nep-mac New Economics Papers
on Macroeconomics
Issue of 2022‒03‒28
68 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Long-run scarring effects of meltdowns in a small-scale nonlinear quadratic model By Francesco Simone Lucidi; Willi Semmler
  2. Inflationary Redistribution, Trading Opportunities and Consumption Inequality By Timothy Kam; Junsang Lee
  3. Economists in the 2008 Financial Crisis: Slow to See, Fast to Act By Levy, Daniel; Mayer, Tamir; Raviv, Alon
  4. Stock Market Response to Covid-19, Containment Measures and Stabilization Policies - The Case of Europe By Jens Klose; Peter Tillmann
  5. Yield Curve Dynamics and Fiscal Policy Shocks By Adam Kucera; Evzen Kocenda; Ales Marsal
  6. Identification through the Forecast Error Variance Decomposition: an Application to Uncertainty By Andrea Carriero; Alessio Volpicella
  7. The Fiscal Theory of the Price Level with a Bubble By Markus Brunnermeier; Sebastian Merkel; Yuliy Sannikov
  8. A Comparison of Japanese and US New Keynesian Phillips Curves with Bayesian VAR-GMM By Takushi Kurozumi; Ryohei Oishi
  9. A DSGE model with partial euroization: the case of the Macedonian economy By Mihai Copaciu; Joana Madjoska; Mite Miteski
  10. Identification of SVAR models by combining sign restrictions with external instruments By Braun, Robin; Brüggemann, Ralf
  11. Macroeconomic Effect of Uncertainty and Financial Shocks: a non-Gaussian VAR approach By Olli Palm\'en
  12. Exploring network effects during bank failures in Argentina By Emiliano A. Carlevaro
  13. Housing, Distribution and Welfare By Nobuhiro Kiyotaki; Alexander Michaelides; Kalin Nikolov
  14. Designing “Win-Win” Rate Caps By Gajendran Raveendranathan; Georgios Stefanidis
  15. Monetary and fiscal policy in a nonlinear model of public debt By Gian Italo Bischi; Germana Giombini; Giuseppe Travaglini
  16. The Great, Greater, and Greatest Recessions of US States By Wall, Howard
  17. Fiscal sustainability, fiscal reactions, pitfalls and determinants By António Afonso; José Carlos Coelho
  18. Robustly optimal monetary policy in a behavioral environment By Lahcen Bounader; Guido Traficante
  19. Naive Agents with Non-unitary Discounting Rate in a Monetary Economy By Koichi Futagami; Daiki Maeda
  20. Consumption effects of mortgage payment By Albuquerque, Bruno; Varadi, Alexandra
  21. Banking Sector Concentration, Credit Supply Shocks and Aggregate Fluctuations By Alfarano, Simone; Blanco-Arroyo, Omar
  22. QE: Implications for Bank Risk-Taking, Profitability, and Systemic Risk By Supriya Kapoor; Adnan Velic
  23. Hours and Wages By Alexander Bick; Adam Blandin; Richard Rogerson
  24. Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices By Thomas Hasenzagl; Filippo Pellegrino; Lucrezia Reichlin; Giovanni Ricco
  25. Ecological Fiscal Transfers and State-level Budgetary Spending in India: Analysing The Flypaper Effects By Kaur, Amandeep; Mohanty, Ranjan; Chakraborty, Lekha S; Rangan, Divy
  26. Covid19 and Gender Budgeting: Applying a “gender lens” to Union Budget 2021-22 in India By Chakraborty, Lekha S
  27. Financial Transaction Tax, macroeconomic effects and tax competition issues: a two-country financial DSGE model By Olivier Damette; Karolina Sobczak; Thierry Betti
  28. Environment, public debt and epidemics * By Marion Davin; Mouez Fodha; Thomas Seegmuller
  29. The Role of Sentiment in the U.S. Economy: 1920 to 1934 By John Landon-Lane
  30. Wealth Heterogeneity and the Marginal Propensity to Consume out of Wealth By Bertrand Garbinti; Pierre Lamarche; Fredérique Savignac
  31. French domination of markets in Francophone Africa: Post-colonialism at its finest? By Kohnert, Dirk
  32. Interpolation and shock persistence of prewar U.S. macroeconomic time series: A reconsideration By Hashem Dezhbakhsh; Daniel Levy
  33. Consumer Spending in the Covid-19 Pandemic: Evidence from Card Transactions in Latvia By Ludmila Fadejeva; Boriss Siliverstovs; Karlis Vilerts; Anete Brinke
  34. Procjena učinaka pandemije koronavirusa na turističke dolaske i noćenja u Republici Hrvatskoj te na vrijednost CROBEXturist indeksa Zagrebačke burze By Lucija Benko; Karlo Krstanović; Luka Sovulj
  35. Exchange Rates and Asset Prices in a Global Demand System By Ralph S. J. Koijen; Motohiro Yogo
  36. Effects of Monetary and Fiscal Policy Interactions on Regional Employment: Evidence from Japan By Tomomi Miyazaki; Haruo Kondoh
  37. (In)Efficient Commuting And Migration Choices: Theory And Policy In An Urban Search Model By Luca Marchiori; Julien Pascal; Olivier Pierrard
  38. Demand-led Industrialisation Policy in a Dual-Sector SmallBalance of Payments Constrained Economy By Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
  39. Consequences of zombie businesses: Australia’s experience By Joel Bowman
  40. The Dispersion of Mark-ups in an Open Economy By Stéphane Auray; Aurélien Eyquem
  41. Did a Successful Fight against COVID-19 Come at a Cost? Impacts of the Pandemic on Employment Outcomes in Vietnam By Hai-Anh Dang; Cuong Nguyen; Calogero Carletto
  42. To Comply or not to Comply: Persistent Heterogeneity in Tax Compliance and Macroeconomic Dynamics By Leonardo Barros Torres; Jaylson Jair da Silveira, Gilberto Tadeu Lima
  43. Covid-19 Economic Stimulus and State-level Power Sector Performance: Analyzing the Efficiency Parameters By Kaur, Amandeep; Chakraborty, Lekha S; Rangan, Divy
  44. Human capital and the intertemporal substitution for leisure: empirical evidence for Spain By Antonio Cutanda; Juan A. Sanchis-Llopis
  45. The Macro-Economic Effects of UK Aid Returning to 0.7 per cent of GNI By Holland, Dawn; te Velde, Dirk Willem
  46. Planning and saving for retirement By Sulka, Tomasz
  47. Is there a euro effect in European football? By Dilger, Alexander; Hickfang, Michael
  48. Oral FX Interventions in Emerging Markets: the Colombian case By Julian A. Parra-Polania; Andrés Sánchez-Jabba; Miguel Sarmiento
  49. Poverty Measurement under Income and Price Dispersions By Christophe Muller
  50. Determinants of NMD Pass-Through Rates in Eurozone Countries By Milan Fičura; Jiří Witzany
  51. COVID-19, Containment and Consumption By Tatjana Dahlhaus; Daniel Hyun; Antoine Poulin-Moore; Jaime Trujillo; Saarah Sheikh; Benjamin Straus
  52. The Emergence of Market Structure By Maryam Farboodi; Gregor Jarosch; Robert Shimer
  53. Cross-Currency Settlement of Instant Payments in a Cross-Platform Context: a Proof of Concept By Massimiliano Renzetti; Andrea Dimartina; Riccardo Mancini; Giovanni Maria Sabelli; Francesco Di Stasio; Carlo Palmers; Faisal Alhijawi; Erol Kaya; Christophe Piccarelle; Stuart Butler; Jwallant Vasani; Giancarlo Esposito; Alberto Tiberino; Manfredi Caracausi
  54. Business investment, the user cost of capital and firm heterogeneity By Alari Paulus
  55. Fiscal Federalism, Expenditure Assignments and Gender Equality By Chakraborty, Lekha S
  56. "Is Greece on the Road to Economic Recovery" By Dimitri B. Papadimitriou; Nikos Rodousakis; Gennaro Zezza
  57. The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia By Haydeeliz Carrasco; Hamidou Jawara; Moritz Meyer
  58. Household Income, Liquidity, and Optimal Unemployment Insurance By Stéphane Auray; David L. Fuller; Nicolas Lepage-Saucier
  59. The international financial system after COVID-19 By Maurice Obstfeld
  60. Contractual Restrictions and Debt Traps By Ernest Liu; Benjamin N. Roth
  61. "Financial Barriers to Structural Change in Developing Economies: A Theoretical Framework" By Giuliano Toshiro Yajima; Lorenzo Nalin
  62. Казахстанский рынок депозитов населения: проблемы и решения // Kazakhstan's retail deposit market: problems and solutions By Хакимжанов Сабит// Khakimzhanov Sabit; Миллер Алия // Miller Aliya; Джусангалиева Камилла // Jussangaliyeva Kamilla; Тазетдинова Динара // Tazetdinova Dinara
  63. Effects of Bank Branch/ATM Consolidations on Cash Demand: Evidence from Bank Account Transaction Data in Japan By Kozo Ueda
  64. El Costo de Oportunidad del Señoreaje en Argentina By Jorge C. Avila
  65. La théorie monétaire institutionnaliste de Jean Cartelier : quels apports ? By Nicolas Piluso; Edouard Cottin-Euziol
  66. The Effect of Unemployment Rate on the Gross Domestic Product in Nigeria (A Bayesian Approach) By Agboli, Victor
  67. Introduction of the Market-Based Price Autocorrelation By Olkhov, Victor
  68. La Macroeconomía de la cuarentena: Un modelo de dos sectores By Waldo Mendoza; Luis Mancilla; Rafael Velarde

  1. By: Francesco Simone Lucidi; Willi Semmler
    Abstract: We build a small-scale nonlinear quadratic (NLQ) model in which credit feedback and regime switches in the output gap a ect the adjustment path of the economy towards a steady state. The central bank solves a finite-horizon decision problem where the policy rate also can be zero or negative. We estimate this model by nonlinear seemingly unrelated regression method (NLSUR) and using the parameters to explore policy scenarios. The latter projects long-run dynamics after a large demand contraction leading to scarring effects in the economy. We point out three main results. First, while scars are dominant when the central bank follows a standard Taylor rule, unconventional monetary policy (UMP) mitigates the output decline in both the short and the long run. Second, a zero natural rate of interest alone curtails the central bank's ability to adjust the economy. Third, financial constraints leave the deepest scars even if UMP is active.
