nep-mac New Economics Papers
on Macroeconomics
Issue of 2023‒12‒18
28 papers chosen by
Daniela Cialfi, Universita' di Teramo
  1. Monetary Rules, Financial Stability and Welfare in a non-Ricardian Framework By Adame Espinosa Francisco
  2. Macroprudential stance assessment: problems of measurement, literature review and some comments for the case of Croatia By Tihana Škrinjarić
  3. Regime-dependent nowcasting of the Austrian economy By Fortin, Ines; Hlouskova, Jaroslava
  4. The New York Fed DSGE Model Perspective on the Lagged Effect of Monetary Policy By Richard K. Crump; Marco Del Negro; Keshav Dogra; Pranay Gundam; Donggyu Lee; Ramya Nallamotu; Brian Pacula
  5. Quantitative Easing During the COVID-19 Pandemic: A Cross-Country Study By Maciej Stefański
  6. Fiscal Rules and Foreign Direct Investment in developing countries By HISGUIMA DASSIDI Crépin
  7. The Political Economy of Domestic and External Sovereign Debt By Hermann, Tim; Scholl, Almuth
  8. Expecting the unexpected: Stressed scenarios for economic growth By Gloria Gonzalez-Rivera; Vladimir Rodriguez-Caballero; Esther Ruiz
  9. Land-Price Dynamics and Macroeconomic Fluctuations with General Household Preferences Abstract : Through the collateral channel for entrepreneurs, a positive housing demand shock in Liu et al. (2013) increases land prices and business investment, but consumption decreases on impact and there is thus a comovement problem. This paper improves Liu et al. (2013) by adding general household preferences with broader intratemporal and intertemporal substitutions Bayesian estimation of our structural model based on aggregate U.S. data suggests that the intratemporal substitution is larger than unity and the intertemporal substitution is smaller than unity. Our impulse responses show that a positive housing demand shock increases land prices, business investment, and consumption, which resolves the comovement problem. Moreover, the strength of the collateral channel linking land prices and business investment in our Bayesian DSGE model is larger than that in Liu et al. (2013). Housing demand shocks explain 39−43% of the variance of output and 41−47% of the variance of investment in our model, but the same shocks explain only 17−31% of the variance of output and 30−41% of the variance of investment in Liu et al. (2013). Variance decomposition reveals that housing demand shocks account for a larger share of the fluctuations in land prices, investment, employment, and output than other shocks. Using the marginal data density as the measure of fit for models, we find that our model can better explain the same U.S. aggregate data. By Been-Lon Chen; Zheng-Ze Lai; Shian-Yu Liao
  10. Theory coherent shrinkage of Time-Varying Parameters in VARs By Andrea Renzetti
  11. The Preference for Wealth and Inequality: Towards a Piketty Theory of Wealth Inequality By Jean-Baptiste Michau; Yoshiyasu Ono; Matthias Schlegl
  12. The Deposit Business at Large vs. Small Banks By Adrien d'Avernas; Andrea L. Eisfeldt; Can Huang; Richard Stanton; Nancy Wallace
  13. Supply chains shocks and inflation in Europe By Jakub Mućk; Łukasz Postek
  14. Natural Rate of Interest in a Small Open Economy with Application to CEE Countries By Maciej Stefański
  15. The Distributional Predictive Content of Measures of Inflation Expectations By James Mitchell; Saeed Zaman
  16. Optimal Taxation in the Life Cycle with Human Capital Investment Abstract : This paper studies optimal taxes in a lifecycle model with unverifiable human capital investment inseparable from regular consumption. The planner faces asymmetric information regarding agents’ exogenous abilities and endogenous human capital. Agents deviate in two ways: misreporting ability and mis-investing in human capital. We characterize the distortions in a model with i.i.d. shocks and full human capital depreciation. Distortions are characterized by capital wedges that are positive over the life cycle, labor wedges that are negative early and positive later in the life cycle, and net human capital wedges that are positive in the life cycle. These wedges serve as mechanisms to eliminate the distortion to consumption due to inseparability from education expenditure. Calibrate to U.S. data, we show numerically that these results apply in a richer model with persistent shocks and non-full human capital depreciation. Simulation suggests that average capital wedges are positive in all working periods, with progressive capital wedges in contemporary skills, average labor wedges are negative in early and positive in later periods, with hump-shape in skills and nonzero at the top and the bottom of the skill distribution, a nd net human capital wedges are positive and regressive in skills, indicating that human capital subsidies are in favor of the high skilled. By Been-Lon Chen; Fei-Chi Liang
  17. Union and Firm Labor Market Power By Miren Azkarate-Askasua; Miguel Zerecero
  18. Quest for the General Effect Size of Finance on Growth: A Large Meta-Analysis of Worldwide Studies By Ichiro Iwasaki; Evžen Kočenda; Evžen Kocenda
  19. Financial System Resilience By Loretta J. Mester
  20. Consumer debt in Luxembourg and the euro area: Evidence from the Household Finance and Consumption Survey By Giuseppe Pulina
  21. Categorisation-enhanced mental-accounting consumer behaviour: demand enhancement and endogenous cycles in an overlapping-generations income-age distribution model By Szymon Chudziak
  22. Flowers vs garbage trucks: which type of local government investment has the greatest impact on economic growth By Łukasz Olejnik
