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on Macroeconomics |
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Issue of 2021‒11‒01
94 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Kremer, Manfred; Chavleishvili, Sulkhan |
| JEL: | C14 C31 C43 C53 E44 G01 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242346&r= |
| By: | Dietrich, Diemo; Gehrig, Thomas |
| JEL: | D11 D83 E21 E22 G21 L22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242347&r= |
| By: | Exler, Florian; Hansak, Alexander |
| JEL: | E21 E43 G18 G41 G51 K12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242359&r= |
| By: | Asaduzzaman, Md |
| Abstract: | The main objective of this study is to empirically examine the relationship between inflation and economic growth in Bangladesh and to investigate the ongoing possible threshold effect. This study draws on diverse tables and charts, correlation matrices, pair-wise Granger Causality tests, ADRL (General to Specific Approach) test, and a quadratic regression equation estimated by OLS using time series annual data covering the sample period from 1980 to 2017. The results demonstrate that the relationship between inflation and GDP growth is non-linear with a subsistence of a breakpoint, which means the inverted U-shape curve. Moreover, the Granger Causality shows that economic growth does granger cause inflation. The empirical result indicates that when the inflation level reaches the threshold level at 7.84 percent then the economic growth is in peak position. This study proposed that the Bangladesh Bank should maintain the precautious and growth-friendly monetary policy structure by keeping inflation targeting below 7.84 percent, or else the growth might be held back. |
| Keywords: | Threshold Inflation, GDP Growth, Quadratic Regression Model, Bangladesh Economy |
| JEL: | C1 C15 C3 C32 E0 E5 E52 E58 E6 O4 O42 O47 |
| Date: | 2021–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110333&r= |
| By: | Kamalyan, Hayk |
| Abstract: | This paper studies how the effects of monetary and fiscal policy vary depending on the business cycle phase. It shows that in a medium-scale DSGE model, estimated on US data, monetary policy has a stronger impact on the economy in downturns and booms. Labor and capital income taxes display similar patterns. Government expenditure shocks and consumption tax shocks, on the contrary, have a stronger impact on output in depressions and recoveries. The paper also shows that accounting for the source of business cycle fluctuations is potentially important when assessing state-dependence in policy transmission. |
| Keywords: | business cycle phases, phase-dependent policy, monetary policy, fiscal policy |
| JEL: | E31 E32 E37 E52 E62 |
| Date: | 2021–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110341&r= |
| By: | Gianluca Benigno; Paolo Pesenti |
| Abstract: | Recent inflationary pressures in the global economy have rekindled the debate on the link between money growth and price stability. Specifically, does rapid central bank money creation resulting from large-scale purchases of government securities fuel inflationary spending by households and firms? We argue that there are many valid reasons to be skeptical about this textbook narrative. In this post, we look at the international experience with regard to asset purchases, money growth, and inflation dynamics in the pre-COVID era in an attempt to draw lessons from the recent past. Most notably, we find that the view that large-scale purchases of sovereign debt cause unmanageable inflationary pressures is not supported by the experiences of foreign advanced economies. As a matter of fact, despite the extent and duration of the quantitative easing programs in those economies, central banks faced challenges in achieving their inflation objectives. |
| Keywords: | quantitative easing; inflation |
| JEL: | E2 E5 E31 |
| Date: | 2021–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93186&r= |
| By: | Jae Won Lee; Woong Yong Park |
| Abstract: | This paper shows that the requirement for monetary policy to achieve equilibrium determinacy is substantially loosened when price change frequencies are heterogeneous. The result holds both in a simple sticky price model with the constant elasticity of substitution aggregator and no trend inflation and in an extended model with a variable elasticity of substitution aggregator that permits trend inflation at the historical level. With a realistic cross-sectional distribution of the price change frequency, monetary policy can achieve equilibrium determinacy with much weaker responses to inflation. We then revisit the debate on the role of monetary policy in the transition from the Great Inflation to the Great Moderation in the postwar US economy. The evidence that the US economy was subject to self-fulfilling expectations-driven fluctuations in the pre-Volcker period and that the systematic shift in the monetary policy rule has played a decisive role in stabilizing inflation is found to be much weakerthan previously concluded in the literature. |
| Keywords: | Heterogeneity in Price Stickiness; Equilibrium Determinacy; Sectoral Relative Price Dispersion; Monetary Policy; Great Inflation |
| JEL: | E12 E31 E43 E52 N12 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:snu:ioerwp:no143&r= |
| By: | Karl Whelan |
| Abstract: | The inability of central banks to attain their target inflation rates in recent years has raised questions about the extent to which central banks can control the inflation process. This paper discusses the evolution of thought and evidence since the 1960s on the determinants of inflation and the role that should be played by central banks. The paper highlights the roles played by two streams of thought associated with Milton Friedman: Monetarist theories predicting a key role for monetary aggregates in determining inflation and the rise in popularity of the expectations-augmented Phillips curve. We discuss influence of the latter in determining the modern consensus on central bank institutions and the relative roles for fiscal and monetary policies. We conclude with a discussion of macroeconomic developments of the past decade and current policy options to stimulate the economy and restore inflation to its target levels, including the merits of “helicopter money”. |
| Keywords: | Inflation; Central banks; Phillips curve; Milton Friedman |
| JEL: | E31 E52 E58 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:202120&r= |
| By: | Kaldorf, Matthias; Wicknig, Florian |
| JEL: | E23 E44 G11 G32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242413&r= |
| By: | Radke, Lucas; Wicknig, Florian |
| JEL: | D84 E32 E37 E52 E70 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242414&r= |
| By: | Bennani, Hamza; Burgard, Jan Pablo; Neuenkirch, Matthias |
| JEL: | E44 E52 E58 G21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242327&r= |
| By: | Pagenhardt, Laura; Große Steffen, Christoph; Rieth, Malte |
| JEL: | E62 C32 E32 H50 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242330&r= |
| By: | Wacks, Johannes |
| JEL: | E21 E24 J24 J62 D31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242391&r= |
| By: | Kumhof, Michael; Rungcharoenkitkul, Phurichai; Sokol, Andrej |
| JEL: | E44 E51 F41 F44 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242328&r= |
| By: | Horn, Carl-Wolfram; Fischer, Johannes J. |
| JEL: | E44 E52 G34 E22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242445&r= |
| By: | Mendicino, Caterina; Cavalcanti, Tiago; Antunes, Antonio; Peruffo, Marcel; Villamil, Anne |
| JEL: | E2 E5 G1 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242407&r= |
| By: | Ayushi Bajaj (Monash University); Nikhil Damodaran (O.P. Jindal Global University) |
| Abstract: | Consumer payment choice is based on heterogeneous preferences, availability, usage costs, and effective taxes. We examine the consequences of this choice on consumption distribution, aggregate output, welfare and the shadow economy. We analyze India’s sudden demonetization of 86% of the cash in circulation with new notes gradually being replaced over the next several months. The welfare cost of this liquidity shock was equivalent to 1% of total consumption. Even though all consumers experienced a decline in welfare, its extent varied depending on the degree of cash dependence and the ability to switch to non-cash payments. The middle consumption deciles were disproportionately affected. |
| Keywords: | Money, Payments, Shadow economy, Demonetization, Monetary policy |
| JEL: | D83 E41 E52 E58 O17 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2021-15&r= |
| By: | Maciej Stefański |
| Abstract: | The paper estimates macroeconomic effects and decomposes transmission channels of quantitative easing in the United States using 15-variable Bayesian vector autoregressive model with stochastic search variable selection prior, distinguishing between Treasury bond purchases, mortgage-backed securities purchases and Operation Twist. A positive quantitative easing shock has a strong, negative impact on unemployment and no impact on prices, with Treasury purchases and Operation Twist found to be more effective than purchases of mortgage-backed securities. Opposite to the assumptions usually made in the literature, quantitative easing transmits to the real economy mostly via the stock market instead of long-term rates. Among numerous extensions to the baseline model, spillbacks are found to account for 40% of the impact of Treasury purchases on unemployment and commercial paper purchases have similar effects on the economy as purchases of Treasury bonds and mortgage-backed securities. However, baseline estimates are not found to be very robust, and thus substantial uncertainty regarding the macroeconomic effects of QE persists. |
| Keywords: | unconventional monetary policy, large-scale asset purchases, QE, GDP, unemployment, United States, stochastic search variable selection, transmission channels, spillbacks, commercial paper. |
| JEL: | E52 E58 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2021068&r= |
| By: | Hossein Hassani (The Research Institute of Energy Management and Planning (RIEMP), University of Tehran, No. 9, Ghods St., Tehran, Iran); Mohammad Reza Yeganegi (Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | In this paper the role of the El Niño-Southern Oscillation (ENSO), measured by the Equatorial Southern Oscillation Index (EQSOI), is used to formally forecast the inflation and GDP growth rates of the United States (US), advanced (excluding the US) and emerging countries, as well as the world economy (barring the US). We rely on univariate and multivariate Singular Spectrum Analyses (SSA), as well as mixed-frequency version of the latter since the EQSOI is monthly, while GDP is available only at quarterly frequency unlike monthly inflation rates. We find statistically significant evidence of the ability of the EQSOI in forecasting inflation and GDP growth rates of the four economic blocs, though there are exceptions in terms of forecasting gains associated with inflation rate of emerging economies and the growth rate of the US. Our results have important implications for policymakers. |
| Keywords: | GDP growth, Inflation, ENSO, Forecastibility, Mixed-Frequency Multivariate SSA, Continuous Wavelet Transform |
| JEL: | C22 C32 E31 E32 E37 Q54 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202169&r= |
| By: | Thitima Chucherd; Chanokkarn Mek-yong; Nalin Nookhwun; Passawuth Nuntnarumit; Natta Piyakarnchana; Suparit Suwanik |
