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on Macroeconomics |
|
Issue of 2019‒12‒16
fifty-four papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Antonio Ribba |
| Abstract: | The unemployment inflation trade-off can be interpreted as a proposition concerning the response of these two variables to aggregate demand shocks. In this paper we study the possible presence of the trade-off in the Euro Area and in a wide group of Euroarea countries in the last 20 years, i.e. since the start of EMU. We use the structural VAR methodology that allows the separation between supply and demand shocks. Our main finding is that the existence of a trade-off is largely confirmed both at the Euro Area and at the national level. Nevertheless, the size of the trade-off, measured at different horizons,shows some heterogeneity among countries. No less important, when we augment the VAR model by introducing monetary policy in the context of an open economy, we find that monetary policy shocks push inflation and unemployment in opposite directions in the Currency Area. Another interesting result concerns the evidence of a relatively flat relation between unemployment and inflation, conditionally to monetary policy shocks. |
| Keywords: | Unemployment, Inflation, Structural VARs, Euro Area |
| JEL: | C32 E24 E31 E32 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:mod:recent:143&r=all |
| By: | Günter Coenen; Carlos Montes-Galdón; Frank Smets (-) |
| Abstract: | We study the incidence and severity of lower-bound episodes and the efficacy of three types of state-dependent policies—forward guidance about the future path of interest rates, large-scale asset purchases and spending-based fiscal stimulus—in ameliorating the adverse consequences stemming from the effective lower bond on nominal interest rates. In particular, we focus on the euro area economy and examine, using the ECB’s New Area- Wide Model, the consequences of the lower bound both for the near-term economic outlook, characterised by persistently low nominal interest rates and inflation, and in a lasting low-real-interest-rate world. Our findings suggest that, if unaddressed, the lower bound can have very substantial costs in terms of worsened macroeconomic performance. Forward guidance, if fully credible, is most powerful and can largely undo the distortionary effects due to the lower bound. A combination of imperfectly credible forward guidance, asset purchases and fiscal stimulus is almost equally effective, in particular when asset purchases enhance the credibility of the forward guidance policy via a signalling effect. |
| Keywords: | Effective lower bound, monetary policy, forward guidance, asset purchases, fiscal policy, euro area |
| JEL: | E31 E32 E37 E52 E62 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:19/983&r=all |
| By: | Jonung, Lars (Department of Economics, Lund University) |
| Abstract: | In a historical perspective, the stabilization policy regime in Sweden is in a state of constant change, affected by economic crises, international impulses, domestic politics, and developments in macroeconomic theory. Economists have been deeply involved in this process. The current framework for monetary and fiscal policy, with an independent central bank focusing on inflation targeting, and a rule-based fiscal policy, is not the final stage of this process. Future crises will once again change the goals, the instruments, and the institutional framework. In a historical perspective, the rapid expansion of the financial system, with the accompanying accumulation of private debt and high rates of asset inflation, stands out as a likely cause behind the next crisis. The next crisis will be followed by yet another step in the perennial pursuit of a better stabilization policy. |
| Keywords: | Monetary policy; fiscal policy; gold standard; price-level targeting; inflation targeting; financial repression; the Riksbank; Sweden |
| JEL: | E12 E30 E60 G01 H63 N14 |
| Date: | 2019–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2019_020&r=all |
| By: | Bradley Jones (Reserve Bank of Australia); Joel Bowman (Reserve Bank of Australia) |
| Abstract: | China's monetary policy framework has evolved considerably over the years. However, official descriptions provide limited detail and it generally remains less well understood than befits the world's second largest economy. This paper takes stock of the evolution of monetary policy in China and, by placing these developments in international context, also contributes to the emerging discussion about whether aspects of monetary policy in China are beginning to converge on advanced economy norms. Our main takeaways are as follows. First, on the institutional set-up, we note that the absence of instrument independence and the nature of accountability mechanisms remain substantial points of difference, reflecting China's single-party state system in which the levers of macroeconomic management remain highly coordinated under the State Council. Second, the objectives for monetary policy in China and how they find practical expression in the operational framework continue to have few parallels in advanced economies, although some implementation features (such as the corridor for policy rates) are more familiar as China continues to transition from a quantity- to price-based monetary system. Third, elements of The People's Bank of China's communication framework are broadly evolving along the lines observed elsewhere, with remaining exceptions mostly a result of China's unique institutional arrangements. Fourth, our empirical analysis of monetary policy transmission points to both similarities and differences: while policy rates now have a larger effect than monetary aggregates on output and bond yields, reflecting a Chinese financial system that is becoming more developed (as in advanced economies in the 1970s–1980s), the similar average inflation outcomes observed in China and advanced economies have been generated through different means. In sum, our analysis suggests that while some aspects of monetary policy in China are beginning to resemble those observed in advanced economies, convergence is neither likely nor even desired by the authorities given China's institutional configuration and preferred model of economic development. |
| Keywords: | China; monetary policy; financial markets |
| JEL: | E02 E42 E52 E58 E63 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2019-11&r=all |
| By: | Kyle F. Herkenhoff; Gajendran Raveendranathan |
| Abstract: | How are the welfare costs from monopoly distributed across U.S. households? We answer this question for the U.S. credit card industry, which is highly concentrated, charges interest rates that are 3.4 to 8.8 percentage points above perfectly competitive pricing, and has repeatedly lost antitrust lawsuits. We depart from existing competitive models by integrating oligopolistic lenders into a heterogeneous agent, defaultable debt framework. Our model accounts for 20 to 50 percent of the spreads observed in the data. Welfare gains from competitive reforms in the 1970s are equivalent to a one-time transfer worth between 0.24 and 1.66 percent of GDP. Along the transition path, 93 percent of individuals are better off. Poor households benefit from increased consumption smoothing, while rich households benefit from higher general equilibrium interest rates on savings. Transitioning from 1970 to 2016 levels of competition yields welfare gains equivalent to a one-time transfer worth between 1.87 and 3.20 percent of GDP. Lastly, homogeneous interest rate caps in 2016 deliver limited welfare gains. |
| Keywords: | Welfare costs of monopoly; consumer credit; competition; welfare |
| JEL: | D14 D43 D60 E21 E44 G21 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2019-13&r=all |
| By: | Alejandro Izquierdo; Ruy E. Lama; Juan Pablo Medina; Jorge P. Puig; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin |
| Abstract: | Over the last decade, empirical studies analyzing macroeconomic conditions that may affect the size of government spending multipliers have flourished. Yet, in spite of their obvious public policy importance, little is known about public investment multipliers. In particular, the clear theoretical implication that public investment multipliers should be higher (lower) the lower (higher) is the initial stock of public capital has not, to the best of our knowledge, been tested. This paper tackles this empirical challenge and finds robust evidence in favor of the above hypothesis: countries with a low initial stock of public capital (as a proportion of GDP) have significantly higher public investment multipliers than countries with a high initial stock of public capital. This key finding seems robust to the sample (European countries, U.S. states, and Argentine provinces) and identification method (Blanchard-Perotti, forecast errors, and instrumental variables). Our results thus suggest that public investment in developing countries would carry high returns. |
| JEL: | E22 E32 E62 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26478&r=all |