  23. Leaning against housing booms fueled by credit By Carlos Canizares Martinez
  24. PUBLIC HEALTH IN GERMANY BEFORE 1848: PRACTICE AND THEORY By Mikhel, Dmitry (Михель, Дмитрий)
  25. Patience ensures fairness By Florian Brandl; Andrew Mackenzie
  26. United States-Latin America and the Caribbean Trade Developments 2023 By -
  27. Technological Change in the Insurance Sector in South Africa: Disruption with the Potential for Social Good in a Developing Country Context? By Zaakhir Asmal; Haroon Bhorat; Lisa-Cheree Martin; Chris Rooney
  28. Exploratory Analysis of Cost Variation in Unlisted Companies : Focusing on Cost Stickiness and Cost Anti-stickiness By SHINKAI, Takahide
  1. By: Adame Espinosa Francisco
    Abstract: This work is based on a new Keynesian theoretical model for an advanced economy, which incorporates overlapping generations to analyze a channel through which fluctuations in household financial wealth influence aggregate demand. The optimal monetary policy, corresponding to that of a central planner maximizing households' welfare, aims to mitigate financial fluctuations while simultaneously reducing variability in inflation and the output gap. The model is calibrated for the United States and reproduces the effect of variations in the price of financial assets on aggregate demand. The results show, first, that in the presence of productivity, financial, and demand shocks, optimal monetary policy significantly improves aggregate welfare by stabilizing financial fluctuations that impact households' wealth. Secondly, in the face of productivity and financial shocks, an augmented monetary rule responding explicitly to fluctuations in the price of financial assets, in addition to inflation and output gaps, can reproduce the welfare achieved under optimal monetary policy. However, this is not the case for demand shocks.
    Keywords: Monetary Policy;Monetary Rules;Overlapping Generations
    JEL: E21 E44 E52 E58
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:bdm:wpaper:2023-14&r=mac
  2. By: Tihana Škrinjarić (Bank of England, United Kingdom)
    Abstract: This paper contributes to the literature on macroprudential stance assessment in two ways. Firstly, it gives a comprehensive review of related literature to see the current directions research and policy practice, alongside the problems. Secondly, it empirically evaluates different aspects and issues when assessing the macroprudential stance. The empirical part of the paper focuses on country that has a fairly active macroprudential policy to establish the initial framework for assessing the effectiveness of macroprudential policy in Croatia. Results show that somewhat different results could be obtained based on variable definition and selection. This means that measuring macroprudential stance is difficult, as it depends on the definition of the macroprudential policy variable, selection of other important variables in the analysis, as well as other methodological factors.
    Keywords: systemic risk, macroprudential policy, financial stability, financial conditions, quantile regression, policy assessment, macroprudential stance, Q-VAR, growth at risk
    JEL: E32 E44 E58 G01 G28 C22
    Date: 2023–11–08
    URL: http://d.repec.org/n?u=RePEc:hnb:wpaper:72&r=mac
  3. By: Fortin, Ines (Institute for Advanced Studies, Vienna, Austria); Hlouskova, Jaroslava (Author-Workplace-Name: Institute for Advanced Studies, Vienna, Austria)
    Abstract: We nowcast and forecast Austrian economic activity, namely real gross domestic product (GDP), consumption and investment, which are available at a quarterly frequency. While nowcasting uses data up to (and including) the quarter to be predicted, forecasting uses only data up to the previous quarter. We use a large number of monthly indicators to construct early estimates of the target variables. For this purpose we use different mixed-frequency models, namely the mixed-frequency vector autoregressive model according to Ghysels (2016) and mixed data sampling approaches, and compare their forecast and nowcast accuracies in terms of the root mean squared error. We also consider traditional benchmark models which rely only on quarterly data. We are particularly interested in whether explicitly considering different regimes improves the nowcast. Thus we examine regime-dependent models, taking into account business cycle regimes (recession/non-recession) or financial/economic uncertainty regimes (high/low uncertainty) driven by global and Austrian economic and financial uncertainty indicators. We find that taking explicit account of regimes clearly improves nowcasting, and different regimes are important for GDP, consumption and investment. While the recession/non-recession regimes seem to be important to nowcast GDP and consumption, high/low global financial uncertainty regimes are important to nowcast investment. Also, some variables seem to be important only in certain regimes, like tourist arrivals in the non-recession regime when nowcasting consumption, while other variables are important in both regimes, like order books in the high and low global financial uncertainty regimes when nowcasting investment. In addition, nowcasting indeed provides a value added to forecasting, and the new information available in the first month seems to be most important. However, sometimes also the forecast performs quite well, and then it mostly comes from a mixed-frequency model. So monthly information seems to be helpful also in forecasting, not only in nowcasting. Finally, we do not find a clear winner among the different mixed-frequency models.