| Abstract: | This paper explores three monetary and financial issues of retail central bank digital currency (CBDC) in the Thai context. The first insight shows that opportunities in the digital age may arise for Thai citizens and businesses to reap the benefits of a more efficient form of public money and financial innovation. It is possible for Thai citizens to quickly adopt unremunerated CBDC for transactional use within a decade. Second, we point out that there are several ways to utilize retail CBDC for enhancing monetary policy effectiveness, namely, through the bank rate channel and the introduction of new monetary policy tools. Nevertheless, monetary policy should not be the first and foremost objective for the central bank to issue CBDC as there are other factors to consider. These included impacts on the central bank balance sheet and monetary operations, especially for remunerated CBDC. Disintermediation and liquidity risks for Thai financial institutions are also key concerns, which are discussed in the third part. We assess that the risks to the banking sector are low in normal periods, but the well-designed CBDC features are necessary to prevent mounting liquidity risks in distressed periods. |
| Keywords: | CBDC; Digital Currency; Digital Money; Financial Landscape; Monetary Policy; Financial Stability |
| JEL: | E41 E42 E52 E58 G21 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:152&r= |
| By: | Gabriel Garber; Atif R. Mian; Jacopo Ponticelli; Amir Sufi |
| Abstract: | From 2011 to 2014, the Brazilian government conducted a heavily advertised major credit expansion program through government banks as part of its effort to stimulate the economy. Using administrative data on individual-level borrowing and spending, we find that the program led to a substantial rise in borrowing by government employees, especially those with low financial literacy. We trace the impact of credit stimulus on borrowers' consumption through the 2011-16 business cycle, and find that the credit stimulus resulted in higher consumption volatility and lower average consumption over the cycle. Our results suggest a potential downside of using household credit as stimulus in emerging markets. |
| JEL: | D12 D14 E21 E32 G21 G28 G53 O16 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29386&r= |
| By: | Alessandro Mistretta (Bank of Italy) |
| Abstract: | This work analyses the effects of the slowdown that has hit Germany since 2018 on the Italian economy using data from Banca d’Italia’s Survey of Inflation and Growth Expectations. First, we briefly argue that these two economies are highly interconnected and describe the slowdown that has hampered the German economy. Using a difference-in-differences strategy, we show that since 2018, when the German economy weakened, Italian companies’ sentiment and assessment whose sales were oriented towards the German market was comparatively worse than that of other companies. This finding suggests that there is a transmission link between these two economies. Finally, using a forecasting model, we provide a quantification of these effects that finds that it would have been contemporaneous and relevant for GDP, lagging for the total investment. In contrast, we do not find any significant employment effect. |
| Keywords: | Business cycle, Synchronization, Transmission, Survey |
| JEL: | E2 E32 F15 F44 L6 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1346_21&r= |
| By: | William Barnett (Department of Economics, University of Kansas and Center for Financial Stability, New York City); Sohee Park (Department of Economics, University of Kansas) |
| Abstract: | This paper investigates the performance of the Credit-Card-Augmented Divisia monetary aggregates in forecasting U.S. inflation and output growth at the 12-month horizon. We compute recursive and rolling out-of-sample forecasts using an Autoregressive Distributed Lag (ADL) model based on Divisia monetary aggregates. We use the three available versions of those monetary aggregate indices, including the original Divisia aggregates, the credit card-augmented Divisia, and the credit-card-augmented Divisia inside money aggregates. The source of each is the Center for Financial Stability (CFS). We find that the smallest Root Mean Square Forecast Errors (RMSFE) are attained with the credit-card-augmented Divisia indices used as the forecast indicators. We also consider Bayesian vector autoregression (BVAR) for forecasting annual inflation and output growth. |
| Keywords: | Divisia, Credit-Card-Augmented Divisia, Monetary Aggregates, Forecasting, Bayesian vector autoregression, Inflation, Output Growth. |
| JEL: | C32 C53 E31 E47 E51 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:202120&r= |
| By: | Shigeto Kitano (Research Institute for Economics and Business Administration, Kobe University, JAPAN); Kenya Takaku (Faculty of International Studies, Hiroshima City University, JAPAN) |
| Abstract: | We reconsider the role of a sovereign wealth fund in commodity-exporting economies facing recent volatile fluctuations of commodity prices due to the COVID-19 shock. We examine the welfare-improving effect of a sovereign wealth fund from the new perspective of the link between commodity prices and interest rate spreads, which is unique to emerging economies. We show that a sovereign wealth fund becomes more effective in improving welfare for commodity-exporting economies with a stronger link between their com-modity prices and interest rate spreads. |
| Keywords: | Sovereign wealth fund; Commodity prices; Interest rate spreads; DSGE model; Financial frictions; Emerging economies |
| JEL: | E32 E44 F32 O20 Q48 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2021-22&r= |
| By: | Stewen, Iryna; Hoffmann, Mathias; Stiefel, Michael |
| JEL: | E62 F21 F32 H32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242412&r= |
| By: | Moritz Kuhn; Iourii Manovskii; Xincheng Qiu |
| Abstract: | Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities in spatial differences in unemployment, vacancies, job finding, and job filling within each country. This robust set of facts guides and disciplines the development of a theory of local labor market performance. We find that a spatial version of a Diamond-Mortensen-Pissarides model with endogenous separations and on-the-job search quantitatively accounts for all the documented empirical regularities. The model also quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle. |
| JEL: | E24 E32 J63 J64 R13 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29399&r= |
| By: | Frédérique Savignac; Erwan Gautier; Yuriy Gorodnichenko; Olivier Coibion |
| Abstract: | Using a new survey of firms’ inflation expectations in France, we provide novel evidence about the measurement and formation of inflation expectations on the part of firms. First, French firms report inflation expectations with a smaller, but still positive, bias than households and display less disagreement. Second, we characterize the extent and manner in which the wording of questions matters for the measurement of firms’ inflation expectations. Third, we document whether and how the position of the respondent within the firm affects the provided responses. Fourth, because our survey measures firms’ expectations about aggregate and firm-level wage growth along with their inflation expectations, we are able to show that expectations about wages are even more condensed than firms’ inflation expectations and almost completely uncorrelated with them, indicating that firms perceive little link between price and wage inflation. Finally, an experimental treatment indicates that an exogenous change in firms’ inflation expectations has no effect on their aggregate wage expectations. |
| JEL: | E3 E4 E5 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29376&r= |
| By: | Romain Baeriswyl; Samuel Reynard; Alexandre Swoboda |
| Abstract: | The issuance of retail central bank digital currency (CBDC) entails a transfer of risk from commercial banks to the central bank. While this paper does not provide an overall assessment on whether or not to issue a retail CBDC, it analyzes how different mechanisms to limit the risk transfer, such as an unattractive interest rate on retail CBDC, a quantity ceiling or preventing convertibility of cash and reserves into CBDC, have different effects on the ability of retail CBDC to fulfil its intended purposes. In particular, these mechanisms hinder the use of CBDC as a medium of exchange. Specific aspects of demand and challenges related to a potential retail CBDC in Switzerland, namely, a small open economy with a safe-haven currency and a low level of government debt, are discussed. |
| Keywords: | Retail central bank digital currency |
| JEL: | E42 E52 E58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2021-19&r= |
| By: | Manuel Amador; Javier Bianchi |
| Abstract: | We present a tractable dynamic macroeconomic model of self-fulfilling bank runs. A bank is vulnerable to a run when a loss of investors' confidence triggers deposit withdrawals and leads the bank to default on its obligations. We analytically characterize how the vulnerability of an individual bank depends on macroeconomic aggregates and how the number of banks facing a run affects macroeconomic aggregates in turn. In general equilibrium, runs can be partial or complete, depending on aggregate leverage and the dynamics of asset prices. Our normative analysis shows that the effectiveness of credit easing and its welfare implications depend on whether a financial crisis is driven by fundamentals or by self-fulfilling runs. |
| JEL: | E44 E58 F34 G01 G21 G33 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29397&r= |
| By: | Shijun Gu; Chengcheng Jia |
| Abstract: | We study China’s state-owned enterprises (SOE) reform with a focus on the corporatization of SOEs. We first empirically document that small SOEs are more likely to exit or become privatized, whereas big SOEs are more likely to be corporatized while remaining under state ownership. We then build a heterogeneous-firm model featuring financial frictions, endogenous entry and exit, and optimal firm-type choices. Our calibrated model suggests that in the long run, the SOE reform increases the aggregate output by facilitating resource reallocation to the private sector. Along the transition, the corporatization option leads to higher aggregate output than the privatization-only policy by giving a higher financing capacity to more productive incumbent SOEs. |
| Keywords: | firm dynamics; economic reform; Chinese economy |
| JEL: | E23 E44 O16 O41 O43 |
| Date: | 2021–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:93174&r= |
| By: | Callum J. Jones; Mariano Kulish; James Morley |
| Abstract: | We propose a shadow policy interest rate based on an estimated structural model that accounts for the zero lower bound. The lower bound constraint, if expected to bind, is contractionary and increases the shadow rate compared to an unconstrained systematic policy response. By contrast, forward guidance and other unconventional policies that extend the expected duration of zero-interest-rate policy are expansionary and decrease the shadow rate. By quantifying these distinct effects, our structural shadow federal funds rate better captures the stance of monetary policy given economic conditions than a shadow rate based only on the term structure of interest rates. |
| Keywords: | Zero lower bound; Forward guidance; Shadow rate; Monetary policy |
| JEL: | E52 E58 |
| Date: | 2021–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-64&r= |
| By: | Michele Cantarella (University of Helsinki); Andrea Neri (Bank of Italy); Giovanna Ranalli (Università degli Studi di Perugia) |
