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The role of local currency pricing in the international transmission effects of a government spending shock in an economy with vertical production linkage and foreign direct investment Journal of Macroeconomics (IF 1.556) Pub Date : 2024-03-10 Kohjiro Dohwa
By constructing a two-country model with asymmetry in price-setting behavior between home and foreign intermediate goods firms, vertical production and trade, and endogenous entry of three types of final goods firms, this paper examines the effects of a home government spending shock. In particular, it focuses on the role of asymmetry in price-setting behavior between home and foreign intermediate
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Monetary policy and reserve requirements with a zero-interest digital euro Journal of Macroeconomics (IF 1.556) Pub Date : 2024-02-16 P, a, o, l, o, , F, e, g, a, t, e, l, l, i
This study presents an analytical framework to investigate the use of reserve requirements as an indirect instrument to manage CBDC flows in an environment with significantly positive rates. This would complement two other possible instruments: hard limits, whose sole use may raise some concerns, and CBDC remuneration, which in a positive rate environment is not considered a viable option. As in the
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The transmission of monetary policy shocks through the markets for reserves and money Journal of Macroeconomics (IF 1.556) Pub Date : 2024-02-11 Michael T. Belongia, Peter N. Ireland
This paper identifies supply and demand curves for bank reserves and a Divisia aggregate of monetary services within a structural vector autoregressive time-series model. Estimated over four sample periods spanning 1967 through 2020, the model illustrates how monetary policy actions can be interpreted with reference to their initial impact on bank reserves and the federal funds rate and their subsequent
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Household heterogeneity and the price puzzle in a new Keynesian model Journal of Macroeconomics (IF 1.556) Pub Date : 2024-01-16 Daisuke Ida
This paper provides a new insight into the price puzzle using a new Keynesian (NK) model with household heterogeneity. To do this, we adopt a tractable heterogeneous-agent NK (THANK) model that nests the two-agent NK (TANK) and representative-agent NK models. We first demonstrate that when the share of liquidity-constrained (LC) consumers is high, the degree of inflation stabilization in the Taylor
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FDI flows and sudden stops in small open economies Journal of Macroeconomics (IF 1.556) Pub Date : 2024-01-04 Sergio Villalvazo
Why are balance of payments crises, characterized by Sudden Stops of capital inflows, more frequent in emerging economies than advanced economies? This paper argues that differences in the composition of the financial account flows explain 30 percent of the gap in the probability of a crisis. I document that although advanced economies have, on average, zero net foreign direct investment (FDI), they
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The political economy of inequality, mobility and redistribution Journal of Macroeconomics (IF 1.556) Pub Date : 2023-12-30 Ignacio P. Campomanes
How does the interaction between inequality and social mobility affect the choice of fiscal policy? I analyze this question in a model of democratic politics with imperfect tax enforcement, where the ability of individuals to evade taxes limits the amount of redistribution in the economy. Social mobility creates an insurance motive that increases voluntary compliance, favoring the tax enforcement process
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Government spending multipliers: Is there a difference between government consumption and investment purchases? Journal of Macroeconomics (IF 1.556) Pub Date : 2023-12-14 Alfred A. Haug, Anna Sznajderska
This paper empirically studies the U.S. multiplier effects of government investment, government consumption and total government purchases on output. We explore dependencies of the multipliers on states of the economy, measured in different ways. Using local projections with instrumental variables, we find that a model without state-dependencies and using total government spending (instead of its components)
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Unveiling the impact of income taxes on inequality in a HACT model Journal of Macroeconomics (IF 1.556) Pub Date : 2023-12-16 Francisco Parro
I introduce a tax shock into a “standard” heterogeneous agent model in continuous time (HACT) to quantify the effect of an income tax on inequality. I find that an income tax, collecting 15% of output, reduces the Gini coefficient by up to 16.9% in an economy with a perfect credit market and up to 24.3% in financial autarky. The tax has a modest effect on production labor income inequality, reduces
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Redistributive policy and R&D-based growth Journal of Macroeconomics (IF 1.556) Pub Date : 2023-12-14 Ken Tabata
