nep-mac New Economics Papers
on Macroeconomics
Issue of 2022‒04‒25
94 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. A Note on Temporary Supply Shocks with Aggregate Demand Inertia By Ricardo J. Caballero; Alp Simsek
  2. Disinflation Costs and Macroprudential Policies: Real and Welfare Effects By Busato, Francesco; Ferrara, Maria; Varlese, Monica
  3. Two Types of Asset Bubbles in a Small Open Economy By Takashi Kamihigashi; Ryonghun Im
  4. Supply or Demand? Policy Makers' Confusion in the Presence of Hysteresis By Antonio Fatás; Sanjay R. Singh
  5. The paper assesses the effects of dominant currency shocks (strong US dollar) on emerging markets by studying exchange market pressure (EMP) or foreign exchange (FX) liquidity, GDP growth, external debt, and inflation. The literature emphasizes inflation passthrough, trade volume and GDP growth contraction in the periphery following a strong dollar. Comparing the dollar shock with euro and commodity price shocks and employing pooled mean group estimates and panel VAR across regimes of trade invoicing, this paper shows that bilateral depreciation can decrease FX liquidity and GDP growth in the periphery, failing to achieve the conventional macroeconomic adjustments of a competitive depreciation. A strong dollar reduces external debt, but strong euro has the opposite effect, implying circumvention of the ‘original sin.’ An EMP, FX liquidity, shock from the periphery appreciates the US dollar, affirming dollar’s safehaven status. These findings have implications for balance of payments and exchange rate policy management. By Aleksandr V. Gevorkyan; ATarron Khemraj
  6. What Do the Data Tell Us About Inflation Expectations? By Francesco D’Acunto; Ulrike Malmendier; Michael Weber
  7. Exploring correlations between aggregate demand and supply shocks in India By Ashima Goyal; Sritama Ray
  8. Uncertainty and Monetary Policy Experimentation: Empirical Challenges and Insights from Academic Literature By Matteo Cacciatore; Dmitry Matveev; Rodrigo Sekkel
  9. Liquidity constraints and fiscal multipliers By Sá, Diogo
  10. Unemployment insurance and labour productivity over the business cycle By Rujiwattanapong, W. Similan
  11. Quarterly GDP Estimates for the German States By Lehmann, Robert; Wikman, Ida
  12. The Coming Rise in Residential Inflation By Marijn A. Bolhuis; Judd N. L. Cramer; Lawrence H. Summers
  13. Going fiscal? A stylised model with fiscal capacity and a safe asset in the Eurozone By Codogno, Lorenzo; van den Noord, Paul
  14. Risk Aversion and Recessive Impacts of Austerity By Vaz de Castro, Afonso
  15. Jamaica: 2021 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Jamaica By International Monetary Fund
  16. FinTech Lending, Social Networks and the Transmission of Monetary Policy By Xiaoqing Zhou
  17. Tracking the German Business Cycle By Tino Berger; Christian Ochsner
  18. Análisis de la transmisión de la tasa de interés de política monetaria en la tasa de interés de microcréditos en Colombia: discusiones de independencia By Batz, A.; Montes, J.; Romero, J.; Rubio, P.
  19. Динамическая факторная модель инфляции для Казахстана // Dynamic Factor Model of Inflation for Kazakhstan By Ержан Ислам // Yerzhan Islam; Сейдахметов Ансар // Seidakhmetov Ansar
  20. What does the COVID-19 experience tell us about Indian growth drivers? By Ashima Goyal
  21. Flexible inflation targeting: Concepts and application in India By Ashima Goyal
  22. Revisiting the accuracy of inflation forecasts in Nigeria: The oil price-exchange rate-asymmetry perspectives By Kazeem Isah; Abdulkader Cassim Mahomedy; Elias Udeaja; Ojo Adelakun; Yusuf Yakubua
  23. Oil price shocks, government revenues and public investment: The case of Ecuador By Díaz-Kovalenko, Igor E.; Torres, José L.
  24. Nigeria: 2021 Article IV Consultation-Press Release; Staff Report; Staff Statement, and Statement by the Executive Director for Nigeria By International Monetary Fund
  25. Republic of North Macedonia: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of North Macedonia By International Monetary Fund
  26. The Wobbly Economy: Global Dynamics with Phase and State Transitions By Tomohiro Hirano; Joseph E. Stiglitz
  27. Assortative Mating and Wealth Inequality By Andreas Fagereng; Luigi Guiso; Luigi Pistaferri
  28. Business Cycles and Healthcare Employment By Erkmen G. Aslim; Shin-Yi Chou; Kuhelika De
  29. Existence and uniqueness of solutions to dynamic models with occasionally binding constraints By Holden, Tom D.
  30. Morocco: 2021 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  31. Is the Fed behind the Curve? Two Interpretations By James B. Bullard
  32. South Africa: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for South Africa By International Monetary Fund
  33. Estimating General Equilibrium Spillovers of Large-Scale Shocks By Kilian Huber
  34. Asset Prices and Unemployment Fluctuations: A Resolution of the Unemployment Volatility Puzzle By Patrick J. Kehoe; Pierlauro Lopez; Virgiliu Midrigan; Elena Pastorino
  35. Scarring Effects of the COVID-19 Pandemic on the Italian Labour Market By Fiaschi, Davide; Tealdi, Cristina
  36. Collective Moral Hazard and the Interbank Market By Levent Altinoglu; Joseph E. Stiglitz
  37. A simple macroeconomic framework for Madagascar By Ramaharo, Franck M.
  38. Heterogeneous savers and their inflation expectation during German industrialization: Social class, wealth, and gender By Lehmann-Hasemeyer, Sibylle H.; Neumayer, Andreas; Streb, Jochen
  39. Zombie Lending: Theoretical, International and Historical Perspectives By Viral V. Acharya; Matteo Crosignani; Tim Eisert; Sascha Steffen
  40. Indonesia: 2022 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Indonesia By International Monetary Fund
  41. Dominica: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Dominica By International Monetary Fund
  42. Temporary employment, informality, poverty and inequality By Tapias, J.
  43. Guinea-Bissau: Second Review Under the Staff Monitored Program-Press Release; and Staff Report By International Monetary Fund
  44. Stock Market Stimulus By Robin Greenwood; Toomas Laarits; Jeffrey Wurgler
  45. Beyond India @ 75: Growth, inclusion and sustainability By S. Mahendra Dev
  46. Optimal Nonlinear Savings Taxation By Brendon, C.
  47. Dynamic Identification Using System Projections and Instrumental Variables By Daniel J. Lewis; Karel Mertens
  48. Union of the Comoros: First Review Under the Staff-Monitored Program and Request for Extension; and Staff Report By International Monetary Fund
  49. Inequality and Income Dynamics in Germany By Drechsel-Grau, Moritz; Peichl, Andreas; Schmieden, Johannes; Schmid, Kai D.; Walz, Hannes; Wolter, Stefanie
  50. Inequality and Income Dynamics in Germany By Moritz Drechsel-Grau; Andreas Peichl; Johannes Friedrich Schmieder; Kai D. Schmid; Hannes Walz; Stefanie Wolter
  51. Employer-to-employer Transitions in Europe By Borowczyk-Martins, Daniel
  52. Tax policies, informality, and real wage rigidities By Salazar, M.
  53. A labor market view on the risks of a U.S. hard landing By Alex Domash; Lawrence H. Summers
  54. Computers, Programming and Dynamic General Equilibrium Macroeconomic Modeling By Bongers, Anelí; Molinari, Benedetto; Torres, José L.
  55. Steering Toward Sustainable Growth By Mary C. Daly
  56. "Is It Time for Rate Hikes? The Fed Cannot Engineer a Soft Landing but Risks Stagflation by Trying" By Yeva Nersisyan; L. Randall Wray
  57. A Tractable Overlapping Generations Structure for Quantitative DSGE Models By Kollmann, Robert
  58. Progressing Towards Efficiency: The Role for Labor Tax Progression in Reforming Social Security By Makarski, Krzysztof; Tyrowicz, Joanna; Komada, Oliwia
  59. A new macroeconomic measure of human capital exploiting PISA and PIAAC: Linking education policies to productivity By Balázs Égert; Christine de la Maisonneuve; David Turner
  60. Consumption and Saving after Retirement By Bent Jesper Christensen; Malene Kallestrup-Lamb; John Kennan
  61. Big data forecasting of South African inflation By Byron Botha; Rulof Burger; Kevin Kotze; Neil Rankin,; Daan Steenkamp
  62. New Evidence on Sectoral Labor Productivity: Implications for Industrialization and Development By Berthold Herrendorf; Richard Rogerson; Ákos Valentinyi
  63. Foreign Currency Debt and Exchange Rate Pass-Through By Anna Burova; Konstantin Egorov; Dmitry Mukhin
  64. Monetary Policy and Economic Growth in a Schumpeterian Model with Incumbents and Entrants By Lu, You-Xun; Chen, Shi-kuan; Lai, Ching-chong
  65. "Financial Barriers to Structural Change in Developing Economies: A Theoretical Framework" By Francesco Zezza; Gennaro Zezza
  66. The bond market impact of the South African Reserve Bank bond purchase programme By Roy Havemann; Henk Janse van Vuuren; Daan Steenkamp; Rossouw van Jaarsveld
  67. Macroprudential Policy Efficiency: Assessment for the Uncollateralized Consumer Loans in Russia By Irina Kozlovtceva; Henry Penikas; Ekaterina Petreneva; Yulia Ushakova
  68. An Augmented Steady-State Kalman Filter to Evaluate the Likelihood of Linear and Time-Invariant State-Space Models By Johannes Huber
  69. Bitcoin: Future or Fad? By Tut, Daniel
  70. Revisión de modelos para la desestacionalización y proyección de series macroeconómicas trimestrales. Año 2021. By Frank, Luis
  71. Strategi Pembangunan Ekonomi Islam M. Umer Chapra By Arikha, Dahlia
  72. Saved by the bell? Equity market responses to surprise Covid-19 lockdowns and central bank interventions By Aakriti Mathur; Rajeswari Sengupta; Bhanu Pratap
  73. What Drives Stock Market Development in Arab Countries? By Chiad, Faycal; Hadj Sahraoui, Hamoudi
  74. Do Countries Default in Bad Times? The Role of Alternative Detrending Techniques By Ugo Panizza
  75. Dominica: Selected Issues By International Monetary Fund
  76. Labour share in Indian economy: An Exploratory analysis of the role of trade, technology and structural transformation By Anwesha Basu; C. Veeramani
  77. Three Fiscal Rules for Bulgaria: Prof. Dr. Steve Hanke’s Exclusive Interview with Petia Minkova, Deputy Editor in Chief of 168 Hours By Hanke, Steve
  78. Price and Payoff Autocorrelations in the Consumption-Based Asset Pricing Model By Olkhov, Victor
  79. Estimating the Employment and GDP Multiplier of Emergency Cash Transfers in Brazil By Ms. Joana Pereira; Mr. Frederik G Toscani; Roberto A. Perrelli; Daniel Cunha
  80. Trend breaks and the long-run implications of investment-specific technological progress By Moura, Alban
  81. Revisión de modelos para ajuste estacional y proyección de sectores de actividad del EMAE. Año 2021. By Frank, Luis
  82. Minimum Wages, Efficiency and Welfare By David W. Berger; Kyle F. Herkenhoff; Simon Mongey
  83. A Model for Pricing Federal Housing Finance Obligations: Working Paper 2022-06 By Congressional Budget Office
  84. Persistencia de la pobreza e informalidad laboral en Colombia: un estudio para hogares de ingresos bajos y medios By Acosta, E.
  85. What is the effect of EU's fuel-tax cuts on Russia's oil income? By Johan Gars; Daniel Spiro; Henrik Wachtmeister
  86. Revisión de la modelación macroeconómica de la informalidad By Castrillón, C.; Gómez, W; Montoya, J.
  87. Stock Volatility and the War Puzzle By Gustavo S. Cortes; Angela Vossmeyer; Marc D. Weidenmier
  88. Labor Market Tightness in Advanced Economies By Mr. Romain A Duval; Mr. Ippei Shibata; Yi Ji; Carlo Pizzinelli; Marina M. Tavares; Longji Li; Myrto Oikonomou; Alessandra Sozzi
  89. Comment on “Labor- and Capital-augmenting technical change”: Does the stability of balanced growth path depend on the elasticity of factor substitution? By Bental, Benjamin; Li, Defu; Tang, Xuemei
  90. La guerre de Poutine en Ukraine, causera-t-elle la faim et des troubles en Afrique ? By Kohnert, Dirk
  91. The UK’s global economic elite: a sociological analysis using tax data By Advani, Arun; Burgherr, David; Savage, Mike; Summers, Andrew
  92. Demographic Changes, Labor Supplies, Labor Complementarities, Calendar Annual Wages of Age Groups, and Cohort Life Wage Incomes By Jensen, Bjarne S.; Pedersen, Peder J.; Guest, Ross
  93. Mediating the claim? How ‘local ecosystems of support’ shape the operation and experience of UK social security By Edmiston, Daniel; Robertshaw, David; Young, David; Ingold, Jo; Gibbons, Andrea; Summers, Kate; Scullion, Lisa; Geiger, Ben Baumberg; de Vries, Robert
  94. Beyond greed: why armed groups tax By Bandula-irwin, Tanya; Gallien, Max; Jackson, Ashley; Van Den Boogaard, Vanessa; Weigand, Florian

  1. By: Ricardo J. Caballero; Alp Simsek
    Abstract: We study optimal monetary policy during temporary supply contractions when aggregate demand has inertia and expansionary policy is constrained. In this environment, it is optimal to run the economy hot until supply recovers. Positive output gaps in the low-supply phase lessen the negative output gaps expected to emerge once supply recovers. However, the policy does not remain loose throughout the low-supply phase: The central bank undoes the initial interest rate cuts once aggregate demand gains momentum. If inflation also has inertia, the central bank still overheats the economy during the low-supply phase but gradually cools it down over time.
