nep-mac New Economics Papers
on Macroeconomics
Issue of 2022‒05‒23
sixty-two papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Monetary Policy and the Financial Cycle: International Evidence By Jaromir Baxa; Jan Zacek
  2. The JobKeeper payment: How good are wage subsidies? By Timothy Watson; Juha Tervala; Tristram Sainsbury
  3. Business cycle asymmetries and the labor market By Kohlbrecher, Britta; Merkl, Christian
  4. Price Level Targeting with Imperfect Rationality: A Heuristic Approach By Vojtech Molnar
  5. Forecast Revisions as Instruments for News Shocks By Danilo Cascaldi-Garcia
  6. Housing market dynamics in Kazakhstan: An estimated DSGE model By Akbobek Akhmediyarova
  7. Pandemic Recession And Helicopter Money: Venice, 1629-1631 By Charles Goodhart; Donato Masciandaro; Stefano Ugolini
  8. Central Bank Communication with the General Public: Promise or False Hope? By Alan S. Blinder; Michael Ehrmann; Jakob de Haan; David-Jan Jansen
  9. Turning in the widening gyre: monetary and fiscal policy in interwar Britain By Ronicle, David
  10. Exploring the Role of Exchange Rate in Inflation Targeting: Evidence from Thailand By Pongsak Luangaram; Nipit Wongpunya
  11. Fiscal dominance in India: Through the windshield and the rearview mirror By Anshuman Kamila
  12. Accounting for the slowdown in output growth after the Great Recession: A wealth preference approach By Kazuma Inagaki,; Yoshiyasu Ono; Takayuki Tsuruga
  13. Sri Lanka: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Sri Lanka By International Monetary Fund
  14. Cohort Effects on Expected Co-Movement By William N. Goetzmann; Akiko Watanabe; Masahiro Watanabe
  15. Systematic Monetary Policy in a SVAR for Australia By Lance A. Fisher; Hyeon-seung Huh
  16. More Than Words: Fed Chairs’ Communication During Congressional Testimonies By Michelle Alexopoulos; Xinfen Han; Oleksiy Kryvtsov; Xu Zhang
  17. Argentina: Staff Report for 2022 Article IV Consultation and request for an Extended Arrangement under the Extended Fund-Facility-Press Release; Staff Report; and Staff Supplements By International Monetary Fund
  18. Pandemic-Era Uncertainty By Brent H. Meyer; Emil Mihaylov; Jose Maria Barrero; Steven J. Davis; David Altig; Nicholas Bloom
  19. The cost of excess reserves and inflation in the United States during the last century By Pavon-Prado, David
  20. Causal Effects of Countercyclical Interest Rates: Evidence from the Classical Gold Standard By Kris James Mitchener; Gonçalo Alves Pina
  21. Colombia: 2022 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for Colombia By International Monetary Fund
  22. Republic of Kazakhstan: 2021 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Kazakhstan By International Monetary Fund
  23. Are fiscal consolidation episodes helpful for public sector efficiency? By António Afonso; José Alves
  24. Stubborn Beliefs in Search Equilibrium By Guido Menzio
  25. The Narrow Channel of Quantitative Easing: Evidence from YCC Down Under By David Lucca; Jonathan H. Wright
  26. Zimbabwe: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Zimbabwe By International Monetary Fund
  27. Japan: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Japan By International Monetary Fund
  28. Democratic Republic of São Tomé and Príncipe: Staff Report for 2022 Article IV Consultation; Fourth Review Under the Extended Credit Facility Arrangement, Request for Waivers for Nonobservance of Performance Criteria, Modification of Performance Criteria and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for São Tomé and Príncipe By International Monetary Fund
  29. Kuwait: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Kuwait By International Monetary Fund
  30. Optimal Taxation of Risky Entrepreneurial Capital By Corina Boar; Matthew P. Knowles
  31. An Evaluation of the Paycheck Protection Program Using Administrative Payroll Microdata By David Autor; David Cho; Leland D. Crane; Mita Goldar; Byron Lutz; Joshua K. Montes; William B. Peterman; David D. Ratner; Daniel Villar Vallenas; Ahu Yildirmaz
  32. Wealth and income inequality in the long run By Philipp Lieberknecht; Philip Vermeulen
  33. Republic of Korea: 2022 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for the Republic of Korea By International Monetary Fund
  34. Additive Growth By Thomas Philippon
  35. Minimum Wage and Collective Bargaining Reforms: A Narrative Database for Advance Economies By António Afonso; João Tovar Jalles; Zoe Venter
  36. Does the Labour Theory of Value Explain Economic Growth? A Modern Classical View By Chatzarakis, Nikolaos; Tsaliki, Persefoni; Tsoulfidis, Lefteris
  37. Asymmetric Investment Rates By Hang Bai; Erica X. N. Li; Chen Xue; Lu Zhang
  38. People’s Republic of China—Macao Special Administrative Region: 2022 Article IV Consultation Discussions By International Monetary Fund
  39. Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador By Fernando E. Alvarez; David Argente; Diana Van Patten
  40. Is empirical granularity high enough to cause aggregate fluctuations? The closeness to Gaussian By ARATA Yoshiyuki
  42. United Kingdom: Financial Sector Assessment Program-Select Issues in Systemic Risk Oversight and Macroprudential Policy By International Monetary Fund
  43. Nowcasting Canadian GDP with Density Combinations By Tony Chernis; Taylor Webley
  44. Spread Too Thin: The Impact of Lean Inventories By Julio L. Ortiz
  45. Modelling Persistence and Non-Linearities in the US Treasury 10-Year Bond Yields By Guglielmo Maria Caporale; Luis A. Gil-Alana; OlaOluwa Simon Yaya
  46. The case for a loan-based euro area stability fund By Florian Misch; Martin Rey
  47. Politique budgétaire, Investissement privé et performance macroéconomique en République démocratique du Congo * By Elie Ndemba Tshilambu
  48. Italian economic growth and the North-South gap: Historical trends and future projections in light of the recent demographic scenarios By Marta De Philippis; Andrea Locatelli; Giulio Papini; Roberto Torrini
  49. Causal coupling between European and UK markets triggered by announcements of monetary policy decisions By Volta, Vittoria; Aste, Tomaso
  50. Regionale Effekte einer durch einen Lieferstopp für russisches Gas ausgelösten Rezession in Deutschland By Holtemöller, Oliver; Lindner, Axel; Schult, Christoph
  51. In the Grip of Whitehall? The Effects of Party Control on Local Fiscal Policy in the UK By Lockwood, Benjamin; Porcelli, Francesco; Rockey, James
  52. THE EFFECTS OF THE ECB COMMUNICATIONS ON FINANCIAL MARKETS BEFORE AND DURING COVID-19 PANDEMICAbstract:The paper aims to estimate the effects of the European Central Bank communications on the sectoral returns of STOXX Europe 600 from 2013 to 2021. Previous literature has investigated the effects of communications of central banks and checked their effects on macroeconomics and financial data. New opportunities offered by text mining analysis allow us to find new insights into these aspects. However, studies focusing on how text mining indices derived from central banks’ communications can affect different financial sectors are more limited. In this paper, we use different sentiment and topic indices derived from the European Central Bank’s speeches. The paper shows how these different topics and sentiment indices affect the returns on different financial sectors. Our results indicate that the topic of communications is more influential on returns of sectoral indices than the type of communications. Moreover, we find that monetary policy and financial stability topics are the most relevant. We also find that during the COVID-19 time, the number of negative speeches is relevant for almost all the sectoral index returns. By Luca Alfieri; Mustafa Hakan Eratalay; Darya Lapitskaya; Rajesh Sharma
  53. Long-term challenges to Russian economic policy By Simola, Heli
  54. Benin: Technical Assistance Report—Fiscal Transparency Evaluation By International Monetary Fund
  56. E pluribus, quaedam. Gross domestic product out of a dashboard of indicators By Mattia Guerini; Fabio Vanni; Mauro Napoletano
  57. Economic policy uncertainty and analyst behaviours: Evidence from the United Kingdom By Min Chen; Zhaobo Zhu; Peiwen Han; Bo Chen; Jia Liu
  58. Russia's growth potential post-COVID-19 By Korhonen, Iikka
  59. Renta económica, régimen tributario y transparencia fiscal de la minería del litio en la Argentina, Bolivia (Estado Plurinacional de) y Chile By Jorratt, Michel
  60. EXPLORING THE CONVERGENCE PUZZLE IN INDIA Combining neoclassical and endogenous models to understand growth experience of Indian states By Anshuman Kamila; Meeta Keswani Mehra
  61. Relationship between the Real Estate Sector and the Stock Market in Chinese Provinces By Di, Zeyu; Heshmati, Almas; Liu, Sijia
  62. Financial development, income inequality and institutional quality: A multi-dimensional analysis By Huynh, Cong Minh; Tran, Hoai Nam

  1. By: Jaromir Baxa; Jan Zacek
    Abstract: We evaluate to what extent inflation-targeting central banks appear to have used their interest rate policies to respond to financial imbalances beyond the reaction via the conventional Taylor-rule variables. First, we use the multivariate structural time series model to extract financial cycles for Australia, Canada, Japan, New Zealand, Sweden, the United Kingdom, and the United States. We then estimate time-varying monetary policy reaction functions extended for the financial cycle. We interpret the responses to the financial cycle as attempts to lean against the wind of financial imbalances. The historical decompositions of interest rates reveal that most central banks raised interest rates in response to asset prices and credit booms in the past, including in the years preceding the global financial crisis. The interest rate response to financial cycles is more pronounced with ex-post than with pseudo real-time data. Finally, we document that the financial crisis of 2008 had less of an impact on credit and real housing prices in countries where the interest rate responses to financial cycles were accompanied by macroprudential measures.
