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on Macroeconomics |
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Issue of 2019‒03‒11
112 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Jongrim Ha (World Bank, Development Prospects Group); M. Ayhan Kose (World Bank, Development Prospects Group; Brookings Institution; CEPR, and CAMA); Franziska L. Ohnsorge (World Bank, Development Prospects Group; CAMA) |
| Abstract: | Emerging market and developing economies (EMDEs) have experienced an extraordinary decline in inflation since the early 1970s. After peaking in 1974 at 17.3 percent, inflation in these economies declined to 3.5 percent in 2017. Despite a checkered history of managing inflation among many EMDEs, disinflation occurred across all regions. This paper presents a summary of our recent book, “Inflation in Emerging and Developing Economies: Evolution, Drivers, and Policies,” that analyzes this remarkable achievement. Our findings suggest that many EMDEs enjoy the benefits of stability-oriented and resilient monetary policy frameworks, including central bank transparency and independence. Such policy frameworks need to be complemented by strong macroeconomic and institutional arrangements. Inflation expectations are more weakly anchored in EMDEs than in advanced economies. In EMDEs that do not operate inflation targeting frameworks, exchange rate movements tend to have larger and more persistent effects on inflation. |
| Keywords: | Prices; Inflation; Monetary Systems; Monetary Policy; Globalization. |
| JEL: | E31 E42 E52 E58 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1902&r=all |
| By: | Troug, Haytem |
| Abstract: | To show how fiscal policy affects the transmission mechanism of monetary policy, we extend a standard new Keynesian model for a small open economy to allow for the presence of non-separable government consumption in the utility function. We show how monetary policy should optimally respond to demand and supply shocks when the government sector is incorporated into the model. The introduction of government consumption affects the transmission of monetary policy. When government consumption has a crowding in effect on private consumption, it will dampen the transmission mechanism of monetary policy, and vice versa. Nevertheless, the degree of openness will minimise the effect of the introduction of government consumption in a non-separable form. Data for 35 OECD countries empirically support these findings, and the empirical results are robust to the zero lower bound period. The theoretical model also shows that, once we model the rest of the world economy, domestic government consumption and foreign government consumption will have opposing effects on private consumption, which contradicts with the existing literature. |
| Keywords: | New Keynesian models, Business Cycle, Monetary Policy, Open Economy Macroeconomics, Joint Analysis of Fiscal and Monetary Policy. |
| JEL: | E12 E32 E52 E63 F41 |
| Date: | 2019–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92511&r=all |
| By: | Miroslav Gabrovski (University of Hawaii at Manoa); Jang-Ting Guo (University of California, Riverside) |
| Abstract: | In the context of a prototypical New Keynesian model, this paper examines the theoretical interrelations between two tractable formulations of progressive taxation on labor income versus (i) the equilibrium degree of nominal wage rigidity as well as (ii) the resulting volatilities of hours worked and output in response to a monetary shock. In sharp contrast to the traditional stabilization view, we analytically show that linearly progressive taxation always operates like an automatic destabilizer which leads to higher cyclical fluctuations within the macroeconomy. We also obtain the same business cycle destabilization result under continuously progressive taxation if the initial degree of tax progressivity is sufficiently low. |
| Keywords: | Progressive Taxation, Nominal Wage Rigidity, Automatic Stabilizer, Business Cycles |
| JEL: | E12 E32 E62 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201902&r=all |
| By: | Michalis Nikiforos |
| Abstract: | The paper builds on the concept of (shifting) involvements, originally proposed by Albert Hirschman (2002 [1982]). However, unlike Hirschman, the concept is framed in class terms. A model is presented where income distribution is determined by the involvement of the two classes, capitalists and workers. Higher involvement by capitalists and lower involvement by workers tends to increase the profit share and vice versa. In turn, shifts in involvements are induced by the potential effect of a change in distribution on economic activity and past levels of distribution. On the other hand, as the profit share increases, the economy tends to become more wage led. The dynamics of the resulting model are interesting. The more the two classes prioritize the increase of their income share over economic activity, the more possible it is that the economy is unstable. Under the stable configuration, the most likely outcome is Polanyian predator-prey cycles, which can explain some interesting historical episodes during the 20th century. Finally, the paper discusses the possibility of conflict and cooperation within each of the distribution-led regimes. |
| Keywords: | Shifting Involvements; Hirschman; Wage Led; Profit Led; Predator-Prey |
| JEL: | E11 E12 E21 E22 E32 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_924&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in the Philippines from 1960 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that P is I(1). The study presents the ARIMA (1, 1, 3). The diagnostic tests further imply that the presented optimal ARIMA (1, 1, 3) model is stable and acceptable for predicting inflation in the Philippines. The results of the study apparently show that P will fall down from 5.6% in 2018 to approximately 0.3% in 2027. The Bangko Sentral ng Pilipinas is expected to continue implementing it inflation targeting policy framework since it proves to work well for the economy. |
| Keywords: | Forecasting; Inflation; Philippines |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92429&r=all |
| By: | Valentin Jouvanceau (Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France) |
| Abstract: | What are the impacts of a flush of interest-bearing excess reserves to the real economy? Surprisingly, the theoretical literature remains silent about this question. We address this issue in a new Keynesian model with various financial frictions and reserve requirements in the balance sheet of bankers. Modeling QE by the supply of excess reserves, allow for endogenous changes in the relative supply of financial assets. We find that this mechanism is crucial to identify and disentangle between the portfolio balance, the credit and the asset prices channels of QE. Further, we demonstrate that the macroeconomic effects of QE are rather weak and mainly transmitted through the asset prices channel. |
| Keywords: | Quantitative Easing, Excess Reserves, Transmission Channels, Securitization Crisis |
| JEL: | E32 E44 E52 E58 G01 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1910&r=all |
| By: | Tibor Hledik; Karel Musil; Jakub Rysanek; Jaromir Tonner |
| Abstract: | This paper presents a semi-structural quarterly projection open-economy model for analyzing monetary policy transmission and macroeconomic developments in Kazakhstan during the period of the fixed exchange rate regime. The model captures key stylized facts of the Kazakh economy, especially the important role of oil prices in influencing the economic cycle in Kazakhstan. The application of the model to observed data provides a reasonable interpretation of Kazakh economic history, including the global crisis, through to late 2015, when the National Bank of Kazakhstan introduced a managed float. The dynamic properties of the model are analyzed using impulse response functions for selected country-specific shocks. The model’s shock decomposition and in-sample forecasting properties presented in the paper suggest that the model was an applicable tool for monetary policy analysis and practical forecasting at the National Bank of Kazakhstan. In a general sense, the model can be considered an example of a quarterly projection model for oil-rich countries with a fixed exchange rate. |
| Keywords: | Fixed exchange rate, Kazakhstan, monetary policy, QPM, stylized facts |
| JEL: | C50 E17 E32 E52 E58 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2018/11&r=all |
| By: | Daniel Sichel; Eric von Hippel |
| Abstract: | Household R&D (or household innovation) is an important source of innovation that has to date been largely overlooked in research related to national accounts. Indeed, it is not currently counted as investment in the literatures on household production and human capital. This paper develops time series estimates of nominal investment, real investment, and real capital stocks for household R&D for product innovations in the United States. (We focus on product innovations because survey data on services innovations in the household sector are not yet available.) In the U.S., we find that household product R&D is significant. Our estimate of real investment in 2017 is $41 billion (2012 dollars). This is about half of what producers spend in R&D to develop new products for consumers – a sizable fraction. Our estimate of the real capital stock of household product R&D in 2017 is $233 billion. We conclude that household R&D is an important feature of household activity and, more generally, of the overall landscape of innovation. |
| JEL: | E01 E21 E22 E24 J24 O3 O31 O33 O34 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25599&r=all |
| By: | Zhou, Siwen |
| Abstract: | This paper examines the macroeconomic impact of the Asset Purchase Programme (APP) in the euro area on the basis of a set of macro-finance variables included in a Dynamic Nelson–Siegel modelling framework. The empirical results emphasise the role of the APP’s portfolio balance channel in stimulating economic growth and inflation, both at the aggregate euro area level and at the disaggregated country-specific level. The portfolio balance channel works at the aggregated level through greater international price competitiveness, easier conditions on capital markets, and higher asset prices. Moreover, the results suggest that the initial APP announcement has increased the annual real GDP growth rates and HICP inflation in the euro area by up to 0.7% and 0.8%, respectively. At the disaggregated level, there is evidence for the stimulation of bank lending through the portfolio balance channel in the core countries. Moreover, the stronger rise in stock prices in the core countries shows that the wealth effect triggered by portfolio rebalancing is mainly concentrated in the richer member countries. A comparison of the country-specific macroeconomic impact of APP shows that while overall GDP responses are broadly comparable across countries, the peripheral countries that have implemented effective labour market reforms have benefited significantly from bond purchases in stimulating inflation. This points to the need for further labour market reforms in Italy. A reform package of labour and product market reforms can help to reduce the resulting transition costs. |
| Keywords: | Quantitative Easing, Asset Purchase Programme, European Central Bank, Term Structure Model, Portfolio Balance Channel |
| JEL: | E43 E44 E52 F31 F42 |
| Date: | 2019–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92530&r=all |
| By: | Ricardo Hausmann (Center for International Development at Harvard University); Tim O'Brien (Center for International Development at Harvard University); Miguel Angel Santos (Center for International Development at Harvard University); Ana Grisanti (Center for International Development at Harvard University); Jorge Tapia (Center for International Development at Harvard University) |
| Abstract: | In the decade 1999-2009, Jordan experienced an impressive growth acceleration, tripling its exports and increasing income per capita by 38%. Since then, a number of external shocks that include the Global Financial Crisis (2008-2009), the Arab Spring (2011), the Syrian Civil War (2011), and the emergence of the Islamic State (2014) have affected Jordan in significant ways and thrown its economy out of balance. Jordan’s debt-to-GDP ratio has ballooned from 55% (2009) to 94% (2018). The economy has continued to grow amidst massive fiscal adjustment and balance of payments constraints, but the large increase in population – by 50% between 2008 and 2017 – driven by massive waves of refugees has resulted in a 12% cumulative loss in income per capita (2010-2017). Moving forward, debt sustainability will require not only continued fiscal consolidation but also faster growth and international support to keep interest payments on the debt contained. We have developed an innovative framework to align Jordan’s growth strategy with its changing factor endowments. The framework incorporates service industries into an Economic Complexity analysis, utilizing the Dun and Bradstreet database, together with an evaluation of the evolution of Jordan’s comparative advantages over time. Combining several tools to identify critical constraints faced by sectors with the greatest potential, we have produced a roadmap with key elements of a strategy for Jordan to return to faster, more sustainable and more inclusive growth that is consistent with its emerging comparative advantages. |
| Keywords: | Jordan, growth, labor markets, female labor, complexity, growth diagnostics, growth accelerations, service exports |
| JEL: | E23 E24 E62 E65 J21 J24 J31 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cid:wpfacu:346&r=all |
| By: | Michael T. Belongia (University of Mississippi); Peter N. Ireland (Boston College) |
| Abstract: | A New Keynesian model, estimated using Bayesian methods over a sample period that includes the recent episode of zero nominal interest rates, illustrates the effects of replacing the Federal Reserve's historical policy of interest rate management with one targeting money growth instead. Counterfactual simulations show that a rule for adjusting the money growth rate, modestly and gradually, in response to changes in the output gap delivers performance comparable to the estimated interest rate rule in stabilizing output and inflation. The simulations also reveal that, under the same money growth rule, the US economy would have recovered more quickly from the 2007-09 recession, with a much shorter period of exceptionally low interest rates. These results suggest that money growth rules can serve as a simple and effective alternative guide for monetary policy in the current low interest rate environment. |
| Keywords: | Divisia monetary aggregates, Monetary policy rules, New Keynesian models, Zero lower bound |
| JEL: | E31 E32 E41 E47 E51 E52 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:976&r=all |
| By: | Nobuhiro Abe (Bank of Japan); Takuji Fueki (Bank of Japan); Sohei Kaihatsu (Strategy, Policy, and Review Department, International Monetary Fund) |
| Abstract: | This paper estimates a Markov switching dynamic stochastic general equilibrium model (MS-DSGE) allowing for changes in monetary/fiscal policy interaction. The key feature of the model is that it seeks to quantitatively examine the impact of changes in monetary/fiscal policy interaction on economic outcomes even during a period when the ZLB is binding and unconventional monetary policy is implemented. To this end, we estimate our model using the shadow interest rate, which can be interpreted as an aggregate that captures the overall effect of unconventional monetary policies as well as conventional monetary policy. Applying our model to Japan, we identify changes in monetary/fiscal policy interaction even during the period when unconventional monetary policy has been implemented. We find that the introduction of Qualitative and Quantitative Easing (QQE) enables the Bank of Japan to actively respond to the inflation rate, which has helped to push up inflation. |