    JEL: E21 E32 E43 E44 E52 G12
    Date: 2022–03
  2. By: Busato, Francesco; Ferrara, Maria; Varlese, Monica
    Abstract: This paper investigates the costs of disinflation in an otherwise standard DSGE model with borrowing constraints and credit frictions, augmented with macroprudential authority. Analyzing the real and welfare effects of a permanent change in the inflation rate, we study the role of macroprudential policy and its interaction with monetary policy in ensuring financial stability. Results show that when macroprudential authority intervenes actively in order to improve financial stability, disinflation costs are limited. As for the welfare effects, disinflation is welfare improving for savers but welfare costly for borrowers and banks.
    Keywords: Disinflation, Macroprudential policy, Loan-to-value ratio, Monetary policy, Sacrifice ratio, Welfare effects
    JEL: D60 E44 E58
    Date: 2022–02–28
  3. By: Takashi Kamihigashi (Research Institute for Economics and Business Administration and Center for Computational Social Science, Kobe University, JAPAN); Ryonghun Im (Faculty of Economics, Kwansei Gakuin University, JAPAN)
    Keywords: Stock market bubbles; Pure bubbles; Small open economy
    JEL: E21 E44
    Date: 2022–03
  4. By: Antonio Fatás; Sanjay R. Singh (Department of Economics, University of California Davis)
    Abstract: Policy makers need to separate between temporary demand-driven shocks and permanent shocks in order to design optimal aggregate demand policies. In this paper we study the case of a central bank that ignores the presence of hysteresis when identifying shocks. By assuming that all low-frequency output fluctuations are driven by permanent technology shocks, monetary policy is not aggressive enough in response to demand shocks. In addition, we show that errors in assessing the state of the economy can be self-perpetuating if seen through the lens of the mistaken views of the policy maker. We show that a central bank that mistakes a demand shock for a supply shock, will produce permanent effects on output through their suboptimal policies. Ex-post, the central bank will see an economy that resembles what they had forecast when designing their policies. The shock is indeed persistent and this persistence validates their assumption that the shock was a supply-driven one. The interaction between forecasts, policies and hysteresis creates the dynamics of self-perpetuating errors that is the focus of this paper.
    Keywords: business cycles, hysteresis, Potential Output, Stabilization Policy
    JEL: E32 E60 O4
    Date: 2022–04–19
  5. By: Aleksandr V. Gevorkyan; ATarron Khemraj (Schwartz Center for Economic Policy Analysis (SCEPA))
    Keywords: dominant currency pricing, exchange market pressure, international monetary system, nominal spillovers
    JEL: E24 I14 J62 J38 E21 J83 J32
    Date: 2022–04
  6. By: Francesco D’Acunto; Ulrike Malmendier; Michael Weber
    Abstract: Inflation expectations are central to economics because they affect the effectiveness of fiscal and monetary policy as well as realized inflation. We survey the recent literature with a focus on the inflation expectations of households. We first review standard data sources and discuss their advantages and disadvantages. We then document that household inflation expectations are biased upwards, dispersed across individuals, and volatile in the time series. We also provide evidence of systematic differences by gender, income, education, and race. Turning to the underlying expectations formation process, we highlight the role of individuals' exposure to price signals in their daily lives, such as price changes in groceries, the role of lifetime experiences, and the role of cognition. We then discuss the literature that links inflation expectations to economic decisions at the individual level, including consumption-savings and financial decisions. We conclude with an outlook for future research.
    JEL: C90 D14 D84 E31 E52 E71 G11 G51 G53
    Date: 2022–03
  7. By: Ashima Goyal (Indira Gandhi Institute of Development Research); Sritama Ray (Indira Gandhi Institute of Development Research)
    Abstract: We explore the relative contributions of demand and supply shocks on inflation and output in India when correlation is allowed between shocks. Our SVAR model is estimated with quarterly GDP, WPI and CPI data covering the period between 1997Q2 and 2020Q1. The Keynesian case is of demand leading to a shift in supply as firms with excess capacity respond, while the case of supply affecting demand could be due to policy reactions to supply shocks. We estimate the correlations and slopes under different identifying assumptions. We find a positive correlation between shocks in all cases. Overall, a Horizontal Supply Curve (HSC) identification is supported, an asymmetry expected for a populous emerging market in transition. The short-run output cost of disinflationary policy is, therefore, large. Moreover, a policy demand contraction following a negative supply shock turns out to have perverse effects when the HSC holds, further aggravated when headline CPI is the target variable. This was the Indian experience of slowdown and inflation persistence after 2011 following demand tightening under food price shocks. Policy should ideally sustain demand, which can induce output expansion, and moderate the impact of shocks making the impact of demand and supply shocks more even. India's inflation targeting framework can therefore work better by aiding supply side improvements and anchoring inflation expectations.
    Keywords: Correlated demand and supply shocks, asymmetry, monetary policy, horizontal and vertical supply curves, India, structural VAR
    JEL: C51 C52 E52 E58
    Date: 2022–03
  8. By: Matteo Cacciatore; Dmitry Matveev; Rodrigo Sekkel
    Abstract: Central banks face considerable uncertainty when conducting monetary policy. Some of the reasons for this include limitations of economic data, the unobservability of key macroeconomic variables such as potential output, structural changes to the economy and disagreements over the correct model for the transmission of monetary policy. At the same time, monetary policy is affected by uncertainty from various sources, including lack of or imperfect observation of economic variables, structural economic changes and possible misspecifications using models. We draw from the academic literature to review some of the key sources of this uncertainty and their implications for the conduct of monetary policy. First, we discuss evidence on release lags and revisions to economic data. We also highlight uncertainty around measuring unobservable variables such as the output gap and the natural rate of unemployment. The strength of a trade-off between these measures of economic slack and inflation—a cornerstone of monetary policy—is itself subject to continuous reassessment. Second, the literature finds that different sources of uncertainty may make the optimal conduct of monetary policy either more or less responsive to economic shocks. Additionally, the benefits of tackling uncertainty by engaging in purposeful monetary policy experimentation are typically small but may become more significant during major structural change or following unprecedented shocks.
    Keywords: Central bank research; Monetary policy and uncertainty; Potential output
    JEL: E3 E5
    Date: 2022–04
  9. By: Sá, Diogo
    Abstract: Although recent studies identified the percentage of constrained agents as the crucial force driving many fiscal policy mechanisms, the values attained were purely the result of model calibrations. We make use of household-level data to estimate the fraction of hand-to-mouth households for several European countries. We calibrate an overlapping generations model with heterogeneous agents to match the net liquid wealth distribution and study the impact of credit constraints on the effectiveness of fiscal consolidation policies. Our findings suggest that the share of hand-to-mouth agents is no longer quantitatively relevant to explain the cross-country heterogeneity in fiscal multipliers when we calibrate the model to match empirically plausible estimates of that share. These results may be driven by the characteristics of the model we employ, which excludes the wealthy hand-to-mouth.
    Keywords: Fiscal Multipliers, Liquidity Constraints, Fiscal Consolidation, Hand-to-Mouth
    JEL: D31 E21 E62 H31
    Date: 2022–01
  10. By: Rujiwattanapong, W. Similan
    Abstract: This paper quantifies the effects of the increasing maximum unemployment insurance (UI) duration during recessions on the drop in the correlation between output and labour productivity in the U.S. since the early 1980s – the so-called productivity puzzle. Using a general equilibrium search and matching model with stochastic UI duration, heterogeneous match quality, variable search intensity and on-the-job search, I demonstrate that the model can explain over 40 percent of the drop in this correlation (28 percent when the Great Moderation is taken into account). More generous UI extensions during recent recessions cause workers to be more selective with job offers and lower job search effort. The former channel raises the overall productivity in bad times. The latter prolongs UI extensions since in the U.S. they are triggered by high unemployment.
    Keywords: business cycles; labour productivity; match quality; search and matching; unemployment insurance
    JEL: E24 E32 J24 J64 J65
    Date: 2021–09–15
  11. By: Lehmann, Robert; Wikman, Ida
    Abstract: To date, only annual information on economic activity is published for the 16 German states. In this paper, we calculate quarterly regional GDP estimates for the period between 1995 to 2020, thereby improving the regional datbase in Germany. The new data set will regularly be updated when quarterly economic growth for Germany becomes available. We use the new data for an in-depth business cycle analysis and find large heterogeneities in the duration and amplitudes of state-specific business cycles as well as in the degrees of cyclical concordance.
    Keywords: Regional economic activity; mixed-frequency vectorautoregression; regional business cycles; concordance; Bayesian methods
    JEL: C32 C53 E32 R11
    Date: 2022–03–30
  12. By: Marijn A. Bolhuis; Judd N. L. Cramer; Lawrence H. Summers
    Abstract: We study how the recent run-up in housing and rental prices affects the outlook for inflation in the United States. Housing held down overall inflation in 2021. Despite record growth in private market-based measures of home prices and rents, government measured residential services inflation was only four percent for the twelve months ending in January 2022. After explaining the mechanical cause for this divergence, we estimate that, if past relationships hold, the residential inflation components of the CPI and PCE are likely to move close to seven percent during 2022. These findings imply that housing will make a significant contribution to overall inflation in 2022, ranging from one percentage point for headline PCE to 2.6 percentage points for core CPI. We expect residential inflation to remain elevated in 2023.
    JEL: E01 E31 E37 R21 R31
    Date: 2022–02
  13. By: Codogno, Lorenzo; van den Noord, Paul
    Abstract: This paper examines the impact of rebalancing the policy mix away from monetary towards fiscal stimu-lus in the Euro zone, achieved at the supranational level by introducing a safe asset together with fiscal capacity at the centre. The model used is consensus Mundel-Fleming for a two-country ('core' and 'periphery') closed economy adapted to the critical features of Europe's Economic and Monetary Union. Specifically, alongside the determination of output, inflation and trade, the determination of financial flows and yields is explicitly modelled while the internal nominal exchange rate is fixed. Simulations are run in which a safe asset - dubbed Eurobond - replaces national bonds on banks and central bank's balance sheets, and a fiscal capacity at the center with the power to adjust the ag-gregate fiscal stance is introduced. Moreover, a new quantitative easing scheme, mandating the European Central Bank to adjust its portfolio of Eurobonds as deemed necessary in the pursuit of price stability, is introduced. The main conclusion emerging from the simulations is that had a Eurobond/fiscal capacity existed at the onset of the Great Financial Crisis, the recession would have been much more muted, and with much less need for unconvention-al monetary policy.
    Keywords: business fluctuations; European Monetary Union; fiscal policy; monetary policy
    JEL: E32 E63 F33
    Date: 2021–03–28
  14. By: Vaz de Castro, Afonso
    Abstract: This paper aims to contribute for the vast literature on the impact of country-specific characteristics on fiscal multipliers. We argue that countries have relevant differences in risk attitudes, and that those differences are economically significant in determining output responses to fiscal consolidation programs. We start with an empirical analysis, estimating the coefficient of relative risk aversion for nine European economies, finding relevant heterogeneity across countries. Using the coefficients found, we calibrate an incomplete markets overlapping generations model and study the impacts of an unanticipated fiscal consolidation shock. We find a positive relationship between fiscal multipliers and risk aversion when there is a spending-based consolidation, showing that recessive impacts from austerity are stronger the larger the degree of risk aversion. The underlying mechanism depends on the effect of risk aversion on precautionary savings behavior and so on the share of constrained agents. Larger risk aversion induces more precautionary savings, thus shrinking the share of constrained agents. Credit-constrained agents have a less responsive labor supply with respect to spending-based fiscal consolidation shocks.