    Keywords: Financial cycle, model-based filters, monetary policy, reaction functions
    JEL: C32 E32 E40 E44 E52
    Date: 2022–04
  2. By: Timothy Watson; Juha Tervala; Tristram Sainsbury
    Abstract: We estimate the effect of the Australian JobKeeper Payment COVID-19 wage subsidy on payroll jobs and wages at the employer-level using novel administrative datasets. We find a cost per job-year saved of around $112,819 ($US80,959) over the program period, implying around 812,000 jobs were saved over this time. Weekly payroll wages were almost $1.1 billion ($US761 million) higher on average during the program period, implying wage benefits equivalent to around 60 per cent of program spending. Program effects are persistent, suggesting cumulative benefits will be larger over time. A medium-scale business cycle model featuring heterogeneous households and learning-by-doing in the production technology is derived to map estimates of costs per job-year saved to approximate output multipliers. The model generates plausible output multipliers centred around 1.3, and identifies the extent to which wage subsidies support liquidity constrained workers as a key determinant of program effectiveness.
    Keywords: Employment, fiscal policy, study of particular macroeconomic policy episodes.
    JEL: E24 E62 E65
    Date: 2022–05
  3. By: Kohlbrecher, Britta; Merkl, Christian
    Abstract: This paper shows that a search and matching model with idiosyncratic training cost shocks can explain the asymmetric movement of the job-finding rate over the business cycle and the decline of matching efficiency in recessions. Large negative aggregate shocks move the hiring cutoff into a part of the training cost distribution with higher density. The position of the hiring cutoff in the distribution is disciplined by the empirical elasticity of the job-finding rate with respect to market tightness. Our model explains a large fraction of the matching efficiency decline during the Great Recession and generates state-dependent effects of policy interventions.
    Keywords: Business cycle asymmetries,matching function,Beveridge curve,job-finding rate,unemployment,effectiveness of policy
    JEL: E24 E32 J63 J64
    Date: 2022
  4. By: Vojtech Molnar
    Abstract: The paper compares price level targeting and inflation targeting regimes in a New Keynesian model with bounded rationality. Economic agents form their expectations using heuristics - they choose between a few simple rules based on their past forecasting performance. In the paper, two main specifications of the price level targeting model are examined - the agents form expectations either about the price level or about inflation, which is ex ante not equivalent because of the sequential nature of the model. In addition, several formulations of the forecasting rules are considered. Both regimes are assessed by performing a loss function comparison. According to the results, price level targeting is slightly preferable in case where expectations are created about the price level under the baseline calibration. It is, however, sensitive to some model parameters and there is a risk of instability. Furthermore, when expectations are created about inflation, price level targeting loses credibility over time and leads to divergence of the economy. On the other hand, inflation targeting model functions in a stable manner. Therefore, while the potential benefits of price level targeting have been confirmed under certain assumptions, the results suggest that inflation targeting constitutes a more robust choice for monetary policy.
    Keywords: Bounded rationality, heuristics, inflation targeting, monetary policy, price level targeting
    JEL: E31 E37 E52 E58 E70
    Date: 2022–04
  5. By: Danilo Cascaldi-Garcia
    Abstract: Upon arrival of macroeconomic news, economic agents update their beliefs about the long-run fundamentals of the economy. I show that signals about the agents’ long-run expectations, proxied by the economic outlook revisions of professional forecasters, convey sufficient information to identify the effects of expected future technological changes, or news shocks. A major advantage of this approach from the existing news shock literature is that it does not depend on an empirical measure for technology, or on assumptions about common trends and timing of the technological change. I show that technological news shocks cause a strong anticipation effect in investment and an increase in hours, while there is less evidence of consumption smoothing over time---in line with news-driven business cycle models featuring a key role of financial frictions.
    Keywords: News shock; Proxy SVAR; Instrumental variable; Professional forecasts
    JEL: E32 E44
    Date: 2022–04–08
  6. By: Akbobek Akhmediyarova (NAC Analytica, Nazarbayev University)
    Abstract: In this paper we analyse the drivers of housing price fluctuations in Kazakhstan using a dynamic stochastic general equilibrium (DSGE) model with the housing market. We estimate the model with Bayesian methods using the data for the period from 2010Q1 to 2020Q4. We find that housing prices are primarily driven by housing preference shocks, rather than by price mark up disturbances or monetary policy shocks. We identify strong housing wealth effects and show that housing preference shocks of borrowers explain a vast part of the consumption volatility. Besides, we find that pension withdrawal policy plays a small role in determining the business-cycle fluctuations of Kazakhstan in the long-term period. Overall, the technology shock is key in explaining the variance in GDP of Kazakhstan, while the variation in inflation rate is mainly explained by monetary policy and foreign demand shocks.
    Keywords: DSGE; Housing market; Bayesian estimation; Kazakhstan.
    JEL: C11 E30 E32 R21
    Date: 2021–12
  7. By: Charles Goodhart; Donato Masciandaro; Stefano Ugolini
    Abstract: This paper analyses the monetary policy of the Most Serene Republic of Venice in the years of calamities using a modern equivalent of helicopter money, namely an extraordinary issue of (base) money, coupled with capital losses for the issuer. We treat the 1629 famine and the 1630-1631 plague as a unique negative macroeconomic shock, which the government addressed using fiscal monetization, with diverse effects on its citizens. Consolidating the balance sheets of the Treasury and of the State Bank of Issue, we show that the Republic implemented what was, in effect, helicopter money, with such policies most likely driven by political reasons, to limit public disturbances and riots.
    Keywords: monetary policy, helicopter money, pandemic, Venice 1629-1631
    JEL: N1 N2 E5 E6 D7
    Date: 2022
  8. By: Alan S. Blinder (Princeton University); Michael Ehrmann (European Central Bank); Jakob de Haan (University of Groningen); David-Jan Jansen (De Nederlandsche Bank)
    Abstract: Central banks are increasingly reaching out to the general public to motivate and explain their monetary policy actions. One major aim of this outreach is to guide inflation expectations; another is to ensure accountability and create trust. This article surveys a rapidly-growing literature on central bank communication with the public. We first discuss why and how such communication is more challenging than communicating with expert audiences. Then we survey the empirical evidence on the extent to which this new outreach does in fact affect inflation expectations and trust. On balance, we see some promise in the potential to inform the public better, but many challenges along the way.
    Keywords: Banks, Monetary Policy
    JEL: D12 D84 E52 E58 G53
    Date: 2022–03
  9. By: Ronicle, David (Bank of England and International Monetary Fund)
    Abstract: This paper brings together modern empirical techniques, a sign-restricted structural vector autoregression, with contemporary high frequency data to answer an old question – what role did macroeconomic policy play in Britain’s high unemployment and deflation in the years 1919 to 1938. Its specific innovation is to draw on a previously little-used weekly publication of public finance statistics, allowing the roles of taxation, public spending and monetary policy to be assessed side-by-side in a coherent framework. In a period of particularly unsettled policy the paper finds that policy shocks, both monetary and fiscal, made a material contribution to variation in prices and unemployment – and these played a central role in the two great recessions of the period, modern Britain’s most severe. Other policy choices could have delivered better outcomes for prices and unemployment – but these would have required making different choices in the face of conflicting objectives and some sharp trade-offs.