| By: | Bertrand Garbinti (Banque de France, Crest); Jonathan Goupille-Lebret (Univ Lyon, CNRS, ENS de Lyon, GATE UMR 5824, F-69342 Lyon, France); Thomas Piketty (Paris School of Economics) |
| Abstract: | Measuring and understanding the evolution of wealth inequality is a key challenge for researchers, policy makers, and the general public. This paper breaks new ground on this topic by presenting a new method to estimate and study wealth inequality. This method combines fiscal data with household surveys and national accounts in order to provide annual wealth distribution series, with detailed breakdowns by percentiles, age and assets. Using the case of France as an illustration, we show that the resulting series can be used to better analyze the evolution and the determinants of wealth inequality dynamics over the 1970-2014 period. We show that the decline in wealth inequality ends in the early 1980s, marking the beginning of a rise in the top 1% wealth share, though with significant fluctuations due largely to asset price movements. Rising inequality in saving rates coupled with highly stratified rates of returns has led to rising wealth concentration in spite of the opposing effect of house price increases. We develop a simple simulation model highlighting how changes in the combination of unequal saving rates, rates of return and labor earnings that occurred in the early 1980s generated large multiplicative effects that led to radically different steady-state levels of wealth inequality. Taking advantage of the joint distribution of income and wealth, we show that top wealth holders are almost exclusively top capital earners, and less and less are made up of top labor earners; it has become increasingly difficult in recent decades to access top wealth groups with one’s labor income only. |
| Keywords: | income inequality, wealth inequality, gender inequality |
| JEL: | D31 E01 E21 N3 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1935&r=all |
| By: | Kristin Forbes |
| Abstract: | Inflation dynamics have been difficult to explain over the last decade. This paper explores if a more comprehensive treatment of globalization can help. CPI inflation has become more synchronized around the world since the 2008 crisis, but core and wage inflation have become less synchronized. Global factors (including commodity prices, world slack, exchange rates, and global value chains) are significant drivers of CPI inflation in a cross-section of countries, and their role has increased over the last decade, particularly the role of non-fuel commodity prices. These global factors, however, do less to improve our understanding of core and wage inflation. Key results are robust to using a less-structured trend-cycle decomposition instead of a Phillips curve framework, with the set of global variables more important for understanding the cyclical component of inflation over the last decade, but not the underlying slow-moving inflation trend. Domestic slack still plays a role for all the inflation measures, although globalization has caused some “flattening” of this relationship, especially for CPI inflation. Although CPI inflation is increasingly “determined abroad”, core and wage inflation is still largely a domestic process. |
| JEL: | E30 E52 E58 F62 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26496&r=all |
| By: | Hintermaier, Thomas; Koeniger, Winfried |
| Abstract: | This paper quantifies the extent of heterogeneity in consumption responses to changes in real interest rates and house prices in the four largest economies in the euro area: France, Germany, Italy, and Spain. We first calibrate a life-cycle incomplete-markets model with a financial asset and housing to match the large heterogeneity of households asset portfolios, observed in the Household Finance and Consumption Survey (HFCS) for these countries. We then show that the heterogeneity in household finances implies that responses of consumption to changes in the real interest rate and in house prices differ substantially across countries, and within countries by household characteristics such as age, housing tenure, and asset positions. The different consumption responses quantified in this paper point towards important heterogeneity in monetary-policy transmission in the euro area. |
| Keywords: | European household portfolios,consumption,monetary policy transmission,international comparative finance,housing |
| JEL: | D14 D31 E21 E43 G11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:637&r=all |
| By: | Kevin XD Huang (Vanderbilt University); Nam T Vu (Miami University of Ohio) |
| Abstract: | A DSGE model with (i) state-dependent pricing and (ii) history-dependent monetary policy that compensates for lost opportunities of cutting the nominal interest rate due to a binding effective zero lower bound (ZLB) generates rare but long-lasting liquidity traps with endogenous transitions between the traps and normal times. Dynamic government spending multipliers (GSMs) are typically above unity in the liquidity traps but are uniformly below unity in normal times. Without (i) or (ii), the model generates only short-lived ZLB events while producing below-unity GSMs irrespective of the state of the economy. |
| Keywords: | State-dependent pricing, history-dependent monetary policy, zero lower bound, fiscal stimulus, dynamic government spending multipliers |
| JEL: | E0 E5 |
| Date: | 2019–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-19-00016&r=all |
| By: | Bennouna, Hicham (Bank Al-Maghrib, Département de la Recherche); Chmielewski, Tomasz (Narodowy Bank Polski); Doukali, Mohamed (Bank Al-Maghrib, Département de la Recherche) |
| Abstract: | This paper investigates the impact of monetary policy on firms’ liability structure depending on their specific characteristics (size, age, profit, and collateral) over the period 2010 to 2016 using firm-level data. Our results provide evidence that firms borrowing tend to decrease after a restrictive monetary policy, in line with the traditional interest rate channel. We confirm that small and medium firms are more significantly affected by tight monetary Policy conditions than large firms, suggesting the existence of the balance sheet channel in Morocco. |
| Keywords: | Corporate balance sheets; monetary policy transmission; panel data |
| JEL: | E44 E52 G20 |
| Date: | 2019–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:bkamdt:2019_001&r=all |
| By: | Viral V. Acharya; Björn Imbierowicz; Sascha Steffen; Daniel Teichmann |
| Abstract: | We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the period from January 2006 to June 2010. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks for maturities beyond one year, even as it lowers deposit spreads for both high-risk and low-risk banks. This adversely affects the balance sheets of high-risk bank borrowers, leading to lower payouts, capital expenditures and employment. Overall, our results suggest that banks’ capital constraints at the time of an easing of monetary policy pose a challenge to the effectiveness of the bank-lending channel and the central bank's lender-of-last-resort function. |
| JEL: | E43 E58 G01 G21 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26479&r=all |
| By: | Bertrand Garbinti (Banque de France, Crest); Jonathan Goupille-Lebret (Univ Lyon, CNRS, ENS de Lyon, GATE UMR 5824, F-69342 Lyon, France) |
| Abstract: | Cet article propose un éclairage sur l’évolution de longue période des inégalités de revenu, de patrimoine et de leur lien en France. Après une forte baisse des inégalités qui avait commencé au début de la première guerre mondiale, une tendance inégalitaire est apparue (et se poursuit) depuis le milieu des années 1980. La perspective historique permet d’illustrer comment de faibles changements dans les inégalités de taux d’épargne, de rendement ou de revenu du travail peuvent avoir de forts effets de long terme sur la concentration du patrimoine. Deux autres grandes tendances s’observent depuis les années 1970. L’une est la baisse de l’écart des revenus du travail entre femmes et hommes – même s’il reste élevé. L’autre est la difficulté accrue, pour les détenteurs de seuls revenus du travail, d’accéder aux plus hauts patrimoines. Enfin, nos comparaisons entre la France et les États-Unis montrent que les inégalités de patrimoine et de revenu étaient comparables voire plus faibles aux États-Unis avant les années 1970. Ce pays est devenu nettement plus inégalitaire désormais. |
| Keywords: | inégalités de revenu, inégalités de patrimoine, inégalités entre femmes et hommes |
| JEL: | D31 E01 E21 N3 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1934&r=all |
| By: | J. Stephen Ferris (Department of Economics, Carleton University); Marcel-Christian Voia (Laboratoire d'Économie d'Orléans (LEO) Faculté de droit, d'économie et de gestion Université d'Orléans) |