    Keywords: Fiscal Multipliers, Fiscal Consolidation, Relative Risk Aversion
    JEL: E21 E62 H31 H63 I31
    Date: 2022–01–14
  15. By: International Monetary Fund
    Abstract: Jamaica was hit hard by the pandemic. An early lockdown in the Spring of 2020 helped contain the number of Covid-19 cases but the impact on the economy was severe, with real GDP shrinking by 10 percent. To counter the social and economic effects of the pandemic, the government temporarily reduced the fiscal balance target from +0.7 to -3 percent of GDP, increased spending on health and social protection and reduced the VAT rate. The central bank injected liquidity and encouraged loan moratoria to provide temporary support to the private sector. Growth is expected to rebound to 4.7 percent in 2021 and 4.3 percent in 2022. Downside risks to the outlook are significant, notably from Covid-19.
    Keywords: inflation expectation; CPI index; tourism stopover visitor; decline in inflation; inflation in December; Inflation; COVID-19; Fiscal responsibility law; Global; Caribbean; Europe
    Date: 2022–02–15
  16. By: Xiaoqing Zhou
    Abstract: One of the main channels through which monetary policy stimulus affects the real economy is mortgage borrowing. This channel, however, is weakened by frictions in the mortgage market. The rapid growth of financial technology-based (FinTech) lending tends to ease these frictions, given the higher quality services provided under this new lending model. This paper establishes that the role of FinTech lending in the monetary policy transmission is further amplified by consumers’ social networks. I provide empirical evidence for this network effect using county-level data and novel identification strategies. A 1 pp increase in the FinTech market share in a county’s socially connected markets raises the county’s FinTech market share by 0.23-0.26 pps. Moreover, I find that in counties where FinTech market penetration is high, the pass-through of market interest rates to borrowers is more complete. To quantify the role of FinTech lending and its network propagation in the transmission of monetary policy shocks, I build a multi-region heterogeneous-agent model with social learning that embodies key features of FinTech lending. The model shows that the responses of consumption and refinancing to a monetary stimulus are 13% higher in the presence of FinTech lending. Almost half of this improvement is accounted for by FinTech propagation through social networks.
    Keywords: FinTech; social networks; mortgage; monetary policy; regional transmission
    JEL: E21 E44 E52 G21 G23
    Date: 2022–03–25
  17. By: Tino Berger (University of Goettingen); Christian Ochsner (University of Goettingen)
    Abstract: The German economy is an important economic driver in the Euro-area in terms of gross domestic product, labour force and international integration. We provide a state of the art estimate of the German output gap between 1995 and 2021 and present a nowcasting scheme that accurately predicts the Germany output gap up to three months prior to a gross domestic product data release. To this end, we elicit a mixed-frequency vector-autoregressive model in the spirit of Berger, Morley, and Wong (forthcoming) who propose to use monthly information to form an expectation about the current-quarter output gap. The mean absolute error of our nowcast is very small (0.25 percentage points) after only one month of observed data. Moreover, we show that international trade and labour market aggregates consistently explain large shares of variation in the German output gap.
    Keywords: output gap, Germany, nowcast, mixed frequency, vector-autoregression
    JEL: E32 E37 C53
    Date: 2022
  18. By: Batz, A.; Montes, J.; Romero, J.; Rubio, P.
    Abstract: La tasa de interés de los microcréditos es importante en la medida en la que representa un costo significativo bajo el cual los microempresarios, emprendedores y trabajadores informales acceden a la financiación. Por lo tanto, la relación entre la tasa de intervención de política monetaria y esta tiene un rol fundamental en el crecimiento y desarrollo socioeconómico de este grupo. Sin embargo, las tasas de interés de este producto crediticio exhiben cierta independencia de la estrategia de política monetaria implementada por el Banco de la República, y una mayor relación con la demanda, el riesgo asociado, la solvencia y estructura de costos de las instituciones microfinancieras, entre otros.
    Keywords: Microcréditos; tasa de interés; tasa de intervención; política monetaria
    JEL: E26 E41 E51 E52 E58
    Date: 2021–11–03
  19. By: Ержан Ислам // Yerzhan Islam (National Bank of Kazakhstan); Сейдахметов Ансар // Seidakhmetov Ansar (National Bank of Kazakhstan)
    Abstract: Для центральных банков, придерживающихся политики инфляционного таргетирования, крайне важно отслеживать текущие тенденции развития инфляционных процессов. Помимо стандартного анализа влияния различных переменных необходимо понимание природы происхождения основных драйверов инфляционной динамики. В этой связи, приобретает особое значение постоянный анализ воздействия ненаблюдаемых переменных на инфляционные процессы. В рамках данной работы авторами были определены ненаблюдаемые переменные и произведена количественная оценка их влияния на динамику инфляционных процессов. // It is extremely important for central banks adhering to the policy of inflation targeting to monitor the current trends in the development of inflationary processes. In addition to the standard analysis of influence by various variables, it is necessary to understand the nature of where the main drivers of inflationary dynamics are stemming from. In this regard, the constant analysis of the impact on inflationary processes by unobserved variables is of particular importance. As part of this study, the authors have defined unobserved variables and made a quantitative assessment of their effect on the dynamics of inflationary processes.
    Keywords: инфляция, метод главных компонент, фактор, ненаблюдаемая переменная, вклад, декомпозиция, inflation, principal component analysis, factor, an unobserved variable, contribution, decomposition
    JEL: E31 E37 E39 E52
    Date: 2022
  20. By: Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: In India's battle with Covid-19, recovery was largely under-predicted and financial sector distress over-predicted. The slowdown through the 2010s led to the view that structural features limit growth and financial sector malfunction lowers monetary transmission. Therefore the reliance on the latter, while fiscal policy was relatively conservative, was expected to slow recovery. The inference from better than expected outcomes is that reforms have reached a threshold and monetary stimulus affects output. Diversity and deepening is sufficient to make the financial sector more stable. A turnaround in liquidity in 2019 had led to a rise in high frequency indicators by the end of the year before Covid-19 hit. Similarly, it aided recovery after Covid-19 waves. Tight monetary-financial conditions through the decade reduced growth. More than fundamental reforms, sustaining Indian growth requires continued fiscal supply-side action that reduces costs of doing business and inflation, allowing monetary policy to keep real interest rates below growth rates, thus stimulating demand and allowing public debt ratios to fall. Such monetary-fiscal coordination works best in Indian conditions. External shocks have to be smoothed and large domestic policy shocks avoided to lower growth volatility. We briefly discuss feasible reforms that can deliver, supported by softening of traditional macroeconomic constraints that were responsible for post-reform growth volatility.
    Keywords: Indian growth; drivers; reforms; fiscal-monetary coordination
    JEL: O16 G21 F43 H60 E52
    Date: 2021–11
  21. By: Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: The paper examines considerations that arise in adapting IT to emerging markets (EMs). These include the necessity of flexibility, the working of the expectations channel, the dominance of supply shocks, fiscal-monetary coordination, forecasting issues and guidance of thin markets. Implementation of inflation targeting in India has matured from a strict form that imposed a large output sacrifice, towards flexibility with better forecasting that kept inflation in the tolerance band, contributed to good growth recoveries as well as improved financial parameters in the first two years of the pandemic.
    Keywords: Flexible inflation targeting, concepts, India, market imperfections, anchoring
    JEL: E52 E63 E65
    Date: 2022–03
  22. By: Kazeem Isah; Abdulkader Cassim Mahomedy; Elias Udeaja; Ojo Adelakun; Yusuf Yakubua
    Abstract: Motivated by the distinctive paradoxical nature of the Nigerian economy as the only OPEC oil-exporting economy that yet depends heavily on the importation of gasoline, we are compelled to re-examine the accuracy of the oil-based augmented Philips curve model in the predictability of inflation. Using quarterly data from 1970 to 2020, we investigate whether including the exchange rate into the oil price-based augmented Phillips curve improves the accuracy of forecasting inflation for the Nigerian economy. We rely on the outcomes of our preliminary analysis to account for the presence of endogeneity, persistence, and conditional heteroscedasticity in the predictability of inflation following the Westerlund & Narayan (2015) procedure. We find the extended variant of the oil price-based Phillips curve model that includes the exchange rate pass-through as most accurate for improving inflation forecasts in Nigeria. Given the robustness of our results from several models, we conclude that the exchange rate channel through which shocks to the oil price transmit into the economy is essential for forecasting inflation.
    Keywords: Nigeria, Inflation forecasts, Phillips curve, Oil price-exchange rate asymmetry
    JEL: E53 E31 E37
    Date: 2022–02
  23. By: Díaz-Kovalenko, Igor E.; Torres, José L.
    Abstract: This paper studies the macroeconomic consequences of oil price shocks for small oil-exporting countries as a function of the adopted specific fiscal policy rule related to oil revenues. We focus on the particular case of Ecuador, where a large fraction of fiscal revenues depends on oil revenues, and where a fiscal policy rule implemented in 2008 establishes that public investment is a function of oil revenues. The paper develops a simple two-sector model featuring some key characteristics of the Ecuadorian economy to study the effects of international oil price shocks on macroeconomic volatility and welfare. The paper investigates alternative simple and easy practical implementation of oil revenues-related fiscal rules and compares their effects on economic activity and welfare to the existing one. We argue that a slight modification of the current fiscal rule, by linking public investment to all government revenues and not only to oil revenues, would significantly reduce the volatility of the Ecuadorian economy and cut down the welfare cost of oil price shocks.
    Keywords: Oil exporting countries; Oil price shocks; Oil windfalls; Fiscal rules; Public investment.
    JEL: E32 H3 Q32 Q48
    Date: 2022–03–07
  24. By: International Monetary Fund
    Abstract: The economy is recovering from a historic downturn thanks to policy support, rebounding oil prices and international financial assistance. Benefiting from the authorities’ pro-active approach, COVID-19 infection rates and fatalities have been contained. With higher oil prices and the country entering into the 2023 Presidential election cycle, there are risks of delays in much needed fiscal and exchange rate reforms. Macroeconomic and structural policies should build confidence and ensure a robust exit from the crisis.
    Keywords: January-November data; staff appraisal; staff projection; oil sector; policy support; headline inflation; Exchange rates; COVID-19; Inflation; Global; Sub-Saharan Africa
    Date: 2022–02–09
  25. By: International Monetary Fund
    Abstract: The economy is rebounding. After a 6 percent drop in 2020, real GDP is projected to grow at 4 percent both in 2021 and 2022, reflecting improved mobility, a return of the diaspora, and continued policy support. With uncertainty remaining high, including about the course of the pandemic, policies need to be kept flexible. Emphasis should be on limiting the economic scars from the pandemic crisis while making progress on long-standing reform priorities such as further strengthening public financial management and revenue administration and buttressing the financial safety net.
    Keywords: minimum wage increase; staff appraisal; productivity development; staff project; policy support; COVID-19; Minimum wages; Inflation; Global; Europe
    Date: 2022–02–16
  26. By: Tomohiro Hirano; Joseph E. Stiglitz
    Abstract: We analyze global dynamics in the standard life-cycle model with production, showing that there can be a plethora of rational expectations dynamics, including “wobbly macro-dynamics”. Depending on people’s beliefs, the macroeconomy can bounce around infinitely, without converging, without regular periodicity. The economy can be plagued by repeated periods of inefficiencies and unemployment. In phase transitions, the economy endogenously changes from a state with a unique momentary equilibrium into one with multiple equilibria, or vice versa. Phase transitions determine the patterns of dynamics. We identify all possible patterns of dynamics, providing a complete characterization of the parameter values under which each may occur, showing how a change in some key parameter (e.g. labor productivity) induces a “state transition,” an abrupt change in the set of feasible global dynamics: a boom can become unstable. Global dynamics exhibits strong hysteresis effects; a temporary positive productivity shock can have long run adverse effects.
    JEL: C61 E32 O11
    Date: 2022–02
  27. By: Andreas Fagereng; Luigi Guiso; Luigi Pistaferri
    Abstract: We use population data on capital income and wealth holdings for Norway to measure asset positions and wealth returns before individuals marry and after the household is formed. These data allow us to establish a number of novel facts. First, individuals sort on personal wealth rather than parents' wealth. Assortative mating on own wealth dominates, and in fact renders assortative mating on parental wealth statistically insignificant. Second, people match also on their personal returns to wealth and assortative mating on returns is as strong as that on wealth. Third, post-marriage returns on family wealth are largely explained by the return of the spouse with the highest pre-marriage return. This suggests that family wealth is largely managed by the spouse with the highest potential to grow it. This is particularly true for households at the top of the wealth distribution at marriage. We use a simple analytical example to illustrate how assortative mating on wealth and returns and wealth management task allocation between spouses affect wealth inequality.