    Keywords: Monetary policy; fiscal Policy; economic history; Great Depression
    JEL: E52 E62 N14
    Date: 2022–04–13
  10. By: Pongsak Luangaram; Nipit Wongpunya
    Abstract: This paper develops a small-scale, structural general equilibrium model for the Thai economy. Using Bayesian estimation, we evaluate the conduct of monetary policy under inflation targeting regime. Specifically, we focus on three main issues. First, we investigate whether exchange rate movements are incorporated in the monetary policy formulation. Second, we conduct welfare evaluation under alternative monetary policy settings. Third, we explore how the varying degree of openness could affect the transmission mechanism. Using data over the past 20 years, we find that the Bank of Thailand adjusted policy interest rate in response to exchange rate movements and this helped to reduce both output and inflation fluctuations from global shocks and improves welfare. While higher degree of openness is found to flatten the slope of the Phillips curve, it does not necessarily reduce monetary policy effectiveness. This is because openness also affects the policy coefficients in the central bank’s endogenous reaction function.
    Keywords: Small open economy models; Monetary policy rules; Exchange rates; Bayesian analysis; Thai economy
    JEL: C32 E52 F41
    Date: 2022–05
  11. By: Anshuman Kamila (Institute of Economic Growth, Delhi)
    Abstract: Theoretical works have pointed at the potentially damaging impacts of fiscal dominance, i.e. fiscal authority’s profligacy being accommodated by the monetary authority. Recent scholarship have highlighted to the contrary the arguably positive effects of such accommodation under certain circumstances. Ergo, a surgical snipping of the cord of joint working of monetary and fiscal policy for all times is not advisable. This article argues that in the Indian context, the impact of fiscal operations or expansionary fiscal policy may have proved counter-productive in the past but the recent time period have shown a clear break from the past trend. As such, monetary accommodation of fiscal activism under conditions where other engines of economic activity have cooled down emphatically is advisable.
    Keywords: VECM, Cholesky impulse response, fiscal dominance, FRBM
    JEL: E52 E62 H62
    Date: 2021–04
  12. By: Kazuma Inagaki,; Yoshiyasu Ono; Takayuki Tsuruga
    Abstract: Previous studies have argued that output growth in advanced economies declined during the Great Recession and remained low afterward. This paper proposes a model to explain this slowdown in output growth. We incorporate wealth preferences and downward nominal wage rigidity into a standard monetary growth model. Our model demonstrates that output initially grows at the same rate as productivity and slows endogenously in the transition path to the stagnation steady state. This stagnation is persistent even if productivity continues to grow at a steady rate. Applying our model to US data, we show that it successfully explains the declines observed in the real interest rate, inflation, and the velocity of money, along with the slowdown in output growth.
    Date: 2022–05
  13. By: International Monetary Fund
    Abstract: COVID-19 severely hit the economy, causing a loss of tourism receipts and necessitating several strict lockdowns. Pre-pandemic tax cuts and the impact of COVID-19 led to fiscal deficits larger than 10 percent of GDP in 2020 and 2021 and a rapid increase in public debt to 119 percent of GDP in 2021. Sri Lanka’s access to international capital markets was lost in 2020, prompting a decline of international reserves to critically low levels and large-scale direct lending to the government by the Central Bank of Sri Lanka (CBSL). External debt repayments and a widening current account deficit have led to foreign exchange (FX) shortages, while the official exchange rate has been de facto fixed since April 2021. Inflation is on the rise, reaching double digits in December 2021, reflecting imported inflation, supply shocks, and a pickup in domestic demand amid loose monetary policy.
    Keywords: government intervention; Sri Lankan authorities; CBSL Monetary Law Act; government financing; liability positions vis-à-vis nonresident; COVID-19; Fiscal consolidation; Global
    Date: 2022–03–25
  14. By: William N. Goetzmann; Akiko Watanabe; Masahiro Watanabe
    Abstract: The covariance of asset returns with economic states of the world is a fundamental input to asset pricing models. Using a semi-annual survey of forecasts by a panel of U.S. economists over more than 70 years, we infer forecaster beliefs about covariance between the S&P index and macro-economic factors. We find evidence that life-experience was a significant determinant of beliefs about the co-movement of inflation and stock returns
    JEL: E31 E37 E44 G17
    Date: 2022–04
  15. By: Lance A. Fisher (Macquarie University); Hyeon-seung Huh (Yonsei Univ)
    Abstract: A SVAR is estimated over the period of conventional monetary policy in Australia. The monetary policy shock is identified by imposing sign restrictions on the coefficients in the structural equation for the cash rate. There is very high posterior probability on structural models which imply a fall in output and prices, in response to a contractionary monetary policy shock, though the posterior probability of a price puzzle is somewhat higher than for other puzzles. The posterior median estimate of the systematic response of the cash rate to inflation increases noticeably when a price puzzle is ruled out.
    Keywords: monetary policy shocks, structural equations, puzzles, identified set of responses
    JEL: C30 C51 E52
    Date: 2022–05
  16. By: Michelle Alexopoulos; Xinfen Han; Oleksiy Kryvtsov; Xu Zhang
    Abstract: We measure soft information contained in the congressional testimonies of U.S. Federal Reserve Chairs and analyze its effect on financial markets. Our measures of Fed Chairs’ emotions expressed in words, voice and facial expressions are created using machine learning. Increases in the Chair’s text-, voice-, or face-emotion indices during these testimonies generally raise the SandP500 index and lower the VIX—indicating that these cues help shape market responses to Fed communications. These effects add up and propagate after the testimony, reaching magnitudes comparable to those after a policy rate cut. Markets respond most to the Chair’s emotions expressed about issues related to monetary policy.
    Keywords: Central bank research; Financial markets; Monetary policy communications
    JEL: E52 E58 E71
    Date: 2022–05
  17. By: International Monetary Fund
    Abstract: Against the background of a decade of declining per-capita income and high inflation, the Article IV consultation focused on policies to begin to tackle Argentina’s underlying impediments to sustained growth and low and stable inflation. Avoiding boom-bust dynamics suggests the need for greater emphasis on policies to promote net exports and mobilize domestic saving to finance much-needed investment. Reversing the high degree of financial dollarization, however, will take time and will require a durable commitment to tackle fiscal dominance and strengthen debt sustainability. Meanwhile, addressing budget rigidities is essential to improve Argentina’s resilience to shocks, while reorienting public spending towards investment and innovation is critical to support productivity and reduce intergenerational inequities. Sustained political and social consensus is necessary for policy predictability and to balance demands from financing Argentina’s large social welfare system while also encouraging private investment and formal employment.
    Keywords: IFC investment activity; EFF arrangement; portfolio investment position; deep-seated challenge; peak fund exposure; policy implementation risk; Inflation; Debt service; Government debt management; Global; Caribbean
    Date: 2022–03–25
  18. By: Brent H. Meyer; Emil Mihaylov; Jose Maria Barrero; Steven J. Davis; David Altig; Nicholas Bloom
    Abstract: We examine several measures of uncertainty to make five points. First, equity market traders and executives at nonfinancial firms have shared similar assessments about one-year-ahead uncertainty since the pandemic struck. Both the one-year VIX and our survey-based measure of firm-level uncertainty at a one-year forecast horizon doubled at the onset of the pandemic and then fell about half-way back to pre-pandemic levels by mid 2021. Second, and in contrast, the 1-month VIX, a Twitter-based Economic Uncertainty Index, and macro forecaster disagreement all rose sharply in reaction to the pandemic but retrenched almost completely by mid 2021. Third, Categorical Policy Uncertainty Indexes highlight the changing sources of uncertainty – from healthcare and fiscal policy uncertainty in spring 2020 to elevated uncertainty around monetary policy and national security as of March 2022. Fourth, firm-level risk perceptions skewed heavily to the downside in spring 2020 but shifted rapidly to the upside from fall 2020 onwards. Perceived upside uncertainty remains highly elevated as of early 2022. Fifth, our survey evidence suggests that elevated uncertainty is exerting only mild restraint on capital investment plans for 2022 and 2023, perhaps because perceived risks are so skewed to the upside.
