nep-mac New Economics Papers
on Macroeconomics
Issue of 2023‒06‒12
34 papers chosen by
Daniela Cialfi
Universita' di Teramo

  1. Does Monetary Policy Reinforce the Effects of Macroprudential Policy By Adam Gersl; Barbara Livorova
  2. KIET Manufacturing Business Survey Index (BSI) for the 1st Quarter 2023 By Hong, Sung Wook
  3. Monetary Policy with Racial Inequality By Makoto Nakajima
  4. CBDC and business cycle dynamics in a New Monetarist New Keynesian model By Assenmacher, Katrin; Bitter, Lea; Ristiniemi, Annukka
  5. Inflation Strikes Back: The Role of Import Competition and the Labor Market By Mary Amiti; Sebastian Heise; Fatih Karahan; Ayşegül Şahin
  6. The conditional path of central bank asset purchases By Christophe Blot; Paul Hubert; Jérôme Creel; Caroline Bozou
  7. Determinants of Inflation in Sierra Leone By Jackson, Emerson Abraham; Kamara, Purity; Kamara, Abdulsalam
  8. Energy News Shocks and their Propagation to Renewable and Fossil Fuels Use By Guinea, Laurentiu; Ruiz, Jesús; Puch, Luis A.
  9. New Facts on Consumer Price Rigidity in the Euro Area By Erwan Gautier; Cristina Conflitti; Riemer P. Faber; Brian Fabo; Ludmila Fadejeva; Valentin Jouvanceau; Jan-Oliver Menz; Teresa Messner; Pavlos Petroulas; Pau Roldan-Blanco; Fabio Rumler; Sergio Santoro; Elisabeth Wieland; Hélène Zimmer
  10. Integration of Econometric Models and Machine Learning- Study on US Inflation and Unemployment By Sri Rajitha Tattikota; Naveen Srinivasan
  11. Heterogeneous Agents Dynamic Spatial General Equilibrium By Maximiliano Dvorkin
  12. Not all ECB meetings are created equal By Sinem Kandemir; Peter Tillmann
  13. The Role of Wages in Trend Inflation: Back to the 1980s? By Michael T. Kiley
  14. Remarks on the Outlook, Monetary Policy, and Supporting a Vibrant Economy By Susan M. Collins
  15. Slowing Growth: More Than a Rough Patch By M. Ayhan Kose; Franziska Ohnsorge
  16. Could Spain be less different? Exploring the effects of macroprudential policy on the house price cycle By Adrian Carro
  17. The relationship between inflation and unemployment in Sub-Saharan Africa By Mah Philippe Valdez Dimitri; Louis Henri Ngah Ntiga
  18. Does the SPF Help Predict the Shape of Recessions in Real Time?  By Yunjong Eo; James Morley
  19. How Much Can GSCPI Improvements Help Reduce Inflation? By Ozge Akinci; Gianluca Benigno; Hunter L. Clark; William Cross-Bermingham; Ethan Nourbash
  20. Understanding Uncertainty Shocks and the Role of Black Swans By Laura Veldkamp
  21. Remarks for the Panel Discussion “Why Did We Miscast Inflation?” By Susan M. Collins
  22. The Choice of Technology in Economic Development By Wen, Lei; Zhou, Haiwen
  23. A Modern Approach to Value Creation: The Data Value Chain By Song, Myungkoo
  24. How Interest Rates Redistribute Income By Fix, Blair
  25. Financial Fragility without Banks By Stein Berre; Asani Sarkar
  26. Reframing The US Dollar Debate: What Outlook for the US Dollar as World Money? By Jeremy Srouji
  27. Burkina Faso: Request for Disbursement Under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Burkina Faso By International Monetary Fund
  28. Can there be a common, risk-based framework for decisions around live insect trade? By M M Quinlan; J D Mumford; M Q Benedict; F Wäckers; C F Oliva; M Wohlfarter; G Smagghe; E Vila; J Klapwijk; A Michaelakis; C M Collins; J Prudhomme; G Torres; F Diaz; L Saul-Gershenz; K Cook; A Verghese; P Sreerama Kumar
  29. Foresight partnership forum: Forum report By CGIAR Initiative on Foresight
  30. Optimal tests following sequential experiments By Karun Adusumilli
  31. European doctrine of mutual respect and cooperation By Corbu, Ion
  32. Self-nudging is more ethical, but less efficient than social nudging By Diederich, Johannes; Goeschl, Timo; Waichman, Israel
  33. Management and Performance in the Public Sector: Evidence from German Municipalities By Florian Englmaier; Gerd Muehlheusser; Andreas Roider; Niklas Wallmeier
  34. Land Resource Regions and Major Land Resource Areas of the United States, the Caribbean, and the Pacific Basin By Natural Resources Conservation Service

  1. By: Adam Gersl (Institute of Economic Studies, Faculty of Social Sciences, Charles University); Barbara Livorova (Institute of Economic Studies, Faculty of Social Sciences, Charles University & Czech National Bank)
    Abstract: This paper contributes to studying the interaction between monetary and macroprudential policies by examining whether the impact of macroprudential policy on credit and house price growth differs between the two key phases of monetary policy cycle, i.e. monetary policy tightening and loosening. The dataset covers 33 advanced and 33 emerging market countries in the period 1990 - 2019 in quarterly frequency. Using the GMM estimation method, the results show that tightening of monetary policy does on average reinforce the effects of macroprudential policy on credit and house prices. Furthermore, we show that this reinforcing effect works for some but not all types of macroprudential policy measures, and that the results differ between advanced countries and emerging markets.