    JEL: E21 E24 J12
    Date: 2022–04
  28. By: Erkmen G. Aslim; Shin-Yi Chou; Kuhelika De
    Abstract: Is healthcare employment recession proof? We examine the hypothesis that healthcare employment is stable across the business cycle. We explicitly distinguish between negative aggregate demand and supply shocks in studying how healthcare employment responds to recessions, and show that this response depends largely on the type of the exogenous shock triggering the recession. We find that healthcare employment responds procyclically to demand-induced recessions; and the reduction is driven by layoffs and discharges rather than voluntary quits. In evaluating additional mechanisms, we find evidence of a reduction in real personal healthcare expenditures resulting from an adverse demand shock. By contrast, we find that healthcare employment is fairly stable and even responds countercyclically to supply-induced recessions, suggesting compositional changes such as downskilling particularly in nursing sectors. Our findings establish that employment responses during economic downturns are heterogeneous across healthcare sub-sectors. More generally, by isolating the impact of the structural demand shock from supply shock on healthcare employment, we provide new empirical evidence that healthcare employment is not recession proof.
    JEL: C32 E32 I11 J22 J23
    Date: 2022–02
  29. By: Holden, Tom D.
    Abstract: Occasionally binding constraints (OBCs) like the zero lower bound (ZLB) can lead to multiple equilibria, and so to belief-driven recessions. To aid in finding policies that avoid this, we derive existence and uniqueness conditions for otherwise linear models with OBCs. Our main result gives necessary and sufficient conditions for such models to have a unique ('determinate') perfect foresight solution returning to a given steady state, for any initial condition. While standard New Keynesian models have multiple perfect-foresight paths eventually escaping the ZLB, price level targeting restores uniqueness. We also derive equilibrium existence conditions under rational expectations for arbitrary non-linear models.
    Keywords: occasionally binding constraints,zero lower bound,determinacy,existence,uniqueness,price level targeting
    JEL: C62 E3 E4 E5
    Date: 2022
  30. By: International Monetary Fund
    Abstract: Thanks to a successful vaccination campaign, COVID19 cases have declined sharply in 2021, and the Moroccan economy is rebounding. Economic activity has recovered most of the ground lost with the severe recession of 2020 and is expected to grow at 6.3 percent in 2021. Among the factors propelling the rebound are the exceptional harvest after two years of drought, continued fiscal and monetary stimulus, and the persistent buoyancy of remittances. Going forward, Morocco’s growth is expected to remain at about 3 percent, assuming the acceleration of new cases in early 2022 proves transitory and the effects of the pandemic on activity gradually fade. Recent inflationary pressures remained manageable and are expected to wane in 2022, as cost pressures from global and domestic supply disruptions are reabsorbed. After its sharp contraction in 2020, the current account deficit is projected to widen in 2021 and over the medium term, but Morocco emerges from the pandemic with a much stronger international reserve position.
    Keywords: fiscal policy stance; accommodative monetary policy; money market rate; liability positions vis-à-vis nonresident; dirham exchange rate; accounts payable; Morocco's exchange system; Structural reforms; Inflation; Exchange rate arrangements; Government finance statistics; Global; Maghreb; Middle East; North Africa; East Africa; Africa
    Date: 2022–02–09
  31. By: James B. Bullard
    Abstract: During a presentation at the University of Missouri-Columbia, St. Louis Fed President Jim Bullard offered two interpretations of whether the Federal Reserve is “behind the curve” on raising its policy rate in response to high inflation.
    Keywords: inflation; monetary policy
    Date: 2022–04–07
  32. By: International Monetary Fund
    Abstract: South Africa’s subpar economic performance over the last decade has weakened its macroeconomic fundamentals and social indicators. In response to formidable COVID-19-related challenges, government expenditure surged, and, amid declining revenue, the budget deficit widened significantly. The South African Reserve Bank (SARB) and the Prudential Authority (PA) preserved adequate liquidity conditions and financial-sector stability. The cyclical recovery from the deep contraction has been faster than expected but its strength is unlikely to be sustained. Benign global market conditions have supported asset performance, although term premia are elevated due to fiscal risks. Bank soundness indicators remain solid, but a deepening bank-sovereign nexus raises some concerns.
    Keywords: State Capture report; IMF South Africa team; U.S. dollar; headline inflation; IMF-World Bank; COVID-19; Inflation; Africa; Global
    Date: 2022–02–11
  33. By: Kilian Huber
    Abstract: Large-scale financial and macroeconomic shocks directly affect some firms and households and indirectly impact others through general equilibrium spillovers. In this paper, I describe how researchers can estimate spillovers directly using quasi-experimental or experimental variation. I then argue that spillover estimates suffer from distinct sources of mechanical bias that standard empirical tools cannot resolve. These biases are particularly relevant in finance and macroeconomics where multiple spillover channels and nonlinear effects are common. I offer guidance on how to detect and overcome mechanical biases. An application to a credit shock and additional examples highlight the broad relevance of the suggested methods.
    JEL: C13 C2 D5 E0 E51 G0 G21 G30 L2 R11 R23 R51
    Date: 2022–04
  34. By: Patrick J. Kehoe; Pierlauro Lopez; Virgiliu Midrigan; Elena Pastorino
    Abstract: Recent work has demonstrated that existing solutions of the unemployment volatility puzzle are at odds with the procylicality of the opportunity cost of employment, the cyclicality of wages, and the volatility of risk-free rates. We propose a model of business cycles that is immune to these critiques by incorporating two key features. First, we allow for preferences that generate time-varying risk over the business cycle to account for observed fluctuations in asset prices. Second, we introduce human capital acquisition consistent with the evidence on how wages grow with experience in the labor market. Our model reproduces the observed fluctuations in unemployment because hiring a worker is a risky investment with long-duration returns. As in the data, the price of risk in our model sharply increases in recessions. The benefit from hiring new workers therefore greatly declines, leading to a large decrease in job vacancies and an increase in unemployment of the same magnitude as in the data. We show that our results extend to versions of the model that include physical capital, a life cycle for workers, and alternative preference structures common in the asset-pricing literature.
    JEL: E3 E32 J22 J23 J24
    Date: 2022–02
  35. By: Fiaschi, Davide (University of Pisa); Tealdi, Cristina (Heriot-Watt University, Edinburgh)
    Abstract: The COVID-19 pandemic raised the share of inactive individuals in 2020 in Italy, mostly at the expense of permanent and fix-term employment. We document sizable asymmetric effects across categories of individuals, defined on the basis of gender, age and geographical area. In particular, the pandemic disproportionately affected females and, among those, more severely the ones living in large households in the North and Center of Italy. These findings find a rationale both in the presence of young children, which imposes strong constraints to the female labour force participation, and in the worse labour market opportunities in the South, which lead to a strong self-selection of women in the labour market. Despite the short period of observation after the burst of COVID-19 pandemic (four quarters of 2020), the identified effects appear large and persistent, rising awareness about the likely long-lasting scarring effects of the COVID-19 pandemic on the labour market choices and opportunities of Italian women.
    Keywords: labour market flows, transition probabilities, labour market shares, female inactivity rate
    JEL: C18 C53 E32 E24 J6
    Date: 2022–02
  36. By: Levent Altinoglu; Joseph E. Stiglitz
    Abstract: The concentration of risk within the financial system leads to systemic instability. We propose a theory to explain the structure of the financial system and show how it alters the risk taking incentives of financial institutions when the government optimally intervenes during crises. By issuing interbank claims, risky institutions endogenously become too interconnected to fail. This concentrated structure enables institutions to share the risk of systemic crises in a privately optimal way, but leads to excessive risk taking even by peripheral institutions. Interconnectedness and excessive risk taking reinforce one another. Macroprudential regulation which limits the interconnectedness of risky institutions improves welfare.
    JEL: E44 E61 G01 G18 G28
    Date: 2022–02
  37. By: Ramaharo, Franck M.
    Abstract: I present a simple model of macroeconomic accounting framework for the economy of Madagascar. The model is an identity-based framework that inherits the characteristics of the World Bank's Revised Minimum Standard Model and the International Monetary Fund's financial programming. Such models are mostly used for designing the macroeconomic framework of the budget laws of Madagascar.
    Keywords: macroeconomic framework, financial programming, accounting framework
    JEL: C63 E17
    Date: 2021–02–24
  38. By: Lehmann-Hasemeyer, Sibylle H.; Neumayer, Andreas; Streb, Jochen
    Abstract: Using microeconomic data on 2,500 savers of the savings bank Ludwigsburg, we study individual savings behavior in 19th century-Germany. We show that wealthy savers responded to an increase in the expected inflation rate (and falling real interest rate) by increasing their savings, suggesting that they pursued a real saving target that could only be defended by saving more when investment conditions became adverse. Workers' savings behavior changed over time. For a long time, poorer, often female, working-class savers were forced to reduce their savings in times of high prices because they had to spend most of their income on essential consumer goods. This changed in the 1880s, when the living conditions of the working class improved significantly due to rising real wages and greater social security. We therefore observe a structural break in the savings regime: the originally negative relationship between inflation expectations and savings was reversed into a positive one. Looking only at the aggregate may obscure the true motives and changes in behavior of heterogeneous savers.
    Keywords: expectations,inflation,industrialization,inequality,heterogeneous savers
    JEL: D15 E21 N33
    Date: 2022
  39. By: Viral V. Acharya; Matteo Crosignani; Tim Eisert; Sascha Steffen
    Abstract: This paper surveys the theory on zombie lending incentives and the consequences of zombie lending for the real economy. It also offers a historical perspective by reviewing the growing empirical evidence on zombie lending along three dimensions: (i) the role of under-capitalized banks, (ii) effects on zombie firms, and (iii) spillovers and distortions for non-zombie firms. We then provide an overview of how zombie lending can be attenuated. Finally, we use a sample of U.S. publicly listed firms to compare various measures proposed in the literature to classify firms as "zombies." We identify definitions of zombie firms that are adequate to investigate economic inefficiency in the form of real sector competitive distortions of zombie lending. We find that only definitions that are based on interest rate subsidies are able to detect these spillovers and thereby provide evidence in support of credit misallocation.
    JEL: E44 E58 G01 G2 G3
    Date: 2022–04
  40. By: International Monetary Fund
    Abstract: As elsewhere, the COVID-19 pandemic has led to tragic loss of life and triggered a major economic downturn in Indonesia. The authorities have responded with a bold and comprehensive policy package that has successfully maintained economic and financial stability. With the recovery underway, they have begun to withdraw the exceptional support measures. Nevertheless, the pandemic has caused scarring and reinforced the need to tackle longstanding structural challenges.
    Date: 2022–03–22
  41. By: International Monetary Fund
    Abstract: Dominica has been hit hard by the Covid-19 pandemic, with an estimated decline in GDP of 11 percent in 2020 underpinned by a sharp reduction in tourism receipts that affected connected sectors and by lockdown measures to limit virus contagion. The output decline was contained by health spending, social transfers, and public investment resilient to natural disasters which increased significantly, leading to an increase in public debt to 106 percent of GDP despite record-high Citizenship-by-Investment (CBI) revenue. The financial sector remained stable and liquid, but vulnerability continue to be significant in the under-capitalized non-bank sector.
    Keywords: CBI revenue; authorities of Dominica; authorities' effort; pandemic well; response to the pandemic; Natural disasters; Public investment spending; COVID-19; Caribbean; Global
    Date: 2022–02–14
  42. By: Tapias, J.
    Abstract: An essential tool in the fight against poverty is the generation of decent jobs through an equitable and inclusive labor market. To achieve this, two fronts of struggle must be addressed. The first is informality, which causes many workers in developing countries to have precarious working conditions and low incomes. The second refers to the misuse of temporary contracts. Temporary jobs are associated with instability and wage penalties. Therefore, a policy aimed at obtaining decent jobs to overcome poverty must include these two battlefronts. In this sense, a Computable General Equilibrium (CGE) model with temporary, permanent, and informal work is developing. We show some interesting relationships through the equations formulated so far. The future results of this work will be helpful to address and generate policies aimed at achieving decent jobs.
    Keywords: Labor informality; temporary employment; poverty;inequality; macroeconomics.
    JEL: E24 E26 I3 D63
    Date: 2021–12–03
  43. By: International Monetary Fund
    Abstract: After two years of protracted political turmoil and delays in reforms, the authorities put in place in 2021 an ambitious fiscal consolidation program to ensure debt sustainability while creating fiscal space to address vast developmental needs. In late July, Fund Management approved a 9-month Staff Monitored Program (SMP) to support the government’s reform program aimed at stabilizing the economy, strengthening governance, and building a soundtrack-record of policy implementation towards an Extended Credit Facility (ECF) arrangement. The first review was concluded satisfactorily in October. A Rapid Credit Facility (RCF) disbursement of SDR 14.2 million (50 percent of quota) was approved in January to provide urgent financing to support critical spending in health and catalyze additional donor resources. The RCF disbursement, the SDR 27.2 million allocation (96 percent of quota) and reforms underpinned by the SMP are contributing to address fragility including the adverse impact of the pandemic, improve government spending transparency and mitigate debt vulnerabilities, and create conditions that would help restore donor confidence and catalyze much-needed concessional financing.
