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on Macroeconomics |
| By: | Francesco Morelli (Link Campus University) |
| Abstract: | The modern macroeconomic debate grapples with explaining complex phenomena, often giving rise to theoretical and empirical puzzles. In response, New Keynesian models have evolved, incorporating frictions and agent heterogeneity, leading to the development of TANK and HANK frameworks. However, increasing model complexity does not always clarify underlying causes. This work introduces a New Keynesian model with Omitted Effects, incorporating previously unaccounted-for variables into agents’ objective functions. Similar to Omitted Variable Bias in econometrics, neglecting key variables in a general equilibrium setting leads to model misspecification and puzzling anomalies. The study follows both theoretical and empirical approaches: first, demonstrating how Omitted Effects address the Forward Guidance Puzzle and the consumption response to government spending; second, using an algorithm to identify omitted variables that improve model fit to US data. Empirical findings highlight the crucial role of real wages, inflation, and income Omitted Effects in resolving key macroeconomic inconsistencies. This framework enhances DSGE models’ flexibility, providing a systematic tool to refine economic modeling and deepen the understanding of macroeconomic dynamics. |
| Keywords: | DSGE, Omitted Effects, Forward Guidance Puzzle, Government Spending, Identification, General Equilibrium. Augmented Objective Function |
| JEL: | E10 E20 E21 E24 E27 E30 E31 E37 E52 E62 |
| Date: | 2025–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:604 |
| By: | Galo Nuño |
| Abstract: | The natural interest rate is the real rate that would prevail in the long-run. The standard view in macroeconomics is that the natural rate depends exclusively on structural factors such as productivity growth and demographics. This paper challenges this view by discussing three alternative, and complementary, views: (i) that the natural rate depends on fiscal policy via the stock of risk-free assets; (ii) that it depends on monetary policy via the central bank in ation target; and (iii) that it depends on persistent supply shocks such as tariffs or wars. These three theories share the relevance of precautionary savings motives. We conclude by drawing some lessons for monetary policy design. |
| Keywords: | HANK model, monetary-fiscal interactions, deep learning, cost-push shocks |
| JEL: | E32 E58 E63 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11878 |
| By: | Tore Dubbert; Adrian Schroeder |
| Abstract: | We estimate output gaps and financial cycles using a cross-country sample comprising Germany, the United States, and the United Kingdom by extending the approach of Berger, Richter & Wong (2022). Specifically, we apply the trend-cycle decomposition of Beveridge & Nelson (1981) within Bayesian vector autoregression models but select different sets of conditioning variables and shrinkage parameters for output gaps and financial cycles – i. e. credit and property price cycles – in each country. As demonstrated by our cross-country results, this strategy yields more realistic estimates of financial cycle amplitudes while retaining reliable output gap estimates. Our results further indicate that large, positive Beveridge-Nelson-based financial cycles, unlike traditional financial cycles, should not be interpreted as early warning indicators of systemic risk. Instead, they indicate periods of financial overhang that may impose constraints on the broader economy. |
| Keywords: | output gap, financial cycle, Beveridge-Nelson decomposition, Bayesian VAR |
| JEL: | C32 E32 E51 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cqe:wpaper:11225 |
| By: | Ochsner, Christian; Zuber, Christopher |
| Abstract: | Germany is undergoing a major shift in fiscal policy. In response to recent crises and long-term structural challenges, the federal government has introduced a debt-financed spending package that marks a significant departure from past fiscal orthodoxy. This paper investigates the macroeconomic implications of Germany's new fiscal consensus, focusing on how the composition of spending-investment versus consumption-affects inflation, growth, and debt sustainability. Using structural vector autoregressions, we estimate fiscal multipliers across key expenditure types and apply them in a scenario analysis. We focus on three scenarios in which policy makers focus either on consumption, constrained consumption or investment. Our results show that an investment-oriented strategy, particularly those targeting infrastructure and R&D, yields stronger and more sustained GDP growth with more favorable long-term debt outcomes than consumption-oriented approaches. These findings highlight the importance of fiscal quality over quantity. They suggest that strategic allocation of fiscal resources is essential for achieving long-term economic resilience and fiscal sustainability, offering important lessons for Germany and the broader EU as fiscal rules evolve. |
| Keywords: | fiscal package, debt, output, Germany |
| JEL: | E22 E60 E62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:svrwwp:319647 |
| By: | Biermann, Marcus |