| Abstract: | In this paper we examine the relationship between economic and electoral outcomes in Canada since Confederation (1867) and the role that economic policy has played in influencing this relationship. The results are consistent with voter concern for the overall performance of the economy in the incumbent’s governing term—the average growth rate of per capita GDP and average unemployment rate—while rejecting the presence of a political business/budget cycle response in the period leading into an upcoming election. Evidence for the effect of performance on the stability of the political party system (as measured by party vote volatility) is even stronger. The data also are consistent with the use of policy for countercyclical stability (primarily through spending and deficits), fiscal response to voter turnout, the growth of both spending and deficits under larger governing majoritiesand compliant monetary response to fiscal deficits. |
| Keywords: | economic and electoral outcomes, political business cycle, political influences on policy,policy endogeneity, seemingly unrelated regressions |
| JEL: | Z18 H30 E60 |
| Date: | 2019–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:19-11&r=all |
| By: | Aya, Achour (Bank Al-Maghrib, Département de la Recherche) |
| Abstract: | Ce document de travail investigue le rôle des réserves de change dans le fonctionnement de l’économie marocaine à travers la proposition et l’estimation d’une version augmentée du modèle dynamique stochastique d’équilibre général (DSGE) séminal de Smets and Wouters en économie ouverte. A l’opposé des formes standards relevées dans la littérature, le DSGE proposé tente de combler l’écart entre les travaux sur les régimes de change et ceux sur la théorie de pricing des actifs financiers en testant l’effet du niveau des réserves de change sur la prime à terme des taux des bons du trésor. Les résultats obtenus en matière de qualité d’ajustement et de fonctions de réponse impulsionnelles du modèle démontrent l’existence d’une relation procyclique entre le niveau des réserves de change et le cycle économique au Maroc. Les effets de second tour que celles-ci sont amenées à exercer sur les variables réelles et que l’on peut traduire en un mécanisme d’amplification des chocs, accroissent la volatilité de l’économie marocaine et réduisent les marges de manœuvre de la politique monétaire. En termes d’implications économiques, l’occultation d’un tel mécanisme reviendrait à négliger une limite supplémentaire du régime de change fixe qui pourrait, lorsqu’elle n’est pas intégrée, biaiser la comparaison avec le régime de change flexible au Maroc. Enfin, une flexibilité plus accrue du régime de change au Maroc participerait à atténuer l’excès de volatilité qui résulte des fluctuations des réserves de change dans la mesure où le taux de change peut s’ajuster en continue pour absorber les différents chocs économiques. |
| Keywords: | DSGE; rigidités; estimation bayésienne; politique monétaire |
| JEL: | C11 C32 E32 E60 |
| Date: | 2019–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:bkamdt:2019_004&r=all |
| By: | Moro, Alessio (University of Cagliari); Valdes, Carlo (Cassa Depositi e Prestiti) |
| Abstract: | Models of structural change in general equilibrium are commonly used to address a number of questions regarding the behaviour of the macro-economy. In this paper, we first revise the main mechanisms at work in generating structural change in a multi-sector environment. These effects emerge due to both an interaction between consumers' preferences and technological change and to different income elasticities of the various goods and services entering the utility function. Next, we address the issue of measurement of these models when comparing them to the data. The typical assumption in multi-sector models is to define GDP as aggregate output in units of a numeraire good, often chosen to be the investment good. However, this procedure is equivalent to deriving nominal GDP in the data (i.e. total output of the economy in units of one particular good), and not to deriving a measure of real GDP. We then discuss how GDP in the model should be measured to provide a statistic that is comparable with the data in national accounts. The last part of the paper is devoted to show how structural transformation from manufacturing to services, when appropriately compared to the data, generates a decline in GDP growth and volatility along the growth path of an economy. |
| Keywords: | Technological Change, Structural Change, Growth, Volatility |
| JEL: | O33 C67 C68 E25 E32 |
| Date: | 2019–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2019049&r=all |
| By: | Bilge Erten; Anton Korinek; Jose Antonio Ocampo |
| Abstract: | This paper synthesizes recent advances in the theoretical and empirical literature on capital controls. We start by observing that international capital flows have both benefits and costs, but some of these are not internalized by individual actors and thus constitute externalities. The theoretical literature has identified pecuniary externalities and aggregate demand externalities that respectively contribute to financial instability and recessions. These externalities provide a natural rationale for counter-cyclical capital controls that lean against boom and busts cycles in international capital flows. The empirical literature has developed several measures of capital controls to capture different aspects of capital account openness. We evaluate the strengths and weaknesses of different measures and provide an overview of the empirical findings on the effectiveness of capital controls in addressing the externalities identified by the theory literature, i.e. in reducing financial fragility and enhancing macroeconomic stability. We also discuss strategies to deal with the endogeneity of capital controls in such statistical exercises. We conclude by providing an overview of the historical and current debates on the role of capital controls in macroeconomic management and their relationship to the academic literature. |
| JEL: | D62 E44 F32 F38 F42 H23 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26447&r=all |
| By: | Mary Everett; Jakob de Haan; David-Jan Jansen; Peter McQuade; Anna Samarina |
| Abstract: | This paper examines whether the increased use of macroprudential policies since the global financial crisis has affected the impact of (euro area and foreign) monetary policy on mortgage lending in Ireland and the Netherlands, which are both small open economies in the euro area. Using bank-level data on domestic lending in both countries during the period 2003-2018, we find that restrictive euro area monetary policy shocks reduce the growth of mortgage lending. We find evidence that stricter domestic prudential regulation mitigates this effect in Ireland, but not so in the Netherlands. There is weak evidence for an international bank lending channel. |
| Keywords: | monetary policy; prudential policy; mortgage lending; European monetary union |
| JEL: | G21 E42 F36 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:659&r=all |
| By: | Karahan, Fatih (Federal Reserve Bank of New York); Mitman, Kurt (Stockholm University); Moore, Brendan (Federal Reserve Bank of New York) |
| Abstract: | We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and provide quasi-experimental evidence on the effect of UI on the labor market. The data indicate that the cut in Missouri significantly increased job finding rates by both raising the search effort of unemployed workers and the availability of jobs. The latter accounts for at least a third and up to 100% of the total effect. |
| Keywords: | unemployment insurance, unemployment, vacancies, search |
| JEL: | E24 J63 J64 J65 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12805&r=all |
| By: | Schuler, Tobias; Corrado, Luisa |
| Abstract: | This paper analyzes the effects of several policy instruments for mitigating financial bubbles generated in the banking sector. We augment a New Keynesian macroeconomic framework by endogenizing boundedly-rational expectations on asset values of loan portfolios, allow for interbank trading and show how a credit bubble can develop from a financial innovation. We then evaluate the efficacy of several policy instruments in counteracting financial bubbles. We find that an endogenous capital requirement reduces the impact of a financial bubble significantly while central bank intervention (“leaning against the wind”) proves to be less effective. A welfare analysis ranks the policy reaction through an endogenous capital requirement highest. We therefore provide a rationale for the use of countercyclical capital buffers. JEL Classification: E44, E52 |
| Keywords: | Basel III, CCyB, credit-to-GDP gap |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192336&r=all |
| By: | Michael Pfarrhofer; Anna Stelzer |