    Keywords: SMP success; SMP review; IMF team; IMF's transparency policy; reform program; tax reform package; Guinea Bissau's Staff-Monitored Program; Arrears; Government debt management; Global
    Date: 2022–02–14
  44. By: Robin Greenwood; Toomas Laarits; Jeffrey Wurgler
    Abstract: We study the stock market effects of the arrival of the three rounds of “stimulus checks” to U.S. taxpayers and the single round of direct payments to Hong Kong citizens. The first two rounds of U.S. checks appear to have increased retail buying and share prices of retail-dominated portfolios. The Hong Kong payments increased overall market turnover and share prices in Hong Kong and mainland Chinese markets, especially in large-cap portfolios. We cannot rule out that these price effects were permanent. The findings raise novel questions about the role of fiscal stimulus in the stock market.
    JEL: E62 G0 G14 G38 G4
    Date: 2022–03
  45. By: S. Mahendra Dev (Indira Gandhi Institute of Development Research)
    Abstract: There have been many successes and failures in economic and social development of India in the last 75 years. The recent covid-19 pandemic had also an adverse impact on growth, employment, health and education etc. In this paper, issues and policies are discussed beyond India@75 for achieving growth, inclusion and development. As India is integrated with the world, global issues are also important for India's development. The country has to achieve higher growth with better macro policies, sectoral policies, increase in investment rate, higher investment on infrastructure, use of technology, increase in exports, better performance of banking and other financial institutions to improve credit to different sectors of the economy. These policies with effective implementation are needed to achieve 7 to 8 growth per annum and achieve $ 5 trillion and $10 trillion economy faster Rising inequalities across regions, income groups, social groups, gender, rural-urban are the major problems in Indian society. The biggest inequality in India has been the slow progress in social indicators and human development inspite of high economic growth. Quality of employment, health and education is a major concern. Inequality in both outcomes and opportunities have to be reduced. Another important strategy refers to social policy. Universal basic services in health and education should be the agenda for action. Equality of opportunity is important. Thus, there are strong social, political and economic reasons for reducing inequalities. Similarly, issues relating to sustainability and climate change are becoming important now than before at both global and national levels. Land, water, energy, common property are some of the natural resources that needs to be sustained over time. India should fulfil its commitments made in COP26 at Glasgow in 2021. The country also should undertake climate change adaptation and mitigation policies faster than before. In a large federal country like India, it is important to have larger role for states in achieving these goals. The spirit of `Cooperative Federalism' has to be followed.
    Keywords: Economic growth, inequalities, health, education, agriculture, industry, services, technology, climate change, sustainability
    JEL: D63 E2 E5 E6 E24 I14 I24 I31 I32 Q1 Q54
    Date: 2021–12
  46. By: Brendon, C.
    Abstract: This paper analyses the design of optimal nonlinear savings taxation, in a multi-period consumption-savings economy where consumers face persistent, uninsurable shocks to the marginal value that they place on consuming. Its main contributions are: (a) to show that shocks of this kind generically justify positive marginal savings taxes, and (b) to characterise these taxes by reference to a limited number of sufficient statistics. The method for obtaining this characterisation is generalisable, and provides a roadmap for reconnecting ‘Mirrleesian’ and ‘sufficient statistics’ approaches to dynamic taxation. Intuitively, dynamic asymmetric information problems imply significant restrictions on intertemporal consumption elasticities. These restrictions keep sufficient statistics representations manageable, despite the multi-dimensional choice setting.
    Keywords: Nonlinear Taxation, Sufficient Statistics, Mirrleesian Taxation, New Dynamic Public Finance
    JEL: D82 E21 E61 H21 H24 H30
    Date: 2022–03–25
  47. By: Daniel J. Lewis; Karel Mertens
    Abstract: We propose System Projections with Instrumental Variables (SP-IV) to estimate dynamic structural relationships. SP-IV replaces lag sequences of instruments in traditional IV with lead sequences of endogenous variables. SP-IV allows the inclusion of controls to weaken exogeneity requirements, can be more efficient than IV with lags, and allows identification over many time horizons without creating many-weak-instruments problems. SP-IV also enables the estimation of structural relationships across impulse responses obtained from local projections or vector autoregressions. We provide a bias-based test for instrument strength, and inference procedures under strong and weak identification. SP-IV outperforms competing estimators of the Phillips Curve parameters in simulations. We estimate the Phillips Curve implied by the main business cycle shock of Angeletos et al. (2020), and find evidence for forward-looking behavior. The data is consistent with weak but also relatively strong cyclical connections between inflation and unemployment.
    Keywords: Structural Equations; Instrumental Variables; Impulse Responses; Robust Inferences; Phillips Curve; Inflation Dynamics
    JEL: E3 C32 C36
    Date: 2022–03–30
  48. By: International Monetary Fund
    Abstract: Comoros is a small, fragile island state (population: 850,000) with persistently low and shock-prone growth and a high risk of external debt distress. Officially recorded COVID-related casualties have remained low (4,569 infections and 151 deaths so far). Growth projections remain at 1.6 percent in 2021 and 3.8 percent in 2022, supported in part by progress in vaccinations.
    Keywords: Comoros' Staff Monitored program; IMF team; SMP review; Comorian authorities; IMF's transparency policy; management of the International Monetary Fund; SMP objective; Arrears; Fiscal stance; Current spending; Sub-Saharan Africa
    Date: 2022–02–08
  49. By: Drechsel-Grau, Moritz (University of Zurich); Peichl, Andreas (Ludwig-Maximilians-Universität München); Schmieden, Johannes (IZA); Schmid, Kai D. (Heilbronn University of Applied Sciences); Walz, Hannes (FAU, Erlangen Nuremberg); Wolter, Stefanie (Institute for Employment Research (IAB), Nuremberg)
    Abstract: We provide a comprehensive analysis of income inequality and income dynamics for Germany over the last two decades. Combining personal income tax and social security data allows us – for the first time – to offer a complete picture of the distribution of annual earnings in Germany. We find that cross-sectional inequality rose until 2009 for men and women. After the Great Recession inequality continued to rise at a slower rate for men and fell slightly for women due to compression at the lower tail. We further document substantial gender differences in average earnings and inequality over the life-cycle. While for men earnings rise and inequality falls as they grow older, many women reduce working hours when starting a family such that average earnings fall and inequality increases. Men's earnings changes are on average smaller than women's but are substantially more affected by the business cycle. During the Great Recession, men's earnings losses become magnified and gains are attenuated. Apart from recession years, earnings changes are significantly right-skewed reflecting the good overall state of the German labor market and increasing labor supply. In the second part of the paper, we study the distribution of total income including incomes of self-employed, business owners, and landlords. We find that total inequality increased significantly more than earnings inequality. Regarding income dynamics, entrepreneurs' income changes are more dispersed, less skewed, less leptokurtic and less dependent on average past income than workers' income changes. Finally, we find that top income earners have become less likely to fall out of the top 1 and 0.1 percent.
    Keywords: inequality, income dynamics, mobility, non-labor income
    JEL: D31 E24 E31 J31
    Date: 2022–02
  50. By: Moritz Drechsel-Grau; Andreas Peichl; Johannes Friedrich Schmieder; Kai D. Schmid; Hannes Walz; Stefanie Wolter
    Abstract: We provide a comprehensive analysis of income inequality and income dynamics for Germany over the last two decades. Combining personal income tax and social security data allows us — for the first time — to offer a complete picture of the distribution of annual earnings in Germany. We find that cross-sectional inequality rose until 2009 for men and women. After the Great Recession inequality continued to rise at a slower rate for men and fell slightly for women due to compression at the lower tail. We further document substantial gender differences in average earnings and inequality over the life-cycle. While for men earnings rise and inequality falls as they grow older, many women reduce working hours when starting a family such that average earnings fall and inequality increases. Men's earnings changes are on average smaller than women’s but are substantially more affected by the business cycle. During the Great Recession, men’s earnings losses become magnified and gains are attenuated. Apart from recession years, earnings changes are significantly right-skewed reflecting the good overall state of the German labor market and increasing labor supply. In the second part of the paper, we study the distribution of total income including incomes of self-employed, business owners, and landlords. We find that total inequality increased significantly more than earnings inequality. Regarding income dynamics, entrepreneurs’ income changes are more dispersed, less skewed, less leptokurtic and less dependent on average past income than workers' income changes. Finally, we find that top income earners have become less likely to fall out of the top 1 and 0.1 percent.
    Keywords: inequality, income dynamics, mobility, non-labor income
    JEL: D31 E24 E31 J31
    Date: 2022
  51. By: Borowczyk-Martins, Daniel (Department of Economics, Copenhagen Business School)
    Abstract: I measure time series of the probabilities that an individual changes employer, sep-arates from employment, and joins employment during the month, using cross-sectional data from the European Union Labor Force Survey covering 13 countries during the past two decades. Employer-to-employer mobility is large and accounts for a sizable fraction of worker mobility in all countries; its levels, both absolute and relative to nonemploy-ment reallocation, vary considerably across countries. In most countries, the employer-to-employer probability exhibits large and procyclical variation. By contrast, there are no systematic cross-country patterns in the low-frequency evolution of employer-to-employer mobility.
    Keywords: Employer-to-employer mobility; Labor market flows; Business cycles
    JEL: E24 J63
    Date: 2022–03–31
  52. By: Salazar, M.
    Abstract: Developing countries have a vast informal sector generally associated with low levels of productivity. The persistence of informality could be a response to rigidities in the labor market, associated with a combination of high non-wages cost and high minimum wages. This paper proposes a theoretical framework to understand the tax policies’ role that discourages informality, such as lower payroll taxes in the formal sector or increases enforcement expenditure in an economy with real wage rigidities. I develop a search and matching model with a shirking mechanism with formal and informal workers. The simulations results suggest that the magnitud effect of tax polcies depends on real wage rigidities. In relative terms, when the economy has high real wage rigidities, the reduction of payroll taxes has a greater effect reducing the informality. In contrast, when the economy has low real wage rigidities, the enforcement expenditure has a significant effect to reduce the informality. Also, the results show the existence of tax polcies combition that reduce the informal labor in an effective way
    Keywords: Informality; Tax policies; Enforcement expenditure; Fiscal policies; Searchand matching; Efficiency wage; Shirking mechanism
    JEL: J46 E26 E62 O17 H26
    Date: 2021–12–02
  53. By: Alex Domash; Lawrence H. Summers
    Abstract: This paper uses historical labor market data to assess the plausibility that the Federal Reserve can engineer a soft landing for the economy. We first show that the labor market today is significantly tighter than implied by the unemployment rate: the vacancy and quit rates currently experienced in the United States correspond to a degree of labor market tightness previously associated with sub-2 percent unemployment rates. We highlight that the super-tight labor market coincides with current wage inflation of 6.5 percent – the highest level experienced in the past 40 years – and that firm-side slack measures predict further increases in wage inflation over the coming year. Finally, we show that high levels of wage inflation have historically been associated with a substantial risk of a recession over the next one to two years. We argue that periods that historically have been hailed as successful soft landings have little in common with the present moment. Our results suggest a very low likelihood that the Federal Reserve can reduce inflation without causing a significant slowdown in economic activity.
    JEL: E31 J11 J23 J3
    Date: 2022–04
  54. By: Bongers, Anelí; Molinari, Benedetto; Torres, José L.
    Abstract: Dynamic stochastic general equilibrium (DSGE) models nowadays undertake the bulk of macroeconomic analysis. Their widespread use during the last 40 years reflects their usefulness as a scientific laboratory in which to study the aggregate economy and its responses to different shocks, to carry out counterfactual experiments and to perform policy evaluation. A key characteristic of DSGE models is that their computation is numerical and requires intensive computational power and the handling of numerical methods. In fact, the main advances in macroeconomic modeling since the 1980s have been possible only because of the increasing computational power of computers, which has supported the expansion of DSGE models as more and more accurate reproductions of the actual economy, thus becoming the prevailing modeling strategy and the dominant paradigm in contemporaneous macroeconomics. Along with DSGE models, specific computer languages have been developed to facilitate simulations, estimations and comparisons of the aggregate economies represented by DSGE models. Knowledge of these languages, together with expertise in programming and computers, has become an essential part of the profession for macroeconomists at both the academic and the professional level.
    Keywords: Dynamic stochastic general equilibrium models; Computers; Programming languages; Codes; Computational economics; Dynare.
    JEL: C61 C63 C88 E37
    Date: 2022–03–22
  55. By: Mary C. Daly
    Abstract: Presentation to the UNLV Center for Business and Economic Research (CBER) Spring Outlook 2022, April 20, 2022, by Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco.
