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- International Business Cycle and Financial Intermediation
by Christian Zimmermann in NEP-DGE blog, 2017-01-17 16:06:21 UTC
By Tamas Csabafi, Max Gillman and Ruthira Naraidoo
The world-wide financial crisis of 2007 to 2009 caused bankruptcy and bank failures in the US and many other parts such as Europe. Recent empirical evidence suggests that this simultaneous drop in output was strongest in countries with greater financial ties to the US economy with important cross border deposit and lending. This paper develops a two-country framework to allow for banking structures within an international real business cycle model. The banking structure across countries is m [...]
- Celtic Phoenix or Leprechaun Economics?
by Aidan Regan in The Irish Economy, 2017-01-16 17:16:25 UTC
Readers might be interested in this UCD Geary working paper , which was featured in the Sunday Business Post yesterday. The title of the paper is “ Celtic Phoenix or Leprechaun Economics: the Political Economy of an FDI-led Growth Model in Europe”.
Our core argument is that Ireland’s post-crisis economic recovery was driven by foreign direct investment (FDI) from Silicon Valley, and whilst this growth model was made possible by Ireland’s low corporate tax rates, it was also a result of inward migration, with these firms using Ireland to directly access the European labour market.
We also demon [...]
- Rising Quality of Life Inequality in "Communist" China
by Matthew Kahn in Environmental and Urban Economics, 2017-01-16 16:51:00 UTC
CNN has just p ublished a good piece where I am quoted about pollution exposure inequality in China. � My research on this topic can be found here and here and here . � �Consider a large number of people who differ with respect to their income levels. �This income can be spent on various consumption and investment goods. �Consumption goods include cell phones, ice cream, sneakers etc. �Investment goods includes stocks, bonds,doctors visits, dentist visits, paying USC's tuition. �These investment goods payoff a future rate of return either by generating future income or by raising your human ca [...]
- GDP-linked Bonds: A Primer
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-01-16 13:45:07 UTC
“We call for further analysis of the technicalities, opportunities, and challenges of state-contingent debt instruments, including GDP-linked bonds.” G20 Finance Ministers & Central Bank Governors, 23-24 July 2016, Chengdu, China Gross government debt in advanced economies has surpassed 105% of GDP, up from less than 75% a decade ago. Some countries with especially large debts—including Greece (177%), Italy (133%) and Portugal (129%)—are viewed not only as a risk to the countries themselves, but to others as well. As a result, policymakers and economists have been looking for ways to make it e [...]
- Metrics Monday: Dealing with Imperfect Instruments I
by Marc F. Bellemare in Marc F. Bellemare, 2017-01-16 11:00:47 UTC
Happy New Year! After running out of easy, off-the-top-of-my-head topics for this series, I have decided to go with a friend’s suggestion of blogging econometrics papers whose results are useful for applied work.
Given that I am working on a paper in which I am dealing with an instrumental variable that is only plausibly exogenous–that is, the exclusion restriction is likely to hold, but there is a small chance that it does not–I thought I should begin the year with two posts on how to deal with imperfect instruments.
This does not mean that these posts will discuss what to do with plain-old [...]
- Should we rely on economic forecasts? The wisdom of the crowds and the consensus forecast
by Guest author in OECD Insights, 2017-01-16 09:32:24 UTC
Brian Dowd, FocusEconomics
Laurence J. Peter, a Canadian educator and author, is often referenced as saying, “an economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”
Economics and especially economic forecasting are often given a bad rap. Many people think of forecasting as akin to licking a finger and testing the wind. However, there is a science to it.
Forecasting is essentially attempting to predict the future and predicting the future behavior of anything, much less something as complex and enormous as an entire economy, is not an easy t [...]
- What's a Macro Model Good For?
by Stephen Williamson in Stephen Williamson: New Monetarist Economics, 2017-01-15 22:38:00 UTC
What's a macro model? It's a question, and an answer. If it's a good model, the question is well-defined, and the model gives a good answer. Olivier Blanchard has been pondering how we ask questions of models, and the answers we're getting, and he thinks it's useful to divide our models into two classes, each for answering different questions. First, there are "theory models," ...aimed at clarifying theoretical issues within a general equilibrium setting. Models in this class should build on a core analytical frame and have a tight theoretical structure. They should be used to think, for examp [...]
- The French economy needs âhelicopter moneyâ to boost labor force growth and avoid deflation
by Ivan Kitov in Economics as Classical Mechanics, 2017-01-13 20:46:00 UTC
In 2013, we published a paper “ Does Banque de France control inflation and unemployment?” We demonstrated that the French economy would likely sink into a longer period of deflation or very low inflation rate after 2013. This is an excerpt from the paper discussing how Banque de France could boost labour force growth and inflation by flooding the French economy with money. Instead of this simple measure, there were several depressing years of contingency measures introduced by the ECB. This update uses data for the past three years and proves that austerity is a counterproductive approach. We [...]
- On Why It is Important to Distinguish Between Consumption and Expenditures When Testing the Permanent Income Hypothesis
by Josh in The Everyday Economist, 2017-01-13 19:23:10 UTC
A central idea in modern macroeconomics is the permanent income hypothesis. The basic idea is as follows. Suppose that you could dichotomize your income into a permanent component and a temporary component. The permanent income hypothesis suggests that you would base your consumption decisions on the permanent component.
Why would people behave this way?
Well, individuals want to smooth the marginal utility of their consumption over time. To understand this, consider the following example. Suppose that you varied your consumption proportionately with your current income and that your income fl [...]
- IPAâs weekly links
by Jeff Mosenkis (IPA) in Chris Blattman, 2017-01-13 14:44:06 UTC
Guest post by Jeff Mosenkis of Innovations for Poverty Action .