This study examines how redistributive policy that attempts to reduce inequality by taxing the bequests of the rich and redistributing the revenue to the poor affects economic growth in an overlapping generations model of R&D-based growth with both product development and process innovation. We show that such a policy simultaneously increases growth and reduces inequality in the long-run. When the
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Trust in public institutions, inequality, and digital interaction: Empirical evidence from European Union countries Journal of Macroeconomics (IF 1.556) Pub Date : 2023-12-13 Flaviana Palmisano, Agnese Sacchi
Declining institutional trust is one of the central problems in modern societies. Identifying its determinants, among which inequality, is fundamental for designing suitable interventions to restore confidence in institutions and preserve the social contract. We study the relationship between the two phenomena for EU-28 countries over the period 2003–2019. We use OLS and IV estimations to show that
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Labor market institutions and technology-induced labor adjustment along the extensive and intensive margins Journal of Macroeconomics (IF 1.556) Pub Date : 2023-11-18 Svetlana Rujin
What is the composition of total hours response to a technology shock in countries with different labor market institutions in terms of extensive and intensive margin movements? To answer this question, I identify technology shocks using structural vector autoregressions (SVARs) and decompose the responses of hours into adjustments along the extensive and intensive margins. I compare the adjustments
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Unconventional monetary policy, financial frictions, and the equity tandem Journal of Macroeconomics (IF 1.556) Pub Date : 2023-11-22 Roland von Campe
A key feature of many DSGE frameworks designed to model Quantitative Easing (QE) is that net worth only plays a relevant role on bank’s balance sheets. In reality, however, net worth of borrowers and lenders plays a relevant role in financing investment projects. I show that this equity tandem has important implications. Net worth of non-financial firms acts as a first line of defense, since non-financial
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The magnifying role of the banking sector during depressions Journal of Macroeconomics (IF 1.556) Pub Date : 2023-11-07 Paulo Júlio, José R. Maria
Is there a magnifying role of the banking sector during depressions? How can a financial perturbation, possibly small-sized, create large impacts on output and enduring recessions? What is the role played by the massive stock of due claims brought about by a financial crisis? We address these questions by putting forth a general equilibrium model endowed with a banking system in which due claims –
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Life-cycle wealth accumulation and consumption insurance Journal of Macroeconomics (IF 1.556) Pub Date : 2023-11-07 Claudio Campanale, Marcello Sartarelli
Households appear to smooth consumption in the face of income shocks much more than implied by life-cycle versions of the standard incomplete market model under reference calibrations. In the current paper we explore in detail the role played by the life-cycle profile of wealth accumulation. We show that a standard model parameterized to match the latter can rationalize between 81 and 100 percent of
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Do central bank words matter in emerging markets? Evidence from Mexico Journal of Macroeconomics (IF 1.556) Pub Date : 2023-11-04 Pavel Solís
This paper analyzes the price and quantity effects of monetary policy statements in an emerging market economy. Surprises in monetary policy are identified using intraday data on asset prices around monetary policy announcements in Mexico. I find that asset prices and the portfolio flows of domestic and foreign investors respond strongly and persistently to both news about the policy rate and guidance
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The limits of limitless debt Journal of Macroeconomics (IF 1.556) Pub Date : 2023-11-04 Kent Osband, Valerio Filoso, Salvatore Capasso
While low real interest rates and issuing public debt in fiat money safeguard against rising sovereign debt-to-GDP ratios, evidence shows that high debt often precedes default, and credit spreads may not signal imminent risk. We offer a simple way to model the trade-offs using local martingales. On the one hand, it acknowledges that large debt overhangs tend to raise default risks. On the other hand
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Seasonal temperature variability and economic cycles Journal of Macroeconomics (IF 1.556) Pub Date : 2023-10-31 Manuel Linsenmeier
