|
on Open Economy Macroeconomics |
| By: | Giorgio Di Giorgio (LUISS Guido Carli and CASMEF); Guido Traficante (European University of Rome and CASMEF) |
| Abstract: | We study the effects of expansionary fiscal shocks in a two-country DSGE model with perpetual youth. We consider two alternative financing regimes, monetary financing and debt financing, and find that a money-financed fiscal stimulus is more expansionary on output and infl ation. We investigate how the transmission mechanism is related to the open-economy dimension and how structural parameters affect macroeconomic dynamics. |
| Keywords: | Exchange Rate, Fiscal Shocks, Helicopter Drop. |
| JEL: | E32 E52 F41 F42 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:1/18&r=opm |
| By: | Guillaume Gaulier; Vincent Vicard |
| Abstract: | Current estimates of misalignments in real effective exchange rates show that euro area imbalances are still large: Germany exhibits a 20 percentage point undervaluation compared to the rest of the euro area (EA). Within a monetary union, rebalancing requires price adjustments through differentials in inflation rates. The rebalancing process therefore involves a 2 percentage point higher inflation in Germany than in the rest of the EA over a decade, or a 1 pp over two decades. It also requires above 2% inflation in surplus countries to meet the 2% ECB inflation target. At the current pace, rebalancing is a 20 year process and requires sustained very low inflation rates in the rest of the euro area. |
| Keywords: | Current account imbalances;Euro area;Exchange rates misalignments |
| JEL: | E31 F32 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepipb:2018-21&r=opm |
| By: | Stefan Avdjiev; Valentina Bruno; Catherine Koch |
| Abstract: | Exchange rate fluctuations influence economic activity not only via the standard trade channel, but also through a financial channel, which operates through the impact of exchange rate fluctuations on borrowers' balance sheets and lenders' risk-taking capacity. This paper explores the "triangular" relationship between (i) the strength of the US dollar, (ii) cross-border bank flows and (iii) real investment. We conduct two sets of empirical exercises - a macro (country-level) study and a micro (firm-level) study. We find that a stronger dollar is associated with lower growth in dollar-denominated cross-border bank flows and lower real investment in emerging market economies. An important policy implication of our findings is that a stronger dollar has real macroeconomic effects that go in the opposite direction to the standard trade channel. |
| Keywords: | financial channel, exchange rates, cross-border bank lending, real investment |
| JEL: | F31 F32 F34 F41 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:695&r=opm |
| By: | Natoli, Filippo; Metelli, Luca |
| Abstract: | We investigate the international propagation of fiscal policy shocks originated in the United States using a Global VAR framework. We identify shocks to US tax rates and government spending by using narrative series as external instruments, following the proxy SVAR methodology. The main results of the paper are the following: (1) the domestic effects of tax shocks are stronger than those of a government spending shock (2) spillovers are in most cases positive and significant, albeit of small size; (3) the boost to exports in recipient economies, stimulated both by stronger US demand and by real exchange rate depreciation vis-à-vis the US dollar, is the main transmission channel; financial channels (through long-term interest rates and equity prices) also play a role. |
| Keywords: | international fiscal spillovers, proxy SVAR, GVAR |
| JEL: | C22 C25 E62 F42 |
| Date: | 2018–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84207&r=opm |
| By: | Sotirios Kokas; Dmitri Vinogradov; Marios Zachariadis |
| Abstract: | By adjusting their lending, banks can smooth or amplify the macroeconomic impact of deposit fluctuations. This may however lead to extended periods of disproportionately high lending relative to deposit intake, resulting in the accumulation of risk in the banking system. Using bank-level data for 8,477 banks in 129 countries for the 24-year period from 1992 to 2015, we examine how individual banks' market power and other characteristics may contribute to smoothing or amplification of shocks and to the accumulation of risk. We find that the higher their market power the lower is the growth rate of lending relative to deposits. As a result, in periods of falling deposits, higher market power for the average bank would be associated with a greater fall in lending resulting in amplification of adverse effects as deposits fall during relatively bad times. Strikingly, at very high levels of market power there is a threshold past which the effect of market power on the growth rate of lending relative to deposits turns positive so that “superpower” banks contribute to smoothing of adverse effects when deposits are falling. In periods of rising deposits, however, such banks lead to amplification and accumulation of risk in the economy. |
| Keywords: | smoothing; amplification; risk accumulation; market power; competition; crisis |
| JEL: | E44 E51 F3 F4 G21 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:ucy:cypeua:01-2018&r=opm |
| By: | JaeBin Ahn (Research Department, International Monetary Fund); Chang-Gui Park (Economic Research Team, Daejeon & Chungnam Branch, the Bank of Korea); Chanho Park (International Finance Division, International Department, the Bank of Korea) |
| Abstract: | Motivated by stylized facts pointing to a dominant role of imported inputs in transmitting external price shocks to domestic prices, this paper zooms in to study the pass-through of imported input costs to domestic producer prices. Our approach constructs effective input price indices from sector-level price data combined with sector-level information on input-output linkages. Applying an error correction model specification to sector-level output and input prices, the long-run pass-through rate of effective imported input costs to domestic producer prices is estimated to be around 70 percent in Korea and almost 100 percent in selected European countries. |
| Keywords: | Exchange rate pass-through, Imported input cost pass-through, Inflation |
| JEL: | E3 F3 F4 |
| Date: | 2016–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:bok:wpaper:1602&r=opm |