| Abstract: | The financial and economic crisis that have shaken many countries in the last years have increased demand for timely, coherent and consistent distributional information for the household sector. In the Euro area, most of the national central banks collect such information through income and wealth surveys, which are often used to inform their decisions. These surveys, however, may be affected by non-response and under-reporting, determining a mismatch with macroeconomic figures from national accounts. In this paper, we develop a novel allocation method that extends proportional allocation and combines information from a power law (Pareto) model with imputation procedures based on calibration to address these issues simultaneously, when only limited external information is available. Finally, we produce distributional indicators for four Euro-Area countries, which are consistent with their national accounts. |
| Keywords: | wealth distribution, non-response, measurement error, Pareto distribution, survey calibration, household finance and consumption survey |
| JEL: | D31 E01 E21 N3 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_646_21&r= |
| By: | Klaus Adam (University of Mannheim); Erwan Gautier (Banque de France); Sergio Santoro (Bank of Italy); Henning Weber (Deutsche Bundesbank) |
| Abstract: | Using micro price data underlying the Harmonized Index of Consumer Prices in France, Germany and Italy, we estimate relative price trends over the product life cycle and show that minimizing price and mark-up distortions in the presence of these trends requires targeting a significantly positive inflation target. Relative price trends shift the optimal inflation target up from a level of zero per cent, as suggested by the standard sticky price literature, to a range of 1.1-2.1 per cent in France, 1.2-2.0 per cent in Germany, 0.8-1.0 per cent in Italy, and 1.1-1.7 per cent in the euro area (three-country average). Differences across countries emerge due to systematic differences in the strength of relative price trends. Other considerations not taken into account in the present paper may push up the optimal inflation targets further. The welfare costs associated with targeting zero inflation turn out to be substantial and range between 2.1 and 4.5 per cent of consumption in present-value terms. |
| Keywords: | Optimal inflation target, micro price trends, welfare |
| JEL: | E31 E52 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1344_21&r= |
| By: | Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg |
| JEL: | O38 H50 H12 E32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242467&r= |
| By: | Maneerat Gongsiang; Pongpitch Amatyakul |
| Abstract: | Using monthly Thai data from 2003–2020, we examine the determinants of the future distribution of inflation. We evaluate how different risk factors predict 1-year- ahead future distributions of CPI inflation and its components. Risk factors come from 5 different groups of variables: inflation expectations, domestic economic activity, global economic activity, financial conditions, and component-specific factors. We obtain points on the future distributions of inflation through quantile regressions and fitting those points with skewed-t distributions. Our focus is on the outlook in the tails of the distribution, which recent literature referred to as `inflation-at-risk.' We find, as expected, that the whole inflation distribution has shifted lower, and thus the probability of negative inflation has increased markedly in recent years. There is a structural break around 2015 that affects both the distributions of inflation and their determinants. This structural break makes it challenging to make out-of-sample forecasts, thus, we focus on in-sample evaluation and explanations. For risk factors, we observe that the tightening of financial conditions and the decreasing world production are prominent sources of downside risks to inflation. Inflation expectations also play a smaller role in the lower quantiles, signaling its lower effectiveness in anchoring actual inflation during disinflationary periods. Finally, high global and domestic economic activity can be effective in decreasing downside risks in the lower tail, providing policy makers a way to counter these risks by stimulating the economy. |
| Keywords: | Inflation Determinants; Central Bank Policies |
| JEL: | E31 E52 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:151&r= |
| By: | Mariano Graziano (Bank of Italy); David Loschiavo (Bank of Italy) |
| Abstract: | The Covid-19 pandemic led to a large and immediate decline in households’ aggregate spending and a surge in bank and postal deposits; although little is known about how this was distributed. This paper overcomes the lack of timely micro-data on households’ liquidity by looking at supervisory data on deposits, introducing a new method to estimate the trend in liquidity distribution and the percentage of liquidity-poor households. We find that in 2020 there was a decrease both in the degree of deposit inequality among Italian households and in the share of liquidity-poor households, alongside government support measures that allowed some households at the bottom of the liquidity ladder to save out of their declining income. The increase in households’ liquidity improved their ability to repay debts and this could help spending patterns to rebound once confidence about the economic outlook is restored. Despite this, households with insufficient liquidity buffers still constitute a large share of population, making their debt repayment capacity dependent on the strength of the economic recovery. |
| Keywords: | liquidity, distribution, financial poverty |
| JEL: | D14 E21 E6 E66 H3 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_642_21&r= |
| By: | Matthew Smith; Danny Yagan; Owen M. Zidar; Eric Zwick |
| Abstract: | This paper studies the coevolution of the fall in the US corporate sector labor share and the rise of business activity in tax-preferred, pass-through form. Reallocating activity to the form it would have taken prior to the Tax Reform Act of 1986 accounts for one third of the decline in the corporate sector labor share between 1978 and 2017. Our adjustments are concentrated among mid-market firms in services, leaving a larger role for the manufacturing sector and superstar firms in driving the remaining decline in the labor share. Our findings highlight the importance of tax policy when measuring factor shares. |
| JEL: | E01 E25 H25 J32 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29400&r= |
| By: | Nicola Fuchs-Schündeln; Dirk Krueger; André Kurmann; Etienne Lalé; Alexander Ludwig; Irina Popova |
| Abstract: | Using a structural life-cycle model and data on school visits from Safegraph and school closures from Burbio, we quantify the heterogeneous impact of school closures during the Corona crisis on children affected at different ages and coming from households with different parental characteristics. Our data suggests that secondary schools were closed for in-person learning for longer periods than elementary schools (implying that younger children experienced less school closures than older children), and that private schools experienced shorter closures than public schools, and schools in poorer U.S. counties experienced shorter school closures. We then extend the structural life cycle model of private and public schooling investments studied in Fuchs-Schuendeln, Krueger, Ludwig and Popova (2021) to include the choice of parents whether to send their children to private schools, empirically discipline it with data on parental investments from the PSID, and then feed into the model the school closure measures from our empirical analysis to quantify the long-run consequences of the Covid-19 school closures on the cohorts of children currently in school. Future earnings- and welfare losses are largest for children that started public secondary schools at the onset of the Covid-19 crisis. Comparing children from the top- to children from the bottom quartile of the income distribution, welfare losses are ca. 0.8 percentage points larger for the poorer children if school closures were unrelated to income. Accounting for the longer school closures in richer counties reduces this gap by about 1/3. A policy intervention that extends schools by 3 months (6 weeks in the next two summers) generates significant welfare gains for the children and raises future tax approximately sufficient to pay for the cost of this schooling expansion. |
| JEL: | E24 E62 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29398&r= |
| By: | Alfonso Rosolia (Bank of Italy) |
| Abstract: | I document the response of the inflation expectations, and pricing and labour demand decisions of Italian firms to randomly provided information about recent inflation and assess the causal effect of the former on firms’ decisions. I use a standard menu cost model to show that conventional IV2SLS estimates based on variation of agents’ inflation expectations generated by experimental manipulation of their information sets are likely devoid of casual content because in such experimental settings some assumptions required for their causal interpretation fail. I discuss alternative estimators based on assumptions more likely to be consistent with the underlying theoretical framework. Empirically, I find that randomly informed firms substantially revise their inflation expectations but do not revise pricing and hiring decisions. Causal inference from appropriate estimators consistently reveals that the lack of reduced form effects reflects absence of statistically significant effects of expected inflation on firms’ decisions rather than offsetting responses. These results cast doubts on the possibility of obtaining substantial real effects through communication strategies that reach the general public more effectively. |
| Keywords: | expectations, experimental data, information, communication, learning. |
| JEL: | E2 E3 D8 C01 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1353_21&r= |
| By: | Robert J. Hill (Department of Economics, University of Graz, 8010 Graz, Austria); Alicia N. Rambaldi (School of Economics, University of Queensland, Brisbane, Qld 4072, Australia) |
| Abstract: | We survey some recent developments in the literature on hedonic price indices for housing. The main classes of hedonic methods are presented along with some new methods that have become popular recently. A number of new approaches are then considered for controlling for location in hedonic models. Next we consider how hedonic models can be used to construct separate price indices for land and structures. Significant progress has been made recently in this field. The survey concludes with a discussion of ways of computing higher frequency (e.g., weekly) hedonic price indices, and ways of deriving house price indices for the whole housing stock, as opposed to just those properties that have traded recently. |
| Keywords: | Adoption of hedonic indices; Controlling for location; Land and structure indices; Higher frequency indices |
| JEL: | C31 C43 E01 E31 E52 R31 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uqcepa:169&r= |
| By: | Edward N. Wolff |
| Abstract: | Two hallmarks of U.S. monetary policy since the 1981-1982 recession have been declining interest rates and moderation in inflation. Coincident with these trends has been a surge in U.S. wealth inequality, with the Gini coefficient up by 0.070 between 1983 and 2019. This paper analyzes the connection between these two developments on the basis of the Survey of Consumer Finances. Contrary to expectations, the paper finds that these two monetary effects have reduced wealth inequality rather than increasing it. The effect is sizeable, with the Gini coefficient declining by 0.045 over these years. Asset price changes and debt devaluation accounted for 72.6 percent of the advance of mean wealth over 1983-2019. They also would have led to a 204.9 percent gain in median wealth, compared to the actual rise of 23.4 percent. Moreover, they have helped lower the racial wealth gap rather than enlarging it. These results are at odds with previous literature in which estimates range from a weak negative effect on inequality to neutral, small positive, and strong positive. In terms of methodology, this paper differs from previous work by focusing on only the direct effects of interest rate changes and inflation on the household balance sheet. |