| Keywords: | Monetary policy; Inflation; Markov-switching DSGE |
| JEL: | E52 E62 C32 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp19e03&r=all |
| By: | Josef Schroth |
| Abstract: | This paper studies optimal bank capital requirements in a model of endogenous bank funding conditions. I find that requirements should be higher during good times such that a macroprudential "buffer" is provided. However, whether banks can use buffers to maintain lending during a financial crisis depends on the capital requirement during the subsequent recovery. The reason is that a high requirement during the recovery lowers bank shareholder value during the crisis and thus creates funding-market pressure to use buffers for deleveraging rather than for maintaining lending. Therefore, buffers are useful if banks are not required to rebuild them quickly. |
| Keywords: | financial frictions, financial intermediation, regulation, counter-cyclical capital requirements, market discipline, access to funding |
| JEL: | E13 E32 E44 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:771&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Egypt from 1960 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that E is I(1). The study presents the ARIMA (0, 1, 1). The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 1) model is stable and acceptable for predicting inflation in Egypt. The results of the study apparently show that E will be approximately 23.3% over the out-of-sample forecast period. The CBE is expected to continue tightening Egypt’s monetary policy in order to restore price stability. |
| Keywords: | Egypt; forecasting; inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92446&r=all |
| By: | Carlo Pizzinelli (University of Oxford); Konstantinos Theodoridis (Cardiff Business School); Francesco Zanetti (University of Oxford (E-mail: Francesco.Zanetti@ economics.ox.ac.uk)) |
| Abstract: | This paper documents state dependence in labor market fluctuations. Using a Threshold Vector-Autoregression model, we establish that the unemployment rate, the job separation rate and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond-Mortensen-Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. The transition rates into and out of employment embed state dependence through the interaction of reservation productivity levels and the distribution of match-specific idiosyncratic productivity. State dependence implies that the effect of labor market reforms is different across phases of the business cycle. A permanent removal of layoff taxes is welfare enhancing in the long run, but it involves distinct short-run costs depending on the initial state of the economy. The welfare gain of a tax removal implemented in a low- productivity state is 4.9 percent larger than the same reform enacted in a state with high aggregate productivity. |
| Keywords: | Search and Matching Models, State Dependence in Business Cycles, Threshold Vector Autoregression |
| JEL: | E24 E32 J64 C11 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:19-e-03&r=all |
| By: | Rasmus Fatum (Alberta School of Business, University of Alberta (E-mail: rasmus.fatum@ualberta.ca)); Naoko Hara (Deputy Director and Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: naoko.hara@boj.or.jp)); Yohei Yamamoto (Department of Economics, Hitotsubashi University (E-mail: yohei.yamamoto@econ.hit-u.ac.jp)) |
| Abstract: | We consider the influence of domestic and US macroeconomic news surprises on daily bond yields over the January 1999 to January 2018 period for four advanced Negative Interest Rate Policy (NIRP) economies - Germany, Japan, Sweden, and Switzerland. Our results suggest that the influence of macroeconomic news surprises is for all four countries under study during the NIRP period non-existent or noticeably weaker than during the preceding Zero Interest Rate Policy (ZIRP) period. Our results are consistent with the suggestion that NIRP is characterized by a lower bound that is no less constraining than the zero lower bound that characterizes ZIRP. |
| Keywords: | NIRP, Bond Yields, Macroeconomic News |
| JEL: | E43 E52 E58 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:19-e-02&r=all |
| By: | Matthes, Christian (Federal Reserve Bank of Richmond); Lubik, Thomas A. (Federal Reserve Bank of Richmond); Verona, Fabio (Bank of Finland) |
| Abstract: | We study the behavior of key macroeconomic variables in the time and frequency domain. For this purpose, we decompose U.S. time series into various frequency components. This allows us to identify a set of stylized facts: GDP growth is largely a high-frequency phenomenon whereby inflation and nominal interest rates are characterized largely by low-frequency components. In contrast, unemployment is a medium-term phenomenon. We use these decompositions jointly in a structural VAR where we identify monetary policy shocks using a sign restriction approach. We find that monetary policy shocks affect these key variables in a broadly similar manner across all frequency bands. Finally, we assess the ability of standard DSGE models to replicate these findings. While the models generally capture low-frequency movements via stochastic trends and business-cycle fluctuations through various frictions, they fail at capturing the medium-term cycle. |
| Keywords: | Wavelets; bandpass filter; SVAR; sign restrictions; DSGE model |
| JEL: | C32 C51 E32 |
| Date: | 2019–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:19-06&r=all |
| By: | Cars Hommes; Joep Lustenhouwer |
| Abstract: | Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations. We find that the region of allowed policy parameters is strictly larger than under rational expectations. However, when the zero lower bound on the nominal interest rate is accounted for, self-fulfilling deflationary spirals can occur, depending on the credibility of the central bank. Deflationary spirals can be prevented with a high inflation target and aggressive monetary easing. |
| Keywords: | Business fluctuations and cycles; Credibility; Monetary policy |
| JEL: | E52 E32 C62 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:19-9&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Lesotho from 1974 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that L is I(1). The study presents the ARIMA (0, 1, 2). The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 2) model is stable and acceptable for predicting inflation in Lesotho. The results of the study apparently show that L will be approximately 5.2% over the out-of-sample forecast period. The CBL is expected to tighten Lesotho’s monetary policy in order to maintain price stability. |
| Keywords: | Forecasting; Inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92428&r=all |
| By: | NYONI, THABANI |
| Abstract: | This paper uses annual time series data on CPI in Iran from 1960 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the I series is I (2). The study presents the ARIMA (1, 2, 1) model for predicting CPI in Iran. The diagnostic tests further imply that the presented optimal model is actually stable and acceptable for predicting CPI in Iran. The results of the study apparently show that CPI in Iran is likely to continue on an upwards trajectory in the next ten years. The study basically encourages Iranian policy makers to make use of tight monetary and fiscal policy measures in order to control inflation in Iran. |
| Keywords: | Forecasting; Iran; inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92454&r=all |
| By: | Heejeong Kim (Concordia University) |
| Abstract: | What drives sharp declines in aggregate quantities over the Great Recession? I study this question by building a dynamic stochastic overlapping generations economy where households hold both low-return liquid and high-return illiquid assets. In this environment, I consider shocks to aggregate TFP that occur alongside a rise in risk of a further economic downturn. Importantly, a higher probability of an economic disaster is consistent with the recent evidence finding a decline in households’ expected income growth over the Great Recession. I also show that a rise in disaster risk explains the rise in savings rates, seen in the micro data over the Great Recession. When calibrated to reproduce the distribution of wealth as well as the frequency and severity of disasters reported in Barro (2006), a rise in disaster risk, and an empirically consistent fall in TFP, explains around 70 percent of the decline in aggregate consumption and more than 50 percent of the decline in investment over the Great Recession. Comparing my model to an economy without illiquid assets, I find that household variation in the liquidity of wealth plays a key role in amplifying the effect of a rise in disaster risk. |
| Keywords: | Business cycles, incomplete markets, disaster risk, portfolio choice |
| JEL: | E21 E32 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:crd:wpaper:19002&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Burundi from 1966 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that B is I(1). The study presents the ARIMA (0, 1, 1). The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 1) model is stable and acceptable for predicting inflation in Burundi. The results of the study apparently show that B will be approximately 9.4% by 2020. Policy makers, particulary, monetary authorities in Burundi are expected to tighten Burundi’s monetary policy in order to restore price stability. |
| Keywords: | Burundi; forecasting; inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92444&r=all |
| By: | NYONI, THABANI |
| Abstract: | This paper uses annual time series data on inflation in Israel from 1960 to 2017, to model and forecast inflation using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that Q is I (1). The study presents the ARIMA (1, 1, 2) model for predicting inflation in Israel. The diagnostic tests further show that the presented parsimonious model is stable and acceptable for predicting inflation in Israel. The results of the study apparently show that inflation in Israel is likely to be hovering around 1.6% over the next decade. Basically, the study encourages the Bank of Israel to continue being transparent and independent in order to retain credibility and boost its ability to engineer successful macroeconomic policy actions. |
| Keywords: | Forecasting; Inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92427&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on CPI in Myanmar from 1960 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the M series is I (2). The study presents the ARIMA (2, 2, 1) model for predicting CPI in Myanmar. The diagnostic tests further imply that the presented optimal model is stable and acceptable in modeling CPI in Myanmar. The results of the study apparently show that CPI in Myanmar is likely to continue on an upwards trajectory in the next decade. The study encourages policy makers to make use of tight monetary and fiscal policy measures in order to deal with inflation in Myanmar. |
| Keywords: | Forecasting; Inflation; Myanmar |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92420&r=all |
| By: | NYONI, THABANI |
| Abstract: | This paper uses annual time series data on CPI in Germany from 1960 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the GC series is I (1). The study presents the ARIMA (1, 1, 1) model for predicting CPI in Germany. The diagnostic tests further show that the presented parsimonious model is stable and acceptable for predicting CPI in Germany. The results of the study apparently show that CPI in Germany is likely to continue on an upwards trajectory in the next decade. The study encourages policy makers to make use of tight monetary and fiscal policy measures in order to deal with inflation in Germany. |
| Keywords: | Forecasting; inflation, Germany |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92442&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Tanzania from 1966 to 2017, to model and forecast inflation using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the T series is I (1). The study presents the ARIMA (1, 1, 2) model for predicting inflation in Tanzania. The diagnostic tests further imply that the presented optimal model is actually stable and acceptable for predicting inflation in Tanzania. The results of the study apparently show that inflation in Tanzania is likely to continue on an upwards trajectory in the next decade. The study basically encourages policy makers to make use of tight monetary and fiscal policy measures in order to control inflation in Tanzania. |
| Keywords: | Forecasting; inflation; Tanzania |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92458&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Algeria from 1970 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that A is I(1). The study presents the ARIMA (1, 1, 1). The diagnostic tests further imply that the presented optimal ARIMA (1, 1, 1) model is stable and acceptable for predicting inflation in Algeria. The results of the study apparently show that A will ranging between 4.9% and 5.2% over the out-of-sample period. Monetary authorities in Algeria are expected to tighten Algeria’s monetary policy in order to maintain price stability. |
| Keywords: | Forecasting; Inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92426&r=all |
| By: | NYONI, THABANI |
| Abstract: | This paper uses annual time series data on CPI in Mauritius from 1963 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the Z series is I (2). The study presents the ARIMA (0, 2, 3) model for predicting CPI in Mauritius. The diagnostic tests further imply that the presented optimal model is actually stable and acceptable for predicting CPI in Mauritius. The results of the study apparently show that CPI in Mauritius is likely to continue on a very sharp upwards trajectory in the next decade. The study basically encourages policy makers to make use of tight monetary and fiscal policy measures in order to control inflation in Mauritius. |
| Keywords: | Forecasting; Inflation; Mauritius |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92423&r=all |
| By: | NYONI, THABANI |
| Abstract: | This paper uses annual time series data on CPI in Japan from 1963 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the Y series is I (2). The study presents the ARIMA (0, 2, 1) model for predicting CPI in Saudi Arabia. The diagnostic tests further imply that the presented optimal model is actually stable and acceptable for predicting CPI in Saudi Arabia. The results of the study apparently show that CPI in Saudi Arabia is likely to be relatively high in the next decade. The study encourages policy makers to make use of tight monetary and fiscal policy measures in order to deal with inflation in Saudi Arabia. |
| Keywords: | Forecasting; Inflation; Saudi Arabia |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92422&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Morocco from 1960 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that M is I(1). The study presents the ARIMA (0, 1, 1) model. The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 1) model is stable and acceptable in forecasting inflation in Morocco. The results of the study apparently show that M will be hovering somewhere around 1.1% over the next decade. Policy makers and the business community in Morocco are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Forecasting; inflation; Morocco |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92455&r=all |
