nep-mac New Economics Papers
on Macroeconomics
Issue of 2022‒04‒18
88 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Inflation Targeting or Fiscal Activism? By Billi, Roberto M.
  2. Seemingly Irresponsible but Welfare Improving Fiscal Policy at the Lower Bound By Billi , Roberto M.; Walsh, Carl E.
  3. Forward guidance shocks By Mirela Miescu
  4. CBDC as Competitor for Bank Deposits and Cryptocurrencies By Max Fuchs
  5. A reassessment of monetary policy surprises and high-frequency identification By Bauer, Michael D.; Swanson, Eric T.
  6. A Real-Business-Cycle Model with Financial Liberalization: Lessons for Bulgaria (1999-2020) By Aleksandar Vasilev
  7. When domestic and foreign QE overlap: evidence from Sweden By Di Casola, Paola; Stockhammar, Pär
  8. Effects of interest rates on functional income distribution, capacity utilization, capital accumulation and profit rates in France: A post-Kaleckian econometric analysis By Kurt, Ozan Ekin
  9. The cost of disinflation in a small open economy vis-à-vis a closed economy By Faryna, Oleksandr; Jonsson, Magnus; Shapovalenko, Nadiia
  10. United Kingdom: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the United Kingdom By International Monetary Fund
  11. Climate Actions, Market Beliefs and Monetary Policy By Barbara Annicchiarico; Fabio Di Dio; Francesca Diluiso
  12. Understanding trend inflation through the lens of the goods and services sectors By Yunjong Eo; Luis Uzeda; Benjamin Wong
  13. Domestic and External Monetary Policy Shocks and Economic Inequality in the Republic of Korea By Hahm, Joon-Ho; Lee, Dong Jin; Park, Cyn-Young
  14. The Anatomy of the Global Saving Glut By Luis Bauluz; Filip Novokmet; Moritz Schularick
  15. Documentation Paper: Representative Survey on Attitudes and Knowledge About Inflation and Monetary Policy in Germany Conducted in December 2021 By Bernd Hayo
  16. The impact of active aggregate demand on utilisation-adjusted TFP By Gantert, Konstantin
  17. Five Facts about the Distributional Income Effects of Monetary Policy By Amberg, Niklas; Jansson, Thomas; Klein, Mathias; Rogantini Picco, Anna
  18. Autonomous Demand and Technical Change: Exploring the Kaldor-Verdoorn Law on a Global Level By Matteo Deleidi; Claudia Fontanari; Santiago J. Gahn
  19. Spain: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Spain By International Monetary Fund
  20. Revisiting the Properties of Money By Hull, Isaiah; Sattath, Or
  21. Monetary policy, labor income redistribution and the credit channel: Evidence from matched employer-employee and credit registers By Martina Jasova; Caterina Mendicino; Ettore Panetti; José-Luis Peydró; Dominik Supera
  22. Republic of Tajikistan: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by Executive Director for the Republic of Tajikistan By International Monetary Fund
  23. A Time of Uncertainty By John C. Williams
  24. Republic of Poland: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Poland By International Monetary Fund
  25. Alternative Monetary-Policy Instruments and Limited Credibility: An Exploration By Javier García-Cicco
  26. Monetary policy, macroprudential policy and financial stability By Laeven, Luc; Maddaloni, Angela; Mendicino, Caterina
  27. The Inexorable Recoveries of Unemployment By Hall, Robert E.; Kudlyak, Marianna
  28. Disaggregation of very small time series with multiple endogenous partial structural breaks By Jérôme Trinh
  29. GDP Solera. The Ideal Vintage Mix By Martín Almuzara; Dante Amengual; Gabriele Fiorentini; Enrique Sentana
  30. The Unemployed with Jobs and without Jobs By Hall, Robert E.; Kudlyak, Marianna
  31. West African Economic and Monetary Union: Staff Report On Common Policies for Member Countries-Press Release; Staff Report; and Statement by the Executive for the WAEMU By International Monetary Fund
  32. The Liquidity of the Government Bond Market – What Impact Does Quantitative Easing Have? Evidence from Sweden By Blix Grimaldi, Marianna; Crosta, Alberto; Zhang, Dong
  33. Republic of Congo: Request for a Three-Year Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Congo By International Monetary Fund
  34. Pension reform and wealth inequality: evidence from Denmark By Andersen, Torben M.; Bhattacharya, Joydeep; Grodecka-Messi, Anna; Mann, Katja
  35. Labour market skills, endogenous productivity and business cycles By Abbritti, Mirko; Consolo, Agostino
  36. Helping the Austrian business sector to cope with new opportunities and challenges in Austria By Dennis Dlugosch; Michael Abendschein; Eun Jung Kim
  37. Exchange Rate Pass-through Under the Unconventional Monetary Policy Regime By YOSHIDA Yushi; Weiyang ZHAI; SASAKI Yuri; Siyu ZHANG
  38. Narrative Fragmentation and the Business Cycle By Bertsch, Christoph; Hull, Isaiah; Zhang, Xin
  39. Montenegro: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Montenegro By International Monetary Fund
  40. Shirking and Capital Accumulation under Oligopolistic Competition By Zhou, Haiwen; Zhou, Ruhai
  41. Monetary compensation schemes during the COVID-19 pandemic: Implications for household incomes, liquidity constraints and consumption across the EU By Michael Christl; Silvia De Poli; Francesco Figari; Tine Hufkens; Chrysa Leventi; Andrea Papini; Alberto Tumino
  42. Structural Change in Labor Supply and Cross-Country Differences in Hours Worked By Alexander Bick; Nicola Fuchs-Schündeln; David Lagakos; Hitoshi Tsujiyama
  43. Strengthening the WAEMU Regional Fiscal Framework By Mr. Antonio David; Hoda Selim; Alexandre Nguyen-Duong
  44. United Arab Emirates: 2021 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund
  45. Textile and Chemical Subsectors in the Azerbaijani Economy: A Descriptive Glance at Possible De-Industrialization By Niftiyev, Ibrahim
  46. The heterogeneity of Okun's law: A metaregression analysis By Porras-Arena, M. Sylvina; Martín-Román, Ángel L.
  47. Supply Bottlenecks: Where, Why, How Much, and What Next? By Oya Celasun; Ms. Aiko Mineshima; Mr. Niels-Jakob H Hansen; Jing Zhou; Mariano Spector
  48. Money markets and bank lending: evidence from the adoption of tiering By Altavilla, Carlo; Boucinha, Miguel; Burlon, Lorenzo; Giannetti, Mariassunta; Schumacher, Julian
  49. Cash and COVID-19: What happened in 2021 By Heng Chen; Walter Engert; Kim Huynh; Daneal O’Habib; Joy Wu; Julia Zhu
  50. How Money relates to value? An empirical examination on Gold, Silver and Bitcoin By José Alves; João Quental Gonçalves
  51. Wirtschaftliche Folgen des Ukraine-Krieges: Zunehmende Belastungen für die deutsche Wirtschaft By Bardt, Hubertus; Grömling, Michael; Schmitz, Edgar
  52. Dynamic Macroeconomic Implications of Immigration By Olovsson, Conny; Walentin, Karl; Westermark, Andreas
  53. Macroeconomic Covariates of Real Household Incomes in America By Martin Ravallion
  54. On the Performance of Cryptocurrency Funds By Bianchi, Daniele; Babiak, Mykola
  55. A simple General Constrained Dynamics (GCD) model for demand, supply and price shocks By Glötzl, Erhard
  56. Risk Aversion and Changes in Regime By Tomás Caravello; Turalay Kenc; Martín Sola
  57. Technological waves and economic growth: thoughts on the digital revolution By João Ferreira do Amaral
  58. Secular Drivers of the Natural Rate of Interest in the United States: A Quantitative Evaluation By Josef Platzer; Marcel Peruffo
  59. Fix vs. Float: Evaluating the Transition to a Sustainable Equilibrium in Bolivia By Mr. Etibar Jafarov; Andres Gonzalez; Chris Walker; Diego Rodriguez Guzman
  60. A Political Economy of Fiscal Space: Political Structures, Bond Markets, and Monetary Accommodation of Government Spending Potential at Municipal, National, and International Levels By Eichacker, Nina
  61. Wages, compositional effects and the business cycle By Christodoulopoulou, Styliani; Kouvavas, Omiros
  62. 2020 Global Stocktaking of National Accounts Statistics: Availability for Policy and Surveillance By Mr. Andrew Baer; Vanda Guerreiro; Anthony Silungwe
  63. EU enlargement and (temporary) migration: Effects on labour market outcomes in Germany By Hammer, Luisa; Hertweck, Matthias S.
  64. Trust What You Hear: Policy Communication, Expectations, and Fiscal Credibility By Mr. Gee Hee Hong; Mr. Nicolas End
  65. Crises, credit booms and monetary regime By Youssef Ghallada; Alexandre Girard; Kim Oosterlinck
  66. Ovisni o euru: makroekonomski učinci tečajnih promjena u Hrvatskoj By Ozana Nadoveza Jelić; Rafael Ravnik
  67. Dollar Invoicing, Global Value Chains, and the Business Cycle Dynamics of International Trade By Nikhil Patel; Mr. David Cook
  68. No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks By D'Orazio, Paola; Hertel, Tobias; Kasbrink, Fynn
  69. How do retailers compete on price promotions? Evidence from a temporary promotion ban in Belgium By Hindriks, Jean; Madio, Leonardo; Serse, Valerio
  70. Economic policy uncertainty, bank nonperforming loans and loan loss provisions: are they correlated? By Ozili, Peterson K
  71. The "place of the Phillips curve" in macroeconometric models: The case of the first Federal Reserve Board's model (1966-1980s) By Rancan, Antonella
  72. Households, Auctioneers, and Aggregation By Karsten O. Chipeniuk; Nets Hawk Katz; Todd Bruce Walker
  73. Fiscal Policies, Inequality, and Poverty in Croatia By Nga Thi Viet Nguyen; Ivica Rubil
  74. The low-carbon transition, climate commitments and firm credit risk By Carbone, Sante; Giuzio, Margherita; Kapadia, Sujit; Krämer, Johannes Sebastian; Nyholm, Ken; Vozian, Katia
  75. Inheritances and Transmission of Opportunity: Evidence from Danish Wealth Records By Joachim Kahr Rasmussen
  76. United Arab Emirates: Selected Issues By International Monetary Fund
  77. Linking the Cs of Financial Stability: Crises, Competition, and Concentration By Bagsic, Cristeta
  78. Papua New Guinea: Request for a Staff-Monitored Program; and Staff Report By International Monetary Fund
  79. Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data By Bruno Albuquerque; Georgina Green
  80. You can't always get what you want (where you want it): Cross-border effects of the US money market fund reform By Fricke, Daniel; Greppmair, Stefan; Paludkiewicz, Karol
  81. Dimension Reduction for High Dimensional Vector Autoregressive Models By Gianluca Cubadda; Alain Hecq
  82. Bank Information and Firm Growth. Microeconomic Evidence from the US Credit Market By Degryse, Hans; Kokas, Sotirios; Minetti, Raoul; Peruzzi, Valentina
  83. A TNT Model for Chile: Explaining the ERPT By Mariana García-Schmidt; Javier García-Cicco
  84. Europäische Wettbewerbsfähigkeit: Potenziale nutzen, um nachhaltig zu wachsen By Bardt, Hubertus; Parthie, Sandra; Rusche, Christian
  85. Why Was Keynes Opposed to Reparations and Carthaginian Peace?‎ By Elise S. Brezis
  86. Public Family Firms and Economic Inequality Across Societies By Joern H. Block; Mirko Hirschmann; Tobias Kranz; Matthias Neuenkirch
  87. Una generalización del modelo de crecimiento de Solow. Nuevos supuestos, nuevas conclusiones By Santiago Picasso
  88. Understanding differences in vaccination uptake among OECD countries By David Turner; Nicolas Woloszko; Thomas Chalaux; Marnix Dek

  1. By: Billi, Roberto M. (Research Department, Central Bank of Sweden)
    Abstract: I study the welfare performance of a policy regime of fiscal activism in which fiscal policy acts as an automatic stabilizer and controls inflation, while monetary policy pegs the nominal interest rate. When evaluated through the lens of a standard New Keynesian model, accounting for price and wage rigidities and for a zero lower bound (ZLB) on the nominal interest rate, fiscal activism can substantially outperform inflation targeting in the face of both demand shocks and technology shocks. Fiscal activism can also eliminate the occurrence of ZLB episodes.