    Keywords: Macroprudential Policy, Monetary Policy Cycle, Credit Growth, House Price Growth, Interaction of Policies
    JEL: E52 E58 G21 G28 E32
    Date: 2023–05
  2. By: Hong, Sung Wook (Korea Institute for Industrial Economics and Trade)
    Abstract: The first quarter (Q1) 2023 manufacturing overall composite index remains below the baseline (100), indicating that conditions remain unfavorable. In addition, indexes for all indicators dropped significantly from the previous quarter. Business conditions (77), sales (75), domestic demand (78), exports (81), ordinary profit (79), and financial conditions (79) in the manufacturing sector all posted decreases, while inventory (101) remained above the baseline. The BSI outlook for Q2, however, indicates that manufacturers expect the business environment to be more favorable compared to the first quarter. Most indices for the manufacturing sector are project to increase compared to Q1, while all feeder indices are expected to remain below the baseline; only inventory (100) and employment (100) are projected to maintain baseline levels over the next quarter. Head to for more industrial projections and data.
    Keywords: Business Survey Index; BSI; Korea; industrial outlook; economic outlook; industrial projections; economic projections; macroeconomics; macroeconomic outlook; manufacturing; exports
    JEL: E10 E17 E21 E22 E23 E24 E27 E30 E31 E32 E51 E52 E58 E60 E62
    Date: 2023–04–30
  3. By: Makoto Nakajima
    Abstract: I develop a heterogeneous-agent New-Keynesian model featuring racial inequality in income and wealth, and studies interactions between racial inequality and monetary policy. Black and Hispanic workers gain more from accommodative monetary policy than White workers mainly due to higher labor market risks. Their gains are larger also because of a larger proportion of them are hand-to-mouth, while wealthy White workers gain more from asset price appreciation. Monetary and fiscal policies are substitutes in providing insurance against cyclical labor market risks. Racial minorities gain even more from an accommodative monetary policy in the absence of income-dependent fiscal transfers.
    Keywords: Business cycle; Marginal Propensity to Consume; Monetary policy; Labor market; Heterogeneous agents; Hand-to-mouth; Unemployment; Wealth distribution; Racial inequality
    JEL: J64 J15 E52 E21
    Date: 2023–04–19
  4. By: Assenmacher, Katrin; Bitter, Lea; Ristiniemi, Annukka
    Abstract: To study implications of an interest-bearing CBDC on the economy, we integrate a New Monetarist-type decentralised market that explicitly accounts for the means-of-exchange function of bank deposits and CBDC into a New Keynesian model with financial frictions. The central bank influences the store-of-value function of money through a conventional Taylor rule while it affects the means-of-exchange function of money through CBDC operations. Peak responses to monetary policy shocks remain similar in the presence of an interest-bearing CBDC, implying that monetary transmission is not impaired. At the same time however, the provision of CBDC helps smooth responses to macroeconomic shocks. By supplying CBDC, the central bank contributes to stabilising the liquidity premium, thereby affecting bank funding conditions and the opportunity costs of money, which dampens and smoothes the reaction of investment and consumption to macroeconomic shocks. JEL Classification: E58, E41, E42, E51, E52
    Keywords: Central bank digital currency, DSGE, monetary policy, search and matching
    Date: 2023–05
  5. By: Mary Amiti; Sebastian Heise; Fatih Karahan; Ayşegül Şahin
    Abstract: U.S. inflation has recently surged, with inflation reaching its highest readings since the early 1980s. We examine the drivers of this rise in inflation, focusing on supply chain disruptions, labor supply constraints, and their interaction. Using a calibrated two-sector New Keynesian DSGE model with multiple factors of production, foreign competition, and endogenous markups, we find that supply chain disruptions combined with a rise in the disutility of work raised inflation by about 2 percentage points in the 2021-22 period. We show that the combined shock increased price inflation in the model by 0.6 percentage point more than it would have risen if the shocks had hit separately. This amplification arises because the joint shock to labor and imported input prices makes substituting between labor and intermediates less effective for domestic firms. Moreover, the simultaneous foreign competition shock allows domestic producers to increase their pass-through into prices without losing market share. We then show that the benefit of aggressive monetary policy in the model depends on the source of the rise in inflation. If the rise in inflation is demand-driven, then aggressive monetary tightening can contain inflation without a recession later. In contrast, aggressive policy can have a large negative effect on the labor market when inflation is driven by supply chain and labor market disruptions. We use aggregate and industry-level data on producer prices, wages, and input prices to provide corroborating evidence for the key amplification channels in the model.
    JEL: E24 E31
    Date: 2023–05
  6. By: Christophe Blot; Paul Hubert; Jérôme Creel; Caroline Bozou
    Abstract: We investigate the financial market effects of central bank asset purchases by exploiting the unique setting provided by ECB’s PSPP and PEPP policies. While the PSPP aimed to counter deflationary risks, the PEPP was announced to alleviate sovereign risks, these programs consist in purchases of identical assets. We assess their impacts on various asset prices. We find that they have different effects on two variables: PSPP positively affects inflation swaps whereas PEPP negatively impacts sovereign spreads, but not the opposite. We document the channels for these differentiated effects and highlight the role of clarifying the rationale of a policy.
