nep-mac New Economics Papers
on Macroeconomics
Issue of 2023‒08‒21
twelve papers chosen by
Daniela Cialfi
Universita' di Teramo

  1. Unwinding quantitative easing: state dependency and household heterogeneity By Cantore, Cristiano; Meichtry, Pascal
  2. The Job Ladder: Inflation vs. Reallocation By Giuseppe Moscarini; Fabien Postel-Vinay
  3. CBDC Policies in Open Economies By Michael Kumhof; Marco Pinchetti; Phurichai Rungcharoenkitkul; Andrej Sokol
  4. Mr Putin and the Chronicle of a Normalisation Foretold By Jagjit S. Chadha
  5. Between russian Invasions: The Monetary Policy Transmission Mechanism in Ukraine in 2015-2021 By Anton Grui; Nicolas Aragon; Oleksandr Faryna; Dmytro Krukovets; Kateryna Savolchuk; Oleksii Sulimenko; Artem Vdovychenko; Oleksandr Zholud
  6. Quantifying priorities in business cycle reports: Analysis of recurring textual patterns around peaks and troughs By Foltas, Alexander
  7. Inflation surprises in a New Keynesian economy with a true consumption function. The Eurozone as an inflation target zone By Roberto Tamborini
  8. Impacts of climate change on global agri-food trade By Bozzola, Martina; Lamonaca, Emilia; Santeramo, Fabio Gaetano
  9. Pattern Mining for Anomaly Detection in Graphs: Application to Fraud in Public Procurement By Lucas Potin; Rosa Figueiredo; Vincent Labatut; Christine Largeron
  10. Knowledge transmission in the second part of careers: does formal training matter? By Pierre-Jean Messe; Nathalie Greenan
  11. The Transmission of Global Risk By Martin Bodenstein; Pablo A. Cuba-Borda; Albert Queraltó
  12. Qu'avons-nous appris en évaluant les accélérateurs de Bpifrance ? By Fabrice Gilles; Yannick L'Horty; Ferhat Mihoubi

  1. By: Cantore, Cristiano (Sapienza University of Rome); Meichtry, Pascal (University of Lausanne)
    Abstract: This paper studies the macroeconomic effect of the state dependency of central bank asset market operations and their interactions with household heterogeneity. We build a New Keynesian model with borrowers and savers in which quantitative easing and tightening operate through portfolio rebalancing between short-term and long-term government bonds. We quantify the aggregate impact of an occasionally binding zero lower bound in determining an asymmetry between the effects of asset purchases and sales. When close to the lower bound, raising the nominal interest rate prior to unwinding quantitative easing minimises the economic costs of monetary policy normalisation. Furthermore, our results imply that household heterogeneity in combination with state dependency amplifies the revealed asymmetry, while household heterogeneity alone does not amplify the aggregate effects of asset market operations.
    Keywords: Unconventional monetary policy; quantitative tightening; quantitative easing; heterogeneous agents; zero lower bound.
    JEL: E21 E32 E52 E58
    Date: 2023–07–21
  2. By: Giuseppe Moscarini; Fabien Postel-Vinay
    Abstract: We introduce on-the-job search frictions in an otherwise standard monetary DSGE New-Keynesian model. Heterogeneity in productivity across jobs gives rise to a job ladder. Firms Bertrand-compete for employed workers according to the Sequential Auctions protocol of Postel-Vinay and Robin (2002). Outside job offers to employed workers, when accepted, reallocate employment up the productivity ladder; when declined, because matched by the current employer, they raise production costs and, due to nominal price rigidities, compress mark-ups, building inflationary pressure. When employment is concentrated at the bottom of the job ladder, typically after recessions, the reallocation effect prevails, aggregate supply expands, moderating marginal costs and inflation. As workers climb the job ladder, reducing slack in the employment pool, the inflation effect takes over. The model generates endogenous cyclical movements in the Neo Classical labor wedge and in the New Keynesian wage mark-up. The economy takes time to absorb cyclical misallocation and features propagation in the response of job creation, unemployment and inflation to aggregate shocks. The ratio between job-finding probabilities from job-to-job and from unemployment, a measure of the “Acceptance rate” of job offers to employed workers, predicts negatively inflation, independently of the unemployment rate.