    Keywords: automatic stabilizers; Öscal and monetary interactions; government debt
    JEL: E24 E31 E52 E63
    Date: 2022–03–01
  2. By: Billi , Roberto M. (Research Department, Central Bank of Sweden); Walsh, Carl E. (University of California, Santa Cruz)
    Abstract: In this paper, we evaluate the consequences of super-active Öscal policy rulesó that is, rules that call for tax cuts and/or spending increases as the governmentís debt level risesó in a standard New Keynesian model subject to an occasionally-binding zero lower bound on the monetary policy interest rate. We show that such seemingly irresponsible, debt-Önanced Öscal stimulus at the ZLB, unbacked by any promise of future tax increases or spending cuts, not only improves economic stability by acting as an automatic stabilizer, but also, somewhat paradoxically, reduces government debt accumulation. When evaluated using a model-consistent measure of welfare, Öscal rules calibrated to the U.S. response during both the Great Recession and COVID recession, combined with a weak monetary policy response to ináation, outperform a monetary policy that responds strongly to ináation and reduce the frequency of episodes at the ZLB.
    Keywords: automatic stabilizers; Öscal and monetary interactions; government debt
    JEL: E31 E52 E63
    Date: 2022–02–01
  3. By: Mirela Miescu
    Abstract: I estimate the effects of a forward guidance (FG) shock and compare it with a traditional monetary policy (MP) shock. I find that FG shocks have smaller effects on macroeconomic aggregates than MP shocks. Structural identification is reached by a novel heteroscedascticity-based approach that exploits (i) the introduction of the forward guidance in the form of a published policy-rate path in the US in January 2012; and (ii) the zero lower bound (ZLB) constraints. My findings are consistent with the predictions of the latest theories about the FG puzzle.
    Keywords: forward guidance, Monetary policy, event study, heteroscedasticity, structural VAR
    JEL: E52 E32 C32
    Date: 2022
  4. By: Max Fuchs (University of Kassel)
    Abstract: Private cryptocurrencies allow for payments without the need for a financial institution. These institutions, the central bank and retail banks, may thus observe a decline in the demand for their payments systems, i.e. cash and deposits. Using the monetary search model of Lagos and Wright (2005), we show that the central bank is able to tilt the playing field until it wins. By introducing an interest-bearing central bank digital currency (CBDC), the central bank is able to provide a payment system which is superior to cryptocurrencies. Miners cannot match the CBDC rate and go bankrupt. Retail banks, on the other hand, face lower profits but survive in the equilibrium. In addition, it can be welfare-improving to kick out cryptocurrencies by an interest-bearing CBDC.
    Keywords: CBDC, cryptocurrencies, welfare analysis
    JEL: E41 E42 E51 E52 E58
    Date: 2022
  5. By: Bauer, Michael D.; Swanson, Eric T.
    Abstract: High-frequency changes in interest rates around FOMC announcements are an important tool for identifying the effects of monetary policy on asset prices and the macroeconomy. However, some recent studies have questioned both the exogeneity and the relevance of these monetary policy surprises as instruments, especially for estimating the macroeconomic effects of monetary policy shocks. For example, monetary policy surprises are correlated with macroeconomic and financial data that is publicly available prior to the FOMC announcement. We address these concerns in two ways: First, we expand the set of monetary policy announcements to include speeches by the Fed Chair, which essentially doubles the number and importance of announcements in our dataset. Second, we explain the predictability of the monetary policy surprises in terms of the "Fed response to news" channel of Bauer and Swanson (2021) and account for it by orthogonalizing the surprises with respect to macroeconomic and financial data. Our subsequent reassessment of the effects of monetary policy yields two key results: First, estimates of the high-frequency effects on financial markets are largely unchanged. Second, estimates of the macroeconomic effects of monetary policy are substantially larger and more significant than what most previous empirical studies have found.
    Keywords: FOMC,policy rule,monetary transmission,SVAR,external instruments
    JEL: E43 E52 E58
    Date: 2022
  6. By: Aleksandar Vasilev (Lincoln International Business School, UK.)
    Abstract: Financial openness is introduced into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of financial openness is investigated for the stabilization of cyclical fluctuations in Bulgaria. The computational experiment performed in this paper reveals that greater financial openness increases the impact of technology shocks on output, investment, consumption, labor hours, and net exports. This amplification effect is due to the following mechanism: openness provides a cheap access to foreign funds. Unfortunately, the new results come at odds with a major empirical observation, i.e. that consumption and net exports are strongly pro-cyclical; the model, however, produces a countercyclical consumption, as well as net exports. Thus, such a setup is not yet ready to be used for policy analysis.
    Keywords: business cycles, progressive capital taxation, Bulgaria
    JEL: E24 E32
    Date: 2022–04
  7. By: Di Casola, Paola (Monetary Policy Department, Central Bank of Sweden); Stockhammar, Pär (Monetary Policy Department, Central Bank of Sweden)
    Abstract: We estimate the effects of domestic and foreign quantitative easing (QE) programmes on a small open economy, Sweden, using a structural BVAR model. Domestic QE raised GDP, lowered unemployment and depreciated the currency, while effects on inflation are less clear. The ECB QE had large positive effects on both GDP and inflation in Sweden, also due to the endogenous response of domestic QE to the foreign one. In terms of transmission channels, domestic QE improved lending conditions for households and lowered expected future rates, while foreign QE improved financing conditions for firms.
    Keywords: Quantitative Easing; international spillovers; transmission channels; small open economy; Bayesian VAR models
    JEL: E44 E52 F41 G15
    Date: 2021–05–01
  8. By: Kurt, Ozan Ekin
    Abstract: The aim of this empirical study is to examine the effects of interest rates on rates of capacity utilization, accumulation and profit in France within the framework of a post-Kaleckian monetary model. The model adopted in the analysis was developed by Hein & Schoder (2011) and is based on endogenous money supply and exogenous interest. The real long-term interest rate shapes the functional distribution of income and, at a given debt-capital ratio, it both directly and indirectly influences the equilibrium rates of capacity utilization, accumulation and profit. We estimated the model using SUR (Seemingly Unrelated Equations) method for the period 1993-2019. Our findings indicate that an increase in the real long-term interest rate has a negative impact on the equilibrium rates of capacity utilization, capital accumulation and profit rates in the French economy. This result implies that this economy is characterized by a “normal regime”, which is in line with the findings of previous research on the US and Germany. Different econometric specifications of the model equations enforce the robustness of our findings that point that an increase in the real long-term interest rate has a considerable negative effect on the equilibrium rate of capacity utilization, while the effects on capital accumulation and profit are relatively low but still negative.
    Keywords: interest rates,monetary policy,functional income distribution,capacity utilization,capital accumulation,profit rates,post-Keynesian economics
    JEL: E12 E21 E22 E25 E43
    Date: 2022
  9. By: Faryna, Oleksandr (National Bank of Ukraine and National University of Kyiv-Mohyla Academy); Jonsson, Magnus (Monetary Policy Department, Central Bank of Sweden); Shapovalenko, Nadiia (National Bank of Ukraine)
    Abstract: We use a standard new Keynesian model to evaluate the cost of disinflation – measured by the sacrifice ratio, the central bank’s loss function, and the welfare cost – in a small open economy vis-à-vis a closed economy. Disinflation is either more costly or less beneficial in the small open economy, but the results vary quantitatively depending on the measure and the economic environment. Optimised simple monetary policy rules imply that the relative weight on inflation stabilisation should be lower in the small open economy if the central bank minimises the loss function, but higher if it maximises welfare.
    Keywords: Disinflation; sacrifice ratio; central bank’s loss function; welfare cost; small open economy; new Keynesian model; optimised rules; imperfect credibility
    JEL: E31 E50 F41
    Date: 2021–11–01
  10. By: International Monetary Fund
    Abstract: The UK’s rapid vaccination campaign enabled it to start to reopen the economy in the Spring of 2021. With highly accommodative policies, the recovery has been faster than expected. However, capacity constraints and rising price pressures have emerged while new Covid-19 variants have raised new uncertainties. The government has allowed all initial pandemic support programs to sunset but has loosened near-term fiscal policy while specifying a back-loaded medium-term consolidation plan. With continued above-target inflation readings, the BoE made a first move to raise the policy rate in December. Macroprudential policies are returning to more standard risk settings. The near-term growth outlook remains strong, but so too are price pressures, while the financial cycle remains ahead of the economic cycle. The pandemic and Brexit have magnified structural challenges. Real GDP would remain below its pre-pandemic trend by about 2–2¼ percent in the medium term. Risks are considerable in the period ahead, centering on new Covid-19 waves and spillovers from tensions in Eastern Europe.
    Date: 2022–02–23
  11. By: Barbara Annicchiarico (DEF and CEIS, Università di Roma "Tor Vergata"); Fabio Di Dio (Institute for Globally Distributed Open Research and Education (IGDORE)); Francesca Diluiso (Mercator Research Institute on Global Commons and Climate Change)
    Abstract: This paper studies the role of expectations and monetary policy on the economy’s response to climate actions. We show that in a stochastic environment and without the standard assumption of perfect rationality of agents, there is more uncertainty regarding the path and the economic impact of a climate policy, with a potential threat to the ability of central banks to maintain price stability. Market beliefs and behavioral agents increase the trade-offs inherent to the chosen mitigation tool, with a carbon tax entailing more emissions uncertainty than in a rational expectations model and a cap-and-trade scheme implying a more pronounced pressure on allowances prices and inflation. The impact on price stability is worsened by delays in the implementation of stringent climate policies, by the lack of confidence in the ability of central banks to keep inflation under control, and by the adoption of monetary rules tied to expectations rather than current macroeconomic conditions. Central banks can implement successful stabilization policies that reduce the uncertainty surrounding the impact of climate actions and support the greening process while staying within their mandate.
    Keywords: Climate policy; monetary policy; expectations; inflation; market sentiments; business cycle.
    JEL: D83 Q50 E32 E71
    Date: 2022–03–25
  12. By: Yunjong Eo; Luis Uzeda; Benjamin Wong
    Abstract: We distinguish between the goods and services sectors in an otherwise standard unobserved components model of U.S. inflation. Our main finding is that, while both sectors used to contribute to the overall variation in aggregate trend inflation, since the 1990s this variation has been predominantly driven by the services sector. We pinpoint two key changes in sector-specific inflation dynamics which led to our main finding: (i) a large fall in the volatility of trend goods inflation; and (ii) the disappearance of comovement between trend goods and trend services inflation. Our results are robust to inflation developments associated with the recent Covid-19 pandemic.
    Keywords: sectoral trend inflation, unobserved components model, disaggregated inflation
    JEL: C11 C32 E31 E52
    Date: 2022–04
  13. By: Hahm, Joon-Ho (Yonsei University); Lee, Dong Jin (Sangmyung University); Park, Cyn-Young (Asian Development Bank)
    Abstract: This paper investigates the effects of monetary policy shocks on income and wealth inequalities in the Republic of Korea. Using the detailed Household Income and Expenditure Survey and Korean Labor and Income Panel Study data, we construct measures of income and wealth inequality for the Korean economy. Empirical results show that both domestic and external monetary policy shocks exert significant countercyclical effects on income inequality. For wealth inequality, however, the effects are very different. Whereas domestic monetary policy shocks are insignificant, external policy shocks proxied by fluctuations in net capital flows seem to have significant effects on net wealth inequality.