    Keywords: monetary policy, asset prices, central bank communication, central bank reaction function, intermediate objectives
    JEL: G12 E52 E58
    Date: 2023
  7. By: Jackson, Emerson Abraham; Kamara, Purity; Kamara, Abdulsalam
    Abstract: This paper examines the determinants of inflation in Sierra Leone using monthly time series data from 2010M1 to 2021M12, with the application of the ARDL model. The emphasis of the empirical study as outlined in the objectives is to examine both supply-side and demand-side pressure as observed in the outcome of the short and long-run relationships. Taking into account the characteristics of the Sierra Leonean economy, which is also backed by recent studies on inflation dynamics, the constructed ARDL model emphasizes the effects of the exchange rate, RGDP, Fiscal Balance (FBAL), Currency in Circulation, and Lending Rate (LR) factors on inflation dynamics in the economy. The empirical results show that in the long-run, the main determinants of inflation in Sierra Leone are the exchange rate, Real Gross Domestic Product (RGDP), Fiscal Balance, Currency in Circulation, and Lending Rate. In the short run, all the variables except RGDP and Exchange Rate manifested significant effects on inflation dynamics. Finally, the error correction term (-0.063) was proven to be negative and statistically significant, thereby suggesting the rapid rate of adjustment to its long-run state
    Keywords: Inflation Targeting, Supply-Side, Demand-Side, Shocks, Sierra Leone
    JEL: C22 E20 E3 E31
    Date: 2022–09–01
  8. By: Guinea, Laurentiu; Ruiz, Jesús; Puch, Luis A.
    Abstract: This paper investigates the impact of anticipated (news) shocks on renewable and fossil energy use on the US economy. Using structural vector autoregressions (SVARs), we identify the news shocks captured in energy stock market indexes. Our findings show that renewable and fossil energy news shocks significantly affect economic activity, revealing the tensions between the traditional fossil fuel-based industries and the emerging green technology-based ones. We further identify news shocks on Economic Policy Uncertainty (EPU) index, as policy is a key factor driving the changes in the energy mix. First, we show that the identified anticipated shocks have very different propagation mechanisms from traditional surprise shocks. Then, we find that the combination of news shocks to energy stock prices and economic policy uncertainty jointly account for about 90% of the variability of output, job openings and house prices. To interpret our findings, we use a DSGE model that incorporates fossil and renewable energy sectors and news shocks as a driving force, and we show that the propagation mechanisms of news shocks in the model are consistent with our empirical observations. Our study illustrates on the critical interaction between energy news and economic policy uncertainty in affecting the real economy in the transition from dirty to clean energy technologies.
    Keywords: News Shocks; Renewable Energy; Economic Policy Uncertainty; Expectations
    JEL: E2 E6 E32 E44 Q42 Q43 Q58
    Date: 2023–05–24
  9. By: Erwan Gautier (Banque de France); Cristina Conflitti (Banca d’Italia); Riemer P. Faber (National Bank of Belgium); Brian Fabo (National Bank of Slovakia); Ludmila Fadejeva (Latvijas Banka); Valentin Jouvanceau (Lietuvos Bankas); Jan-Oliver Menz (Deutsche Bundesbank); Teresa Messner (Oesterreichische Nationalbank); Pavlos Petroulas (Bank of Greece); Pau Roldan-Blanco (Banco de España); Fabio Rumler (Oesterreichische Nationalbank); Sergio Santoro (European Central Bank); Elisabeth Wieland (Deutsche Bundesbank); Hélène Zimmer (National Bank of Belgium)
    Abstract: Using CPI micro data for 11 euro area countries, covering 60% of the European consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) on average 12.3% of prices change each month, compared with 19.3% in the United States; however, when price changes due to sales are excluded, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) the differences in price rigidity are rather limited across euro area countries and are larger across sectors; (iii) the median price increase (decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size of the price change than for the frequency; (iv) the distribution of price changes is highly dispersed: 14% of price changes are below 2% in absolute values, whereas 10% are above 20%; (v) the frequency of price changes barely changes with inflation and it responds very little to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size of the price change; when this effect is broken down, variations in the share of price increases have a greater weight than changes in the size of the price increase or in the size of the price decrease. These findings are consistent with the predictions of a menu cost model in a low-inflation environment in which idiosyncratic shocks are a more relevant driver of price adjustments than aggregate shocks.
    Keywords: price rigidity, inflation, consumer prices, micro data
    JEL: D40 E31
    Date: 2022–07
  10. By: Sri Rajitha Tattikota (Madras School of Economics, Chennai, India); Naveen Srinivasan ((Corresponding author) Professor, Madras School of Economics, Chennai, India)
    Abstract: In this study we compare the in-sample-accuracy to evaluate the performance of Econometric models and Machine Learning models on the Time Series data. Enclosed to explore techniques which perform better for Time Series Classification to predict the state (High, Medium, or Low) of each quarter by studying macroeconomic variables in the United States: Inflation and Unemployment. In the direction of improving the models using machine learning techniques and investigating how they are incorporated in time series data to improve the efficiency of the predictions. We perform a comparative analysis of various models for this classification problem. In ML, Logistic regression, K-Nearest neighbors, Support vector machines, Gradient boosting and Random forest models were explored. In Econometrics, Autoregressive Moving Average and Autoregressive Conditional Heteroskedasticity models were explored. The results showed that Machine learning models are superior compared to the traditional Econometric models for time series data. The best model for Unemployment data was EGARCH in Econometrics and K- Nearest Neighbors to predict both 2 states and 3 states in ML. The best model for Inflation data was EGARCH in Econometrics and Linear SVM, Random forest to predict 2 states and 3 states respectively in ML. Even though the ML models lack the interpretability and clarity in the exact internal process, these models have resulted exceptional in terms of accuracy in predictions. Econometric modelling would be more suitable, if we focus to only understand the effect and interpret the casual effect of the data.
