nep-mac New Economics Papers
on Macroeconomics
Issue of 2023‒10‒16
seventeen papers chosen by
Daniela Cialfi, Universita' di Teramo

  1. Asymmetric Interest Rate Pass-through and Its Effects on Macroeconomic Variables: Evidence from Thailand By THOSAPON TONGHUI; JIN SEO CHO
  2. Botswana: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Botswana By International Monetary Fund
  3. Drivers of Fiscal Sustainability: a Time-Varying Analysis for Portugal By António Afonso; José Carlos Coelho
  4. COVID-19 and Bangladesh Macroeconomic Impact and Policy Choices By Debapriya Bhattacharya; Towfiqul Islam Khan; Md Mursalin Hossain Rabbi
  5. Attention to the Macroeconomy By Sebastian Link; Andreas Peichl; Christopher Roth; Johannes Wohlfart
  6. Identification Using Higher-Order Moments Restrictions By Philippe Andrade; Filippo Ferroni; Leonardo Melosi
  7. Real-time VaR Calculations for Crypto Derivatives in kdb+/q By Yutong Chen; Paul Bilokon; Conan Hales; Laura Kerr
  8. Searching for Smurfs: Testing if Money Launderers Know Alert Thresholds By Rasmus Ingemann Tuffveson Jensen; Joras Ferwerda; Christian Remi Wewer
  9. Educational Reforms and Their Positive Externalities on the Labor Market By Elsenberger, Fabio; Kendzia, Michael Jan
  10. Smart working and the organisation of labour: smart working and internal labour markets By Dominik Owczarek; Maciej PaÅ„ków
  11. A compendium of data sources for data science, machine learning, and artificial intelligence By Paul Bilokon; Oleksandr Bilokon; Saeed Amen
  12. Leveraging Purchasing Systems to Ensure Access, Stewardship, and Innovation: A Landscape Review of Current and Potential Market Structures for Antimicrobials By Anthony McDonnell; Katherine Klemperer; Morgan Pincombe; Javier Guzman
  13. Topic Salience and Political Polarization: Evidence from the German “PISA shock” By Pietro Sancassani
  14. Ensuring Good Governance in Implementation of Public Infrastructure Projects (PIPs) By Mustafizur Rahman; Muhammad Nafis Shahriar Farabi
  15. Inputs, outputs and living standards in rural China during the 1920s and 30s: a quantitative analysis By Wang, Yuton; Guo, Jingyuan; Deng, Kent
  16. Nonparametric estimation of k-modal taste heterogeneity for group level agent-based mixed logit By Xiyuan Ren; Joseph Y. J. Chow
  17. On Sparse Grid Interpolation for American Option Pricing with Multiple Underlying Assets By Jiefei Yang; Guanglian Li

  1. By: THOSAPON TONGHUI (Yonsei University); JIN SEO CHO (Yonsei University)
    Abstract: This study employs the two-step Nonlinear Autoregressive Distributed Lag estimation method proposed by Cho, Greenwood-Nimmo, and Shin (2019) to identify the asymmetric impact of monetary policy on economic variables using monthly data from Thailand between 2001 and 2023. The primary objective is to investigate the effects of policy rate shocks on the economy. This study examines three key aspects: (i) the asymmetric pass-through of policy rates to commercial bank deposits and loan rates; (ii) pass-through variations across bank sizes; and (iii) the asymmetric macroeconomic effects on output and inflation. The empirical findings reveal the presence of asymmetry within the relationships between the variables. First, the study identifies an incomplete interest rate pass-through with deposit rates ranging from 28.1% to 102.7% and loan rates ranging from 12.7% to 89.6%. Notably, long-term upward asymmetry is observed for loan rates, whereas the evidence for deposit rates is limited. Second, regarding bank size, large banks exhibit a greater pass-through effect on loan rates, whereas small and medium-sized banks display higher responsiveness to short-term deposits or savings rates. Finally, this study provides strong evidence of long-term asymmetric macroeconomic impacts. Quantitatively, rate hikes have a more substantial effect on output growth, being 1.4 times larger than the impact of rate cuts. Conversely, rate decreases exhibit a more pronounced effect on inflation, being 3.4 times larger than the impact of rate increases. These findings suggest the presence of downward price rigidity associated with monetary policy shocks in the context of Thailand.
    Keywords: Interest rate pass-through; asymmetric impact; macroeconomic effects; Nonlinear Autoregressive Distributed Lag model.