    Keywords: monetary policy; income inequality; wealth inequality; external monetary policy shock; emerging market economies
    JEL: D31 E44 E52 F42 G51
    Date: 2022–04–01
  14. By: Luis Bauluz (University of Bonn, World Inequality Lab); Filip Novokmet (University of Bonn, World Inequality Lab); Moritz Schularick (Sciences Po, University of Bonn, CEPR)
    Abstract: This paper provides a household-level perspective on the rise of global saving and wealth since the 1980s. We calculate asset-specific saving flows and capital gains across the wealth distribution for the G3 economies – the U.S., Europe, and China. In the past four decades, global saving inequality has risen sharply. The share of household saving flows coming from the richest 10% of household increased by 60% while saving of middle class households has fallen sharply. The most important source for the surge in top-10% saving was the secular rise of global corporate saving whose ultimate owners the rich households are. Housing capital gains have supported wealth growth for middle-class households despite falling saving and rising debt. Without meaningful capital gains in risky assets, the wealth share of the bottom half of the population declined substantially in most G3 economies.
    Keywords: Income and wealth inequality, household portfolios, historical micro data
    JEL: D31 E21 E44 N32
    Date: 2022–04
  15. By: Bernd Hayo (University of Marburg)
    Abstract: This paper provides background information on, and basic descriptive statistics for, a representative survey of the German population conducted on my behalf by GfK in December 2021. The survey covers various topics having to do with inflation and monetary policy, including: 1) inflation perceptions and expectations, 2) interest in and subjective, as well as objective, knowledge about monetary policy, 3) attitude to and knowledge about the ECB’s monetary policy reform in 2021, 4) trust in the ECB and perception of its independence, 5) importance of climate-change-related measures, and 6) an experiment evaluating whether information about the ECB’s monetary policy reform in 2021 reduces people’s trust in the ECB and their perception of its independence. A broad range of socio-demographic and economic indicators are collected too.
    Keywords: Public opinion survey, Attitudes, Inflation perception, Inflation expectation, Monetary policy, ECB’s monetary policy reform in 2021, Germany
    JEL: D90 E31 E58 E71
    Date: 2022
  16. By: Gantert, Konstantin
    Abstract: Non-clearing goods markets are an important driver of capacity utilisation and total factor productivity (TFP). The trade-off between goods prices and household search effort is central to goods market matching and therefore drives TFP over the business cycle. In this paper, I develop a New-Keynesian DSGE model with capital utilisation, worker effort, and expand it with goods market search-and-matching (SaM) to model non-clearing goods markets. I conduct a horse-race between the different capacity utilisation channels using Bayesian estimation and capacity utilisation survey data. Models that include goods market SaM improve the data fit, while the capital utilisation and worker effort channels are rendered less important compared to the literature. It follows that TFP fluctuations increase for demand and goods market mismatch shocks, while they decrease for technology shocks. This pattern increases as goods market frictions increase and as prices become stickier. The paper shows the importance of non-clearing goods markets in explaining the difference between technology and TFP over the business cycle.
    Keywords: Bayesian estimation,capacity utilisation,non-clearing goods markets,search-and-matching,total factor productivity
    JEL: E22 E23 E3 J20
    Date: 2022
  17. By: Amberg, Niklas (Research Department, Central Bank of Sweden); Jansson, Thomas (Research Department, Central Bank of Sweden); Klein, Mathias (Research Department, Central Bank of Sweden); Rogantini Picco, Anna (Research Department, Central Bank of Sweden)
    Abstract: We use Swedish administrative individual-level data to document five facts about the distributional income effects of monetary policy. (i) The effects of monetary policy shocks are U-shaped with respect to the income distribution—i.e., expan sionary shocks increase the incomes of high- and low-income individuals relative to middle-income individuals. (ii) The large effects in the bottom are accounted for by the labor-income response and (iii) those in the top by the capital-income response. (iv) The heterogeneity in the labor-income response is due to the earnings heterogeneity channel, whereas (v) that in the capital-income response is due to the income composition channel.
    Keywords: Monetary policy; income inequality; heterogeneous agents; administrative data
    JEL: C55 E32 E52
    Date: 2021–05–01
  18. By: Matteo Deleidi; Claudia Fontanari; Santiago J. Gahn
    Abstract: This paper aims to explain labour productivity through the lens of a Kaldorian perspective. To assess the relationship between output, demand, capital accumulation, and labour productivity, we apply Panel Structural Vector Autoregressive (P-SVAR) modelling to a dataset of 52 countries observed over a long-time span as provided by the Penn World Table. Findings validate the Kaldorian perspective and show that demand shocks – measured by government expenditures and exports – produce positive and persistent effects on labour productivity. Findings are confirmed even when the full sample is broken down to consider developed and developing countries separately.
    Keywords: Labour productivity; Autonomous demand; Panel SVAR; Penn World Table, Kaldor-Verdoorn
    JEL: C33 E12 E24 O33 O47
    Date: 2022–04
  19. By: International Monetary Fund
    Abstract: The Spanish economy is recovering from the deep recession caused by the COVID pandemic and employment is already above its pre-pandemic level. A highly successful vaccination campaign helped limit the impact of the recent wave of infections on hospitalizations and economic activity. Output is expected to return to its pre-pandemic level by the end of 2022. However, there is significant uncertainty around the recovery path related to the evolution of the pandemic and the duration of global supply bottlenecks. The pace of absorption and the effectiveness of use of Next Generation EU (NGEU) funds will also affect growth in the coming years. In the near term, the key policy challenge is to continue to provide targeted pandemic support while facilitating resource reallocation and a transformation to a greener and more inclusive economy.
    Keywords: vis nonresident; money market rate; IMF staff calculation; liability positions vis; transparency policy; core inflation; EU emissions trading scheme framework; investment agenda; Labor markets; Inflation; COVID-19; Employment; Fiscal stance; Global
    Date: 2022–02–16
  20. By: Hull, Isaiah (Research Department, Central Bank of Sweden); Sattath, Or (Department of Computer Science)
    Abstract: The properties of money commonly referenced in the economics literature were originally identified by Jevons (1876) and Menger (1892) in the late 1800s and were intended to describe physical currencies, such as commodity money, metallic coins, and paper bills. In the digital era, many non-physical currencies have either entered circulation or are under development, including demand deposits, cryptocurrencies, stablecoins, central bank digital currencies (CBDCs), in-game currencies, and quantum money. These forms of money have novel properties that have not been studied extensively within the economics literature, but may be important determinants of the monetary equilibrium that emerges in forthcoming era of heightened currency competition. This paper makes the first exhaustive attempt to identify and define the properties of all physical and digital forms of money. It reviews both the economics and computer science literatures and categorizes properties within an expanded version of the original functions-and-properties framework of money that includes societal and regulatory objectives.
    Keywords: Money; CBDC; Digital Currencies; Quantum Money; Currency Competition
    JEL: E40 E42 E50 E51
    Date: 2021–11–01
  21. By: Martina Jasova; Caterina Mendicino; Ettore Panetti; José-Luis Peydró; Dominik Supera
    Abstract: This paper documents the redistributive effects of monetary policy on labor market outcomes via the credit channel. For identification, we exploit matched administrative datasets in Portugal - employee-employer and credit registers - and monetary policy since the Eurozone creation in 1999. We find that softer monetary policy improves worker labor market outcomes (wages, hours worked and firm employment) more in small and young firms, which are more financially constrained. Within small and young firms, the wage effects accrue to incumbent workers, in line with the back-loaded wage mechanism. Consistent with the capital-skill complementarity mechanism, we document an increase in skill premium and show that financially constrained firms increase both physical and human capital investment by most. Our findings uncover a central role for both the firm-balance sheet and the bank lending channels of the monetary policy transmission to labor income inequality, with state-dependent effects that are substantially stronger during crisis times. Importantly, we do not find any redistributive effects for firms without bank credit.
    Keywords: Monetary policy, labor income inequality, firm balance sheet channel, bank lending channel, capital-skill complementarity.
    JEL: D22 D31 E52 G01 G21
    Date: 2021–09
  22. By: International Monetary Fund
    Abstract: With a strong recovery in train, the authorities are gradually withdrawing the policy stimulus released during the pandemic. Although debt is sustainable, there is a high risk of debt distress. At the same time, financing the Roghun dam project while implementing tax reform remains a key challenge. The financial sector has stabilized, but intermediation remains low. Risks to the outlook are tilted to the downside due to uncertainty on the pandemic and regional spillovers.
    Keywords: government of the Republic of Tajikistan; monetary policy stance; liquidation procedure; Tajik authorities; government decree; growth projection; Debt sustainability analysis; Financial statistics; External sector statistics; Global; Central Asia and the Caucasus; Central Asia
    Date: 2022–02–18
  23. By: John C. Williams
    Abstract: Remarks at Griswold Center for Economic Policy Studies 2022 Spring Symposium, Princeton, New Jersey.
    Keywords: inflation; pandemic; COVID-19; monetary policy; stability; labor market; Ukraine; expectations
    Date: 2022–04–02
  24. By: International Monetary Fund
    Abstract: The Polish economy has rebounded strongly, with policy actions limiting the damage from the pandemic-induced recession by supporting employment and avoiding unnecessary bankruptcies. While the pandemic continues to take a toll on lives, the economy has been less impacted by successive waves of the pandemic.
    Date: 2022–02–24
  25. By: Javier García-Cicco (Universidad del CEMA)
    Abstract: We evaluate the dynamics of a small and open economy under simple rules for alternative monetary-policy instruments, in a model with imperfectly anchored expectations. The inflation-targeting consensus indicates that interest-rate rules are preferred, instead of using either a monetary aggregate or the exchange rate as the main instrument; with arguments usually presented under rational expectations and full credibility. In contrast, we assume agents use econometric models to form inflation expectations, capturing limited credibility. In particular, we emphasize the exchange rate’s role in shaping medium- and long-term inflation forecasts. We compare the dynamics after a shock to external-borrowing costs (arguably one of the most important sources of fluctuations in emerging countries) under three policy rules: a Taylor-type rule for the interest rate, a constant-growth-rate rule for monetary aggregates, and a fixed exchange rate. The analysis identifies relevant trade-offs in choosing among alternative instruments, showing that the relative merits of each of them is indeed influenced by how agents form inflation-related expectations.
    Date: 2022–02
  26. By: Laeven, Luc; Maddaloni, Angela; Mendicino, Caterina
    Abstract: Recent research developed under the ECB research task force on Monetary Policy, Macroprudential Policy and Financial Stability highlights the existence of trade-offs and spillovers that monetary policy and macroprudential authorities face when deciding on their policy interventions. Monetary policy measures are key to support the supply of credit to the economy, but they could also have unintended consequences on financial stability risks. Macroprudential policies are instead effective in limiting financial stability risks, but they could also reduce the length of economic expansions by preventing credit from flowing to productive economic activities. In addition, since monetary and macroprudential policies transmit to the broad economy via the financial system, they unavoidably affect each other’s effectiveness. Taking these factors into account is key for the design and implementation of both policies. JEL Classification: E3, E44, G01, G21
    Keywords: financial frictions, policy trade-offs, risk taking, systemic risk
    Date: 2022–02
  27. By: Hall, Robert E. (Stanford University); Kudlyak, Marianna (Federal Reserve Bank of San Francisco)
    Abstract: Unemployment recoveries in the US have been inexorable. Between 1948 and 2019, the annual reduction in the unemployment rate during cyclical recoveries was fairly tightly distributed around 0.1 log points per year. The economy seems to have an irresistible force toward restoring full employment. In the aftermath of a recession, unless another crisis intervenes, unemployment continues to glide down. Occasionally, unemployment rises rapidly during an economic crisis, while most of the time, unemployment declines slowly and smoothly at a near-constant proportional rate. We show that similar properties hold for other measures of the US unemployment rate and for the unemployment rates of many other emerging and advanced countries.
    Keywords: business cycle, recovery, unemployment, recession
    JEL: E32 J63 J64
    Date: 2022–03
  28. By: Jérôme Trinh (Université de Cergy-Pontoise, THEMA)
    Abstract: In this paper, we propose a method to disaggregate very small time series by fitting them with higher frequency related series using a cointegration regression with multiple partial endogenous structural breaks. We allow any coecient to change at up to two dates of structural break and three related series and provide critical values for the test of cointegration corrected for the very small sample size. We find that increasing the num- ber of related series drastically improves the power of the test by allowing for increased flexibility in the cointegration model. The simulated power of the test is shown to be very high even in very small sample sizes such as fifteen observations. This flexibility also mildly improves the accuracy of the disaggregation method when the sample size is as small as thirty-five observations. An application to the Chinese national accounts data is provided and allows the study of the Chinese business cycles stylized facts. We find that household consumption, public spending, and trade surpluses are the main driver of the business cycle.
