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Does Uncertainty Matter for the Fiscal Consolidation and Investment Nexus? The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2024-02-29 Ioannis Bournakis, Nelson R. Ramírez-Rondán
The aim of this research paper is to investigate whether there are non-linearities in the relationship between fiscal consolidation and investment. To achieve this, we take into account the overall state of the economy, as represented by the level of uncertainty. We analyzed a sample of 27 OECD countries from 1996 to 2019 and identified two different regimes of low and high uncertainty. We found that
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Merging Structural and Reduced-Form Models for Forecasting The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2024-02-15 Jaime Martinez-Martin, Richard Morris, Luca Onorante, Fabio Massimo Piersanti
Recent economic crises have posed important challenges for forecasting. Models estimated pre-crisis may perform badly when normal economic relationships have been disrupted. Meanwhile, forecasting, especially in central banks, is increasingly based on a suite of models, following two main approaches: structural (DSGE) and reduced form. The challenge remains to identify which model – or combination
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The Bitcoin Premium: A Persistent Puzzle The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2024-01-24 Matthew S. Wilson
On average, stocks have a much higher rate of return than bonds; this has led to research on the equity premium puzzle. Similarly, Bitcoin outperforms stocks; I call this the Bitcoin premium puzzle. I show that standard macroeconomic models predict a low or negative Bitcoin premium. Though Bitcoin is extremely volatile, the model is rejected even when the coefficient of relative risk aversion is above
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A Tide that Lifts Some Boats: Assessing the Macroeconomic Effects of EU Enlargement The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-11-13 Joe Maganga Zonda, Chang-Ching Lin, Ming-Jen Chang
Based on two-country scenarios (entrants vs. incumbents), this paper employs the synthetic control method to quantify the macroeconomic effects of the European Union (EU) enlargement, and examines whether these effects varied before, during, and after economic crises. We find that enlargement effects are very complex, and significantly varied across economic cycles and the country groups. In particular
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Optimal Monetary Policy with Government-Provided Unemployment Benefits The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-31 Mehrab Kiarsi
This paper considers a standard New Keynesian model with matching frictions and explores the impact of modeling the opportunity cost of employment as government unemployment transfers. The findings reveal that under such circumstances, maintaining full price stability at all times ceases to be optimal. This outcome persists even when production subsidies are introduced to address inefficiencies caused
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Current Account Balances’ Divergence in the Euro Area: An Appraisal of the Underlying Forces The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-28 Emmanuelle Faure, Carl Grekou, Valérie Mignon
This paper revisits the crucial issue of current account imbalances and focuses on the determinants of their gaps between eurozone Member States. We conduct robust estimations of the current account balances for a panel of ten founding euro area economies and construct a measure that allows us to diagnose why some countries have started to diverge from the eurozone mean in the last two decades. Our
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Intermediate Goods–Skill Complementarity The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-27 Kozo Kiyota, Yoshinori Kurokawa
Recent research has begun to imply intermediate goods–skill complementarity; however, this possible complementarity has been hypothesized but not statistically tested, despite the increasing importance of intermediate goods in production. This study provides statistical evidence regarding whether intermediate goods are more complementary with skilled labor than with unskilled labor. Using panel data
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Initial Beliefs Uncertainty The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-23 Jaqueson K. Galimberti
This paper evaluates how initial beliefs uncertainty can affect data weighting and the estimation of models with adaptive learning. One key finding is that misspecification of initial beliefs uncertainty, particularly with the common approach of artificially inflating initials uncertainty to accelerate convergence of estimates, generates time-varying profiles of weights given to past observations in
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Optimal Taxation of Informal Firms: Misreporting Costs and a Tax Reform in Brazil The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-19 Marcelo Arbex, Enlinson Mattos, Rebeca Regatieri
This paper investigates multistage taxes on firms in a limited tax capacity economy. We characterize the optimal taxation of informal firms reinterpreting behavioral and mechanical effects. Our numerical exercises highlight the relationship between misreporting costs and the elasticities of reported revenues and costs. We explore a tax reform in Brazil with a survey of informal firms to estimate these
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Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks? The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-12 Benjamin Lochner
This paper studies the effects of labor market duality in terms of employment legislation protection (EPL) on labor market volatilities. Modeling contractual heterogeneity through a gap in EPL of temporary and permanent workers (weakly protected temporary/highly protected permanent contracts), I simulate both supply and demand shocks in a New Keynesian model with unemployment. I find that unemployment