| JEL: | D31 H31 J15 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29392&r= |
| By: | Hyeyoon Jung |
| Abstract: | I exploit a natural experiment in South Korea to examine the real effects of macroprudential foreign exchange (FX) regulations designed to reduce risk-taking by financial intermediaries. By using crossbank variation in the regulation's tightness, I show that it causes a reduction in the supply of FX derivatives (FXD) and results in a substantial decline in exports for the firms that were heavily relying on FXD hedging. I offer a mechanism in which imbalances in hedging demand, banks' costly equity financing, and firms' costly switching of banking relationships play a central role in explaining the empirical findings. |
| Keywords: | real effects; macroprudential policy; international finance; derivatives hedging; FX risk management |
| JEL: | D14 E44 G15 G28 G32 |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:93271&r= |
| By: | Cardani, Roberta (European Commission); Croitorov, Olga (European Commission); Giovannini, Massimo (European Commission); Pfeiffer, Philipp (European Commission); Ratto, Marco (European Commission); Vogel, Lukas (European Commission) |
| Abstract: | The COVID-19 pandemic led to a sharp contraction of economic activity in the euro area (and worldwide). Its anatomy differs strongly from other crises in recent history. We analyse the short-term economic effects of the COVID-19 shock through the lens of an estimated DSGE model. We augment the canonical DSGE set-up with ‘forced savings’ (lockdowns, social distancing), labour hoarding (short-time work) and liquidity-constrained firms to capture salient demand and supply effects of the COVID shock and the containment and stabilisation policies. Shock decompositions with the estimated model show the dominant role of 'lockdown shocks' ('forced savings', labour hoarding) in explaining the quarterly pattern of real GDP growth in 2020, complemented by a negative contribution from foreign and investment demand particularly in 2020q2 and a negative impact of persistently higher (precautionary) savings. The initial inflation response has been modest compared to the severity of the recession. |
| Keywords: | COVID-19, estimated DSGE model, Euro Area, recession, forced savings |
| JEL: | C11 E1 E20 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrs:wpaper:202110&r= |
| By: | International Monetary Fund |
| Abstract: | The COVID-19 pandemic and oil price shocks have taken a deep toll on the Congolese economy, weighing on incomes and inequality. Debt sustainability challenges precluded Fund financial assistance during the pandemic, and the Extended Credit Facility (ECF) arrangement, approved in 2019, expired in April 2021 without having completed the first review. Recently, debt sustainability has been restored owing to the authorities’ debt restructuring strategy and current and projected higher oil prices. However, the risk of debt distress remains high given liquidity risks and vulnerabilities to negative oil price shocks. The authorities are actively negotiating the resolution of pending external arrears. Until this process is concluded and the negotiations with two external creditors are finalized, debt is classified as being “in distress.” |
| Date: | 2021–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/225&r= |
| By: | Nuttanan Wichitaksorn |
| Abstract: | Macroeconomic data are an important piece of information in decision making for both the public and private sectors in Thailand. However, the release of key macroeconomic data, usually in a lower frequency such as quarterly, is not always in a timely manner. Using the higher frequency data such as monthly and daily to analyze or forecast the lower frequency data can mitigate the release timing effect. This study applies the mixed-frequency data approach to analyze and forecast Thai key macroeconomic data. The mixed data sampling regressions with various specifications are employed and implemented through some macroeconomic data such as gross domestic product and inflation. The results show that in most cases the mixed-frequency models outperform the autoregressive integrated moving average model, which we used as the benchmark model, even during the COVID-19 period. Some policy implications can also be drawn from the analysis. |
| Keywords: | Thai Macroeconomic Data; Mixed-frequency; Forecasting; Vector Autoregression; COVID-19 |
| JEL: | C22 C32 C53 E17 E27 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:146&r= |
| By: | Luisa Corrado (DEF and CEIS, Università di Roma "Tor Vergata"); Stefano Grassi (DEF and CEIS, Università di Roma "Tor Vergata"); Aldo Paolillo (DUniversità di Roma "Tor Vergata") |
| Abstract: | This paper proposes and estimates a new Two-Sector One-Agent model that features large shocks. The resulting medium-scale New Keynesian model includes the standard real and nominal frictions used in the empirical literature and allows for heterogeneous COVID-19 pandemic exposure across sectors. We solve the model nonlinearly and we propose a new nonlinear, non-Gaussian fiter designed to handle large pandemic shocks to make inference feasible. Monte Carlo experiments show that it correctly identifies the source and time location of shocks with a massively reduced running time, making the estimation of macro-models with disaster shocks feasible. The estimation is carried out using the Sequential Monte Carlo sampler recently proposed by Herbst and Schorfheide (2014). Our empirical results show that the pandemic-induced economic downturn can be reconciled with a combination of large demand and supply shocks. More precisely, starting from the second quarter of 2020, the model detects the occurrence of a large negative demand shock in consuming all kinds of goods, together with a large negative demand shock in consuming contact-intensive products. On the supply side, our proposed method detects a large labor supply shock to the general sector and a large labor productivity shock in the pandemic-sensitive sector. |
| Keywords: | COVID-19, Nonlinear, Non-Gaussian, Large shocks, DSGE |
| JEL: | C11 C51 E30 |
| Date: | 2021–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:517&r= |
| By: | Lorenzo Di Domenico (University of Warsaw (PL)) |
| Abstract: | The paper discusses the implications of disaggregation within the theoretical debate on the long-run convergence of the degree of capacity utilization towards the normal one. To this end, we develop an Agent Based – Stock Flow Consistent version of a demand-led growth model based on the capacity adjustment principle, fixed normal rate of capacity utilization and non-capacity creating autonomous component of demand. We show that, once the implicit assumption on the centralized control over the aggregate productive capacity characterizing aggregate models is removed, the economy displays emergent properties: the fluctuations of the business cycle endogenously arise, and the long-run aggregate degree of capacity utilization fluctuates around a level lower than the normal one. These proprieties help to explain some empirical evidence about the tendential under-utilization of productive capacity and confute both the traditional wisdom according to which there is only one degree of capacity utilization (the normal one) compatible with a stable accumulation and the neo-Kaleckian “closure”. To this extent, we point out that the long-run growth path determined within a Supermultiplier model can be somehow characterized by neo-Kaleckian features but, differently from the last one, such “undesired equilibrium” does not present Harrodian Instability: in the quasi-steady state firms keep trying to restore the exogenously given normal degree of capacity utilization without succeeding in that. The emerging phenomena derive, precisely, from considering a multiplicity of firms rather than the aggregate macro firm, and not by their heterogeneity. In particular, for any given distribution of demand across firms, the decentralized control over aggregate productive capacity produces over-investment with respect to the normal growth path. |
| Keywords: | Post-Keynesian economics; Economic growth; Agent Based – Stock Flow Consistent models |
| JEL: | C63 E11 E12 O42 P16 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2116&r= |
| By: | James B. Bullard |
| Keywords: | COVID-19; monetary policy; fomc; federal open market committee; inflation; labor market; real GDP growth |
| Date: | 2021–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93226&r= |
| By: | Vincenzo Mariani (Bank of Italy) |
| Abstract: | This work proposes a reconstruction of survey data that makes it possible to analyse the mechanical effect of ageing on the consumption of Italian households. Ageing has limited the increase in the propensity to spend recorded in the period between 2005 and 2017, and it has had a negative - but small - impact on the dynamics of average, per capita and equivalized household expenditure. The decline in household expenditure in the period considered is almost entirely attributable to the reduction of consumption within the age groups, determined by the negative income dynamics. |
| Keywords: | consumption, saving rate, ageing |
| JEL: | E21 J11 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_638_21&r= |
| By: | James B. Bullard |
| Keywords: | COVID-19; inflation; labor market; monetary policy |
| Date: | 2021–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93225&r= |
| By: | International Monetary Fund |
| Abstract: | The new administration has committed to continue with the Fund-supported Extended Fund Facility (EFF) of SDR 4,615 million (661 percent of quota, about $6.5 billion) that was approved by the IMF Executive Board on September 30, 2020. The authorities’ objectives under the program are to ensure an environmental-friendly growth with high quality jobs, promote a transparent management of public resources, and ensure equity in the conduct of fiscally sustainable policies. Upon the completion of the Second and Third Reviews under the EFF, an additional SDR $568 million would be made available. |
| Date: | 2021–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/228&r= |
| By: | James B. Bullard |
| Keywords: | COVID-19; GDP growth; inflation; monetary policy |
| Date: | 2021–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93231&r= |
| By: | Gavresi, Despina; Litina, Anastasia |
| Abstract: | This paper explores the interplay between past exposure to macroeconomic shocks and pop-ulist attitudes. We document that individuals who experienced a macroeconomic shock during their impressionable years (between 18 and 25 years of age), are currently more proneto voting for populist parties, and manifest lower trust both in national and European institutions. We use data from the European Social Survey (ESS) to construct the differentialindividual exposure to macroeconomic shocks during impressionable years. Our findings sug-gest that it is not only current exposure to shocks that matters (see e.g., Guiso et al. (2020))but also past exposure to economic recessions, which has a persistent positive effect on therise of populism. Interestingly, the interplay between the two, i.e., past and current exposure to economic shocks, has a mitigating effect on the rise of populism. Individuals who wereexposed to economic shocks in the past are less likely to manifest populist attitudes whenfaced with a current crisis, as suggested by the experience-based learning literature. |