    Keywords: nowcasting, mixed-frequency VAR models, mixed data sampling regressions, macroeconomic forecasting, GDP nowcast, consumption nowcast, investment nowcast, regimes
    JEL: C10 C22 C32 C53 E17
    Date: 2023–12
    URL: http://d.repec.org/n?u=RePEc:ihs:ihswps:51&r=mac
  4. By: Richard K. Crump; Marco Del Negro; Keshav Dogra; Pranay Gundam; Donggyu Lee; Ramya Nallamotu; Brian Pacula
    Abstract: This post uses the New York Fed DSGE model to ask the question: What would have happened to interest rates, output, and inflation had the Federal Reserve been following an average inflation targeting (AIT)-type reaction function since 2021:Q2, when inflation began to rise—as opposed to keeping the federal funds rate at the zero lower bound (ZLB) until March 2022, and then raising it aggressively thereafter? We show that actual policy was more accommodative in 2021 than implied by the AIT reaction function and then more contractionary in 2022 and beyond. On net, the lagged effect of monetary policy on the level of GDP, when measured relative to the counterfactual, has been positive throughout the forecast horizon, due to the initial boost associated with keeping the fed funds rate near zero in 2021.
    Keywords: Dynamic Stochastic General Equilibrium (DSGE) models; DSGE; lagged effects; forecasting; monetary policy; New York Fed
    JEL: E52
    Date: 2023–11–21
    URL: http://d.repec.org/n?u=RePEc:fip:fednls:97347&r=mac
  5. By: Maciej Stefański
    Abstract: This paper estimates the financial market and macroeconomic effects of central bank asset purchases (quantitative easing, QE) in 16 economies which have launched asset purchases for the first time in response to the COVID-19 pandemic. We opt for regression-based methods rather than event studies, which enable us to estimate the effects of QE on government bond yields and stock prices over the first year of the pandemic rather than only at the time of the programme announcement. These estimates are inputted into Bayesian vector autoregressive models using Structural Scenario Analysis to obtain the effects on GDP and inflation. Contrary to most of the previous literature, we find that QE has a strong and robust impact on stock prices (raising them by 40% on average), but only a muted and on average neutral impact on bond yields. This translates into usually positive, but rather muted and often statistically insignificant impact on GDP of 0.4% on average and an insignificant impact on prices. Analysing the cross-country differences in the results we find that QE tends to be more effective in countries with more credible monetary and fiscal policies, which suggests that it is a useful tool primarily in advanced economies.
    Keywords: unconventional monetary policy, large-scale asset purchases, QE, GDP, inflation, stock prices, government bond yields, credibility, comparative study
    JEL: E52 E58
    Date: 2023–06
    URL: http://d.repec.org/n?u=RePEc:sgh:kaewps:2023088&r=mac
  6. By: HISGUIMA DASSIDI Crépin
    Abstract: This study analyses the effect of fiscal rules on Foreign Direct Investment (FDI) in developing countries. Using a sample of 78 countries, we use the entropy balancing method to analyze the causal effect of rule adoption on FDI. Two hypotheses are tested in this study. The first one states that adopting fiscal rules increases FDI, and the second one is related to the ability of different types of rules to attract more investments. First, the robust results show that adopting fiscal rules increases FDI. The ratio of the public deficit to GDP, the rating of long-term sovereign debt in foreign currency, and the ratio of short-term external debt outstanding are the transmission channels through which fiscal rules affect FDI. The effect of the rules is amplified in the presence of a high level of business climate, economic performance, and better structuring of the agricultural and industrial sectors. On the other hand, this effect is attenuated in the presence of mineral rents and the economy’s high real interest rate.