This study examines the role of temperature as a driver of seasonal economic cycles. The study first presents a novel dataset of seasonal temperature and seasonal GDP. Stylised facts show that seasonal economic cycles are much more diverse than previous research suggested. The study then attributes seasonal economic cycles to temperature variability. For causal identification, the study proposes a
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Efficiency of short-time work schemes and the role of monetary policy Journal of Macroeconomics (IF 1.556) Pub Date : 2023-10-23 Stefan Wilhelm
This paper examines the relationship between the utilization of short-time work, inflation dynamics and monetary policy. Using a New Keynesian general equilibrium model with search and matching frictions, this study is a first to point out that short-time work can give rise to deflationary tendencies which may impact its efficacy, contingent on the monetary environment. While aggressive inflation targeting
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The effect of legislated tax changes on the trade balance: Empirical evidence for the United States, Germany, and the United Kingdom Journal of Macroeconomics (IF 1.556) Pub Date : 2023-09-24 Bernd Hayo, Sascha Mierzwa
This study uses a narrative account of quarterly discretionary changes in tax liabilities from 1974Q4 to 2018Q2 in a VAR setting to examine whether legislative tax changes affect the trade balance in the US, Germany, and the UK. Six different types of legislative tax changes are considered, including indirect tax changes, personal income tax changes, and business tax changes. The results show that
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Do more frequent price adjustments guarantee less effective monetary stimulus when uncertainty rises? Journal of Macroeconomics (IF 1.556) Pub Date : 2023-09-09 Kwangyong Park
Probably not. When firms face higher uncertainty, they may reset their prices more frequently, but this does not necessarily mean that monetary policy is less effective in boosting real activity. In fact, the real effect of monetary policy may be strengthened because firms shift their attention away from the monetary policy shock to productivity shocks to minimize profit loss due to suboptimal price-setting
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Financial concerns and the marginal propensity to consume in COVID times: Evidence from UK survey data Journal of Macroeconomics (IF 1.556) Pub Date : 2023-09-11 Bruno Albuquerque, Georgina Green
We study how household concerns about their future financial situation may affect the marginal propensity to consume (MPC) during the COVID-19 pandemic. We use a representative survey of UK households to compute the MPC from a hypothetical transfer of £500. We find that household expectations play a key role in determining differences in MPCs across households: households that are concerned about not
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AI revolution and coordination failure: Theory and evidence Journal of Macroeconomics (IF 1.556) Pub Date : 2023-09-09 Burak Ünveren, Tunç Durmaz, Seçkin Sunal
This paper analyzes theoretically and empirically the coordination failure problem inherent within the 21st-century automation revolution. First, we build a general equilibrium model with labor-saving artificial intelligence (AI) technology that is developed through R&D investments in automation. The model exhibits multiple market equilibria due to a positive feedback loop between AI investments and
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On the welfare costs of business cycles: Beyond nondurable goods Journal of Macroeconomics (IF 1.556) Pub Date : 2023-09-07 Fernando Barros, Gabriel T. Couto, Fábio A.R. Gomes
This paper constitutes the first effort to measure the welfare costs of economic cycles considering that the consumer derives utility from the consumption of nondurable goods and services and the stock of durable goods. To accomplish such a task, we put forward a novel approach based on a nonseparable utility function. As a result, we take into account the complementarities among the consumption categories
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Quantitative analysis of a wealth tax for the United States: Exclusions and expenditures Journal of Macroeconomics (IF 1.556) Pub Date : 2023-09-01 Rachel Moore, Brandon Pecoraro
We use a quantitative overlapping generations model with endogenous tax avoidance and rich tax detail to analyze two major issues in the design of a wealth tax for the United States: the provision of exclusions for certain housing and business equity, and the range of government expenditure options allowed for by additional revenues. First, we find that while the exclusion for owner-occupied housing
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Measuring Household Inflation Perceptions and Expectations: The Effect of Guided vs Non-Guided Inflation Questions Journal of Macroeconomics (IF 1.556) Pub Date : 2023-08-17 Bernd Hayo, Pierre-Guillaume Méon