| Keywords: | Macroeconomic Shocks, Trust, Attitudes, Populism |
| JEL: | D72 E60 F68 P16 Z13 |
| Date: | 2021–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110215&r= |
| By: | Matthew Smith; Owen M. Zidar; Eric Zwick |
| Abstract: | This paper uses administrative tax data to estimate top wealth in the United States. We assemble new data that links people to their sources of capital income and develop new methods to estimate the degree of return heterogeneity within asset classes. Disaggregated fixed income data reveal that rich individuals earn much more of their interest income in higher-yielding forms, and have much greater exposure to credit risk. Consequently, in recent years, the interest rate on fixed income at the top is approximately three times higher than the average. Using firm-level characteristics to value firms, we find that twenty percent of total pass-through business wealth accrues to those with losses. We combine this new data on fixed income and pass-through business returns with refined estimates of C-corporation equity, housing, and pension wealth to deliver new capitalized wealth estimates. Our approach---which builds on Saez and Zucman (2016) and Bricker, Henriques, and Hansen (2018)---reduces bias because wealth and rates of return are correlated. From 1989 to 2016, the top 1%, 0.1%, and 0.01% wealth shares increased by 7.6, 5.1, and 3.0 percentage points, respectively, to 31.5%, 15.0%, and 7.0%. While these changes are less dramatic than some prior estimates, wealth is very concentrated: the top 1% holds nearly as much wealth as either the bottom 90% or the "P90-99" class. We discuss implications for income inequality measures, capital tax policy, and savings behavior. |
| JEL: | D31 E01 E21 H2 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29374&r= |
| By: | Minetti, Raoul (Michigan State University, Department of Economics); Murro, Pierluigi (Luiss University); Rowe, Nicholas (Michigan State University, Department of Economics) |
| Abstract: | This paper investigates the effects of local nancial development on rms' internationalization in the presence of a heterogeneous banking sector. Using rm-level data from Italy, we document that, when driven by banks with a local focus, nancial development boosts export participation but can depress the export sales of incumbent exporters. We explain these patterns through an industry equilibrium model of international trade with heterogeneous rms and banks. Local nancial deepening enhances banks' ability to monitor domestic and export activities, easing the entry of credit rationed rms into export, but induces credit satiated exporters to partly redirect their production capacity to domestic markets. Calibrating the model to match the data reveals that, when nancial development is too local, increased domestic output and export participation can come at the cost of reduced aggregate exports. |
| Keywords: | Financial Development; Internationalization; Banking Structure; Aggregate Trade Flows |
| JEL: | E44 G21 O16 |
| Date: | 2021–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:ris:msuecw:2021_003&r= |
| By: | Thomas Kroen; Ernest Liu; Atif R. Mian; Amir Sufi |
| Abstract: | Do low interest rates contribute to the rise in market concentration? Using data on firm financials and high frequency monetary policy shocks, we find that falling interest rates disproportionately benefit industry leaders, especially when the initial interest rate is already low. Falling rates raise the valuation of industry leaders relative to industry followers and this effect snowballs as the interest rate approaches zero. There are multiple channels through which falling rates disproportionately benefit industry leaders: (i) the cost of borrowing falls more for industry leaders, (ii) industry leaders are able to raise more debt, increase leverage, and buyback more shares, and (iii) capital investment and acquisitions increase more for industry leaders. All three of these effects also snowball as the interest rate approaches zero. The findings provide empirical support to the idea that extremely low interest rates and the rise of superstar firms are connected. |
| JEL: | E0 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29368&r= |
| By: | Mondolo, Jasmine |
| Abstract: | In recent years, the US and other advanced countries have experienced macroeconomic dynamics which raise some concerns and which, according to the literature, are at least partly attributable to a rise in product market power. This study mainly aims to understand how Italy performs in terms of five relevant economic variables (i.e., domestic investment rate, labour share, labour force participation, wage inequality and economic dynamism), and whether firms’ markups are on the rise. The picture that emerges is mixed, and the negative performance in terms of business dynamism and wage dispersion may be ascribable to an increase in product market power. The firm-level analysis of the Italian manufacturing sector for the years 2011-2018, which complements previous empirical analysis on product market power in this country and accounts for labour market power as well, reveals an increment in the average markup which, however, is not particularly pronounced and unsettling, and which is preceded by a period of steady decline. Moreover, this trend is accompanied by a more remarkable increase in the workers’ labour market power, which helps explain the modest growth in the revenue-based labour share observed during the same period. |
| Keywords: | labour share, market power, markup, investment, inequality |
| JEL: | E25 J42 L11 |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110172&r= |
| By: | Massimiliano Affinito (Bank of Italy); Fabiana Sabatini (Bank of Italy); Massimiliano Stacchini (Bank of Italy) |
| Abstract: | We analyse whether and to what extent both firm and bank soundness are associated with the use of collateral in bank lending, and whether these relationships changed during the global financial crisis and the euro-area sovereign debt crisis. By using a large dataset of 2 million observations at bank and firm level covering the years 2007-13, we find that the degree of collateralization is higher for firms that are financially stressed and have low capitalization and that it increases further for these borrowers during downturns. In addition, we find that collateral policies are tighter at sounder banks, that is, at banks that are more capitalized and have a lower burden of bad loans. This result is consistent with the existence of a negative link between bank soundness and risk-taking in bank lending. |
| Keywords: | bank-lending channel, collateral, financial crises. |
| JEL: | G01 G21 E5 E51 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1352_21&r= |
| By: | Matthew Higgins; Thomas Klitgaard |
| Abstract: | The return of U.S. real GDP to its pre-pandemic level in the second quarter of this year was driven by consumer spending on goods. Such spending was well above its pre-pandemic path, while spending on services was well below. Despite the surge in goods spending, domestic manufacturing has increased only modestly, leaving most of the increase in demand being filled by imports. While higher imports have been a drag on growth, the size of this drag has been moderated by the value created by the domestic transportation, wholesale, and retail sectors in selling these goods. Going forward, a rebalancing of consumer spending toward services could give a lift to growth, by shifting demand toward purchases with little import content. |
| Keywords: | consumer spending; goods; services; Gross National Product; GDP; imports; pandemic; COVID-19 |
| JEL: | E2 F00 |
| Date: | 2021–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93270&r= |
| By: | International Monetary Fund |
| Abstract: | Economic performance has been much better than expected, in part due to the authorities’ forceful policy response. Nevertheless, Brazil’s long-standing challenges of low growth, high debt, and elevated levels of poverty and inequality have been exacerbated by the pandemic. Tragically, more than 550,000 Brazilians have died from COVID-19. |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/217&r= |
| By: | Cherbonnier, Frédéric |
| Abstract: | We examine the provision of insurance against non-observable liquidity shocks for time-inconsistent agents who can privately store resources. When lack of self-control is strong enough, optimal contracts are similar to individual nancial accounts with remunerated savings and costly borrowing. The corresponding rate of return decreases with savings, which gives a theoretical rationale for pension accounts with decreasing incentive schemes, as implemented in most developed countries. Extending the model to an innite horizon, we show that, in the presence of repeated shocks, optimal contracts lead to impoverishment almost surely. Usury laws, capping interest rates, worsen this tendency to over-indebtedness for consumers with low risk aversion. By contrast, hidden storage constrains resource allocation for time-consistent agents, so that optimal contracts induce them to accumulate wealth. Those results show how lack of self-control changes the nature of optimal savings and borrowing instruments, with normative implications in terms of tax policy and credit regulation. |
| Keywords: | Time-inconsistency; self-control; mechanism design; insurance, over-indebtedness; retirement savings; consumer credit; credit regulation; saving incentives |
| JEL: | C61 C63 C73 D82 E21 H21 |
| Date: | 2021–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:tse:iastwp:126129&r= |
| By: | Cherbonnier, Frédéric |
| Abstract: | We examine the provision of insurance against non-observable liquidity shocks for time-inconsistent agents who can privately store resources. When lack of self-control is strong enough, optimal contracts are similar to individual nancial accounts with remunerated savings and costly borrowing. The corresponding rate of return decreases with savings, which gives a theoretical rationale for pension accounts with decreasing incentive schemes, as implemented in most developed countries. Extending the model to an innite horizon, we show that, in the presence of repeated shocks, optimal contracts lead to impoverishment almost surely. Usury laws, capping interest rates, worsen this tendency to over-indebtedness for consumers with low risk aversion. By contrast, hidden storage constrains resource allocation for time-consistent agents, so that optimal contracts induce them to accumulate wealth. Those results show how lack of self-control changes the nature of optimal savings and borrowing instruments, with normative implications in terms of tax policy and credit regulation. |
| Keywords: | Time-inconsistency; self-control; mechanism design; insurance, over-indebtedness; retirement savings; consumer credit; credit regulation; saving incentives |
| JEL: | C61 C63 D73 D82 E21 H21 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126131&r= |
| By: | Oguzhan Cepni (Copenhagen Business School, Department of Economics, Porcelænshaven 16A, Frederiksberg DK-2000, Denmark); Hardik A. Marfatia (Department of Economics, Northeastern Illinois University, 5500 N St Louis Ave, BBH 344G, Chicago, IL 60625, USA); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | The housing markets in districts across the United Kingdom (UK) co-move over time. We use the dynamic factor model to decompose the co-movement in house prices of the smallest possible geographical unit into national, regional, and idiosyncratic factors. Using the Bayesian time-varying parameter VAR (TVP-VAR) model, we study the dynamic impact of uncertainty shocks on the synchronization in housing markets. We find that the estimated national factor accurately tracks the overall housing market cycles in the UK and explains nearly all the variations in East, SouthEast, and SouthWest districts. Furthermore, the results from TVP-VAR indicate that the estimated response of the national factor to uncertainty shocks is negative. However, the magnitude of the effect is more pronounced and persists longer in the case of housing price uncertainty shocks compared to overall economic uncertainty. Overall, our results suggest that uncertainty about house prices is a primary driver of the national factor. |