| Abstract: | We explore the international transmission of monetary policy and central bank information shocks by the Federal Reserve and the European Central Bank. Identification of these shocks is achieved by using a combination of high-frequency market surprises around announcement dates of policy decisions and sign restrictions. We propose a high-dimensional macroeconometric framework for modeling aggregate quantities alongside country-specific variables to study international shock propagation and spillover effects. Our results are in line with the established literature focusing on individual economies, and moreover suggest substantial international spillover effects in both directions for monetary policy and central bank information shocks. In addition, we detect heterogeneities in the transmission of ECB policy actions to individual member states. |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1912.03158&r=all |
| By: | Elton Beqiraj, Valeria Patella and Massimiliano Tancioni; Valeria Patella; Massimiliano Tancioni |
| Abstract: | This paper presents a unified analysis of the run-up of sovereign and credit risk in an environment where latent factors, along with fundamentals, feed financial crises. A Markov-switching VAR in four variables (debt, GDP, sovereign and corporate spreads) is estimated on Italian 1990-2018 data. The model displays both stochastic and systematic switches in the determination of spreads, and historically identifies: i) a high sovereign stress state of high and volatile spreads, which lines up mostly with crisis times; ii) a high credit stress state of tight connections between spreads, prevailing on the pre-euro and global crisis periods. We find that high spreads in high stress states are mainly explained by latent factors, orthogonal to fundamentals and possibly linked to agents' expectations. In normal times, instead, fiscal shocks are expansionary and trigger drops in spreads. |
| Keywords: | Fundamentals; Latent factors; Sovereign spreads; Credit spreads; Financial crisis |
| JEL: | E4 E6 G01 H63 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:wp191&r=all |
| By: | Etienne Lalé (Université du Québec à Montréal, CIRANO and IZA); Linas Tarasonis (Vilnius University & Bank of Lithuania) |
| Abstract: | In this paper, we first provide a comprehensive account of the relationship between cross-country differences in aggregate employment and disaggregated differences in worker flows along the life cycle. To this end, we use survey micro-data for 31 European countries, and estimate the life-cycle profiles of transition probabilities across employment, unemployment and non-participation for each country. We develop a decomposition measuring the contribution of these transition probabilities to aggregate employment differences. We find substantial cross-country and cross-gender heterogeneity with respect to the role of worker flows between each labor market state. |
| Keywords: | Employment, Unemployment, Labor Force Participation, Life cycle, Worker Flows, Labor Market Institutions |
| JEL: | E02 E24 J21 J64 J82 |
| Date: | 2019–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:lie:dpaper:16&r=all |
| By: | Joseph E. Gagnon (Peterson Institute for International Economics); Christopher G. Collins (Peterson Institute for International Economics) |
| Abstract: | Central banks in the three largest advanced economies (the United States, Japan, and the eurozone) have only limited ammunition to fight a recession based on the tools used to date. The Federal Reserve has the most amount of tried and tested ammunition in this group. If a recession were to hit the US economy now, the Fed would be able to deliver monetary stimulus equivalent to a cut in the short-term policy interest rate of about 5 percentage points, which is sufficient to fight a mild but not severe recession. The European Central Bank and the Bank of Japan have little ability to ease policy with tools used to date, about the equivalent of a 1 percentage point cut in the policy rate. But they can engage in more exotic forms of monetary policy, such as large-scale purchases of equity and real estate and direct transfers to households, which the Fed cannot do. These tools, however, are largely untested and face political resistance. An important implication of this analysis is that raising expected inflation before a recession hits has a much larger benefit than has been widely recognized. A higher long-run inflation rate gives central banks more room to not only cut their policy rates but also use forward guidance and quantitative easing to reduce longer-term rates. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb19-18&r=all |
| By: | Christensen, Jens H. E. (Federal Reserve Bank of San Francisco); Mirkov, Nikola (Swiss National Bank) |
| Abstract: | Safe assets usually trade at a premium thanks to their high credit quality and deep liquidity. To understand the role of credit quality for such premia, we focus on Swiss Confederation bonds, which are extremely safe, but not particularly liquid. We therefore refer to their premia as safety premia and quantify them using an arbitrage-free term structure model that accounts for time-varying premia in individual bond prices. The estimation results show that Swiss safety premia are large and exhibit long-lasting trends. Furthermore, regression analysis suggests that they shifted upwards in a persistent manner following the launch of the euro and have been depressed in recent years by the asset purchases of the European Central Bank. |
| JEL: | C32 E43 E52 F34 G12 |
| Date: | 2019–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2019-28&r=all |
| By: | Paul Gaggl; Rowena Gray; Ioana Marinescu; Miguel Morin |
| Abstract: | Electricity is a general purpose technology and the catalyst for the second industrial revolution. Developing countries are currently making huge investments in electrification, with a view to achieving structural change. What does history say about its impact on the structure of employment? We use U.S. Census data from 1910 to 1940 and measure electrification with the length of higher-voltage electricity lines. Instrumenting for electrification using hydroelectric potential, we find that the average expansion of high-voltage transmission lines between 1910 and 1940 increased the share of operatives in a county by 3.3 percentage points and decreased the share of farmers by 2.1 percentage points. Electrification can explain 50.5% of the total increase in operatives, and 18.1% of the total decrease in farmers between 1910 and 1940. At the industry level, electrification drove 15.7% of the decline in the share of agricultural employment and 28.4% of the increase in the share of manufacturing employment between 1910 and 1940. Electrification was thus a key driver of structural transformation in the U.S. economy. |
| JEL: | E24 J24 N32 N72 O33 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26477&r=all |
| By: | LAHLOU, Kamal (Bank Al-Maghrib, Département de la Recherche) |
| Abstract: | In this paper, we present the improvement made by Morocco in terms of capital account openness, the remaining levels to be achieved, the challenges that the economy should face and to analyze through a panel data model estimated for 47 emerging and developing countries the structural factors of foreign capital attractiveness. The analysis of the regulation shows that the capital account is totally open for short and long-term foreign investments and partly for foreign investment maid by Moroccan financial and non-financial firms. For individuals, the capital account remains restricted. The models results have shown that the most important determinants of capital inflows are GDP, the current account balance, price stability, and exchange rate stability. Thus, opening the capital account may be seen more as a necessary condition for allowing foreign capital to integrate the economy, but not sufficient to attract large flows. In terms of recommendations and based on the results of models and lessons from international experiences, it appears that, firstly, progress must be made in terms of sustainability of internal and external balances, but also at the level of structural reforms that will lead to productivity gains and the development of the business environment. For the capital account regulation, it would seem important to pay particular attention to the risks associated with portfolio investments that are almost completely liberalized for non-residents. In addition, the strategy of gradual liberalization, particularly for residents, must be maintained by basing decisions on the expected gains in terms of growth but also on the stability of macroeconomic balances. |
| Keywords: | capital control; capital account liberalization; capital flows drivers |
| JEL: | E44 F43 G20 |
| Date: | 2019–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:bkamdt:2019_002&r=all |
| By: | Fan, Yi (London School of Economics); Yi, Junjian (National University of Singapore); Zhang, Junsen (Chinese University of Hong Kong) |
| Abstract: | This paper documents an increasing intergenerational income persistence in China since economic reforms were introduced in 1979. The intergenerational income elasticity increases from 0.390 for the 1970–1980 birth cohort to 0.442 for the 1981–1988 birth cohort; this increase is more evident among urban and coastal residents than rural and inland residents. We also explore how changes in intergenerational income persistence is correlated with market reforms, economic development, and policy changes. |