    JEL: D80 E22 E32
    Date: 2022–04
  19. By: Pavon-Prado, David
    Abstract: This paper proposes another factor explaining why the American banking sector accumulates reserves (the reserves-cost mechanism) and its consequences mainly on inflation (reserves-cost channel). The mechanism claims that when banks are holding reserves more expensive than those available in the market, they obtain new reserves and accumulate those unused. In addition, the cost of the sources from where banks obtain their reserves determines banks’ decisions about the loans rate. This originates the reserves-cost channel, whereby banks’ decisions about the loans rate modify the impact of Fed’s policies on final targets such as inflation. I test the validity of the mechanism and channel estimating an SVAR for the period 1922-2020. The results confirm both hypothesis and show that when banks set a loans rate lower in relation to the short-term rate of reference, there is higher demand for credit, output and inflation levels.
    Keywords: monetary policy, Federal Reserve, SVARs, excess reserves, reserves cost
    JEL: E4 E5
    Date: 2022–04–28
  20. By: Kris James Mitchener; Gonçalo Alves Pina
    Abstract: We estimate the causal impact of countercyclical interest rates on macroeconomic outcomes in open economies. To identify countercyclical interest rates, we construct a new database of short-term interest rates, principal exports, and international commodity prices for 40 economies from 1870 to 1913. This era of capital mobility, nominal anchors, specialization and trade integration, exposed economies to multiple exogenous demand-side shocks. Specialization and trade integration subjected economies to a “commodity lottery” in the form of price fluctuations in world markets. Capital mobility and a currency peg exposed them to interest-rate movements originating in the U.K., the largest economy and linchpin of the classical gold standard. We identify (i) positive effects of commodity-export prices on real GDP and the domestic price level and (ii) negative effects of exogenous changes in short-term interest rates on the same variables. We then show that countercyclical interest rates, defined relative to export-price shocks, stabilized both output and the domestic price level. This stabilization was more effective for the price level than for output.
    JEL: E4 E52 F33 F41 N10
    Date: 2022–04
  21. By: International Monetary Fund
    Abstract: Colombia’s economy rebounded strongly in 2021 with 10.6 percent growth led by pent-up domestic demand, notably private consumption. Around 66 percent of the population is fully vaccinated against Covid-19 as of end-February and the economy continues to reopen more fully. While GDP has already reached pre-pandemic levels, employment has trailed in its recovery and macroeconomic imbalances have emerged. Amid strong demand, supply constraints, and rising commodity prices, rising inflation exceeded the upper limit of the central bank’s tolerance range in 2021. With demand-led growth and higher import prices, the current account deficit widened to 5¾ percent of GDP. Under staff’s assumptions for the evolution of the pandemic, above-potential growth around 5½ percent is expected in 2022, led by robust household consumption and a continued recovery of investment and exports. External vulnerabilities remain elevated with high external financing needs and tighter financial conditions. External risks remain elevated and an intensification of the ongoing conflict in Ukraine may impart considerable volatility in financial and commodity markets. Domestic risks are also tilted to the downside—including uncertainty around the evolution of the pandemic, political uncertainty with national elections this year, and slower implementation of the infrastructure agenda and peace accords.
    Date: 2022–04–04
  22. By: International Monetary Fund
    Abstract: Activity returned to its pre-COVID level in 2021. Inflation remains well above the NBK’s 4–6 percent target band, and spillovers from sanctions on Russia will exacerbate price pressures and weaken economic growth in 2022. Kazakhstan benefits from strong fiscal and external buffers but risks to the outlook are elevated due to the uncertain impact on Kazakhstan of the sanctions on Russia and heightened domestic tensions since the January social unrest episode. In the medium term, non-oil growth under the baseline is expected to converge to about 4 percent. Sustainable growth will require greater economic diversification. Climate-related challenges are acute for Kazakhstan given its outsized hydrocarbon sector, high per-capita greenhouse gas emissions, and low domestic energy prices.
    Date: 2022–04–11
  23. By: António Afonso; José Alves
    Abstract: We assess the consequences of fiscal consolidation episodes on public sector efficiency (scores) for 35 OECD countries for the 2007-2020 period. We find that fiscal consolidations improve public sector efficiency and results are robust across efficiency models. Moreover, peripheral euro-area economies and economies with debt-to-GDP ratios between 60% and 90% are those whose public sector efficiency scores improve more when fiscal consolidation episodes occur. The evidence that fiscal consolidations enhance spending efficiency is an additional argument for fiscal consolidations, from a policy perspective.
    Keywords: fiscal consolidation episodes; government spending efficiency; panel data; OECD
    JEL: C23 D61 H21 E62 H63
    Date: 2022–05
  24. By: Guido Menzio
    Abstract: I study a search equilibrium model of the labor market in which workers have stubborn beliefs about their labor market prospects, i.e. beliefs about their probability of finding a job and the wage they will earn that do not respond to aggregate fluctuations in fundamentals. I show that, when workers have stubborn beliefs, the response of the wage bargained by a firm and a worker to aggregate shocks is dampened. As a result, the response of labor market tightness, job-finding probability, unemployment and vacancies to aggregate fluctuations is amplified. I show that stubborn beliefs generate cyclical inefficiencies in the labor market that can be corrected with countercyclical employment subsidies. I find that the response of the labor market to negative shocks is the same even if only a small fraction of workers has stubborn beliefs. In contrast, if the fraction of workers with stubborn beliefs is small, the response of the labor market to positive shocks is approximately the same as under rational expectations.
    JEL: E03 E32
    Date: 2022–04
  25. By: David Lucca; Jonathan H. Wright
    Abstract: We study the recent Australian experience with yield curve control (YCC) of government bonds as perhaps the best evidence of how this policy might work in other developed economies. We interpret the evidence with a simple model in which YCC affects prices of both government and other bonds via “broad” transmission channels, but only government bond prices through “narrow” liquidity channels. YCC seemingly worked well in 2020 while the market expected short rates to stay at zero for long. But as the global recovery and inflation gained momentum in 2021, liftoff expectations moved up, the Reserve Bank of Australia purchased most of the outstanding amount of the targeted government bond, and its yield dislocated from other financial market instruments. The model and empirical evidence point to narrow transmission channels playing more prominent roles than broad channels considered in prior studies of quantitative easing (QE), such as portfolio balance effects and signaling about short term rates. We argue that asset-specific narrow channels may be primary transmission mechanisms of quantity-based QE policies as well.
    JEL: C32 E43 E52 G12 G14
    Date: 2022–04
  26. By: International Monetary Fund
    Abstract: Zimbabwe experienced severe exogenous shocks (cyclone Idai, protracted drought, and the COVID-19 pandemic) during 2019-20, which along with policy missteps in 2019, led to a deep recession and high inflation. Real GDP contracted cumulatively by 11.7 percent during 2019-20 and inflation reached 837 percent (y/y) by July 2020. Reflecting good rainfall and relaxation of containment measures, real GDP rose by 6.3 percent in 2021. A tighter policy stance since mid-2020 (relative to 2019) has contributed to reducing inflation to 60.7 percent (y/y) at end-2021. However, high double-digit inflation and wide parallel foreign exchange (FX) market premia persist. The economic downturn and high inflation increased the financial system vulnerabilities. Extreme poverty has risen and about a third of the population is at risk of food insecurity. The international community seeks improvements in domestic political conditions and economic policies to initiate reengagement with Zimbabwe. The authorities have started token payments to external creditors in a bid to revive international reengagement.
    Date: 2022–04–08
  27. By: International Monetary Fund
    Abstract: Pre-COVID-19, economic policies under “Abenomics” helped ease financial conditions, exit deflation, and raise labor market participation, but fell short on the deep reforms needed to raise productivity and achieve inclusive and sustainable growth. The Japanese economy is now recovering from the pandemic amid strong policy support that has helped to mitigate the downturn. Japan had substantially lower rates of COVID-related infections and deaths than most advanced economies.
    Date: 2022–04–06
  28. By: International Monetary Fund
    Abstract: São Tomé and Príncipe has maintained macroeconomic stability, despite many challenges. The COVID-19 pandemic exacerbated long-standing socio-economic vulnerabilities, which were further compounded by persistent energy shortages and damages from the floods in end-2021. Growth declined in 2021 with power outages, while a targeted expansion of the cash transfer and food support programs provided needed relief to the most vulnerable. Strong grant financing remains critical for mitigating the impact of the pandemic. Vaccinations are proceeding, although the new COVID-19 variants pose risks for protracting the impact of the pandemic and require renewed actions to mitigate those risks. Parliamentary elections are expected in October 2022.