    Keywords: Fiscal rules, Foreign Direct Investment, fiscal policy
    JEL: C33 E62 F21
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:ise:remwps:wp02992023&r=mac
  7. By: Hermann, Tim; Scholl, Almuth
    JEL: F34 H63 E62 F41 D72
    Date: 2023
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc23:277632&r=mac
  8. By: Gloria Gonzalez-Rivera (Department of Economics, University of California Riverside); Vladimir Rodriguez-Caballero (ITAM (Mexico)); Esther Ruiz (Universidad Carlos III de Madrid (Spain))
    Abstract: We propose the construction of conditional growth densities under stressed factor scenarios to assess the level of exposure of an economy to small probability but potentially catastrophic economic and/or fi nancial scenarios, which can be either domestic or international. The choice of severe yet plausible stress scenarios is based on the joint probability distribution of the underlying factors driving growth, which are extracted with a multi-level Dynamic Factor Model (DFM) from a wide set of domestic/worldwide and/or macroeconomic/fi nancial variables. All together, we provide a risk management tool that allows for a complete visualization of the dynamics of the growth densities under average scenarios and extreme scenarios. We calculate Growth-in-Stress (GiS) measures, defi ned as the 5% quantile of the stressed growth densities, and show that GiS is a useful and complementary tool to Growth-at-Risk (GaR) when policymakers wish to carry out a multi-dimensional scenario analysis. The unprecedented economic shock brought by the COVID19 pandemic provides a natural environment to assess the vulnerability of US growth with the proposed methodology.
    Keywords: Growth vulnerability, Multi-level factor model, Scenario analysis, Stressed factors
    JEL: C32 C55 E32 E44 F44 F47 O41
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:ucr:wpaper:202314&r=mac
  9. Land-Price Dynamics and Macroeconomic Fluctuations with General Household Preferences Abstract : Through the collateral channel for entrepreneurs, a positive housing demand shock in Liu et al. (2013) increases land prices and business investment, but consumption decreases on impact and there is thus a comovement problem. This paper improves Liu et al. (2013) by adding general household preferences with broader intratemporal and intertemporal substitutions Bayesian estimation of our structural model based on aggregate U.S. data suggests that the intratemporal substitution is larger than unity and the intertemporal substitution is smaller than unity. Our impulse responses show that a positive housing demand shock increases land prices, business investment, and consumption, which resolves the comovement problem. Moreover, the strength of the collateral channel linking land prices and business investment in our Bayesian DSGE model is larger than that in Liu et al. (2013). Housing demand shocks explain 39−43% of the variance of output and 41−47% of the variance of investment in our model, but the same shocks explain only 17−31% of the variance of output and 30−41% of the variance of investment in Liu et al. (2013). Variance decomposition reveals that housing demand shocks account for a larger share of the fluctuations in land prices, investment, employment, and output than other shocks. Using the marginal data density as the measure of fit for models, we find that our model can better explain the same U.S. aggregate data.
    By: Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Zheng-Ze Lai (National Chengchi University); Shian-Yu Liao (Fu Jen Catholic University)
    Keywords: land prices, housing demand shocks, CES preferences, collateral constraints
    JEL: E3 E5
    Date: 2023–07
    URL: http://d.repec.org/n?u=RePEc:sin:wpaper:23-a005&r=mac
  10. By: Andrea Renzetti
    Abstract: Time-Varying Parameters Vector Autoregressive (TVP-VAR) models are frequently used in economics to capture evolving relationships among the macroeconomic variables. However, TVP-VARs have the tendency of overfitting the data, resulting in inaccurate forecasts and imprecise estimates of typical objects of interests such as the impulse response functions. This paper introduces a Theory Coherent Time-Varying Parameters Vector Autoregressive Model (TC-TVP-VAR), which leverages on an arbitrary theoretical framework derived by an underlying economic theory to form a prior for the time varying parameters. This "theory coherent" shrinkage prior significantly improves inference precision and forecast accuracy over the standard TVP-VAR. Furthermore, the TC-TVP-VAR can be used to perform indirect posterior inference on the deep parameters of the underlying economic theory. The paper reveals that using the classical 3-equation New Keynesian block to form a prior for the TVP- VAR substantially enhances forecast accuracy of output growth and of the inflation rate in a standard model of monetary policy. Additionally, the paper shows that the TC-TVP-VAR can be used to address the inferential challenges during the Zero Lower Bound period.