    Keywords: Inflation, Unemployment, Econometric models, Machine Learning
    JEL: C5 E24 E27 E31 E37
  11. By: Maximiliano Dvorkin
    Abstract: I develop a dynamic model of migration and labor market choice with incomplete markets and uninsurable income risk to quantify the effects of international trade on workers’ employment reallocation, earnings, and wealth. Macroeconomic conditions in different labor markets and idiosyncratic shocks shape agents’ labor market choices, consumption, earnings, and asset accumulation over time. Despite the rich heterogeneity, the model is highly tractable as the optimal consumption, labor supply, capital accumulation, and migration and reallocation decisions of individual workers across different markets have closed-form expressions and can be aggregated. I study the asymmetric impact of international trade on the evolution of employment, earnings, and wealth, and decompose the frictions workers face to reallocate across U.S. sectors and regions into those with a transitory effect and those with long-lasting consequences.
    Keywords: international trade; migration; spatial equilibrium; dynamic Roy models; human capital; wealth; inequality
    JEL: E21 E24 F16 F66 J24 J61 R23
    Date: 2023–03–22
  12. By: Sinem Kandemir (Justus-Liebig-University Giessen); Peter Tillmann (Justus-Liebig-University Giessen)
    Abstract: Most meetings of the Governing Council of the ECB take place intra muros at the ECB’s premises in Frankfurt. Some meetings, however, are held extra muros, i.e. outside Frankfurt, hosted by one of the national central banks. This paper uses high-frequency surprises from meeting days to show that the standard deviation of surprises is higher when the ECB meets intra muros. This difference is mostly due to larger timing, forward guidance and QE surprises when meeting in Frankfurt. We show that the transmission of policy surprises to longer-term interest rates is significantly weaker when meeting extra muros. In addition, when the meeting takes place extra muros, the wording of the ECB communication during the press conference is significantly more similar to the preceding meeting. The results suggest that the important decisions are taken in Frankfurt and that the ECB avoids large changes to the policy path when meeting extra muros. The difference across meeting types has consequences for the macroeconomic impact of monetary policy.
    Keywords: monetary policy, expectations, central bank communication, monetary policy committee, text analysis
    JEL: E58 E43
    Date: 2023
  13. By: Michael T. Kiley
    Abstract: This paper examines whether the measurement of trend inflation can be improved by using wage data in a dynamic factor model of disaggregated prices and wages for the United States. The model features time-varying coefficients and stochastic volatility. An estimate of trend inflation is a time-varying distributed lag of prices and wages, where the weight on a series depends on its time-varying volatility, persistence, and comovement with other series. The results show that wages inform estimates of trend inflation. The weight on wages was highest around 1980, drifted down through the 2000s, and returned to its 1980s value by 2022. In addition, inflation in the 2020s appears to have unmoored moderately from the 2 percent range that prevailed for decades, as the role of the persistent component of inflation increased in recent year. However, accounting for wages lowers the model's view of the increase in the volatility of trend inflation.
    Keywords: Price Inflation; Wage Inflation; Unobserved Components Model; Factor Model
    JEL: E37 E31 C32
    Date: 2023–04–17
  14. By: Susan M. Collins
    Abstract: The following topics were covered: 1) financial stability; 2) monetary policy and the macroeconomic outlook; 3) financial infrastructure and payments services; and 4) community economic development and opportunity.
    Keywords: inflation; maximum employment; price stability; labor market; monetary policy; dual mandate; inclusive economy; working places; FedNow service; instant payments
    Date: 2023–03–30
  15. By: M. Ayhan Kose (Prospects Group, World Bank; Brookings Institution; CEPR; CAMA); Franziska Ohnsorge (Prospects Group, World Bank; CEPR; CAMA)
    Abstract: Across the world, a structural growth slowdown is underway: at current trends, the global potential growth rate—the maximum rate at which an economy can grow without igniting inflation—is expected to fall to a three-decade low over the remainder of the 2020s. The slowdown could be even more pronounced if financial crises erupt in major economies and spread to other countries, as these types of episodes often lead to lasting damage to potential growth. A persistent and broad-based decline in long-term growth prospects imperils the ability of emerging market and developing economies (EMDEs) to combat poverty, tackle climate change, and meet other key development objectives. These challenges call for an ambitious policy response at the national and global levels.
    Keywords: production function; investment; trade; emerging and developing economies.; production function; investment; trade; emerging and developing economies.
    JEL: E30 E22 E32 E37 F14 O20 O47
    Date: 2023–05
  16. By: Adrian Carro (Banco de España)
    Abstract: Employing an agent-based model of the Spanish housing market, this paper explores the main drivers behind the large amplitude of the Spanish house price cycle —as compared to most other European countries—, as well as the scope for macroprudential policy to reduce this amplitude. First, we exploit the availability of a previous calibration to the UK, which has a less pronounced house price cycle, to show the prominent role played by the distributions of various mortgage risk metrics: loan-to-value, loan-to-income and debt-service-to-income ratios. Second, we use the model to calibrate both a hard loan-to-value limit and a soft loan-to-income limit to smooth the Spanish house price cycle and match the amplitude of the UK equivalent. Finally, we characterise the effects of these calibrated policies over the different phases of the cycle, finding that both instruments reduce credit and price growth during the expansionary phase and also reduce their decline during the contractionary phase. Moreover, both instruments lead to a compositional shift in lending: the loan-to-value policy from first-time buyers to buy-to-let investors and the loan-to-income policy from both first-time buyers and home movers to buy-to-let investors.