    Keywords: Time series, macroeconomic forecasting, disaggregation, structural change, business cycles, emerging economies
    JEL: C32 E17 E37
    Date: 2022
  29. By: Martín Almuzara (Federal Reserve Bank of New York); Dante Amengual (CEMFI, Centro de Estudios Monetarios y Financieros); Gabriele Fiorentini (Università di Firenze and RCEA); Enrique Sentana (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We exploit the information in the successive vintages of GDE and GDI from the current comprehensive revision to obtain an improved timely measure of US aggregate output by exploiting cointegration between the different measures and taking seriously their monthly release calendar. We also combine all existing overlapping comprehensive revisions to achieve further improvements. We pay particular attention to the Great Recession and the pandemic, which, despite producing dramatic fluctuations, does not generate noticeable revisions in previous growth rates. The estimated parameters of our dynamic state-space model suggest that comprehensive revisions have not changed the long-run growth rate of US GDP.
    Keywords: Cointegration, Comprehensive revisions, Signal extraction, US aggregate output, Vintages.
    JEL: E01 C32
    Date: 2022–04
  30. By: Hall, Robert E. (Stanford University); Kudlyak, Marianna (Federal Reserve Bank of San Francisco)
    Abstract: Potential workers are classified as unemployed if they seek work but are not working. The unemployed population contains two groups—those with jobs and those without jobs. Those with jobs are on furlough or temporary layoff. This group expanded tremendously in April 2020, at the trough of the pandemic recession. They wait out periods of non-work with the understanding that their jobs still exist and that they will be recalled. We show that the resulting temporary-layoff unemployment mostly dissipated by the end of 2020. Potential workers without jobs constitute what we call jobless unemployment. Shocks that elevate jobless unemployment have much more persistent effects. Historical major adverse shocks, such as the financial crisis in 2008, created mostly jobless unemployment and consequently caused extended periods of elevated unemployment. Jobless unemployment reached its pandemic peak in November 2020, at 4.9%, modest by historical standards, and has declined at a faster-than-historical pace since.
    Keywords: business cycle, recovery, unemployment, recession, layoffs, temporary layoff, recall, COVID-19
    JEL: E32 J63 J64
    Date: 2022–03
  31. By: International Monetary Fund
    Abstract: The WAEMU has, so far, demonstrated strong resilience to the Covid crisis. The economic rebound that started in the second half of 2020 firmed up in 2021, while fiscal and monetary policies remained supportive. External reserves have risen to comfortable levels and the financial system appears to be broadly sound. However, the region faces significant challenges to ensure the sustainability of macroeconomic policies, while supporting the economic recovery and navigating the uncertain outlook.
    Date: 2022–03–02
  32. By: Blix Grimaldi, Marianna (Swedish National Debt Office); Crosta, Alberto (Swedish Financial Supervisory Authority); Zhang, Dong
    Abstract: We consider the effects of quantitative easing on the liquidity of the Swedish government bonds. To capture multiple dimensions of liquidity we use several measures built on a unique and highly granular transaction-based dataset. We find that the Riksbank’s purchases of government bonds improved liquidity, but only to a point. In fact, the deterioration in the level of market liquidity from quantitative easing via the scarcity effect is significantly larger than the improvement from the demand effect. We find that such effects are nonlinear; they tend to be amplified when the share of the central bank holdings is larger than a threshold (40 percent).
    Keywords: Market Liquidity; Government Bond Market; Quantitative Easing; Public Debt Management
    JEL: E52 E58 G12
    Date: 2021–05–01
  33. By: International Monetary Fund
    Abstract: A new wave of the COVID-19 pandemic is creating headwinds for the nascent economic recovery from the deep recession spurred by the pandemic’s onset and related oil price shocks. Over the medium term, reforms supporting improved governance, economic diversification, and resilience will help confront challenges from climate change, and the global transition to low-carbon economies—gradually resulting in improved incomes, job creation, inequality, and exit from fragility. In the near term, fiscal space to address these challenges is limited. Although debt sustainability was recently restored, large liquidity risks and vulnerabilities remain. Due to arrears and on-going negotiations with an external commercial creditor, debt is classified as “in distress”. The recent AIV consultation concluded on September 24, 2021.
    Date: 2022–02–17
  34. By: Andersen, Torben M. (University of Aarhus); Bhattacharya, Joydeep (Iowa State University); Grodecka-Messi, Anna (Research Department, Central Bank of Sweden); Mann, Katja (Copenhagen Business School)
    Abstract: A growing literature explores reasons for rising wealth inequality, but disregards the role of pension systems despite their well-understood influence on life-cycle saving. In theory and according to available evidence, both pay-as-you-go (PAYG) and fully-funded (FF) pension schemes crowd out voluntary retirement saving. They differ because aggregate savings decrease in the former but increase under the latter system. Unlike most nations, Denmark has seen a decline in wealth inequality in recent decades. This paper studies a calibrated life-cycle model of Denmark and employs unique registry data to argue that a Danish pension system transition, from a mostly PAYG to a dominant, mandated FF scheme, explains much of this decline.
    Keywords: Wealth inequality; pension systems; crowding out; life-cycle savings
    JEL: D31 E01 E21 G51 H55 J32
    Date: 2022–02–01
  35. By: Abbritti, Mirko; Consolo, Agostino
    Abstract: This paper analyses how labour market heterogeneity affects unemployment, productivity and business cycle dynamics that are relevant for monetary policy. The model matches remarkably well the short and long run dynamics of skilled and unskilled workers. Skill mismatch and skill-specific labour market institutions have three main effects on business cycles and growth dynamics. First, as the composition of labour market skills leads to supply segmentation, the relative scarcity of skilled workers increases the natural rate of unemployment and reduces total factor productivity with long-run effects on the growth rate of output. Second, skill heterogeneity in the labour market generates asymmetric outcomes and measures of employment, wages and consumption inequality. Finally, the model provides important insights for the Phillips and Beveridge curves. Skill-specific labour market heterogeneity leads to a flattening of the Phillips curve as wages and unemployment are affected differently across skill types. Also, the model generates sideward shifts of the Beveridge curve following business cycle shocks that are related to the degree of skill heterogeneity. JEL Classification: E24, E3, E5, O41, J64
    Keywords: Beveridge curve, consumption inequality, endogenous growth, labour market, monetary policy, Phillips curve, skill heterogeneity, unemployment fluctuations
    Date: 2022–02
  36. By: Dennis Dlugosch; Michael Abendschein; Eun Jung Kim
    Abstract: The economic shock induced by the COVID-19 pandemic is accelerating structural changes and is posing new challenges. Austria faces wider growth opportunities and new adjustment challenges related notably to two major structural transformations: transition to carbonless growth and the generalisation of more advanced forms of digitalisation. These imply new entries and exits in the business sector, more capital and labour re-allocations and greater geographic mobility of labour. A better activation of the existing talent pool, in particular female, elderly and migrant workers is also needed to address the ageing of the society. In this context public policies should aim at further stimulating business dynamism by facilitating market entries; supporting firms’ capacity to invest by helping strengthen their balance sheets; better adapting skills to jobs for all categories of workers; and providing the right incentives to R&D to boost long-term innovation.
    Keywords: investment, labour market, potential growth, skill shortages
    JEL: O11 O12 O14 E22 E24 J01 J21 J24 J26
    Date: 2022–04–06
  37. By: YOSHIDA Yushi; Weiyang ZHAI; SASAKI Yuri; Siyu ZHANG
    Abstract: We apply the structural VAR model to Japan under the unconventional monetary policy regime, 2000Q1 and 2019Q4. In addition to the traditional sign restrictions, we impose narrative sign restrictions based on five phenomenal economic episodes. Estimated exchange rate pass-through induced by monetary policy shock or exogenous exchange rate shock is consistent with the conventional view, i.e., a Japanese yen depreciation induces inflation at the consumer level. On the other hand, we found evidence of perverse exchange rate pass-through induced by demand shock. A ten percent exchange rate depreciation driven by weak domestic demand is associated with a one percent deflation at the consumer level. The magnitude of the latter effect is greater than the former. This demand-shock-induced exchange rate pass-through effect may have undermined the continuous efforts of the Bank of Japan to achieve the target of a two percent inflation rate.
    Date: 2022–03
  38. By: Bertsch, Christoph (Research Department, Central Bank of Sweden); Hull, Isaiah (Research Department, Central Bank of Sweden); Zhang, Xin (Research Department, Central Bank of Sweden)
    Abstract: According to Shiller (2017), economic and financial narratives often emerge as a con sequence of their virality, rather than their veracity, and constitute an important, but understudied driver of aggregate fluctuations. Using a unique dataset of newspaper articles over the 1950-2019 period and state-of-the-art methods from natural language processing, we characterize the properties of business cycle narratives. Our main finding is that narratives tend to consolidate around a dominant explanation during expansions and fragment into competing explanations during contractions. We also show that the existence of past reference events is strongly associated with increased narrative consolidation.
    Keywords: Natural Language Processing; Machine Learning; Narrative Economics
    JEL: C63 D84 E32 E70
    Date: 2021–01–01
  39. By: International Monetary Fund
    Abstract: COVID-19 hit the economy hard, but a strong recovery is underway. Public debt, already elevated before the pandemic, has increased further. The government has embarked on a reform program ‘Europe Now’, which aims to arrest outward migration through a sharp minimum wage increase, labor tax wedge reduction, and the introduction of a progressive tax code. The financial sector appears to have withstood the COVID-19 shock well.
    Date: 2022–02–24
  40. By: Zhou, Haiwen; Zhou, Ruhai
    Abstract: In this infinite horizon model, unemployment results from the existence of efficiency wages. Consumers choose saving optimally and there is capital accumulation. Firms producing intermediate goods engage in oligopolistic competition and choose technologies to maximize profits. A more advanced technology has a higher fixed cost but a lower marginal cost of production. In the steady state, it is shown that an increase in population size or a decrease in the discount rate leads intermediate good producers to choose more advanced technologies and the wage rate increases. Interestingly, the equilibrium unemployment rate decreases with the size of the population.
    Keywords: : Unemployment, increasing returns to scale, capital accumulation, choice of technology, oligopolistic competition
    JEL: E24 J64 L13 O14
    Date: 2022–03–17
  41. By: Michael Christl (European Commission - JRC); Silvia De Poli (European Commission – JRC); Francesco Figari; Tine Hufkens; Chrysa Leventi; Andrea Papini (European Commission - JRC); Alberto Tumino (European Commission - JRC)
    Abstract: This paper analyses the effect of the COVID-19 pandemic on household disposable income and household demand in the European Union (EU), making use of the EU microsimulation model EUROMOD and nowcasting techniques. We show evidence of heterogeneity in the impact of the COVID-19 pandemic on the labour markets in EU Member States, with some countries hit substantially harder than others. Most EU Member States experience a large drop in market incomes in 2020, with poorer households hit the hardest. Tax-benefit systems cushioned significantly the transmission of the shock to the disposable income and the household demand, with monetary compensation schemes playing a major role. Additionally, we show that monetary compensation schemes prevent a significant share of households from becoming liquidity constrained during the pandemic.
    Keywords: COVID-19, Inequality, Microsimulation, EUROMOD
    JEL: D31 E24 H24
    Date: 2022–03
  42. By: Alexander Bick; Nicola Fuchs-Schündeln; David Lagakos; Hitoshi Tsujiyama
    Abstract: This paper studies how structural change in labor supply along the development spectrum shapes cross-country differences in hours worked. We emphasize two main forces: sectoral reallocation from self-employment to wage work, and declining fixed costs of wage work. We show that these forces are crucial for understanding how the extensive margin (the employment rate) and intensive margin (hours per worker) of aggregate hours worked vary with income per capita. To do so we build and estimate a quantitative model of labor supply featuring a traditional self-employment sector and a modern wage-employment sector. When estimated to match cross-country data, the model predicts that sectoral reallocation explains more than half of the total hours decrease at lower levels of development. Declining fixed costs drive the rise in employment rates at higher levels of income per capita, and imply higher hours in the future, in contrast to the lower hours resulting from income effects and expansions in tax-and-transfer systems.