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2311.11858&r=mac
  11. By: Jean-Baptiste Michau (Ecole Polytechnique, France); Yoshiyasu Ono (Institute of Social and Economic Research, Osaka University, Japan); Matthias Schlegl (Sophia University, Japan)
    Abstract: What are the consequences of the preference for wealth for the accumulation of capital and for the dynamics of wealth inequality? Assuming that wealth per se is a luxury good, inequality tends to rise whenever the interest rate is larger than the economic growth rate. This induces the economy to converge towards an equilibrium with extreme wealth inequality, where the capital stock is equal to the golden rule level. Far from immiseration, this equilibrium results in high wages and in the golden rule level consumption for ordinary households. We then introduce shocks to the preference for wealth and show that progressive wealth taxation prevents wealth from being held by people with high saving rates. This permanently reduces the capital stock, which is detrimental to the welfare of future generation of workers. This also raises the interest rate, to the benefit of the property-owning upper-middle class. By contrast, a progressive consumption tax successfully and persistently redistributes welfare from the very rich to the poor.
    Keywords: Capital accumulation, Progressive wealth tax, Wealth inequality, Wealth preference
    JEL: D31 E21 E22 H20
    Date: 2023–11–15
    URL: http://d.repec.org/n?u=RePEc:crs:wpaper:2023-11&r=mac
  12. By: Adrien d'Avernas; Andrea L. Eisfeldt; Can Huang; Richard Stanton; Nancy Wallace
    Abstract: The deposit business differs at large versus small banks. We provide a parsimonious model and extensive empirical evidence supporting the idea that much of the variation in deposit-pricing behavior between large and small banks reflects differences in "preferences and technologies." Large banks offer superior liquidity services but lower deposit rates, and locate where customers value their services. In addition to receiving a lower level of deposit rates on average, customers of large banks exhibit lower demand elasticities with respect to deposit rate spreads. As a result, despite the fact that the locations of large-bank branches have demographics typically associated with greater financial sophistication, large-bank customers earn lower average deposit rates. Our explanation for deposit pricing behavior challenges the idea that deposit pricing is mainly driven by pricing power derived from the large observed degree of concentration in the banking industry.
    JEL: E0 E40 E44 G0 G2 G21 G28
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:31865&r=mac
  13. By: Jakub Mućk; Łukasz Postek
    Abstract: This article quantifies the effects of supply chains disruptions on inflation in European economies. We apply the local projections method in a panel framework and estimate responses of nine measures of consumer and producer inflation to shortages in materials and equipment reported by enterprises in the business surveys conducted by the European Commission. We find that supply chains disruptions are proinflationary for all considered measures of inflation, and a larger effect can be observed for inflation of prices of goods rather than services. The peak of impulse responses can be observed 4-6 quarters after shock, while the effect usually dies out after 8-12 quarters. The forecast error variance decomposition (FEVD) suggests that supply chain disruptions are much more important in explaining inflation changes at medium- rather than short-run forecast horizon. Moreover, supply chain shocks seem to matter relatively more for the variance of inflation of consumer prices of goods than for other measures of inflation. Interestingly, the positive estimates of the impact of supply chains disruptions on inflation can be related mainly to the period corresponding with the COVID-19 pandemics as well as the full-scale invasion of Ukraine and may exhibit asymmetric or regime-switching nature.
    Keywords: supply chains shock, inflation, local projections, panel data
    JEL: E31 E32 F41 C33
    Date: 2023–09
    URL: http://d.repec.org/n?u=RePEc:sgh:kaewps:2023094&r=mac
  14. By: Maciej Stefański
    Abstract: This paper extends the Laubach-Williams (2003) framework, which is widely used to estimate the natural rate of interest, to make it more suitable for studying small open economies. The model is augmented with consumer inflation expectations, foreign output gap, the exchange rate, energy prices and a lending spread. It also uses survey data to improve the accuracy of output gap and potential growth estimates. This model is subsequently applied to CEE countries (Poland, Czechia and Hungary) and the euro area. The natural interest rate is found to be relatively volatile and pro-cyclical; it fell following the global financial crisis, but rebounded in recent years; however, while it remains lower than before the crisis, it is positive for all analysed economies. The model gives more precise and robust estimates than the standard Laubach-Williams framework, but ex-post revisions remain substantial.
    Keywords: natural interest rate, small open economy, CEE, Kalman filter
    JEL: E43 E52 C32
    Date: 2023–09
    URL: http://d.repec.org/n?u=RePEc:sgh:kaewps:2023093&r=mac
  15. By: James Mitchell; Saeed Zaman
    Abstract: This paper examines the predictive relationship between the distribution of realized inflation in the US and measures of inflation expectations from households, firms, financial markets, and professional forecasters. To allow for nonlinearities in the predictive relationship we use quantile regression methods. We find that the ability of households to predict future inflation, relative to that of professionals, firms, and the market, increases with inflation. While professional forecasters are more accurate in the middle of the inflation density, households’ expectations are more useful in the upper tail. The predictive ability of measures of inflation expectations is greatest when combined. We show that it is helpful to let the combination weights on different agents’ expectations of inflation vary by quantile when assessing inflationary pressures probabilistically.