    Keywords: covid19; pandemic; inflation; monetary policy; federal funds rate
    Date: 2022–04–20
  56. By: Yeva Nersisyan; L. Randall Wray
    Abstract: Roughly two years into the economic recovery from the COVID-19 crisis, the topic of elevated inflation dominates the economic policy discourse in the United States. And the aggressive use of fiscal policy to support demand and incomes has commonly been singled out as the culprit. Equally as prevalent is the clamor for the Federal Reserve to raise interest rates to relieve inflationary pressures. According to Research Scholar Yeva Nersisyan and Senior Scholar L. Randall Wray, this narrative is flawed in a number of ways. The problem with the US economy is not one of excess of demand in their view, and the Federal Reserve will not be able to engineer a "soft landing" in the way many seem to be expecting. The authors also deliver a warning: excessive tightening, combined with headwinds in 2022, could lead to stagflation. Moreover, while this recovery looks robust in comparison to the jobless recoveries and secular stagnation that have typified the last few decades, in Nersisyan and Wray's estimation there are few signs of an overheating economy to be found in the macro data. In their view, this inflation is not centrally demand driven; rather dynamics at the micro-level are playing a much more central role in driving the price increases in question, while significant supply chain problems have curtailed productive capacity by disrupting the availability of critical inputs. The authors suggest there is a better way to conduct policy—one oriented around targeted investments that would increase our real resource space. This will serve not only to address inflationary pressures, according to Nersisyan and Wray, but also the far more pressing climate emergency.
    Date: 2022–04
  57. By: Kollmann, Robert
    Abstract: This paper develops a novel tractable overlapping generations (OLG) structure that is suitable for use in rich quantitative dynamic stochastic general equilibrium (DSGE) models. The OLG structure assumes that newborn agents receive a wealth transfer such that that their equilibrium consumption represents a time-invariant share of aggregate consumption. Under efficient risk sharing across contemporaneous cohorts, this implies that aggregate consumption obeys a (quasi-)Euler equation that is isomorphic to the Euler equation of an infinitely-lived representative agent. As a result, DSGE models, with the proposed OLG structure, can be solved as conveniently as standard DSGE models with infinitely-lived representative agents. The great tractability of the OLG structure here constitutes an important advantage over conventional OLG models, especially when agents are long-lived. While highly tractable, the present OLG structure maintains key predictions of standard OLG models, namely the possibility of low (even negative) real interest rates and of equilibrium indeterminacy.
    Keywords: overlapping generations; dynamic stochastic general equilibrium models; Euler equation; subjective discount factor; transversality condition; multiple equilibria.
    JEL: C6 E1 E3
    Date: 2022–03–27
  58. By: Makarski, Krzysztof (Warsaw School of Economics); Tyrowicz, Joanna (University of Warsaw); Komada, Oliwia (GRAPE)
    Abstract: We study interactions between progressive labor taxation and social security reform. Increasing longevity puts fiscal strain that necessitates the social security reform. The current social security is redistributive, thus providing (at least partial) insurance against idiosyncratic income shocks, but at the expense of labor supply distortions. A reform which links pensions to individual incomes reduces distortions associated with social security contributions, but incurs insurance loss. We show that the progressive labor tax can partially substitute for the redistribution in social security, thus reducing the insurance loss.
    Keywords: social security reform, labor income tax, redistribution, insurance, welfare effects
    JEL: C68 D72 E62 H55 J26
    Date: 2022–02
  59. By: Balázs Égert; Christine de la Maisonneuve; David Turner
    Abstract: This paper provides a new measure of human capital using PISA and PIAAC surveys, and mean years of schooling. The new measure is a cohort-weighted average of past PISA scores (representing the quality of education) of the working age population and the corresponding mean years of schooling (representing the quantity of education). In contrast to the existing literature, the relative weights of each component are not imposed or calibrated but directly estimated. The paper finds that the elasticity of the stock of human capital with respect to the quality of education is three to four times larger than for the quantity of education. The new measure has a strong link to productivity with the potential for productivity gains being much greater from improvements in the quality than quantity component of human capital. The magnitude of these potential gains in MFP is comparable to a similarly standardised improvement in product market regulation, but the effects materialise with much longer lags. The paper demonstrates through the example of pre-primary education, how to simulate the impact of a particular reform to education policy on human capital and productivity.
    Keywords: education policies, human capital, OECD countries, PIAAC, PISA, productivity
    JEL: E24 I20 I25 I26 I28
    Date: 2022–04–08
  60. By: Bent Jesper Christensen; Malene Kallestrup-Lamb; John Kennan
    Abstract: The paper analyzes consumption decisions of retired workers, using Danish register data. A major puzzle, which motivates much of the analysis below, is that wealth actually increases for a large fraction of the people in our data. One would expect that wealth accumulated before retirement would be used to augment consumption in later life, with the implication that wealth should decline over time. The risk of large out-of-pocket medical expenditures is negligible in Denmark, so although explanations associated with such expenditures might explain similar patterns in U.S. data, these explanations are not plausible for Denmark (and therefore also questionable for the U.S.). Our analysis instead attempts to explain wealth paths using a model that emphasizes fluctuations in the marginal utility of consumption. The results show that a latent state variable extension of the standard life-cycle consumption model is quite successful in explaining the curious observed wealth patterns after retirement for singles.
    JEL: E21 J26
    Date: 2022–03
  61. By: Byron Botha; Rulof Burger; Kevin Kotze; Neil Rankin,; Daan Steenkamp
    Abstract: We investigate whether the use of machine learning techniques and big data can enhance the accuracy of inflation forecasts and our understanding of the drivers of South African inflation. We make use of a large dataset for the disaggregated prices of consumption goods and services to compare the forecasting performance of a suite of different statistical learning models to several traditional time series models. We find that the statistical learning models are able to compete with most benchmarks, but their relative performance is more impressive when the rate of inflation deviates from its steady state, as was the case during the recent COVID-19 lockdown, and where one makes use of a conditional forecasting function that allows for the use of future information relating to the evolution of the inflationary process. We find that the accuracy of the Reserve Bank’s near-term inflation forecasts compare favourably to those from the models considered, reflecting the inclusion of off-model information such as electricity tariff adjustments and within-month data. Lastly, we generate Shapley values to identify the most important contributors to future inflationary pressure and provide policymakers with information about the potential sources of future inflationary pressure.
    Keywords: Micro-data, Inflation, High dimensional regression, Penalised likelihood, Bayesian methods, Statistical learning
    JEL: C10 C11 C52 C55 E31
    Date: 2022–02
  62. By: Berthold Herrendorf; Richard Rogerson; Ákos Valentinyi
    Abstract: Moving labor from agriculture to manufacturing – “industrialization” – is often viewed as essential for the development of poor countries. We present new evidence on the channels through which industrialization can help poor countries close the productivity gap with rich countries. To achieve this, we leverage recent data releases by the Groningen Growth and Development Centre and build a new dataset of comparable labor productivity levels in agriculture and manufacturing for 64 mostly poor countries during 1990–2018. We find two key results: (i) cross-country labor productivity gaps in manufacturing are larger than in the aggregate and (ii) there is no tendency for manufacturing labor productivity to converge. While these results challenge the notion that expanding manufacturing employment is essential for the development of today’s poor countries, we also find that higher labor productivity growth in manufacturing is associated with higher labor productivity growth in the aggregate and in several key sectors.
    JEL: E24 O11 O14 O47
    Date: 2022–03
  63. By: Anna Burova (Bank of Russia, Russian Federation); Konstantin Egorov (New Economic School); Dmitry Mukhin (London School of Economics)
    Abstract: This paper studies both theoretically and empirically the firm’s choice of currency for its debt. We use a parsimonious model with financial frictions to derive an intuitive sufficient statistic for the share of foreign-currency debt in firm’s liabilities and demonstrate its robustness in several extensions. Due to the risk management considerations, firms are more likely to borrow in dollars when the pass-through of the exchange rate into their profits is higher. We leverage this insight empirically using the micro-level data on loans issued by Russian banks to local firms as well as the data on firms’ balance sheets and cash flows. The data strongly supports the predictions of the model indicating that firms with profits more stable in dollars are more likely to borrow in foreign currency than firms with profits stable in local currency. These results extend to a choice between the euro and the dollar and survive after controlling for firms’ size and export status. Note that our results describe efficiency at the firm level, and they do not have direct implications for macroprudential policy as foreign currency debt may also affect exchange rate volatility, inflation and output.
    Keywords: currency choice, invoicing currency, borrowing currency, dollar in global economy, bank loans, exporter status, optimal debt composition
    JEL: D22 F31 F34 G11 G21 G32
    Date: 2022–02
  64. By: Lu, You-Xun; Chen, Shi-kuan; Lai, Ching-chong
    Abstract: An important aspect of economic growth is the interaction between incumbents and new firms. In this study, we develop a monetary Schumpeterian model with an endogenous market structure (EMS) and two types of quality improvements (the own-product improvements of incumbents and creative destruction of entrants) to analyze the effects of monetary policy. The key finding of our analysis is that an increase in the nominal interest rate importantly affects the composition of innovation that drives economic growth, stimulating the incumbents’ own-product improvements and reducing the entrants’ creative destruction. Therefore, the growth effect of monetary policy is ambiguous, and depends on the relative magnitudes of the incumbents’ and entrants’ contributions to R&D and growth. Finally, we provide a quantitative analysis of the growth and welfare effects of monetary policy and consider an extension of the benchmark model with an elastic labor supply and a CIA constraint on consumption.
    Keywords: innovation, monetary policy, economic growth, endogenous market structure
    JEL: E41 O31 O41
    Date: 2022–01–18
  65. By: Francesco Zezza; Gennaro Zezza
    Abstract: Starting from the seminal works of Wynne Godley (1999; Godley and Lavoie 2005, 2007a, 2007b), the literature adopting stock-flow consistent (SFC) models for two or more countries has been flourishing, showing that consistently taking into account real and financial markets of two open economies will generate different results with respect to more traditional open economy models. However, few contributions, if any, have modeled two regions in the same country, and our paper aims at filling this gap. When considering a regional context, most of the adjustment mechanisms at work in open economy models--such as exchange rate movements, or changes in interest on public debt--are simply not present, as they are in control of "external" authorities. So, what are the adjustment mechanisms at work? To answer this question, we adapt the framework suggested in Godley and Lavoie (2007a) to consider two regions that share the same monetary, fiscal, and exchange rate policies. We loosely calibrate our model to Italian data, where the South (Mezzogiorno) has both a lower level of real income per capita and a lower growth rate than the North. We also introduce a fragmented labor market, as discouraged workers in the South will move North in hopes of finding commuting jobs. Our model replicates some key features of the Italian economy and sheds light on the interactions between financial and real markets in regional economies with "current account" imbalances.
    Keywords: Stock-Flow Consistent; Regional Labor Mobility; Regional Economic Activity and Development
    JEL: E12 J61 R12
    Date: 2022–04
  66. By: Roy Havemann; Henk Janse van Vuuren; Daan Steenkamp; Rossouw van Jaarsveld
    Abstract: We use a unique dataset comprising over a million trades and quotes to assess the impact of the unexpected announcement of a bond purchase programme by the South African Reserve Bank on intraday market liquidity, yields and pricing volatility. Our dataset details the timing and order details of individual bonds purchased by the South African Reserve Bank during the COVID-19 pandemic, as well as data from over a million other fixed-coupon bond trades and intraday quotes. We find that the programme was successful at shoring up market confidence and addressing dislocation in the government bond market. We show that bond spreads fell both on announcement and after purchases themselves. Bond pricing adjusted slowly, with effects typically strengthening over the course of the trading day. We find that announcement effects dominated the impact of purchases themselves. Lastly, our intraday dataset enables assessment of the spillovers of central bank announcements in major economies and we show that the Federal Reserve played an important role in stabilising South Africa’s bond market, helping to support the actions of SARB.
    Keywords: bond purchase programme, liquidity, yield curve
    JEL: C5 E43 E58 G12 G14
    Date: 2022–03
  67. By: Irina Kozlovtceva (Bank of Russia, Russian Federation); Henry Penikas (Bank of Russia, Russian Federation); Ekaterina Petreneva (Bank of Russia, Russian Federation); Yulia Ushakova (Bank of Russia, Russian Federation)
    Abstract: We use the Russian banks’ 2015-2019 data to evaluate the effectiveness of the macro- prudential measures in curbing the booming consumer lending segment. We find that the measures are successful in reducing the overall loan portfolio riskiness and in capital cushion accumulation by banks. In the short-run of up to 1-2 quarters after the measure announcement date banks tend to reduce both the new loan volumes and the average consumer loan portfolio growth rate. Such reduction is more typical with the smallest market players. However, in the longer time horizon up to a year from the measure application date we observe the increase in the average credit growth rates. Such findings correspond to the experience of the emerging markets of Argentine, Colombia, Thailand. In general, we consider that the observed credit growth after the measure implementation is smaller than it could have been without the measures in place. We also expect that the observed lending growth rate brings less financial instability risks and it reflects the potential for the natural loan extension in Russia.