    JEL: E43 E51 E52
    Date: 2023–09
  2. By: International Monetary Fund
    Abstract: The 2023 Article IV Consultation highlights that following a strong recovery of almost 12 percent growth in 2021, Botswana’s economy grew by 5.8 percent in 2022, significantly above the long-run average of 4 percent. The authorities plan a fiscal expansion in FY2023 followed by two years of substantial fiscal adjustment to reach a small fiscal surplus by FY2025. Growth is expected to slow in 2023 due to a projected decline in diamond production, with the weaker global environment likely to depress other exports. Inflation has fallen since August 2022, returning to the central bank’s objective range. The authorities plan a fiscal expansion in FY2023 followed by two years of substantial fiscal adjustment to reach a small fiscal surplus by FY2025, but implementation risks are elevated. Structural transformation of the economy aims at diversifying production, increasing the relative size of the private sector, and enhancing resilience to external shocks.
    Keywords: liability positions vis-à-vis nonresident; inflation risk; Botswana authorities; transmission mechanism; PPI coverage; government action; Inflation; Central bank policy rate; Fiscal stance; Financial Sector Assessment Program; Global; Africa; Sub-Saharan Africa
    Date: 2023–08–31
  3. By: António Afonso; José Carlos Coelho
    Abstract: We assess the drivers of fiscal sustainability in Portugal during the period 1999Q4-2021Q4. We resort to expanding window and Schlicht (2003, 2021)’s time-varying approaches to construct the responses of government revenues to government expenditures and the responses of the primary government balance and the cyclically adjusted primary government balance (CAPB) to the debt-to-GDP ratio. Our results show the prevalence of a Ricardian fiscal regime in Portugal. If the (i-g) differential is positive, the positive response of the primary government balance to the debt-to-GDP ratio is amplified. An improvement in the external accounts, the increase in the European Commission's fiscal rules index and the extension of the debt maturity were beneficial for fiscal sustainability. Sovereign debt rating downgrades implied a posterior fiscal reaction that improves fiscal sustainability. Moreover, fiscal sustainability increased during the implementation of the international financial assistance program to Portugal, between 2011Q2 and 2014Q2.
    Keywords: fiscal sustainability; primary government balance; government debt; expanding window; time-varying; Portugal.
    JEL: C23 H61 H63 E62
    Date: 2023–09
  4. By: Debapriya Bhattacharya; Towfiqul Islam Khan; Md Mursalin Hossain Rabbi
    Abstract: Bangladesh, like most of the countries in the world, had to restrict mobility and economic activities to tackle the spread of the COVID-19 virus. Indeed, the pandemic has been exerting pressure on the economy through both global and domestic shocks leading to a detrimental impact on major macroeconomic correlates of the country. The present study urges that Bangladesh will need to pursue a countercyclical fiscal policy stance in the face of deceleration in aggregate demand.
    Keywords: COVID-19, Macroeconomy, Fiscal policy, Bangladesh
    Date: 2021–12
  5. By: Sebastian Link (ifo Institute, LMU Munich, IZA, CESifo); Andreas Peichl (LMU Munich, ifo Institute); Christopher Roth (University of Cologne, ECONtribute, briq, CESifo, CEPR, Max-Planck Institute for Collective Goods Bonn); Johannes Wohlfart (Department of Economics and CEBI, University of Copenhagen, CESifo, Danish Finance Institute)
    Abstract: We provide evidence on the dynamics, drivers, and consequences of attention to the macroeconomy using tailored panel surveys of German firms and households. Draw-ing on novel measures of attention based on open-ended questions collected before and during a historic shock to inflation, we document three sets of results: First, at-tention to the macroeconomy is characterized by large and persistent individual het-erogeneity, responds strongly to changes in the economic environment, and is nega-tively correlated with attention to household- or firm-level topics. Second, more at-tentive respondents are more likely to adjust inflation expectations during the shock, have higher confidence in their beliefs, and hold smaller misperceptions about re-alized inflation, yet their expectations about future inflation deviate more strongly from professional forecasts. Third, personal experiences are associated with house-holds’ attention allocation and belief formation during the shock in a time-varying way, consistent with similarity-based recall. Our results have implications for model-ing attention allocation and expectation formation about the economy.