    Keywords: credit cycles; credit spread; inflation targeting; nonlinear Phillips curve; unconventional monetary policy
    JEL: E42 E52 E58
    Date: 2022–03
  2. By: Timothy Kam; Junsang Lee
    Abstract: We study competitive search in goods markets in a heterogeneous-agent monetary model. The model accounts for three stylized facts connecting inflation to consumption inequality, to price dispersion, and to the speed of monetary payments. With competitive search, individuals’ endogenous probabilities on trading events give rise to a trading-opportunity (extensive-margin) force that works in opposite direction to well-known redistributive (intensive-margin) effect of inflation. This implies a new trade-off in response to long-run inflation targets. Welfare falls but liquid-wealth inequality falls and then rises with inflation as an extensive margin of trade dominates the redistributive intensive margin, when inflation is sufficiently high.
    Keywords: Competitive Search; Inflation; Policy Trade-offs; Redistribution; Computational Geometry
    JEL: E0 E4 E5 E6 C6
    Date: 2022–03
  3. By: Levy, Daniel; Mayer, Tamir; Raviv, Alon
    Abstract: We study the economics and finance scholars’ reaction to the 2008 financial crisis using machine learning language analyses methods of Latent Dirichlet Allocation and dynamic topic modelling algorithms, to analyze the texts of 14,270 NBER working papers covering the 1999–2016 period. We find that academic scholars as a group were insufficiently engaged in crises’ studies before 2008. As the crisis unraveled, however, they switched their focus to studying the crisis, its causes, and consequences. Thus, the scholars were “slow-to-see,” but they were “fast-to-act.” Their initial response to the ongoing Covid-19 crisis is consistent with these conclusions.
    Keywords: 2008 Financial Crisis; Financial Crises; Economic Crisis; Great Recession; Textual Analysis; LDA Topic Modeling; Dynamic Topic Modeling; Machine Learning; Securitization; Repo; Sudden Stop
    JEL: A11 C38 C55 E32 E44 E52 E58 F30 G01 G20 G21 G28
    Date: 2022–02–13
  4. By: Jens Klose (THM Business School Giessen); Peter Tillmann (Justus-Liebig-University Giessen)
    Abstract: Policymakers imposed constraints on public life in order to contain the Covid-19 pandemic. At the same time, fiscal and monetary policy implemented a large range of of expansionary measures to limit the economic consequences of the pandemic and stimulate the recovery. In this paper, we assess the response of the equity market as a high-frequency indicator of economic activity to containment and stabilization policies for 29 European economies. We construct indicators of containment and stabilization policies and estimate a range of panel VAR models. The main results are threefold: First, we find that stock markets are highly responsive to containment and stabilization policies. We show that domestic fiscal policy as well as monetary policy support the recovery as reflected in the stock market. Second, expansionary fiscal policy conducted at the European level reduces rather raises stock prices. Third, we estimate the model over subsamples and show that the counter-intuitive stock market response to EU policies is driven by the responses in medium- and high-debt countries. These countries' stock markets are also particularly susceptible to monetary policy announcements.
    Keywords: COVID-19, stabilization policies, lockdown-measures, panel VAR
    JEL: E44 E52 E62
    Date: 2022
  5. By: Adam Kucera (Czech National Bank, Czech Republic); Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Institute of Information Theory and Automation, Prague, Czech Republic); Ales Marsal (Slovak National Bank, Slovak Republic & Mendel University in Brno)
    Abstract: We show that government spending does play a role in shaping the yield curve which has important consequences for the cost of private and government financing. We combine government spending shock identification strategies from the fiscal macro literature with recent advancements in no-arbitrage affine term structure modeling, where we account for time-varying macroeconomic trends in inflation and the equilibrium real interest rate. We stress in our empirical macro-finance framework the importance of timing in the response of yields to government spending. We find that the yield curve responds positively but mildly to a surprise in government spending shocks where the rise in risk-neutral yields is compensated by a drop in nominal term premia. The news shock in expectations about future expenditures decreases yields across all maturities. Complementarily, we also analyze the effect of fiscal policy uncertainty where higher fiscal uncertainty lowers yields.
    Keywords: Government Expenditures, Fiscal policy, U.S. Treasury Yield Curve, Affine Term Structure Model
    JEL: C38 C51 C58 E43 E47
    Date: 2022–04
  6. By: Andrea Carriero (Queen Mary University of London and University of Bologna); Alessio Volpicella (University of Surrey)
    Abstract: We develop a novel approach to achieve point identification in a Structural Vector Autoregression, based on imposing constraints on the forecast error variance decomposition. We characterize the properties of this approach and provide Bayesian algorithms for estimation and inference. We use the approach to study the effects of uncertainty shocks, allowing for the possibility that uncertainty is an endogenous variable, and distinguishing macroeconomic from financial uncertainty. Using US data we find that macroeconomic uncertainty is mostly endogenous, and that overlooking this fact can lead to distortions on the estimates of its effects. We show that the distinction between macroeconomic and financial uncertainty is empirically relevant. Finally, we study the relation between uncertainty shocks and pure financial shocks, showing that the latter can have attenuated effects if one does not take into account the endogeneity of uncertainty.
    JEL: C11 C32 E32 E37 E44
    Date: 2022–03
  7. By: Markus Brunnermeier (Princeton University); Sebastian Merkel (Princeton University); Yuliy Sannikov (Stanford University)
    Abstract: This paper incorporates a bubble term in the standard FTPL equation to explain why countries with persistently negative primary surpluses can have a positively valued currency and low inflation. It also provides an example with closed-form solutions in which idiosyncratic risk on capital returns depresses the interest rate on government bonds below the economy’s growth rate.
    Keywords: Fiscal policy, Monetary Economics
    JEL: E44 E52 E63
    Date: 2020–05
  8. By: Takushi Kurozumi (Bank of Japan); Ryohei Oishi (Bank of Japan)
    Abstract: We compare Japanese and US inflation dynamics during the post-Global Financial Crisis period by utilizing Bayesian VAR-GMM to estimate several specifications of the New Keynesian Phillips curve. With the estimation method, we derive expectations in the Phillips curve from a VAR and analyze the formation of inflation expectations explicitly. We select the specification with variable elasticity of demand for Japan and that with sticky information for the US, using quasi-marginal likelihood. The selected specifications show that the persistence of inflation expectations formation is higher and trend inflation is lower in Japan than in the US. These findings account for persistently weak inflation developments in Japan: in the presence of firms' cautious price-setting behavior that reflects the purchasing attitude of consumers who are sensitive to price increases, inflation remains low and induces, through the highly persistent formation of inflation expectations, low expected future inflation and hence low trend inflation, which in turn put downward pressure on present inflation through the Phillips curve.
    Keywords: New Keynesian Phillips curve; Inflation expectations formation; Variable elasticity of demand; VAR-GMM; Bayesian method
    JEL: E31 C11 C26 C52
    Date: 2022–03–22
  9. By: Mihai Copaciu (National Bank of Romania); Joana Madjoska; Mite Miteski (National Bank of the Republic of North Macedonia)
    Abstract: This paper describes the theoretical structure and estimation results for a DSGE model for the Macedonian economy. Having as benchmark the model of Copaciu et al. (2015), modified to allow for a fixed exchange rate, we are able to match relatively well the volatility observed in the data. Given the monetary policy regime in place, the debt deflation channel is more important relative to the financial accelerator one when compared to the flexible exchange rate case. The lack of balance sheet effects results in no significant differences in terms of net worth evolution across the two types of entrepreneurs when impulse response functions are evaluated. However, the shocks related to the financial sector appear to be especially important for investment, for the domestic interest rate and interest rate spreads, illustrating the relevance of including financial frictions in the model. With the exchange rate not acting as a shock absorber, the external shocks are more relevant for the CPI inflation and the domestic interest rate. The drop in GDP associated with the pandemic mainly reflects the negative innovations to the consumption preference shock and to the permanent technology shock.
    Keywords: DSGE model, Financial frictions, Partial euroization, Small open economy, Bayesian estimation
    JEL: E0 E3 F0 F4 G0 G1
    Date: 2022
  10. By: Braun, Robin (Bank of England); Brüggemann, Ralf (University of Konstanz)
    Abstract: We discuss combining sign restrictions with information in external instruments (proxy variables) to identify structural vector autoregressive (SVAR) models. In one setting, we assume the availability of valid external instruments. Sign restrictions may then be used to identify further orthogonal shocks, or as an additional piece of information to pin down the shocks identified by the external instruments more precisely. In a second setting, we assume that proxy variables are only ‘plausibly exogenous’ and suggest various types of inequality restrictions to bound the relation between structural shocks and the external variable. This can be combined with conventional sign restrictions to further narrow down the set of admissible models. Within a proxy-augmented SVAR, we conduct Bayesian inference and discuss computation of Bayes factors. They can be useful to test either the sign or IV restrictions as overidentifying. We illustrate the usefulness of our methodology in estimating the effects of oil supply and monetary policy shocks.
    Keywords: Structural vector autoregressive model; sign restrictions; external instruments; proxy VAR
    JEL: C11 C32 E32 E52
    Date: 2022–02–11
  11. By: Olli Palm\'en
    Abstract: The Great Recession highlighted the role of financial and uncertainty shocks as drivers of business cycle fluctuations. However, the fact that uncertainty shocks may affect economic activity by tightening financial conditions makes empirically distinguishing these shocks difficult. This paper examines the macroeconomic effects of the financial and uncertainty shocks in the United States in an SVAR model that exploits the non-normalities of the time series to identify the uncertainty and the financial shock. The results show that macroeconomic uncertainty and financial shocks seem to affect business cycles independently as well as through dynamic interaction. Uncertainty shocks appear to tighten financial conditions, whereas there appears to be no causal relationship between financial conditions and uncertainty. Moreover, the results suggest that uncertainty shocks may have persistent effects on output and investment that last beyond the business cycle.
    Date: 2022–02
  12. By: Emiliano A. Carlevaro (Economics Department, Business School, The University of Western Australia)
    Keywords: Spatial autoregressive, Banking crises, Financial contagion, Argentina
    JEL: C21 E44 G01 G21
    Date: 2022
  13. By: Nobuhiro Kiyotaki (Princeton University); Alexander Michaelides (Imperial College London); Kalin Nikolov (European Central Bank)
    Abstract: Housing is a long-lived asset whose value is sensitive to variations in long-term growth and interest rates. When a large fraction of the population is leveraged, housing price fluctuations cause large-scale redistribution and consumption volatility. We examine policies to mitigate the impact of housing fluctuations on vulnerable households. We find that the most practical way to insure the young and the poor from the housing cycle is through a well-functioning rental market. In practice, home-ownership subsidies keep the rental market small and the housing cycle affects aggregate consumption. Removing home-ownership subsidies hurts older home-owners, while leverage limits hurt younger home-owners.