| By: | Hardik A. Marfatia (Department of Economics, Northeastern Illinois University, BBH 344G, 5500 N. St. Louis Ave., Chicago, IL 60625, USA); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Esin Cakan (Department of Economics, University of New Haven, 300 Boston Post Road, West Haven, CT 06516, USA) |
| Abstract: | In this paper, we assess the dynamic impact of the U.S. monetary policy announcements on oil market futures returns and volatility. We use intra-day data together with a time-varying modeling approach to study the nature of this dynamic impact. In addition, we also control for macroeconomic news shocks and separately study the response of good and bad realized volatility. Evidence suggests that there is a significant time variation in the response of oil returns as well as its volatility to the Federal Reserve policy announcements. Furthermore, we find that higher (lower) uncertainty about Federal Reserve policy actions weakens (strengthens) the impact of the announcements on oil returns and volatility. |
| Keywords: | Monetary Policy, Macroeconomic Surprises, Oil Returns and Volatility, Time-Varying Model |
| JEL: | C32 E44 E52 G14 Q43 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201916&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on CPI in Italy from 1960 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the T series is I (2). The study presents the ARIMA (0, 2, 1) model for predicting CPI in Italy. The diagnostic tests further imply that the presented optimal model is actually stable and acceptable for predicting CPI in Italy over the period under study. The results of the study apparently show that CPI in Italy is likely to continue on an upwards trajectory in the next decade. The study basically encourages policy makers to make use of tight monetary and fiscal policy measures in order to control inflation in Italy. |
| Keywords: | Forecasting; Italy; Inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92421&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Senegal from 1968 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that the inflation rate series is I(0). The study presents the ARMA (1, 0, 0) model, which is equivalent to an AR (1) model. The diagnostic tests further imply that the presented optimal ARMA (1, 0, 0) model is stable and acceptable for forecasting inflation rates in Senegal. The results of the study apparently show that inflation will be approximately 4.7% by 2020. Policy makers and the business community in Senegal are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Forecasting; Inflation; Senegal |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92431&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Finland from 1960 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that F is I(1). The study presents the ARIMA (1, 1, 3) model. The diagnostic tests further imply that the presented optimal ARIMA (1, 1, 3) model is stable and acceptable in predicting Finnish inflation. The results of the study apparently show that F will be hovering around 1% over the next 10 years. Policy makers and the business community in Finland are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Forecasting; inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92448&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Niger from 1964 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that N is I(0). The study presents the ARMA (1, 0, 0) model, which is simply an AR (1) model. The diagnostic tests further imply that the presented optimal ARMA (1, 0, 0) model is stable. The results of the study apparently show that N will be approximately 4.3% by 2020. Policy makers and the business community in Niger are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Forecasting; inflation; Niger |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92450&r=all |
| By: | NYONI, THABANI |
| Abstract: | This paper uses annual time series data on inflation rates in the USA from 1960 to 2016, to model and forecast inflation using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the US inflation series is I (1). The study presents the ARIMA (2, 1, 1) model for predicting inflation in the US. The diagnostic tests further show that the presented parsimonious model is stable and acceptable for predicting annual inflation rates in the US. The results of the study apparently show that inflation in the US is likely to be less than 2% over the out-of-sample forecast period (i.e 10 years). The study encourages policy makers to make use of tight monetary policy measures in order to maintain price stability in the US. |
| Keywords: | Forecasting; inflation, USA |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92460&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Burkina Faso from 1960 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that B is I(0). The study presents the ARMA (2, 0, 0) model, which is nothing but an AR (2) model. The diagnostic tests further imply that the presented optimal ARMA (2, 0, 0) model is stable and acceptable. The results of the study apparently show that W will be approximately 4% by 2020. Policy makers and the business community in Burkina Faso are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Burkina Faso; forecasting; inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92443&r=all |
| By: | Cantore, Cristiano; Ferroni, Filippo; León-Ledesma, Miguel |
| Abstract: | The textbook New-Keynesian (NK) model implies that the labor share is pro-cyclical conditional on a monetary policy shock. We present evidence that a monetary policy tightening robustly increased the labor share and decreased real wages and labor productivity during the Great Moderation period in the US, the Euro Area, the UK, Australia, and Canada. We show that this is inconsistent not only with the basic NK model, but with a wide variety of NK models commonly used for monetary policy analysis and where the direct link between the labor share and the markup can be broken. |
| Keywords: | Labor Share; monetary policy shocks |
| JEL: | C52 E23 E32 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13551&r=all |
| By: | Baldi, Guido; Pons, Martina |
| Abstract: | While the labor share of income has decreased in most advanced economies since the 1980s, it has remained relatively stable in Switzerland. However, this does not imply that the capital share of income has also remained stable. Our results suggest that the share of imputed capital rental payments to income has decreased. Similar to other countries, Switzerland has seen an increase in the so-called factorless income share that cannot be readily attributed to capital and labor. The increase in factorless income may reflect a rise in economic rents, higher compensation for business risks, or increased compensation for unmeasured input factors, especially intangible capital. We find that the stable labor share in Switzerland cannot be traced back to high wage growth, but rather to subdued investment growth and a high growth rate of the labor force. |
| Keywords: | Labor Share, Capital Share, Factorless Income, Return to Capital. |
| JEL: | E01 E22 E23 E25 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92408&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Thailand from 1960 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that T is I(0). The study presents the ARMA (0, 0, 1) model, which is nothing but an MA (1) process. The diagnostic tests further imply that the presented optimal ARMA (0, 0, 1) model is stable and acceptable. The results of the study apparently show that T will be approximately 4.2% by 2020. Policy makers and the business community in Thailand are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Forecasting, inflation, Thailand |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92451&r=all |
| By: | Sokic, Alexandre |
| Abstract: | This paper is deeply motivated by the need to explore the impressive Bitcoin price development by addressing Bitcoin as money in its essential attribute as a medium of exchange. We adopt a monetary economics viewpoint and resort to a representative agent modelling strategy within a money-in-the-utility function (MIUF) framework. First, we show that the impressive Bitcoin price development observed since its inception can be interpreted as a hyperdeflation when we focus on Bitcoin role as a medium of exchange. Second, we show that specific monetary features of Bitcoin, its asymptotical fixed nominal stock and divisibility down to eight decimal places, account for a strong possibility of speculative hyperdeflationary paths. It is shown that those paths are fully consistent with the medium of exchange monetary role of Bitcoin and the representative agent optimizing behavior. |
| Keywords: | Cryptocurrencies, Bitcoin, hyperdeflation, medium of exchange |
| JEL: | E31 E41 E42 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90603&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in the Kingdom of Bahrain from 1966 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that Bahrain inflation series is I(1). The study presents the ARIMA (0, 1, 1). The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 1) model is stable and acceptable for predicting inflation in the Kingdom of Bahrain. The results of the study apparently show that predicted inflation will be approximately 1.5% by 2020. Policy makers and the business community in the Kingdom of Bahrain are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Bahrain; forecasting; inflation |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92452&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Jamaica from 1968 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that JINF is I(0). The study presents the ARMA (1, 0, 0) model, which is the same as an AR (1) process. The diagnostic tests further imply that the presented optimal ARMA (1, 0, 0) model is stable and acceptable for forecasting inflation rates in Jamaica. The results of the study apparently show that JINF will be approximately 11.42% by 2020. Policy makers in Jamaica are expected to the take the necessary action with regards to maintaining a low and stable inflation rate over the next decade and even beyond. |
| Keywords: | Forecasting; inflation; Jamaica |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92449&r=all |
| By: | Germán Gutiérrez; Callum Jones; Thomas Philippon |
| Abstract: | We propose a model to identify the causes of rising profits and concentration, and declining entry and investment in the US economy. Our approach combines a rich structural DSGE model with cross-sectional identification from firm and industry data. Using asset prices, our model estimates the realized and anticipated shocks that drive the endogeneity of entry and concentration and recovers shocks to entry costs. We validate our approach by showing that the model-implied entry shocks correlate with independently constructed measures of entry regulation and M&A activities. We conclude that entry costs have risen and that the ensuing decline in competition has depressed consumption by five to ten percent. |
| JEL: | D4 E0 E22 E3 L1 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25609&r=all |
| By: | David M. Byrne; Daniel E. Sichel; Ana M. Aizcorbe |
| Abstract: | This paper addresses two measurement issues for mobile phones. First, we develop a new mobile phone price index using hedonic quality-adjusted prices for smartphones and a matched-model index for feature phones. Our index falls at an average annual rate of 17 percent during 2010-2018, close to the rate of decline in the price index used in the GDP Accounts. Given relatively flat average prices over this period, our index points to substantial quality improvement. Second, we propose a methodology to disentangle purchases of phones and wireless services when they are bundled together as part of a long-term service contract. Getting the allocation right is especially important for real PCE because the price deflators for phones and wireless services exhibit very different trends. Our adjusted estimates suggest that real PCE spending currently captured in the category Cellular Phone Services increased 4 percentage points faster than is reflected in published data. |
| Keywords: | Cell phone ; Hedonic indexes ; Mobile phone ; Personal consumption expenditures ; Price indexes ; Quality adjustment ; Smartphone |
| JEL: | E31 E21 O33 |
| Date: | 2019–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2019-12&r=all |
| By: | NYONI, THABANI |
| Abstract: | This research uses annual time series data on inflation rates in Sri Lanka from 1960 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that S is I(0). The study presents the ARMA model (1, 0, 0) [or simply AR (1) process] for forecasting inflation rates in Sri Lanka. The diagnostic tests further imply that the presented optimal ARMA (1, 0, 0) model is not only stable but also suitable. The results of the study apparently show that S will be approximately 8.17% by 2020. Policy makers and the business community in Sri Lanka are expected to take advantage of the anticipated stable inflation rates over the next decade. |
| Keywords: | Forecasting; Inflation; Sri Lanka |
| JEL: | C53 E31 E37 E47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92432&r=all |
| By: | Ana Fostel (Dept. of Economics, George Washington University); John Geanakoplos (Cowles Foundation, Yale University); Gregory Phelan (Department of Economics, Williams College) |
| Abstract: | Cross-border financial flows arise when (otherwise identical) countries differ in their abilities to use assets as collateral to back financial contracts. Financially integrated countries have access to the same set of financial instruments, and yet there is no price convergence of assets with identical payoffs, due to a gap in collateral values. Home (financially advanced) runs a current account deficit. Financial flows amplify asset price volatility in both countries, and gross flows driven by collateral differences collapse following bad news about fundamentals. Our results can explain financial flows among rich, similarly-developed countries, and why these flows increase volatility. |
| Keywords: | Collateral, Capital flows, Asset prices, Current account, Securitized markets, Asset-backed securities |
| JEL: | D52 D53 E32 E44 F34 F36 G01 G11 G12 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2169&r=all |
| By: | Miyamoto, Wataru; Nguyen, Thuy Lan |
| Abstract: | We quantify the effects of changes in international input-output linkages on the nature of business cycles. We build a multi-sector multi-country international business cycle model that matches the input-output structure within and across countries. We find that, in our 23 countries sample with manufacturing and non-manufacturing sectors, changes in the international input-output linkages between 1970 and 2007 causes a 15% drop in output volatility in a median country, but the effects are heterogeneous across countries. Changing international linkages tend to stabilize output in most countries, while leading to a higher risk of a global recession. |
| Keywords: | International business cycles, trade linkages, volatilities, input-output |
| JEL: | E32 F31 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2018-16&r=all |
| By: | Alesina, Alberto F; Favero, Carlo A.; Giavazzi, Francesco |
