parallels with the ideas of Robert Triffin (1911-1993). Triffin became famous with trenchant analyses of the vulnerabilities of the international monetary system, especially his book Gold and the Dollar Crisis. Triffin put forward several proposals for reforming the global monetary system, but he also developed proposals for regional monetary integration. These were very much based on his experience with the European Payments Union, and focused on the creation of a (European) Reserve Fund and a (European) currency unit. In this paper we focus on Triffin’s proposals for an Asian payments union in the late 1960s, giving special attention to Japan (in Triffin’s time the biggest Asian economy).
    Keywords: : Triffin, Bretton Woods, international liquidity, regional monetary integration, Asian Payments Union, Japan
    JEL: A11 B22 B31 E30 E50 F02 F32
    Date: 2022–03
  72. By: Roland Roland Bénabou (Princeton University); Davide Ticchi (Marche Polytechnic University); Andrea Vindigni (University of Genova)
    Abstract: We study the coevolution of religion, science and politics. We first uncover, in international and U.S. data, a robust negative relationship between religiosity and patents per capita. The model then combines: (i) scientific discoveries that raise productivity but sometimes erode religious beliefs; (ii) a government that allows innovations to diffuse, or blocks them; (iii) religious institutions that can invest in doctrinal reform. Three long-term outcomes emerge. The Western-European Secularization regime has declining religiosity, unimpeded science, and high taxes and transfers. The Theocratic regime involves knowledge stagnation, unquestioned dogma, and high religious-public-goods spending. The American regime combines scientific progress and stable religiosity through doctrinal adaptations, with low taxes and some fiscal-legal advantages for religious activities. Rising income inequality can, however, empower a Religious-Right alliance that starts blocking belief-eroding ideas.
    Keywords: science, discovery, innovation, progress, knowledge, religion, secularization, tolerance, religious right, theocracy, politics, populism, denialism, inequality, redistribution
    JEL: E02 H11 H41 O3 O43 P16 Z12
    Date: 2020–07
  73. 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.
    JEL: E3 F1 F41
    Date: 2022–02
  74. By: Murau, Steffen; Haas, Armin; Guter-Sandu, Andrei
    Abstract: How to finance the Green Transition towards net-zero carbon emissions remains an open question. The literature either operates within a market-failure paradigm that calls for a Pigou tax to help markets correct themselves, or via war finance analogies that offer a ‘triad’ of state intervention possibilities: taxation, treasury borrowing, and central bank money creation. These frameworks often lack a thorough conceptualisation of endogenous credit money creation, for instance when resorting to loanable funds theory, and disregard the systemic and procedural dimensions of financing the Green Transition. We propose that ‘monetary architecture’, which perceives the monetary and financial system as a constantly evolving and historically specific hierarchical web of interlocking balance sheets, offers a more comprehensive framework to conceptualize the systemic and procedural financing challenges. Using the US as an example, we draw implications of a systemic financing view while considering a division of labor between ‘firefighting’ institutions such as the Federal Reserve and the Treasury, and ‘workhorse’ institutions such as off-balance-sheet fiscal agencies, commercial banks, and shadow banks. We argue further that financing the Green Transition must undergo three ideal-typical phases—initial balance sheet expansion, long-term funding, and possibly final contraction—that require diligent macro-financial management to avoid financial instability.
    Date: 2022–02–16
  75. By: Deepak Hegde; Kyle F. Herkenhoff; Chenqi Zhu
    Abstract: How does the publication of patents affect innovation? We answer this question by exploiting a large-scale natural experiment—the passage of the American Inventor's Protection Act of 1999 (AIPA)—that accelerated the public disclosure of most U.S. patents by two years. We obtain causal estimates by comparing U.S. patents subject to the law change with “twin” European patents which were not. After AIPA's enactment, U.S. patents receive more and faster follow-on citations, indicating an increase in technology diffusion. Technological overlap increases between distant but related patents and decreases between highly similar patents, and patent applications are less likely to be abandoned post-AIPA, suggesting a reduction in duplicative R&D. Firms exposed to one standard deviation longer patent grant delays increased their R&D investment by 4% after AIPA. These findings are consistent with our theoretical framework in which AIPA provisions news shocks about related technologies to follow-on inventors and thus alters their innovation decisions.