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Perfect Competition and Fixed Costs: The Role of the Ownership Structure The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-10-11 Vincent Boitier
It is widely considered that a (perfectly) competitive equilibrium cannot survive to the existence of fixed costs because firms generate losses in equilibrium. In this theoretical and methodological article, I demonstrate that this statement is not valid by developing some counter-examples. In particular, I clearly show that a competitive equilibrium and fixed costs are tenable, depending on the ownership
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Open Economy Neoclassical Growth Models and the Role of Life Expectancy The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-08-11 Tselmuun Tserenkhuu, Stephen Kosempel
This paper applies the Ramsey–Cass–Koopmans (RCK) growth model to an open economy so that, when calibrated with standard parameter values that are commonly used in the small open economy macroeconomic literature, the time paths of the model variables and the speeds of convergence implied by the model conform with empirical evidence. Open-economy versions of the RCK growth model lead to several counterfactual
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Un-Incorporation and Conditional Misallocation: Firm-Level Evidence from Sri Lanka The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-08-03 Ranpati Dewage Thilini Sumudu Kumari, Shawn Xiaoguang Chen, Sam Hak Kan Tang
Un-incorporated firms are usually found less productive than their incorporated counterparts. However, little is known about the misallocation conditional on firms’ incorporation status and their productivity. This paper investigates the resource misallocation across un-incorporated firms and gauges the consequent aggregate productivity loss in comparison with their incorporated counterparts. We examine
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Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-07-22 Michael Reiter, Tommy Sveen, Lutz Weinke
Standard (S, s) models of lumpy investment allow us to match many aspects of the micro data, but it is well known that the implied interest rate sensitivity of investment is unrealistically large. In fact, the micro-level lumpiness in investment puts empirical discipline on the modeling of investment decisions, and this makes it hard to explain the monetary policy transmission mechanism.
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Wealth Inequality and the Exploration of Novel Technologies The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-05-22 Alessandro Spiganti
I investigate whether wealth inequality hinders the discovery of novel technologies in a competitive screening model. Agents can engage in exploration, which may lead to the discovery of superior technologies, but it is likely to waste time with inferior ones. Talented agents are better at weeding out inferior technologies, but talent is unobservable by lenders. When agents are poor, this causes an
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Interest Rates, Money, and Fed Monetary Policy in a Markov-Switching Bayesian VAR The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-05-04 Kenneth M. Rich
This paper evaluates the roles of short- and long-term private and government interest rates and inside and outside money in the monetary transmission mechanism. With money and credit markets present, changes in monetary policy set off a chain of relative price and portfolio adjustments affecting output and prices. I study interest rate and money supply rules within this monetary transmission mechanism
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Learning, Central Bank Conservatism, and Stock Price Dynamics The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-03-24 Marine Charlotte André, Meixing Dai
This paper studies how adaptive learning affects the interactions between monetary policy, stock prices and the optimal degree of Rogoff conservatism in a New Keynesian DSGE model with non-Ricardian agents whose heterogeneous portfolios generate a financial wealth channel of monetary transmission. A positive intergenerational portfolio turnover in the stock market could improve the dual-mandate central
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The Macroeconomic Effects of Shadow Banking Panics The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-02-24 Johannes Poeschl
We study the interaction between occasionally binding financial constraints in the traditional (retail) banking sector and banking panics in the shadow banking sector. Shadow banking panics occur when retail banks choose not to roll over their lending to shadow banks. Occasionally binding financial constraints of retail banks increase the likelihood of and amplify boom-bust dynamics around such shadow
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The Macroeconomic Impact of Social Unrest The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2023-01-26 Metodij Hadzi-Vaskov, Samuel Pienknagura, Luca Antonio Ricci
This paper explores the macroeconomic impact of social unrest, using a novel index based on news reports. It shows that unrest has an adverse effect on economic activity, with GDP remaining on average 0.2 percent below the pre-unrest baseline six quarters after a one-standard deviation increase in the unrest index. Moreover, results are robust to instrumenting via regional unrest to address potential
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The New Keynesian Phillips Curve and Imperfect Exchange Rate Pass-Through The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-12-02 Syed Kanwar Abbas
This paper estimates the New Keynesian Phillips Curve (NKPC) with imperfect exchange rate pass-through (alternatively, deviations from the law of one price). Our results describe the nature of inflation dynamics and business cycles under imperfect pass-through, with importance of both domestic price rigidity and import price rigidity for the US and other four open economies. The estimates of structural