| Keywords: | intergenerational income persistence, economic transition, great gatsby curve |
| JEL: | E24 J62 O15 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12804&r=all |
| By: | Yi Fan; Junjian Yi; Junsen Zhang |
| Abstract: | This paper documents an increasing intergenerational income persistence in China since economic reforms were introduced in 1979. The intergenerational income elasticity increases from 0.390 for the 1970–1980 birth cohort to 0.442 for the 1981–1988 birth cohort; this increase is more evident among urban and coastal residents than rural and inland residents. We also explore how changes in intergenerational income persistence is correlated with market reforms, economic development, and policy changes. |
| Keywords: | intergenerational income persistence, economic transition, Great Gatsby Curve |
| JEL: | E24 J62 O15 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2019-067&r=all |
| By: | Eleni Iliopulos; Francois Langot (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique); Thepthida Sopraseuth (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We study the welfare costs of business cycles in a search and matching model with financial frictions à la Kiyotaki & Moore (1997). We investigate the mechanisms thatnallow the model to replicate the volatility on labor and financial markets and show that business cycle costs are sizable. We first demonstrate that the interactions between labor market and financial frictions magnify the impact of shocks via (i) a credit multiplier effect and (ii) an endogenous wage rigidity inherent to financial frictions. Secondly, in a non-linear framework, we show that the large welfare costs of fluctuations are also explained by the high average unemployment and the low job finding rates with respect to their deterministic steady-state values. |
| Keywords: | Welfare,business cycle,financial friction,labor market search |
| Date: | 2019–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02334103&r=all |
| By: | Ondrej Schneider (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 21, 110 00, Prague, Czech Republic) |
| Abstract: | This paper examines effects of political ideology of a governing party on fiscal outcomes, using data from eight Central and Eastern European countries in the 2001-2017 period. The analysis shows that there is a statistically significant effect of conservative governments on fiscal variables, namely they tend to reduce expenditures and improve fiscal balance by 0.4-0.7% of GDP. Conservative governments are found to reduce expenditures on social security and health care, but they tend to increase subsidies. This may be explained by their proximity to business interests that typically benefit from these subsidies. Our result suggest that while conservative governments do tend to reduce public spending and run smaller deficits, their impact on fiscal outcomes is more limited than they often claim. |
| Keywords: | fiscal policy, political parties, budget deficit, Europe |
| JEL: | E62 H10 H50 H62 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2019_37&r=all |
| By: | Sanchez-Romero, Miguel; Fürnkranz-Prskawetz, Alexia |
| Abstract: | In this paper we investigate the impact of a reduction in the pension replacement rate on the schooling choice and on inequality. We develop an overlapping generations model in which individuals differ by their life expectancy and in the cost of attending schooling. Individuals optimally choose their consumption path and their educational attainment. Within our framework we first show how many progressive pension systems are ex ante regressive due to the difference in life expectancy across skill groups and, second, we derive the level of progressivity that restores an equal treatment of the pension system across skill groups. |
| Keywords: | Human capital,Longevity,Inequality,Life cycle,Social security,Pension,Progressivity |
| JEL: | E24 J10 J18 H55 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuweco:072019&r=all |
| By: | Catherine Haeck (Department of Economics, University of Quebec in Montreal); Marie Connolly (Department of Economics, University of Quebec in Montreal) |
| Abstract: | (in French) Cet article dresse un portrait de l’accessibilité des données des administrations publiques en portant une attention particulière aux données fiscales, ainsi qu’aux données des deux plus grands postes de dépenses du gouvernement du Québec, soit la santé et l’éducation. Nous ne sommes certainement pas les premières à parler du potentiel des données de source administrative : nommons, parmi d’autres, les écrits de Card et al. (2010), Einav et Levin (2014), Statistique Canada (2009) et Connelly et al. (2016). Les vertus de l’analyse quantitative pour outiller les décideurs étaient déjà mises de l’avant par Amos Tverysky et Daniel Kahneman (prix Nobel d’économie) il y a de cela 40 ans. Mais notre contribution ici est de présenter le point de vue des chercheurs québécois et discuter de leur accès aux données des administrations publiques canadiennes et québécoises. Dans ce point de vue, nous mettons l’accent sur les microdonnées administratives anonymisées sur les individus. Les données agrégées sont plus facilement accessibles, mais ces données ne permettent pas de répondre à un vaste ensemble de questions permettant de mieux comprendre le fonctionnement de notre société. Ce point de vue dresse l’état de nos connaissances sur le sujet à l’heure d’écrire ces lignes sachant très bien que l’accès aux données évolue en continu à travers le Canada, et que nous ne sommes pas en mesure de couvrir l’ensemble des initiatives à travers chaque province. Abstract (in English, working paper is in French) This paper gives a snapshot of the accessibility of administrative data, in particular fiscal data and data from the two largest components of the budget of the government of Québec, health and education. |
| Keywords: | administrative data, Québec, fiscal data, education, health |
| JEL: | C8 I18 I28 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:grc:wpaper:19-04&r=all |
| By: | Minten, Bart; Dorosh, Paul A. |
| Abstract: | Nominal cereal prices in Ethiopia in July 2019 were significantly higher than the year before – maize prices had risen by 32 percent; sorghum by 39 percent; teff by 35 percent; and wheat by 2 percent. Moreover, there is anecdotal evidence that nominal cereal prices have increased rapidly since. A number of factors help explain this pattern: Overall inflation has been high both for food and non-food items. This general high inflation is linked to macro factors related to broad money and credit growth; overall changes in prices for inputs, labor, and transport have important impacts on production costs for agricultural products, thereby putting upward pressure on prices. However, controlling for inflation, real prices are close to average real prices over the last ten years, indicating little change in supply relative to demand; seasonality is important in Ethiopian cereal markets, with mostly higher prices in August and September, just before the new Meher harvest comes in. The current (September 2019) high prices for food are partly a seasonal phenomenon; there are no signs of increased real marketing costs. Nonetheless, given their importance for food security, close monitoring and assessments of the functioning of Ethiopia’s food markets remains necessary. |
| Keywords: | ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; cereals; prices; markets; food prices |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:essprn:73&r=all |
| By: | García, Juan Angel; Poon, Aubrey |
| Abstract: | Trend inflation estimates for 12 of the largest Asian economies over 1995-2018 offer important insights on inflation dynamics and inflation expectations. The disinflationary shocks that hit the region since 2014 were partly transitory, but their effects have been different depending on the behaviour of trend inflation in each country. Countries with relatively high inflation (India, Philippines, Indonesia) benefited, and some were impacted very mildly (China, Taiwan, Hong Kong SAR, Malaysia). Among countries with inflation below target, in those with trend inflation low but constant (Australia, New Zealand) low inflation maybe lasting, but temporary, while those in which trend inflation has declined (South Korea, Thailand) risk low inflation to become entrenched and a de-anchoring of expectations. This diverse international evidence could offer important lessons for monetary policy worldwide. JEL Classification: C11, C32, E31, F41 |
| Keywords: | Asian economies, state space model, stochastic volatility, survey inflation expectations, trend inflation |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192338&r=all |
| By: | Alex Costa; Jaume Garcia; Josep Lluís Raymond; Daniel Sanchez-Serra |