    Keywords: Attention, expectation formation, personal experiences, inflation
    JEL: D83 D84 E71
    Date: 2023–09
  6. By: Philippe Andrade; Filippo Ferroni; Leonardo Melosi
    Abstract: We exploit inequality restrictions on higher-order moments of the distribution of structural shocks to sharpen their identification. We show that these constraints can be treated as necessary conditions and used to shrink the set of admissible rotations. We illustrate the usefulness of this approach showing, by simulations, how it can dramatically improve the identification of monetary policy shocks when combined with widely used sign-restriction schemes. We then apply our methodology to two empirical questions: the effects of monetary policy shocks in the U.S. and the effects of sovereign bond spread shocks in the euro area. In both cases, using higher-moment restrictions significantly sharpens identification. After a shock to euro area government bond spreads, monetary policy quickly turns expansionary, corporate borrowing conditions worsen on impact, the real economy and the labor market of the euro area contract appreciably, and returns on German government bonds fall, likely reflecting investors’ flight to quality.
    Keywords: shock identification; Skewness; Kurtosis; VAR; Sign restrictions; monetary shocks; Euro area
    JEL: C32 E27 E32
    Date: 2023–08–18
  7. By: Yutong Chen; Paul Bilokon; Conan Hales; Laura Kerr
    Abstract: Cryptocurrency market is known for exhibiting significantly higher volatility than traditional asset classes. Efficient and adequate risk calculation is vital for managing risk exposures in such market environments where extreme price fluctuations occur in short timeframes. The objective of this thesis is to build a real-time computation workflow that provides VaR estimates for non-linear portfolios of cryptocurrency derivatives. Many researchers have examined the predictive capabilities of time-series models within the context of cryptocurrencies. In this work, we applied three commonly used models - EMWA, GARCH and HAR - to capture and forecast volatility dynamics, in conjunction with delta-gamma-theta approach and Cornish-Fisher expansion to crypto derivatives, examining their performance from the perspectives of calculation efficiency and accuracy. We present a calculation workflow which harnesses the information embedded in high-frequency market data and the computation simplicity inherent in analytical estimation procedures. This workflow yields reasonably robust VaR estimates with calculation latencies on the order of milliseconds.
    Date: 2023–09
  8. By: Rasmus Ingemann Tuffveson Jensen; Joras Ferwerda; Christian Remi Wewer
    Abstract: To combat money laundering, banks raise and review alerts on transactions that exceed confidential thresholds. This paper presents a data-driven approach to detect smurfing, i.e., money launderers seeking to evade detection by breaking up large transactions into amounts under the secret thresholds. The approach utilizes the notion of a counterfactual distribution and relies on two assumptions: (i) smurfing is unfeasible for the very largest financial transactions and (ii) money launderers have incentives to make smurfed transactions close to the thresholds. Simulations suggest that the approach can detect smurfing when as little as 0.1-0.5\% of all bank transactions are subject to smurfing. An application to real data from a systemically important Danish bank finds no evidence of smurfing and, thus, no evidence of leaked confidential thresholds. An implementation of our approach will be available online, providing a free and easy-to-use tool for banks.
    Date: 2023–09
  9. By: Elsenberger, Fabio (Zurich University of Applied Sciences (ZHAW)); Kendzia, Michael Jan (Zurich University of Applied Sciences (ZHAW))
    Abstract: Educational reforms aim to improve education quality and accessibility, creating positive externalities like individual growth and societal benefits. Although the global educational attainment has progressed, disparities still exist. This study applies the four-cell matrix developed by Münich and Psacharopoulos (2018) as analytical framework to classify the benefits of schooling into four different quadrants. It distinguishes between private and social benefits on the x-axis and market and non-market benefits on the y-axis. The survey finds that educational reforms and policies significantly impact society's development and progress, improving economic growth, social mobility, and health outcomes. By and large, the investigated reforms vary by country and education level, with some focusing on primary education and access to education while others focus more on tertiary education. The findings reveal that large differences exist in how far certain reforms were already implemented. Developing nations mainly experience non-market benefits like improved health and disease reduction, while developed countries show positive externalities in market and non-market areas. Reforms targeting tertiary education often translate into more positive externalities in the two private quadrants.