    Keywords: Structural Change; Development; Employment; Hours Worked; Taxation
    JEL: E24 H31 J21 J22 L16 O11
    Date: 2022–03–28
  43. By: Mr. Antonio David; Hoda Selim; Alexandre Nguyen-Duong
    Abstract: This paper assesses the adequacy and effectiveness of the WAEMU fiscal framework along three pillars that have proven to effectively support fiscal discipline in monetary unions—common fiscal rules (including adequacy of numerical ceilings as well as elements of design and enforcement), shared public financial management systems, and coordination mechanisms for decentralized fiscal policies. We undertake a calibration of regional debt and fiscal deficit ceilings taking into account different macroeconomic tradeoffs and risks and conclude that numerical ceilings that prevailed before the suspension of the fiscal rules remain adequate and strike the right balance between growth and fiscal sustainability. The paper also proposes reform options to strengthen the WAEMU regional fiscal surveillance framework, with a view to more effectively supporting fiscal discipline.
    Keywords: Fiscal policy, fiscal rules, fiscal governance, PFM, fiscal coordination, monetary unions, WAEMU
    Date: 2022–03–04
  44. By: International Monetary Fund
    Abstract: A swift policy response helped mitigate the economic impact of the twin COVID-19 and oil price shocks and contain the initial spread of the virus. A gradual recovery driven by the non-oil sector is underway, following a deep recession in 2020. Fiscal and external balances have improved with recent oil price increases. The UAE is among the world leaders in delivering vaccinations, with nearly 85 percent of the population fully vaccinated as of October 2021.
    Keywords: manufacturing sector producer price index; reform effort; CPI data; CPI basket weight; Policy discussion; liability positions vis-à-vis nonresident; Oil prices; Loans; Financial sector stability; Global
    Date: 2022–02–17
  45. By: Niftiyev, Ibrahim
    Abstract: Azerbaijan’s economy has been investigated within Dutch disease (DD) and Natural Resource Curse Theory (NRCT) several times during the last 20-22 years, but the studies relied on heavily aggregated data and speculative theoretical models. Opinions differ in academia as to how and to what extent these phenomena happened. However, we are still of the assertion that non-oil manufacturing, in general, has experienced adverse effects since the huge oil revenue found its way into the Azerbaijani economy because the cost of non-oil production rose and competitiveness declined due to the domestic inflationary pressures. Meanwhile, subsectoral and specific parts of non-oil economy have not been studied in more detail. This working paper invites to consider textile and chemical subsectors as de-industrialized economic subsectors due to the oil boom’s take over since 2005 and 2006 in Azerbaijan. The descriptive analysis shows that the textile subsector is less likely to be relevant from a de-industrialization standpoint after the collapse of the Soviet Union; however, certain chemical subsectors seem to strongly react to the oil boom. Still, this does not mean that we have nothing to worry about the output of the textile industry. These results can be supported by quantitative and empirical works, but not limited to. Qualitative methods can generate new insights on microeconomic levels (i.e., factory or industrial park) about non-oil manufacturing in the Azerbaijani economy to reveal potential adverse/positive effects of oil-led economic growth and development. This working paper and upcoming works can be a useful framework for the government officials and decisionmakers to follow more thorough industrial policies to recover non-oil industrial potential of the Azerbaijani economy in a short period.
    Keywords: Azerbaijan economy,chemical subsectors,de-industrialization,Dutch disease,economic subsectors,industrial output,natural resource curse theory,non-oil industry,textile subsectors
    JEL: D04 E32 L6 O14 O52 O53
    Date: 2022
  46. By: Porras-Arena, M. Sylvina; Martín-Román, Ángel L.
    Abstract: Okun's law is an extremely influential parameter in empirical research and policy analysis, based on the sizable number of estimates from this perspective. Nevertheless, it is also subject to considerable heterogeneity. We first show graphical and statistical evidence on the existence of a high level of heterogeneity among Okun's law estimates in existing research, then analyze potential sources of heterogeneity. Using 1,213 estimates of Okun's law for various countries, regions, and time periods, separate metaregressions are estimated; one using estimates with the unemployment rate as the dependent variable, and the other with output as the dependent variable. Our findings indicate that the specification of the underlying model of the relationship has an effect on the magnitude of Okun's parameter. Differential labor market characteristics may also explain part of the observed heterogeneity. Finally, the results are also found to be influenced by methodological issues, such as the type of data (time series or panel data), the frequency of the data (annual or quarterly), the spatial coverage of the estimates (country, region, or group of countries), whether more variables are included in estimations, and whether a dynamic or static, symmetric or asymmetric model is estimated. This paper contributes to highlight the heterogeneity affecting the estimates of Okun's law and that needs to be taken into account. In order to know the "true" relationship between unemployment and economic growth, researchers should bear in mind that there are a number of methodological choices that have consequences for the results.
    Keywords: Okun’s Law,heterogeneity,metaregression
    JEL: C55 E23 E24 J60
    Date: 2022
  47. By: Oya Celasun; Ms. Aiko Mineshima; Mr. Niels-Jakob H Hansen; Jing Zhou; Mariano Spector
    Abstract: Supply constraints hurt the economic recovery and boosted inflation in 2021. We find that in the euro area, manufacturing output and GDP would have been about 6 and 2 percent higher, respectively, and half of the rise in manufacturing producer price inflation would not have occurred in the absence of supply bottlenecks. Globally, shutdowns can explain up to 40 percent of the supply shocks. Sectors that are more reliant on differentiated inputs—such as autos—are harder hit. Late last year industry experts expected supply shortages for autos to largely dissipate by mid-2022 and broader bottlenecks by end-2022, but given the Omicron wave, disruptions will last for longer, possibly into 2023. With supply constraints adding to price pressures, the challenge for policymakers is to support recovery without allowing high inflation to become entrenched.
    Keywords: Output, Inflation, Manufacturing, Supply Constraints; PPI inflation; producer price inflation; supply-shock contribution; chip shortage; industry expert; Supply shocks; Inflation; Manufacturing; Producer price indexes; Labor shortages; Global
    Date: 2022–02–17
  48. By: Altavilla, Carlo; Boucinha, Miguel; Burlon, Lorenzo; Giannetti, Mariassunta; Schumacher, Julian
    Abstract: Exploiting the introduction of the ECB’s tiering system for remunerating excess reserve holdings, we document the importance of access to the money market for bank lending. We show that the two-tier system produced positive wealth effects for banks with excess reserves and encouraged a reallocation of liquidity toward banks with unused exemptions. This ultimately decreased the fragmentation in the money market and enhanced the monetary policy transmission mechanism. The increased access to money market by banks with unused allowances incentivizes them to extend more credit than other banks, including banks with excess liquidity whose valuations increase the most. JEL Classification: G2, E5
    Keywords: bank lending, Money market, negative interest rate policy
    Date: 2022–02
  49. By: Heng Chen; Walter Engert; Kim Huynh; Daneal O’Habib; Joy Wu; Julia Zhu
    Abstract: We provide an update on the impact the COVID-19 pandemic on the demand for cash and the use of methods of payment based on data from the Bank Note Distribution System and from consumer surveys conducted in April and August 2021. Our key findings are as follows: • Cash in circulation remained high throughout 2021, driven mainly by demand for large-denomination notes. • Canadians’ holdings of cash on hand in April (median $70) and August (median $80) were comparable to results seen in 2020. Other cash holdings reported by Canadians remained elevated, with a median value of $260 in August. • In August 2021, 62% of Canadians used cash for payments, and indicators of merchant acceptance of cash improved in both the April and August surveys. • A large majority of Canadians (around 80%) in 2021 continued reporting that they have no plans to go cashless in the next five years.
    Keywords: Bank notes; Central bank research; Coronavirus disease (COVID-19); Digital currencies and fintech; Econometric and statistical methods
    JEL: C C1 C12 C9 E E4 O O5 O54
    Date: 2022–04
  50. By: José Alves; João Quental Gonçalves
    Abstract: The present work offers a review on two divergent schools of thought regarding the subject of money and highlights why understanding it is important to grasp the workings and nature of the concept of money. We adopt a spontaneous order perspective on social institutions, considering money as one. Such framework allows for the construction of axioms from which we formulate our problem allowing us to ask how old forms of money such as Gold and Silver hold up in today’s world regarding their hedging properties. Moreover, we also do so for Bitcoin since we consider it an appropriate asset due to its specific characteristics and its (at the time of writing) more than 10-year life span. We resort to the Autoregressive Distributed Lag (ARDL) methodology in order to study our three assets in the context of the US dollar and the US Economy for two different time periods. We analyse price dynamics from 1980 to 2020 for gold and silver resorting to annual data. Regarding bitcoin we employ quarterly data from 2009 to 2020. We conclude that the theories that explain what money is, how it comes to be so and how certain types of “money assets” may serve both as an indirect hedge against inflation in the two interpretations of the word and as a “stock of value” have merits that might deserve further investigation.
    Keywords: Money; Inflation; Gold; Silver; Bitcoin
    JEL: B25 D46 E42 E51
    Date: 2022–03
  51. By: Bardt, Hubertus; Grömling, Michael; Schmitz, Edgar
    Abstract: Der durch den russischen Überfall ausgelöste Krieg in der Ukraine bringt erhebliche Belastungen für die deutsche Wirtschaft mit sich. Auf Basis verschiedener laufender Befragungen durch das Institut der deutschen Wirtschaft werden die verschiedenen Auswirkungen vermessen. Rund drei Viertel der Unternehmen sehen sich derzeit durch hohe Energiepreise belastet. Weit mehr als ein Drittel sehen sich in ihren Geschäftsabläufen durch ausfallende Lieferungen von Vorleistungen oder drohende Engpässe in der Energieversorgung bedroht. Seit der ersten Kriegs- und Befragungswoche haben sich die Sorgen tendenziell erhöht. Für die mittlere Frist werden weiter ansteigende Belastungen durch den Krieg für die Unternehmen in Deutschland erwartet.
    JEL: C82 E32 F23 F51
    Date: 2022
  52. By: Olovsson, Conny (Research Department, Central Bank of Sweden); Walentin, Karl (Research Department, Central Bank of Sweden); Westermark, Andreas (Research Department, Central Bank of Sweden)
    Abstract: International immigration flows are large, volatile and have recently increased. This paper is the first to study the dynamic effects of immigration shocks on the economy within a search and matching framework. Since the microdata indicates that some of the key macroeconomic effects of immigration are largest in the short run, a steady state analysis would be insufficient. To construct a quantitatively relevant general equilibrium framework, we use extensive Swedish microdata. We then study the effect of a large immigration shock on various macroeconomic aggregates. Due to compositional effects, there is a substantial negative effect on GDP per capita and the employment rate on impact that then decreases over time.
    Keywords: Immigration; dynamics; search and matching
    JEL: J21 J31 J61
    Date: 2021–10–01
  53. By: Martin Ravallion (Department of Economics, Georgetown University)
    Abstract: Household survey data for the U.S. spanning 30 years are used to study the co-movements between log real household incomes and standard macroeconomic indicators. The semi-elasticities of the income quantiles with respect to the macro indicators are found to vary substantially and non-monotonically across the distribution. The unemployment rate matters at all income levels, but especially so for the poorest, living at the estimated income floor. Inflation rates matter more at middle incomes. Recessions are poverty-increasing, but also skewness-decreasing, with implications for the political economy of redistribution. These complex distributional effects are obscured by standard scaler measures of income inequality. Classification- D31, E31, E32
    Keywords: Unemployment, inflation, growth, poverty, inequality, skewness
    Date: 2022–04–12
  54. By: Bianchi, Daniele (School of Economics and Finance, Queen Mary University of London); Babiak, Mykola (Lancaster University Management School)
    Abstract: We investigate the performance of funds that specialise in cryptocurrency markets and contribute to a grow ing literature that aims to understand the value of digital assets as investments. The main empirical results support the idea that cryptocurrency funds generate significantly alphas compared to passive benchmarks or conventional risk factors. We compare the actual fund alphas against the simulated values from a panel semi-parametric bootstrap approach. The analysis shows that the extreme outperformance is unlikely to be explained by the luck of fund managers. However, the significance of the alphas becomes statistically weaker after considering the cross-sectional correlation in fund returns.