| Keywords: | Uncertainty Shocks, Macroeconomic Shocks, Housing Prices, Regional Markets, the United Kingdom |
| JEL: | C32 D8 E30 E40 R31 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202168&r= |
| By: | Randal K. Quarles |
| Date: | 2021–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgsq:93263&r= |
| By: | Michele Giammatteo (Bank of Italy); Stefano Iezzi (Bank of Italy); Roberta Zizza (Bank of Italy) |
| Abstract: | This paper explores the role of cash usage in feeding the underground economy by using a unique dataset that combines, at province level, official estimates of Italian firms’ underreporting with data on cash transactions drawn from the aggregate anti-money laundering reports filed to the Italian Financial Intelligence Unit (UIF) by banks. In order to derive causal evidence, we apply two different econometric strategies: an instrumental variable approach and a difference-in-difference approach, which exploits the change in the maximum threshold for cash transactions introduced in 2016, thereby providing a measure of the effect of such policy on tax evasion. We find that an increase in cash usage translates, other things being equal, into a higher level of underreporting by firms, and that raising the cash threshold in 2016 – a measure motivated by the objective of boosting spending – had the side effect of leading to a larger underground economy. |
| Keywords: | shadow economy, tax evasion, cash threshold, bank branches, ATM, cashless payments |
| JEL: | O17 H26 E26 E42 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_649_21&r= |
| By: | Arthur Jacobs; Freddy Heylen (-) |
| Abstract: | We construct and calibrate an overlapping generations model incorporating demographic change and the possibility to automate the production process to test the hypothesis put forward by Acemoglu and Restrepo (2017). In line with their hypothesis, we find that ageing is a powerful force stimulating the adoption of automation technologies in OECD economies. Ageing-induced automation is found to soften the negative effects of labour scarcity and rising old-age dependency rates on per capita growth, but the compensation is incomplete. One important reason is that automated tasks are far from perfect substitutes for tasks executed by human labour. A second reason is that ageing-induced automation reduces the intensity of positive behavioural reactions to ageing in the form of retiring later and investing more in human capital. Moreover, the partial compensation comes at the price of rising wage and welfare inequality between individuals of different innate ability level and a fall in the net labour share of income. Compared to existing literature, we pay special attention to the theoretical and empirical foundations of the modelling of automation. Theoretically, our work is the first one testing this hypothesis that relates the approach to automation rigorously to the state-of the-art conception by Acemoglu and Restrepo (2018a; 2018b). Empirically, we tested and largely confirmed the validity of our approach and calibration by comparing model predictions of (changes in) automation density to actual data on robotization in a cross-country fashion. |
| Keywords: | Automation, Demographic change, Secular stagnation, Overlapping generations model, Robotics, Factor shares |
| JEL: | E22 E27 J11 J23 J24 J31 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:21/1030&r= |
| By: | Qiao, Elizabeth (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise) |
| Abstract: | In this paper, the author provides a bibliography of major and minor scholarly writings on free banking up to mid-2021. It is helpful both for expanding knowledge of the history of free banking and for providing references that may be useful for thinking about some aspects of cryptocurrencies. |
| Keywords: | Bibliography; free banking |
| JEL: | E42 E50 |
| Date: | 2021–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:ris:jhisae:0193&r= |
| By: | Nicola Amendola (DEF, Università di Roma "Tor Vergata"); Lorenzo Carbonari (CEIS & DEF, Università di Roma "Tor Vergata"); Leo Ferraris (Università di Milano-Bicocca) |
| Abstract: | We examine a theoretical model of liquidity with three assets {money, government bonds and equity- that are used for transaction purposes. Money and bonds complement each other in the payment system. The liquidity of equity is derived as an equilibrium outcome. Liquidity cycles arise from the loss of confidence of the traders in the liquidity of the system. Both open market operations and credit easing play a beneficial role for different purposes. |
| Keywords: | Money, Bonds, Equity, Liquidity, Credit Easing. |
| JEL: | E40 |
| Date: | 2021–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:516&r= |
| By: | James B. Bullard |
| Keywords: | COVID-19; inflation |
| Date: | 2021–10–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93233&r= |
| By: | Alain Raybaut (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019)) |
| Abstract: | This paper focusses on some relatively neglected French contributions to the revival of nonlinear business theory around 1980. Drawing on the formal distinction between continuous and discrete-time modeling, we investigate the mathematical and analytical features of these contributions. The Benassy model exemplifies the use of the Poincaré-Bendixon theorem to prove the existence of endogenous cycles in a simple non-Walrasian framework. The discretization of Kaldor's model by Dana and Malgrange mobilizes recent advances in bifurcation theory and chaotic dynamics developed at the same time by French scholars in dynamical systems. It is shown that both contributions build on the aggregate macroeconomic framework, but differ substantially in their objectives and ambition. Benassy mobilizes the nonlinear approach to extend his non-Walrasian theory to short-term dynamics. On the contrary, Dana and Malgrange are more interested in the operational aspects of nonlinear modeling. For the these reasons, this second line of research will contribute to further important developments in nonlinear dynamics in France, albeit in a different perspective. |
| Keywords: | Endogenous business cycle theory,Nonlinear dynamics,Non-Walrasian and Kaldorian macrodynamics |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03375804&r= |
| By: | James B. Bullard |
| Keywords: | inequality; monetary policy |
| Date: | 2021–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93227&r= |
| By: | International Monetary Fund |
| Abstract: | Since the 2015 FSAP, the NBG has significantly strengthened its institutional framework for macroprudential policy and put in place a comprehensive toolkit. Among other reforms, to strengthen the transparency of and accountability for macroprudential policy, the NBG published its Macroprudential Policy Strategy in 2019, which sets out five intermediate objectives: (i) mitigating and preventing excessive credit growth and leverage; (ii) mitigating and preventing excessive maturity mismatch and market illiquidity; (iii) limiting direct and indirect exposure concentrations; (iv) limiting the systemic impact of misaligned incentives with a view to reducing moral hazard; and (v) reducing dollarization of the financial system. |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/220&r= |
| By: | Jaison R. Abel; Jason Bram; Richard Deitz; Jessica Lu |
| Abstract: | As the economy continues to recover from the pandemic recession, many businesses are struggling to keep up with surging demand amid widespread supply shortages and delays. While a rare phenomenon before the pandemic, supply chain disruptions have become increasingly common, with transportation of goods becoming especially tricky due to myriad issues such as clogged ports and difficulty finding truck drivers. Indeed, such supply disruptions are expected to continue into next year. Our October regional business surveys asked firms to what extent, if any, they are being affected by supply problems and what measures they have taken in response. Difficulty obtaining supplies was nearly universal among survey respondents, affecting about 80 percent of service firms and 95 percent of manufacturers. A large share of businesses in the region have responded to the disruptions by increasing their selling prices and scaling back their operations. |
| Keywords: | pandemic; surveys; supply disruptions; COVID-19 |
| JEL: | R10 E2 |
| Date: | 2021–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93235&r= |
| By: | Corina Boar; Danial Lashkari |
| Abstract: | Based on responses in the General Social Survey, we construct an index that captures non-monetary qualities of occupations, such as respect, learning, and work hazards, relevant to the well-being of workers. Using the Panel Study of Income Dynamics and National Longitudinal Survey of Youth data, we document that the children of richer US parents are more likely to select into occupations that rank higher in terms of this index. We rationalize this fact by introducing occupational choice with preferences over the intrinsic qualities of occupations into a standard theory of intergenerational mobility. Estimating the model allows us to infer the equivalent monetary compensation each worker receives from the intrinsic qualities of their chosen occupation. Earnings adjusted to reflect this additional compensation show substantially larger persistence of income from parents to children. Our model further predicts that the trends in the composition of labor demand in the US over the past three decades decreased intergenerational persistence, and also led to higher growth in the welfare of the average worker than that implied by observed earnings. |
| JEL: | E2 J2 J6 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29381&r= |
| By: | Jose Asturias; Sewon Hur; Timothy J. Kehoe; Kim J. Ruhl |
| Abstract: | Applying the Foster, Haltiwanger and Krizan (FHK) (2001) decomposition to plant-level manufacturing data from Chile and Korea, we find that the entry and exit of plants account for a larger fraction of aggregate productivity growth during periods of fast GDP growth. To analyze this relationship, we develop a model of firm entry and exit based on Hopenhayn (1992). When we introduce reforms that reduce entry costs or reduce barriers to technology adoption into a calibrated model, we find that the entry and exit terms in the FHK decomposition become more important as GDP grows rapidly, just as they do in the data from Chile and Korea. |
| Keywords: | Entry; Exit; Productivity; Entry costs; Barriers to technology adoption |
| JEL: | E22 O10 O38 O47 |
| Date: | 2021–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:93268&r= |
| By: | International Monetary Fund |