    Keywords: educational reforms, market benefits, non-market benefits, private benefits, social benefits
    JEL: I0 J6 O1 N3
    Date: 2023–09
  10. By: Dominik Owczarek; Maciej PaÅ„ków
    Abstract: The paper aims at providing an overview of the connection between smart working practices and the organization of labour. It attempts to analyse both pre-pandemic and post-pandemic sources to obtain the broadest possible perspective and conclusions, based on well-established scientific theory and evidence. In so doing we first analysis the drivers of remote work, taking into account both the perspective of the organisation (managers) and employees. Second, we investigate the impact of remote work on the efficiency and quality of work from the perspective of the employer. Third we analyse ten case studies covering the motivation to introduce remote work, its impact on working conditions and job satisfaction, development of skills and the role of collective workers representation in setting conditions of remote work. The report is concluded with some final remarks and key takeouts.
    Keywords: Remote work; post-pandemic recovery; labour organisation
    JEL: J08 J81 K31
    Date: 2023–09–18
  11. By: Paul Bilokon; Oleksandr Bilokon; Saeed Amen
    Abstract: Recent advances in data science, machine learning, and artificial intelligence, such as the emergence of large language models, are leading to an increasing demand for data that can be processed by such models. While data sources are application-specific, and it is impossible to produce an exhaustive list of such data sources, it seems that a comprehensive, rather than complete, list would still benefit data scientists and machine learning experts of all levels of seniority. The goal of this publication is to provide just such an (inevitably incomplete) list -- or compendium -- of data sources across multiple areas of applications, including finance and economics, legal (laws and regulations), life sciences (medicine and drug discovery), news sentiment and social media, retail and ecommerce, satellite imagery, and shipping and logistics, and sports.
    Date: 2023–09
  12. By: Anthony McDonnell (Center for Global Development); Katherine Klemperer (Center for Global Development); Morgan Pincombe (Center for Global Development); Javier Guzman (Center for Global Development)
    Abstract: This working paper aims to synthesise existing research and thinking on how antimicrobials are procured and ways to improve the current purchasing system. It examines interventions designed to improve innovation, access, and stewardship of antimicrobials and seeks to lay the foundation for a new CGD working group, A New Grand Bargain for Antimicrobial Procurement: Improving Purchasing Systems to Enhance Access, Stewardship, and Innovation for Antimicrobials in Low- and Middle-Income Countries (LMICs). We conducted a systematic review of academic and grey literature and identified 141 papers. We also interviewed 28 stakeholders with a broad range of expertise in this field. Key findings include: • The literature is overly focused on high-income countries (HICs). Whilst 51 percent of papers mention an LMIC (72/141), fewer than 10 percent exclusively focus on LMICs (14/141). Also, just 12.5 percent of papers with listed authors (16/128) have any authors based in an LMIC. LMIC- and HIC-based groups have very different priorities, as evidenced in both the interviews and the literature. Those in the former group focus more on access to drugs, while the latter are more concerned about innovation. Both groups highlighted stewardship as a priority. • There is broad agreement that a new purchasing system is needed for antimicrobials in LMICs. Although the literature lacks consensus about the best way to reform purchasing systems, interview findings suggest a more recent coalescence around subscription models in HICs. In these models, purchasers pay annually for a drug, regardless of how many units are needed. The National Health System in the United Kingdom is currently piloting such a system with two drugs, and the US Congress is considering its own version with the PASTEUR Act. There is less clarity on the optimal system for LMICs. • There is insufficient research on how to implement policies and—with the exception of the GAIN Act, a 2012 piece of US legislation that grants an additional five years of exclusivity for qualifying antimicrobials—a dearth of research evaluating previously implemented initiatives.
    Keywords: AMR, Antimicrobial resistance, procurement
    JEL: I11 H57
    Date: 2022–06–28
  13. By: Pietro Sancassani
    Abstract: Does the salience of a topic affect polarization in related parliamentary debates? When discussing a salient topic, politicians might adopt more extreme stances to gain electoral consensus. Alternatively, they could converge towards more moderate positions to find a compromise. Using parliamentary debates from the 16 German state parliaments, I exploit the exogenous increase in the salience of education induced by the unexpectedly low performance of German students in the PISA 2000 test—the German “PISA shock”. I combine machine-learning and text analysis techniques to obtain topic-specific measures of polarization of parliamentary debates. In a difference-in-differences framework, I find that the PISA shock caused an 8.8% of a standard deviation increase in polarization of education debates compared to other topics. The effect is long-lasting and fades after about six years.