    JEL: E24 E31 J60
    Date: 2023–07
  3. By: Michael Kumhof (Centre for Macroeconomics (CFM); Centre for Economic Policy Research (CEPR)); Marco Pinchetti (Centre for Macroeconomics (CFM)); Phurichai Rungcharoenkitkul (Bank of Thailand; Bank for International Settlement); Andrej Sokol (Bloomberg; Centre for Macroeconomics (CFM))
    Abstract: We study the consequences for business cycles and welfare of introducing an interest-bearing retail CBDC, competing with bank deposits as medium of exchange, into an estimated 2-country DSGE environment. CBDC issuance of 30% of GDP increases output and welfare by around 6% and 2%, respectively. Financial shocks account for around half of the variance of aggregate demand and inflation, and for the bulk of the variance of financial variables. An aggressive Taylor rule for the interest rate on reserves achieves welfare gains of 0.57% of steady state consumption, an optimized CBDC interest rate rule that responds to a credit gap achieves additional welfare gains of 0.44%, and further gains of 0.57% if accompanied by automatic fiscal stabilizers. A CBDC quantity rule, a response to an inflation gap, a cash-like CBDC, and CBDC as generalized access to reserves, yield significantly smaller gains. CBDC policies can substantially reduce the volatilities of domestic and cross-border banking flows and of the exchange rate. Optimal policy requires a steady state quantity of CBDC of over 40% of annual GDP.
    Keywords: Central bank digital currencies, monetary policy, bank deposits, bank loans, monetary frictions, money demand, money supply, credit creation
    Date: 2023–03
  4. By: Jagjit S. Chadha
    Abstract: Major central banks have been caught in a low interest rate trap for over a decade. The temporary response to the financial crisis of 2008-9 has become something of a regime. The Federal Reserve, for example, attempted to ease quantitative easing in 2013 but this stalled following the "taper tantrum" and commenced a normalisation in the Federal Funds rate from 2015 but during Covid major central banks around the world rapidly returned policy rates to around zero. Low policy rates have been the response to tighter credit conditions, excessive global savings, low levels of investment and fiscal consolidation. But they have also played a role in propelling asset price growth and increasing levels of indebtedness. The accommodative stance in monetary policy, as well as the impetus from previous monetary and fiscal interventions seem like to have stoked inflation to a higher level that might otherwise have been the case following the shock of a war on the European continent. But may also have finally secured a normalisation in policy rates.
    Keywords: Monetary policy, Ukraine War, Normalisation, Liquidity Trap
    JEL: E43 E58 E61
    Date: 2023–08
  5. By: Anton Grui (National Bank of Ukraine); Nicolas Aragon; Oleksandr Faryna (National Bank of Ukraine; National University of Kyiv-Mohyla Academy); Dmytro Krukovets (National Bank of Ukraine); Kateryna Savolchuk (National Bank of Ukraine); Oleksii Sulimenko; Artem Vdovychenko (National Bank of Ukraine); Oleksandr Zholud (National Bank of Ukraine)
    Abstract: This report evaluates the monetary policy transmission mechanism in Ukraine during the early years of inflation targeting. It assesses both the overall strength of the policy interest rate transmission, and its channels. Furthermore, it addresses the stabilizing role of forward guidance, foreign exchange interventions, and monetary policy credibility. The National Bank of Ukraine abandoned its fixed exchange rate regime in 2014 in response to an economic crisis ignited by the initial invasion by russia. Under inflation targeting, the short-term interest rate became the main monetary policy instrument, while the exchange rate remained floating. The full-scale russian invasion in 2022 forced the National Bank of Ukraine to temporarily shelve its policy interest rate, fix the exchange rate and impose administrative restrictions. However, it remains committed to returning to conventional inflation targeting when economic conditions normalize. This report could become a point of reference for future policy decisions by the Ukrainian central bank.
    Keywords: monetary policy transmission mechanism, inflation targeting, interest rate channel, exchange rate channel, expectations channel
    JEL: E37 E43 E52
    Date: 2023–07
  6. By: Foltas, Alexander
    Abstract: I propose a novel approach to uncover business cycle reports' priorities and relate them to economic fluctuations. To this end, I leverage quantitative business-cycle forecasts published by leading German economic research institutes since 1970 to estimate the proportions of latent topics in associated business cycle reports. I then employ a supervised approach to aggregate topics with similar themes, thus revealing the proportions of broader macroeconomic subjects. I obtain measures of forecasters' subject priorities by extracting the subject proportions' cyclic components. Correlating these priorities with key macroeconomic variables reveals consistent priority patterns throughout economic peaks and troughs. The forecasters prioritize inflation-related matters over recession-related considerations around peaks. This finding suggests that forecasters underestimate growth and overestimate inflation risks during contractive monetary policies, which might explain their failure to predict recessions. Around troughs, forecasters prioritize investment matters, potentially suggesting a better understanding of macroeconomic developments during those periods compared to peaks.