| Abstract: | In this paper, new facts are documented on the racial distribution of seminar speakers in economics. From a sample of 270 institutions, I determined that before the COVID-19 pandemic, 82.5% of seminars were given by White speakers, 13.9% of seminars were given by Asian speakers, and 3.6% by speakers with a Hispanic-Latino or Black background. The racial distribution of speakers did not change globally. However, the share of speakers from underrepresented minorities in the United States almost doubled with the introduction of virtual seminars during the COVID-19 pandemic. |
| Keywords: | COVID-19; economics seminars; racial inequality |
| JEL: | F3 G3 J1 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128118 |
| By: | Trachtman, Carly; Kramer, Berber; do Nascimento Miguel, Jérémy |
| Abstract: | Investments in R&D are often made under ambiguity about the potential impacts of various projects. High-quality, systematic market research could help reduce that ambiguity, including in investments in agricultural research-for-development, such as plant breeding. Using an online framed artefactual experiment with a diverse sample of breeding experts working in various disciplines across the world, we ask how market information and information quality influences breeding experts’ investments in prospects with ambiguous returns, and how the quality and source of information affect willingness to pay for market information. We find that providing market information leads participants to make more prioritized (rather than diversified) decisions. However, participants do not consider differences in information quality, instead over extrapolating from noisy and biased information signals. Finally, while most participants are willing to use experimental funds to purchase market information, around half prefer lower quality information even if higher quality information is available at the same price. We conclude that prioritizing R&D projects with greater impact opportunities will require better awareness among decision-makers of quality issues in various types of market research. |
| Keywords: | agricultural research for development; plant breeding; experimental design; market research |
| Date: | 2024–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:169025 |
| By: | Comerton-Forde, Carole (University of Melbourne); Ford, Billy (None); Foucault, Thierry (HEC Paris); Jurkatis, Simon (Bank of England) |
| Abstract: | Investors act as a liquidity backstop in the corporate bond market. By providing liquidity, investors help ease dealers’ balance sheet constraints, especially during market stress. During the March 2020 Dash-for-Cash, in bonds where investors stopped providing liquidity, transaction costs rose by 38%. We find the composition of types of liquidity providers – rather than just their presence – shapes trading costs. Dealers relying on flexible-mandate investors, such as hedge funds, are more resilient to liquidity shocks. Dealers offer discounts to investors for past liquidity services to maintain liquidity provider networks. These discounts represent two thirds of relationship discounts. |
| Keywords: | Bond markets; liquidity; client-sourced liquidity; balance sheet cost |
| JEL: | G10 G14 G23 |
| Date: | 2025–05–16 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:1126 |
| By: | Delassus, Joséphine; Perona, Mathieu |
| Abstract: | L’Unedic nous a confié la conception et l’exploitation du module tournant de son 6e volet du Baromètre de la perception du chômage et de l’emploi. Les résultats montrent que le chômage affecte profondément le bien-être global des demandeurs d’emploi, notamment à travers la perte de revenu et la stigmatisation sociale. La poursuite d’une activité, même réduite, permet de préserver, au moins en partie, le sentiment de valeur personnelle et de sens dans le quotidien. Les différents profils de demandeurs d’emploi soulignent la nécessité d’un accompagnement personnalisé pour une réinsertion professionnelle réussie. Enfin, la connaissance des droits à l’assurance chômage émerge comme un facteur protecteur, contribuant à atténuer les angoisses liées à la perte d’emploi. |
| Keywords: | France, Chômage |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpm:notobe:2512 |
| By: | Ms. Gabriela Cugat |
| Abstract: | We examine growth strategies for the Pacific Island Countries (PICs) focusing on the role of tourism and diversification. First, we quantify the contribution of tourism to growth using panel regressions and we compute how much additional tourism would be needed for PICs to sustain comparators’ growth rates. Given the sizable scaling ups in tourism required, we consider the benefits of an alternative growth strategy based on diversification. We identify diversification episodes in the PICs and quantify their benefits using the synthetic control method. Such episodes have had mixed results for PICs. Finally, we outline a framework for designing growth strategies in the PICs, based on diagnosing the binding constraints to their economic expansion and working around these limitations. |
| Keywords: | Tourism; diversification; growth; Pacific Islands countries |
| Date: | 2025–06–13 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/111 |
| By: | Matias D. Cattaneo; Rocio Titiunik; Ruiqi Rae Yu |
| Abstract: | Boundary discontinuity designs -- also known as Multi-Score Regression Discontinuity (RD) designs, with Geographic RD designs as a prominent example -- are often used in empirical research to learn about causal treatment effects along a continuous assignment boundary defined by a bivariate score. This article introduces the R package rd2d, which implements and extends the methodological results developed in Cattaneo, Titiunik and Yu (2025) for boundary discontinuity designs. The package employs local polynomial estimation and inference using either the bivariate score or a univariate distance-to-boundary metric. It features novel data-driven bandwidth selection procedures, and offers both pointwise and uniform estimation and inference along the assignment boundary. The numerical performance of the package is demonstrated through a simulation study. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.07989 |