    Keywords: Polarization, text analysis, machine learning, Germany, PISA shock
    JEL: D72 D71
    Date: 2023
  14. By: Mustafizur Rahman; Muhammad Nafis Shahriar Farabi
    Abstract: Economic and social infrastructure is one of the key foundations that drive the development of any country. Broadly speaking, infrastructure is defined as the basic systems and structures and facilities and services which are required for smooth operation of an economy, at various levels. It will not be an exaggeration to state that an economy’s growth and sustainability of growth hinge critically on the state of its infrastructure
    Keywords: Good Governance, Public Infrastructure Projects, PIPs, Social infrastructure, Economic infrastructure, Bangladesh
    Date: 2022–06
  15. By: Wang, Yuton; Guo, Jingyuan; Deng, Kent
    Abstract: Since Kenneth Pomeranz’s Great Divergence that was published in 2000, the scholarly debate has been focused on when the divergence was likely to begin. But a lack of real data for the Pomeranz framework has been noticeable. For our purpose, real data are imperative. The primary-source data this study uses are from the first large-scale modern survey of the rural economy in China in the 1920s and 30s to establish correlations between inputs, outputs and living standards in China’s rural sector. This study views China’s traditional growth trajectory continuing from the Qing to troubled times of the 1920s and 1930s despite considerable negative externalities from a regime change. The present view is that given that the rural economy managed to hang on during the Republican Period despite many disadvantages Qing China would have performed at least at the 1920s-30s’ level. Our findings indicate that rural population did indeed eat quite well during the politically troubled time, supporting Pomeranz’s pathbreaking comparison of utility functions between China’s Yangzi Delta and Western Europe. Secondly, food consumption proved incentives for improvement in labour productivity. Thirdly, China’s peasants were rational operators to maximise their returns. Fourthly, China’s highyield farming depended on land and labour inputs along a production probability frontier, which explains the root cause of the Great Divergence. Finally, there was a ‘little divergence’ inside China which was dictated by rice production, which justifies the Yangzi Delta as the best scenario.
    Keywords: Great Divergence; little divergence; primary-source data; inputs and outputs; living standards
    JEL: N35 N55 C51
    Date: 2023–09–01
  16. By: Xiyuan Ren; Joseph Y. J. Chow
    Abstract: Estimating agent-specific taste heterogeneity with a large information and communication technology (ICT) dataset requires both model flexibility and computational efficiency. We propose a group-level agent-based mixed (GLAM) logit approach that is estimated with inverse optimization (IO) and group-level market share. The model is theoretically consistent with the RUM model framework, while the estimation method is a nonparametric approach that fits to market-level datasets, which overcomes the limitations of existing approaches. A case study of New York statewide travel mode choice is conducted with a synthetic population dataset provided by Replica Inc., which contains mode choices of 19.53 million residents on two typical weekdays, one in Fall 2019 and another in Fall 2021. Individual mode choices are grouped into market-level market shares per census block-group OD pair and four population segments, resulting in 120, 740 group-level agents. We calibrate the GLAM logit model with the 2019 dataset and compare to several benchmark models: mixed logit (MXL), conditional mixed logit (CMXL), and individual parameter logit (IPL). The results show that empirical taste distribution estimated by GLAM logit can be either unimodal or multimodal, which is infeasible for MXL/CMXL and hard to fulfill in IPL. The GLAM logit model outperforms benchmark models on the 2021 dataset, improving the overall accuracy from 82.35% to 89.04% and improving the pseudo R-square from 0.4165 to 0.5788. Moreover, the value-of-time (VOT) and mode preferences retrieved from GLAM logit aligns with our empirical knowledge (e.g., VOT of NotLowIncome population in NYC is $28.05/hour; public transit and walking is preferred in NYC). The agent-specific taste parameters are essential for the policymaking of statewide transportation projects.
    Date: 2023–09
  17. By: Jiefei Yang; Guanglian Li
    Abstract: In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American options using dynamic programming, and then employing static sparse grids to interpolate the continuation value function at each time step. To achieve high efficiency, we first transform the domain from $\mathbb{R}^d$ to $(-1, 1)^d$ via a scaled tanh map, and then remove the boundary singularity of the resulting multivariate function over $(-1, 1)^d$ by a bubble function and simultaneously, to significantly reduce the number of interpolation points. We rigorously establish that with a proper choice of the bubble function, the resulting function has bounded mixed derivatives up to a certain order, which provides theoretical underpinnings for the use of sparse grids. Numerical experiments for American arithmetic and geometric basket put options with the number of underlying assets up to 16 are presented to validate the effectiveness of the approach.
    Date: 2023–09

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