| Abstract: | We review the debate surrounding the macroeconomic effects of deficit reduction policies (austerity). The discussion about "austerity" in general has distracted commentators and policymakers from a very important result, namely the enormous difference, on average, between expenditure- and tax-based austerity plans. Spending-based austerity plans are remarkably less costly than tax-based plans. The former have on average a close to zero effect on output and lead to a reduction of the debt over GDP ratio. Tax-based plans have the opposite effect and cause large and long lasting recessions. These results also apply to the recent episodes of European austerity which in this respect were not especially different from previous cases. |
| Keywords: | austerity; fiscal adjustment plans; output growth |
| JEL: | E60 E62 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13565&r=all |
| By: | Chen, Sophia; Ratnovski, Lev; Tsai, Pi-Han |
| Abstract: | We estimate credit and fiscal multipliers in China, using subnational political cycles as a source of exogenous variation. The tenure of the provincial party secretary, interacted with the credit and fiscal expenditure used in other provinces, instruments for provincial credit and government expenditure growth. We find a fiscal multiplier of 0.75 in 2001-2008, which increased to 1.2 in 2010-2015, consistent with higher multipliers in a slower economy. At the same time, a credit multiplier of 0.2 in 2001-2008 declined to close to zero in 2010-2015, consistent with credit saturation and credit misallocation. Our results suggest that credit expansion cannot further support economic growth in China. The flip side is that lower credit growth is also unlikely to disrupt output growth. Fiscal policy is powerful, and can cushion the macroeconomic adjustment to lower credit intensity. |
| JEL: | E63 G21 H20 R12 |
| Date: | 2019–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2019_005&r=all |
| By: | International Monetary Fund |
| Abstract: | The economy is recovering well from several natural disasters, supported by accommodative fiscal and monetary policies. • Growth performance picked up in recent years with improved political stability, though average growth rates were still lower than in other emerging and developing countries. • The current government was reelected in mid-November. • Fiscal buffers have been used and external conditions, including oil prices and growth prospects of main trading partners, are becoming less favorable. |
| Keywords: | Statistics;External sector;Financial statistics;Government finance statistics;Consumer price indexes;RBF;Proj;potential growth;percent of GDP;text figure |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/57&r=all |
| By: | Williams, John C. (Federal Reserve Bank of New York) |
| Abstract: | Remarks at the U.S. Monetary Policy Forum, New York City. |
| Keywords: | HMS; flattening; price inflation dynamics; inflation expectations; Cyclically Sensitive Inflation (CSI); personal consumption expenditures (PCE); unemployment gap |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:305&r=all |
| By: | Rafael Ribeiro (Cedeplar-UFMG); Stefan D'Amato (Cedeplar-UFMG); Wallace Pereira (Cedeplar-UFMG) |
| Abstract: | There are two unconnected strands of the inflation-distribution literature, one that studies the impact of inflation on income distribution and the other the impact of distribution on inflation. This paper is an attempt to fill a gap in this literature, by taking into account the simultaneous determination between inflation and income distribution. We set forth a Post-Keynesian model in which inflation and income distribution are jointly determined in a dynamical system of difference equations. The theoretical framework advanced in the paper allows us to show that conflicting claims on income, expectation formation and the realisation of increasing returns to scale ascribed to demand-pull and distributive factors also play a key role in the determination of the inflation and income distribution dynamics. Then, we conducted an empirical investigation of the relationship between inflation and distribution. Both empirical exercises were done using GMM estimator. This econometric technique is robust to reverse causality as it uses lagged observations in difference and level of endogenous variables as instruments and hence is the preferred method of estimation. Our findings corroborate our theoretical model by showing that, in average, increases in the wage share tend to exert a downward pressure in future inflation. Our estimates also show that the wage share is highly dependent of its past values, thus suggesting that income distribution may be only sensitive to autonomous (political) factors. |
| Keywords: | Cost-push inflation, income distribution, Kaleckian models, GMM. |
| JEL: | C33 C60 D33 E12 E31 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td596&r=all |
| By: | International Monetary Fund |
| Abstract: | The strong growth upswing since 2017 was supported by three coincident cycles—a rebound in euro-area activity, a substantial increase in EU transfers, and new large social benefit programs. Unemployment was reduced to a record low and Poland has attracted large inflows of foreign workers. Slowing external demand, however, is projected to moderate real GDP growth in 2019, while medium-term prospects are more subdued against a shrinking working-age population, modest private investment and tepid productivity gains. Increased state control of the financial sector raises challenges for sound supervision, and a larger state footprint in the economy could slow productivity growth. Risks to the outlook for the Polish economy from external developments are elevated, while any slippage from prudent policies and sound governance principles could dent investors’ risk appetite. |
| Keywords: | Poland;Europe; |
| Date: | 2019–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/37&r=all |
| By: | Miguel Casares Polo (Departamento de Economía-UPNA); Alba Del Villar (Departamento de Economía-UPNA) |
| Abstract: | We calibrate a two-country New Keynesian model with endogenous portfolio choice and valuation effects to discuss the determinants of the increase in Canadian Net Foreign Assets with the US observed after 2012. Furthermore, we discuss the shocks that may explain the “reversed two-way” capital flows pattern recently characterizing the Canada-US asset trading: Canada has a negative position on bond holdings owned by US investors while a positive balance emerges on its equity holdings from US firms. The combination of a global technology shock, the US fiscal contraction, an adverse wage-push shock in the US and the greater monetary stimulus in the US than in Canada (QE) provide insights to describe the recent capital flows between Canada and the US. Both the QE and the negative wage-push shock in the US play a crucial role as explanatory factors through substantial valuation effects. |
| Keywords: | US-Canada capital flows, portfolio choice model, business cycles |
| JEL: | E44 F41 F44 E12 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:nav:ecupna:1901&r=all |
| By: | Olivier J Blanchard (Peterson Institute for International Economics) |
| Abstract: | Blanchard develops four main arguments concerning the costs of public debt when safe interest rates are low. First, the current US situation in which safe interest rates are expected to remain below growth rates for a long time is more the historical norm than the exception. If the future is like the past, this implies that debt rollovers—that is, the issuance of debt without a subsequent increase in taxes—may well be feasible. Put bluntly, public debt may have no fiscal cost. Second, even without fiscal costs, public debt reduces capital accumulation and may therefore have welfare costs. However, welfare costs may be smaller than typically assumed. The reason is that the safe rate is the risk-adjusted rate of return on capital. A safe rate that is lower than the growth rate indicates that the risk-adjusted rate of return to capital is in fact low. The average risky rate, i.e. the average marginal product of capital, also plays a role, however. Blanchard shows how both the average risky rate and the average safe rate determine welfare outcomes. Third, while the measured rate of earnings has been and is still quite high, the evidence from asset markets suggests that the marginal product of capital may be lower, with the difference reflecting either mismeasurement of capital or rents. This matters for debt: The lower the marginal product, the lower the welfare cost of debt. Fourth, Blanchard discusses a number of arguments against high public debt, and in particular the existence of multiple equilibria where investors, believing debt to be risky, require a risk premium, which increases the fiscal burden and makes debt effectively more risky. This argument, while relevant, does not have straightforward implications for the appropriate level of debt. Some of these conclusions will be controversial. But the aim of the paper is to foster a richer discussion of the costs of debt and fiscal policy than is currently the case, not to argue for more public debt, especially in the current political environment. The appendices and data underlying this analysis and appendices are available https://piie.com/system/files/documents/ wp19-4_0.zip |
| Keywords: | Unemployment, Debt, deficits, interest rate, safe rate, risky rate, marginal product of capital, growth rate, risk premium, secular stagnation, overlapping generation, welfare, transfers |
| JEL: | H3 H6 E62 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp19-4&r=all |
| By: | Banfi, Stefano; Choi, Sekyu; Villena-Roldán, Benjamin |
| Abstract: | We use an unusually rich data from a Chilean job board to document novel facts regarding job search for unemployed and employed seekers. We show how application behavior is influenced by (1) demographics such as gender, age, and marital status, (2) alignment between applicant wage expectations and wage offers, (3) applicant fit into ad requirements such as education, experience, job location and occupation (4) timing variables, including unemployment duration, job tenure (for on-the-job searchers) and business cycle conditions. This empirical evidence can discipline current and future search-theoretical frameworks. |
| Keywords: | Online job search, Applications, Search frictions, Unemployment, On-the-job search, Networks. |
| JEL: | E24 J4 J64 |
| Date: | 2019–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92482&r=all |
| By: | Brant Abbott; Giovanni Gallipoli |
| Abstract: | We characterize the distribution of permanent-income and quantify the value of assets and human capital in lifetime wealth portfolios. We estimate the distribution of human wealth using nonparametric identification results that allow for state-dependent stochastic discounting and unobserved heterogeneity. The approach imposes no restrictions on income processes or utility. Accounting for the value of human capital delivers a different view of inequality: (i) in 2016 the top 10% share of permanent-income was 1/3 lower than the corresponding share of assets; (ii) however, since 1989, the top 10% share of permanent-income has grown much faster than the corresponding share of assets. Human wealth has a mitigating influence on inequality, but this effect has waned over time due to the growing importance of assets in lifetime wealth portfolios. We find that consumption expenditures are tightly linked to permanent-income; however, liquidity constraints can lead to substantial deviations below permanent-income. |
| Keywords: | Wealth, Human Capital, Permanent Income, Consumption, Inequality |
| JEL: | E2 E21 D31 I24 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1411&r=all |
| By: | Jongrim Ha (World Bank, Development Prospects Group); M. Ayhan Kose (World Bank, Development Prospects Group; Brookings Institution; CEPR, and CAMA); Franziska L. Ohnsorge (World Bank, Development Prospects Group; CAMA) |
| Abstract: | We study the extent of global inflation synchronization using a dynamic factor model in a large set of countries over a half century. Our methodology allows us to account for differences across groups of countries (advanced economies and emerging market and developing economies) and to analyze commonalities in inflation synchronization across a wide range of inflation measures. We report three major results. First, inflation movements have become increasingly synchronized internationally over time: a common global factor has accounted for about 22 percent of variation in national inflation rates since 2001. Second, inflation synchronization has also become more broad-based: while it was previously much more pronounced among advanced economies than among emerging market and developing economies, it has become substantial in both groups over the past two decades. In addition, inflation synchronization has become significant across all inflation measures since 2001, whereas it was previously prominent only for inflation measures that included mostly tradable goods. |
| Keywords: | Global inflation, synchronization, dynamic factor model, advanced economies, emerging markets, developing economies. |
| JEL: | E31 E32 F42 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1903&r=all |
| By: | Halit Yanikkaya (Department of Economics, Gebze Technical University); Pinar Tat (Department of Economics, Gebze Technical University) |
| Abstract: | This article explores educational mismatch for twenty-three different Turkish industrial sectors using all available household surveys from 2004 to 2015. Our aim is to first evaluate the educational mismatch level in the Turkish industrial sectors and then analyze its effects on the sectoral total factor productivity, labor productivity, and wages. For the sectoral total factor productivity, our dynamic panel data estimations suggest that the modal value of education increases the growth rate of total factor productivity. Therefore, the widespread existence of educational mismatch implies the efficiency loss in Turkish manufacturing sector for the period of 2004-2015. For the sectoral labor productivity, the modal value of education and the mean value of over-education increases labor productivity whereas the mean value of under-education decreases it. These results clearly imply that the human capital theory overcomes the job satisfaction theory for the Turkish industrial industry because the mean years of over-education increases the sectoral labor productivity. For the sectoral wages, the mean value of over-education raises wages. |
| Keywords: | educational mismatch, total factor productivity, labor productivity, wages, Turkey, industrial sectors |
| JEL: | E24 I25 J24 |
| Date: | 2019–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:geb:wpaper:2019-02&r=all |
| By: | María C. Latorre (Universidad Complutense de Madrid); Zoryana Olekseyuk (German Development Institute (Deutsches Institut für Entwicklungspolitik [DIE])); Hidemichi Yonezawa (Statistics Norway); Sherman Robinson (Peterson Institute for International Economics) |