    Keywords: Housing prices, credit constraints, distribution, rental markets, welfare
    JEL: D15 D58 E02 E21
    Date: 2020–04
  14. By: Gajendran Raveendranathan; Georgios Stefanidis
    Abstract: We show how a rate cap can be designed to improve both consumer and lender welfare in the credit card market. We analyze transition paths resulting from different rate caps in a model with revolving credit lines, search frictions, and lender market power. Our analysis shows that if a rate cap only applies to new credit card issuance and not existing accounts, it can improve lender welfare. Incumbent lenders benefit because they can retain their customers for a longer time. New issuers are not affected as long as the posting of credit offers is competitive (zero expected profits in equilibrium). Consumers benefit because of lower interest rates. The rate cap that maximizes consumer welfare leads to gains to consumers and lenders that are equivalent to a onetime transfer worth 0.44 percent of disposable income. The gains to consumers amount to 73 percent of the value of credit access.
    Keywords: revolving credit; credit search; rate cap; welfare
    JEL: E21 E44 E65 G28 G50
    Date: 2022–03
  15. By: Gian Italo Bischi (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Germana Giombini (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Giuseppe Travaglini (Department of Economics, Society & Politics, Università di Urbino Carlo Bo)
    Abstract: In this paper we study the dynamic relationship between the pub- lic debt ratio and the real interest rate. Specifically, by means of a macroeconomic model of simultaneous di erence equations - one for the debt ratio and the other for the real interest rate - we focus on the role of monetary policy, fiscal policy and risk premium in affecting the stability of the debt ratio and the existence of steady states, if any. We show that, in a dynamic framework, fiscal rules may not be enough to control the pattern of the debt ratio, and the adoption of a monetary policy, in the form of an interest rate rule, is necessary to control the pattern of the debt ratio for assuring its sustainability over time. Notably, the creation or disappearance of steady states, or periodic (stable) cycles, can generate scenarios of multistability. While we obtain clear evidence that an active monetary policy has a stabilizing effect on both the real interest rate and the debt ratio, we also find that, in some scenarios, fiscal policy is not sucient to avoid explosive patterns of the debt ratio.
    Keywords: Public debt; Interest rate; Instability; Chaos
    Date: 2022
  16. By: Wall, Howard
    Abstract: This paper examines state-level differences in the effects of the Great Recession. It finds that several states were in recession prior to the official start of the recession, while more than a dozen states didn’t enter recession until six months or more after the official start. States’ exits from recession were similarly staggered. As a result, 11 states’ recessions lasted one year or shorter, while the recessions for five states lasted two years or longer. Further, there were geographic patterns to the spread of the recession across states. I use these state-level estimates to introduce a new approach for calculating the total effects of recessions on employment, one that accounts for lost employment growth as well the decrease in employment. States formed distinct geographic groupings according to these total effects, with states in the West and Southeast tending to have seen the greatest harm. Finally, many of the state-level differences in the effects of the Great Recession were related to differences in industry mix and the prevalence of sub-prime mortgages. The states with the longest and deepest recessions also tended to have been those with the highest shares of subprime mortgages.
    Keywords: State recessions
    JEL: E24 E32 R12
    Date: 2022–01–18
  17. By: António Afonso; José Carlos Coelho
    Abstract: We examine the sustainability of public finances and its determinants for 19 Eurozone countries from 1995 to 2020. We conclude for the existence of panel cointegration between government revenues and expenditures; primary government balance and one-period lagged public debt-to-GDP ratio; and public debt-to-GDP ratio and one-period lagged primary government balance. the estimated fiscal reaction functions suggest the existence of a Ricardian fiscal regime. Finally, modelling via time-varying coefficients, we find that fiscal sustainability increases with growth, fiscal balances and fiscal rules indices, and decreases with trade openness, current account balances, government effectiveness index, after 2010, and with sovereign ratings assigned by the main rating agencies.
    Keywords: fiscal sustainability; budget balance; public debt; panel data; time-varying coefficients; Eurozone, sovereign ratings.
    JEL: C23 H61 H63 E62
    Date: 2022–03
  18. By: Lahcen Bounader (International Monetary Fund); Guido Traficante (European University of Rome)
    Abstract: This paper studies robustly optimal monetary policy in a behavioral New Keynesian model, where the private sector has myopia, while the central bank has Knightian uncertainty about the degree of myopia of the private sector and the degree of price stickiness. In such a setup the central bank solves an optimal robust monetary policy problem. We show that under uncertainty in myopia the Brainard’s attenuation principle holds, while under uncertainty on price stickiness, alone or in addition to myopia, monetary policy becomes more aggressive.
    Keywords: Optimal monetary policy, bounded rationality, min- max, parameter uncertainty
    JEL: E
    Date: 2022
  19. By: Koichi Futagami (Department of Economics, Doshisha University); Daiki Maeda (School of Global Studies, Chukyo University)
    Abstract: We incorporate naive agents with a non-unitary discounting rate into a cash- in-advance (CIA) model. Through this extension, we obtain the following results. First, we show that there exists an equilibrium in which the CIA constraint does not bind when individuals discount their utilities from future consumption lower than their utilities from future leisure time. It is important to note that this non- binding equilibrium exists even if the nominal interest rate takes a positive value. Second, we demonstrate that increases in the money supply growth rate decreases the individuals f saving rate in the equilibrium in which the CIA constraint does not bind. Third, we exhibit that when the equilibrium where the CIA constraint does not bind exists, the welfare level of this equilibrium can be higher than that of the equilibrium in which the CIA constraint binds. Moreover, we deduce that the Friedman rule cannot be optimal in the equilibrium in which the CIA constraint binds and present the result that the optimal level of the optimal nominal interest rate is a?ected by the di?erence of the discount rates.
    Keywords: Non-unitary discounting rate; Naive agents; CIA constraint; Monetary policy; Friedman rule
    JEL: E52 E70
  20. By: Albuquerque, Bruno (International Monetary Fund); Varadi, Alexandra (Bank of England)
    Abstract: We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.
    Keywords: Mortgage payment holidays; household behaviour; consumption; high-frequency data; difference-in-differences; panel data
    JEL: D14 E21 G51
    Date: 2022–02–25
  21. By: Alfarano, Simone; Blanco-Arroyo, Omar
    Abstract: This paper studies whether the raise in concentration experienced by the Spanish banking sector has lead to the increase of bank-specific credit supply shocks contribution to aggregate credit supply. We decompose aggregate credit volatility and find that (i) the Spanish banking sector is granular, (ii) the direct effect of bank-specific shocks accounts for the overwhelming majority of the variation in aggregate volatility, contrary to the manufacturing sector, and (iii) the raise in concentration translated into an increase of bank-specific shocks contribution to aggregate volatility.
    Keywords: Granular Residual, Idiosyncratic Shocks, Banking Sector, Manufacturing Sec- tor, Concentration, Aggregate Fluctuations
    JEL: E44 G21
    Date: 2022–02–12
  22. By: Supriya Kapoor (Technological University Dublin); Adnan Velic (Technological University Dublin)
    Abstract: In the aftermath of the sub-prime mortgage bubble, the Federal Reserve implemented large scale asset purchase (LSAP) programmes that aimed to increase bank liquidity and lending. The excess liquidity created by quantitative easing (QE) in turn may have stimulated bank risk-taking in search of higher profits. Using comprehensive data on balance sheets, risk measures, and daily market returns in the U.S., we investigate the link between QE, bank risk-taking, profitability, and systemic risk. We find that, particularly during the third round of QE, banks that were more exposed to the unconventional monetary policy increased their risk-taking behavior and profitability. However, these banks also reduced their contribution to systemic risk indicating that the implementation of QE had an overall stabilizing effect on the banking sector. These results highlight the different distributional effects of QE.
    Keywords: large-scale asset purchases, quantitative easing, bank risk-taking, systemic risk, expected shortfall
    JEL: E52 E58 G21
    Date: 2022–02
  23. By: Alexander Bick; Adam Blandin; Richard Rogerson
    Abstract: We document 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 at 50 hours. We develop and estimate a model of labor supply to account for these features. The novel feature of our model is that earnings are non-linear in hours, with the extent of nonlinearity varying over the hours distribution. Our estimates imply significant wage penalties for individuals that deviate from 40 hours in either direction, leading to a large mass of individuals that work 40 hours and are not very responsive to shocks. This has important implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous agent-incomplete markets model and for empirical strategies designed to estimate labor supply parameters.
    Keywords: weekly hours; hourly wages
    JEL: D31 E24 H31 J22 J31
    Date: 2021–12
  24. By: Thomas Hasenzagl; Filippo Pellegrino; Lucrezia Reichlin; Giovanni Ricco (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)
    Abstract: A mixed-frequency semi-structural model is used for estimating unobservable quantities such as the output gap, the Phillips curve and the NAIRU in real time. We consider two specifications for the US: in one the output gap is observed as the official CBO measure, in the other is unobserved and derived via minimal theory-based restrictions. We find that the CBO model implies a smoother trend output but the second model better captures the business cycle dynamics of nominal and real variables. The methodology offers both a framework for evaluating official estimates of unobserved quantities of economic interest and for tracking them in real time.
    Keywords: Real-time forecasting,output gap,Phillips curve,semi-structural models,Bayesian estimation
    Date: 2022–02–14
  25. By: Kaur, Amandeep; Mohanty, Ranjan; Chakraborty, Lekha S; Rangan, Divy
    Abstract: This paper examines the empirical evidence of flypaper effects in the ecological fiscal spending in India. Using the panel data models, we analyse whether the intergovernmental fiscal transfers, or the states’ own income determine the expenditure commitments on ecology at the State level. The econometric results show that the intergovernmental fiscal transfers rather than the states’ own income determines ecological expenditure at subnational levels in India. The results hold, when the models are controlled for ecological outcomes and demographic variables.