    Keywords: financial stability, risk-weight, consumer loan, macroprudential
    JEL: G21 G28 G32
    Date: 2020–11
  68. By: Johannes Huber (University of Augsburg, Department of Economics)
    Abstract: We propose a modified version of the augmented Kalman filter (AKF) to evaluate the likelihood of linear and time-invariant state-space models (SSMs). Unlike the regular AKF, this augmented steady-state Kalman filter (ASKF), as we call it, is based on a steady-state Kalman filter (SKF). We show that to apply the ASKF, it is sufficient that the SSM at hand is stationary. We find that the ASKF can significantly reduce the computational burden to evaluate the likelihood of medium- to large-scale SSMs, making it particularly useful to estimate dynamic stochastic general equilibrium (DSGE) models and dynamic factor models. Tests using a medium-scale DSGE model, namely the 2007 version of the Smets and Wouters model, show that the ASKF is up to five times faster than the regular Kalman filter (KF). Other competing algorithms, such as the Chandrasekhar recursion (CR) or a univariate treatment of multivariate observation vectors (UKF), are also outperformed by the ASKF in terms of computational efficiency.
    Keywords: kalman filter, dsge, bayesian estimation, maximum-likelihood estimation, computational techniques
    JEL: C18 C63 E20
    Date: 2022–04
  69. By: Tut, Daniel
    Abstract: Is Bitcoin the payment system of the future? In these notes, we argue that Bitcoin is neither currency nor gold, but that it is a tradable asset and an alternative form of investments. Bitcoin also exhibits some features as an investment asset that are similar to collectibles. The true value of Bitcoin lies not in its speculative nature but in the embedded technology which has the long term potential of revolutionizing traditional nance. Blockchain technology can provide solutions to Big Data challenges and provide an o -ramp during political uncertainty. Bitcoin's long-term survivability and viability as an asset will largely depend on its diversification role, institutional adoption, tax treatment and regulations.
    Keywords: Bitcoin, Cryptocurrency, Blockchain technology, smart contracts, digital assets, NFTs, Payment Systems, Money
    JEL: D8 D84 E4 G0 G02 G1 G17 G18 K22 M21 O3 O31 O33
    Date: 2022–03–10
  70. By: Frank, Luis
    Abstract: The paper presents a review of the seasonal ARIMA models used to deseasonalize and project the main macroeconomic variables of Argentina. The review was mainly motivated by the impact of the COVID pandemic starting in early 2020. The results confirmed the necessity of the review - despite only four quarters passed since the last revision - and the suitability of the outlier-variables introduced during the pandemic, except for foreign trade series. Nevertheless, a closer inspection of the results show that models should have been revised two or three quarters after the start of the pandemic to ensure that the specifications were consistent with the intervention done on each series.
    Keywords: seasonal adjustment of series, seasonal ARIMA
    JEL: C82
    Date: 2021–04–16
  71. By: Arikha, Dahlia
    Abstract: This research is a study with a literature method based on the author's search for Chapra's works on the Islamic Economics Development. In formulating economic development, Chapra first analyzed the thought of economic development from the west dominated by secular thought. As a result, Chapra found inconsistencies in secular economic development thinking which applied in the economic development system of the world's countries. Chapra believes that the inconsistencies of economic development cause destruction and bring the economy away from justice. Chapra's criticism led Chapra to the conclusion that Islam has great potential to fill consistency in socially equitable economic struggles.
    Keywords: Secular Economic Development, Islamic Economic Development, Justice
    JEL: A13 B00 C53 D63 E6
    Date: 2022–01–01
  72. By: Aakriti Mathur (The Graduate Institute of International and Development Studies); Rajeswari Sengupta (Indira Gandhi Institute of Development Research); Bhanu Pratap (Reserve Bank of India)
    Abstract: Negative equity market reactions at the onset of the Covid-19 crisis raised concerns about the vulnerabilities in non-financial firms, requiring swift actions by central banks to prevent system-wide stresses. We investigate the Indian context, where the announcement of a surprise, nationwide lockdown in March 2020, was followed by the announcement of an unanticipated policy package by the central bank a few days later. Using natural language processing on quarterly earnings call reports, we construct a firm-specific measure of concern about the pandemic for a set of Indian non-financial firms. We find that firms that were exposed to the pandemic in early 2020 had worse stock market performance when the lockdown was announced. These results are explained by the implications of pandemic-related uncertainty for the future cash flows of these firms. The central bank's policy package seemed to have reversed the impact of the lockdown announcement in the short-term.
    Keywords: Covid-19, event study, earnings calls, firm performance, uncertainty, central bank policies
    JEL: G14 G18 G32 E58 L25 D8
    Date: 2022–03
  73. By: Chiad, Faycal; Hadj Sahraoui, Hamoudi
    Abstract: Arab stock exchanges have witnessed tremendous growth in recent decades, and the number of listed companies and the size of stock market capitalization have increased. In the light of this remarkable growth, this study aims to find out what are the most important determinants and economic factors affecting this development during the period 2006– 2017. By employing panel data models, we find that trade openness; market liquidity, money supply and economic growth have positive impacts on stock market development, whereas the global financial crisis has negative impact. Based on these results, measures should be taken to improve market liquidity, control of money supply, and maintain a balanced economic growth rate to promote the development of Arab stock exchanges. Policy recommendations are provided based on these findings.
    Keywords: Macroeconomic variables; stock markets development; Arab countries; panel data analysis
    JEL: E0 E00 G10
    Date: 2021
  74. By: Ugo Panizza (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: Quantitative models of sovereign debt predict that countries should default during deep recessions. However, empirical research on sovereign debt has found a surprisingly large share of "good times" defaults (i.e., defaults that happen when GDP is above trend). Existing evidence also indicates that, on average, defaults happen when output is close to potential. This paper reassesses the empirical evidence and shows that the detrending technique proposed by Hamilton (2018) yields results that are closer to the predictions of standard quantitative models of sovereign debt.
    Keywords: Sovereign Debt; Default; Business Cycles
    JEL: F34 F32 H63
    Date: 2022–04–10
  75. By: International Monetary Fund
    Abstract: Selected Issues
    Keywords: moment Calibration summary; income distribution implication; building RESILIENCE; shadow economy estimate; B. General model description; fiscal policy experiment; Corporate income tax; Informal economy; Personal income tax; Consumption; Caribbean
    Date: 2022–02–14
  76. By: Anwesha Basu (Indira Gandhi Institute of Development Research); C. Veeramani (Indira Gandhi Institute of Development Research)
    Abstract: This study analyses the trends, patterns and determinants of the labour share in India. While most of the literature on this topic covers only the organized manufacturing sector, this paper provides a detailed analysis of the labour share at the sectoral level, covering both formal and informal sectors of the entire economy. Using KLEMS data, we find that the aggregate economy-wide labour share declined from 54 in 1980 to 49 in 2016. Shift-share decomposition exercise reveals that both within and between sectoral factors played a role in determining the trends in the aggregate labour share. However, analysis at the disaggregated level reveals that the within sector decline in labour share is neither driven by technological progress, nor by exposure to international trade. Instead, it is mainly driven by two sectors: real estate and construction, neither of which is susceptible to the effects of technological change or trade. The between sector component, on the other hand, is driven by the idiosyncratic nature of the economy's structural transformation, which has favored the high skilled service sector and bypassed manufacturing completely. Within the organized manufacturing sector as well we find that the value-added share of capital-intensive sectors, with the lowest level of labour share, has increased steadily, while that of unskilled manufacturing has declined; leading to a decline in the labour share within the formal manufacturing sector. Sectoral level regression analysis reveals that, controlling for other factors like trade openness and capital intensity, a growth in the share of capital intensive and high skilled sectors leads to a decline in the sectoral wage share. We conclude that the apprehension regarding automation and globalization eating up labour's share of the income might be pre-mature in the context of India. The nature of reallocation of economic activity between sectors has an important role to play.
    Keywords: labour share, structural transformation, trade, technological progress
    JEL: D33 E25 F66
    Date: 2021–12
  77. By: Hanke, Steve (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: Prof. Steve H. Hanke’s Answers to Petia Minkova’s Questions of February 20, 2022 for 168 Hours
    Date: 2022–03
  78. By: Olkhov, Victor
    Abstract: This paper considers common consumption-based asset pricing model and derives approximations of the basic pricing equation that describes mutual dependence of the mean price “to-day”, mean payoff “next-day”, price and payoff volatility and impact of the price and payoff autocorrelations. The deep conjunction of the consumption-based model with other modifications of asset pricing as ICAPM, APM and etc. (Cochrane, 2001) causes that our results can be derived in other versions of CAPM. We introduce the market-based price averaging and discuss the origin of its distinctions from the common frequency-based price probability. The market-based price statistical moments, price volatility and autocorrelation are determined by statistical moments of the random market trade value and volume. Distinctions between the frequency-based and the market-based approaches to price averaging cause different assessment of the price volatility and autocorrelation and result in different treatment of the price-volume relations in particular. The market-based price averaging provides direct dependence of the price statistical moments on the market trade value and volume statistical moments. It establishes a unified ground for description of financial markets but uncovers tough complexity. The usage of the frequency-based or proposed market-based price averaging is completely determined by agent’s preferences, beliefs and habits. The collision between “rational” market-based approach and “soulful” or “home-felt” frequency-based approach to price averaging creates significant challenge for financial theory.
    Keywords: asset pricing; autocorrelation; price probability; market trades
    JEL: C0 D40 D53 E44 F37 G12 G17
    Date: 2022–03–05
  79. By: Ms. Joana Pereira; Mr. Frederik G Toscani; Roberto A. Perrelli; Daniel Cunha
    Abstract: We estimate the subnational employment and GDP multiplier of Brazil's 2020 federal cash transfers to vulnerable households. Using two-stage least squares regressions we estimate a formal employment multiplier and then apply an analytical transformation to recover an implied GDP multiplier in the range of 0.5-1.5. The lower bound of this range lies below most estimates in the literature, which may result from the exceptional constraints imposed by the pandemic on supply chains and consumption. Nevertheless, even using the lower end of our range implies that federal cash transfers played an important role in supporting employment and GDP.
    Keywords: Fiscal multipliers, Household cash transfers, Labor informality
    Date: 2022–03–18
  80. By: Moura, Alban
    Abstract: I update the Greenwood, Hercowitz, and Krusell (1997) decomposition of U.S. growth into contributions from neutral and investment-specific technological progress. I allow the decomposition to vary across sub-samples, reflecting the presence of trend breaks in the data. The estimates suggest that neutral technological progress explained virtually all growth between 1950 and the mid-1970s. However, investment-specific technological progress accounts for about 75 percent of growth since the 1980s. These results support splitting the postwar sample and using two-sector models to study the recent period.
    Keywords: neutral technology; investment-specific technology; sources of long-run growth; structural breaks
    JEL: E13 O33 O41 O47
    Date: 2021–08
  81. By: Frank, Luis
    Abstract: In the paper, regARIMA models used to seasonally adjust and to project the GVA at the section level of ISIC-3.1 are reviewed. Although the review was originally motivated by the effect of the COVID pandemic on seasonal adjustment, previous difficulties in reproducing the seasonally adjusted EMAE published by INDEC were also deeply analysed. From the review, it is inferred that discrepancies between the reproduced seasonally-adjusted EMAE and the series published by INDEC are explained by the exclusion of national holidays from INDEC's adjustment procedure, rather than by differences in the specifications of sectoral models. Besides, the discrepancy observed in the aggregated trend-cycle is due to the fact that INDEC follows the direct procedure proposed by E. Bee Dagum intead of an indirect procedure similar to that used to seasonally adjust the EMAE.
    Keywords: seasonal adjustment of series, seasonal ARIMA, EMAE
    JEL: C82
    Date: 2021–07–02
  82. By: David W. Berger; Kyle F. Herkenhoff; Simon Mongey
    Abstract: It has long been argued that a minimum wage could alleviate efficiency losses from monopsony power. In a general equilibrium framework that quantitatively replicates results from recent empirical studies, we find higher minimum wages can improve welfare, but most welfare gains stem from redistribution rather than efficiency. Our model features oligopsonistic labor markets with heterogeneous workers and firms and yields analytical expressions that characterize the mechanisms by which minimum wages can improve efficiency, and how these deteriorate at higher minimum wages. We provide a method to separate welfare gains into two channels: efficiency and redistribution. Under both channels and Utilitarian social welfare weights the optimal minimum wage is $15, but alternative weights can rationalize anything from $0 to $31. Under only the efficiency channel, the optimal minimum wage is narrowly around $8, robust to social welfare weights, and generates small welfare gains that recover only 2 percent of the efficiency losses from monopsony power.