An experiment using a representative survey of the German population shows that letting respondents report a number rather than asking them to choose from a list of predefined ranges lowers the response rate for both perceived past and expected inflation and decreases (increases) reported past (expected) inflation. Income, education, gender, objective and subjective knowledge about monetary policy
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Naïve agents with non-unitary discounting rate in a monetary economy Journal of Macroeconomics (IF 1.556) Pub Date : 2023-08-01 Koichi Futagami, Daiki Maeda
We incorporate naïve agents with a non-unitary discounting rate into a cash-in-advance (CIA) model. Through this extension, we obtain the following results. First, we show that there exists an equilibrium in which the CIA constraint does not bind when individuals discount their utilities from future consumption lower than their utilities from future leisure time. Notably, this non-binding equilibrium
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Global models for a global pandemic: The impact of COVID-19 on small euro area economies Journal of Macroeconomics (IF 1.556) Pub Date : 2023-07-31 Pablo Garcia, Pascal Jacquinot, Črt Lenarčič, Matija Lozej, Kostas Mavromatis
We analyse the COVID-19 pandemic shock on small open economies (SOEs) in the euro area in a unified modelling framework: the Euro Area and the Global Economy model. We find strong negative international spillovers affecting each of the modelled SOEs, stemming not only from the rest of the euro area, but also from the United States and the rest of the world. A lower bound on nominal interest rates in
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Effects of monetary and government spending policy on economic inequality Journal of Macroeconomics (IF 1.556) Pub Date : 2023-07-24 Saroj Dhital, Senyuan Jiang, Jillian Reese
Using detailed micro-level income and expenditure data, we study the effects of monetary and government spending policy shocks on income and expenditure inequality in the US from 1990 to 2018. We find that expansionary monetary and government spending policy shocks systematically decrease income, disposable income and expenditure inequality. There is evidence of time variation on the effects and monetary
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Big Brother is also being watched: Measuring fiscal credibility Journal of Macroeconomics (IF 1.556) Pub Date : 2023-07-17 Nicolas End
Fiscal policy is less credible than monetary policy, due to political economy issues. This paper provides an explicit measure of fiscal credibility, based on the anchoring of private expectations onto official targets. It documents how credibility varied among a sample of 27 European countries over 1995–2019. Credibility behaves like a stock of trust that is affected by fiscal policy, past performance
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Wage rigidity and destabilizing spirals Journal of Macroeconomics (IF 1.556) Pub Date : 2023-07-14
This paper investigates the impact of real wage rigidity on the (de)stabilizing role of demand feedback. I show that destabilizing supply–demand feedback driven by countercyclical precautionary savings demand against uninsured unemployment risk is fundamentally a matter of rigid real wage adjustments over business cycles. Given the estimated wage rigidity consistent with aggregate labor market dynamics
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Child survival and contraception choice: Theory and evidence Journal of Macroeconomics (IF 1.556) Pub Date : 2023-07-12 Joydeep Bhattacharya, Shankha Chakraborty, Minkyong Kim
This paper asks whether increases in child survival bring down fertility and incentivize couples to switch from traditional to modern methods of contraception. Our parsimonious model predicts the answer in each case is, yes. We test these connections using household-level Demographic and Health Surveys from recent fertility transitions using arguably exogenous variation in child survival at the regional
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Taylor rules: Consequences for wealth and income inequality Journal of Macroeconomics (IF 1.556) Pub Date : 2023-06-24 Yoichi Gokan, Stephen J. Turnovsky
This paper compares the consequences of “active” vs. “passive” Taylor rules for wealth and income inequality. Since the distinction is operative only along transitional paths, we compare the implications for two forms of government expenditure that generate such transitions. Our results confirm that the contrasting effects obtained previously for the aggregate economy have significant distributional
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COVID-19 inflation weights in the UK and Germany Journal of Macroeconomics (IF 1.556) Pub Date : 2023-06-17 Francesco Grigoli, Evgenia Pugacheva
The COVID-19 pandemic altered consumption patterns significantly in a short period of time. However, official inflation statistics take time to reflect changes in the weights of the CPI consumption basket. Using credit card data for the UK and Germany, we document how consumption patterns changed and quantify the resulting inflation bias. We find that consumers experienced a higher level of inflation