    Keywords: Intergovernmental Transfers, Flypaper effect, Environmental Economics, Macroeconomic Policy, National Government Expenditures
    JEL: E6 H5 H7 Q5
    Date: 2021
  26. By: Chakraborty, Lekha S
    Abstract: Gender budgeting is a public financial management (PFM) tool for transparency and accountability. Against the backdrop of covid-19 pandemic, this paper analyses the Union Budget 2021-22 through a “gender lens” to understand the intensity of gender in the budgetary allocations. The analysis of specifically targeted programmes for women and the intrinsic gender components in the mainstream spending revealed that the gender budgeting hovered around only 5 per cent of total budget. The sectoral analysis revealed that higher budgetary allocations per se do not ensure higher spending. The analysis of fiscal marksmanship – the deviation between what is budgeted and what is actual – revealed significant fiscal slippages in various sectoral spending. The economic stimulus package in India has given significance to gender budgeting in energy infrastructure and increased allocation on gender budgeting in a prima facie gender neutral ministry like Petroleum is welcome. However, the framework of gender budgeting as a PFM tool can be explored further to ensure sustainable gender equality outcomes, when economic stimulus packages are short run and there is fiscal normalization procedure. Given the accommodative fiscal stance in times of pandemic, reflected in the flexibility of deficit thresholds, prioritization of spending on gender budgeting can lessen widening inequalities.
    Keywords: Gender Budgeting , Public Financial Management , Fiscal Policy , Human Development
    JEL: E62 H3 H50
    Date: 2021
  27. By: Olivier Damette; Karolina Sobczak; Thierry Betti
    Abstract: We document how introducing a financial transaction tax affects real and financial activity in a general equilibrium framework. Our model replicates some interesting stylised facts about financial markets. Informed, or rational, traders follow the standard rational expectations, while exogenous disturbances, such as optimism or pessimism shocks, affect the expectations of noise traders. An entry cost is introduced to endogenise the entry of noise traders in the financial markets. In contrast to the previous literature, financial contagion and international spillovers are considered in a two-country financial DSGE model. A welfare analysis is performed and we show that the effects of the financial transaction tax on welfare are non-linear and mainly depend on the composition of the financial market. In addition, introducing a financial transaction tax allows volatility to be reduced in both the real and financial sectors, and this result is robust to several model specifications. In a context where only one country implements the tax, we identify some externalities, as the country with the tax is likely to export stability or instability through the flows of traders. Like in the Heckscher-Ohlin-Samuelson (HOS) model in which capital and labor move internationally when countries trade, we assume that there are trader flows when traders invest abroad. As a consequence, noise traders can implicitly move to the foreign country to escape the tax, and this means that countries have conflicting interests. When markets are liquid with a large proportion of noise traders, countries do not internalise that they export noise traders and then some instability to the other market and so they set a tax rate that is higher than the optimal. At the opposite end of the scale, when markets are less liquid and the proportion of noise traders is small, some positive externalities (like financial stability) are overlooked, and so the tax rate is set too low and is sub-optimal. A cooperative situation where countries set a common tax rate is the best solution ans is welfare-enhancing. These results have important policy implications, since the existence of the tax competition issues revealed by our two-country framework might explain why the European Commission proposal initially discussed in 2011 is so contested and has been rejected by several countries.
    Keywords: Financial Transaction Tax, DSGE, Welfare, Noise Traders, Tax coordination, EU tax project.
    JEL: E22 E44 E62
    Date: 2022–03–24
  28. By: Marion Davin (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Mouez Fodha (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Thomas Seegmuller (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 study whether fiscal policies, especially public debt, can help to curb the macroeconomic and health consequences of epidemics. Our approach is based on three main features: we introduce the dynamics of epidemics in an overlapping generations model to take into account that old people are more vulnerable; people are more easily infected when pollution is high; public spending in health care and public debt can be used to tackle the effects of epidemics. We show that fiscal policies can promote convergence to a stable disease-free steady state. When public policies are not able to permanently eradicate the epidemic, public debt, and income transfers could reduce the number of infected people and increase capital and GDP per capita. As a prerequisite, pollution intensity should not be too high. Finally, we define a household subsidy policy that eliminates income and welfare inequalities between healthy and infected individuals.
    Keywords: public debt,overlapping generations,pollution,Epidemics
    Date: 2021–12–06
  29. By: John Landon-Lane (Rutgers University)
    Abstract: This paper investigates sentiment in the US economy from 1920 to 1934 using digitized articles from the Wall St Journal. We derive a monthly sentiment index and use a ten variable vector error correction model to identify sentiment shocks that are orthogonal to fundamentals. We show the timing and strength of these shocks and their resultant effects on the economy using historical decompositions. Intermittent impacts of up to fifteen percent on Industrial Production, ten percent on the S&P 500 and Bank loans and, thirty-seven basis points for the Credit risk spread, suggest a large role for sentiment. Select number of author(s): : 1
    Keywords: Great Depression, General Theory, Behavioural Economics
    JEL: D89 E32 E70
    Date: 2022–03–15
  30. By: Bertrand Garbinti (CREST-ENSAE-Institut Polytechnique Paris); Pierre Lamarche (CREST-INSEE); Fredérique Savignac (Banque de France)
    Abstract: We study how the marginal propensity to consume out of wealth (MPC) varies across households depending on the level and composition of their wealth. We build a unique household-level panel dataset which combines wealth and consumption surveys for five European countries to estimate country-specific marginal propensity to consume out wealth. We use instrumented household-level panel regressions. First, we show that the MPC out of total wealth is higher for lowwealth households, whatever the country. Second, we find that the MPC out of housing assets is significant and decreasing along the wealth distribution in all countries. Third, we show that the observed cross-country heterogeneity in MPC is strongly correlated with the use of mortgages, suggesting a collateral channel. Finally, we conduct a simulation exercise to investigate to what extent heterogeneous MPC and wealth inequality affect consumption inequality.
    Keywords: consumption, marginal propensity to consume out of wealth, collateral channel, household surveys
    JEL: D12 E21 C21
    Date: 2022–01–19
  31. By: Kohnert, Dirk
    Abstract: Francophone Africa has been dominated to date by the political, economic and cultural repercussions of France’s colonial rule. A major instrument to assert France's interests was the upkeep of a common monetary policy and currency, the CFA Franc. Although this has been increasingly resented by African politicians and economists, who wanted to replace it with a West African currency (the 'Eco') the CFA still prevails, due to the social network of French and African political leaders, the ‘messieurs Afrique’ who benefit from the system. The controversial international discussion concentrates on questions of sovereignty and formal political and economic questions. However, the rules of the informal sector proved to be at least as crucial in structuring the CFA-zone as the institutions and policies of the formal economic sector, including its monetary institutions. For decades, for example, prices of French imports were overpriced, due to protection by tied aid and other political and cultural non-tariff trade barriers. The cost of this rent-seeking was carried not only by the French Treasury, who guarantees the peg, but by the French and EU taxpayers, who financed budgetary bail-outs and development aid, and last, but not least, by the poorer African member countries and social strata. Although this applies strictly speaking only to the CFA zone, there are strong indicators that things haven't changed much since then for Francophone Africa in general. The repercussions of rent-seeking in Francophone Africa impact up to date negatively on economic performance. For example, growth levels have been significantly lower for two decades compared with Anglophone competitors.
    Keywords: France, Francophone Africa, post-colonialism, regulated market, special interests, regulatory capture, monetary policy, CFA franc, international trade, free trade area, customs union, African Studies,
    JEL: E26 E31 E42 E52 F13 F15 F22 F35 F45 F52 F54 L13 N17 N97 O17 R11 R58 Z13
    Date: 2022–02–18
  32. By: Hashem Dezhbakhsh (Department of Economics, Emory University, USA); Daniel Levy (Department of Economics, Emory University, USA; Department of Economics, Bar-Ilan University, Israel; Rimini Centre for Economic Analysis; International Centre for Economic Analysis, Wilfrid Laurier University, Canada; International School of Economics, Tbilisi State University, Georgia)
    Abstract: The U.S. prewar output series exhibit smaller shock-persistence than postwar-series. Some studies suggest this may be due to linear interpolation used to generate missing prewar data. Monte Carlo simulations that support this view generate large standard-errors, making such inference imprecise. We assess analytically the effect of linear interpolation on a nonstationary process. We find that interpolation indeed reduces shock-persistence, but the interpolated series can still exhibit greater shock-persistence than a pure random walk. Moreover, linear interpolation makes the series periodically nonstationary, with parameters of the data generating process and the length of the interpolation time-segments affecting shock-persistence in conflicting ways.
    Keywords: Linear Interpolation, Random Walk, Shock-Persistence, Nonstationary series, Periodic nonstationarity, Stationary series, Prewar US Time Series
    JEL: C01 C02 E01 E30 N10
    Date: 2022–03
  33. By: Ludmila Fadejeva (Bank of Latvia); Boriss Siliverstovs (Bank of Latvia); Karlis Vilerts (Bank of Latvia); Anete Brinke (Bank of Latvia)
    Abstract: We use a novel card transaction data from the Latvijas Banka to study the consumption response to the Covid-19 pandemic in Latvia throughout three separate waves of the pandemic. We find that card transaction activity fell similarly in all three waves. There is also some suggestive evidence that during the second and third waves of the pandemic, the consumption response was largely caused by the containment measures instead of the behavioural adjustment of consumers. The consumption response varied greatly across different sectors with the Airlines and Entertainment sectors faring the worst. However, the situation was not homogeneous during the three waves of the pandemic, given the changing composition of the containment measures. We show that merchants with a higher share of online transactions in the prepandemic period fared better than others during the second and the third waves of the pandemic. Similarly, we also find evidence that investment in online platforms during the initial phases of the pandemic seems to have resulted in better resilience in the following waves. Finally, we show that the nowcasting model with card transaction data outperforms all benchmark models when it comes to retail nowcasting and yields a notable improvement in forecasting metrics.