    Keywords: agent-based modelling, housing market, macroprudential policy, borrower-based measures, buy-to-let sector
    JEL: D1 D31 E58 G51 R21 R31
    Date: 2022–09
  17. By: Mah Philippe Valdez Dimitri (CIRCE - Centre Interdisciplinaire de Recherches Centre-Européennes - EUR'ORBEM - Cultures et sociétés d’Europe orientale, balkanique et médiane - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique); Louis Henri Ngah Ntiga (CIRCE - Centre Interdisciplinaire de Recherches Centre-Européennes - EUR'ORBEM - Cultures et sociétés d’Europe orientale, balkanique et médiane - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The notions of unemployment and inflation remain the main concerns of public and monetary authorities in the sense that they represent the main lever of economic policy in terms of arbitrage. The existing relationship between these variables is old, but the paternity of this study goes to Phillips (1958) who managed to explain an inverse relationship between unemployment and inflation in Great Britain (1861-1957). The present study aims to verify this theory for subSaharan African countries. The estimation of the model confirms this theory. Thus, it would be wise to pursue "controlled" contractionary policies to promote employment. Contractionist" policies to promote employment in the region would be appropriate. However, this economic policy needs to take into account the quality of institutions.
    Abstract: Les notions chômage et inflation demeurent les principales préoccupations des autorités publiques et monétaires en ce sens qu'elles représentent le principal levier de la politique économique en matière d'arbitrage. La relation existante entre ces variables est ancienne, mais la paternité de cette étude revient à Phillips (1958) qui est parvenu à expliciter une relation inverse entre le chômage et l'inflation de la Grande Bretagne (1861-1957). La présente étude vise alors à vérifier cette théorie pour les pays de l'Afrique subsaharienne. L'estimation du modèle confirme bel et bien cette théorie. Ainsi, il serait judicieux de mener des politiques contractionnistes « contrôlées » pour promouvoir l'emploi au sein de la Région. Toutefois, cette politique économique nécessite de prendre en compte la qualité des institutions.
    Keywords: Unemployment, inflation, Phillips curve (1958), courbe de Phillips (1958), Chômage inflation courbe de Phillips (1958) Classification JEL : E10 E24 E31 C33 Unemployment inflation Phillips curve (1958), courbe de Phillips (1958) Classification JEL : E10, E24, E31, C33 Unemployment, Chômage
    Date: 2023–05–09
  18. By: Yunjong Eo; James Morley
    Abstract: We revisit our Markov-switching model of U.S. real GDP that accommodates different shapes of recessions to determine what it suggests about the nature of the COVID-19 recession. As with linear time series models, we find that it is important to account for the extreme outliers during the pandemic when estimating model parameters, but a simple decay function for volatility from 2020Q2 leads to robust inferences compared to our original estimates and clearly suggests that the COVID-19 recession was more U shaped than L shaped. We then consider the extent to which our model can be used to predict the shape of recessions in a real-time setting, rather than just classifying recessions ex post. Considering the last four recessions with real-time data and estimation, we find that feeding SPF data through our model can help accurately predict the nature of recovery at the time of the trough of each recession.
    Keywords: L-shaped recession, U-shaped recession, COVID-19, Markov switching, real-time analysis
    JEL: C22 C51 E32 E37
    Date: 2023–05
  19. By: Ozge Akinci; Gianluca Benigno; Hunter L. Clark; William Cross-Bermingham; Ethan Nourbash
    Abstract: Inflationary pressures—their determinants and evolution—continue to dominate policy discussions. In this post, we provide a simple framework to analyze the determinants of different measures of inflation and use it to lay out a risk-scenario analysis. We find that global supply factors captured by the New York Fed’s Global Supply Chain Pressure Index (GSCPI) are strongly associated with inflationary developments measured by the producer price index (PPI) and by the c0nsumer price index (CPI). Under the assumption that the GSCPI falls back to its historical average over twelve months, our model would project a substantial easing of consumer price inflation over 2023 to below 4.0 percent. The normalization of the GSCPI would then be consistent with a return of inflation to levels consistent with a soft-landing scenario.
    Keywords: inflation; Global Supply Chain Pressure Index (GSCPI); oil price
    JEL: E31 E52 F0
    Date: 2023–02–22
  20. By: Laura Veldkamp
    Abstract: Economic uncertainty is a powerful force in the modern economy. Research shows that surges in uncertainty can trigger business cycles, bank runs and asset price fluctuations. But where do sudden surges in uncertainty come from? This paper provides a data-disciplined theory of belief formation that explains large fluctuations in uncertainty. It argues that people do not know the true distribution of macroeconomic outcomes. Like Bayesian econometricians, they estimate a distribution. Our main contribution is to explain why real-time estimation of distributions with non-normal tails results in large uncertainty fluctuations. We use theory and data to show how small changes in estimated skewness whip around probabilities of unobserved tail events (black swans). Our estimates, based on real-time GDP data, reveal that revisions in the estimates of black swan risk explain most of the fluctuations in uncertainty.