| Abstract: | This paper examines 12 economic simulation models that estimate the impact of Brexit. We provide their range of results and explain their associated assumptions and methodologies (macroeconometric models, computable general equilibrium [CGE] models, or mixed approaches). CGE models simulate the operation of market economies, solving for changes in equilibrium prices and quantities (production, employment, demand, and international trade) for all sectors in the economy. Macroeconometric models focus on economic aggregates and macro shocks, such as interest rates, the exchange rate, inflation, risk, uncertainty, and government expenditure/revenue. Most of the studies find adverse effects for the UK and the EU-27. The UK's GDP losses from a hard Brexit (reversion to World Trade Organization rules due to a lack of UK-EU agreement) range from –1.2 to –4.5 percent in most of the models analyzed. A soft Brexit (e.g., Norway arrangement, which seems in line with the nonbinding text of the political declaration of November 14, 2018 on the future EU-UK relationship) has about half the negative impact of a hard Brexit. Only two of the models derive gains for the UK after Brexit because they are based on unrealistic assumptions. We analyze more deeply a CGE model that includes productivity and firms' selection effects within manufacturing sectors à la Melitz (2003) and the operations of foreign multinationals in services. Based on this latest model, we provide a complete overview and explanation of the likely economic impact of Brexit on a wide range of macroeconomic variables, namely GDP, wages, private consumption, capital remuneration, aggregate exports, aggregate imports, and the consumer price index. The data underlying this analysis are available at https://piie.com/system/files/documents/ wp19-5.zip. |
| Keywords: | Economic Methodology, Economic Simulation, Foreign Trade, Multinationals, Foreign Direct Investment, European Economy |
| JEL: | B41 F17 F14 C63 F23 F21 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp19-5&r=all |
| By: | Poeschl, Johannes; Zhang, Xue |
| Abstract: | We study the macroeconomic effects of bank capital requirements in an economy with two banking sectors. Banks are connected through a wholesale funding market. Anticipated banking crises occur endogenously in the form of self-fulfilling wholesale funding rollover crises. Retail bank capital requirements can reduce the frequency and severity of banking crises. Tightening retail bank capital requirements increases the size and leverage of the shadow banking sector through a novel channel that works through the anticipation of banking crises. A policy which corrects this spillover is more than twice as effective in reducing the frequency and severity of banking crises. |
| Keywords: | Bank capital regulation, shadow banking, anticipated bank runs. |
| JEL: | E44 G24 G28 |
| Date: | 2018–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92529&r=all |
| By: | CHAFIK, Omar |
| Abstract: | Nominal interest rate is generally assumed to follow an UIP condition when the exchange rate is fixed, and the capital account is opened. Consequently, domestic interest rate is determined by foreign rates and the risk premium. This paper shows that for an oil exporting country like UAE, adjusting nominal interest rate only to foreign rate could be economically inconsistent. In fact, what really matters with exchange rate is expectations, and for an oil exporter country like UAE these expectations are significantly impacted by oil prices. By incorporating a market-expected exchange rate mechanism in a semi-structural New Keynesian Model, this paper highlights the importance of this mechanism and provides a consistent analytical framework. |
| Keywords: | Monetary policy, exchange rate, New Keynesian Model, UIP condition, Bayesian estimation |
| JEL: | C11 E3 E5 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92558&r=all |
| By: | Boerma, Job; Karabarbounis, Loukas |
| Abstract: | We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and home production. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Home production does not offset differences that originate in the market sector because productivity differences in the home sector are significant and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. The optimal tax system should feature more progressivity taking into account home production. |
| Keywords: | Consumption; Home Production; inequality; Labor Supply |
| JEL: | D10 D60 E21 J22 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13554&r=all |
| By: | International Monetary Fund |
| Abstract: | Recent developments are broadly favorable, and policies are aligned with staff recommendations and program priorities. Supported by a favorable rainy season, economic growth is recovering and inflation easing. However, unemployment is very high, and development and social needs are very large. |
| Date: | 2019–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/67&r=all |
| By: | International Monetary Fund |
| Abstract: | Following a prolonged period of tepid growth, economic activity in Nepal has picked up, reflecting cyclical factors and some structural improvements, especially in electricity supply. The improved outlook, greater political stability, and ongoing transition to a federal system provide an opening to address deep-seated structural weaknesses and boost long-term growth potential. |
| Date: | 2019–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/60&r=all |
| By: | Nuno Palma (University of Manchester and CEPR) |
| Abstract: | Classic accounts of the English industrial revolution present a long period of stagnation followed by a fast take-off. However, recent findings of slow but steady per capita economic growth suggest that this is a historically inaccurate portrait of early modern England. This growth pattern was in part driven by specialization and structural change accompanied by an increase in market participation at both the intensive and extensive levels. These, I argue, were supported by the gradual increase in money supply made possible by the importation of precious metals from America. They allowed for a substantial increase in the monetization and liquidity levels of the economy, hence decreasing transaction costs, increasing market thickness, changing the relative incentive for participating in the market, and allowing agglomeration economies to arise. By making trade with Asia possible, precious metals also induced demand for new desirable goods, which in turn encouraged market participation. Finally, the increased monetization and market participation made tax collection easier. This helped the government to build up fiscal capacity and as a consequence to provide for public goods. The structural change and increased market participation that ensued paved the way to modernization. |
| Keywords: | Origins and persistence of modern economic growth; the industrious, industrial and financial revolutions; early modern monetary injections; the great divergence; the little divergence; state-formation; provision of public goods |
| JEL: | E10 E40 E50 N13 N33 O40 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0147&r=all |
| By: | Cristina Fernández Mejía |
| Abstract: | Existen pocas fuentes para estimar la informalidad empresarial en Colombia, pero a partir de la Encuesta de Hogares es posible afirmar que constituye cerca del 60% de las firmas, el 37% de los trabajadores y el 33% del valor agregado, en las áreas urbanas. Esta gran prevalencia de la informalidad contrasta con los beneficios de la formalidad en términos de bienestar laboral, productividad y cumplimiento futuro de la normativa tributaria, sanitaria, ambiental y de calidad. La respuesta a esta paradoja puede encontrarse en los diferenciales de ganancias después de impuestos entre firmas formales e informales. En efecto, los beneficios económicos de la formalización exceden sus costos únicamente en las firmas de mayor productividad relativa. En estas firmas existe un círculo virtuoso entre formalidad y productividad que contrasta con el círculo vicioso al que se enfrentan las firmas de menor productividad relativa. Este análisis también permite adaptar una versión simplificada del modelo y la taxonomía de la informalidad de Ulyssea (2017) al caso colombiano e identificar algunas recomendaciones para su implementación, y en particular: 1) las políticas de reducción de costos de entrada a la formalidad focalizadas en firmas de muy baja productividad pueden tener poco éxito si se aplican sobre la informalidad de subsistencia y de manera aislada a otras políticas; 2) Las políticas de monitoreo y control deben estar focalizadas en firmas de mayor productividad relativa. Su aplicación sobre firmas de muy baja productividad, aunque reduciría la informalidad, podría ocasionar un problema de bienestar. |
| Keywords: | Informalidad, Informalidad de Firma, Mercado Laboral Informal, Taxonomía de la Informalidad, Recomendaciones de Política para la Informalidad, Costo de la Informalidad |
| JEL: | D24 E24 J21 O17 |
| Date: | 2018–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000123:017196&r=all |
| By: | Olena Kostyshyna; Corinne Luu |
| Abstract: | Underlying wage growth has fallen short of what would be consistent with an economy operating with little or no slack. While many factors could explain this weakness, the availability of additional labour resources from informal (“gig”) work—not fully captured in standard measures of employment and hours worked—may play a role. We investigate this possibility through the Bank of Canada’s Canadian Survey of Consumer Expectations (CSCE) by documenting the characteristics and size of such working arrangements. We find that just under one-third of Canadians participate in this type of work, and this participation is often consistent with labour market slack. Just over one-third of respondents who take part in informal work do so as a result of weak economic conditions, and over half would switch their hours worked for hours in formal employment with no increase in pay. Part-time workers, youth and people in provinces with historically high unemployment rates were most likely to participate in informal employment. A portion of these workers would not be considered part of the labour force by standard labour market measures due in part to the irregularity of their work schedules. Accounting for these workers could boost participation rates by 2–3 percentage points. Moreover, the magnitude of labour supply from such work that could become available to the formal sector is sizable. It amounts to roughly 700,000 full-time equivalent jobs or 3.5 per cent of the labour force on average over the third and fourth quarters of 2018. This additional margin of labour market supply may be contributing to reducing wage pressures. |
| Keywords: | Labour markets; Recent economic and financial developments |
| JEL: | E24 E26 J20 J30 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:19-6&r=all |
| By: | Koji Yokota |
| Abstract: | The present paper studies the optimal behavior of the firm facing labor friction characterized by convex hiring cost and sufficiently differentiated output good. The problem turns out to be a singular control problem. General paths are studied including socially inefficient ones caused by the rise of demand constraint. Analysis of optimal firing behavior becomes possible with this setup. It turns out that the singularity brings costate jumps at junction points to the firing phase, which result in the discontinuity of production. Those jumps have been known to occur in problems with inequality constraints that contain only state variables. The present model shows that they can occur with inequality constraints with control variables when singularity is present. |
| Keywords: | labor friction, business cycles, effective demand, optimal firing, labor hoarding, singular control |
| JEL: | E3 J2 C6 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:mei:wpaper:42&r=all |
| By: | Esteban Cruz Hidalgo (Universidad de Extremadura, Spain); Francisco Manuel Parejo Moruno (Universidad de Extremadura, Spain); José Francisco Rangel Preciado (Universidad de Extremadura, Spain) |
| Abstract: | En la Génesis del dinero Marx expone sin éxito la postulación del equivalente general, una laguna en su teoría del valor que ha motivado considerable literatura. En este documento de trabajo planteamos una alternativa al método dialéctico para explicar el surgimiento y naturaleza del dinero, la cual presenta cierta coherencia con algunas observaciones históricas respecto al mismo realizadas por el propio Marx. La integración con la Teoría del Dinero del Estado nos permite interpretar la teoría laboral del valor como una teoría monetaria del valor-trabajo, acorde con las relaciones y dinámicas capitalistas. A través de las nociones de la forma de valor y el concepto de trabajo abstracto, analizaremos cómo la teoría laboral del valor es esencial para comprender el pleno empleo con estabilidad de precios en un sistema de producción fragmentado, caracterizado por las quiebras empresariales y el papel jugado por los bancos privados en la endogeneidad de la oferta monetaria. Finalmente, sugerimos el mecanismo del Trabajo Garantizado como estabilizador del valor de la moneda, mitigando los efectos de la financiarización de la economía y las apuestas fallidas de los bancos. |
| Keywords: | Teoría Laboral del Valor, Financiarización, Teoría Monetaria Moderna, Teoría Marxista, Chartalismo, Trabajo Garantizado |
| JEL: | B24 B25 E02 P16 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ahe:dtaehe:1905&r=all |
| By: | International Monetary Fund |
| Abstract: | A broad-based recovery continued in 2018, lowering unemployment, swinging the headline fiscal balance into surplus, and reducing the public debt ratio. Growth is expected to slow moderately to 3.4 percent in 2019, and risks remain tilted to the downside, notably related to a rise in protectionism, political and policy uncertainty in Europe. |
| Keywords: | Structural fiscal balance;Central banks;Gross domestic product;Balance of payments;Social security;account surplus;output gap;percent of GDP;SOEs;Haver |
| Date: | 2019–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/58&r=all |
| By: | Kauko, Karlo; Tölö, Eero |
| Abstract: | The trend deviation of the Credit-to-GDP ratio (“Basel gap”) is a widely used early warning indicator of banking crises. It is calculated with the one-sided Hodrick-Prescott filter using an extremely large value of the smoothing parameter λ. We recalibrate the smoothing parameter with panel data covering almost one and a half centuries and 15 countries. The optimal λ is found to be much lower than previously suggested. The 2008 crisis does not dominate the results. The long sample almost eliminates filter initialisation problems. |
| JEL: | G01 E44 N20 |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2019_006&r=all |
| By: | Paolo Cavallino; Damiano Sandri |
| Abstract: | We provide a theory of the limits to monetary policy independence in open economies arising from the interaction between capital flows and domestic collateral constraints. The key feature is the existence of an "Expansionary Lower Bound" (ELB), defined as an interest rate threshold below which monetary easing becomes contractionary. The ELB can be positive, thus binding before the ZLB. Furthermore, the ELB is affected by global monetary and financial conditions, leading to novel international spillovers and crucial departures from Mundell's trilemma. We present two models in which the ELB may arise due to either carry-trade capital flows or currency mismatches. |
| Keywords: | monetary policy, collateral constraints, currency mismatches, carry trade, spillovers |
| JEL: | E5 F3 F42 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:770&r=all |
| By: | Potter, Simon M. (Federal Reserve Bank of New York) |
| Abstract: | Remarks for the Federal Reserve Banks of Atlanta and New York's First Annual Joint Research Day on Quantitative Tools for Monitoring Macroeconomic and Financial Conditions, Federal Reserve Bank of New York, New York City. |
| Keywords: | superforecasting; Tetlock; Intelligence Advanced Research Projects Activity (IARPA); NBER recession; Arturo Estrella; Rick Mishkin; Applied Critical Thinking (ACT); Meg McConnell |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:306&r=all |