    Keywords: Macroeconomic forecasting, Evaluating forecasts, Business cycles, Recession forecasting, Topic Modeling, Natural language processing, Machine learning, Judgemental forecasting
    JEL: E32 E37 C45
    Date: 2023
  7. By: Roberto Tamborini
    Abstract: The resurgence of inflation since late 2021 is now accompanied by a reversal of prospects of growth, reviving fears of stagflation across the world (IMF 2022, World Bank 2022). In almost all accounts of the mounting stagflation threats, a prominent role is played by the fall of households purchasing power, and hence consumption, due to the inflation shock vis-Ã vis lagging nominal wages. This paper addresses the theoretical puzzle as to why this endogenous real income effect of inflation surprises, independent of restrictive monetary policy, is not present in the standard New Keynesian models for monetary policy. The paper shows how this channel can be introduced by reformulating the consumption function, with the consequence that it endogenously exerts a stabilisation effect on inflation. By means of simulations the paper discusses the main monetary policy implication: what is the role left to monetary policy intended to curb inflation in the same way?
    Keywords: Cost-push inflation, real income effect, stagflation, New Keynesian models for monetary policy
    JEL: E17 E3 E5
    Date: 2023
  8. By: Bozzola, Martina; Lamonaca, Emilia; Santeramo, Fabio Gaetano
    Abstract: Climate change and trade are closely related. Climate may alter the comparative advantages across countries, which may in turn trigger changes in trade patterns. Trade itself may constitute an adaptation strategy, moving excesses of agri-food supply to regions with shortages, and this in turn may explain changes in land-use. We investigate these linkages, showing that the changes in climate affect counties’ trade value and contribute to reshaping trade patterns. First, we quantify the long-term impacts of climate on the value of agri-food exports, implicitly considering the ability of countries to adapt, and show that higher marginal temperatures and rainfall levels tend to be beneficial for countries’ exports. Following a gravity model approach, we then link the evolving trade patterns to climate change adaptation strategies. We find that the larger the difference in temperatures and rainfall levels between trading partners, the higher the value of bilateral exports. Furthermore, while developed and developing exporters are both sensitive to climate change and to cross-countries heterogeneity in climate, we found their responses to changes in climate to be quite diverse.
    Keywords: Climate normal; Climate heterogeneity; Export; Economic development.
    JEL: F18 O13 O44 Q17 Q54
    Date: 2023
  9. By: Lucas Potin (LIA - Laboratoire Informatique d'Avignon - AU - Avignon Université - Centre d'Enseignement et de Recherche en Informatique - CERI); Rosa Figueiredo (LIA - Laboratoire Informatique d'Avignon - AU - Avignon Université - Centre d'Enseignement et de Recherche en Informatique - CERI); Vincent Labatut (LIA - Laboratoire Informatique d'Avignon - AU - Avignon Université - Centre d'Enseignement et de Recherche en Informatique - CERI); Christine Largeron (LHC - Laboratoire Hubert Curien - IOGS - Institut d'Optique Graduate School - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the context of public procurement, several indicators called red flags are used to estimate fraud risk. They are computed according to certain contract attributes and are therefore dependent on the proper filling of the contract and award notices. However, these attributes are very often missing in practice, which prohibits red flags computation. Traditional fraud detection approaches focus on tabular data only, considering each contract separately, and are therefore very sensitive to this issue. In this work, we adopt a graph-based method allowing leveraging relations between contracts, to compensate for the missing attributes. We propose PANG (Pattern-Based Anomaly Detection in Graphs), a general supervised framework relying on pattern extraction to detect anomalous graphs in a collection of attributed graphs. Notably, it is able to identify induced subgraphs, a type of pattern widely overlooked in the literature. When benchmarked on standard datasets, its predictive performance is on par with state-of-the-art methods, with the additional advantage of being explainable. These experiments also reveal that induced patterns are more discriminative on certain datasets. When applying PANG to public procurement data, the prediction is superior to other methods, and it identifies subgraph patterns that are characteristic of fraud-prone situations, thereby making it possible to better understand fraudulent behavior.
    Keywords: Pattern Mining, Graph Classification, Public Procurement, Fraud Detection
    Date: 2023–09–18
  10. By: Pierre-Jean Messe; Nathalie Greenan
    Date: 2023
  11. By: Martin Bodenstein; Pablo A. Cuba-Borda; Albert Queraltó
    Abstract: Turmoil in the banking sector in the U.S. and Europe in early 2023 brought jitters to financial markets and increased concerns about a global risk-off event. Risk-off episodes—periods of increased global risk aversion—are characterized by sharp increases in credit spreads, high volatility in equity markets, and appreciation of reserve currencies
    Date: 2023–06–27
  12. By: Fabrice Gilles; Yannick L'Horty; Ferhat Mihoubi
    Date: 2023

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