    Keywords: forecast bias; rational expectations; model uncertainty; expectations formation; bayesian econometrics
    JEL: D80 D84 C11
    Date: 2022–12
  21. By: Susan M. Collins
    Abstract: Inflation remains too high, and recent data – including several strong labor market indicators, as well as faster than expected retail sales and producer price inflation – all reinforce my view that we have more work to do, to bring inflation down to the 2 percent target. While optimistic there is a path to restoring price stability without a significant downturn, I am also well aware of the many risks and uncertainties, including the risk of a self-fulfilling loss of business and consumer confidence.
    Keywords: inflation; maximum employment; price stability; supply; demand; federal funds rate; labor market; monetary policy
    Date: 2023–02–24
  22. By: Wen, Lei; Zhou, Haiwen
    Abstract: The impact of capital accumulation on job creation is an important and interesting issue in economic development. This model provides a general-equilibrium framework for studying technology choice with unemployment in a developing economy based on microfoundations. Unemployment in the urban sector results from the existence of efficiency wages. Manufacturing firms engage in oligopolistic competition and choose technologies to maximize profits. A more advanced technology uses more capital and less labor. In the steady state, an increase in the amount of capital induces firms to choose more advanced technologies and the wage rate increases. While a higher capital stock always induces firms to choose more advanced technologies, urban unemployment rate may decrease, and agricultural sector employment may increase.
    Keywords: Economic development, technology choice, unemployment, increasing returns, rural-urban migration
    JEL: E24 J64 L13 O14
    Date: 2023–05–16
  23. By: Song, Myungkoo (Korea Institute for Industrial Economics and Trade)
    Abstract: Although manufacturing has brought economic prosperity to many economies, it has been difficult to maintain or achieve manufacturing competitiveness. Global manufacturing value-added has been growing since 2004, demonstrating the importance of manufacturing in the global economy. However, much of this growth has been driven by the growth of the Chinese economy rather than that of developed economies. In fact, several developed economies are losing their shares of manufacturing value-added. To address this issue, several countries, including the Republic of Korea, have implemented policies to enhance the competitiveness of their manufacturing sectors. Most of these policies focus on adopting appropriate technological advances in manufacturing to create additional value. With the aforementioned evolution of the manufacturing sector and the rapid development of data science, the significance of data in manufacturing as a new source of competitiveness is becoming increasingly apparent to both governments and companies. This realization has prompted institutions to consider how best to capitalize on this opportunity. Against this backdrop, this paper explores the data value chain approach as a means of generating value from manufacturing data.
    Keywords: manufacturing; value-added; manufacturing value-added; manufacturing innovation; manufacturing policy; manufacturing competitiveness; manufacturing data; manufacturing value chain; data value chain; data value chain approach; Korea
    JEL: C82 D23 D24 E22 E23 L60
    Date: 2023–04–27
  24. By: Fix, Blair
    Abstract: When I read about monetary policy, I have a rule of thumb. Every time I see the phrase interest rate, I replace it with the term wage rate. Then I ask myself whether the discussion still makes sense. Often, it does not. The reason I make this substitution is that in conceptual terms, the interest rate and the wage rate are similar: they are both rates of return. Wages are the return on employment. Interest rates are the return on credit. Now, the important thing about rates of return is that when we change them, we are toying with the distribution of income. Hike wages and we send more income to workers. Hike the rate of interest and we send more income to creditors. Sure, the specifics of this redistribution are open for inquiry. But by definition, rates of return are ‘distributional variables’ — they determine how the income pie gets divvied up. Back to my word substitution. When it comes to wages, the issue of distribution is typically front and center. That’s why talk of a minimum-wage hike prompts businesses (and many economists) to complain about reduced profits. But when creditors hike the rate of interest, talk of income distribution is curiously absent. Instead, we get a barrage of macroeconomic jargon — terms like the ‘natural rate of interest’ and the ‘non-accelerating inflation rate of unemployment’. Why the discrepancy? One possibility is that economists know something that we don’t. Perhaps they’ve looked at the evidence and concluded that interest rates have a ‘neutral’ effect on the distribution of income. Another possibility is that the macroeconomic jargon is mostly a distraction. In other words, like wages, the rate of interest is a ‘distributional variable’. But it’s one that mainstream economists prefer to ignore. So which option is true? In this post, I let the evidence speak for itself. Looking at cross-country evidence, I find that interest rates are decidedly non-neutral. As interest rates rise, three things happen: (1) the interest share of income increases; (2) the labor share of income decreases; (3) income inequality increases. In short, the evidence suggests that interest rates play a key role in the game of class warfare. And that makes sense. Interest, after all, is a rate of return. And when it comes to divvying up the income pie, rates of return are always zero sum.
    Keywords: credistors, distribution, interest rates, labour, wages
    JEL: E5 J3 E4
    Date: 2023
  25. By: Stein Berre; Asani Sarkar
    Abstract: Proponents of narrow banking have argued that lender of last resort policies by central banks, along with deposit insurance and other government interventions in the money markets, are the primary causes of financial instability. However, as we show in this post, non-bank financial institutions (NBFIs) triggered a financial crisis in 1772 even though the financial system at that time had few banks and deposits were not insured. NBFIs profited from funding risky, longer-dated assets using cheap short-term wholesale funding and, when they eventually failed, authorities felt compelled to rescue the financial system.