| By: | Syed Zwick, Hélène; Syed, Sarfaraz Ali Shah |
| Abstract: | This study applies threshold regression model in a bivariate framework to explore the nonlinear and long-term relationship among daily Bitcoin and gold prices over the period April 2010 to December 2018. Our empirical results are threefold: first, we show that gold is a significant predictor of Bitcoin prices. Second, we find evidence of a non-linear relationship between Bitcoin and gold prices characterized rather by a two-regime relationship with a structural break occurring in October 2017. Third, we explain the existence at before the break, there is statistically significant, negative but weak causality indicating that Bitcoin is a speculative asset. However, after the break, the relationship becomes positive and strong revealing the diversifier and hedge properties of Bitcoin. |
| Keywords: | Bitcoin, gold prices, hedge, diversifier, structural break, threshold regression |
| JEL: | C24 E42 G15 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92512&r=all |
| By: | International Monetary Fund |
| Abstract: | Australia experienced only a minor downturn after the end of the mining investment and commodity price boom but, as elsewhere, the adjustment and rebalancing has been slow, with below-target inflation and low wage growth amid economic slack. Macro-financial vulnerabilities relating to high household debt and low housing affordability have become major concerns after a recent housing boom. |
| Date: | 2019–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/55&r=all |
| By: | Moulaye Bamba (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Jean-Louis Combes (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Alexandru Minea (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In response to increasing debt paths, governments often implement fiscal consolidation programs. This paper studies the impact of these programs on the composition of government spending. System-GMM estimations performed on a sample of 53 developed and emerging countries over 1980-2011 reveal that fiscal consolidations significantly reduce the government investment-to-consumption ratio, i.e. a composition effect. Robust to a wide set of tests, this significantly stronger contraction of government investment with respect to government consumption is at work particularly when debt is high, for spending-based fiscal consolidations, in the low phase of the economic cycle, and following debt and stock market crises. Therefore, in such contexts, fiscal consolidations aimed at short-run stabilization may hurt the economy in the long-run through their detrimental effect on public investment, calling for a reflection upon how they could be re-designed to allow avoiding such undesirable consequences. |
| Keywords: | Fiscal consolidation,Government consumption,Government investment |
| Date: | 2019–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02043892&r=all |
| By: | Zhou, Haiwen |
| Abstract: | The interaction among a firm’s choices of output, technology, and monitoring intensity is studied in a general equilibrium model. Firms engage in oligopolistic competition and unemployment is a result of the existence of efficiency wages. The following results are derived analytically. First, an increase in the cost of exerting effort leads a firm to choose a more advanced technology and a lower level of monitoring intensity. Second, an increase in the discount rate does not change a firm’s choices of technology and monitoring intensity. Third, an increase in the elasticity of substitution among goods leads a firm to choose higher levels of monitoring intensity and technology. In a model in which the level of monitoring is exogenously given, there is a negative relationship between the wage rate and the monitoring intensity. In this model with endogenously chosen monitoring intensity, the wage rate and the monitoring intensity can move either in the same direction or in opposite directions. |
| Keywords: | Unemployment, efficiency wages, monitoring intensity, the choice of technology, oligopoly |
| JEL: | E24 J64 L13 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92494&r=all |
| By: | Federico Etro |
| Abstract: | I augment the Romer model of endogenous technological progress with a general CRS production function in labor and intermediate inputs. This determines markups and profits of the innovators in function of the number of inputs. Under imperfect substitutability the economy can converge to a steady state (as under a nested CES technology), replicating the properties of neoclassical growth due to a decreasing marginal profitability of innovation, or to contant growth linear in population growth as in semi-endogenous growth models. |
| Keywords: | Endogenous growth, technological progress, monopolistic competition, variable markups, Solow model |
| JEL: | E2 L1 O3 O4 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2019_08.rdf&r=all |
| By: | Criscuolo, Chiara; Martin, Ralf; Overman, Henry G.; Van Reenen, John |
| Abstract: | We exploit changes in the area-specific eligibility criteria for a program to support jobs through investment subsidies. European rules determine whether an area is eligible for subsidies, and we construct instrumental variables for area eligibility based on parameters of these rule changes. Areas eligible for higher subsidies significantly increased jobs and reduced unemployment. A 10-percentage point increase in the maximum investment subsidy stimulates a 10 percent increase in manufacturing employment. This effect exists solely for small firms: large companies accept subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but not Total Factor Productivity. |
| JEL: | E24 G31 H25 L25 L52 R23 |
| Date: | 2019–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:88837&r=all |
| By: | Olivier J. Blanchard |
| Abstract: | This lecture focuses on the costs of public debt when safe interest rates are low. I develop four arguments. First, I show that the current U.S. situation in which safe interest rates are expected to remain below growth rates for a long time, is more the historical norm than the exception. If the future is like the past, this implies that debt rollovers, that is the issuance of debt without a later increase in taxes may well be feasible. Put bluntly, public debt may have no fiscal cost. Second, even in the absence of fiscal costs, public debt reduces capital accumulation, and may therefore have welfare costs. I show that welfare costs may be smaller than typically assumed. The reason is that the safe rate is the risk-adjusted rate of return to capital. If it is lower than the growth rate, it indicates that the risk-adjusted rate of return to capital is in fact low. The average risky rate however also plays a role. I show how both the average risky rate and the average safe rate determine welfare outcomes. Third, I look at the evidence on the average risky rate, i.e. the average marginal product of capital. While the measured rate of earnings has been and is still quite high, the evidence from asset markets suggests that the marginal product of capital may be lower, with the difference reflecting either mismeasurement of capital or rents. This matters for debt: The lower the marginal product, the lower the welfare cost of debt. Fourth, I discuss a number of arguments against high public debt, and in particular the existence of multiple equilibria where investors believe debt to be risky and, by requiring a risk premium, increase the fiscal burden and make debt effectively more risky. This is a very relevant argument, but it does not have straightforward implications for the appropriate level of debt. My purpose in the lecture is not to argue for more public debt. It is to have a richer discussion of the costs of debt and of fiscal policy than is currently the case. |
| JEL: | E62 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25621&r=all |
| By: | Robert E. Hall; Marianna Kudlyak |
| Abstract: | We track the path that a worker follows after losing a job. Initially, the typical job-loser spends some time out of the labor force and in job search. Only a month or two later, in normal times, the worker lands a job. But the job is frequently brief. Over the next few months, the worker finds a good match that becomes a long-term job. Short-term jobs tend to precede long-term ones. Short-term employment shares some of the characteristics of unemployment and some of the characteristics of employment. We show that this pattern of moving among working, searching for a job, and being out of the labor force is concentrated in a segment of the working-age population. In other segments, individuals are insulated from disturbances to their activities in the labor market. Some work continuously while others are always out of the labor market. We develop a model that incorporates heterogeneity across and within these segments. |
| JEL: | E24 J63 J64 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25625&r=all |
| By: | Francis W. Ahking (University of Connecticut) |
| Abstract: | ucas (1987, 2003) calculates the potential welfare gains to stabilization of business cycles to be surprisingly small. Welfare gain is measured by a compensation parameter which makes a household indifferent between a deterministic lifetime stream and a compensated, risky lifetime stream of consumption. Using a constant relative risk aversion utility function and a coefficient of risk aversion of one, Lucas calculates that the welfare gain in real per capita consumption is in the order of one-twentieth of 1 percent. This is equivalent to an increase of about $18.33 in real per capita consumption per year for 1947 – 2001, stated in 2016 dollars. The main focus of this paper is to examine the welfare cost of business cycles for the 50 states using the same preference function as Lucas (1987, 2003). To our knowledge, this is the first paper that examines the welfare cost of business cycles at the state level. Our results support the findings of Lucas (1987, 2003) and Otrok (2001) that further welfare gain from stabilization of business cycles are very small, ranging from one-eighth of 1 percent for Wyoming to one-forty-fifth of 1 percent for Iowa. Further results from additional analysis also suggest that welfare cost of business cycles varies considerably across regions of the country. |
| Keywords: | welfare gain, stabilization policy, state business cycles |
| JEL: | E32 E63 H80 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2019-03&r=all |
| By: | Chuku Chuku (African Development Bank; University of Uyo - Nigeria); Onye Kenneth (University of Uyo - Nigeria) |
| Abstract: | Are poor macroeconomic outcomes primarily the result of economic policies, or of deeper underlying state fragility problems in sub-Saharan Africa? We attempt to answer this question by using carefully specified dynamic panel regression techniques to show how state fragility conditions help to explain the differences in the macroeconomic performance of sub-Saharan African economies, and to identify the most plausible mechanisms of transmission. We find that countries with greater fragility suffer higher macroeconomic volatility and crisis; they also experience weaker growth. When we disaggregate state fragility into its various components, we find that it is the security and social components that have the strongest causal impact on macroeconomic outcomes, while the political component is, at best, weak. Therefore, we conclude: it is state fragility conditions, and not necessarily macroeconomic policies, that are of first-order importance in explaining the differences in macroeconomic performance for African countries. The knock-on effects are mostly mediated through the fiscal channel, the aid channel, and the finance channel. Accordingly, we recommend that interventions in fragile states should best focus on exploiting the potential for using fiscal policy, aid, and finance as instruments to improve macroeconomic outcomes.Keywords: State fragility, macroeconomic volatility and crises, dynamic panel model, macroeconomic polices, sub-Saharan Africa. JEL classification: E02, O43, D72 |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:2433&r=all |
| By: | Zeqin Liu (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, China); Zongwu Cai (Department of Economics, The University of Kansas); Ying Fang (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, China); Ming Lin (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, China) |
| Abstract: | In this paper, we highlight some recent developments of a new route to evaluate macroeconomic policy effects, which are investigated under the framework with potential out- comes. First, this paper begins with a brief introduction of the basic model setup in modern econometric analysis of program evaluation. Secondly, primary attention goes to the focus on causal effect estimation of macroeconomic policy with single time series data together with some extensions to multiple time series data. Furthermore, we examine the connection of this new approach to traditional macroeconomic models for policy analysis and evaluation. Finally, we conclude by addressing some possible future research directions in statistics and econometrics. |
| Keywords: | Impulse response function; Macroeconomic casual inferences; Macroeconomic pol- icy evaluation; Multiple time series data; Potential outcomes; Treatment effect. |
| JEL: | C12 C13 C14 C23 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:201904&r=all |
| By: | Valentina Flamini; Pierluigi Bologna; Fabio Di Vittorio; Rasool Zandvakil |
| Abstract: | Credit is key to support healthy and sustainable economic growth but excess aggregate credit growth can signal the build-up of imbalances and lead to systemic financial crisis. Hence, monitoring the credit cycle is key to identifying vulnerabilities, particularly in emerging markets, which tend to be more exposed to sudden external shocks and reversal in capital flows. We estimate the credit cycle in Central America, Panama, and the Dominican Republic and find that the creadit gap is a powerful predictor of systemic vulnerability in the region. We simulate the activation of the Basel III countercyclical capital buffers and discuss the macroprudential policy implications of the results, arguing that countercyclical macroprudential policies based on the credit gap could prove useful to enhance the resilience of the region’s financial sector but the activation of macroprudential instruments should also be informed by the development of other macrofinancial variables and by expert judgment. |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/39&r=all |
| By: | Shy, Oz (Federal Reserve Bank of Atlanta) |
| Abstract: | Cash users withdraw money from automated teller machines (ATMs) to finance cash payments. However, most ATMs in the United States dispense only multiples of $20 bills. The paper first constructs a consumer's optimization model showing how the precise denomination of dollar bills available from ATMs affects consumers' decision whether to pay with cash or with (plastic) cards. Then, the paper uses various statistical techniques to conduct empirical analyses of consumers who choose to pay cash for transactions below a certain threshold payment amount and pay with cards for transactions exceeding that threshold. |
| Keywords: | currency denomination; automated teller machines; ATM; consumer payment choice; payment methods; point of sale |
