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2022-05-10

• Liquidity constraints and fiscal multipliers
  by Christian Zimmermann in NEP-DGE blog, 2022-05-10 04:28:58 UTC

  By Diogo Sá http://d.repec.org/n?u=RePEc:pra:mprapa:112132&r=dge Although recent studies identified the percentage of constrained agents as the crucial force driving many fiscal policy mechanisms, the values attained were purely the result of model calibrations. We make use of household-level data to estimate the fraction of hand-to-mouth households for several European countries. We calibrate an overlapping generations model with heterogeneous agents to match the net liquid wealth distribution and study the impact of credit constraints on the effectiveness of fiscal consolidation policies. Ou [...]

2022-05-09

• House prices: who wins, who loses
  by chris in Stumbling and Mumbling, 2022-05-09 12:55:19 UTC

  I grow my own kale and never buy any from the shops. If the price of kale rises, do I therefore win or lose? The answer is: neither. On the one hand, I could profit if I were to sell the kale I grow. But on the other, the cost of eating my own kale – the money I would make if I were to sell it – has also risen. Net, I’m neither better or worse off. Some of you might not care very much about the kale-growers of Rutland. What’s true of kale, though, is true of something many of you do care about – house prices. Just as I am self-sufficient in kale, so I’m self-sufficient in housing. As an owner- [...]

2022-04-28

• Dollar Invoicing, Global Value Chains, and the Business Cycle Dynamics of International Trade
  by Christian Zimmermann in NEP-DGE blog, 2022-04-28 18:59:01 UTC

  By Nikhil Patel and David Cook http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/028&r=dge Recent literature has highlighted that international trade is mostly priced in a few key vehicle currencies and is increasingly dominated by intermediate goods and global value chains (GVCs). Taking these features into account, this paper reexamines the relationship between monetary policy, exchange rates and international trade flows. Using a dynamic stochastic general equilibrium (DSGE) framework, it finds key differences between the response of final goods and GVC trade to both domestic and foreign shocks [...]

2022-04-27

• Migrant Smuggling to Europe: a Matching Model
  by Christian Zimmermann in NEP-DGE blog, 2022-04-27 04:09:39 UTC

  By Olivier Charlot, Claire Naiditch and Radu Vranceanu http://d.repec.org/n?u=RePEc:ema:worpap:2022-05&r=dge This paper develops a matching model à la Pissarides (2000) to analyze the migrant smuggling market, building on the empirical evidence related to the smuggling of migrants from the Horn of Africa and the Middle East to the European region in the last decade. The model allows us to determine the equilibrium numbers of smugglers and of incoming irregular migrants as well as the total migrant welfare. Most of the coercion-based measures targeting the smugglers achieve the reduction in th [...]

2022-04-22

• What the Shanghai Lockdown Tells Us About China’s Future
  by Nancy Qian in Project Syndicate, 2022-04-22 14:20:48 UTC

  CHICAGO – After signaling that it was moving to a more nuanced COVID-19 policy, Shanghai – a city of 26 million – was pressured by the central government to lock down in late March, and has only just started to ease restrictions after almost one month. The official reason for this drastic policy shift is that citywide testing had revealed high infection rates. Yet one is left wondering why the authorities didn’t opt for a less costly alternative to a complete lockdown. After all, Omicron, which now accounts for almost all new cases globally, has only mild effects on vaccinated people. And w [...]

2022-04-18

• Attention and Fluctuations in Macroeconomic Uncertainty
  by Christian Zimmermann in NEP-DGE blog, 2022-04-18 14:46:30 UTC

  By Yu-Ting Chiang http://d.repec.org/n?u=RePEc:fip:fedlwp:93807&r=dge This paper studies a dispersed information economy in which agents can exert costly attention to learn about an unknown aggregate state of the economy. Under certain conditions, attention and four measures of uncertainty are countercyclical: Agents pay more attention when they expect the economy to be in a bad state, and their reaction generates higher (i) aggregate output volatility, (ii) cross-sectional output dispersion, (iii) forecast dispersion about aggregate output, and (iv) subjective uncertainty about aggregate out [...]