    Keywords: card transactions, consumer spending, Covid-19, retail trade nowcasting
    JEL: E21 E27 C32 C53
    Date: 2022–02–15
  34. By: Lucija Benko (Faculty of Economics and Business, University of Zagreb); Karlo Krstanović (Faculty of Economics and Business, University of Zagreb); Luka Sovulj (Faculty of Economics and Business, University of Zagreb)
    Abstract: Proglašenje pandemije bolesti COVID-19 početkom 2020. godine ostavilo je traga na gospodarstvima država diljem svijeta. Javno-zdravstvene mjere koje su donesene radi suzbijanja širenja bolesti, a koje uključuju karantenu, socijalnu distancu, restrikcije u kretanju i putovanjima, kampanje čiji je cilj navesti ljude da ostanu u svojim domovima, ovisno o načinu i intenzitetu njihova uvođenja i provođenja, pogađaju razne gospodarske grane od kojih se kao jedna od najpogođenijih ističe turizam. Prema podacima posljednje Turističke satelitske bilance izrađene za 2016. godinu, turizam je na direktan način doprinio bruto domaćem proizvodu Republike Hrvatske s vrlo visokih 17% dodane vrijednosti, a zajedno s povezanim djelatnostima 24% dodane vrijednosti. Bilo kakav negativan eksterni šok u slučaju ovako visoke ovisnosti o nekoj djelatnosti ostavlja snažne kontrakcijske posljedice na gospodarstvo te iste države. Cilj je ovoga rada procijeniti utjecaj pandemije koronavirusa na osnovne varijable turističke potražnje, turističke dolaske i noćenja, odnosno na vrijednost indeksa CROBEXturist Zagrebačke burze koji služi kao aproksimacija jačine turističke ponude Republike Hrvatske. U tu svrhu rabimo ARIMA prognostički model kojime nastojimo modelirate spomenute varijable, odnosno njihove vrijednosti u slučaju bez pandemije koronavirusa. Takve podatke uspoređujemo s dostupnim sekundarnim podacima i procjenjujemo razmjer štete uzrokovane koronavirusom. Dobiveni rezultati ukazuju na činjenicu da je Hrvatska trebala imati još jednu stabilnu turističku sezonu s nešto manjim brojem turističkih dolazaka i nešto većim brojem noćenja i s vrijednošću burzovnog indeksa sličnoj onoj iz 2019. godine za promatrano razdoblje. Posljedica egzogenog šoka sadržana je u činjenici da model primjerice u travnju 2020. predviđa blizu 1.500.000 turističkih dolazaka, a zabilježeni stvarni dolasci jednaki su 2.000 s podjednakim snažnim padom noćenja i vrijednosti burzovnog indeksa. Dobiveni rezultati jasno i kvantitativno oslikavaju posljedice egzogenog šoka, a koji se potom mogu staviti u korelaciju s glavnim ekonomskim varijablama kao što su na primjer nezaposlenost, BDP, inflacija i devizni tečaj, a uzevši u obzir ranije spomenutu visoku ovisnost Republike Hrvatske o turizmu. Iz svega navedenog, može se zaključiti kako je od velike važnosti za stabilizaciju gospodarskih ciklusa Republike Hrvatske istovremeno provoditi politiku smanjenja ovisnosti hrvatskog gospodarstva o turizmu na način da se provodi diferencijacija gospodarskih grana u RH, ali i diferencijacija oblika turizma unutar te djelatnosti te politiku jačanja turističke djelatnosti kroz spomenutu diferencijaciju.
    Keywords: pandemija koronavirusa, utjecaj na turizam, financijska tržišta, ARIMA modeli
    JEL: C53 C58 Z30 E32
    Date: 2022–03–22
  35. By: Ralph S. J. Koijen (University of Chicago); Motohiro Yogo (Princeton University)
    Abstract: Using international holdings data, we estimate a demand system for financial assets across 36 countries. The demand system provides a unified framework for decomposing variation in exchange rates, long-term yields, and stock prices, interpreting major economic events such as the European sovereign debt crisis, and estimating the convenience yield on US assets. Macro variables and policy variables (i.e., short-term rates, debt quantities, and foreign exchange reserves) account for 55 percent of the variation in exchange rates, 57 percent of long-term yields, and 69 percent of stock prices. The average convenience yield is 2.15 percent on US long-term debt and 1.70 percent on US equity.
    Keywords: demand system, international
    JEL: E52 F31 G12
    Date: 2020–06
  36. By: Tomomi Miyazaki (Graduate School of Economics, Kobe University); Haruo Kondoh (Department of Economics, Seinan Gakuin University)
    Abstract: This study examines the effects of the interaction between unconventional monetary policy and fiscal stimulus on regional employment in Japan. A mixed vector autoregressions (VARs)/event study approach is used. Our empirical findings first show that whereas employment recovery was salient in western Japan, it was not the case in Tokyo metropolitan areas, the country’s main economic hub. Second, we confirm employment recovery on female employees in all regions. However, we do not observe this on male employees, implying the policy interaction did not necessarily increase the number of regular workers, which might suppress a wage hike in the entire country.
    Date: 2022–03
  37. By: Luca Marchiori (Banque centrale du Luxembourg, Département Économie et Recherche); Julien Pascal (Banque centrale du Luxembourg, Département Économie et Recherche); Olivier Pierrard (Banque centrale du Luxembourg, Département Économie et Recherche)
    Abstract: We develop a monocentric urban search-and-matching model in which workers can choose to commute or to migrate within the region. The equilibrium endogenously allocates the population into three categories: migrants (relocate from their hometown to the city), commuters (traveling to work in the city) and home stayers (remaining in their hometown). We prove that the market equilibrium is usually not optimal: a composition externality may generate under- or over-migration with respect to the central planner’s solution, which in all cases results in under-investment in job vacancies and therefore production. We calibrate the model to the Greater Paris area to reproduce several gradients observed in the data, suggesting over-migration. We show how policy interventions can help to reduce inefficiencies.
    Keywords: Migration, Commuting, Urban search-and-matching, Efficiency, Policy
    JEL: E24 J68 R13 R23
    Date: 2022–03–18
  38. By: Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
    Abstract: This article models the process of structural transformation and catching-up in a demand-led Southern economy constrained by its balance of payments. Starting from the Sraffian Supermultiplier Model, we model a dual-sector small open economy divided between traditional and modern sectors that interacts with a technologically advanced Northern economy. We propose two (alternative) autonomous elements that define the growth rate of this demand-led economy: government spending and exports. Autonomous government spending plays a central role in stimulating demand, and thus is a source of growth of the modern sector. Productivity adjusts to the growth rate of output, given by the growth rate of autonomous expenditure. Drawing from the Structuralist literature, the technologically laggard Southern economy catches up by absorbing technology from the Northern economy, potentially closing the technology gap. The gap affects the income elasticity of exports, bringing a supply-side mediation to the growth rates in line with the Balance of Payments Constrained Model. We observe that a demand-led government policy plays a central role in structural change, pushing the modern sector to a take-off. Also, the economy is stable in terms of capacity utilisation and modern sector employment.
    Keywords: Industrialisation; Catching-up; Balance of Payments; Sraffian Supermultiplier
    Date: 2022–03–23
  39. By: Joel Bowman
    Abstract: This paper assesses the consequences of zombie businesses in Australia between 2001/02 to 2018/19. Zombie businesses are broadly defined as businesses whose ability to meet interest expenses from current profits is less compared with other firms operating within the same industry. This work finds that an increasing share of labour sunk into zombie businesses is correlated with weaker activity for viable businesses operating within the same industry. However, it does not find that zombie firms adversely affect the allocative efficiency of labour and capital and does not reduce the responsiveness of business exits to productivity. Further, the spillover effect of zombie firms does not appear to be propagated by the crowding out of financing or the imposition of additional entry barriers for firms operating within the same industry. Overall, the stable share of labour allocated to zombie firms at an aggregate level since 2007 suggests that it is unlikely that the adverse effects of zombie firms explain the slowdown in Australia’s economic activity since the mid 2000s.
    Keywords: Zombie Firms, Labour Productivity, Firm Dynamics, Resource Allocation
    JEL: D24 E22 G33 J24 L25
    Date: 2022–03
  40. By: Stéphane Auray (CREST-Ensai and ULCO, France); Aurélien Eyquem (Université Lumière Lyon2, France)
    Abstract: We introduce heterogeneous mark-ups through Bertrand competition in a two-country model with endogenous firms' entry and tradability à la Ghironi and Melitz (2005). Bertrand competition generates a distribution of mark-ups according to which firms that are larger and more productive charge lower prices, attract larger market shares and extract larger mark-ups. First, we characterize first-best allocations and their implementation. We find that they are independent from the degree of mark-ups' heterogeneity, suppress the dispersion of mark-ups and imply zero distortions on labor as well as substantial subsidies to preserve firm's incentives to enter. Second, second-best alternative policies with a restricted number ofi nstruments and a balanced budget significantly reduce the potential welfare gains from fiscal policies. Third, the total welfare losses from passive policies are lower under heterogeneous mark-ups than under homogeneous mark-ups: while th edispersion of mark-ups has negative effects on the intensive margin, output per firm, it also raises expected profits for potential entrants and raises the extensive margin, the number of firms in both domestic and export markets, pushing them closer to their efficient levels. Fourth, we also investigate the dynamic properties of allocations under passive and optimal policies considering aggregate productivity shocks and trade liberalization experiments.
    Keywords: Heterogeneous firms, Endogenous Entry, Open economy, Strategic pricing, Optimal taxation
    JEL: D4 E20 E32
    Date: 2021–06–15
  41. By: Hai-Anh Dang (World Bank); Cuong Nguyen (Vietnam National University); Calogero Carletto (World Bank)
    Abstract: Little evidence exists on the adverse effects of COVID-19 on the labor market for poorer countries. Despite its low middle-income status, Vietnam has been widely praised for its success in the fight against early waves of the COVID-19 pandemic, with a low mortality rate of around 100 deaths out of a population of less than 100 million by the end of 2020. We rigorously estimate the pandemic effects on employment outcomes in Vietnam, applying difference-in-differences and regression discontinuity design models to rich individual-level data from the Labor Force Surveys spanning 2015 to 2020. We find post-pandemic increased unemployment and temporary layoff rates and decreased employment quality. Monthly wages reduced but the proportion of workers receiving below-minimum wages substantially increased, contributing to sharply rising wage inequality. Our findings suggest that more resources can be allocated to protect vulnerable workers, especially as the pandemic prolongs and likely results in more severe damages to the economy.
    Keywords: COVID-19, employment, wage inequality, differences-in-differences, RDD, Vietnam
    JEL: E24 I30 J21 O12
    Date: 2022–03
  42. By: Leonardo Barros Torres; Jaylson Jair da Silveira, Gilberto Tadeu Lima
    Abstract: We set forth an overlapping generations model in which the microdynamics of tax compliance is coupled to the macrodynamics of the economy. We specify the proportion of individuals who do not comply with their tax obligations as endogenously time-varying using the discrete choice approach, which allows considering both deterministic components and idiosyncratically subjective motivations and proclivities (such as tax morale) as drivers of tax compliance. The model replicates (and hence provides an analytical framework for a potential interpretation of) some pieces of evidence on tax evasion. First, heterogeneity in tax compliance exhibits persistence and fluctuations over the long run. Second, the proportion of non-compliant taxpayers varies positively with the tax rate and negatively with the probability of detection of tax evaders. Third, the impact of a change in the proportion of non-compliant taxpayers on the per capita output over the long run is ambiguous.