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Intergenerational Linkages, Uncertain Lifetime and Educational and Health Expenditures The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-11-17 Sharmila Gamlath, Radhika Lahiri
Empirical evidence suggests a positive correlation between health and educational outcomes at the aggregate level. However, both inter and intra-country data suggest that these variables may not always be monotonically increasing in income, pointing towards household income as a possible mitigating factor in the relationship between health and education expenditures and outcomes. We develop an overlapping
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Forward Guidance Effectiveness in a New Keynesian Model with Housing Frictions The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-11-09 Stephen J. Cole, Sungjun Huh
Housing markets are closely related to monetary policy. This paper studies the link between housing frictions and the effectiveness of forward guidance. A housing collateral constraint and forward guidance shocks are incorporated into a standard medium-scale New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. Our main results produce a number of important implications. First, financial
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The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-04-22 Martin Karlsson,Mykhailo Matvieiev,Maksym Obrizan
Abstract In this paper, we develop an overlapping generations model with endogenous fertility and calibrate it to the Swedish historical data in order to estimate the economic cost of the 1918–19 influenza pandemic. The model identifies survivors from younger cohorts as main benefactors of the windfall bequests following the influenza mortality shock. We also show that the general equilibrium effects
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Asymmetric Effects of Private Debt on Income Growth The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-03-30 Zara Liaqat,Muhammad Farid Ahmed
Abstract This paper uses a panel vector autoregressive model to study the differential effects of components of private debt on income growth for a large panel of countries. While household debt growth in a given period generally has a positive impact on income, this effect is much stronger for countries with relatively lower levels of income and household debt-to-GDP ratios. On the other hand, the
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Labor Share Dynamics and Factor Complementarity The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-03-24 Juin-Jen Chang,Chun-Hung Kuo
Abstract This paper investigates the mechanism behind the cyclical movements in the labor income share. We build a dynamic stochastic general equilibrium model with search and matching frictions to examine the counter-cyclicality and overshooting of the labor income share, following a technology innovation. This model features (i) a time-varying output elasticity of labor, generated from the capital–labor
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Uncertainty Shocks, Innovation, and Productivity The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-03-04 Dario Bonciani,Joonseok Oh
Abstract In this paper, we argue that macroeconomic uncertainty shocks cause a persistent decline in economic activity, investment in R&D, and total factor productivity. After providing empirical evidence, we build a DSGE model with sticky prices and endogenous growth through investment in R&D. In this framework, uncertainty shocks lead to a short-term fall in demand because of precautionary savings
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Tolerance of Informality and Occupational Choices in a Large Informal Sector Economy The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-02-25 Marcelo Arbex,Márcio V. Corrêa,Marcos R. V. Magalhães
Abstract We study an equilibrium two-sector occupational choice model – agents can be (formal or informal) entrepreneurs or workers. An informal entrepreneur faces taxation determined by the combination of her capital choice and society’s tolerance of informality. Our model is consistent with many empirical findings regarding the informal sector in Brazil, a developing economy with a large informal
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Aggregate Costs of a Gender Gap in the Access to Business Resources The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-02-15 Javier Gonzalez,Francisco Parro
Abstract We quantify the aggregate costs of a discriminatory restriction against women in the access to business resources. To do so, we develop a general equilibrium model with an endogenous size distribution of production units, which are run by either female or male entrepreneurs. In this setting, we introduce a distortion that limits the amount of capital that women can use to run their businesses
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A New General Equilibrium Welfare Measure, with Application to Labor Income Taxes The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2022-01-14 Arman Mansoorian,Leo Michelis,Constantine Angyridis
Abstract In this paper we extend the Hicksian compensating variation welfare measure in two directions. First, we adjust the size of the compensating variation in order to account for the fact that the compensating transfers will result in changes in output, as well as in prices, because labor and, in dynamic models, capital will adjust in response to these transfers. Second, we extend the measure
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Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-12-03 Hung-Ju Chen,Koichi Miyazaki
Abstract This study analytically investigates the effects of pay-as-you-go social security and educational subsidies on the fertility rate, retirement age, and GDP per capita growth rate in an overlapping generations model, where parents invest resources toward their children’s human capital. We find that an old agent retires fully when his or her labor productivity is low and retires later when the
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Effect of Feed-In Tariff with Deregulation on Directed Technical Change in the Energy Sector The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-11-25 Minoru Nakada