    JEL: D23 E02 G24 L26 O34
    Date: 2022–02
  76. By: Laura Liu (Indiana University); Mikkel Plagborg-Møller (Princeton University)
    Abstract: We develop a generally applicable full-information inference method for heterogeneous agent models, combining aggregate time series data and repeated cross sections of micro data. To handle unobserved aggregate state variables that affect cross-sectional distributions, we compute a numerically unbiased estimate of the model-implied likelihood function. Employing the likelihood estimate in a Markov Chain Monte Carlo algorithm, we obtain fully efficient and valid Bayesian inference. Evaluation of the micro part of the likelihood lends itself naturally to parallel computing. Numerical illustrations in models with heterogeneous households or firms demonstrate that the proposed full-information method substantially sharpens inference relative to using only macro data, and for some parameters micro data is essential for identification.
    Keywords: Bayesian inference, data combination, heterogeneous agent models
    JEL: C11 C32 E1
    Date: 2021–01
  77. By: Vlados, Charis (Democritus University of Thrace, Department of Economics); Koutroukis, Theodore (Democritus University of Thrace, Department of Economics); Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics)
    Abstract: The outbreak of the COVID-19 pandemic seems to be structurally transforming the global economy. This article explores how these recent changes impact the different types of organizations and the ways these may adapt in this repositioned context. First, we present the central dimensions of the unfolding health crisis and the subsequent broader socioeconomic crisis. Then, it is argued that this global-scale emerging transformation has brought about fundamental changes in the working environment within the accelerated Fourth Industrial Revolution. The article concludes that all socioeconomic organizations (irrespectively of size and sectoral scope) are now required to grow as swiftly as possible their strategic, technological, and managerial potential to innovate and adapt in this emerging reality. Τhis innovational adaptation to exit this structural crisis seems to be requiring the structuration of corresponding change management mechanisms.
    Keywords: Change management; COVID-19; Fourth Industrial Revolution; Innovation; Labor relations; Organizational adaptation
    JEL: E24 F66 M19 O10
    Date: 2021–09–29
  78. By: Sebastian Gechert (Macroeconomic Policy Institute (IMK)); Philipp Heimberger (Vienna Institute for International Economic Studies (wiiw))
    Abstract: The empirical literature on the impact of corporate taxes on economic growth reaches ambiguous conclusions: corporate tax cuts increase, reduce, or do not significantly affect growth. We apply meta-regression methods to a novel dataset with 441 estimates from 42 primary studies. There is evidence for publication selectivity in favour of reporting growth-enhancing effects of corporate tax cuts. Correcting for this bias, we cannot reject the hypothesis of a zero effect of corporate taxes on growth. Several factors influence reported estimates, including researcher choices concerning the measurement of growth and corporate taxes, and controlling for other budgetary components.
    Keywords: Corporate income taxes; economic growth; meta-analysis
    JEL: E60 H25 O40
    Date: 2021
  79. By: Vlados, Charis (Democritus University of Thrace, Department of Economics); Koutroukis, Theodore (Democritus University of Thrace, Department of Economics); Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics)
    Abstract: The recent transformation caused by the COVID-19 pandemic crisis drives the world economy to an accelerated mutation. This chapter focuses on how the current developments affect the various socioeconomic organizations and systems and how they can adapt to this new emerging reality. To this end, relevant forecasts on the current pandemic crisis are examined. Τhis crisis seems to cause the acceleration of the Fourth Industrial Revolution, functioning as a catalyst of the structural changes also observed in the working environment. The chapter suggests that all socioeconomic organizations (irrespectively of their size, spatial reach, and sectorial focus) are called upon nowadays to readjust themselves and that innovation is the fundamental generator for exiting the ongoing structural crisis. However, innovation unavoidably creates significant changes that socioeconomic organizations must manage effectively in the foreseeable future, according to a new way of perceiving organizational resilience and adaptability for the post-COVID-19 era.