2022-04-16

• (In)Efficient Commuting And Migration Choices: Theory And Policy In An Urban Search Model
  by Christian Zimmermann in NEP-DGE blog, 2022-04-16 21:49:42 UTC

  By Luca Marchiori, Julien Pascal and Olivier Pierrard http://d.repec.org/n?u=RePEc:ctl:louvir:2022006&r=dge We develop a monocentric urban search-and-matching model in which workers can choose to commute or to migrate within the region. The equilibrium endogenously allocates the population into three categories: migrants (relocate from their hometown to the city), commuters (traveling to work in the city) and home stayers (remaining in their hometown). We prove that the market equilibrium is usually not optimal: a composition externality may generate under- or over-migration with respect to th [...]

2022-04-12

• Who Suffers the Most From Crime Wave?
  by GianCarlo Canaparo in The Foundry, 2022-04-12 13:53:14 UTC

  Violent crime, like the price of gas, is rising. Not everyone is experiencing this crime wave in the same way. For some, it’s a distant issue experienced by other people somewhere else. For others, it’s a daily life-threatening concern. We parsed the FBI’s crime data from 2011 to 2020 (the most recent data available) and found that African Americans bear an increasingly large share of the harm from crime. African American offenders, meanwhile, are committing an increasingly large share of violent crimes. For other racial groups, the numbers are either decreasing (in the case of both whi [...]

2022-04-07

• Land is back, it should be taxed, it can be taxed
  by Christian Zimmermann in NEP-DGE blog, 2022-04-07 19:10:20 UTC

  By Odran Bonnet, Guillaume Chapelle, Alain Trannoy and Etienne Wasmer http://d.repec.org/n?u=RePEc:hal:journl:hal-03238443&r=dge Land is back. The increase in wealth in the second half of 20th century arose from housing and land. It should be taxed. We introduce land and housing structures in Judd’s standard setup: first best optimal taxation is achieved with a property tax on land and requires no tax on capital. With positive taxes on housing rents, a first best is still possible but with subsidies to rental housing investments, and either with differential land tax rates or with a tax on imp [...]

2022-03-30

• Opportunity and Inequality across Generations
  by Christian Zimmermann in NEP-DGE blog, 2022-03-30 22:04:04 UTC

  By Winfried Koeniger and Carlo Zanella http://d.repec.org/n?u=RePEc:iza:izadps:dp15073&r=dge We analyze how intergenerational mobility and inequality would change relative to the status quo if dynasties had access to optimal insurance against low ability of future generations. Based on a dynamic, dynastic Mirrleesian model, we find that insurance against intergenerational ability risk increases in the social optimum relative to the status quo. This implies less intergenerational mobility in terms of welfare but no quantitatively significant change in earnings mobility. Earnings mobility is thu [...]

2022-03-28

• There Is No Saving the Case for Industrial Policy
  by Don Boudreaux in Cafe Hayek, 2022-03-28 16:14:03 UTC

  (Don Boudreaux) Tweet Mr. W__ alleges that my opposition to industrial policy “must be explained only by [my] dogmatic faith in the magic of imaginary free market forces.” Mr. W__: You write, in support of industrial policy, that “[t]here is no guarantee that we’ll get optimum comparative advantage under the free market.” Of course not. Nothing in life, save death, is guaranteed. That standard is inappropriate because meeting it is impossible. The relevant question here is this: Under which policy – free markets or government direction – are individuals as producers most likely to discover [...]

• Video of My Presentation on Asymmetric Carbon Emissions
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2022-03-28 04:47:00 UTC

  I recently gave a seminar in Italy (virtually) on our paper on asymmetric carbon emissions over the business cycle. Here is the video: [...]

2022-03-25

• Minimum Wage Shocks in an Estimated DSGE Model with Underreporting
  by Christian Zimmermann in NEP-DGE blog, 2022-03-25 23:35:13 UTC

  By Alisher Tolepbergen http://d.repec.org/n?u=RePEc:ajx:wpaper:20&r=dge We build and estimate a New Keynesian DSGE model to analyze the macroeconomic effects of minimum wage shocks in an economy characterized by a high degree of wage underreporting. The estimation results suggest that the effect of the minimum wage shocks to all economic aggregates but employment is not significant. The impulse response analysis shows that a higher degree of underreporting results in less responsive dynamics to the minimum wage shocks. In addition, the magnitude of the responses is also affected by the share o [...]