    Keywords: inflation expectations measures; inflation; density forecasts; quantile predictive regressions; non-Gaussian models; nonlinearities
    JEL: C15 C53 E3 E37
    Date: 2023–11–30
    URL: http://d.repec.org/n?u=RePEc:fip:fedcwq:97395&r=mac
  16. By: Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Fei-Chi Liang (Institute of Economics, Academia Sinica, Taipei, Taiwan)
    Keywords: Optimal capital and labor taxes, Human capital accumulation
    JEL: E62 H21 J24
    Date: 2023–10
    URL: http://d.repec.org/n?u=RePEc:sin:wpaper:23-a006&r=mac
  17. By: Miren Azkarate-Askasua; Miguel Zerecero
    Abstract: Can union and firm market power counteract each other? What are the output and welfare effects of employer and union labor market power? Using data from French manufacturing firms, we leverage mass layoff shocks to competitors to identify a negative effect of employment concentration on wages. In line with the reduced form evidence and the French institutional setting, we develop and estimate a multi-sector bargaining model that incorporates employer market power. We find that in the absence of unions output decreases by 0.48 percent because they partially counteract distortions coming from oligopsony power. Furthermore, eliminating employer and union labor market power increases output by 1.6 percent and the labor share by 21 percentage points. Workers’ geographic mobility is key to realizing the output gains.
    Keywords: Labor markets, Wage setting, Misallocation, Monopsony, Unions
    JEL: J2 J42 J51
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_475&r=mac
  18. By: Ichiro Iwasaki; Evžen Kočenda; Evžen Kocenda
    Abstract: We analyze diverse and heterogenous literature to grasp the general effect size of financial development on economic growth on a world scale. For that, we perform by far the largest available meta-analysis of the finance–growth nexus using 3561 estimates collected from 177 studies. Our meta-synthesis results show that large heterogeneity in empirical evidence is, in fact, driven by only a limited number of variables (moderators). By using advanced techniques, we also document the existence of the publication selection bias that is propagated in the literature in a nonlinear fashion. We account for uncertainty in moderator selection by employing model-averaging techniques. After adjusting for the publication bias, the results of our meta-regression provide evidence of a small but genuine positive effect of the financial development on growth that very mildly declines over time. Finance channeled via capital markets seems to be more beneficial for economic growth than that provided in the form of private credit. Our evidence goes against arguments about the damaging role of financial development and is in line with century-old theoretical foundations that favor the positive role of finance on economic growth.
    Keywords: financial development, economic growth, meta-analysis, publication selection bias
    JEL: C12 D22 G21 G33
    Date: 2023
    URL: http://d.repec.org/n?u=RePEc:ces:ceswps:_10740&r=mac
  19. By: Loretta J. Mester
    Abstract: Today I will speak about financial system resilience, its interactions with monetary policy in the context of today’s economy, and some recommendations for increasing the resilience of the banking system. In less than two decades, the world has experienced two historically deep negative shocks to the global economy and financial system. While their causes were different, the global financial crisis of 2008 and the COVID-19 pandemic that hit in 2020 each necessitated the intervention of central banks in ways not contemplated in earlier decades. This spring, the Fed was required to intervene again to address stresses in the banking system that were precipitated by the failures of Silicon Valley Bank (SVB) and Signature Bank. This stress episode was a painful reminder that whether we are operating in a low-interest-rate environment or in a high-interest-rate environment, financial system vulnerabilities can lead to adverse shocks being propagated across the financial system and sometimes very quickly. The episode also underscored that to promote financial system resilience, financial institutions must properly manage risks and supervisors must effectively monitor risks.
    Keywords: financial stability; monetary policy; Financial Resilience
    Date: 2023–11–29
    URL: http://d.repec.org/n?u=RePEc:fip:fedcsp:97394&r=mac
  20. By: Giuseppe Pulina
    Abstract: On average, consumer debt per household is twice as high in Luxembourg as in the euro area. Among lower-income households, consumer debt is even three times higher in Luxembourg. However, since incomes are also higher in Luxembourg, the ratio of consumer debt to gross income is comparable in Luxembourg and the euro area. This paper uses household survey data to compare the prevalence of consumer debt in Luxembourg and the euro area. It focuses on the two major components of consumer debt, installment loans and credit card debt, linking the probability of contracting these types of debt to individual household socio-economic characteristics. In the euro area, households with mortgage debt are more likely to take out consumer debt, highlighting the need to better understand this behavior and its potential link to financial vulnerability. Credit cards, instead, are more common in Luxembourg than in the euro area, but the share of households holding credit card debt is similar. Many euro area households that hold credit card debt also hold liquid assets, often in amounts sufficient to repay this debt. Credit constraints and differences in individual risk preferences may help to explain this otherwise puzzling behavior.