    Keywords: nonbank financial institutions; nonbank financial institutions (NBFIs); crisis of 1772; financial intermediation; economic history
    JEL: G01 G2 N00
    Date: 2023–04–17
  26. By: Jeremy Srouji (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: It is often difficult to make sense of the range of optimistic, cautious, and pessimistic views about the sustainability of the US dollar's role as the top international currency. This paper reframes the US dollar debate by demonstrating that economists generally draw on two distinct theories of currency internationalization, with very different assumptions about how currencies achieve and maintain an international role. These assumptions often remain implicit, but are essential to make sense of the debate, as well as the question of international money more generally. The paper then considers whether crypto currencies and central bank digital currencies could play the international currency role, as understood by these theories. It concludes by reflecting on whether in an increasingly multipolar world the question of the sustainability of the US dollar's international role is misplaced, particularly given the growing support for the establishment of a true global international reserve currency.
    Keywords: US dollar, international money, international monetary system reform, US debt, Bretton Woods II, global macroeconomic imbalances
    JEL: F01 F33
    Date: 2022–02
  27. By: International Monetary Fund
    Abstract: Following two military coups in 2022, Burkina Faso remains committed to return to constitutional order, via democratic elections, by July 2024. Deviations from this timeline could put at risk the relationships with financial partners and donors. Deteriorating security, unfavorable climate conditions, the disruption of international supply-chains caused by the COVID-19 pandemic, and Russia’s invasion of Ukraine are all factors that contributed to sharply rising food prices during 2021-2022. As a result, food access for poor households deteriorated significantly, and at present about 3.4 million Burkinabé (out of a population of 21.5 million) are in conditions of food crisis, while one province is in a situation of food emergency, as defined by the World Food Program. In addition, the adverse impact on the current account of price increases for key cereals and fertilizers is estimated to amount to 0.4 percent of GDP cumulatively during 2022 and 2023. The overall costs to fully address food insecurity over the next year are estimated to be up to 3.5 percent of GDP.
    Date: 2023–04–25
  28. By: M M Quinlan (Imperial College London); J D Mumford (Imperial College London); M Q Benedict; F Wäckers (Biobest Groupe NV); C F Oliva (CTIFL - Centre Technique Interprofessionnel des Fruits et Légumes); M Wohlfarter; G Smagghe; E Vila; J Klapwijk; A Michaelakis; C M Collins; J Prudhomme (MIVEGEC - Maladies infectieuses et vecteurs : écologie, génétique, évolution et contrôle - CNRS - Centre National de la Recherche Scientifique - IRD [France-Sud] - Institut de Recherche pour le Développement - UM - Université de Montpellier); G Torres (WOAH - World Organisation for Animal Health); F Diaz (WOAH - World Organisation for Animal Health); L Saul-Gershenz (UC Davis - University of California [Davis] - UC - University of California); K Cook; A Verghese; P Sreerama Kumar
    Abstract: A network of scientists involved in shipment of live insects has met and generated a series of articles on issues related to live insect transport. The network is diverse, covering large-scale commercial interests, government operated areawide control programmes, biomedical research and many smaller applications, in research, education and private uses. Many insect species have a record of safe transport, pose minimal risks and are shipped frequently between countries. The routine shipments of the most frequently used insect model organism for biomedical research, Drosophila melanogaster, is an example. Successful large-scale shipments from commercial biocontrol and pollinator suppliers also demonstrate precedents for low-risk shipment categories, delivered in large volumes to high quality standards. Decision makers need access to more information (publications or official papers) that details actual risks from the insects themselves or their possible contaminants, and should propose proportionate levels of management. There may be harm to source environments when insects are collected directly from the wild, and there may be harm to receiving environments. Several risk frameworks include insects and various international coordinating bodies, with experience of guidance on relevant risks, exist. All stakeholders would benefit from an integrated overview of guidance for insect shipping, with reference to types of risk and categories of magnitude, without trying for a single approach requiring universal agreement. Proposals for managing uncertainty and lack of data for smaller or infrequent shipments, for example, must not disrupt trade in large volumes of live insects, which are already supporting strategic objectives in several sectors.
    Keywords: Courier services, Insect, Intergovernmental treaties and organisations, Risk analysis, Trade
    Date: 2022
  29. By: CGIAR Initiative on Foresight
    Abstract: Background | The challenges facing food, land, and water systems are numerous and complex. In addressing these interlinked challenges, the choices facing governments and their development partners have also become increasingly complicated. Synergies are possible, but trade-offs are often unavoidable. Decision-makers need better evidence to help them choose actions that minimize trade-offs and advance progress towards collective goals. The CGIAR Foresight Initiative aims to inform these choices and enhance decision-making about the future by combining advanced analytics and close engagement with national, regional, and global partners. The Initiative forms part of CGIAR’s new research portfolio, delivering science and innovation to transform food, land, and water systems in a climate crisis. Objectives | The Foresight Partnership Forum brought together key partners from across Sub-Saharan Africa to explore challenges facing food, land, and water systems at national, regional, and global scales; identify opportunities to share and strengthen capacity for foresight; and examine ways to use foresight tools and analysis to inform policy making. The Forum on 24-25 January was followed by a training session on country development and policy modeling for partners on 26-27 January.