2022-03-21

• Worker-Firm Screening and the Business Cycle
  by Christian Zimmermann in NEP-DGE blog, 2022-03-21 21:42:49 UTC

  By Jake Bradley http://d.repec.org/n?u=RePEc:iza:izadps:dp15017&r=dge There has been a substantial body of work modeling the co-movement of employment, vacancies, and output over the business cycle. This paper builds on this literature, and informed by empirical investigation, models worker and firm search and hiring behavior in a manner consistent with recent micro-evidence. Consistent with empirical findings, for a given vacancy, a firm receives many applicants, and chooses their preferred candidate amongst the set. Similarly, workers in both unemployment and employment, can evaluate many op [...]

2022-03-16

• Other-Regarding Preferences and Redistributive Politics
  by maximorossi in NEP-LTV blog, 2022-03-16 09:55:15 UTC

  By: Fehr, Ernst (University of Zurich); Epper, Thomas (University of Lille); Senn, Julien (University of Zuri). Abstract:Increasing inequality and associated egalitarian sentiments have again put redistribution on the political agenda. Other-regarding preferences may also affect support for redistribution, but knowledge about their distribution in the broader population and how they are associated with political support for redistributive policies is still scarce. In this paper, we take advantage of Swiss direct democracy, where people voted several times on strongly redistributiv [...]

2022-03-15

• On the Inefficiency of Non-Competes in Low-Wage Labor Markets
  by Christian Zimmermann in NEP-DGE blog, 2022-03-15 15:08:47 UTC

  By Bart Hobijn, André Kurmann and Tristan Potter http://d.repec.org/n?u=RePEc:fip:fedfwp:93658&r=dge We study the efficiency of non-compete agreements (NCAs) in an equilibrium model of labor turnover. The model is consistent with empirical studies showing that NCAs reduce turnover, average wages, and wage dispersion for low-wage workers. But the model also predicts that NCAs, by reducing turnover, raise recruitment and employment. We show that optimal NCA policy: (i) is characterized by a Hosios like condition that balances the benefits of higher employment against the costs of inefficient con [...]

2022-03-14

• China's Hedge Against Geopolitical Shock
  by Zhang Jun in Project Syndicate, 2022-03-14 15:35:55 UTC

  SHANGHAI – In terms of geopolitical impact, nothing could be more important than the United States’ shift from strategic cooperation to strategic competition with China. This change has darkened many observers’ views of China’s economic prospects, as indicated by a Bruegel report released late last year. The assumption, it seems, is that China has no choice but to retreat from its successful development path and embark on a less prosperous path toward self-reliance, with the state exercising complete control over the economy to hedge against geopolitical shocks. But China’s efforts to bolster [...]

2022-03-12

• Robots and Humans: The Role of Fiscal and Monetary Policies in an Endogenous Growth Model
  by Christian Zimmermann in NEP-DGE blog, 2022-03-12 17:34:16 UTC

  By Óscar Afonso, Elena Sochirca and Pedro Cunha Neves http://d.repec.org/n?u=RePEc:por:cetedp:2201&r=dge In this paper we develop a dynamic general equilibrium growth model in which robots can replace unskilled labor and: i) the government uses tax revenues to invest in social capital and compensate those who do not work; ii) there is monetary policy with cash-in-advance restrictions that impact, for example, wages; iii) social capital increases skilled-labor productivity and facilitates the technological-knowledge progress. Our results confirm that by reducing the unskilled-to-skilled-labor r [...]

2022-03-11

• Quotation of the Day…
  by Don Boudreaux in Cafe Hayek, 2022-03-11 09:30:00 UTC

  (Don Boudreaux) Tweet … is from page 73 of Israel Kirzner’s March 1992 South African Journal of Economics paper, “ Subjectivism, Freedom and Economic Law ” as this lecture is reprinted in  Austrian Subjectivism and the Emergence of Entrepreneurship Theory , (Peter J. Boettke and Frédéric Sautet, eds., 2015), which is a volume in  The Collected Works of Israel M. Kirzner : The tendency of market outcomes to reflect, at least to some extent, the realities which surround the society of men, derives from the propensity of men shrewdly to size up these uncertainties and to act purposefully to d [...]

2022-03-10

• Consumption taxation to finance pension payments
  by Christian Zimmermann in NEP-DGE blog, 2022-03-10 17:08:47 UTC

  By Kilian Ruppert, Mattias Schön and Nikolai Stähler http://d.repec.org/n?u=RePEc:zbw:bubdps:472021&r=dge This paper assesses how a permanent shift from financing a public pay-as-you-go pension by direct (labour income) taxation towards financing it by indirect (consumption) taxation affects the economy and welfare. To this end, we use an overlapping-generations-augmented two-region general equilibrium framework with search frictions on the labour market. The analysed tax reform partially shifts the tax burden from domestic to foreign producers and lowers marginal costs of domestic production [...]