    Keywords: Cryptocurrency markets; Alternative investments; Fund management; Bootstrap methods
    JEL: C58 E44 G12 G17
    Date: 2021–11–01
  55. By: Glötzl, Erhard
    Abstract: In economics balance identities as e.g. C+K'-Y(L,K) = 0 must always apply. Therefore, they are called constraints. This means that variables C,K,L cannot change independently of each other. In General Equilibrium Theory (GE), the solution for equilibrium is obtained as optimisation under the above or similar constraints. The standard method for modelling dynamics in macroeconomics are Dynamic Stochastic General Equilibrium (DSGE) models. Dynamics in DSGE models result from the maximisation of an intertemporal utility function that results in the Euler-Lagrange equations. The Euler-Lagrange equations are differential equations that determine the dynamics of the system. In Glötzl, Glötzl, und Richters (2019) we have introduced an alternative method to model dynamics, which is constitutes a natural extension of GE theory. It is based on the standard method for modelling dynamics under constraints in physics. We therefore call models of this type "General Constrained Dynamic (GCD)" models. GCD models can be seen as an alternative to DSGE models to model the dynamics of economic processes. DSGE models are used in particular to analyse economic shocks. For this reason, the aim of this article is to show how GCD models are formulated and how they can be used to model economic shocks such as demand, supply, and price shocks. Since the goal of this paper is to lay out the fundamental principles to the formulation of such GCD models, very simple macroeconomic models are used for illustrative purposes. All calculations can easily be carried out with the open-source program GCDconfigurator, which also allows for the integration of shocks.
    Keywords: macroeconomic models, demand shock, supply shock, price shock, constraint dynamics, GCD, DSGE, out-of-equilibrium dynamics, Lagrangian mechanics, stock flow consistent, SFC
    JEL: A12 B13 B41 B59 C02 C30 C54 C60 E10
    Date: 2022–03–15
  56. By: Tomás Caravello; Turalay Kenc; Martín Sola
    Abstract: We develop and estimate a consumption-based asset pricing model that assumes recursive utility using historical US financial data, allowing for regime changes, priced regime risk, and intrinsic bubbles. We also estimate several restricted versions which include only a subset of these features. We find that switching risk is an essential component of the equity risk premium, explaining up to fifty percent of it. Furthermore, a model which does not take this into account would overestimate the degree of risk aversion of the public, mistakenly assigning the observed risk premium to highrisk aversion instead of priced regime-switching. Intrinsic bubbles are not crucial in explaining the risk premia, but they substantially improve the model’s fit at the end of the sample.
    Keywords: Intrinsic Bubbles; Macroeconomic Risk; Stochastic Differential Utility,Markov Chain; Equity Risk Premium.
    JEL: G00 G12 E44 C32
    Date: 2021–12
  57. By: João Ferreira do Amaral
    Abstract: This paper develops concepts and theoretical models that can prove useful for the study of technological revolutions both from the point of view of economic growth theory and of economic history. The basic concepts are innovative capital, technological wave and technological revolution and a comparison is made with other concepts such as industrial revolution and social revolution in the Marxian sense.
    Keywords: economic growth; digital revolution; technological progress; innovation.
    JEL: E10 E11 E22 N10 O30
    Date: 2022–03
  58. By: Josef Platzer; Marcel Peruffo
    Abstract: We develop a heterogeneous agent, overlapping generations model with nonhomothetic preferences that nests several explanations for the decline in the natural rate of interest (r∗) suggested in the literature: demographic change, a slowdown in productivity growth, a rise in income inequality, and public policy. The model can account for a 2.2 percentage point (pp) decline in r∗ between 1975 and 2015, which is within the range of empirical estimates. Rising income inequality is an important driver (-0.70 pp), and together with demographic change (-0.71 pp) and the slowdown in productivity growth (-1.0 pp) explains most of the decline. Growing public debt is the major counteracting force (+0.31 pp). Permanent income inequality is of greater importance than inequality due to uninsurable income risk, and matching the degree of nonhomotheticity in consumption and savings behavior to empirical estimates is essential for this result. We predict that r∗ will reach a low of 0.38% by 2030, after which a slow reversal will begin. The natural rate will stabilize at 1% in the long run, a low level when compared with the postwar path of r∗ implied by the model. This remains true even if we take into account soaring public debt levels due to the COVID-19 pandemic. Policy can have considerable impact on the level of r∗ through the tax and transfer system.
    Keywords: Demographic Change, Inequality, Life-cycle, Natural Rate of Interest, Nonhomothetic Preferences, Secular Stagnation; transition path; baseline transition-path; labor income; uninsurable income risk; implied path; path of r; Nonhomothetic consumption preference; Income inequality; Income; Productivity; Consumption; Europe; Global
    Date: 2022–02–11
  59. By: Mr. Etibar Jafarov; Andres Gonzalez; Chris Walker; Diego Rodriguez Guzman
    Abstract: Bolivia has achieved noteworthy success over the past 15 years in raising incomes, reducing poverty, and maintaining macroeconomic stability by deploying commodity revenues to finance transfers, public investment, and state-led development, using an exchange rate peg as a policy anchor. However, with the end of the commodity boom in 2014, fiscal deficits have grown and reserves have fallen. One route to restoring long-run sustainability would be to combine fiscal consolidation with a switch to a floating exchange rate. However, a preference for maintaining the peg could be accommodated with adjustments elsewhere in the policy framework. Employing a detailed dynamic stochastic general equilibrium model of the Bolivian economy, this study assesses the long-run sustainability and relative benefits of alternative policy combinations, and calculates optimal adjustment paths for the transition from the present situation to the steady state. It concludes that continued adherence to a fixed-rate regime, while not optimal, is feasible, if supported by a larger fiscal effort.
    Keywords: Bolivia, inflation target, fixed exchange rate, speculative attack, transition path, linear time iteration, time consistency.
    Date: 2022–02–25
  60. By: Eichacker, Nina
    Abstract: In times of economic crisis, academics, policy-makers, and pundits often debate how much government debt is too much. This paper argues that discourses about fiscal space should consider several political economic factors beyond the ratio of fiscal deficits and debt to GDP when determining the sustainability of any economy’s fiscal deficit. These include political constraints on both government spending and taxation, financial and monetary dynamics in bond markets for sovereign debt, and the relative hierarchy of governments attempting to issue sovereign debt. While the federal governments of the US and Germany may easily issue and sell debt in private markets, smaller economies are more vulnerable to demand fluctuations, and will benefit from explicit commitments by monetary authorities to resume their historic roles as governments’ banks, especially during crises. By highlighting present political constraints, monetary structures, and market factors that may inhibit governments’ successful placement of bonds, it deepens present debate about the potential feasibility of functional finance to facilitate fiscal activity, even in unprecedented times.
    Date: 2022–02–24
  61. By: Christodoulopoulou, Styliani; Kouvavas, Omiros
    Abstract: During the Great Recession, unemployment increased substantially across several euro area countries, with wages exhibiting a muted response. As low skilled workers lose their jobs first during a recession, the remaining employed workers result in a relatively more skilled employment pool. This change in the composition of the employed workers inflates the aggregate wage mechanically, even in the case of no actual pay rises. This paper uses individual level data to control for the effect of changes in the composition of workers on wages and wage cyclicality. We find that compositional effects are highly correlated with the severity of the business cycle, being significant in countries where employment losses were larger. Thus, the results partially explain the muted response of the observed wages to the business cycle, as wages decreased more than what the aggregate numbers suggest during the downturn, a picture that is reversed somewhat during the recent recovery. JEL Classification: J30, E32
    Keywords: Compositional effects, Wage cyclicality, Wages
    Date: 2022–03
  62. By: Mr. Andrew Baer; Vanda Guerreiro; Anthony Silungwe
    Abstract: This paper analyzes the availability, methodological soundness, and scope of National Accounts statistics in IMF member and non-member countries in 2020. National Account statistics are instrumental in the development of fiscal and monetary policy and in monitoring economic developments. This analysis examines the appropriateness of the current set of global national accounts statistics for current policy development and highlights regions where further development may be required. The assessment is based on the results of a national accounts survey conducted by Fund staff that examined the scope of national accounts programs in IMF member countries. The survey was completed by statistical authorities between March 2021 and July 2021. The information reflects the state of National Accounts Programs as of the end 2020. In cases of non-response, IMF staff used information taken from the IMF’s Dissemination Standards Bulletin Board (DSBB) and country websites to provide the status of national accounts compilation practices. This analysis summarizes the following key indicators: time lag of national accounts benchmarks, availability annual and quarterly GDP estimates, vintage of the System of National Accounts (SNA), index formula used for calculating annual constant price (volume) estimates, availability of GDP by different approaches, timeliness of disseminating and annual and quarterly GDP estimates, availability institutional sector accounts, and access to source data.
    Keywords: Benchmarking, GDP, Institutional Sectors, National Accounts; GDP estimate; number economy; vintage of the System of National Accounts; statistic department; current price; GDP measurement; Global; Asia and Pacific; Europe; Africa
    Date: 2022–02–11
  63. By: Hammer, Luisa; Hertweck, Matthias S.
    Abstract: EU Eastern Enlargement elicited a rise in (temporary) labour market oriented immi-gration to Germany starting in May 2011. Taking into account that not all immigrantsstay permanently and that outmigration flows are selective, this paper classifies recent EUimmigrants into 'new arrivals' and 'stayers' drawing on administrative social securitydata (2005-2017). This novel strategy allows us to separately identify their potentiallyopposing short- and medium-run effects on labour market outcomes in Germany. We finda transitory negative wage effect among German nationals, particularly at the bottom ofthe wage distribution; and a permanent positive effect on full-time employment.
    Keywords: EU Eastern Enlargement,immigration,wages,employment,Germany
    JEL: E24 F22 J31 J61
    Date: 2022
  64. By: Mr. Gee Hee Hong; Mr. Nicolas End
    Abstract: How do policy communications on future f iscal targets af fect market expectations and beliefs about the future conduct of f iscal policy? In this paper, we develop indicators of f iscal credibility that quantify the degree to which policy announcements anchor expectations, based on the deviation of private expectations f rom official targets, for 41 countries. We find that policy announcements partly re-anchor expectations and that f iscal rules and strong fiscal institutions, as well as a good policy track record, contribute to magnifying this effect, thereby improving fiscal credibility. Conversely, empirical analysis suggests that markets reward credibility with more favorable sovereign financing conditions.
    Keywords: Fiscal credibility, fiscal policy, forecast errors, private expectations, fiscal institutions, fiscal rules, fiscal councils, fiscal surprises
    Date: 2022–02–18
  65. By: Youssef Ghallada; Alexandre Girard; Kim Oosterlinck
    Abstract: In theory credit booms, and the crises associated to these booms, should occur more frequently in Fiat monetary regimes than in regimes, such as the Gold Standard, where money creation is constrained. In this note, we investigate whether the importance of the credit boom factor, as an early warning indicator (EWI) of systemic financial crises, varies across monetary regimes for a sample of 17 developed countries over the 1870-2016 period. We find no evidence of a difference between monetary regime for credit-driven crises and this both for the occurrence and the severity of crises.