    Date: 2022–04–04
  29. By: International Monetary Fund
    Abstract: Sustained political gridlock has hobbled reforms and increased macroeconomic vulnerabilities, but a new high-level effort offers hope for resolving the impasse. The authorities have been preparing a comprehensive reform plan which, if adopted by parliament, would pave the way to address the structural and fiscal imbalances in the economy and promote sustainable and inclusive growth. The authorities responded swiftly and decisively to the COVID-19 crisis with social distancing restrictions and fiscal, monetary, and financial policy support measures. In 2021, a high rate of vaccination was achieved, although there has been a major surge in infections with the recent arrival of the Omicron variant. A nascent economic recovery is underway, supported by higher oil prices and some relaxation of mobility restrictions. However, substantial uncertainties to the economic outlook underscore the importance of phasing out COVID-19 relief measures at a measured pace as the economy recovers, and of accelerating the reform momentum to limit risks and rebuild buffers. Banks entered the crisis from a position of strength and have remained well capitalized and highly liquid.
    Date: 2022–03–28
  30. By: Corina Boar; Matthew P. Knowles
    Abstract: We study optimal taxation in a model with endogenous financial frictions, risky investment and occupational choice, where the distribution of wealth across entrepreneurs affects how efficiently capital is used. The planner chooses linear taxes on wealth, capital and labor income to maximize the steady state utility of a newborn agent. Most agents in the model are poor, leading to a redistributive motive for taxation. Optimal tax rates can be written as a closed-form function of the size of the tax bases and their elasticities with respect to tax rates. We find that it is optimal to tax capital income because financial frictions reduce the elasticity of capital income with respect to taxes and because capital income taxes prevent excessive entry into entrepreneurship. Optimal wealth taxes are positive but close to zero, since they strongly discourage capital accumulation.
    JEL: E2 E6 H2
    Date: 2022–04
  31. By: David Autor; David Cho; Leland D. Crane; Mita Goldar; Byron Lutz; Joshua K. Montes; William B. Peterman; David D. Ratner; Daniel Villar Vallenas; Ahu Yildirmaz
    Abstract: The Paycheck Protection Program (PPP), a principal element of the fiscal stimulus enacted by Congress during the COVID-19 pandemic, aimed to assist small businesses to maintain employment and wages during the crisis. We use high-frequency administrative payroll data from ADP--one of the world’s largest payroll processing firms--to estimate the causal effect of the PPP on the evolution of employment at PPP-eligible firms relative to PPP-ineligible firms, where eligibility is determined by industry-specific firm-size cutoffs. We estimate that the PPP boosted employment at eligible firms by between 2 percent to 5 percent at its peak in mid-2020, with this effect waning to 0 to 3 percent throughout the remainder of the year. Employers retained an estimated additional 3.6 million jobs due to the PPP as of mid-May 2020, and 1.4 million jobs at the end of 2020. The implied cost per year of employment retained was $169,000 to $258,000, equal to 3.4 to 5.2 times median earnings.
    JEL: E24 H25 H32 H81 J38
    Date: 2022–04
  32. By: Philipp Lieberknecht (Deutsche Bundesbank, Frankfurt, Germany); Philip Vermeulen (Faculty of Business, Economics and Law at AUT University)
    Abstract: This paper analyses the joint long-run evolution of wealth and income inequality. We show that top wealth and income shares were cointegrated over the past century in France and the US. We rationalise this _nding using a two-agent version of the Solow growth model. In this framework, the co-movement of top wealth and income shares is determined by the relative saving rate at the top, i.e. the ratio of the saving rate of rich individuals to the aggregate saving rate. The cointegration _nding suggests that relative saving rates at the top are fairly stable over time, thus explaining the tight co-movement between top wealth and income shares over the past century.
    Keywords: income inequality, wealth inequality, top shares, savings rates, cointegration, error correction
    JEL: D31 E21 E25 N32 N34
    Date: 2022–05
  33. By: International Monetary Fund
    Abstract: Korea has recovered impressively from the COVID-19 pandemic, which is a testament to its strong economic fundamentals and the authorities’ able policy responses. Activity has surpassed pre-covid levels despite multiple COVID waves. The recovery was supported by the effective containment of the pandemic, including rapid vaccination in 2021, and pursuing proactive economic policy support, which helped minimize economic scarring, sustain income growth, and maintain financial stability. Given Korea’s high global integration, strong external demand also supported the recovery. The upcoming presidential election offers a window of opportunity to reinvigorate structural reforms.
    Date: 2022–03–28
  34. By: Thomas Philippon
    Abstract: Growth theory is based on the assumption of exponential total factor productivity (TFP) growth. Across countries and time periods I find that TFP growth is actually linear. Unlike the exponential model, the additive growth model provides useful medium-term forecasts of TFP. It also explains the TFP slowdown and the volatility puzzle, and predicts falling real interest rates. For the distant future the model predicts ever increasing increments in standards of living but with growth rates that converge to zero. For the distant past the model suggests that the size of TFP increments has changed in the late 1600’s, the early 1800’s, and around 1930.
    JEL: E22 N1 O11 O3 O4
    Date: 2022–04
  35. By: António Afonso; João Tovar Jalles; Zoe Venter
    Abstract: This paper presents and describes a new database of major minimum wage and collective bargaining reforms covering 26 advanced economies over the period 1970-2020. The main advantage of this dataset is the precise identification of the nature and date of major reforms, which is valuable in many empirical applications. Based on the dataset, major changes in minimum wages have been more frequent than in collective bargaining in the last decades, and the majority of these were implemented during the 1980s and 1990s. In our empirical application, we find that minimum wage reforms have a medium-run positive impact on labor productivity and they lead to a fall in the unemployment rate. Collective bargaining reforms do not seem to affect either productivity or capital formation but they have a clear medium-term effect on the labor market. Moreover, collective bargaining reforms are more sensitivity to the prevailing business cycle conditions at the time of the reform (vis-à-vis minimum wage reforms).
    Keywords: labour market policies, minimum wage, collective bargaining, labour productivity, growth, local projection
    JEL: C22 E24 J31 J52
    Date: 2022
  36. By: Chatzarakis, Nikolaos; Tsaliki, Persefoni; Tsoulfidis, Lefteris
    Abstract: The labour theory of value (LTV) is the cornerstone of the classical and Marxian political economy for it explains the creation and valuation of wealth in capitalist societies and it remains the chief analytical tool in investigating economic phenomena. In this respect macroscopic phenomena, which include many distinct production processes evolving over long gestation periods, conceal the transformation of labour values into their monetary expression (prices). Consequently, the use of the LTV on a grand and dynamic scale is usually considered inapplicable in the construction of macroeconomic models. The classical/Marxian analysis is conducted through either multi-dimensional multi-sectoral models or the solution of the summation problem of heterogeneous commodities. However, many studies have corroborated the dynamic aspects of the LTV and probed for a reduction in the dimensionality of macroeconomic models. In this paper, on the one hand, we restate the dynamic aspects of the LTV over time and, on the other hand, ascertain its utility as a long-run macroeconomic tool. The way to proceed is to model the divergence of actual prices and quantities of commodities from their equilibria in a multi-sectoral economy and establish that the long-run behaviour of the system mirrors the long-run movement of the labour values.
    Keywords: labour theory of value; heterodox microeconomics; micro-founding of economic growth; dynamic input-output analysis
    JEL: B51 C61 D46 D57 E32
    Date: 2022–04–21
  37. By: Hang Bai; Erica X. N. Li; Chen Xue; Lu Zhang
    Abstract: Integrating national accounting with financial accounting, we provide firm-specific estimates of current-cost capital stocks for the entire Compustat universe, as well as an array of estimates of investment flows, economic depreciation rates, and capital and investment price deflators. The firm-level current-cost investment rate distribution is heavily right-skewed, with a small fraction of negative investment rates, 5.51%, but a huge fraction of positive investment rates, 91.64%. Despite a tiny fraction of inactive investment rates, 2.85%, firm-level investment also seems lumpy, featuring a fraction of 32.66% for positive spikes (investment rates higher than 20%). For a typical firm, 39% of total investment is completed within 20% of the sample years.