2022-03-09

• Redistributive Effect and the Progressivity of Taxes and Benefits: Evidence for the UK, 1977–2018
  by maximorossi in NEP-LTV blog, 2022-03-09 11:11:25 UTC

  By: Herault, Nicolas ; Jenkins, Stephen P. :We apply the Kakwani approach to decomposing redistributive effect into average rate, progressivity, and reranking components using yearly UK data covering 1977–2018. We examine cash and in-kind benefits, and direct and indirect taxes. In addition, we highlight an empirical implementation issue – the definition of the reference (‘pre-fisc’) distribution. Drawing on an innovative counterfactual approach, our empirical analysis shows that trends in the redistributive effect of cash benefits are largely associated with cyclical changes in average be [...]

2022-03-07

• Firm Inattention and the Efficacy of Monetary Policy: A Text-Based Approach
  by Christian Zimmermann in NEP-DGE blog, 2022-03-07 14:01:13 UTC

  By Wenting Song and Samuel Stern http://d.repec.org/n?u=RePEc:bca:bocawp:22-3&r=dge This paper provides direct evidence of the importance of firm attention to macro-economic dynamics. We construct a text-based measure of firm attention to macro-economic news and document firm attention that is polarized and countercyclical. Differences in attention lead to asymmetric responses to monetary policy: expansionary monetary shocks raise market values of attentive firms more than those of inattentive firms, and contractionary shocks lower values of attentive firms by less. We use the measure to calib [...]

2022-03-02

• Governing an Ocean of Plastics
  by Raimund Bleischwitz in Project Syndicate, 2022-03-02 12:50:48 UTC

  BREMEN – Images of plastic pollution in the ocean and on beaches are now commonplace, and the problem is likely to get worse. Last week, the OECD’s first Global Plastics Outlook revealed a dramatic increase in the plastic waste leaked into aquatic environments. That report came only a month after the World Wildlife Fund for Nature released a study that projects a doubling of microplastics in the ocean over the next few decades. While there are promising innovations that extract plastic from the ocean or intercept it in rivers, these projects will barely make a dent in the amount of plastic [...]

2022-02-28

• New and Novel ARCH Model Appication (Seriously)
  by Francis Diebold in No Hesitations, 2022-02-28 12:22:00 UTC

    The Variability and Volatility of Sleep: An Archetypal Approach By: Hamermesh, Daniel S.  (Barnard College);  Pfann, Gerard A.  (Maastricht University) Abstract: Using Dutch time-diary data from 1975-2005 covering over 10,000 respondents for 7 consecutive days each, we show that individuals' sleep time exhibits both variability and volatility characterized by stationary autoregressive conditional heteroscedasticity: The absolute values of deviations from a person's average sleep on one day are positively correlated with those on the next day. Sleep is more variable on weekends and among peop [...]

• Long-Memory Neural Nets
  by Francis Diebold in No Hesitations, 2022-02-28 12:12:00 UTC

    Fractional SDE-Net: Generation of Time Series Data with Long-term Memory By: Kohei Hayashi ;  Kei Nakagawa Abstract: In this paper, we focus on generation of time-series data using neural networks. It is often the case that input time-series data, especially taken from real financial markets, is irregularly sampled, and its noise structure is more complicated than i.i.d. type. To generate time series with such a property, we propose fSDE-Net: neural fractional Stochastic Differential Equation Network. It generalizes the neural SDE model by using fractional Brownian motion with Hurst index la [...]

2022-02-22

• Information impact on Market Performance
  by Inaki Villanueva in Applied economist, 2022-02-22 09:44:00 UTC

  I realized I never mentioned� this famous paper �( or here ) in this blog.� The idea that the availability of more information increases agents' wellbeing has always been theoretically sound.� Jensen, on this paper, used a key technological event to prove the theory empirically.� "When information is limited or costly, agents are unable to engage in optimal arbitrage. Excess price dispersion across markets can arise, and goods may not be allocated efficiently. In this setting, information technologies may improve market performance and increase welfare. Between 1997 and 2001, mobile phone serv [...]

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