    Keywords: household finance, consumer debt, installment loans, credit cards.
    JEL: G51 D14 D91 E21 G02
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp175&r=mac
  21. By: Szymon Chudziak
    Abstract: Weaknesses of intertemporal optimisation approaches to consumption modelling include excess sensitivity of an individual's expenditure to interest rate changes and the inability to account for the documented behavioural aspects of decision-making, such as mental accounting or infrequent purchases and debt-taking. Credibly representing category-of-goods mental accounting in an intertemporal optimisation framework is notoriously difficult, as this modelling approach imposes interrelations between the demand for different categories through first-order conditions. This breaks the principle of nonfungibility, contrary to the rationale of mental-accounting theory. Thus, a behavioural-procedural framework is needed. This work applies such an approach in the form of a merger with categorisation theories, devised in a separate paper, to modelling consumer demand in a multimarket overlapping-generations agent-based income distribution model. Consumer decisions about spending on nondurable and frequently bought durable goods and infrequently-bought durable goods, such as houses and flats, are subject to different rules, which allows to model real-world features such as infrequent purchases and rare debt-taking. The devised single and multi-agent models of consumer behaviour are consistent both with microeconomic and macroeconomic evidence on consumption. Moreover, the results of the overlapping-generations agent-based income distribution model demonstrate that income changes are greatly enhanced by behavioural responses of consumers, thus creating high aggregate demand growth.
    Keywords: mental accounting, consumption, consumer choice, behavioural economics, agent-based computational economics, simulation models
    JEL: D90 D91 E03 D11 D14
    Date: 2023–06
    URL: http://d.repec.org/n?u=RePEc:sgh:kaewps:2023089&r=mac
  22. By: Łukasz Olejnik
    Abstract: Recently, there has been a rise in research focused on determining the magnitude of the fiscal multiplier. One aspect of this research involves estimating the fiscal multiplier of specific components of government revenues and expenditures and different sub-sectors within the general government sector. The article showcases the results of an analysis that calculates the fiscal multipliers of local government total investments and investments broken down into 10 different categories of investment expenditures, for 73 NUTS-3 sub-regions in Poland over the period from 2007 to 2021. The findings suggest that in the 1-2 years following the initial shock, the accumulated fiscal multipliers of investment expenditures are either insignificant or are significant but less than 1. Contrarily, during the 3-5 year period, the accumulated fiscal multipliers of total investment expenditures and expenditures on road construction show a significant increase, surpassing 1.5. Meanwhile, the fiscal multiplier of investments funded by EU structural funds can reach as high as 3.0.
    Keywords: fiscal multiplier, local government investment, fiscal multiplier of disaggregated investment expenditure, local projections
    JEL: E62 H70 R50
    Date: 2023–03
    URL: http://d.repec.org/n?u=RePEc:sgh:kaewps:2023084&r=mac
  23. By: Carlos Canizares Martinez (National Bank of Slovakia)
    Abstract: This study aims to empirically identify the state of the US housing market and establish a countercyclical state-dependent macroprudential policy rule. I do so by estimating a Markov switching model of housing prices, in which mortgage debt affects house prices nonlinearly and drives state transition probabilities. Second, I propose a state-contingent policy rule fed with the probability of being in each state, which I apply to setting a housing countercyclical capital buffer, a mortgage interest deduction, and a dividend payout restriction. Finally, I show that such hypothetical tools contain early warning information in a forecasting exercise to predict the charge-off rates of real estate residential loans and a financial stress index. The significance of this study is that it informs policymakers about the state of the housing market mechanically, while also providing a general rule to implement a state-contingent and timely macroprudential policy. We propose a new method of dealing with the end point problem when filtering economic time series. The main idea is to replace filtered quarterly observations at the end of the sample with static forecasts from a MIDAS regression using higher frequency time series. This method is capable to improve stability of output gap estimates or other cyclical series, as we confirm by empirical analysis on selected CEE countries and the United States. We find that stability may still be violated due to structural breaks in business cycles, or by an excessive amount of short-term noise. While MIDAS regressions have the potential to improve output gap estimates compared to the HP filter approach, the country-specific circumstances play a considerable role and need to be considered.