    Keywords: Tax compliance; discrete choice modeling; tax morale; heterogeneous behavior; macrodynamics
    JEL: H62 H40 C02 C62 E13
    Date: 2022–03–22
  43. By: Kaur, Amandeep; Chakraborty, Lekha S; Rangan, Divy
    Abstract: Against the backdrop of the COVID-19 pandemic, the Government of India, as part of economic stimulus package, increased the borrowing limit of the States from 3 to 5 per cent of GSDP. The power sector reform at the State-level is one of the criteria to avail this extra-borrowing. We analyse the efficiency parameters of power sector and observe that there are statewise differentials in the financial and operational indicators of power sector. We notice that the average AT&C (Aggregate Technical and Commercial) losses that should have been 15% by 2018-19, presently, on average, stand at 26.15%. The ACS-ARR gap (the gap between Average Cost and Average Revenue) has also widened. The power tariff revisions have also not been implemented in the States, and the operational parameters in our analysis indicate widening inefficiencies across States in power infrastructure.
    Keywords: Power Infrastructure , State Government , Covid19, Economic Stimulus, Efficiency
    JEL: E62 H3 H7
    Date: 2021
  44. By: Antonio Cutanda (Universidad de Valencia, Valencia, Spain ORCID number: 0000-0003-2066-4632); Juan A. Sanchis-Llopis (Universidad de Valencia and ERICES, Valencia, Spain ORCID number: 0000-0001-9664-4668)
    Abstract: Spain. Further, we will study whether human capital accumulation affects this key elasticity. For this purpose, we estimate the equation for the intertemporal substitution without accounting for human capital and introducing it. We build a pseudo-panel data set combining the Spanish Family Expenditure Survey and the Labour Survey over the period 1987-1997. From our results the estimate of the intertemporal elasticity of leisure is about 0.25, that is comparable to estimates found for other economies. Further, considering the effect of human capital significantly increases the estimated elasticity of intertemporal substitution for leisure, obtaining an estimate about 0.5, what confirms the existence of a bias if we do not consider human capital. Finally, this bias is larger for the younger cohorts than for the older ones.
    Keywords: Euler equation, Instrumental variables, Intertemporal Substitution for leisure, Panel data.
    JEL: C33 C36 E24 J22
    Date: 2022–02
  45. By: Holland, Dawn; te Velde, Dirk Willem
    Abstract: The UK has recently reduced its foreign aid budget from 0.7 per cent of gross national income (GNI) to 0.5 per cent, with a view to going back to 0.7 per cent when the fiscal context allows, estimated to be in 2024/5. The provision of aid is motivated by a wide range of factors that include moral, historical, strategic and security reasons. The primary aim of this paper is to complement the broad existing literature that focuses on the social and ethical aspects of aid by exploring aid flows from a macroeconomic perspective. The analysis reveals that the decision to cut UK aid will provide negligible direct savings for the UK, comes at a cost to the UK economy, and poses significant humanitarian and social costs in many poor countries. Aid delivers good value for money. Every £1 spent on aid delivers at least triple its value in the aid recipient regions. In addition, when we take international spillovers of aid into account, well-directed aid delivers a net positive return to the donor countries. Every £1 of ODA that is restored over the period 2021/22-2023/24, can be expected to provide recipient regions with the equivalent of £2.98-£5.31 in goods and services, and raise UK GDP by 1-13 pence. The estimates suggest that the decision to cut the UK ODA budget has cost in the range of £322 million to £423 million in lost UK exports, while up to 1.5 million more people in sub-Saharan Africa may suffer hunger as a result.
    Keywords: Foreign aid, uk economy, humanitarian costs
    JEL: E12 E60 F35
    Date: 2022–03
  46. By: Sulka, Tomasz
    Abstract: Planning for retirement and subsequent execution of the plan are difficult, but essential for financial security in old age. To formally analyse the interplay between planning and self-control, I introduce cognitive costs of formulating a plan into the dual-self model of impulse control. The resulting model can generate rational inaction in pension choices, with the agent's self-control and level of income playing a role of inputs into the decision whether or not to undertake costly planning. Furthermore, when they do plan, agents characterised by poor self-control save over shorter horizons and accumulate lower pension wealth. The possibility of rational inaction can explain other robustly observed behaviours, such as disproportionately low savings of individuals on low incomes and non-fungibility between public and private pension wealth. The model is applied to study welfare and savings implications of automatic enrolment into private pensions. The default option effect on plan participation arises due to the fact that counterfactual non-savers have the lowest threshold for accepting the default scheme. Nevertheless, the impact of automatic enrolment on total savings is ambiguous in general, because in addition to the counterfactual non-savers, the default may anchor contributions of a counterfactual active saver to a low default contribution rate. Consequently, although raising the default contribution rate itself has an ambiguous impact on aggregate savings, it always reduces the dispersion in pension wealth accumulation.
    Keywords: Planning,Self-Control,Cognitive Costs,Pensions,Automatic Enrolment
    JEL: D14 D15 D91 E21 E71 H55 J32
    Date: 2022
  47. By: Dilger, Alexander; Hickfang, Michael
    Abstract: We analyse whether the creation of the eurozone and the euro crisis had an effect on the sportive performance of professional football teams in European nations. We find a significantly positive sign of membership in the eurozone on UEFA points. However, this positive finding is not robust over time and disappears in models with more covariates. It is probably a size effect but at least the adoption of the euro brought no disadvantages in football.
    JEL: E42 F02 G01 Z20
    Date: 2022
  48. By: Julian A. Parra-Polania; Andrés Sánchez-Jabba; Miguel Sarmiento
    Abstract: Do oral FX interventions (i.e. announcements made by central bank officials and economic authorities) influence the exchange rate behavior in emerging economies? Following an event study approach, we evaluate whether this type of interventions in the Colombian FX market have an impact on the level or volatility of the exchange rate (U.S Dollar / Colombian peso). We find there is no conclusive evidence of a statistically significant impact. This finding consistently arises across different subsamples and parameters. Robustness tests based on the exchange rate authority that makes the announcement or the mechanism used for actual interventions yield the same conclusion. We interpret these findings as possible evidence of the fact that higher levels of uncertainty (and hence lower credibility levels) or the predominance of global over domestic factors may reduce the effectiveness of oral interventions in emerging economies. **** RESUMEN: ¿Tienen las intervenciones cambiarias orales (i. e. anuncios cambiarios hechos por autoridades del banco central u otras autoridades económicas) influencia sobre el comportamiento de la tasa de cambio en las economías emergentes? Aplicando métodos de estudio de eventos, examinamos si este tipo de intervenciones, en el mercado cambiario colombiano, tienen algún impacto sobre el nivel o la volatilidad de la tasa de cambio (dólar de EEUU versus peso colombiano). Encontramos que no hay evidencia robusta de que exista un impacto estadísticamente significativo. Este resultado surge de forma consistente en todas las sub-muestras y parámetros analizados. Adicionalmente, llevamos a cabo pruebas de robustez diferenciando las autoridades que hacen los anuncios o los mecanismos usados para las intervenciones materiales y encontramos que la conclusión se mantiene. Interpretamos estos resultados como posible evidencia de que mayores niveles de incertidumbre (y los consecuentes menores niveles de credibilidad) o la predominancia de los factores globales sobre los domésticos puedan reducir la efectividad de las intervenciones orales en las economías emergentes.
    Keywords: Oral intervention, exchange rate, communication, event study, Emerging Economies, intervención oral, tasa de cambio, comunicación, estudio de eventos, economías emergentes
    JEL: F31 E58 G14
    Date: 2022–02
  49. By: Christophe Muller (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: This chapter discusses facts, methods and empirical results that pertain to poverty measurement under income and price dispersions. The correlation of prices and living standards is examined, and its origins are considered, in terms of whether such origins are related to consumer preferences, economic interactions and market imperfections. Then, the relationship of price dispersion and aggregate social indicators - including poverty measures - is analysed by combining stochastic hypotheses about prices and incomes with normative properties of social and poverty indicators. Finally, empirical results about how dispersed heterogeneous price indices affect poverty measurement, anti-poverty targeting and poverty-alleviation price reforms are reviewed.
    Keywords: poverty, prices, living standards, price dispersion, poverty alleviation, price indices
    JEL: C83 D43 E31 I32
    Date: 2022–03
  50. By: Milan Fičura; Jiří Witzany
    Abstract: Non-Maturing Deposit (NMD) pass-through rate represents a key parameter needed in the process of interest rate management of the banking book (IRRBB). NMD interest rates for retail and corporate segments are usually not directly linked to the market interest rates, but depend rather on the bank's marketing strategy, market competition, liquidity, and possibly on other factors. The ratio in which banks adjust their NMD interest rates to the changes of the interbank market interest rates is known as the NMD pass-through rate. The goal of this paper is to analyse the variability of NMD pass-through rates in the 19 Eurozone countries and identify their possible determinants. The pass-through rates are estimated using cointegration analysis based on datasets available from the ECB Statistical Data Warehouse and the results show significant variability between countries. To analyse the determinants of pass-through rates in the Eurozone, the rates are regressed on 9 aggregates of country-level banking sector including concentration, profitability, or funding. Out of the tested predictors, surprisingly only the ratio of Wholesale Funding to Liabilities proves to impact the pass-through rates significantly, with a positive sign, indicating that countries where banks rely more heavily on wholesale funding exhibit higher pass-through of the market interest rate changes to the NMD deposit rates.
    Keywords: Non-Maturing Deposits (NMD), pass-through rate, IRRBB
    JEL: C32 E43 E58 G21
    Date: 2021–11–30
  51. By: Tatjana Dahlhaus; Daniel Hyun; Antoine Poulin-Moore; Jaime Trujillo; Saarah Sheikh; Benjamin Straus
    Abstract: We assess the impact of the COVID-19 pandemic on consumption indicators by estimating the effects of government-mandated containment measures and of the willingness of individuals to voluntarily physically distance to prevent contagion. To do this, we use weekly panel regressions across Canadian provinces to study how differences in both containment measures and voluntary physical distancing affect consumption, proxied by transaction data. We also conduct a similar panel analysis across 28 advanced economies using retail mobility data as a proxy for in-person consumption of goods and services. Two main findings are broadly robust across a variety of tests and specifications. First, indicators of both government containment measures and voluntary physical distancing are negatively correlated with consumption indicators, with the latter relationship showing variation over time. Second, contact-intensive and other highly restricted sectors in Canada were generally more affected by increases in the stringency of government containment measures and voluntary physical distancing. In contrast, the impact from voluntary physical distancing on spending categories deemed essential by some Canadian provincial governments was muted relative to the impact on other categories.