Abstract In this study, we examine how a feed-in tariff (FIT) accompanied with deregulation in the energy sector affects the direction of technical change along the balanced growth path. A final good is composed of resource-saving (such as renewable) energy and traditional resource-intensive energy. The government introduces a FIT scheme for promoting resource-saving energy, while it deregulates the
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Front-Loading Agricultural Subsidies: Quantifying Public Savings The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-11-16 Kai Ding,Filippo Rebessi
Abstract Reforms to agricultural policy have been stalling in OECD economies. In this paper, we quantify the potential for public savings from switching to an optimal transfer system in small open economies. Following the insights from the literature on repeated moral hazard, optimal subsidies are front-loaded, which provides stronger incentives for farmers to transition out of agriculture, compared
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Revisiting the Link between House Prices and Monetary Policy The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-11-12 Shiu-Sheng Chen,Tzu-Yu Lin
Abstract This paper revisits the link between house prices and monetary policy using a data set on house prices provided by the Bank for International Settlements. It is found that a loose monetary policy unambiguously results in a rise in real house prices, and such an increase is statistically significant for 19 of the 20 countries studied here. Empirical results also show that for some countries
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Handle with Care: Regulatory Easing in Times of COVID-19 The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-10-15 Fabián Valencia,Richard Varghese,Weijia Yao,Juan F. Yépez
Abstract The policy response to the COVID-19 shock included regulatory easing across many jurisdictions to facilitate the flow of credit to the economy and mitigate a further amplification of the shock through tighter financial conditions. Using an intraday event study, this paper examines how stock prices – a key driver of financial conditions – reacted to regulatory easing announcements in a sample
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Collateral Constraints, Wage Rigidity, and Jobless Recoveries The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-09-15 Tobias Föll
Abstract The Great Recession has drawn attention to the importance of macro-financial linkages. In this paper I explore the joint role of imperfections in labor and financial markets for the cyclical adjustment of the labor market. I show that jobless recoveries emerge when, upon exiting a recession, firms are faced with deteriorating credit conditions. On the financial side, collateral requirements
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The Mechanics of Individually- and Socially-Optimal Decisions during an Epidemic The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-09-14 Guillaume Vandenbroucke
Abstract I present a model where work implies social interactions and the spread of a disease is described by an SIR-type framework. Upon the outbreak of a disease reduced social contacts are decided at the cost of lower consumption. Private individuals do not internalize the effects of their decisions on the evolution of the epidemic while the planner does. Specifically, the planner internalizes that
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Assessing the Role of Sentiment in the Propagation of Fiscal Stimulus The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-09-07 Bijie Jia,Hyeongwoo Kim,Shuwei Zhang
Abstract This paper studies the dynamic effects of the fiscal policy shock on private activity using an array of vector autoregressive models for the post-war U.S. data. We are particularly interested in the role of consumer sentiment in the transmission of fiscal stimulus. Our major findings are as follows. Private spending fails to rise persistently in response to government spending shocks, while
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Accounting for the International Great Depression: Efficiency, Distortions and Factor Utilization during the Interwar Period The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-08-30 Alexander Klein,Keisuke Otsu
Abstract In this paper, we analyze the International Great Depression (IGD) in the U.S. and Western Europe by applying the business cycle accounting method to a dynamic stochastic general equilibrium model with time-varying production efficiency and factor market distortions. We measure the size of labor and capital market distortions with endogenous factor utilization and their relative importance
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The Impact of the Lockdown on the Greek Economy and the Role of the Recovery Fund The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-08-02 George Economides,Apostolis Philippopoulos,Vanghelis Vassilatos
Abstract We develop a microfounded macroeconomic model that embeds the key features of the Greek economy. After calibrating the model to Greek data over 1995–2019, we assume that the economy is initially in the year 2019 and then quantify the adverse economic impact of the lockdown measures taken to control the spread of the pandemic, as well as the implications of the various policy measures (at national
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Quarantine, Contact Tracing, and Testing: Implications of an Augmented SEIR Model The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-07-21 Andreas Hornstein
Abstract I incorporate quarantine, contact tracing, and random testing in the basic SEIR model of infectious disease diffusion. A version of the model that is calibrated to known characteristics of the spread of COVID-19 is used to estimate the transmission rate of COVID-19 in the United States in 2020. The transmission rate is then decomposed into a part that reflects observable changes in employment