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Misallocation of talent, teachers’ human capital, and development in Brazil Journal of Macroeconomics (IF 1.556) Pub Date : 2023-06-16 Fernando Barros, Bruno R. Delalibera, Luciano Nakabashi, Marcos J. Ribeiro
In this study, we investigate the allocation of talent in an economy where teachers play a critical role in developing the human capital of the workforce. To this end, we formulate a Roy model with externality in the occupational choice, as the quantity and quality of teachers are key determinants of workers’ human capital. Our analysis suggests that when individuals with greater abilities opt for
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Does automation technology increase wage? Journal of Macroeconomics (IF 1.556) Pub Date : 2023-06-15 Ryosuke Shimizu, Shohei Momoda
This paper examines the relationship between automation technology and wages. In the model, producers either choose automation or non-automation technology, whichever is more profitable. Furthermore, when producers introduce automation technology, they must pay fixed costs, which differ between industries. The main results of this paper indicate that the increased productivity of automation technology
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Public debt and welfare in a quantitative Schumpeterian growth model with incomplete markets Journal of Macroeconomics (IF 1.556) Pub Date : 2023-06-02 Marco Cozzi
This paper quantifies the welfare effects of counterfactual public debt policies using an endogenous growth model with incomplete markets. The economy features public debt, Schumpeterian growth, infinitely-lived agents, uninsurable income risk, and discount factor heterogeneity. Two versions of the model are specified, one with households holding equity in the group of innovating firms. The model is
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Behavioral New Keynesian Models: An empirical assessment Journal of Macroeconomics (IF 1.556) Pub Date : 2023-05-27 Greta Meggiorini
This paper uncovers the fact that cognitive discounting modeled à la Gabaix (2020) is highly generalizable to alternative models and expectational assumptions by offering a mathematically tractable way of introducing behavioral elements in linearized models. This is not the case for other models of bounded rationality, as most derivations, if not all among those proposed up to today, are algebraically
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Public investment, national debt, and economic growth: The role of debt finance under dynamic inefficiency Journal of Macroeconomics (IF 1.556) Pub Date : 2023-05-12 Akira Kamiguchi, Toshiki Tamai
Public investment is a central issue in the dynamic analyses of fiscal policy and economic growth. Debt financing for public investment and its effects have recently received great attention because interest rates have been low, almost invariably remaining below economic growth rates. This paper presents examination of the effects of debt-financed public investment subject to a simple fiscal rule in
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Fiscal stabilization rule Journal of Macroeconomics (IF 1.556) Pub Date : 2023-05-09 Hovick Shahnazarian
The optimal fiscal stabilization rule presented in this paper is derived from a loss function where the government is assumed to keep the structural balance close to its target level and simultaneously stabilize the GDP and inflation gaps. The rule yields the size of the discretionary stabilization measures needed, in addition to automatic stabilizers, to be able to stabilize the business cycle, without
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Business cycle synchronization and African monetary union: A wavelet analysis Journal of Macroeconomics (IF 1.556) Pub Date : 2023-05-06 Gislain Stéphane Gandjon Fankem, Lucien Cédric Fouda Mbesa
In this paper, we analyze the feasibility of an African monetary union based on the necessary condition of business cycle synchronization. In this regard, we examine the synchronization of growth cycles between five Regional Economic Communities (RECs) that will have to merge to form an African monetary union: the East African Community; the Economic Community of Central African States; the Economic
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Wealth in utility, the Taylor principle and determinacy Journal of Macroeconomics (IF 1.556) Pub Date : 2023-04-26 Junzhu Zhao
Wealth in the utility function leads to the discounting to consumer’s Euler equation, enlarging determinacy regions and making it easier for the monetary authority to ensure equilibrium determinacy. We show that a passive policy rule which adjusts nominal interest rate by less than one-for-one in response to the inflation rate is able to rule out equilibrium indeterminacy, if properly specified, due
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Fiscal policy, macroeconomic performance and industry structure in a small open economy Journal of Macroeconomics (IF 1.556) Pub Date : 2023-04-25 Pål Boug, Thomas von Brasch, Ådne Cappelen, Roger Hammersland, Håvard Hungnes, Dag Kolsrud, Julia Skretting, Birger Strøm, Trond C. Vigtel