| Abstract: | Due to the lack of Purchasing Power Parities (PPPs) at regional level, regional Gross Domestic Product (GDP) figures have been traditionally adjusted using national PPPs. The simplifying assumption that all regions of a country have the same cost of living, and implicitly that there are no regional differences in prices, might lead to regional GDP figures (adjusted for national PPPs) that are biased and might limit the design and implementation of regional policies. This paper tries to overcome this problem by estimating PPPs at subnational level (TL2 regions) for OECD countries through a new method which uses publicly available data and is based on the Balassa-Samuelson hypothesis. |
| Keywords: | Balassa-Samuelson hypothesis, regional price levels, Regional Purchasing Power Parity |
| JEL: | C20 E31 O47 R10 |
| Date: | 2019–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaab:2019/12-en&r=all |
| By: | Chu, Angus C.; Furukawa, Yuichi; Kou, Zonglai; Liu, Xueyue |
| Abstract: | This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. Using firm-level data in China, we find that a higher minimum wage is associated with more innovation by importing firms but less innovation by non-importing firms. To interpret these empirical findings, we develop an open-economy R&D-based growth model and find that a higher minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. Intuitively, when a higher minimum wage reduces employment, importing firms respond by importing more inputs, which have technology spillovers and enhance their innovation. |
| Keywords: | innovation; minimum wage; imports; knowledge spillovers |
| JEL: | E24 F43 O31 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:97008&r=all |
| By: | Federico Morelli (LPTMC - Laboratoire de Physique Théorique de la Matière Condensée - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique); Michael Benzaquen (LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique); Marco Tarzia (LPTMC - Laboratoire de Physique Théorique de la Matière Condensée - CNRS - Centre National de la Recherche Scientifique - UPMC - Université Pierre et Marie Curie - Paris 6); Jean-Philippe Bouchaud (SPEC - UMR3680 - Service de physique de l'état condensé - CEA - Commissariat à l'énergie atomique et aux énergies alternatives - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We investigate a multi-household DSGE model in which past aggregate consumption impacts the confidence, and therefore consumption propensity, of individual households. We find that such a minimal setup is extremely rich, and leads to a variety of realistic output dynamics: high output with no crises; high output with increased volatility and deep, short lived recessions; alternation of high and low output states where relatively mild drop in economic conditions can lead to a temporary confidence collapse and steep decline in economic activity. The crisis probability depends exponentially on the parameters of the model, which means that markets cannot efficiently price the associated risk premium. We conclude by stressing that within our framework, narratives become an important monetary policy tool, that can help steering the economy back on track. |
| Date: | 2019–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02323098&r=all |
| By: | Bertoni, Marco (University of Padova); Nistico, Roberto (University of Naples Federico II) |
| Abstract: | We use data from two experiments that randomly assign students to groups to show that, so long as ordinal rank has a causal effect on educational achievement, estimates of the effects of peer ability composition obtained from models that omit rank are downward biased. This finding holds both in the standard linear-in-means model as well as in models that allow for non-linear and heterogeneous peer effects, and contributes to explain why previous studies have detected only modest effects of peer ability on achievement. We also illustrate how this finding helps understand the mechanisms behind the effects of ability tracking policies. |
| Keywords: | rank effects, peer effects, omitted variables bias, ability tracking |
| JEL: | I21 I24 J24 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12789&r=all |
| By: | Aviral Kumar Tiwari (Rajagiri Business School, Rajagiri Valley Campus, Kochi, Kerala, India); Micheal Kofi Boachie (School of Economics, University of Cape Town, Rondebosch 7701, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa) |
| Abstract: | We investigate the nonlinear dependencies and interconnectedness of macroeconomic and financial uncertainties in 11 developed countries. The study applies structure learning with weakly additive noise model using Directed Acyclic Graphs (DAGs) to data covering 1997:01 to 2017:09. The results indicate the existence of nonlinear dependencies among macroeconomic and financial uncertainties. That an increased macroeconomic and financial uncertainty in a particular economy affects other economies. Overall, Spain happens to be a major receiver of macroeconomic and financial uncertainties from the other developed economies. The findings call for macroprudential policies to ensure stability in these economies. |
| Keywords: | Connectedness, Economic and Financial Uncertainties, Advanced Economies, Directed Acyclic Graphs |
| JEL: | C32 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201982&r=all |
| By: | Suryadi, Dedy |
| Abstract: | Tinjauan Pemungutan, Perhitungan, dan Pelaporan Pajak Penghasilan Pasal 21 atas Gaji Pegawai Tetap Pada Dinas Pendapatan Pemerintah Kota Cimahi, yang bertujuan untuk menganalisis pemungutan, perhitungan, dan pelaporan Pajak Penghasilan Pasal 21 atas gaji pegawai tetap pada Dinas Pendapatan Pemerintah Kota Cimahi. Metode penelitian yang digunakan adalah metode analisis deskriptif meliputi kegiatan observasi, studi kepustakaan, dan wawancara. Berdasarkan hasil analisis yang dilakukan dalam pemungutan Pajak Penghasilan Pasal 21 sudah sesuai dengan Peraturan Menteri Keuangan Nomor 262/KMK.03/2010. Untuk perhitungan Pajak Penghasilan Pasal 21 dengan menggunakan PTKP (Penghasilan Tidak Kena Pajak) terbaru Dinas Pendapatan Pemerintah Kota Cimahi baru menerapkannya pada bulan november 2015. Pelaporan yang dilakukan Dinas Pendapatan Pemerintah Kota Cimahi pada tahun 2015 terdapat 91,67% pelaporan yang sesuai dan 8,33% yang tidak sesuai dengan Undang-Undang Nomor 36 Tahun 2008. Pada tahun 2013 sampai tahun 2014 Dinas Pendapatan Pemerintah Kota Cimahi tidak melaporkan Pajak Penghasilan Pasal 21 dikarenakan kurangnya kesadaran akan kewajibannya melaporkan pajak. Oleh karena itu Dinas Pendapatan Pemerintah Kota Cimahi dikenakan sanksi administrasi berupa bunga sebesar 2% (dua persen) atas keterlambatan penyetoran dan sanksi administrasi berupa denda sebesar Rp.1.000.000,- atas keterlambatan pelaporan pajak. |
| Date: | 2018–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:inarxi:j26z7&r=all |
| By: | Normann Rion (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In this paper, I build a simple Mortensen-Pissarides model embedding a dual labor market. I derive conditions for the existence of an equilibrium with coexisting strongly protected open-ended contracts and exogeneously short fixed-term contracts. I also study dynamics after a reform on employment protection legislation. Temporary contracts play the role of fillers while permanent contracts are used to lock up high-productivity matches. High firing costs favor the emergence of a dual equilibrium. Employment protection legislation encourages the resort to temporary employment in job creation. This scheme is intertwined with a general-equilibrium e_ect: permanent contracts represent the bulk of employed workers and a more stringent employment protection reduces aggregate job destruction. This pushes down unemployment and in turn reduces job creation ows through temporary contracts. The model is calibrated to match the French labor market. Policy experiments demonstrate that there is no joint gain in employment and social welfare through reforms on firing costs around the baseline economy. The optimal policy consists in implementing a unique open-ended contract with a strong cut in firing costs. Increases in firing costs within a dual labor market lead to a sluggish adjustment, while large cuts in firing costs lead to a quick one. The adjustment time of the labor market is highly non-monotonous between these two extremes. Policy-related uncertainty significantly strengthens fixed-term employment on behalf of open-ended employment. Considering extensions, I draw conclusions on the inability of a large class of random-matching models to mimic the distribution of temporary contracts' duration while maintaining possible the expiring temporary contracts' conversion into permanent contracts. |
| Keywords: | Fixed-term Contracts,Unemployment,Employment Protection,Policy,Dynamics |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02331887&r=all |
| By: | Wellschmied, Felix (Universidad Carlos III de Madrid); Yurdagul, Emircan (Universidad Carlos III de Madrid) |