    JEL: E44 G12
    Date: 2022–04
  38. By: International Monetary Fund
    Abstract: Macao SAR’s recovery is expected to continue in 2022, but it will take several years before the economy returns to its pre-crisis level. Although strong fiscal support and the financial strength of Macao SAR’s casino groups cushioned employment and consumption, the sharp contraction in activity exposed Macao SAR’s vulnerability to external forces affecting the inflow of tourists. Short-term risks to the outlook include a re-intensification of the COVID-19 pandemic and an increase in Macao SAR’s financial sector stress. The heavy impact of the pandemic on Macao SAR’s growth highlights the need to diversify the economy beyond the gaming industry. The high exposure to climate-related shocks poses long-term concerns.
    Date: 2022–04–12
  39. By: Fernando E. Alvarez; David Argente; Diana Van Patten
    Abstract: This paper studies the potential of a cryptocurrency to become a medium of exchange. We use evidence from a natural experiment: In September 2021, El Salvador became the first country in the world to make bitcoin legal tender, and all economic agents were required to accept bitcoin for all payments. The Salvadorean government also launched an app, “Chivo Wallet,” which allowed users to digitally trade both bitcoin and dollars, and gave major incentives to download it. We conduct a representative national face-to-face survey to obtain information on bitcoin’s usage and effects. Leveraging this data, we document how, despite the government’s “big push” and a large fraction of people downloading Chivo Wallet, usage of bitcoin for everyday transactions is low and is concentrated among the banked, educated, young, and male population. We also estimate the fixed cost of adopting the new payment technology, the importance of strategic complementarities for users, and the elasticity of substitution between mobile payments and other payment methods.
    JEL: E4 E41 E42
    Date: 2022–04
  40. By: ARATA Yoshiyuki
    Abstract: Recent studies (e.g., Gabaix (2011)) argue that because of the high heterogeneity of firm size, microeconomic shocks generate aggregate fluctuations (i.e., the granular hypothesis). This paper tests whether empirical granularity is high enough to explain fluctuations in the GDP growth rate using firm-level data in G7 countries. I find that even when the central limit theorem does not hold, microeconomic shocks cancel each other out, and thus, the distribution of aggregate output induced by microeconomic shocks is very close to a Gaussian. In other words, the observed heterogeneity of firm size in all G7 countries is not high enough to prevent the averaging effect of microeconomic shocks. Furthermore, because of the closeness to a Gaussian, microeconomic shocks with export/import relations would result in no tail dependence of aggregate fluctuations. Since the empirical GDP growth rates deviate from a Gaussian in the tail region and show positive tail dependence across countries, the granular hypothesis cannot explain these tail features of the GDP growth rates.
    Date: 2022–04
  41. By: Florin Marius PAVELESCU (Institute of National Economy – Romanian Academy)
    Abstract: The paper reveal the main features of the investment flows and the dynamics of the stock of fixed capital during the XX-th century in correlation with the changes of the institutional framework and cyclical fluctuations of the gross domestic product or national income. The research methodology is differentiated for 1900-1947 period and 1948-2000 period, respectively, due to the available statistical data and the essential differences between the institutional framework and the sectoral structure of the economy. The analysis of the 1900-1947 period uses proxy variables for the estimation of the investments dynamics in agriculture and industrial activities. It was revealed the slow growth of the investments in agriculture and small industry (the craft industry, the household industry, the peasant milling industry). The trends of the investments dynamics in big industry (mining and quarrying, manufacturing, electric power industry) were identified. It was remarked the steady growth of the investments in electric power industry even in the context of the sensible fluctuations of the gross domestic product, in real terms. The impact of the macroeconomic policies and external shocks on the investment flows was also emphasized.
    Keywords: Consum de capital fix, forţa de tracţiune animală, stoc de capital fix, cicluri economice, eficienţa utilizării fondurilor fixe, privatizare, reajustări structurale, imobilizări corporale
    JEL: E22 E N13 N14 O11 O47
    Date: 2021–12
  42. By: International Monetary Fund
    Abstract: The United Kingdom’s macroprudential policy framework has proven its effectiveness. After the Global Financial Crisis (GFC) of 2007–09, the United Kingdom assigned the Bank of England (BOE) a clear financial stability mandate, created a new Financial Policy Committee (FPC) to set macroprudential policy, and shifted to a “twin peaks” model of financial oversight. The 2016 Financial Sector Assessment Program (FSAP) concluded that the new framework appeared appropriate for effectively conducting macroprudential policy. However, the framework was then relatively new. The 2021 FSAP represents an opportunity to review its performance in building systemic resilience through the financial cycle, including the market volatility resulting from the Brexit vote and the COVID-19 pandemic.
    Keywords: FPC mortgage market Recommendations; housing price development; mortgage market; FPC member; policy measure; policy action; affordability stress test; Financial sector stability; Systemic risk; Stress testing; Countercyclical capital buffers; Financial sector risk; Global
    Date: 2022–04–08
  43. By: Tony Chernis; Taylor Webley
    Abstract: Assessing the state of the economy in real time is critical for policy-making, and understanding the risks to those assessments is equally important. Policy-makers are typically provided with point forecasts that contain insufficient information about risks. In contrast, predictive densities estimate the entire range of possible outcomes. This provides a method for quantifying not only the current state of the economy but also the degree of uncertainty, the tail risks and the overall balance of risks around that state. Accordingly, this paper extends the framework of Chernis and Sekkel (2018) to produce density nowcasts for Canadian real GDP growth. We compare several methods of combining predictive densities from 98 models representing four popular classes of nowcasting models. The performance of these combinations is then assessed in both real-time and pseudo real-time out-of-sample exercises, with the limited sample real-time simulations reinforcing the importance of data revisions for nowcasting. We demonstrate that the combined densities are reliable and accurate tools for assessing the state of the economy and risks to the outlook. We highlight in particular risks at the start of the COVID-19 pandemic.
    Keywords: Econometric and statistical methods
    JEL: C C53 E E3 E7
    Date: 2022–05
  44. By: Julio L. Ortiz
    Abstract: Widespread adoption of just-in-time (JIT) production has reduced inventory holdings. This paper finds that JIT creates a trade-off between firm profitability and vulnerability to large shocks. Empirically, JIT adopters experience higher sales and less volatility while also exhibiting heightened cyclicality and sensitivity to natural disasters. I explain these facts in a structurally estimated general equilibrium model where firms can adopt JIT. Relative to a no-JIT economy, the estimated model implies a 1.3% increase in firm value. At the same time, an unanticipated shock results in a roughly 15% deeper output contraction. This occurs because firms "stock out" or hoard materials.
    Keywords: Inventory investment; Firm dynamics; Just-in-time production
    JEL: D25 E22 G30
    Date: 2022–04–20
  45. By: Guglielmo Maria Caporale; Luis A. Gil-Alana; OlaOluwa Simon Yaya
    Abstract: This paper analyses persistence and non-linearities in quarterly and monthly US Treasury 10-year bond yields over the period 1962-2021 using two different fractional integration approaches including Chebyshev polynomials and Fourier functions respectively. The results for both quarterly and monthly data provide evidence of non-linear structures and mean reversion (i.e., of transitory effects of shocks) under the assumption of autocorrelated errors.
    Keywords: non-linearities, Chebyshev polynomials, Fourier functions, persistence, US Treasury, 10-year bond yields
    JEL: C22 E43
    Date: 2022
  46. By: Florian Misch (ESM); Martin Rey (ESM)
    Abstract: A greater likelihood of significant asymmetric shocks, the war in Ukraine, and stretched fiscal space all underscore the importance of establishing a euro area fiscal stabilisation capacity. This paper considers the merits of a fund that provides loans for fiscal stabilisation purposes, referred to as ‘stability fund’. First, we argue that this fund could better address moral hazard and be more easily set up than other proposed schemes. Second, using quarterly data from two decades, we model eligibility and the authorities’ decision to request loans to simulate the loan portfolio of this fund had it existed all along, with the loan parameters calibrated to match what the ESM could provide. The results suggest the ESM’s current lending capacity is sufficient to host this fund, and that the expansion of fiscal space can be macroeconomically significant and larger compared to other fiscal stabilisation capacity types.