We analyse how fiscal policy affects both the macroeconomy and the industry structure, using a multi-sector macroeconomic model of the Norwegian economy with an inflation targeting monetary policy. Our simulations show that the magnitude of the government spending and labour tax cut multipliers, whether monetary policy is active or passive, is comparable to what is found in the literature. A novel
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This time truly is different: The cyclical behaviour of fiscal policy during the Covid-19 crisis Journal of Macroeconomics (IF 1.556) Pub Date : 2023-03-21 Philipp Heimberger
Fiscal policy was more countercyclical during the Covid-19 crisis than in previous (crisis) episodes. This paper presents empirical evidence in favour of a “this time truly is different” moment based on analysing the cyclical behaviour of fiscal policy for 28 advanced economies over 1995–2021. Discretionary fiscal policy during the Covid-19 crisis (2020–2021) did more to counteract the downturn – especially
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Staggered wages, unanticipated shocks and firms’ adjustments Journal of Macroeconomics (IF 1.556) Pub Date : 2023-03-12 Francesco G. Caloia, Jante Parlevliet, Mauro Mastrogiacomo
This paper empirically investigates the employment and wage effects of contract staggering, i.e., the asynchronous and infrequent way in which wages adjust to changes in the economic environment. Using an identification strategy based on exogenous start dates of collective agreements around the Great Recession, we estimate the effect of increases in base wages on firms’ labor cost adjustments. Our
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Tax evasion policies and the demand for cash Journal of Macroeconomics (IF 1.556) Pub Date : 2023-03-10 Edoardo Rainone
This paper analyzes the relationship between tax evasion and the demand for cash by studying the effects of two measures to fight evasion: accessing taxpayers’ bank data and imposing thresholds for cash payments. We study the effects of these policies in Italy, where visibility of bank data and cash thresholds were recently increased. We show that both significantly affected cash holdings, which grew
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Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis Journal of Macroeconomics (IF 1.556) Pub Date : 2023-03-02 Mei-Ying Hu, You-Xun Lu, Ching-chong Lai
Due to the lags in commercialization, the effective life of a patent is generally less than its statutory term. We introduce commercialization lags into the Schumpeterian growth model and explore the effects of patent term extensions on pharmaceutical R&D and social welfare. Our results show that extending patent terms stimulates the consumption of homogeneous goods but generates an ambiguous effect
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Can variable elasticity of substitution explain changes in labor shares? Journal of Macroeconomics (IF 1.556) Pub Date : 2023-02-19 Alessandro Bellocchi, Giuseppe Travaglini
In CES production functions, the magnitude of the elasticity of substitution between capital and labor (σ) is crucial to explain the evolution of the labor share. The decline in labor share observed worldwide can be explained by capital accumulation if σ>1. However, empirical evidence on the value of σ is mixed. To shed light on this issue, we employ a Variable Elasticity of Substitution (VES) production
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Taxes and firm investment Journal of Macroeconomics (IF 1.556) Pub Date : 2023-02-21 K. Peren Arin, Kevin Devereux, Mieszko Mazur
We investigate the firm-level investment response to unanticipated narrative shocks to average personal and corporate tax rates using a universal micro dataset of publicly-traded U.S. firms for the post-1976 period. Using local projections, we show that: (i) corporate tax shocks have significant effects on investment while personal tax shocks do not; (ii) corporate income tax responses are negative
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Human capital heterogeneity of the unemployed and jobless recoveries Journal of Macroeconomics (IF 1.556) Pub Date : 2023-02-13 Nic Pusateri
The jobless recovery enigma remains largely unsolved. As a special case of broader unemployment, the term “jobless recovery” describes an economic recovery where output recovers—and even expands—yet employment growth remains anemic. While the effects of these prolonged recoveries are significant—from increased crime to a lifetime reduction in wages—they are not well understood. Building on the insights
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Model uncertainty, economic development, and welfare costs of business cycles Journal of Macroeconomics (IF 1.556) Pub Date : 2023-02-11 Masakatsu Okubo