| JEL: | D9 E42 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2019-02&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Note on Systemic Risk Oversight and Macroprudential Policy for Australia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on September 14, 2018. |
| Date: | 2019–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/50&r=all |
| By: | Fabrizio Antenucci; Matteo Deleidi; Walter Paternesi Meloni |
| Abstract: | The recent slowdown in labour productivity growth experienced in advanced economies is generally considered one of the main causes of the current phase of economic stagnation. This has led scholars to carry out a number of theoretical and empirical studies to identify the long-run determinants of productivity growth. The present work aims to fall within this debate, with a peculiar focus on the relevance of the Kaldor-Verdoorn law. To this purpose, we empirically investigate on the determinants of labour productivity growth both for the total economy and for the manufacturing sector, comparing the role played by demand- and supply-side factors. A Structural Vector Autoregressive (SVAR) model is estimated for G7 countries from 1970 to 2017. Although the analyses confirm the positive role of supply-side factors in fostering productivity growth, our findings generally validate also the relevance of demand-side factors. Additionally, the positive effect generated by demand factors on labour productivity growth suggests that supply-side measures would be not sufficient to enhance productivity. Our findings suggest that demand-side policies are likely to foster productivity by also stimulating supply-side factors, particularly in the manufacturing sector of the economy. |
| Keywords: | Labour Productivity; Kaldor-Verdoorn Law; Capital Deepening; SVAR |
| JEL: | O47 D24 E22 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ast:wpaper:0042&r=all |
| By: | Heejeong Kim (Concordia University) |
| Abstract: | This paper studies the implications of observed and unobserved heterogeneity in wages across households with different education levels on wealth inequality and life-cycle savings. Using the PSID, I estimate skill-specific wage processes that allow both observed between-group wage dispersion and unobserved within-group wage dispersion. The implications of these estimated skill-specific wage processes are quantitatively studied in an incomplete-markets overlapping-generations general equilibrium model wherein households choose their education. I show that, in contrast to a model with a common wage process, the model with skill-specific wage processes explains far more wealth inequality and life-cycle wealth accumulation of skilled and unskilled households seen in data. |
| Keywords: | Incomplete markets, wealth inequality, life-cycle savings |
| JEL: | E21 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:crd:wpaper:19003&r=all |
| By: | NYONI, THABANI |
| Abstract: | Using annual time series data on GDP per capita in South Africa from 1960 to 2017, the study investigates GDP per capita using the Box – Jenkins ARIMA technique. The diagnostic tests such as the ADF tests show that South African GDP per capita data is I (1). Based on the AIC, the study presents the ARIMA (0, 1, 1) model. The diagnostic tests further show that the presented parsimonious model is indeed stable and quite reliable. The results of the study indicate that living standards in South Africa may improve but very slowly over the next decade, unless prudent macroeconomic management practices are exercised. The paper offers 5 main policy prescriptions in an effort to help policy makers in South Africa on how to promote and maintain the much awaited growth and development. |
| Keywords: | Forecasting; GDP per capita; South Africa |
| JEL: | C53 E37 O47 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92441&r=all |
| By: | Alain Raybaut (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | This paper focusses on a first episode in the renewal of nonlinear economic dynamics in France that develops at Cepremap in the late 70s and the early 80s. These contributions refer to the non-Walrasian perspective and the Keynes-Kaldor tradition building on emerging mathematical advances on bifurcation theory and chaotic dynamics of mappings on the interval, developed notably at the same time by French scholars in dynamical systems. These developments contribute directly to further and systematic investigations, albeit within the different analytical framework of the OLG model, on endogenous cycles and complex dynamics. |
| Keywords: | Endogenous business cycle theory, Nonlinear dynamics, Non-Walrasian and Kaldorian macrodynamics |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2019-07&r=all |
| By: | Fedesarrollo |
| Abstract: | Este estudio tiene como "objetivo principal evaluar los impactos causados en las regiones productoras de hidrocarburos y minerales vis a vis las regiones no productoras. Para cumplir los objetivos mencionados este informe está dividido en 6 partes incluyendo esta introducción. El siguiente capítulo presenta el funcionamiento actual del SGR. Primero se presenta las reglas de distribución entre y al interior de los fondos; posteriormente se presentan algunas estadísticas que describen la importancia de las regalías para los entes territoriales (ET); por último, se presentan los hallazgos y percepciones de los actores sobre el funcionamiento del esquema de distribución. Esto último se hace mediante el análisis cualitativo de cerca de 80 entrevistas en todas las regiones del país y sus representantes en la Federación Nacional de Departamentos y Municipios, congresistas y expertos en el tema. El capítulo 3 presenta el núcleo central de la evaluación de impacto y el análisis costo beneficio con el objeto de comparar si los costos están compensados por los beneficios estimados. El capítulo comienza presentando las percepciones que tienen las regiones sobre los impactos de los cambios experimentados a partir del nuevo esquema de distribución desde 2012; con este objetivo se entrevistaron a los secretarios de planeación de las regiones productoras y no productoras para contrastar los efectos no observados entre estas dos tipologías (sección 3.1). La evaluación de impacto cuantitativa recurre a un ejercicio de diferencias en diferencias para comparar la evolución de los municipios productores vis a vis los no productores antes y después de la reforma. Este ejercicio tiene como objeto evaluar la hipótesis de que los municipios productores son “perdedores” de las modificaciones del SGR. Teniendo en cuenta algunas de las críticas que se han hecho al nuevo SGR, en el sentido de la baja ejecución de recursos, el ejercicio se amplía a triples diferencias para conocer el impacto de la reforma sobre los municipios ejecutores de recursos; en este sentido se evalúa si la doble condición de productor y ejecutor tiene efectos positivos sobre las variables de ingresos, empleo, educación y salud de los municipios (variables de desarrollo socioeconómico). Esto último comparando los resultados con i) los productores no ejecutores, ii) no productores ejecutores (ganadores directos), iii) no productores no ejecutores (ganadores que no han aprovechado la reforma Este mismo capítulo presenta un análisis de los costos sociales y ambientales en que incurren los municipios que explotan estos recursos minero-energéticos, a través de la información de la evaluación económica de los impactos que deben presentar todos los proyectos de explotación a la ANLA para recibir las licencias ambientales (sección 3.3). Con los costos reportados a la ANLA se contrasta si las pérdidas del proyecto son mayores a las ganancias (incluidos los impactos estimados mediante el panel de datos mencionados anteriormente). El ejercicio finaliza con las estimaciones de la relación beneficio-costo y la TIR (sección 3.4). Posteriormente se presentan los escenarios de simulaciones cuyo objetivo es identificar aquellas condiciones bajo las cuales la distribución entre fondos alcanza una mayor equidad en la distribución de recursos (capítulo 4). La medición de equidad consiste en sumar a los ingresos tributarios municipales per cápita las asignaciones per cápita de regalías en cada escenario simulado (por ejemplo, al quitarle un porcentaje a un fondo y transferirlo a otro) y recalcular el coeficiente Gini de la distribución original de ingresos tributarios. Así mismo, se hacen simulaciones modificando las condiciones de NBI, población y desempleo que se utilizan al interior de los fondos (por ejemplo, que sucedería con el nuevo Gini si todos los recursos se entregaran por la condición de NBI sin tener en cuenta a la población). El capítulo 5 presenta un análisis comparativo de la compensación a las regiones productoras frente a experiencias internacionales y el capítulo 6 presenta las conclusiones más relevantes del estudio." |
| Keywords: | Regalías, Sistema General de Regalías, Evaluación de Impacto, Análisis Costo Beneficio, Economía Regional, Hidrocarburos, Minería, Colombia |
| JEL: | L71 F43 O47 R11 E60 |
| Date: | 2018–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:col:000124:017194&r=all |
| By: | International Monetary Fund |
| Abstract: | The Eastern Caribbean Currency Union (ECCU) is gradually recovering following the catastrophic impact of Hurricanes Irma and Maria in 2017. Tourism is slowly picking up in hurricane-stricken countries and has remained strong elsewhere in the ECCU. Conditions remain favorable to growth, but risks are increasing. The fiscal balance for the region as a whole—which is particularly important in a quasi-currency board arrangement—worsened in 2017, reflecting lower inflows from citizenship-by-investment programs and higher reconstruction and current spending. While public debt has declined, helped by debt relief operations in some countries, the ECCU debt target of 60 percent of GDP by 2030 remains elusive for most countries. Important progress has been made in financial sector reforms, but long-standing weaknesses and emerging risks weigh on growth prospects and may entail fiscal costs. External deficits remain large, highlighting low competitiveness. Natural disasters are becoming more frequent and intense, compounding these vulnerabilities. |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/62&r=all |
| By: | Avaro, Maylis; Bignon, Vincent |
| Abstract: | This paper uses a historical study to show a solution to the trade-off faced by central banks between providing liquidity to a broad group of financial intermediaries and the risk that this easy access may fuel moral hazard. In late 19th century the Bank of France operated a very wide discount window and used a variety of risk management techniques to effectively subdue risk-taking behaviors and to protect its balance sheet from taking any loss. This allowed agents to monetize a very diverse set of capital while limiting the risk of bail-out. We show that this effectively helped the central bank to stabilize the economy from the consequences of negative income shocks. |
| Keywords: | central bank; discount window; lender of last resort; Retail and shadow banks |
| JEL: | E51 G23 N13 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13556&r=all |
| By: | Boly Amadou; Seydou Coulibaly (Centre d’Etudes et de Recherches sur le Développement International (CERDI), CNRS, and Université d’Auvergne (Clermont-Ferrand, France)); Eric Kéré Nazindigouba (African Development Bank) |
| Abstract: | JEL Code : C23, E62, F21, H25.Keywords: FDI, statutory corporate tax rate, panel data, spatial econometrics. |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:2436&r=all |
| By: | ITO Hiroyuki; Phuong TRAN |
| Abstract: | It has been increasingly argued that highly globalized financial markets have been playing a bigger role in determining domestic asset prices and long-term interest rates. Rey (2013) argues that global financial cycles essentially dictate the movements of domestic financial markets to such an extent that policy makers have to decide between either retaining monetary autonomy by imposing capital controls, or retaining free capital mobility but relinquishing monetary independence. In such a world, managing long-term interest rates through manipulating short-term interest rates can be difficult. In this paper, we empirically examine whether net capital inflows contribute to weakening the link between short-term and long-term interest rates. We find that economies open to cross-border capital flows or with more developed financial markets tend to have a greater negative relationship between net capital inflows and interest rate pass-through. We also examine whether macroprudential policies can affect the extent of interest rate pass-through and find that broad-based capital macroprudential tools are effective in retaining control of short- to long-term interest rate pass-through. |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:19012&r=all |
| By: | International Monetary Fund |
| Abstract: | Following the opening of a modern international airport, signs of an economic recovery have emerged, with increased direct flights from major cities in the U.S. and Canada and renewed interests from foreign investors in tourism projects. The overall fiscal balance has improved over the past few years, and the debt to GDP ratio fell in 2017 for the first time since 2007. Despite these positive developments, St. Vincent and the Grenadines faces challenges in sustaining the growth momentum over the longer-term. Like other Caribbean economies, its high exposure to natural disasters, limited land, narrow production and exports base, weak business competitiveness, and limited physical and human capital constrain potential growth. The financial system remains broadly stable but has vulnerable spots in the non-bank financial sector. |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/66&r=all |
| By: | Tahsin, Emine |
| Abstract: | This paper aims to focus on income inequality concentration based on Palma ratio as an income inequality metrics and in this regard change in income deciles of Turkey both on national ( for period 2002-2017) and NUTS-1 level for period of 2006-2017 would be investigated. In this context cons and pros of metrics would be considered hence this study would not suggest that Palma ratio is the best inequality metrics that explains inequalities. However analytical framework of the Palma ratio would be taken into consideration in order to focus on concentration of income inequality. So that possibility of exploring dimensions of hidden inequality that could not be asserted by Gini coefficient, in case of Turkey would be investigated. Given that, primarily the Gini coefficient series based on Turkstat and Povcal data would be compared for period 2002-2017 for Turkey. Following this path, the Palma ratio; the ratio of the share of top 10 percent income to the bottom 40 percent income (D10/D1-D4) would be investigated both on national and regional level. First of all based on studies that refers to Palma ratio descriptive and explanatory statistics would be utilized. For analyzing robustness of Palma ratio and investigating importance of change in relevant income deciles, mean and percentage shares’ would be considered. Within this context rather than analyzing absolute improvement, proportional change in income deciles, Gini coefficient and Palma ratio with respect to total mean income and GDP per capita income(Turkstat 2004-2016)would be estimated. While analyzing descriptive statistics for both income deciles and mean income data, existence of “outliers” would be investigated. For this purpose in order to examine regional disparities,on the basis of income deciles’ percentage share of relevant deciles would be estimated by Mahalanobis distance calculation. Furthermore in order to analyze concentration of income inequality, decomposition of Gini coefficient values based on sub-population grouping (regions) would be evaluated. In doing so between(Bahattacharya and Mahalanobis,1976, Giorgi,2011) and within group decomposition (Bellu and Liberati, 2006) analysis would be considered for mean incomes and Gini coefficient values’. Based on these results, it would be suggested that investigation based on Palma ratio and income deciles would permit more detailed analysis of concentration of income inequality. Opposite tails ( the richest D10 and the poorest D1-D4) of Turkey’s provide us to explain asymmetries in income distribution dynamics. Robustness of Palma ratio would be evaluated while it would be underlined that apart from overlapping trend between Palma ratio and Gini coefficient, D10 income deciles and Gini coefficient has strong correlation that determines concentration of income inequality. |