| Abstract: | US entrepreneurs typically work long hours in their firms and these hours form a large part of the firms' labor input. This paper studies the role of endogenous owner hours in shaping the wealth distribution among entrepreneurs. We introduce owners' endogenous labor supply into a model of entrepreneurial choice and financial frictions. The model fits well the levels and the dispersion of wealth among entrepreneurs. Long owner hours incentivize poor, highly productive individuals to be owners and help the most productive owners to accumulate large quantities of wealth. On net, owners working long hours decreases the median owner wealth and increase wealth dispersion among owners. Differently, the ability to work sufficiently short hours incentivizes owners to run low productivity firms with high wealth to income ratios. Finally, alternative calibrations ignoring the endogenous labor supply of owners lead to owners that are much richer than in the data and overstate the effect of financial frictions in the economy. |
| Keywords: | entrepreneurship, wealth accumulation, labor supply, firm dynamics |
| JEL: | E23 J22 J23 L26 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12802&r=all |
| By: | Nicolas Abad (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université); Teresa Lloyd-Braga (FCEE - Faculdade de Ciencias Economicas e Empresariais - Universidade Catolica Portuguesa); Leonor Modesto (FCEE - Faculdade de Ciencias Economicas e Empresariais - Universidade Catolica Portuguesa) |
| Abstract: | We consider an innite horizon neoclassical model with a government that (i) balances its budget at each point in time, (ii) needs to nance unavoidable (incompressible) public expenditures, and (iii) further uses a scal rule for the share of variable government spending in output with the purpose of stabilizing the economy. We show that insulating this economy from belief driven uctuations is not possible if the government needs to nance (with distortionary taxes) incompressible public expenditures. In this case, we always have steady state multiplicity (two steady states) and global indeterminacy, while local indeterminacy is also possible. More precisely, even if a suciently procyclical share of the variable government spending component in output is still able to eliminate local indeterminacy, two saddle steady states prevail, so that, depending on expectations, the economy may either converge to the low steady state or to the high steady state. This implies that a regime switching rational expectation equilibrium, where the economy switches between paths converging to the two dierent steady states, easily arises. As expectations inuence long run outcomes, our model is able to generate large and sudden expansions and contractions in response to expectation shocks. |
| Date: | 2019–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02331811&r=all |
| By: | Mikkel Hermansen |
| Abstract: | This paper studies the association between occupational licensing and job hire and job separation rates along with earnings of job stayers and job-to-job movers. In contrast to previous studies, it attempts to provide macro-level estimates by relying on a novel Job-to-Job Flows database from the U.S. Census Bureau, covering the near universe of job transitions. The empirical analysis exploits variation in licensing regulation across states and industries and constructs indicators for both the share of employment subject to licensing (the extensive margin) and the strictness of regulation (the intensive margin). Results show that more extensive and stricter licensing are both associated with lower job mobility. This holds for job-to-job mobility as well as for transitions in and out of nonemployment. The strictness indicator points to lower job-to-job mobility from entry restrictions and renewal requirements to licensing, while education and training requirements may increase job-to-job mobility. The analysis also finds a negative association between licensing restrictions for people with a criminal record and job hire from nonemployment. Further analysis shows that interstate job-to-job mobility tends to be lower towards states with more extensive and stricter licensing regulation. The results from the analysis of earnings are generally mixed and mostly insignificant. However, there is some evidence of lower earnings gains from job-to-job moves to states with more licensing within the same industry, which may reflect lower productivity growth because of weaker reallocation of labour resources and reduced competition. |
| Keywords: | earnings, entry restrictions, job mobility, occupational licensing, regulation |
| JEL: | E24 J30 J44 J61 K20 L51 |
| Date: | 2019–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1585-en&r=all |
| By: | Nicolas Abad (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université, UNIROUEN - Université de Rouen Normandie - NU - Normandie Université) |
| Abstract: | This work proposes to study the emergence of aggregate instability, in the form of macroeconomic fluctuations due to the volatility of agents' expectations, caused by imperfect competition on the labor market. We consider that firms have some monopsony power which is introduced by a) considering that firms face a finite elasticity of labor supply, b) there is a finite number of firms operating under Cournot competition on the labor market. We show that given a free-entry and zero profit conditions, we obtain local indeterminacy when the elasticity of the sectoral labor supply is sufficiently low and factors are substitutable enough. We illustrate numerically our results with some empirical estimates for OECD countries and we conclude that expectation-driven fluctuations is obtained for plausible values. |
| Keywords: | Monopsony power,local indeterminacy,expectation-driven business cycles |
| Date: | 2019–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02329802&r=all |
| By: | Dautović, Ernest; Hau, Harald; Huang, Yi |
| Abstract: | The paper evaluates the impact of the Chinese minimum wage policy on consumption of low-wage households for the period 2002-2009. Using a representative household panel, we find that the consumption response to minimum wage income shock is increasing in the minimum wage share of household income and that poorer households fully consume their additional income. The large marginal propensity to consume is driven by households with at least one child, while childless poor households save two thirds of a minimum wage hike. The expenditure increase is concentrated in health care and education with potentially long-lasting benefits to household welfare. JEL Classification: E24, J38, C26 |
| Keywords: | household consumption, labor income, minimum wages, transfer income |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192333&r=all |
| By: | Magali Dauvin (Observatoire français des conjonctures économiques); Adeline Gueret (Observatoire français des conjonctures économiques); Hervé Péléraux (Observatoire français des conjonctures économiques) |
| Abstract: | Nous comparons les prévisions de croissance de l’économie française à l’horizon 2021 réalisées entre septembre et mi-novembre 2019 par 20 organismes (publics et privés, dont l’OFCE). Après être passée de 2,4 % en 2017 à 1,7 % en 2018, l’activité ralentirait pour l’ensemble des prévisionnistes, en moyenne à 1,3 % en 2019. Il n'y a pas d'accélération prévue à l’horizon de l'exercice de prévision : l’activité progresserait en moyenne à son rythme potentiel de 1,2 % en 2020 et de 1,25 % en 2021. En 2018, le commerce extérieur, par sa contribution positive, a compensé partiellement une demande intérieure moins dynamique. En 2019, la consommation des ménages est le principal moteur de la croissance. L’environnement international serait moins favorable et les risques sur la croissance plutôt orientés à la baisse. Pour tous, l’inflation reste globalement modérée en prévision (entre 1,1 % et 1,9 % en 2021 selon les instituts), c’est également le cas de l’inflation sous-jacente, comprise entre 0,8 % et 1,4 % en 2021. Il existe un moindre consensus sur le taux de chômage à l’horizon 2021 : il baisserait de 9,1 % de la population active en 2018 à 8,5 % en moyenne en 2019 mais les prévisions sont diverses en fin de période. En effet, les plus pessimistes l’envisagent à 9,8 % tandis que les plus optimistes le situent à 7,5 %. En moyenne, il se stabiliserait à 8,3 % sur les deux dernières années étudiées. La progression des salaires resterait contenue (avec un maximum à 2,1 % en 2021). L’impact positif des réformes passées et en cours sur la compétitivité des entreprises et sur l’emploi et in fine sur la croissance du PIB ne ressort pas véritablement des scénarios. Enfin, la France est sortie de la Procédure de déficit excessif en 2018 et tous les instituts sauf un prévoient le respect des règles budgétaires concernant le déficit public, qui resterait en deçà du seuil des 3 % à l’horizon 2021 (hormis le dépassement exceptionnel en 2019 du fait du CICE). En 2021, il serait compris entre 4 % et 1,8 % du PIB. Si les règles sont respectées en termes de solde budgétaire, ce n’est pas le cas des efforts structurels inscrits dans les différents scénarios puisqu’il est quasiment nul sur l’ensemble de l’exercice de prévision. Un document de travail plus détaillé est associé à ce Policy brief. |