| Abstract: | Already battered by a still unfolding COVID-19 pandemic, Equatorial Guinea was struck on March 7 by massive accidental explosions at a military compound in Bata, its largest city, that killed over 100 people and caused widespread damage to surrounding neighborhoods. These shocks have adversely impacted economic activity and weakened considerably the fiscal and external positions, relative to the EFF-supported program approved in December 2019, creating a substantial financing gap. With the EFF-supported program off-track, as governance reforms have taken longer than originally envisaged, it is not feasible to effectively respond to the humanitarian crisis within the EFF framework. Bringing the program back on track would take time as the authorities continue to work on outstanding structural measures due to capacity constraints in the pandemic context and need for consensus building. Support provided under the RFI, buttressed by appropriate prior actions on governance and safeguards, would create the fiscal space necessary for the authorities to meet the immediate humanitarian needs, and reinvigorate engagement under the EFF-supported program. |
| Date: | 2021–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/219&r= |
| By: | James B. Bullard |
| Keywords: | COVID-19; macroeconomic performance |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93229&r= |
| By: | Luca Rossi (Bank of Italy) |
| Abstract: | Differentiating between standard risk measures and downside risk has a longstanding tradition in finance. Interestingly, this fundamental distinction has been neglected in the literature on risk sharing. Drawing on a simple definition in Markowitz (1959), we translate downside-risk metrics appropriate for stock returns into ones that can be used in our macro-forecasting setting, and propose a new methodology to estimate channels of downside-risk sharing, with an application to the federal fiscal channel in the United States. Our work reinstates some discarded arguments as to why a fiscal union could be desirable, as our findings suggest that public risk sharing is considerably higher than was previously thought. We also show that the great importance long attributed to the capital market channel estimated with popular income smoothing methodologies is instead entirely driven by the neglect of the effect of capital depreciation. Therefore, our paper argues that the relative importance of the fiscal channel as compared to the capital market one has been substantially underestimated. |
| Keywords: | downside risk, risk sharing, fiscal unions |
| JEL: | C80 E01 E17 E64 H29 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1351_21&r= |
| By: | Asaduzzaman, Md |
| Abstract: | This study investigates the empirical relationship between economic growth (GDP) and Foreign Direct Investment (FDI) as well as the Real Effective Exchange Rate (REER) and Trade Openness (TOP) of Bangladesh over the period from 1973 to 2017 by using Johansen cointegration test and VECM analysis. The empirical findings exhibit that there are a distinctive short-run and long-run relationship that exists between economic growth and foreign direct investment in Bangladesh. While the Error Correction Term (ECT) result exhibits that real effective exchange rate and trade openness are causing economic growth in the long-run. This study highly suggests that fully utilizing foreign direct investment and trade openness is one of the best chances of Bangladesh to develop its economy. Therefore, the policymaker should have more foresight to influence foreign direct investment and trade openness on the long term basis, especially to facilitate investment in the special economic zone (such as EPZ) and export more manufacturing goods and services and importing capital goods through maintaining the trade balance. |
| Keywords: | Gross Domestic Product (GDP) growth; Foreign Direct Investment (FDI), Real Effective Exchange Rate (REER); Trade Openness (TOP); Vector Error Correction Model (VECM) Model; Bangladesh Economy |
| JEL: | C1 C15 C3 C32 C4 C49 C5 C51 E6 F1 F3 |
| Date: | 2019–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110328&r= |
| By: | Dräger, Lena; Bui, Dzung; Nghiem, Giang; Hayo, Bernd |
| JEL: | E17 H12 I12 I18 Z18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242375&r= |
| By: | An, Sungbae (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kang, Tae Soo (KAIST College of Business); Kim, Kyunghun (Hongik University); Kang, Eunjung (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | 2008년 글로벌 금융위기는 기존의 통화정책 및 미시건전성정책만으로는 대응할 수 없다는 한계점을 인식하게 되었다. 이에 따라 다수 국가들이 거시건전성 정책수단을 도입하게 되었다. 우리나라도 2010년 이후 대외부문 거시건전성 3종 세트(외환선물환포지션 한도 규제, 외환건전성 부담금 부과, 외국인 채권투자 과세)를 도입해 성공적으로 운용해왔다. 하지만 최근에는 과거와 다른 형태의 잠재 리스크가 금융안정을 위협하고 있음에 유의할 필요가 있다. 이에 따라 본고는 지난 10년간의 거시건전성 정책을 돌이켜 본 후 이를 바탕으로 대외부문 안정성 제고를 위한 정책적 시사점 도출하고자 하였다. Major advanced economies have taken policy measures to strengthen the resilience of the financial system since the 2008 global financial crisis. On that basis, the G20 Coherent Conclusions for the Management of Capital Flows Drawing on Country Experiences was established in 2011, followed by discussions among policy circles including the OECD and IMF. Emerging economies have also taken various policy measures to manage systemic risks associated with cross-border capital flows. In 2010, the Korean government and central bank announced foreign exchange-related macroprudential measures (MPMs) aimed at building resilience against external financial shocks. These measures have greatly contributed to limiting systemic risk by curbing excessive capital inflows. Twelve years have passed since the global financial crisis started, and ten years after the introduction of FX-related macroprudential policy measures in Korea. It is now an opportune time to check the performance and effectiveness of these policies. Given the newly heightened risky environment, it is urgent to discuss how to improve macroprudential measures in response to emerging external risks. (the rest omitted) |
| Keywords: | Korea; macroprudential policies; cross-border; capital flows; G20; MPMs; financial crisis; risk |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2020_018&r= |
| By: | Jose Luis Oreiro; Vitor Antonio Ferreira Dotta; João Pedro Heringer Machado |
| Abstract: | The main objective of this paper is to incorporate the technological asymmetries between countries in the formal structure of the so-called Kaldor-Pasinetti model of growth and distribution. We will name such a model as Kaldor-Pasinetti-Verspagen Growth-Model. Our basic contribution for the literature of post-Keynesian models of growth and distribution is to redefine Kaldor´s technical progress function to incorporate the technological gap in the determination of the natural rate of growth. Such incorporation will make possible for such class of models to generate uneven development between countries, at least for mature economies, that is, economies where all labor force is employed in the modern or capitalist sector. Since in such models, income distribution is the adjusting variable between natural and warranted rate of growth, one important result of our model is that income distribution between wages and profits is a non-linear function of the level of technological gap: below some threshold level of technological gap, profit-share will be reduced with the reduction of technological gap; above such threshold level, hover, the opposite effect occurs. Another important contribution of this article is to make a general formulation of the saving function, incorporating in the same model the contributions of both Kaldor and Pasinetti. From this general formulation, we can make different closures for the general model, which will allow the analysis of the implications of different assumptions about saving behavior over the income and wealth distribution in the balanced-growth path of mature economies that operate with different levels of technological gap. |
| Keywords: | Uneven Development, Post Keynesian Economics, Technological progress |
| JEL: | E12 O11 O14 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2115&r= |
| By: | Satoshi Nakano; Kazuhiko Nishimura |
| Abstract: | Based on a multisector general equilibrium framework, we show that the sectoral elasticity of substitution plays the key role in the evolution of robustness and the asymmetric tails in the aggregate macroeconomic fluctuations. Non-unitary elasticity of substitution of the production networks renders a nonlinear Domar aggregation where normal sectoral productivity shocks translates into a non-normal aggregated shocks. We estimate 100 sectoral elasticities of substitution, using the time-series linked input-output tables for Japan, and find that the production economy is elastic overall. Along with the vested assessment of an inelastic production economy for the US, the contrasting tail asymmetry of the distribution of aggregated shocks between the US and Japan is explored. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.08612&r= |
| By: | James B. Bullard |
| Keywords: | COVID-19; inflation; real GDP growth; labor market |
| Date: | 2021–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93223&r= |
| By: | Bhattacharya, Rudrani (National Institute of Public Finance and Policy); Bhandari, Bornali (National Council of Applied Economic Research); Mundle, Sudipto (National Council of Applied Economic Research) |
| Abstract: | Governments, central banks, private firms and others need high frequency information on the state of the economy for their decision making. However, a key indicator like GDP is only available quarterly and that too with a lag. Hence decision makers use high frequency daily, weekly or monthly information to project GDP growth in a given quarter. This method, known as nowcasting, which started out in advanced country central banks using bridge models. Nowcasting is now based on more advanced techniques, mostly dynamic factor models. In this paper we use a novel approach, a Factor Augmented Time Varying Coefficient Regression (FA-TVCR) model, which allows us to extract information from a large number of high frequency indicators and at the same time inherently addresses the issue of frequent structural breaks encountered in Indian GDP growth. One specification of the FA-TVCR model is estimated using 19 variables available for a long period starting in 2007-08:Q1. Another specification estimates the model using a larger set of 28 indicators available for a shorter period starting in 2015-16:Q1. Comparing our model with two alternative models, we find that the FA-TVCR model outperforms a DFM model in terms of both in-sample and out-of-sample RMSE. The RMSE of the ARIMA model is somewhat lower than the FA-TVCR model within the sample period but is higher than the out-of-sample of the FA-TVCR model. Further, comparing the predictive power of the three models using the Diebold-Mariano test, we find that FA-TVCR model out-performs DFM consistently. In terms of out-of-sample forecast accuracy both the FA-TVC model and the ARIMA model have the same predictive accuracy under normal conditions. However, the FA-TVCR model outperforms the ARIMA model when applied for nowcasting in periods of major shocks like the Covid-19 shock of 2020-21. |
| Keywords: | Nowcasting ; Quarterly Year-on-Year GDP growth ; State-Space Model, India |
| JEL: | C52 C53 O40 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:21/357&r= |
| By: | David Autor; David Dorn; Gordon H. Hanson |