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Cash-Management in Times of Covid-19 The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-06-23 Fernando Alvarez,David Argente
Abstract The incidence of COVID-19 has systematically decreased households’ use of cash as means of payment as well as the average size and frequency of cash withdrawals. We argue that the structure of Baumol–Tobin type inventory theoretical models and their extensions can be used to separate the confounding factors, such as the desired level of consumption and the choice of the fraction of consumption
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The Government in SNA-Compliant DSGE Models The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-06-23 Gonzalo F. de-Córdoba,Benedetto Molinari,José L. Torres
Abstract The government size in developed economies expanded remarkably after the Second World War. This growth shaped the role of the government as a key player in the economic activity and the aggregate dynamics of a country. However, the way in which the government is represented in DSGE models is often reductive, containing homogeneous public spending and a few distortionary taxes without clear
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Financial Reforms and Consumption Smoothing The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-06-16 Martin Boileau,Tianxiao Zheng
Abstract We study how financial reforms affect the extent of consumption smoothing in a dynamic stochastic general equilibrium model of an emerging economy. Consistent with the empirical literature and reform efforts in South Korea and South Africa, we emphasize the relation between consumer credit and durable purchases, and model reforms as the relaxation of the collateral constraint on lower income
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Precaution, Social Distancing and Tests in a Model of Epidemic Disease The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-06-03 Francesc Obiols-Homs
Abstract I develop an extension of a canonical epidemiology model in which the policy in place determines the probability of transmission of an epidemic disease during economic and social interaction. I use the model to evaluate the effects of isolating symptomatic individuals, of increasing social distancing and of tests such as polymerase chain reaction – PCR – or Rapid Diagnostic Test that discriminate
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Equilibrium Tax Rates under Ex-ante Heterogeneity and Income-dependent Voting The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-05-24 Bo Hyun Chang,Yongsung Chang,Sun-Bin Kim
Abstract The standard models with incomplete markets (e.g. Aiyagari) have difficulty justifying the current income tax rates as an optimal or political equilibrium outcome. Given the highly skewed income distribution, the majority of the population would be in favor of raising taxes to a much higher level. We show that incorporating (i) the ex-ante heterogeneity of earnings and (ii) income-dependent
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Supply-side Effects of Pandemic Mortality: Insights from an Overlapping-generations Model The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-05-21 Etienne Gagnon,Benjamin K. Johannsen,David López-Salido
Abstract We use an overlapping-generations model to explore the implications of mortality during pandemics for the economy’s productive capacity. Under current epidemiological projections for the progression of COVID-19, our model suggests that mortality will have, in itself, only small effects on output and factor prices because projected mortality is small in proportion to the population and skewed
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Uncertainty, Financial Markets, and Monetary Policy over the Last Century The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-05-18 Sangyup Choi,Chansik Yoon
Abstract What has been the effect of uncertainty shocks in the U.S. economy over the last century? What are the roles of the financial channel and monetary policy channel in propagating uncertainty shocks? Our empirical strategies enable us to distinguish between the effects of uncertainty shocks on key macroeconomic and financial variables transmitted through each channel. A hundred years of data
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Assessing Targeted Containment Policies to Fight COVID-19 The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-05-14 Ariadne Checo,Francesco Grigoli,Jose M. Mota
Abstract The large economic costs of full-blown lockdowns in response to COVID-19 outbreaks, coupled with heterogeneous mortality rates across age groups, led to question non-discriminatory containment measures. In this paper we provide an assessment of the targeted approach to containment. We propose a SIR-macro model that allows for heterogeneous agents in terms of mortality rates and contact rates
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Macrodynamic Modeling of Innovation Equilibria and Traps The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-05-14 Edgar J. Sanchez-Carrera,Sebastian Ille,Giuseppe Travaglini
Abstract We study the interplay between the decision of firms to innovate and human capital. Based on a dynamic evolutionary model, we show that in the presence of a high stock of human capital, an advanced economy can remain caught in an “innovation trap”. Following the literature on endogenous growth, R&D investments and human capital are modeled as strategic complements. Skilled workers increase
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Home Production and Leisure during the COVID-19 Recession The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-26 Oksana Leukhina,Zhixiu Yu
Abstract Between the months of February and April of 2020, average weekly market hours in the U.S. dropped by 6.25, meanwhile 36% of workers reported switching to remote work arrangements. In this paper, we examine implications of these changes for the time allocation of different households, and on aggregate. We estimate that home production activity increased by 2.65 h a week, or 42.4% of lost market