| By: | Pal, Barun Deb; Kapoor, Shreya; Rashid, Shahidur |
| Abstract: | Salt water intrusion and rising soil salnity are threatening food and livelihood security of paddy farmers in coastal Bangladesh. Visible manifestations of these challenges are degraded soils and chronic decline in tradtional farming, as it is becoming an increasingly infeasible means of livelihood. Promoting saline-tolerant paddy varieties (STRV) has been one of the major focuses of the Bangladesh Rice Research Institute (BRRI) and the attention to the problem has been intensified in recent years through a partnerhsip with a consortium of CGIAR centers. Howewer, robust empirical analysis has hitherto been limited. Using farm level data, this paper analyzes the determinants and impacts of the adopting these new varieties. We use a multi-variate logit model to identify the constraints to adoption, and Propensity Score Matching (PSM) and Endogeneous Switching Regression methods to assess the impacts on yeilds, and net income of the paddy farmers. Results show that adopting saline-tolerant rice varieties raises crop yield by an average of 1 to 2 tons per hectare, equivalent to a net income increase of about US$100 per hectare of cultivated land. Yet, adoption rates remain low due to several institutional constraints and perhaps a lack of nudging farmers in the scaling up strategies. Robustness of the results are tested, and the implications are discussed. |
| Keywords: | climate change adaptation; impact; livelihoods; saltwater intrusion; rice; seeds; soil; technology adoption; Bangladesh; Asia; Southern Asia |
| Date: | 2024–11–11 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:159540 |
| By: | Janet Currie; Soodeh Saberian |
| Abstract: | This study examines the relationship between wildfires and mental health-related hospitalizations in Canada from 2006 to 2018. Most previous estimates of the mental health costs of wildfire have focused on the impacts of exposure to PM₂.₅. We break new ground by highlighting other pathways for wildfires to affect mental health, including evacuation orders, direct local costs of fires, and climate anxiety, which is proxied using wildfire-related Twitter activity. We find that all these mechanisms affect mental health-related hospitalizations, with especially large impacts on hospitalizations for anxiety and substance abuse. Conditional on air quality, wildfire events that draw national attention worsen the mental health of susceptible people, even when they live far away. Elderly people and those with pre-existing health conditions that make them more vulnerable, are more strongly affected. The results indicate that climate anxiety stoked by wildfire events may account for much of the overall mental health cost. Accounting for these additional mechanisms does little to diminish the estimated effect of PM ₂.₅ from wildfire smoke, however, suggesting that the additional factors have effects on mental health that are in addition to those of PM₂.₅. |
| JEL: | I1 Q54 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33912 |
| By: | Sourish Dutta |
| Abstract: | Outlines the construction of high-resolution, 7-digit product-level Supply-Use Tables (SUTs) and symmetric Input-Output Tables (IOTs) for the Indian economy, leveraging microdata from the Annual Survey of Industries (ASI) for the period 2016-2022. We delineate a robust methodology encompassing the generation of detailed input and output flows, with a particular focus on the reconciliation of data from registered and unregistered manufacturing sectors through a meticulously developed NPCMS-NIC concordance. The critical transformation from the often-rectangular SUTs to square, symmetric product-by-product IOTs is explicated using the Industry Technology Assumption, a choice justified by its suitability for handling by-products prevalent in a diverse manufacturing landscape. The analytical prowess of this newly constructed high-resolution IOT framework is then demonstrated through its application to assess key economic impacts, specifically the Domestic Value Added (DVA) generated and the employment supported by production and export activities. A detailed case study of India's rapidly evolving mobile phone manufacturing sector (NPCMS 4722200) for the 2016-2022 period reveals profound structural shifts: significant output growth coupled with notable import substitution, a remarkable surge in exports, and a dynamic evolution in the DVA versus Foreign Value Added (FVA) shares, particularly in export-oriented production. The analysis further uncovers substantial employment growth, albeit with an increasing reliance on contractual labour and a heartening rise in female participation in the workforce. These meticulously constructed tables represent a significant methodological advancement and provide an invaluable empirical resource for nuanced analysis of sectoral interdependencies, the efficacy of industrial policy, and the complex dynamics of India's engagement with global value chains. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.13936 |