    Keywords: Fourth Industrial Revolution; Post-COVID-19 Era; Evolutionary Organizational Adaptation; Neo-Schumpeterian Innovation; Post-COVID-19 Change Management; Post-COVID-19 Working Environment
    JEL: E24 F66 M19 O10
    Date: 2021–11
  80. By: Jeremy Greenwood; Nezih Guner; Karen A. Kopecky
    Abstract: There have been more than 500,000 opioid overdose deaths since 2000. To analyze the opioid epidemic, a model is constructed where individuals, with and without pain, choose whether to misuse opioids knowing the probabilities of addiction and dying. These odds are functions of opioid use. Markov chains are estimated from the US data for the college and non-college educated that summarize the transitions into and out of opioid addiction as well as to a deadly overdose. A structural model is constructed that matches the estimated Markov chains. The epidemic's drivers, and the impact of medical interventions, are examined.
    JEL: D11 E13 E70 I12 I14 I31 J11 J17
    Date: 2022–02
  81. By: Ghosh, Sudipta; Aithal, Sreeramana
    Abstract: Purpose: The CPSEs were established by the administration of Indian Govt. to serve macro-economic objectives of our country. They are viewed as a device for growth of the economy with fairness and social justice. Due to unsatisfactory performance of the CPSEs towards fulfillment of the socio-economic objectives of our country, the Govt. of India started the process of disinvestment from the financial year 1991-92 to ensure optimum utilization of national wealth and to augment return on investment of the CPSEs in India. With this background, the current paper is an effort to measure the change (i.e., impact) in investment returns of the CPSEs in the disinvestment environment during the period 2010-11 to 2019-20. Design/Methodology/Approach: Traditional investment ratios are employed for measurement of investment returns of the CPSEs on the basis of secondary data. To capture the impact in investment returns, paired t test is used in the study. Furthermore, the rate of growth related to investment returns are calculated by log linear regression method. Significant difference (if any) in the rate of growth related to different components of aggregate investment returns is measured by Chow statistic. Findings/Result: Aggregate financial investments have significantly increased. Though the growth rates of selected performance indicators are observed to be significantly positive in majority of the cases, no significant differences in growth rates of the same are found between the two sub-periods (except shareholders’ equity). Though significant increase in financial investment is observed during the years under study, impact of investment returns in the disinvestment environment is observed to be negative i.e., it indicates that investment returns (particularly ROCE and ROE) of the CPSEs at aggregate level have decreased significantly during the study period. Originality/Value: In the uninterrupted disinvestment environment, the present study has been conducted to examine the impact of investment returns through ROA, ROCE, and ROE.
    Keywords: Investment returns, CPSEs, Disinvestment, Impact assessment, ROA, ROCE, ROE,
    JEL: A12 E2 G2
    Date: 2022–01–24
  82. By: Nicholas Charron; Victor Lapuente; Andres Rodriguez-Pose
    Abstract: Why have some territories performed better than others in the fight against COVID-19? This paper uses a novel dataset on excess mortality, trust and political polarization for 165 European regions to explore the role of social and political divisions in the remarkable regional differences in excess mortality during the first wave of the COVID-19 pandemic. First, we investigate whether regions characterized by a low social and political trust witnessed a higher excess mortality. Second, we argue that it is not only levels, but also polarisation in trust among citizens – in particular, between government supporters and non-supporters – what matters for understanding why people in some regions have adopted more pro-healthy behaviour. Third, we explore the partisan make-up of regional parliaments and the relationship between political division – or what we refer to as ‘uncooperative politics’. We hypothesize that the ideological positioning – in particular those that lean more populist – and ideological polarization among political parties is also linked to higher mortality. Accounting for a host of potential confounders, we find robust support that regions with lower levels of both social and political trust are associated with higher excess mortality, along with citizen polarization in institutional trust in some models. On the ideological make-up regional parliaments, we find that, ceteris paribus, those that lean more ‘tan’ on the ‘gal-tan’ spectrum yielded higher excess mortality. Moreover, although we find limited evidence of elite polarization driving excess deaths on the left-right or gal-tan spectrums, partisan differences on the attitudes towards the EU demonstrated significantly higher deaths, which we argue proxies for (anti)populism. Overall, we find that both lower citizen-level trust and populist elite-level ideological characteristics of regional parliaments are associated with higher excess mortality in European regions during the first wave of the pandemic.
    Keywords: COVID-19; trust, polarization, populism, regions
    JEL: E02 H75 R58
    Date: 2022–01

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