    Keywords: Coronavirus disease (COVID-19); Domestic demand and components
    JEL: C23 D12 E65 I18
    Date: 2022–03
  52. By: Maryam Farboodi (MIT); Gregor Jarosch (Princeton University); Robert Shimer (University of Chicago)
    Abstract: What market structure emerges when market participants can choose the rate at which they contact others? We show that traders who choose a higher contact rate emerge as intermediaries, earning profits by taking asset positions that are misaligned with their preferences. Some of them, middlemen, are in constant contact with other traders and so pass on their position immediately. As search costs vanish, traders still make dispersed investments and trade occurs in intermediation chains, so the economy does not converge to a centralized market. When search costs are a differentiable function of the contact rate, the endogenous distribution of contact rates has no mass points. When the function is weakly convex, faster traders are misaligned more frequently than slower traders. When the function is linear, the contact rate distribution has a Pareto tail with parameter 2 and middlemen emerge endogenously. These features arise not only in the (inefficient) equilibrium allocation, but also in the optimal allocation. Moreover, we show that intermediation is key to the emergence of the rest of the properties of this market structure.
    Keywords: Over-the-Counter Markets, Intermediation, Middlemen, Random Matching, Endogenous Search Intensity, Network Formation, Pareto Distribution, Welfare
    JEL: E44 G12 G20
    Date: 2020–05
  53. By: Massimiliano Renzetti (Banca d'Italia); Andrea Dimartina (Banca d'Italia); Riccardo Mancini (Banca d'Italia); Giovanni Maria Sabelli (Banca d'Italia); Francesco Di Stasio (Banca d'Italia); Carlo Palmers (SWIFT); Faisal Alhijawi (Buna Payment Platform); Erol Kaya (Buna Payment Platform); Christophe Piccarelle (DXC Technology); Stuart Butler (DXC Technology); Jwallant Vasani (Jordan Ahli Bank); Giancarlo Esposito (Intesa Sanpaolo); Alberto Tiberino (Intesa Sanpaolo); Manfredi Caracausi (Intesa Sanpaolo)
    Abstract: This paper presents the results of a joint experiment involving Banca d’Italia and the Arab Regional Payments Clearing and Settlement Organization (ARPSCO), focusing on the settlement of cross‑currency instant payments across different technical platforms. TIPS and Buna are the instant payment settlement platforms with multi-currency features operated by the two organizations respectively. Both platforms started with an initial investigative phase, in order to assess operational policies and the legal and technical implications of implementing a cross‑currency instant payment settlement service, i.e. one in which the debtor and creditor accounts are denominated in two different currencies both eligible for settlement on the platform. For the purpose of the Proof of Concept (PoC), two representatives of the abovementioned market communities, namely Intesa Sanpaolo and Jordan Ahli Bank, participated in their respective capacities of Originator PSP and ultimate Beneficiary PSP for the corresponding currencies, i.e. the euro and the Jordanian dinar. In line with building blocks 13 and 17 of the G20 global roadmap for enhancing cross-border payments (concerning the interlinking of payment systems), the natural evolution of these investigations was to explore possible options for providing the same type of cross-currency service in a cross-platform scenario, i.e. through the interoperability of different instant payment platforms. The PoC described in this paper relates to the implementation of a cross-platform scenario involving TIPS and Buna.
    Keywords: Payment Systems, Instant Payments, Market Infrastructures, Cross-Border Payments.
    JEL: E42
    Date: 2022–03
  54. By: Alari Paulus
    Abstract: The sensitivity of business fixed investment to one of its key determinants, the user cost of capital, has been little investigated with firm-level data that captures firm heterogeneity to the full extent. I study the determinants of business fixed investment in Estonia, using the universe of business statements for non-financial firms in 1994-2020 from administrative records. The results with various panel data models provide strong support for a theoretical long-term relationship between the gross investment rate, and changes in production output and the user cost of capital. I find that the capital stock is modestly responsive to changes in output and the user cost of capital, with elasticities less than 0.5 in absolute size, and that different estimation strategies yield broadly similar results. Elasticities differ by firm size, but sectoral variation is relatively limited. User cost elasticities also exhibit notable variation over time, while output elasticities are much more stable. I also find that investments in machinery and equipment are more elastic than investments in buildings and structures.
    Keywords: business investment, user cost of capital, corporate taxation, firm panel data
    JEL: D22 E22 H32
    Date: 2022–03–24
  55. By: Chakraborty, Lekha S
    Abstract: We analyse the theoretical and empirical constructs of federal fiscal relations and present a roadmap to integrate gender in fiscal federalism. Applying an “equally distributed equivalent” methodology, gender equality is measured for this purpose. This also involves an analysis of the institutional space through a “gender lens”, especially in the tax and expenditure assignments as well as the intergovernmental fiscal transfers. We arrive at the following four inferences. One, fiscal federalism, theoretically, is neither good nor bad for gender equality. The impact of fiscal federalism on gender equality outcomes depend on the interface between institutional design and intergovernmental fiscal transfers. Two, with the progress of federal governance and fiscal decentralization, significant expenditure assignments that are important for gender equality including health care, labour and education are given importance in the gender budgeting design. Three, the fiscal allocations relate to eliminating the statistical invisibility of unmonetised care economy labour that may promote women’s economic empowerment need further emphasis. Four, the system of taxation and tax policy design are relevant to gender equality. However, evidence suggests that differential tax system and tax exemptions cannot correct gender inequalities. Five, in addition to integrating gender criteria in the tax-transfer formula, the fiscal federalism arrangements such as specific-purpose grants to subnational governments can promote gender equality.
    Keywords: Fiscal federalism, gender equality, intergovernmental fiscal transfers
    JEL: E62 H77
    Date: 2021
  56. By: Dimitri B. Papadimitriou; Nikos Rodousakis; Gennaro Zezza
    Abstract: In this strategic analysis, Institute President Dimitri B. Papadimitriou, Research Scholar Gennaro Zezza, and Research Associate Nikos Rodousakis analyze how the Greek economy started to recover from the shock of the COVID-19 pandemic and the prospects of continuing and sustaining its recovery. A key contribution is linked to tourism, which increased significantly in 2021, notwithstanding the pandemic, but was still very much below its 2019 level; it is expected, however, to continue its recovery in the current year. In addition, a key role will be played by NGEU funds and the Greek government's capacity to use such funds in an effective and timely manner when starting and completing the already approved capital projects. A potential threat is linked to the possibility that persistent inflation will drive up the cost of borrowing, reducing the government's fiscal space. Another "known unknown"--not considered in this report--is the geopolitical turbulence emanating from the Ukraine–Russian conflict, adding an additional layer of uncertainty to the medium-term prospects for Europe and Greece.
    Date: 2022–03
  57. By: Haydeeliz Carrasco; Hamidou Jawara; Moritz Meyer
    Abstract: The overall objective of this study is to assess the impact of the fiscal system on poverty and inequality in The Gambia as of 2015. The study presents the first empirical evidence on the distributional impacts of taxes and social spending on households in The Gambia. Furthermore, it also evaluated the distributional effects of recent fiscal policy reforms in The Gambia. The assessment was based on the Commitment to Equity (CEQ) Methodology with data from the Integrated Household Survey of 2015 and fiscal administrative data from various government ministries, departments, and agencies. The analyses show that while the fiscal system in The Gambia reduces inequality by 1.2 Gini points, it increases the national poverty headcount by 5.3 percentage points as all households (including the poor) are net payers into the fiscal system. Most of the inequality reduction is due to primary education benefits, with a marginal contribution of 0.44 Gini points, and most of the poverty increase is due to custom duties and VAT with marginal contributions of -2.63 percentage points and -2.07 percentage points, respectively. Simulating the effect of changes in the structure of personal income tax (PIT) and the government’s ongoing absorption of the School Feeding Program indicate that these changes reduce inequality but do not offset the impoverishing effect of the fiscal system. Hence, more cashable transfer programs targeted to the poor are needed to offset the impoverishing effect of indirect taxes and make the fiscal system more pro-poor.
    Keywords: fiscal policy, social spending, taxes, fiscal incidence, inequality, poverty, The Gambia
    JEL: H22 I38 D31
    Date: 2022–01
  58. By: Stéphane Auray (CREST-Ensai and ULCO, France); David L. Fuller (University of Wisconsin-Oshkosh, USA); Nicolas Lepage-Saucier (Toulouse School of Economics, France)
    Abstract: We examine the optimal provision of unemployment insurance (UI) benefits in a directed search model with matching frictions. Workers have differing levels of liquidity to smooth consumption during an unemployment spell. The model allows workers to choose between paying a fixed cost to collect the government provided UI benefits, or to forgo this scheme. Non-collectors do not receive liquid UI benefits, but do experience a shorter expected unemployment duration. Using data from the SIPP and a Mixed Proportional Hazard (MPH) model, we estimate jointly the decision to collect UI benefits and the risk of going back to work, which yields several novel results with policy implications. Households with lower liquidity are less likely to opt into the government UI scheme, as the need to find a job quickly outweighs the short-lived liquidity provided by UI benefits. The MPH estimation also finds that collecting benefits significantly lengthens the duration of unemployment. The model is calibrated to the empirical results. The optimal policy in the calibrated economy features a relatively high replacement rate and short potential duration.
    Keywords: unemployment insurance, liquidity, moral hazard, search, calibration
    JEL: E61 J32 J64 J65
    Date: 2021–09–17
  59. By: Maurice Obstfeld (Peterson Institute for International Economics)
    Abstract: In March 2020, international markets seized up with a violence unequaled since the global financial crisis nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash, liquidity strains emerged even in the market for US Treasurys, and capital flows to emerging-market and developing economies (EMDEs) reversed violently. This paper reviews the evolution of global financial markets since the global financial crisis, changes in academic thinking about these markets' domestic impacts, the strains seen during the COVID-19 crisis, and perils that may lie ahead. A key theme is that stability will be enhanced if the global community embraces reforms that elevate market resilience, rather than depending on skillful policymakers wielding aggressive but ad hoc policy interventions to ride to the rescue again.