    Date: 2022–05–05
  47. By: Elie Ndemba Tshilambu (UPC - Université protestante au Congo)
    Abstract: Ce papier tente d'apprécier l'incidence de la politique budgétaire sur l'investissement privé et la croissance économique en R.D. Congo de 1990-2018. Dans ce sens, il évalue l'intensité du multiplicateur Budgétaire afin de statuer sur mécanisme budgétaire de quelques sous périodes. Une régression simple servira à cette fin. Nous estimons, comme Katuala (2020), un modèle de Vecteurs Autorégressifs structurels sous l'approche Bayésienne (B-SVAR) pour vérifier l'effet d'éviction et la dynamique macroéconomique sur les séries trimestrielles obtenues après désagrégation (Denton, 1971). La causalité de Granger (1980) et la cointégration de Johansen (1991) permettront de statuer sur les liens entre variables alors que l'identification des chocs du modèle s'inspire des travaux de Binning (2013) qui combinent les restrictions de signes et de zéros tant à court terme qu'à long terme dans le cadre de modèles VAR structurels sousidentifiés. Nos résultats ont révélé que : (i) Le multiplicateur budgétaire est très faible mais significatif. Ce qui pourrait justifier la faible force impulsive des investissements publics sur l'activité économique en R.D. Congo ; (ii) les chocs sur le Dépenses publiques n'ont pas donné des retombées escomptées sur la croissance économique ; (iii) les cours du cuivre sont restés rigides. Ce qui prouve que la R.D. Congo est un petit pays face à la scène internationale et (iv) Les investissements privés réagissent positivement aux soldes budgétaires et dépenses en capital du gouvernement congolais. Cette relation réfute l'hypothèse d'effet d'éviction.
    Keywords: Politique Budgétaire,Investissement privé,Croissance économique,Analyse bayésienne Classification JEL : E62,E22,O40,C11 Fiscal Policy,Private Investment,Economic Growth,Bayesian Analysis JEL classification : E62,C11
    Date: 2022–04–01
  48. By: Marta De Philippis (Bank of Italy); Andrea Locatelli (Bank of Italy); Giulio Papini (Bank of Italy); Roberto Torrini (Bank of Italy)
    Abstract: This paper presents a historical account of economic trends in Italy and its two macro-regions, the Centre and North and the South, since the 1950s, and outlines several growth scenarios based on recent demographic projections and alternative hypotheses on future labour market and productivity paths. We document a progressive slowdown in GDP, particularly in the South, driven by productivity and, more recently, also by employment and capital accumulation dynamics. Going forward, given the reduction in the working age population, without improvements in productivity and labour force participation, the Italian economy – the southern one in particular – is projected to shrink from the second half of the current decade. Despite the unfavourable demographic trends, robust growth rates could still be achieved if productivity grew at the same rate as in other European countries and assuming a catching-up process of between the South and the Centre and North of the country.
    Keywords: regional disparities, demographic trends, economic growth, labour market, total factor productivity
    JEL: J11 R1 O40 O52 N10 E01
    Date: 2022–04
  49. By: Volta, Vittoria; Aste, Tomaso
    Abstract: We investigate high-frequency reactions in the Eurozone stock market and the UK stock market during the time period surrounding European Central Bank (ECB) and the Bank of England (BoE)’s interest rate decisions, assessing how these two markets react and co-move influencing each other. The effects are quantified by measuring linear and nonlinear transfer entropy combined with a bivariate empirical mode decomposition from a dataset of 1 min prices for the Euro Stoxx 50 and the FTSE 100 stock indices. We uncover that central banks’ interest rate decisions induce an upsurge in intraday volatility that is more pronounced on ECB announcement days and there is a significant information flow between the markets with prevalent direction going from the market where the announcement is made towards the other.
    Keywords: markets; transfer entropy; risk spillover; causality; ES/K002309/1; (EP/P031730/1); H2020-ICT-2018-2 825215
    JEL: F3 G3
    Date: 2022–03–30
  50. By: Holtemöller, Oliver; Lindner, Axel; Schult, Christoph
    Abstract: Ein Stopp der russischen Gaslieferungen würde zu einer Rezession der deutschen Wirtschaft führen. Nicht alle Regionen wären davon gleich betroffen: Vor allem wäre dort, wo das Verarbeitende Gewerbe ein großes Gewicht hat, mit einem deutlich stärkeren Einbruch der Wirtschaftsleistung zu rechnen als andernorts. Deshalb wäre Westdeutschland und dort insbesondere der Süden stärker betroffen als der Osten Deutschlands. Dagegen spielt für die Frage, wie viele Arbeitsplätze durch einen bestimmten Rückgang der Wertschöpfung gefährdet sind, die Höhe der Arbeitsproduktivität eine ausschlaggebende Rolle.
    Keywords: Erdgas,Prognose,Regionalstruktur
    JEL: E37 Q43 R11
    Date: 2022
  51. By: Lockwood, Benjamin (University of Warwick); Porcelli, Francesco (University of Bari); Rockey, James (University of Birmingham)
    Abstract: This paper uses an instrumental variable approach based on close elections to evaluate the effect of political parties on local fiscal policy in England and Wales over the period 1998-2016. Our main finding is that political control of the council (by Labour, Conservative or Liberal Democrat parties) has no effect on total expenditure, the composition of expenditure, the property tax rate (council tax per band D property) or total council tax revenue. Thus, our results confirm the widely expressed belief that centrally imposed constraints on local government fiscal policy (rate-capping, and more recently, compulsory referenda) hold local government fiscal policy in a tight grip. JEL classification: H70 ; H71 ; D72
    Keywords: Party Control ; Grants ; Government Spending ; Taxation
    Date: 2022
  52. By: Luca Alfieri; Mustafa Hakan Eratalay; Darya Lapitskaya; Rajesh Sharma
    Keywords: Monetary policy, Central banking, Text mining, COVID-19
    Date: 2022
  53. By: Simola, Heli
    Abstract: Russia's economic growth slowed substantially over the past decade. To improve its long-term growth outlook, Russia must deal with structural problems. While the country has not lacked for ambitious development plans, the results of late have been rather thin. We discuss some of the key challenges facing the Russian economy and policy responses. Considering Russia's recent economic policy in light of the economic literature and potential reasons for its successes and failures, we suggest the focus of the country's current economic policy framework is too narrowly drawn to achieve a significant acceleration in long-term growth.
    Keywords: Russia,economic policy,development plans,economic growth
    Date: 2021
  54. By: International Monetary Fund
    Abstract: This report provides an evaluation of fiscal transparency practices (FTE) in Benin according to the standards defined by the IMF’s Fiscal Transparency Code. The evaluation focuses on 36 principles covering three pillars of the Code: (I) fiscal reporting; (II) fiscal forecasting and budgeting; and (III) fiscal risk analysis and management. To take account of different levels of institutional capacity in each country, the Code distinguishes three levels of practices for each principle: basic, good, and advanced. A practice is considered “not met” if it has not met the Code’s requirements for basic level.
    Keywords: government budget control; programming paper; budget law; IMF resident Representative; authorities of Benin; Subnational government; du Bénin; quantitative analysis; government action program; Budget planning and preparation; Fiscal risks; Fiscal law; Budget execution and treasury management; West Africa; Global
    Date: 2022–04–08
  55. By: Victor PLATON (Institute of National Economy – Romanian Academy); Andreea CONSTANTINESCU (Institute of National Economy – Romanian Academy); Sorina JURIST (Institute of National Economy – Romanian Academy)
    Abstract: Cele mai recente È›inte È™i eforturi, în vederea unei dezvoltări durabile, au dus la promovarea unor noi concepte, cum ar fi: creÈ™terea ecologică, economia circulară È™i reciclarea, ca reacÈ›ie la recesiunea globală È™i schimbările climatice. Tema abordată, în această lucrare, urmăreÈ™te aprofundarea anumitor aspecte specifice ale economie circulare, la nivel regional. Obiectivul propus a fost de a identifica specificul regional al economiei circulare È™i mecanismele economice pentru promovarea economiei circulare la nivel regional. La realizarea acestei lucrări de cercetare au fost avute în vedere cinci regiuni geografice precizate în metodologia de cercetare, care grupează țările din Uniunea Europeană din punct de vedere al plasării în spaÈ›iul european. Obiectivele urmărite în realizarea acestei lucrării au fost: 1. Analiza economiei circulare la nivel regional în UE È™i identificarea tendinÈ›elor comune È™i a divergenÈ›elor regionale; 2. Identificarea influenÈ›ei pe care experienÈ›a acumulată în structurile UE o exercită asupra evoluÈ›iei economiei circulare, la nivel regional; 3. Precizarea locului ocupat de România în contextul economiei circulare la nivel European. Au fost efectuate analize statistice pentru a defini modele econometric care să pună în evidență caracteristicile regionale È™i influenÈ›ele asupra economiei circulare. Analiza s-a limitat la doar cinci indicatori, din cei 11 menÈ›ionaÈ›i anterior urmând ca, în lucrările ce vor urma, să fie extinsă metodologia aplicată în lucrarea de cercetare
    Keywords: Circular Economy, Econometric modelling, non-stationary time series, linear regression, autocorrelation of errors, regional economics
    JEL: Q53 Q55 C33 E52
    Date: 2021–12
  56. By: Mattia Guerini; Fabio Vanni; Mauro Napoletano
    Abstract: Is aggregate income enough to summarize the well-being of a society? We address this long-standing question by exploiting a novel approach to study the relationship between gross domestic product (GDP) and a set of economic, social and environmental indicators for nine developed economies. By employing dimensionality reduction techniques, we quantify the share of variability stemming from a large set of different indicators that can be compressed into a univariate index. We also evaluate how well this variability can be explained if the univariate index is GDP. Our results indicate that univariate measures, and GDP among them, are doomed to fail in accounting for the variability of well-being indicators. Even if GDP would be the best linear univariate index, its quality in synthesizing information from indicators belonging to different domains is poor. Our approach provides additional support for policy makers interested in measuring the trade offs between income and other relevant socio-economic and ecological dimensions. Furthermore, it adds new quantitative evidence to the already vast literature criticizing GDP as the most prominent measure of well-being.