    Keywords: KENYA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; decision making; climate change; policy innovation; capacity development; agrifood sector
    Date: 2023
  30. By: Karun Adusumilli
    Abstract: Recent years have seen tremendous advances in the theory and application of sequential experiments. While these experiments are not always designed with hypothesis testing in mind, researchers may still be interested in performing tests after the experiment is completed. The purpose of this paper is to aid in the development of optimal tests for sequential experiments by analyzing their asymptotic properties. Our key finding is that the asymptotic power function of any test can be matched by a test in a limit experiment where a Gaussian process is observed for each treatment, and inference is made for the drifts of these processes. This result has important implications, including a powerful sufficiency result: any candidate test only needs to rely on a fixed set of statistics, regardless of the type of sequential experiment. These statistics are the number of times each treatment has been sampled by the end of the experiment, along with final value of the score (for parametric models) or efficient influence function (for non-parametric models) process for each treatment. We then characterize asymptotically optimal tests under various restrictions such as unbiasedness, \alpha-spending constraints etc. Finally, we apply our our results to three key classes of sequential experiments: costly sampling, group sequential trials, and bandit experiments, and show how optimal inference can be conducted in these scenarios.
    Date: 2023–04
  31. By: Corbu, Ion
    Abstract: One can approximate the idea that political doctrines represent coherent sets of visions, principles and theses that enable the political organization and leadership of a country or groups of countries. In its content, a doctrine reflects a certain historical experience of humanity, based on observations and analyzes of previous doctrines and concrete results on society generated by previous doctrines. As many doctrines so far have contained within themselves the seeds of potential conflicts, the world has been concerned and is concerned with imagining and theorizing political doctrines that would ensure the development of society and the realization of relations between the members of society that would satisfy its general aspirations. At the same time, political doctrines must give society the general directions of action, the foundations of societal existence and economic and social performance. The doctrine presented in this work has a rational-empirical character. It constitutes a general solution to the disappointments and conflicts that the doctrines in the European societal space, until now, have generated. We have identified the idea that EDMRC can be a viable solution: cooperation and mutual respect in the European space, combined with Christian morality in a world where technological progress influences all areas of economic and social life. This doctrine can ensure, in the long term, both the harmonious development of society and the non-conflictual coexistence of different states.
    Keywords: political doctrine; cooperation; mutual respect; Christian morality; nation
    JEL: B52 B59 D59 D60 F2 F29 F42 H1 H19 H53 H54 H55 H75 H77 P5 P59 Z13
    Date: 2023–05–09
  32. By: Diederich, Johannes; Goeschl, Timo; Waichman, Israel
    Abstract: Manipulating choice architectures to achieve social ends (‘social nudges’) raises problems of ethicality. Giving individuals control over their default choice (‘selfnudges’) is a possible remedy, but the trade-offs with efficiency are poorly understood. We examine under four different information structures how subjects set own defaults in social dilemmas and whether outcomes differ between the self-nudge and two exogenous defaults, a social (full cooperation) and a selfish (perfect free-riding) nudge. Subjects recruited from the general population (n = 1, 080) play a ten-round, ten-day voluntary contribution mechanism online, with defaults triggered by the absence of an active contribution on the day. We find that individuals’ own choice of defaults structurally differs from full cooperation, empirically affirming the ethicality problem of social nudges. Allowing for self-nudges instead of social nudges reduces efficiency at the group level, however. When individual control over nudges is non-negotiable, self-nudges need to be made public to minimize the ethicality-efficiency trade-off.
    Keywords: choice architecture; defaults; choice architecture; public goods; self-nudge; online experiment; nudging; behavioral economics
    Date: 2023–05–05
  33. By: Florian Englmaier (LMU Munich); Gerd Muehlheusser (University of Hamburg); Andreas Roider (University of Regensburg); Niklas Wallmeier (University of Hamburg)
    Abstract: We study management practices and performance in a representative sample of German municipalities, which provide the bulk of direct administrative services for citizens and firms in Germany. Surveyed municipalities differ substantially in their use of structured management practices, and this heterogeneity is also pronounced within all federal states, regional types, and population size brackets. Moreover, we document a systematic positive relationship between the degree of structured management and a diverse set of performance measures capturing municipalities' attractiveness for citizens and firms. Topic modelling (LDA) of survey responses suggests that the predominant management style is to use relatively little structured management.
    Keywords: management practices; public sector organizations; local government; municipal performance; state capacity; World Management Survey (WMS);
    JEL: D20 D73 H11 H73 R50
    Date: 2023–05–14
  34. By: Natural Resources Conservation Service
    Abstract: Excerpts from the report Introduction: United States Department of Agriculture Handbook 296 is a broadscale synthesis of current knowledge about land areas based on patterns of physiography, geology, climate, water resources, soils, biological resources, and land use. These patterns were used to establish the unique central concept and boundaries for each land resource region (LRR) and major land resource area (MLRA). This handbook is designed primarily for use in developing soil and water conservation programs at the continental scale (using the LRR concept) and the inter-State scale (using the MLRA concept). The three previous editions of Agriculture Handbook 296 were published in 1965, 1981, and 2006. This update of Agriculture Handbook 296 was driven by the need to improve the usability of the land resource hierarchy system so that a more consistent application of soil-ecological-landscape concepts could provide more accurate and efficient application of conservation on the ground. It involved innovations to the current system through incorporation of updated climate, elevation, soil, and land use data and improvement in linework accuracy based on advances in remote sensing and geographic information systems (GIS).
    Keywords: Crop Production/Industries, Land Economics/Use, Livestock Production/Industries, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy
    Date: 2022–05

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