| Keywords: | Income inequality, Palma ratio, Regional income distribution in case of Turkey, Mahallonobis distance calculation, Gini decomposition, Income inequality concentration |
| JEL: | C1 E25 O1 O5 R10 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92490&r=all |
| By: | Boneva, Lena (Bank of England); Elliott, David (Bank of England); Kaminska, Iryna (Bank of England); Linton, Oliver (University of Cambridge); McLaren, Nick (Bank of England); Morley, Ben (Bank of England) |
| Abstract: | In August 2016, the Bank of England (BoE) announced a Corporate Bond Purchase Scheme (CBPS) to purchase up to £10 billion of sterling corporate bonds. To investigate the impact of these purchases on liquidity, we create a novel dataset that combines transaction-level data from the secondary corporate bond market with proprietary offer-level data from the BoE’s CBPS auctions. Identifying the impact of central bank asset purchases on liquidity is potentially impacted by reverse causality, because liquidity considerations might impact purchases. But the offer-level data allow us to construct proxy measures for the BoE’s demand for bonds and auction participants’ supply of bonds, meaning that we can control for the impact of liquidity on purchases. Across a range of liquidity measures, we find that CBPS purchases improved the liquidity of purchased bonds. |
| Keywords: | Quantitative easing; market liquidity; market-making; corporate bonds |
| JEL: | E52 E58 G12 G23 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0782&r=all |
| By: | Robert Anderton; Benedetta Di Lupidio |
| Abstract: | Evidence using macroeconomic data shows that employment-output elasticities in the euro area increased during the recovery from the crisis, especially in those countries where reforms aimed to facilitate labour market adjustments. In this paper, we investigate whether similar Okun-style empirical relationships show similar changes at the micro level. We econometrically estimate the responsiveness of individual worker flows (i.e. flows of individuals from employment to unemployment and from unemployment to employment) to GDP dynamics in euro area countries during the period 2000-2015; we also investigate whether structural reforms implemented in those countries are associated with a change in the flexibility of job transitions after the crisis. The econometric specifications include, in addition to GDP, micro (individual-level) explanatory variables from the Eurostat Labour Force Survey (EU-LFS) – i.e., socio-demographic variables such as gender, age, and education – in order to capture the key determinants of the individual flows. Overall, the results presented in this paper are consistent with previous results using aggregate data and show a higher responsiveness of individual worker flows to changes in GDP after the crisis, particularly for a group of euro area countries which implemented significant reforms. Moreover, we find that a number of measures which decrease the stringency of regulation (such as reforms which reduce employment protection legislation, product market regulation, and collective bargaining) increase the flexibility of the labour market as they have a positive and statistically significant impact on worker flows. |
| Keywords: | Worker flows, Linear probability model, Labour market regulations, Structural reforms, Great Recession |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:2019-01&r=all |
| By: | Suwareh Darbo (African Development Bank); Amandine Nakumuryango (African Development Bank) |
| Abstract: | The objective of this working paper is to investigate the factors contributing to inflation in Sudan in the wake of South Sudan’s secession, which resulted in the loss of 75% of the country’s oil exports. The paper uses a single equation model in a Vector Error Correction Model (VECM) to investigate the determinants of inflation. The independent variables included in the model are money supply, the nominal effective exchange rate based on the parallel rate, credit to the private sector as a percentage of GDP, and crude oil prices. The results indicate that, in the long run, oil prices have a negative effect on inflation while money supply, credit to private sector, and nominal effective exchange rate have positive effects. This underscores the need to manage money supply, the exchange rate, and credit to the private sector, all of which can be influenced by the monetary authorities—that is, the Central Bank of Sudan.JEL classification: E310 E520 E58Keywords: Inflation, money supply, exchange rate, credit, oil prices Sudan, long-run, VECM. |
| Date: | 2018–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:2432&r=all |
| By: | Goetz, D.; Rodnyansky, A. |
| Abstract: | Do firms respond to cost shocks by reducing the quality of their products? Using microdata from a large Russian retailer that varies its offerings twice-yearly, we document that ruble devaluations are associated with a reduction in the observed material quality of products imported for resale, but that higher quality goods are also more profitable. We reconcile these facts using a simple multi-product sourcing model that features a demand system with expenditure switching, where more profitable products can be dropped more quickly after a cost shock. The estimated model shows that quality downgrading reduces average passthrough by 6% and has meaningful consequences for welfare. |
| JEL: | E30 F14 F31 L11 L15 L16 L81 M11 |
| Date: | 2019–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1915&r=all |
| By: | International Monetary Fund |
| Abstract: | The Dutch economy has grown faster than the euro area average over the past few years reflecting recovering consumption and investment, and strong net exports. The unemployment rate reached a decade low, but slow productivity growth and growing labor market duality have constrained wages and contributed to low inflation. Moreover, progress with tackling long-standing imbalances in the households and corporate sectors, and thus external imbalances, has lagged. Households remain highly leveraged and their consumption constrained by a stagnating disposable income. In the corporate sector, dominated by large multinational corporations (MNCs), investment is low but savings are high, and developments are diverging with domestic small and medium enterprises (SMEs) relatively stagnant. Strong fiscal performance in recent years has boosted buffers that can now be used to reduce distortions and strengthen potential growth. |
| Keywords: | Europe;Netherlands; |
| Date: | 2019–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/44&r=all |
| By: | Robert J. Shiller (Cowles Foundation, Yale University) |
| Abstract: | Concerns that technological progress degrades job opportunities have been expressed over much of the last two centuries by both professional economists and the general public. These concerns can be seen in narratives both in scholarly publications and in the news media. Part of the expressed concern about jobs has been about the potential for increased economic inequality. But another part of the concern has been about a perceived decline in job quality in terms of its effects on monotony vs creativity of work, individual sense of identity, power to act independently, and meaning of life. Public policy should take account of both of these concerns, inequality and job quality. |
| Keywords: | Labor-saving machines, Artificial intelligence, History of thought, Division of labor, Unemployment, Automation, Robotics |
| JEL: | N3 J0 B0 E2 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2168&r=all |
| By: | Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino |
| Abstract: | We use transaction-level data to study changes in the concentration of US imports. Concentration has fallen in the typical industry, while it is stable by industry and country of origin. The fall in concentration is driven by the extensive margin: the number of exporting firm has grown, and the number of exported products has fallen more for top firms. Instead, average revenue per product of top firms has increased. At the industry level, top firms are converging, but top firms within country are diverging. These facts suggest that intensified competition in international markets coexists with growing concentration among national producers. |
| Keywords: | Concentration; Firm Heterogeneity; International trade; Superstar Firms; US Imports |
| JEL: | E23 F12 F14 L11 R12 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13566&r=all |
| By: | Isaac Baley; Laura Veldkamp; Michael E. Waugh |
| Abstract: | Common wisdom dictates that uncertainty impedes trade—we show that uncertainty can fuel more trade in a simple general equilibrium trade model with information frictions. In equilibrium, increases in uncertainty increase both the mean and the variance in returns to exporting implying that trade can increase or decrease with uncertainty depending on preferences. Under general conditions on preferences, we characterize the importance of these forces using a sufficient statistics approach. Higher uncertainty leads to increases in trade because agents receive improved terms of trade, particularly in states of nature where consumption is most valuable. Trade creates value, in part, by offering a mechanism to share risk and risk sharing is most effective when both parties are uninformed. |
| JEL: | A0 E1 F1 F4 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25606&r=all |
| By: | Jonathan Heathcote; Kjetil Storesletten; Giovanni L. Violante |
| Abstract: | This paper studies optimal taxation of earnings when the degree of tax progressivity is allowed to vary with age. The setting is an overlapping-generations model that incorporates irreversible skill investment, flexible labor supply, ex-ante heterogeneity in the disutility of work and the cost of skill acquisition, partially insurable wage risk, and a life cycle productivity profile. An analytically tractable version of the model without intertemporal trade is used to characterize and quantify the salient trade-offs in tax design. The key results are that progressivity should be U-shaped in age and that the average marginal tax rate should be increasing and concave in age. These findings are confirmed in a version of the model with borrowing and saving that we solve numerically. |
| JEL: | E20 H2 H21 H31 H41 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25617&r=all |
| By: | Giorgia Giovannetti; Elena Perra |
| Abstract: | The Syrian Civil War has begun in 2011 and is still wrecking enormous damages on the country's economy, with an impressive toll measured in deaths, migration, and the destruction of the Syrian historical heritage and physical infrastructure. This paper examines the impact of the War on Syria's economy from the perspective of outer space, to bypass the issue of data availability due to the inaccessibility of the war-ravaged territory. The estimates obtained in this way are more pessimistic than the ones reported by international organisations. Starting from our estimates, we provide long-term projections for the country's economy, and estimate the window for GDP recovery at the pre-war levels. We discuss geo-political implications which could prevent our projections from happening. |
| Keywords: | Syria, War, GDP estimates, Night-Lights |
| JEL: | E01 O15 C82 H56 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2019_05.rdf&r=all |
| By: | Fernando Martins; Domingos Seward |
| Abstract: | This paper provides a comprehensive study of the heterogeneity in the Portuguese labour market. We use Labour Force Survey microdata covering a complete business cycle, from 1998:1 to 2018:1, to evaluate the labour market attachment of several labour states and assess the most suitable allocation of individuals across statuses. We also evaluate the adequacy of the conventional unemployment criteria. Following the relevant strand of literature on this topic, we apply an evidence-based categorisation of labour market status by exploiting the information on the results of the behaviour of non-employed. To that end, we use multinomial and binary logit models of the determinants of transitions of workers across labour market states to test for the equivalence between non-employed groups. We conclude that heterogeneity is an evident feature of the Portuguese labour market, both between and within the conventional non-employment states. In particular, we find that the status comprising those inactive workers which want work constitutes a distinct state in the labour market and displays a transition behaviour closer to unemployment than to the group of inactive workers which do not want work. Moreover, the classification as inactive workers of individuals which report "waiting" as a reason for not having searched for a job, those individuals who have searched for a job but are still considered to be out-of-the-labour-force, as well as those individuals which are due to start work in more than three months might not be reasonable, since they show considerable attachment to the labour market and we reject the pooling of such states with their counterparts. |
| Keywords: | labour market dynamics, heterogeneity, labour force survey, unemployment, labour market slack |
| JEL: | C82 E24 J20 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp0762019&r=all |
| By: | Edoardo Chiarotti (IHEID, Graduate Institute of International and Development Studies, Geneva); Nathalie Monnet (IHEID, Graduate Institute of International and Development Studies, Geneva); |
| Abstract: | In this paper, we study empirically how a policy targeting the cash-funding system of armed groups affects criminal activities, focusing on the 2016 Indian Banknote Demonetization as a natural experiment. We take advantage of a unique dataset on daily surrenders of the Maoist insurgents in India between 2006 and 2018. In order to measure the exposure of the conflict to the policy in different districts, we use three sources of access to funding for Maoists, namely mineral resources, public works’ contractors and forest products. Our results suggest that there is a positive and significant impact of the demonetization on surrenders of Maoist extremists. We find a lower increase in surrenders where insurgents have higher abilities to raise new cash through mineral resources and public works, while we find a sharper increase in districts that rely on subsistence agriculture. This paper provides evidence that policies that curb illicit cash flows have the desired impact of deterring illegal and violent activities. |
| Keywords: | Counterinsurgency, Conflict, Demonetization |
| JEL: | C23 D74 Q34 E50 |
| Date: | 2019–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp03-2019&r=all |