    Keywords: Gross domestic product; well-being indicators; data reduction techniques.
    Date: 2022–05–14
  57. By: Min Chen (SFSU - San Francisco State University); Zhaobo Zhu (Audencia Business School); Peiwen Han (Shenzhen University [Shenzhen]); Bo Chen (Shenzhen MSU-BIT University); Jia Liu (University of Portsmouth)
    Abstract: This paper documents that both domestic and crosscountry economic policy uncertainty have significant impacts on the behaviours of domestic analysts in the United Kingdom. Specifically, domestic economic policy uncertainty has significant negative impacts on analyst earnings forecast accuracy, dispersion, and both analyst recommendation upgrades and downgrades, whereas it has no significant impact on analyst coverage in the United Kingdom. An industry analysis shows that the effects of policy uncertainties on analyst behaviours vary across industries. Moreover, European and global economic policy uncertainty have similar crosscountry impacts as U.K. policy uncertainty on analyst behaviours in the United Kingdom, whereas U.S. policy uncertainty exhibits different impacts. This study presents novel and comprehensive evidence of the impacts of policy uncertainty on an important information intermediary that has significant influences on capital market efficiency, providing practical implications for investors, analysts, corporate managers, and policy makers.
    Keywords: Economic policy uncertainty,Analyst earnings forecast accuracy,Forecast dispersion,Analyst coverage,Analyst stock recommendations
    Date: 2022
  58. By: Korhonen, Iikka
    Abstract: This paper updates my earlier calculations on Russia's long-run growth potential using a standard growth accounting framework in which GDP growth depends on available labor, capital and efficiency in combining them, i.e. total factor productivity. Russia's economy has grown relatively slowly during the past decade, partly because of declining labor force. In my revised framework, growth recovers after the negative COVID-19 shock, but remains subdued as the working-age population continues to dwindle. Productivity growth remains lower than in the early 2000s, while average GDP growth settles at approximately 1.5% p.a.
    Date: 2021
  59. By: Jorratt, Michel
    Abstract: El objetivo de este documento es contribuir al debate sobre algunos temas clave de los regímenes fiscales en la minería: por un lado, la captura de las rentas económicas por parte de los gobiernos, con instrumentos que doten de mayor progresividad, equidad y eficiencia a los sistemas fiscales, y, por otro lado, la transparencia en la apropiación, el uso y la distribución de los ingresos fiscales derivados de la actividad minera. Para ello, se estudian los casos de la minería del litio en la Argentina, Bolivia (Estado Plurinacional de) y Chile, y se analizan la renta económica, el régimen fiscal, la estructura de ingresos tributarios y no tributarios y la transparencia en la apropiación, uso y distribución de los ingresos fiscales provenientes de la minería del litio en los tres países. Los análisis permiten apreciar el tamaño y la importancia de los recursos movilizados en las economías consideradas, así como evaluar la progresividad de algunos instrumentos y explicar las brechas existentes entre tasas nominales y efectivas. Se señalan también algunos desafíos en materia de divulgación de datos e información a la ciudadanía y se brindan recomendaciones para la mejora de la progresividad, equidad, eficiencia y transparencia de estos regímenes fiscales.
    Date: 2022–03–23
  60. By: Anshuman Kamila; Meeta Keswani Mehra (Institute of Economic Growth, Delhi)
    Abstract: The study of economic growth across countries is highly rewarding. Understanding the varied patterns of growth across countries is crucial because disparities in growth rates have, in due course of time, led to gaps in living standards and ‘welfare’. The Economic Survey 2016-17 (2017)conducts an empirical exercise for the ß-convergence for i) countries of the world; ii) provinces of China and iii) states of India. It depicts poorer countries are closing the per capita income gap with richer countries, the poorer Chinese provinces with the richer ones, but in India, the less developed states are not converging to their richer counterparts; instead they are, on average, going further from the richer states. Against the above backdrop, this study is an attempt to scrutinise existing literature on the subject of convergence and infer the gaps in literature pertaining to GSDP per capita growth experience of Indian states. Then, an attempt is made to test for applicability of neoclassical and endogenous growth models. Following this, is an inquiry into whether difference in growth of per capita GSDP across states is on account of difference in inputs in the production process or the difference in efficiency in utilising such inputs in the process of production. We discover that while neo-classical growth model broadly applies to Indian states, only 20% of variation in per capita GSDP across Indian states is explained by dispersion of values of rates of investment, population growth, depreciation and TFP growth - as opposed to nearly 60% dispersion of GDP across world economies being accounted for by such differences. In addition, 8 and 11 states show evidence for AK model and R&D model respectively. Finally, states that were initially ‘rich’ or ‘poor’ have shown similar growth rates for the past two decades, on account of similarity in investment in physical and human capital across these. Therefore, more progressive redistribution of physical and human capital is necessary for convergence in per capita GSDP levels.
    Date: 2021–03
  61. By: Di, Zeyu (Jönköping University, Sogang University); Heshmati, Almas (Jönköping University, Sogang University); Liu, Sijia (Jönköping University, Sogang University)
    Abstract: In China, real estate and the stock market are the two main markets favored by both individual and institutional investors. There is a significant economic link between the two. Therefore, their relationship and long-term and short-term causality can provide good guidance for investors. This paper studies the causality and correlation relationship between the stock market and real estate sector's trading volumes in 31 provinces of China. Its empirical results are based on panel data from 2000 to 2016. Various panel unit root, co-integration, and model specification and estimation tests are carried out. The panel mean group is found to be the most suitable method for the analysis. The study finds that the main industries in different provinces may affect the short-term causal relationship between the real estate sector and the stock market. But in the long-run, the causal relationship between the two is 2-way and stable.
    Keywords: real estate, stock market, causal relationship, asset allocation, portfolio, economic area, Chinese provinces
    JEL: E22 H54 O16 O18 R53
    Date: 2022–04
  62. By: Huynh, Cong Minh; Tran, Hoai Nam
    Abstract: Ambiguous impacts of financial development on income inequality in the literature imply that the impacts can be affected by other variables and may depend on different dimensions of financial development. This paper studies the effects of financial development with multi-dimensional analysis (financial depth, financial access and financial efficiency) of two main categories (financial institutions and financial markets) and institutional quality on income inequality in 30 Asian countries in the period 2000 – 2019. Results show that the financial institutions development (FI), the financial institutions access (FIA), the financial institutions efficiency (FIE), and the financial markets access (FMA) reduce income inequality; but the overall financial development (OFD), the financial markets development (FM), the financial institutions depth (FID), and the financial markets depths (FMD) increase it. Notably, better institutional quality not only lessens income inequality, but also moderates the effects of financial development on income inequality. Specifically, the improvement of institutional quality strengthens the beneficial effects of FI, FIA, FIE, and FMA on income inequality. Meanwhile, OFD, FM, FID, and FMD initially exacerbate income inequality until respective thresholds of institutional quality, and then beyond those levels of IQ, these indicators of financial development reduce income inequality. Results are robust with various estimators. These findings strongly support the importance of financial development with multi-dimensions and institutional reform in Asian countries as they have both direct and indirect impacts on income inequality through their mutual interactions.
    Keywords: Asian countries; Financial development; Income inequality; Institutional quality
    JEL: D31 D53 E02 O16 P48
    Date: 2022–04–22

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