    Date: 2021–03–01
  66. By: Ozana Nadoveza Jelić (Hrvatska narodna banka, Hrvatska & Ekonomski fakultet, Sveučilište u Zagrebu, Hrvatska); Rafael Ravnik (Macrodea, Hrvatska)
    Abstract: U zemljama koje karakterizira neki oblik valutne supstitucije promjene tečaja mogu imati značajne posljedice u gospodarstvu, zbog čega se monetarne vlasti u takvim zemljama katkad odlučuju za neku inačicu upravljanoga tečajnog režima. Hrvatska narodna banka odabrala je jedan od takvih načina upravljanja monetarnom politikom. U Hrvatskoj je među glavnim prednostima odabira tzv. upravljanoga fluktuirajućeg tečaja dugogodišnje održavanje inflacije niskom i stabilnom, a glavni je nedostatak gubitak dijela autonomije u vođenju protucikličke monetarne politike. U Hrvatskoj su zagovornici jačanja autonomije nerijetko poistovjećivali autonomiju s deprecijacijom kune koja bi doprinijela ispravljanju nastalih eksternih neravnoteža. Međutim, realizacija učinaka deprecijacije valute na gospodarstvo ne odvija se samo kroz vanjskotrgovinski kanal i posljedično ispravljanje eksternih neravnoteža, već i kroz utjecaj na bilance svih domaćih sektora, tzv. balance-sheet kanal. Stoga je cilj ovog rada sveobuhvatno analizirati učinke tečajnih promjena na hrvatsku ekonomiju koristeći se jedinstvenim analitičkim okvirom, odnosno makroekonometrijskim modelom PACMAN. Na temelju simulacija provedenih u ovom radu možemo zaključiti da je u Hrvatskoj aktivan kanal preko kojeg deprecijacija negativno utječe na bilance domaćih sektora (engl. balance-sheet channel), a samim time i na domaću potražnju. S druge strane, rezultati pokazuju da je srednjoročna reakcija neto izvoza (engl. trade channel) na deprecijaciju tečaja pozitivna, ali relativno blaga. Iako konačna reakcija BDP-a (neto učinak) ovisi o parametrizaciji i velikom broju pretpostavki, sve simulacije provedene u ovom radu upućuju na isti normativni zaključak prema kojem negativan učinak na bilance domaćih sektora u Hrvatskoj nadmašuje pozitivan vanjskotrgovinski učinak deprecijacije.
    Keywords: polustrukturni makroekonometrijski model, Hrvatska, deprecijacija tečaja, vanjskotrgovinski kanal, balance-sheet kanal.
    JEL: E17 E27 F31 F41 F47
  67. By: Nikhil Patel; Mr. David Cook
    Abstract: Recent literature has highlighted that international trade is mostly priced in a few key vehicle currencies and is increasingly dominated by intermediate goods and global value chains (GVCs). Taking these features into account, this paper reexamines the relationship between monetary policy, exchange rates and international trade flows. Using a dynamic stochastic general equilibrium (DSGE) framework, it finds key differences between the response of final goods and GVC trade to both domestic and foreign shocks depending on the origin and ultimate destination of value added and the intermediate shipments involved. For example, the model shows that in response to a dollar appreciation triggered by a US interest rate increase, direct bilateral trade between non-US countries contracts more than global value chain oriented trade which feeds US final demand, and exports to the US decline much more when measured in gross as opposed to value added terms. We use granular data on GVCs at the sector level to document empirical evidence in favor of these key predictions of the model.
    Keywords: Dollar invoicing, global value chains, exchange rates, monetary policy; business cycle dynamics; dollar invoicing; EU importer; EU exporter; goods trade; Exports; Global value chains; Currencies; Trade balance; Imports; Global
    Date: 2022–02–11
  68. By: D'Orazio, Paola; Hertel, Tobias; Kasbrink, Fynn
    Abstract: Climate change poses several risks to the value of financial assets and financial stability. The study conducted in this paper focuses on the German banking sector and estimates its exposure to climate risks arising from a transition to a carbon-neutral economy. Our analysis identifies the energy, transportation, and manufacturing sectors as the most sensitive to transition risks and shows that the German banking sector's direct exposure to climate transition risks is non-negligible. Moreover, it points out that an amplified exposure to transition risks characterizes large private banks. These findings are comparable to other countries' exposures and relevant to financial supervision and regulation, calling for increased engagement to assess, measure, and manage climate-related financial risks.
    Keywords: Climate-related financial risks,transition risks,banking sector,climate policy,climate neutrality,climate-related prudential regulation
    JEL: E58 G21 Q53 Q54
    Date: 2022
  69. By: Hindriks, Jean (Université catholique de Louvain, LIDAM/CORE, Belgium); Madio, Leonardo (Université catholique de Louvain, LIDAM/CORE, Belgium); Serse, Valerio (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: In March 2020, the Belgian government imposed a two-week promotion ban to contain panic buying at the beginning of the Covid-19 Pandemic. Using a unique daily dataset tracking list prices and promotions in different retail chains at the store level, we investigate how retailers set price promotions once the ban was lifted. We find that both frequency and size of promotions reverted to the pre-ban but only several months after the ban was lifted. This effect presents large heterogeneity across retailers: one chain acted as a promotion leader, reintroducing promotions quicker than others. Another large chain acted as a promotion follower, reintroducing promotions more gradually but eventually setting more frequent and larger price promotions than in the pre-ban period. Overall, the promotion ban was a major factor driving up sale prices in Belgian stores.
    Keywords: Price promotions ; promotion ban ; retailers ; competition
    JEL: D22 E30 E31 L11
    Date: 2022–02–01
  70. By: Ozili, Peterson K
    Abstract: This paper investigates the correlation of economic policy uncertainty (EPU) with nonperforming loans and loan loss provisions for 22 developed countries from 2008 to 2017. The findings reveal that economic policy uncertainty is negatively correlated with nonperforming loans and loan loss provisions in the banking sector of EU countries. Also, economic policy uncertainty is negatively correlated with nonperforming loans in the banking sector of the G7 countries while loan loss provision is more responsive to changes in EPU in EU countries. The implication of the findings is that the correlation of economic policy uncertainty with loan loss provisions and nonperforming loans is influenced by regional characteristics.
    Keywords: Loan loss provisions, bank performance, nonperforming loans, policy uncertainty, EPU index, economic policy uncertainty, European union, correlation.
    JEL: E52 E59 G21 G23 G28
    Date: 2022
  71. By: Rancan, Antonella
    Abstract: In the article I examine how model builders from academia and from the Federal Reserve Board confronted the Phillips curve in the construction and subsequent modifications of the Federal Reserve, MIT and University of Pennsylvania macroeconometric model. It is argued that academic debates on Friedman's and Phelps' accelerationist hypothesis, and the evolution of the macroeconomics discipline, did not affect the model building agenda at the Division of Research and Statistics of the Board over the 1970s and 1980s.
    Keywords: Phillips curve, Natural rate hypothesis, Federal Reserve-MIT-University of Pennsylvania model
    JEL: B22 B23 E12
    Date: 2022–03–29
  72. By: Karsten O. Chipeniuk (Reserve Bank of New Zealand); Nets Hawk Katz (California Institute of Technology); Todd Bruce Walker (Indiana University Department of Economics)
    Abstract: We examine aggregation in the neoclassical growth model with aggregate shocks and uninsurable employment risk, as well as related environments. We introduce a Walrasian auctioneer whose job is to report to households all possible state-contingent future prices. Households take these as given when forming expectations and making optimal consumption / savings decisions, and the auctioneer adjusts her forecasts until markets clear. This natural dichotomy between the households and the auctioneer allows us to study each problem in isolation as well as to discuss the intersection. On the household side, we separate an explicit expression for the linear permanent income component of savings from a well-behaved nonlinear adjustment arising from precautionary behavior and incomplete markets. Equipped with this decomposition, we then study how economies aggregate in the presence of various auctioneer types that are popular in the literature. The steady-state auctioneer of Huggett (1997) and Aiyagari (1994) ffers a paper-and-pencil analysis of aggregation that provides a bound on more complex environments. We provide an economic interpretation of the regression coefficients and explain the lack of time variation in the auctioneer of Krusell and Smith (1998). We also introduce a new numerical method which uses the empirical distribution of auctioneer forecasts to substantially improve solution accuracy in cases where the standard coefficient of determination and other well-known statistics prove to be misleading.
    Keywords: Aggregation, Heterogeneous Agents, Incomplete Markets
    Date: 2022–04
  73. By: Nga Thi Viet Nguyen (The World Bank); Ivica Rubil (The Institute of Economics, Zagreb)
    Abstract: In a fiscally expansionary context, policy makers in Croatia must keep in mind the redistributive role of fiscal policies, particularly their impact on inequality and poverty. This paper uses both household survey data and national accounts to estimate how in 2018 the Croatian fiscal system affected income distribution and poverty. Moreover, it assesses the individual and the combined effects of interventions like direct and indirect taxes and social spending. The analysis found that in 2018 the fiscal system helped to reduce inequality but also increased poverty. All fiscal interventions except indirect taxes (VAT and excises) reduced inequality. However, indirect taxes not only widened the income gap between rich and poor but also increased poverty—only direct transfers had poverty-reducing effects. Direct taxes (personal income tax [PIT] and property taxes) had no impact on poverty in 2018. A series of reforms introduced between 2018 and 2021 helped reduce poverty slightly, mainly because the VAT on some food items was lowered. However, these reforms pushed up inequality, mostly because PIT reforms reduced the tax burden for those with high incomes.
    Keywords: fiscal policy, fiscal incidence, social spending, inequality, poverty, taxes, Croatia
    JEL: H22 I38 D31
    Date: 2021–10
  74. By: Carbone, Sante (Financial Stability Department, Central Bank of Sweden); Giuzio, Margherita (European Central Bank); Kapadia, Sujit (European Central Bank); Krämer, Johannes Sebastian (European Central Bank); Nyholm, Ken (European Central Bank); Vozian, Katia (European Central Bank, Helsinki Graduate School of Economics, Hanken School of Economics, Leibniz Institute for Financial Research SAFE)
    Abstract: This paper explores how the need to transition to a low-carbon economy influences credit risk. It develops a novel dataset covering firms’ greenhouse gas emissions over time alongside information on strategies for managing transition risk, includ ing climate disclosure practices and forward-looking emission reduction targets. It assesses how such metrics influence firms’ credit ratings and their market-implied distance-to-default. High emissions tend to be associated with higher credit risk. But disclosing emissions and setting emission reduction targets are associated with lower credit risk, with the effect somewhat stronger for more ambitious climate commitments. After the Paris agreement, firms most exposed to transition risk also saw their ratings deteriorate relative to otherwise comparable firms, with the effect larger for European than US firms, probably reflecting differential climate policy expectations. These results have policy implications for corporate disclosures and strategies around climate change, and the treatment of climate-related transition risk in the financial sector.
    Keywords: climate change; transition risk; disclosure; net zero; green finance; credit risk
    JEL: C58 E58 G11 G32 Q51 Q56
    Date: 2022–01–01
  75. By: Joachim Kahr Rasmussen (Department of Economics, University of Copenhagen)
    Abstract: In recent years, a vast literature has documented how yearly transmissions of wealth through inheritances constitute a non-negligible share of GDP in Western economies. However, it is still somewhat unclear whether these transmissions are invested in human capital and thereby help families sustain social and economic status across many generations or rather represent transmission of mere consumption. In this paper, I exploit detailed wealth records from Denmark along with multi-generational family linkages in order to investigate the extent at which inheritances from grandparents are invested children. Leveraging heterogeneity in inheritances along with variation in the relative timing of grandparent death and school examination years, I find that inheritances have a substantial impact on child human capital accumulation as measured by school performance if received around the time of birth, while the impact is smaller in later years. In a series of event studies, I rationalize this finding. In particular, I provide evidence of substantial reductions in parental labor supply in response to receiving inheritances, and this reduction is stronger when parents have young children. In addition, I find that parents move to neighborhoods with better schools — but once again only if their children are small.