| Abstract: | Abstract We evaluate the duration of the China trade shock and its impact on a wide range of outcomes over the period 2000 to 2019. The shock plateaued in 2010, enabling analysis of its effects for nearly a decade past its culmination. Adverse impacts of import competition on manufacturing employment, overall employment-population ratios, and income per capita in more trade-exposed U.S. commuting zones are present out to 2019. Over the full study period, greater import competition implies a reduction in the manufacturing employment-population ratio of 1.54 percentage points, which is 55% of the observed change in the value, and the absorption of 86% of this net job loss via a corresponding decrease in the overall employment rate. Reductions in population headcounts, which indicate net out-migration, register only for foreign-born workers and the native-born 25-39 years old, implying that exit from work is a primary means of adjustment to trade-induced contractions in labor demand. More negatively affected regions see modest increases in the uptake of government transfers, but these transfers primarily take the form of Social Security and Medicare benefits. Adverse outcomes are more acute in regions that initially had fewer college-educated workers and were more industrially specialized. Impacts are qualitatively—but not quantitatively—similar to those caused by the decline of employment in coal production since the 1980s, indicating that the China trade shock holds lessons for other episodes of localized job loss. Import competition from China induced changes in income per capita across local labor markets that are much larger than the spatial heterogeneity of income effects predicted by standard quantitative trade models. Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes. |
| JEL: | E24 F16 J23 J31 R12 R23 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29401&r= |
| By: | Peter M. Solar (CEREC, Université Saint-Louis - Bruxelles and Faculty of History, University of Oxford) |
| Abstract: | Broadberry, Guan and Li (2018) made estimates for China’s GDP per capita from 980 to 1840 in order to date the onset of the Great Divergence between China and western European economies. In response to Solar’s (2021) criticisms, they (2021) made some revisions to the estimates but largely dismissed most of Solar’s concerns, particularly those about their series for China’s population and its implications for dating the Great Divergence. This working paper assesses their revisions, reaffirms concerns about the level of their 1840 benchmark, and points out the weaknesses of the population figures in greater detail. The dating of the Great Divergence turns out to depend on the population series used and on the interpretation of what was happening to incomes in China during the mid-seventeenth century. This paper recommends considerable skepticism about Broadberry, Guan and Li’s estimates. |
| Keywords: | China, Great Divergence, historical national accounts, population |
| JEL: | E1 N15 O47 O53 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0217&r= |
| By: | Daniel L. Greenwald; Adam Guren |
| Abstract: | To what extent did an expansion and contraction of credit drive the 2000s housing boom and bust? The existing literature lacks consensus, with findings ranging from credit having no effect to credit driving most of the house price cycle. We show that the key difference behind these disparate results is the extent to which credit insensitive agents such as landlords and unconstrained savers absorb credit-driven demand, which depends on the degree of segmentation in housing markets. We develop a model with frictional rental markets that allows us to consider cases in between the extremes of no segmentation and perfect segmentation typically assumed in the literature. We argue that the relative elasticities of the price-rent ratio and homeownership with respect to an identified credit shock is a sufficient statistic to measure the degree of segmentation. We estimate this moment using three different credit supply instruments and use it to calibrate our model. Our results reveal that rental markets are highly frictional and closer to fully segmented, which implies large effects of credit on house prices. In particular, changes to credit standards can explain between 34% and 55% of the rise in price-rent ratios over the boom. |
| JEL: | E3 G51 R31 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29391&r= |
| By: | David G. Blanchflower; Alex Bryson |
| Abstract: | Economic shocks are notoriously difficult to predict but recent research suggests qualitative metrics about economic actors’ expectations are predictive of downturns. We show consumer expectations indices from both the Conference Board and the University of Michigan predict economic downturns up to 18 months in advance in the United States, both at national and at state-level. All the recessions since the 1980s have been predicted by at least 10 and sometimes many more point drops in these expectations indices. A single monthly rise of at least 0.3 percentage points in the unemployment rate also predicts recession, as does two consecutive months of employment rate declines. The economic situation in 2021 is exceptional, however, since unprecedented direct government intervention in the labor market through furlough-type arrangements has enabled employment rates to recover quickly from the huge downturn in 2020. However, downward movements in consumer expectations in the last six months suggest the economy in the United States is entering recession now (Autumn 2021) even though employment and wage growth figures suggest otherwise. |
| JEL: | E17 J01 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29372&r= |
| By: | Kim, Hyosang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Yang, Da Young (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Soyoung (Seoul National University) |
| Abstract: | 본 연구는 개별 국가들을 국제투자의 한 주체로 보고 국가 차원의 순대외자산 포트폴리오를 수익성 측면에서 분석하였다. 이를 위해 먼저 내국인의 해외자산 수익률, 외국인의 국내자산 수익률, 순수익률 등 각국의 대외자산 수익률을 정의하고 산출하였다. 이렇게 산출한 각국의 대외자산 수익률을 바탕으로 정성적 분석 및 실증분석을 실시하여 경제적 함의를 찾고자 했다. As external asset positions increased significantly in both developed and emerging countries due to globalization and financial integration, countries are exposed to capital gains and losses caused by fluctuations in exchange rates and asset values. This study constructs the return rate of external asset position (rate of external) by considering the individual country as the economy’s representative agent. Assuming that the foreign asset position is the optimal investment portfolio, the rate of external defined in this study directly measures the country’s risk premium. The rate of external is also the excess return of the portfolio that takes a long for foreign assets and a short for foreign liabilities. We observe that advanced economies have a far greater rate of external than emerging countries in general. In comparison, emerging countries have a relatively higher rate of external during crisis periods. Thus, international risk sharing and consumption smoothing mechanism works through external investment. Advanced economies are in a speculator position, while emerging countries are in a hedging position. We also empirically analyze the determinants of the rate of external. The rate of external is higher as the foreign assets’ size, and the proportion of risky assets increased. There are negative relationships with the domestic currency value, GDP growth rate, inflation rate, and current accounts. The rate of external is higher as the financial market and institutions developed, and the financial market openness increased. However, these effects are offset in the event of financial instability proxied by the VXO index. Contrary to general expectations, foreign reserves are likely to relate to the return on foreign liabilities rather than foreign assets. The more the foreign reserves, the higher the return on foreign liability. Countries with larger amounts of foreign reserves are more likely to have favorable economic conditions such as trade surplus, higher growth rate, and higher productivity, bringing a higher return rate to foreign investors. These effects, however, disappear in times of financial instability. |
| Keywords: | external asset; investment; foreign; return |
| Date: | 2021–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepre:2020_006&r= |
| By: | F. Lagona (UiB - University of Bergen, Università degli Studi Roma Tre); Fabio Padovano (CREM - Centre de recherche en économie et management - CNRS - Centre National de la Recherche Scientifique - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - UNICAEN - Université de Caen Normandie - NU - Normandie Université) |
| Abstract: | The Political Legislation Cycle theory predicts a peak of legislative production in the pre-electoral period, when legislators focus on voters' welfare to be reelected. This paper verifies the theory on South Korean legislative production (1948–2016); it is the first test of the theory in a country undergoing a process of democratization, thus providing evidence relevant also for the conditional political cycles literature. Two insofar untested hypotheses are verified: 1) peaks of legislative production should increase with the degree of democracy; 2) as the party system and the mechanisms of legislative checks and balances develop, the PLC should become more evident in bills of legislative rather than executive's initiative. A hurdle model estimated on both laws of parliamentary proposal and of government assignment lends empirical support to both hypotheses, with the noticeable feature that PLC in Korea appear more in the form of an upward trend than of pre-electoral peaks. © 2021 Elsevier B.V. |
| Keywords: | Autocracy,Conditional political cycles,Democratic transition,Executive vs. parliamentary legislative initiative,Hurdle model,Over-dispersion,Political legislation cycles,Zero inflation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03225568&r= |
| By: | Maria Begicheva; Oleg Travkin; Alexey Zaytsev |
| Abstract: | Macroeconomic indexes are of high importance for banks: many risk-control decisions utilize these indexes. A typical workflow of these indexes evaluation is costly and protracted, with a lag between the actual date and available index being a couple of months. Banks predict such indexes now using autoregressive models to make decisions in a rapidly changing environment. However, autoregressive models fail in complex scenarios related to appearances of crises. We propose to use clients' financial transactions data from a large Russian bank to get such indexes. Financial transactions are long, and a number of clients is huge, so we develop an efficient approach that allows fast and accurate estimation of macroeconomic indexes based on a stream of transactions consisting of millions of transactions. The approach uses a neural networks paradigm and a smart sampling scheme. The results show that our neural network approach outperforms the baseline method on hand-crafted features based on transactions. Calculated embeddings show the correlation between the client's transaction activity and bank macroeconomic indexes over time. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.12000&r= |
| By: | International Monetary Fund |
| Abstract: | Jordan has taken important steps to enhance its fiscal transparency over the past decade. Notably, there is a comprehensive legal framework for the management of public finances. Fiscal reports have become more comprehensive and cover a high proportion of public sector institutions. The frequency of in-year reporting is at an advanced level, as is the timeliness of publication of the government’s annual financial statements. Fiscal statistics are disseminated in accordance with international standards (SDDS). Fiscal forecasts and budgets have become more forward looking and policy oriented with the introduction of a five-year medium-term budget framework and a program classification. As a result of improvements in fiscal transparency practices, in the 2019 Open Budget Survey, Jordan scored above the global average for transparency, and is the only country in the region ranked overall as ‘green’ on this measure. Nevertheless, the FTE provides a more detailed and in-depth analysis with a broader focus. |
| Date: | 2021–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/224&r= |
| By: | Link, Sebastian; Peichl, Andreas; Roth, Christopher; Wohlfart, Johannes |
| JEL: | D83 D84 E71 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242376&r= |