Some researchers argue that the welfare gains from eliminating consumption fluctuations for the United States are not small once model uncertainty is taken into account. This paper presents new evidence on the welfare gains from eliminating model uncertainty using a data set from a broad range of countries. It quantifies exactly the effect of model uncertainty on the welfare gains using an analytical
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Impact of infectious disease pandemics on individual lifetime consumption: An endogenous time preference approach Journal of Macroeconomics (IF 1.556) Pub Date : 2023-02-04 Kei Hosoya
This paper considers the impact of the coronavirus disease 2019 (COVID-19) pandemic on long-term individual lifetime consumption profiles. The framework for the analysis is a model that extends Strulik (2021) to include the government sector, where time preference is determined by individual health damage (deficit) distinct from normal aging. Thus, the health damage caused by COVID-19 changes the rate
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Data deepening and nonbalanced economic growth Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-30 Richard B. Freeman, Buyuan Yang, Baitao Zhang
As a newly emerging factor, data can promote economic growth by driving technological progress, and nonbalanced growth between digital industries and nondigital industries has been notable in recent years. This paper provides a novel growth model with two sectors that differ in the degree of data deepening and the factor structure of the production function. In the model, data in one sector is the
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Land and housing: The twin forces of non-balanced growth Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-31 Anuradha Saha
In a three-sector closed economy where housing land is accumulated for the construction of houses, we depict significant effects of housing and land market on sectoral growth. We assume agriculture is the most intensive in the use of land, followed by manufacturing and then services. In the long run, land intensity differences in conjunction with labor growth contribute to sectoral growth gaps. In
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Automation and the employment elasticity of fiscal policy Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-24 Christian H. Ebeke, Kodjovi M. Eklou
This paper investigates whether automation (the use of industrial robots in production) makes fiscal policy less powerful for stimulating job creation. It posits that a fiscal stimulus will lead to fewer new jobs if the supplementary demand that it creates can be met by using more robots in production processes. Using data for 18 European countries over recent decades, including data on the use of
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Quantifying the uncertainty of long-term macroeconomic projections Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-14 Ufuk Devrim Demirel, James Otterson
We propose a practical approach to measuring the uncertainty of long-term economic projections. The presented method quantifies the uncertainty of economic variables by using simulations from a multivariate unobserved components model in which variables are formulated as sums of stationary and nonstationary components. The method captures the correlations between both the stationary and nonstationary
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Labour market rigidity and expansionary austerity Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-09 Andrea Tafuro
This study provides new evidence on how labour market rigidities affect the transmission of fiscal consolidations using a sample of 17 OECD countries. Owing to a novel empirical approach, the outcomes of consolidations are modelled as a function of employment and wage rigidities. The evidence confirms that tax-based consolidations are distortionary, while expenditure-based consolidations have wealth
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Monetary policy, fiscal policy and cross signal jamming Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-07 Jeong-Yoo Kim, Hyung Sun Choi
This paper considers the issue of rule versus discretion when the central bank and the government share private information but have different preferences over inflation and output. We demonstrate that if the monetary policy is rule-based, Intuitive Criterion selects the unique separating equilibrium in which the central bank signals a low supply shock by a low interest rate. Interestingly, discretion
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A political economy approach to endogenous industrial policies Journal of Macroeconomics (IF 1.556) Pub Date : 2023-01-09 Wan-Jung Cheng
This paper uses a political economy perspective to study the endogenous formation of economic policies and its interplay with political institutions. This paper provides a novel view that both the institutions and economic development status are essential factors in endogenously determining economic policies. The model aims to explain both the differences in the degree of adopting industrial policies