| Keywords: | Croissance; France; Prévisions; Commerce extérieur; Chômage; Deficit public |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/395k2p14nu9t393t3rrud6l26v&r=all |
| By: | Aref Ardekani (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges); Isabelle Distinguin (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges) |
| Abstract: | This paper investigates whether interbank network topology influences the impact of monetary policy announcements on bank cumulative abnormal returns (CAR's). Although recent studies have emphasized the channels of non-conventional monetary policy actions and the sensitivity of bank stock prices to "News", how such reaction could be influenced by the shape of bank networks remains an open issue. We look at how banks' interconnectedness within interbank loan and deposit networks affects investors' expectations of future bank performance in response to monetary policy "News". Our sample consists of commercial, investment, real estate and mortgage banks in 10 Euro-zone countries. Our results show that the stock prices of banks with stronger local network positions are less sensitive to monetary policy announcements while those of banks with stronger system-wide positions are more sensitive to them. |
| Keywords: | Interbank network topology,Monetary policy,bank's stock reaction,event study |
| Date: | 2019–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02384533&r=all |
| By: | Onsardi, Onsardi |
| Abstract: | Abstrak Universitas Muhammadiyah Bengkulu (UMB) adalah salah Perguruan Tinggi Swasta yang bernaung pada Perserikatan Muhammadiyah. Dalam melaksanakan Tri Dharma Perguruan Tinggi, tentu saja UMB seharus mempunyai pegawai yang cakap, cerdas, terampil serta mempunyai knowledge yang memadai. Pegawai UMB mempunyai dua kategori yaitu pegawai edukatif yaitu Dosen dan administratif yaitu karyawan. Tujuan penulisan dalam ini adalah untuk menjelaskan implementasi Human Capital Management pada Universitas Muhammadiyah Bengkulu. Setelah dilakukan pembahasan, sehingga dapat ditarik kesimpulan dalam paper ini adalah: (1) Implementasi Human Capital di Uiversitas Muhammadiyah Bengkulu sudah direncanakan berdasarkan Renstra lima tahunan dari tahun akademik 2013- 2014 sd. 2017/2018. (2) Pelaksanaan Renstra sudah berjalan tiga tahun, namun belum tercapai target berdasarkan rencana operasional tahunan. (3) Pengembangan Human Capital pada Universitas Muhammadiyah Bengkulu diarahkan pada nilai rasio ketercukupan setiap program studi. (4) Pengembangan sumberdaya Human Capital dosen dilakukan dengan pola rekruitmen dosen baru dan studi lanjut. Keyword: Human Capital Management |
| Date: | 2019–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:n7yue&r=all |
| By: | Yushi Hamaguchi |
| Abstract: | In this paper we study a time-inconsistent consumption-investment problem with random endowments in a possibly incomplete market under general discount functions. We provide a necessary condition and a verification theorem for an open-loop equilibrium consumption-investment pair in terms of a coupled forward-backward stochastic differential equation. Moreover, we prove the uniqueness of the open-loop equilibrium pair by showing that the original time-inconsistent problem is equivalent to an associated time-consistent one. |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1912.01281&r=all |
| By: | Peter C.B. Phillips (Cowles Foundation, Yale University); Zhentao Shi (The Chinese University of Hong Kong) |
| Abstract: | The Hodrick-Prescott (HP) ï¬ lter is one of the most widely used econometric methods in applied macroeconomic research. The technique is nonparametric and seeks to decompose a time series into a trend and a cyclical component unaided by economic theory or prior trend speciï¬ cation. Like all nonparametric methods, the HP ï¬ lter depends critically on a tuning parameter that controls the degree of smoothing. Yet in contrast to modern nonparametric methods and applied work with these procedures, empirical practice with the HP ï¬ lter almost universally relies on standard settings for the tuning parameter that have been suggested largely by experimentation with macroeconomic data and heuristic reasoning about the form of economic cycles and trends. As recent research \citep{phillips2015business} has shown, standard settings may not be adequate in removing trends, particularly stochastic trends, in economic data. This paper proposes an easy-to-implement practical procedure of iterating the HP smoother that is intended to make the ï¬ lter a smarter smoothing device for trend estimation and trend elimination. We call this iterated HP technique the \emph{boosted HP ï¬ lter} in view of its connection to $L_{2}$-boosting in machine learning. The paper develops limit theory to show that the boosted HP (bHP) ï¬ lter asymptotically recovers trend mechanisms that involve unit root processes, deterministic polynomial drifts, and polynomial drifts with structural breaks, thereby covering the most common trends that appear in macroeconomic data and current modeling methodology. In doing so, the boosted ï¬ lter provides a new mechanism for consistently estimating multiple structural breaks even without knowledge of the number of such breaks. A stopping criterion is used to automate the iterative HP algorithm, making it a data-determined method that is ready for modern data-rich environments in economic research. The methodology is illustrated using three real data examples that highlight the differences between simple HP ï¬ ltering, the data-determined boosted ï¬ lter, and an alternative autoregressive approach. These examples show that the bHP ï¬ lter is helpful in analyzing a large collection of heterogeneous macroeconomic time series that manifest various degrees of persistence, trend behavior, and volatility. |
| Keywords: | Boosting, Cycles, Empirical macroeconomics, Hodrick-Prescott filter, Machine learning, Nonstationary time series, Trends, Unit root processes |
| JEL: | C22 C55 E20 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2212&r=all |
| By: | Yen Joe, Wong |
| Abstract: | A company's profitability performance or return on assets (ROA) can be affected by its internal and external variables. The internal variables that used in this study were operating margin, corporate governance index, current ratio and average collection period whereas the external variables used were inflation, GDP, interest rate, exchange rate, and standard deviation. The main objective of this study was to examine the impacts of firm-specific factors and macroeconomics factors towards company performance. The independence variables of firm-specific factors and macroeconomic factors were examined to determine their relationship with the dependent variable which is the company performance or ROA. Data were gathered through the company's annual reports, Focus Economics, World Bank and International Monetary Fund (IMF) and was analyzed by using Statistical Package for Social Science (SPSS) version 22. Besides, this study applied descriptive analysis, correlation analysis, coefficients, and multiple regression analysis to examine the relationship between the variables. The multiple regression analysis of company performance shows that there is significant relationship with the average collection period and inflation. The recommendation for this study is that Salesforce Inc should practices well risk management in order to mitigate unexpected threats. In addition, Salesforce Inc should also invest in corporate social responsibility to maintain its sustainable development. This study is able to help people in studying the impacts of the firm-specific variables and macroeconomic variables towards the company performance. |
| Keywords: | Firm-specific Factors, Macroeconomics Factors, Company Performance |
| JEL: | G3 G32 O16 |
| Date: | 2019–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:97283&r=all |
| By: | Le, Huong; Ho, Toan Manh (Thanh Tay University Hanoi) |
| Abstract: | This paper examines the macro-economic performance of Vietnam through the six phases of Doi Moi reform and analyzes the impact of external liberalization on economic growth, aggregate demand, employment and income distribution. The decomposition of aggregate demand suggests that private investment was the most important determinant of Vietnamese economic growth during the period of 1994 – 2011, while government expenditure has become more significant since 2005, and the external sector together with government expenditure are the important driving factors of Vietnamese economic growth since 2012. The decomposition of overall labor productivity highlighted the fact that sectoral productivity growth of the service sector plays an important role in the improvement of overall labor productivity in Vietnam. |
| Date: | 2019–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:ctj5z&r=all |