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Environmental Taxes and Economic Growth with Multiple Growth Engines The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-23 Hamid Beladi,Ping-ho Chen,Hsun Chu,Mei-ying Hu,Ching-chong Lai
Abstract We develop an endogenous growth model in which long-run growth is driven by three engines: private abatement R&D, expanding-variety R&D, and capital accumulation. We show that an environmental tax activates private abatement by directing researchers from the variety R&D sector to the abatement R&D sector, which helps the economy avoid the environmental disaster. Our results also show that
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Protecting Lives and Livelihoods with Early and Tight Lockdowns The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-19 Francesca Caselli,Francesco Grigoli,Damiano Sandri
Abstract Using high-frequency proxies for economic activity over a large sample of countries, we show that the economic crisis during the first seven months of the COVID-19 pandemic was only partly due to government lockdowns. Economic activity also contracted severely because of voluntary social distancing in response to higher infections. Furthermore, we show that lockdowns substantially reduced
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Dating Structural Changes in UK Monetary Policy The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-12 Vincenzo De Lipsis
Abstract The UK historical monetary policy experience is rich of institutional changes, but it remains unclear which of these many events dominated the policy actions and what timing characterised the inception of different policy regimes. We develop a new empirical approach to answer these questions and we identify in particular the historical institutional events that effectively translated into
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The Neoclassical Growth Model and the Labor Share Decline The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-12 Zachary L. Mahone,Joaquín Naval,Pau S. Pujolas
Abstract The labor share may be declining in the data, but it is often assumed constant in neoclassical growth models (NGM). We assess the quantitative importance of this discrepancy by comparing alternative calibration approaches featuring constant and declining labor shares. We find little difference in model performance. Our results derive from strong general equilibrium effects: while a declining
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International Historical Evidence on Money Growth and Inflation: The Role of High Inflation Episodes The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-09 Michele Fratianni,Marco Gallegati,Federico Giri
Abstract How long is the long run in the relationship between money growth and inflation? How important are high inflation episodes for the unit slope finding in the quantity theory of money? To answer these questions, we study the relationship between excess money growth and inflation over time and across frequencies using annual data from 1870 to 2013 for 16 developed countries. Wavelet-based exploratory
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Inequality, Growth, and Congestion Externalities The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-04-09 Babatunde Aiyemo,AKM Mahbub Morshed
Abstract We describe and numerically simulate the aggregate and distributional properties of an endogenous growth model with an infrastructure externality which is subject to relative congestion. We show that the congested externality induces higher growth, greater inequality, labor/leisure trade-off ambiguities and an ineffective capital income tax for the government to achieve long-term redistribution
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Unraveling News: Reconciling Conflicting Evidence The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-02-19 Maria Bolboaca,Sarah Fischer
Abstract This paper addresses the lack of consensus in the empirical literature regarding the effects of technology diffusion news shocks. We attribute the conflicting evidence to the wide diversity in terms of variable settings, productivity series used, and identification schemes applied. We analyze the different identification schemes that have been employed in this literature. More specifically
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Agricultural Trade and Structural Change: Evidence from Paraguay The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-02-17 Cesar Blanco
Abstract We study how international trade affects structural change in an agricultural exporting country. For this purpose, we calibrate a three-sector growth model to quantify the role of international trade in explaining structural change patterns observed in Paraguay. This country experienced a significant rise in net agricultural exports as a percentage of aggregate output during the period 1962–2012
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COVID Social Distancing and the Poor: An Analysis of the Evidence for England The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-02-16 Parantap Basu,Clive Bell,Terence Huw Edwards
Abstract Social distancing is a matter of individuals’ choices as well as of regulation. We analyse weekly panel data on such behaviour for English Upper Tier Local Authorities (UTLAs) from March to July 2020, paying attention to the influence of poverty, as measured by free school meals provision. Panel regressions suggest that, although more stringent regulation and slightly lagged local cases of
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Did the FED React to Asset Price Bubbles? The B.E. Journal of Macroeconomics (IF 0.233) Pub Date : 2021-02-05 Marc-Andre Luik,Dennis Wesselbaum
Abstract This paper investigates whether the Federal Reserve Bank (FED) reacted to asset price bubbles before the Great Recession and whether this affected macroeconomic variables. We estimate a DSGE model featuring a financial accelerator and a process for asset price bubbles with different Taylor-rule specifications. We find that a Taylor-rule with a feedback to Tobin’s Q and bubble shocks fits best