    JEL: C22 C24 G51 R21 R31
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:svk:wpaper:1101&r=mac
  24. By: Mikhel, Dmitry (Михель, Дмитрий) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The rise of public health care in Germany was part of a modernization process, the first product of which was the state. As part of the cameralist policy of encouraging population productivity, the dignitaries of Prussia and other German states began to establish special authorities responsible for the health and well-being of the population as early as the late seventeenth century. The 18th century saw a bureaucratization of health management methods, with district doctors (Kreisphysickus) as representatives in the field. They were entrusted with a wide range of administrative responsibilities, but their social status remained low. Some of the district doctors became known as the authors of treatises on medical police, presenting their views on the development of public health. Their theories, however, were far removed from actual practice. The situation began to change only after 1848, when political events in Germany prompted a new generation of physicians to vigorously demand political, social and medical reforms.
    Keywords: Germany, modernization, public health, district doctors, medical police
    Date: 2023–06–14
    URL: http://d.repec.org/n?u=RePEc:rnp:wpaper:w20220280&r=mac
  25. By: Florian Brandl; Andrew Mackenzie
    Abstract: We revisit the problem of fairly allocating a sequence of time slots when agents may have different levels of patience (Mackenzie and Komornik, 2023). For each number of agents, we provide a lower threshold and an upper threshold on the level of patience such that (i) if each agent is at least as patient as the lower threshold, then there is a proportional allocation, and (ii) if each agent is at least as patient as the upper threshold and moreover has weak preference for earlier time slots, then there is an envy-free allocation. In both cases, the proof is constructive.
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2311.06092&r=mac
  26. By: -
    Abstract: United States trade in goods fell by 3.9% year-on-year in the first six months of 2023, ending a recovery that started in 2021. This was a result of goods exports declining by almost 1% and goods imports by 6.3%. In contrast, in 2022, United States services trade reached a record high, with US$ 697 billion in imports and US$ 929 billion in exports. United States-Latin America and the Caribbean Trade Developments provides an overview of selected developments in trade relations between the United States and Latin America and the Caribbean. In light of the global focus on the climate crisis and the specific emphasis of President Biden’s trade policy agenda on advancing a sustainable environment and climate path, this year’s report includes a section on United States trade in circular economy goods.
    Date: 2023–11–10
    URL: http://d.repec.org/n?u=RePEc:ecr:col896:68681&r=mac
  27. By: Zaakhir Asmal; Haroon Bhorat; Lisa-Cheree Martin; Chris Rooney (Development Policy Research Unit, University of Cape Town)
    Abstract: Technological change has affected long-term change on countries and sectors across the world. One of the most visible manifestations of these changes is technology’s effects on Workplace Innovation (WI). Adopting the case study approach, we examine how technological change has affected the insurance sector in South Africa, with a particular focus on employment and job quality, skills and inequality. We find that technological innovation is likely to lead to job losses, while the effect on job quality is currently indeterminate. In terms of skills, our respondents experienced two challenges: the lack of skills transfer from older employees to younger employees and the recruitment of skilled individuals. Technological innovation is likely to worsen inequality in South Africa, as it advantages those who are highly-skilled, who tend to be from higher socioeconomic backgrounds. Overall, these findings suggest that technological innovation in the insurance industry needs to be carefully managed, with appropriate policies implemented so that all can benefit.
    Keywords: Insurance sector; labour market; South Africa; technological innovation
    JEL: J21 O33 D22 J24 I24
    Date: 2023–08
    URL: http://d.repec.org/n?u=RePEc:ctw:wpaper:202306&r=mac
  28. By: SHINKAI, Takahide
    Abstract: The purpose of this study is to focus on cost stickiness and cost anti-stickiness and, by using financial data from unlisted companies to conduct quantitative analysis, to uncover aspects of cost variation and their underlying mechanisms among the group of unlisted companies that previous research has yet to clarify. Analyzing a large-scale financial data set from unlisted companies, it was confirmed that the results, both for samples excluding the construction and financial sectors and for samples including only the construction sector, did not contradict the findings of Anderson et al. (2003) and Banker et al. (2014). It was also concurrently verified that these results are consistent with the estimated outcomes of empirical studies focusing on publicly listed companies in Japan. This research, which analyzed a large-scale financial panel data set of unlisted companies, is likely the first of its kind in the world. Through this study, it is believed that we have been able to present the potential for expanding existing research on cost variability, which has predominantly been analyzed using published data from listed companies.
    Keywords: cost stickiness, anti-cost stickiness, unlisted companies, cost behavior
    Date: 2023–11
    URL: http://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2023-01&r=mac
This nep-mac issue is ©2023 by Daniela Cialfi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at https://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.
This page is being maintained by Thomas Krichel. It was last updated on 2023‒12‒18 at 9:39.