    Keywords: Inheritances, Intergenerational Mobility, Early Childhood Development
    JEL: E21 J24 J62
    Date: 2022–04–08
  76. By: International Monetary Fund
    Abstract: Selected Issues
    Keywords: capital market development; firm Level TFP growth; productivity in the UAE; implementation date; money market rate; monetary policy transmission; corridor system; Total factor productivity; Productivity; Structural reforms; Money markets; Labor markets; Global
    Date: 2022–02–17
  77. By: Bagsic, Cristeta
    Abstract: This paper is a replication and extension of Schaeck, Cihak, and Wolfe (2009). In contrast to results for a heterogeneous set of countries in Schaeck, Cihak, and Wolfe (2009), findings herein indicate that there is a chance that competition engenders systemic banking crisis for ASEAN EMEs, and that although concentration may not increase the probability of a banking crisis, at decreasing levels of competition, increasing concentration could damage financial stability. When controls for regulation and macroprudential tools are introduced, the opposite effects of competition and concentration on financial stability becomes more apparent.
    Keywords: financial stability; concentration; competition; banking crises
    JEL: E5 G1
    Date: 2021–12–12
  78. By: International Monetary Fund
    Abstract: Papua New Guinea (PNG) is a fragile state, vulnerable to recurrent shocks. A third wave of the COVID-19 pandemic is straining the healthcare system. Widespread vaccine hesitancy has contributed to very low uptake of the vaccines with about only 2 percent of the population fully vaccinated. Real GDP is estimated to rebound modestly to grow by 1.7 percent in 2021 after the downturn in 2020. Elections are due to take place in June 2022, and the formal campaign period will commence by end-April.
    Date: 2022–02–22
  79. By: Bruno Albuquerque; Georgina Green
    Abstract: We study how household concerns about their future financial situation may affect the marginal propensity to consume (MPC) during the COVID-19 pandemic. We use a representative survey of UK households to compute the MPC from a hypothetical transfer of £500. We find that household expectations play a key role in determining differences in MPCs across households: households concerned about not being able to make ends meet have a 20% higher MPC than other households. Our findings suggest that policies targeted to vulnerable and financially distressed households may prove more effective in stimulating demand than providing stimulus payments to all households.
    Keywords: COVID-19; Marginal propensity to consume; Survey data; Household behaviour; Expectations; Financial concerns; Fiscal policy.
    Date: 2022–03–04
  80. By: Fricke, Daniel; Greppmair, Stefan; Paludkiewicz, Karol
    Abstract: This paper documents significant cross-border effects of the 2014 US money market fund (MMF) reform on MMFs in the euro area. As US-based prime MMFs became less money-like due to the reform, euro area-based prime MMFs received large inflows from foreign investors. These cross-border flows were largely motivated by the search for stable net asset value instruments rather than by the introduction of gates and fees. Consistent with an easing of competitive pressure, institutional prime funds in the euro area reduced their risk-taking. However, the industry became more concentrated overall and more exposed to run risk from foreign investors. This risk materialized during the COVID-19-induced stress period.
    Keywords: cross-border effects,regulation,money market funds,risk-taking
    JEL: E41 G23 G28
    Date: 2022
  81. By: Gianluca Cubadda (CEIS & DEF University of Rome "Tor Vergata"); Alain Hecq (yMaastricht University)
    Abstract: This paper aims to decompose a large dimensional vector autoregessive (VAR) model into two components, the first one being generated by a small-scale VAR and the second one being a white noise sequence. Hence, a reduced number of common components generates the entire dynamics of the large system through a VAR structure. This modelling, which we label as the dimension-reducible VAR, extends the common feature approach to high dimensional systems, and it differs from the dynamic factor model in which the idiosyncratic component can also embed a dynamic pattern. We show the conditions under which this decomposition exists. We provide statistical tools to detect its presence in the data and to estimate the parameters of the underlying small-scale VAR model. Based on our methodology, we propose a novel approach to identify the shock that is responsible for most of the common variability at the business cycle frequencies. We evaluate the practical value of the proposed methods by simulations as well as by an empirical application to a large set of US economic variables.
    Keywords: Vector autoregressive models, dimension reduction, reduced-rank regression, multivariate autoregressive index model, common features, business cycle shock.
    Date: 2022–03–24
  82. By: Degryse, Hans (KU Leuven & CEPR); Kokas, Sotirios (University of Essex); Minetti, Raoul (Michigan State University, Department of Economics); Peruzzi, Valentina (Sapienza University of Rome)
    Abstract: We investigate the impact that banks’ information on borrowing firms has on firm-level growth using matched bank-firm data from the U.S. credit market. Exploiting the structure of lending syndicates to construct proxies for bank information, we find consistent evidence that banks’ information spurs firms’ tangible and intangible investments, as well as promoting better growth outcomes. We find limited evidence of banks’ exploitation of informational monopolies that could deter firms’ investment, even when banks hold significant credit market power. Banks’ information does not appear to bias firm growth towards capital-intensive investments, but rather fosters employment growth.
    Keywords: Firm Growth; Banks; Information; Syndicates
    JEL: G21 L25
    Date: 2022–04–11
  83. By: Mariana García-Schmidt (Banco Central de Chile); Javier García-Cicco (Universidad del CEMA)
    Abstract: We present a fully-edged dynamic stochastic general equilibrium (DSGE) model for the Chilean economy to explain the economy’s adjustments to external shocks, explicitly separating between tradable and non-tradable sectors (TNT). The model was built to explain Chile’s linkages with the external sector, to recognize that the sectors of the economy have particular price dynamics that are affected differently by shocks that move the nominal exchange rate, and to study different measures of exchange rate pass through (ERPT). We show unconditional and conditional ERPT measures. The former measures are comparable with the empirical literature, while the latter are defined after a particular shock hit the economy. We highlight important differences in their magnitudes and in their effect on different prices. While a shock to international prices has a transitory and low ERPT, one that affects the uncovered interest rate parity condition has a very high and persistent ERPT for all price indexes. In addition, the prices that are more rapidly affected are those of tradable sectors, while non-tradable prices are affected with a lag, but for longer. We use the model to show that the conditional ERPT measures could have helped to anticipate a great part of the inflationary effects of the depreciation following the tapering announcements of the US in 2013-2015, which was not possible using unconditional ERPT measures of the empirical literature.
    Date: 2022–01
  84. By: Bardt, Hubertus; Parthie, Sandra; Rusche, Christian
    Abstract: Die Position der EU als globale wirtschaftliche Großmacht ist zunehmend gefährdet. Dies ist zum einen Folge der Krisen, denen sich vor allem die EU in den letzten zwei Dekaden gegenübersah. Insbesondere zu nennen sind die weltweite Finanzkrise (2007-2009), die Eurokrise (2010-2012), die Flüchtlingskrise (2015-2016), der Brexit (2016-2020), die Corona-Pandemie seit 2020 und der Krieg in der Ukraine ab 2022. Zum anderen haben sich jedoch auch die globalen Wettbewerber, vor allem die USA und China, bei einer Reihe relevanter Wettbewerbsfaktoren von der EU absetzen können. Der Anteil der EU am weltweiten Bruttoinlandsprodukt ist in den letzten Jahren gesunken, weil andere Staaten schneller gewachsen sind. Die USA verzeichnen selbst mit ihrer geringeren Bevölkerung als die EU einen größeren Anteil an der weltweiten Wirtschaftsleistung. Die Volksrepublik China befindet sich seit 1999 in einem stetigen Aufholprozess bei der Wirtschaftsleistung pro Kopf. Sie startete bei rund acht Prozent des US-amerikanischen Niveaus und lag im Jahr 2020 bei rund 27 Prozent [...]
    JEL: E20 F01 O57
    Date: 2022
  85. By: Elise S. Brezis (Bar-Ilan University)
    Abstract: The Economic Consequences of the Peace was first published in 1919, and since then, changed the economic discourse surrounding reparations and Carthaginian peace. This paper specifies how three elements hinted at in the introduction of the Economic Consequences of the Peace – social classes, national sovereignty, and the international political system – can explain Keynes’ assessment of Carthaginian peace. The paper analyzes the optimality of reparations in the context of these three elements. I show that in the situation of a hegemonic country, all classes - the working class as well as the elite - opt for no reparations. But, in a balance of power context, wherein no single actor on the international scene possesses hegemonic status, the working class will choose harsh reparations, while the transnational elite and Keynes will not.
    Keywords: Balance of Power, Carthaginian Peace, Hegemony, Reparations, National Sovereignty.
    JEL: B17 B27 E12 F30
    Date: 2022–03
  86. By: Joern H. Block; Mirko Hirschmann; Tobias Kranz; Matthias Neuenkirch
    Abstract: Research and public interest on economic inequality have grown over the last years. Family firms and the concentration of wealth and power in the hands of a few wealthy business families have been discussed as both a cause and a consequence of economic inequality. Yet, so far, we lack knowledge about the relationship between economic inequality and the share of family firms in an economy. Our study investigates how the share of family-controlled public firms correlates with various measures of income and wealth inequality. The results show that a higher share of public family-controlled firms leads to more income inequality in a country. This effect is particularly pronounced for the middle of the income distribution as opposed to the top quantiles. Redistribution only mitigates this effect to some extent, as the effect is significant for market income and disposable income. We also find that a higher share of family-controlled firms contributes to an increase in wealth inequality. Our results are of economic relevance as, for instance, a one standard deviation change in the share of family-controlled firms leads to an increase of around 1.4 percentage points in the Gini coefficients for market income, disposable income, and wealth.
    Keywords: Cross-country analysis, family firms, income inequality, wealth inequality
    JEL: C50 D63 E00 L23
    Date: 2022
  87. By: Santiago Picasso
    Abstract: Este trabajo desarrolla una reformulaci ́on del modelo de Solow (de ahora en adelante MS). La din ́amica de la poblaci ́on de este modelo es ex ́ogena, con tasa de crecimiento de la poblaci ́on (de aqu ́ı en adelante TCP) constante. Se modifica este supuesto. En primer lugar se endogeniza la TCP, a trav ́es de la trayectoria del consumo. Este hecho estilizado se ilustra emp ́ıricamente. Bajo estas nuevas restricciones la TCP deja de ser constante con una evoluci ́on no mon ́otona. En consecuencia, el modelo presenta soluciones distintas del modelo can ́onico. Pueden existir varios equilibrios y en particular una trampa de pobreza. Adem ́as, si ocurre que la poblaci ́on alcanza tasas negativas de crecimiento, se puede obtener un crecimiento econ ́omico end ́ogeno al modelo, sin necesidad de suponer rendimientos marginales constantes o crecientes. Los efectos de un cambio ex ́ogeno de la tecnolog ́ıa o de la tasa de ahorro, se generalizan. Bajo ciertas restricciones se apartan de los resultados obtenidos en MS. Existe un umbral a partir del cual el progreso técnico o el aumento en el ahorro, no incrementa ni el stock del capital ni el producto en el corto plazo. Finalmente, se muestra que nada asegura convergencia entre pa ́ıses (ni absoluta, ni relativa). Los resultados sugieren que la din ́amica de la poblaci ́on es un supuesto relevante para explicar porqu ́e los pa ́ıses crecen de manera distinta y alcanzan productos per capita disımiles.
    Keywords: Teor ́ıa de crecimiento, poblaci ́on end ́ogena, convergencia, Solow
    Date: 2021–08
  88. By: David Turner; Nicolas Woloszko; Thomas Chalaux; Marnix Dek
    Abstract: Resolving stark differences between rich and poor countries in vaccine coverage against COVID is a global policy priority for 2022. However, even among OECD countries, there currently remain surprisingly large differences in vaccine coverage and this paper attempts to explain these differences, including the role that policy has played. The main findings are: vaccination has had massive health and economic benefits; vaccine hesitancy can be overcome, although there remains a link with historical flu and MMR vaccination rates; well-designed vaccine passes can boost coverage; trust in government and other public institutions matter, although the link to vaccine coverage is not straight-forward; demographic structure and policy stances towards vaccinating children play a role in explaining differences in overall population vaccination rates; mandatory vaccination has been implemented or is being considered in a few OECD countries, although it is too early to assess the effects. Finally, case studies of the most successful vaccination campaigns provide additional illumination, which cannot easily be captured in multi-country correlations.
    Keywords: COVID, COVID certificates, Sars-Cov-2, vaccination rate, vaccine hesitancy, vaccine pass
    JEL: E61 I18
    Date: 2022–04–04

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