    Keywords: COVID-19 crisis, emerging markets, capital flows, international finance, global financial cycle, US dollar, Korean economy
    JEL: E58 F32 F33 F36 F42 F44
    Date: 2022–02
  60. By: Ernest Liu (Princeton University); Benjamin N. Roth (Harvard University)
    Abstract: Microcredit and other forms of small-scale finance have failed to catalyze entrepreneurship in developing countries. In these credit markets, borrowers and lenders often bargain over not only the interest rate but also implicit restrictions on types of investment. We build a dynamic model of informal lending and show this may lead to endogenous debt traps. Lenders constrain business growth for poor borrowers yet richer borrowers may grow their businesses faster than they could have without credit. The theory offers nuanced comparative statics and rationalizes the low average impact and low demand of microfinance despite its high impact on larger businesses.
    Keywords: credit markets, developing countries
    JEL: E51 O12
    Date: 2020–07
  61. By: Giuliano Toshiro Yajima; Lorenzo Nalin
    Abstract: Liabilities denominated in foreign currency have established a permanent role on emerging market firms' balance sheets, which implies that changes in both global liquidity conditions and in the value of the currency may have a long-lasting effect for them. In order to consider the financial conditions that may encourage (discourage) structural change in a small, open economy, we adopt the framework put forward by the "monetary theory of distribution" (MTD). More specifically, we follow the formulation adopted by Dvoskin and Feldman (2019), whereby the financial system is intended as a basic sector that promotes innovation (Schumpeter 1911). In accordance with this, financial conditions are binding only for the innovative entrepreneurs, whose methods of production are not dominant and hence they need to borrow from banks to kickstart their production. Through this device, our model offers an explanation of the technological lock-in experienced by a small, open economy that takes international prices as given.
    Keywords: Foreign Exchange Policy; Currency Mismatches; Structural Change
    JEL: F37 F31 E7
    Date: 2022–03
  62. By: Хакимжанов Сабит// Khakimzhanov Sabit; Миллер Алия // Miller Aliya (National Bank of Kazakhstan); Джусангалиева Камилла // Jussangaliyeva Kamilla (National Bank of Kazakhstan); Тазетдинова Динара // Tazetdinova Dinara
    Abstract: В этой статье мы описываем историю развития и регулирования казахстанского рынка розничных депозитов в традициях эмпирической экономики. Мы представляем историю рынка депозитов как состояние и поведение банков и вкладчиков в зависимости от взаимодействия регуляторной среды, правовых традиций, регуляторных требований, механизмов финансовой стабильности, регулирования ставок по депозитам, надзора и урегулирования несостоятельности. Анализ информирован теоретической и эмпирической литературой. Критерии оценки и фокус анализа менялись в зависимости от описываемой проблематики и включали способность рынка направить сбережения населения в банки, которые найдут им наиболее продуктивное применение, способность банков привлечь устойчивое фондирование, сформировать продуктовое пространство и правильно оценить его атрибуты, включая срочность и срок. Мы рассматриваем решения проблем и оцениваем их с позиции влияния на долгосрочное развитие рынка; способности устранять причину проблемы, а не её внешние проявления. // In this paper we describe the history of the development and regulation of Kazakhstan’s retail deposit market in line with the empirical economics traditions. We present the history of the deposit market as the condition and behavior of banks and depositors depending on the interaction of the regulatory environment, legal traditions, regulatory requirements, financial stability mechanisms, regulation of deposit rates, supervision and insolvency resolution. The analysis is informed by theoretical and empirical literature. The evaluation criteria and the focus of the analysis varied depending on the described issues and included the ability of the market to transfer population savings to banks capable to use them most productively, the ability of banks to attract sustainable funding, develop a product space and correctly assess its attributes, including maturity and term. We consider solution of the problems and evaluate them based on impact on the long-term market development; the ability to eliminate the cause of the problem, not its external manifestations.
    Keywords: рынок депозитов, система гарантирования вкладов, механизм предельных ставок, агентство по гарантированию депозитов, Казахстанский фонд гарантирования депозитов, deposit market, deposit guarantee system, marginal rates, deposit guarantee agency, Kazakhstan Deposit Guarantee Fund
    JEL: E43 G21 G28
    Date: 2022
  63. By: Kozo Ueda
    Abstract: This study considers the retrogression event of convenience for bank users as a natural experiment and analyzes the effect of this event on cash demand. Using bank account transaction data, we find that branch/ATM consolidations reduce not only the amount of cash withdrawals by past users but also the total expenditure and inflows that include non cash transactions by the same amount. This implies that the retrogression in convenience possibly caused users to shift to other banks for their daily payments. We also document facts about cash withdrawals from ATMs using bank account transaction data. JEL Classification Number : D14, E41 Keywords: money demand, ATM, natural experiment
    Date: 2022–03
  64. By: Jorge C. Avila
    Abstract: En los últimos veinte años, cada vez que se propone la dolarización oficial de la economía argentina la invariable respuesta enfatiza la pérdida del señoreaje, y la propuesta se descarta. Pero todo bien supone un costo. ¿Cuál es el costo de oportunidad del señoreaje? Aquí estimamos tanto el costo que implica conservar el señoreaje como su beneficio. Nuestra conclusión es que el costo superaría ampliamente al beneficio. In the last twenty years, every time someone puts forward the official dollarization of the Argentine economy, the usual answer emphasizes the loss of seigniorage, and the proposal is discarded. Yet every good has a cost. Which is the opportunity cost of seigniorage? We estimate here both the cost involved in keeping the seigniorage and its benefit. We conclude that the cost would be much higher than the benefit.
    JEL: E49
    Date: 2022–02
  65. By: Nicolas Piluso (CERTOP - Centre d'Etude et de Recherche Travail Organisation Pouvoir - UT3 - Université Toulouse III - Paul Sabatier - Université Fédérale Toulouse Midi-Pyrénées - CNRS - Centre National de la Recherche Scientifique - UT2J - Université Toulouse - Jean Jaurès); Edouard Cottin-Euziol (LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - IMT - Institut Mines-Télécom [Paris] - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO - Université de Brest - UBS - Université de Bretagne Sud - UBL - Université Bretagne Loire - UBO - Université de Brest)
    Abstract: The purpose of this article is to highlight the added value of Jean Cartelier's monetary theory as set out in his 2018 book, in the continuity of work that began in the early 1980s. The interest of Cartelier's monetary approach in relation to traditional theories of value can be broken down into three themes: the coordination of economic agents' decisions in a market society that is by definition decentralized; the highlighting of a plurality of economic relations, through the introduction of asymmetric relations between active and non-active individuals; the problem of viability, which seems more relevant for analyzing economic dynamics.
    Abstract: L'objet de cet article est de mettre en lumière la valeur ajoutée de la théorie monétaire de Jean Cartelier telle qu'elle est exposée dans son ouvrage de 2018, dans la continuité de travaux qui ont débuté dès le début des années 80. L'intérêt de l'approche monétaire de Cartelier par rapport aux théories traditionnelles de la valeur se décline en trois thèmes : la coordination des décisions des agents économiques dans une société marchande par définition décentralisée ; la mise en évidence d'une pluralité de relations économiques, par l'introduction de relations asymétriques entre individus actifs et non-actifs ; la problématique de la viabilité qui semble plus pertinente pour analyser la dynamique économique. Mots-clés : coordination. monnaie. déséquilibre.
    Keywords: unemployment,sustainability,disequilibrium,money,coordination
    Date: 2021
  66. By: Agboli, Victor
    Abstract: This study investigates the impact of unemployment on the Gross Domestic Product (GDP) of Nigeria for a period of 28 years (1990-2018). The study focuses on the relationship between unemployment and economic growth in Nigeria (GDP). The method used in this study is the Bayesian Linear Regression Analysis, the major findings were that unemployment has a positive impact on the economic growth of Nigeria. Some suggestions and policy recommendations were made based on the findings.
    Date: 2021–09–30
  67. By: Olkhov, Victor
    Abstract: This paper considers direct dependence of the market price autocorrelation on statistical moments of the market trades as a must necessary requirement. We regard market time-series of the trade value and volume as origin of price time-series. That determines dependence of the market-based averaging of price on averaging of the trade value and volume time-series. We introduce the market-based price statistical moments as functions of the statistical moments of trade value and volume. Moving average helps define the market-based price statistical moments with time-lag and introduce the price time autocorrelation as function of time-lag statistical moments of the trade value and volume. Statistical moments of the market trade value and volume are determined by conventional frequency-based probability measures. However, the price statistical moments and the price autocorrelation in particular are determined by the market-based probability measure that differs from the conventional frequency-based price probability. That distinction leads to different treatments of the price autocorrelation via market-based and frequency-based approach. To assess market dependence of price statistical moments and price autocorrelation one should revise results founded on frequency-based approach.
    Keywords: asset pricing; price probability; autocorrelation; market trades
    JEL: C1 C5 C80 E37 F37 G10 G12 G17
    Date: 2022–01–15
  68. By: Waldo Mendoza (Departamnento de Economía, Pontificia Universidad Católica del Perú.); Luis Mancilla (Departamnento de Economía, Pontificia Universidad Católica del Perú.); Rafael Velarde (Departamnento de Economía, Pontificia Universidad Católica del Perú.)
    Abstract: La caída del PBI en 11 por ciento en el año 2020 fue de las más duras en América Latina y la más severa en el Perú desde 1989. El desencadenante fue la COVID-19 y el principal instrumento para contenerla: la cuarentena. No obstante, la recuperación del 2021 ha sido una de las más vigorosas en la región. En este documento se presenta un modelo macroeconómico de dos sectores, inspirado en Blanchard (2021), que busca reproducir los hechos descritos. Los dos sectores son keynesianos, pues la producción está determinada por la demanda; y los niveles de precios dependen del nivel esperado de precios y de la brecha del PBI en cada sector. La conexión intersectorial se produce porque los trabajadores consumen bienes de ambos sectores. El sector 1 (hoteles, restaurantes, líneas aéreas, etc.) es el directamente afectado por la cuarentena y el sector 2 (producción de alimentos, y bienes y servicios indispensables) es afectado indirectamente por el shock de demanda negativo procedente del sector 1. Debido a la cuarentena, el descenso del PBI potencial y el consumo autónomo en el sector 1 desencadenan una recesión general. Sin embargo, el fin de la cuarentena y las políticas que impidieron el deterioro de la capacidad productiva de la economía permiten una recuperación también generalizada de esta economía. Palabras claves: cuarentena, modelo de dos sectores, Covid-19, PBI sectorial. JEL Classification-JE: E32, E23
    Keywords: cuarentena, modelo de dos sectores, Covid-19, PBI sectorial.
    Date: 2022

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