    Keywords: Minimum wages; Oligopsony; Labor markets; Market structure
    JEL: J42 J20 E20
    Date: 2022–04–06
  83. By: Congressional Budget Office
    Abstract: This paper presents a risk-neutral approach used by the Congressional Budget Office to inform its estimates of the fair-value cost of mortgage obligations. The fair-value cost is the amount that a private entity would charge in a competitive market for taking the risks associated with a government activity. CBO’s approach adjusts the probability distribution of macroeconomic variables to obtain a risk-neutral distribution of default, recovery, and prepayment rates. The macroeconomic variables are calibrated by determining the adjustment that leads the estimates of the fair-
    JEL: G21 G28 H81
    Date: 2022–04–19
  84. By: Acosta, E.
    Abstract: En Colombia se ha identificado la existencia de pobreza persistente a nivel regional. En el presente trabajo buscamos brindar evidencia sobre el impacto que tiene en especial la informalidad laboral sobre la persistencia en la pobreza a nivel de hogar. Para ello, proponemos estimar un modelo logit multinomial a partir de la Encuesta Longitudinal Colombiana (ELCA) la cual contiene información sobre hogares de ingresos bajos y medios. El periodo de estudio comprende las olas 2010, 2013 y 2016. A partir de la exploración de datos identificamos que mientras el 64,2 por ciento de los hogares pobres persistentes tienen jefes de hogar que son informales, en los hogares que son pobres de manera transitoria este porcentaje es de 48,5 y en los que no son pobres en ninguna de las olas es del 37,5 por ciento. Entre las variables relevantes para explicar la pobreza persistente se encuentran tener un jefe hogar trabajador informal o que no trabaje, el grado de dependencia económica, la región a la cual pertenece el hogar, el ahorro, los años de educación del jefe de hogar, el acceso al crédito y el índice de riqueza del hogar. En el caso de la pobreza transitoria, ni la edad ni la región resultan relevantes. Finalmente, el sexo y el estado civil no resultan ser importantes para explicar ningún tipo de pobreza.
    Keywords: persistencia en la pobreza; dinámicas de la pobreza; informalidad
    JEL: E26 I32 J21 J46 J82
    Date: 2021–11–10
  85. By: Johan Gars; Daniel Spiro; Henrik Wachtmeister
    Abstract: Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.
    Date: 2022–04
  86. By: Castrillón, C.; Gómez, W; Montoya, J.
    Abstract: En este artículo se presenta una revisión en la que se identifican cuatro ramas distintas de la modelación de la economía informal en la literatura, a saber: modelos duales, modelos de elección ocupacional, modelos con mecanismos de incentivos y modelos de búsqueda. Para cada una de estas ramas, se presenta un modelo representativo que recoge las ideas principales, sus características, además de la forma en que se introduce el sector informal. Posteriormente, se da cuenta de las consecuencias del modelo para comprender la informalidad, adicional a algunas extensiones que amplían la propuesta del modelo representativo. Como resultado, dada la heterogeneidad del fenómeno, no puede hablarse con precisión de la existencia de un paradigma o una teoría “general†o dominante sobre la informalidad.
    Keywords: Economía informal; economía subterránea; mercados laborales informales; sectoresformales e informales; economía sumergida; arreglos institucionales
    JEL: E26 J46
    Date: 2021–10–04
  87. By: Gustavo S. Cortes; Angela Vossmeyer; Marc D. Weidenmier
    Abstract: U.S. stock volatility is 33 percent lower during wartime and periods of conflict. This is true even for World Wars I and II, which would seemingly increase uncertainty. In a seminal paper, Schwert (1989) identified the “war puzzle” as one of the most surprising facts from two centuries of stock volatility data. We propose an explanation for the puzzle: the profits of firms become easier to forecast during wartime due to massive government spending. We test this hypothesis using newly-constructed data on more than 100 years of defense spending. The aggregate analysis finds that defense spending reduces stock volatility. The sector level regressions show that defense spending predicts lower stock volatility for firms that produce military goods. Finally, an event-study demonstrates that earnings forecasts of defense firms by equity analysts become significantly less disperse after 9/11 and the invasions of Afghanistan (2001) and Iraq (2003).
    JEL: E30 G1 H56 N12
    Date: 2022–03
  88. By: Mr. Romain A Duval; Mr. Ippei Shibata; Yi Ji; Carlo Pizzinelli; Marina M. Tavares; Longji Li; Myrto Oikonomou; Alessandra Sozzi
    Abstract: Two years after the onset of the COVID-19 pandemic, a puzzle has emerged in several advanced economies: unfilled job vacancies have increased sharply even though employment has yet to fully recover. This note sheds light on three contributing factors, namely barriers to returning to work, changing worker preferences away from certain types of jobs, and sectoral and occupational job mismatch. The note also assesses the impact of labor market tightness on wage growth, showing that it has been large for low-pay jobs but milder overall. Bringing disadvantaged groups of workers into the labor force, including by controlling the pandemic itself, would ease labor market pressures while amplifying the recovery and making it more inclusive.
    Keywords: Employment, Vacancies, Labor Market Dynamics, COVID-19, Mismatch, Wage Phillips Curve; wage growth; labor market tightness; worker preference; unfilled job vacancy; wage inflation; Labor markets; Wages; Labor force; Employment; COVID-19; Global
    Date: 2022–03–31
  89. By: Bental, Benjamin; Li, Defu; Tang, Xuemei
    Abstract: In a classic paper, Acemoglu (2003) developed a growth model where firms can undertake both labor- and capital-augmenting technological improvements. According to that paper the balanced growth path with purely labor-augmenting technical change is the unique asymptotic (noncycling) equilibrium, and is stable only when capital and labor are gross complements, i.e., only when the elasticity of substitution between these two factors is no greater than 1. Otherwise, the model not only has two other asymptotic steady-state paths, but also the balanced growth path is unstable. The current comment points out that Acemoglu's conclusion ignores the crowding effect in innovation sector that he has proposed due to the assumption of perfect mobility of scientists between sectors. By replacing the perfect mobility assumption with a smooth adjustment process, implicitly invoking the presence of some adjustment costs, this comment not only points out that the factors affecting the direction of technological progress include both the demand side of innovations (relative price and relative market size) and the supply side of innovations (relative marginal productivity of innovation), but also proves that regardless of whether the substitution elasticity is greater than 1 or less than 1, the balanced growth path is not only unique, but also at least locally saddle-path stable.
    Keywords: elasticity of substitution, crowding effect of innovation, scientist migration function, balanced growth path, direction of technological progress
    JEL: E25 O14 O31 O33
    Date: 2022–03–23
  90. By: Kohnert, Dirk
    Abstract: Famines are almost always man-made often used as a deterrent. Since ancient times, food and hunger have been a weapon of war. Among the most notorious examples in Africa are the Herero and Namaqua genocide in German South-West Africa (now Namibia) from 1904 to 1908. It was the first genocide of the 20th century. Also, the subsequent famines in Biafra (South-East Nigeria, 1967-1969), when an estimated 1.5 million people starved to death, the 1980 famine in Uganda, one of the worst in African history, when 21% of the population died, and the recurring famines in Ethiopia, Somalia and South Sudan since the 1990s have been burned into human memory. The use of food as a weapon was condemned as a war crime by the Rome Statute of the International Criminal Court in 1998. Since most African countries are Least Developed Countries (LLCs), they will suffer the hardest in the aftermath of Putin's war in Ukraine, especially Africa's poor. They have already suffered the consequences of drought, the corona pandemic and Islamist terrorism. Their already weakened position will be exacerbated by the spill-over effects of Russian aggression in Ukraine, which will further exacerbate hunger and poverty in Africa. All the more so as international development aid to Africa is likely to suffer from a massive redirection of aid to rearmament. Last but not least, Putin's war in Ukraine will have a major impact on EU-Africa relations. In view of the consequences of the Covid-19 pandemic for Africa, it will further damage the mutual trust between both partners. About 86% of Africans have yet to receive two doses of vaccine. A growing number of African heads of state and government no longer see Western countries as reliable partners.
    Keywords: Russie, invasion, Ukraine, Afrique, famine, commerce international, pouvoir alimentaire, marchés d'armes, État fragile, terrorisme islamiste, Maghreb, Égypte, Maroc, Algérie, Tunisie, Libye, Afrique subsaharienne, Afrique du Sud, Cameroun, Mozambique, Éthiopie, Kenya, Ouganda , Somalie, Namibie, Nigeria, Soudan, sécurité énergétique, Chine, UE, USA
    JEL: E26 E31 F02 F13 F35 F51 F54 H56 N47 N57 N77 P26 Q17 Z13
    Date: 2022–04–17
  91. By: Advani, Arun; Burgherr, David; Savage, Mike; Summers, Andrew
    Abstract: In this paper we show the importance of international ties amongst the UK’s global economic elite, by exploiting administrative data derived from tax records. We show how this data can be used to shed light on the kind of transnational dynamics which have long been hypothesised to be of major significance in the UK, but which have previously proved intractable to systematic study. Our work reveals the enduring and distinctive influence of long-term imperial forces, especially to the former ‘white settler’ ex-dominions which have been called the ‘anglosphere’. These are allied to more recent currents associated with European integration and the rise of Asian economic power. Here there are especially strong ties to the ‘old EU-6’ nations of France, Germany, Netherlands, Belgium, Luxembourg, and Italy. The incredible detail and universal coverage of our data means that we can study those at the very top with a level of granularity that would be impossible using traditional survey sources. We find compelling support for the public perception that non-doms are disproportionately highly affluent individuals who can be viewed as a part of a global elite. However, whilst there is some evidence for the stereotype of the global wealthy parking themselves in the UK, this underplays the significance of the working rich. Our analysis also reveals the remarkable concentration of non-doms in central areas of London.
    Keywords: ES/L011719/1
    JEL: N0 E6
    Date: 2022–04
  92. By: Jensen, Bjarne S. (University of Southern Denmark); Pedersen, Peder J. (Aarhus University); Guest, Ross (Griffith University)
    Abstract: This paper analyzes the impact on age group wage differentials in a setting of imperfect labor substitution at different ages (years) of working life. We examine the wage prospect of assuming medium, high, and low levels of fertility during the population projection period (2020-2090). Main focus is on comparisons of selected Calendar year Age wage profiles and the comparisons of selected Cohort Lifetime wage profiles. The analytical results come from applying a CRESH Labor Aggregator to Age-group Labor supplies with a parametric calibration to register based micro data for Denmark. The results show Calendar year wage effects and Cohort wage effects from ageing that will not exist without non-zero Labor Complementarity elasticities, and are new contributions demonstrating the economic effects of large/small generations and cohort sizes. The impact of cohort size on the lifetime wage profile of its own cohort does depend on sizes of other cohorts, which are affected by the fertility rates underlying many cohorts. Hence, economic advantages of being a small cohort depend on fertilities and the sizes of many other existing cohorts.
    Keywords: labor substitution, CRESH, demographic cohorts, lifetime wage incomes
    JEL: J1 O4 E2
    Date: 2022–03
  93. By: Edmiston, Daniel; Robertshaw, David; Young, David; Ingold, Jo; Gibbons, Andrea; Summers, Kate; Scullion, Lisa; Geiger, Ben Baumberg; de Vries, Robert
    Abstract: Local state and third sector actors routinely provide support to help people navigate their right to social security and mediate their chequered relationship to it. COVID-19 has not only underlined the significance of these actors in the claims-making process, but also just how vulnerable those working within ‘local ecosystems of support’ are to external shocks and their own internal pressures. Drawing on qualitative fieldwork with organisations providing support to benefit claimants and those financially struggling during COVID-19, this paper examines the increasingly situated nature of the claims-making process across four local areas in the United Kingdom. We do so to consider what bearing ‘local ecosystems of support’ have on income adequacy, access and universality across social security systems. Our analysis demonstrates how local state and third sector actors risk amplifying inequalities that at best disadvantage, and at worst altogether exclude, particular social groups from adequate (financial) assistance. Rather than conceiving of social security as a unitary collection of social transfers, we argue that its operation needs to be understood as much more fragmented and contingent. Practitioners exhibit considerable professional autonomy and moral agency in their discretionary practice, arbitrating between competing organisational priorities, local disinvestment, and changing community needs. Our findings offer broader lessons for understanding the contemporary governance of social security across welfare states seeking to responsibilise low-income households through the modernisation of public services, localism, and welfare reforms.
    Keywords: Covid-19; discretion; localisation; social security; welfare reform; coronavirus; ES/V003879/1
    JEL: E6
    Date: 2022–02–09
  94. By: Bandula-irwin, Tanya; Gallien, Max; Jackson, Ashley; Van Den Boogaard, Vanessa; Weigand, Florian
    Abstract: Based on a review of the diverse practices of how armed groups tax, we highlight that a full account of why armed groups tax needs to go beyond revenue motivations, to also engage with explanations related to ideology, legitimacy, institution building, legibility and control of populations, and the performance of public authority. This article builds on two distinct literatures, on armed groups and on taxation, to provide the first systematic exploration of the motivations of armed group taxation. We problematize common approaches toward armed group taxation and state-building, and outline key questions of a new research agenda.
    JEL: E6
    Date: 2022–02–22

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