As described in a long piece from New York Magazine , millions of people have been told by a Harvard psychology website they are secretly racist, despite no consensus on the underlying research. You may recall the debate where Hillary Clinton referenced “implicit bias” responding to a question about police shootings. She was referring to a prominent line of research in psychology based on the Implicit Association Test (IAT). The computerized test measures millisecond differences in reaction times and has been promoted by promine [...]
- As we predicted in 2010,a longer deflation period has started in Australia
by Ivan Kitov in Economics as Classical Mechanics, 2017-01-13 14:26:00 UTC
Six years ago we wrote a paper on price inflation and unemployment in Australia. Here, we compare our predictions against measurements. Concluding this paper we made a projection into 2050: “As a final remark on the evolution inflation (DGDP) and unemployment in Australia we present two predictions as based on the labour force projection provided by the Productivity Commission (2005) and the coefficients in (7) and (8) estimated for the period after 1994: a 1 =3.299, a 2 =-0.0259; b 1 =-2.08, b 2 =0.0979. We assume that there will be no change in the definitions of all involved macroeconomic v [...]
- In the long run, the rate of unemployment in Canada will be growing. A four year update.
by Ivan Kitov in Economics as Classical Mechanics, 2017-01-11 21:46:00 UTC
Here, I continue presenting cases of accurate predictions based on the link between real GDP and unemployment, which is a modified Okun’s law in an integral form. This is a four-year update for Canada. The model prediction is getting better and better! Canada provides an excellent set of macroeconomic data, which can be described by a few deterministic links with a high level of reliability and confidence. We have retrieved real GDP (GK per capita) data from the Total Economic Database and the rate of unemployment from the OECD . In 2012, we published a paper in the Journal of Theoretical and [...]
- The Okun's integral law for Australia revisited
by Ivan Kitov in Economics as Classical Mechanics, 2017-01-11 19:12:00 UTC
Three and a half years ago, I reported that Australia gives the best example of accurate quantitative prediction of unemployment in developed countries and therefore I felt satisfaction. Historically, we published a paper on Okun's in developed countries in the Journal of Theoretical and Practical Research in Economic Fields in 2012. We presented the first version of the modified Okun’s law for developed countries including Australia. The model was estimated before 2010 and we used only data available in 2011. Briefly, the model is estimated by the LSQ technique applied to the integral versio [...]
- The Enigma of Chinese Business Records
by joymanlee in NEP-HIS blog, 2017-01-11 13:14:18 UTC
Discovering Economic History in Footnotes: The Story of the Tong Taisheng Merchant Archive (1790-1850)
By Debin Ma (London School of Economics) and Weipeng Yuan (Chinese Academy of Social Sciences)
Abstract: The Tong Taisheng ( 统泰升 ) merchant account books in Ningjin county of northern China in 1800-1850 constitute the most complete and integrated surviving archive of a family business for pre-modern China. They contain unusually detailed and high-quality statistics on exchange rates, commodity prices and other information. Utilized once in the 1950s, the archive has been left largely untouc [...]
- In 2008, we accurately predicted the evolution of unemployment rate in Italy!
by Ivan Kitov in Economics as Classical Mechanics, 2017-01-10 12:46:00 UTC
In this blog, three and a half years ago we revisited our prediction of the rate of unemployment in Italy, which had been made in our 2008 paper. Five years after this publication, we found that the accuracy of prediction was excellent. We decided that our model works well. Since the model has a natural 11-year horizon, in this post we check our original (2008!) prediction for 2013 and 2016 (preliminary) using new estimates. According to the OECD, the unemployment rate in 2015 is 12.0%. For 2016, the rate is 11.6%. There is no doubt; these values again fully validate our model of unemploym [...]
- Coal pollution and health before WWI
by Nicholas Gruen in Club Troppo, 2017-01-09 17:23:57 UTC
Research Design Meets Market Design: Using Centralized Assignment for Impact Evaluation
By: Abdulkadiroğlu, Atila (Duke University) ; Angrist, Joshua (MIT) ; Narita, Yusuke (Yale University) ; Pathak, Parag A. (MIT)
Atmospheric pollution was an important side effect of coal-fired industrialisation in the nineteenth century. In Britain emissions of black smoke were on the order of fifty times as high as they were a century later. In this paper we examine the effects of these emissions on child development by analysing the heights on enlistment during the First World War of men bor [...]
- We gave Sri Lankan microenterprises wage subsidies to hire workers: 8 years after starting, hereâs what happened
by David McKenzie in Development Impact, 2017-01-09 14:28:00 UTC
In my very first experiment, Suresh de Mel, Chris Woodruff, and I gave small grants of capital to microenterprises in Sri Lanka. We found that these one-time grants had lasting impacts on firm profitability for male owners. However, despite these increases in firm profits, few owners made the leap from self-employed to hiring others.
In 2008 we therefore started a new experiment with a different group of Sri Lankan microenterprises, trying to see if we could help them make this transition to becoming employers. Eight years later, I’m delighted to finally have a working paper out with the resu [...]
- Thoughts on Proposed Corporate Tax Reform
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-01-09 14:20:30 UTC
“We teach our students that […] the benefits of a simpler, more easily administered tax system that treats different forms of income more equally may well rise as our need for revenue rises. We also teach them that progressive taxation involves a trade-off between equity and efficiency and that, when revenue requirements rise, the efficiency cost of redistribution rises as well.” Alan J. Auerbach, The Future of Fundamental Tax Reform , 1997. With a Republican government intent on major changes in fiscal policy, it’s useful to start thinking about the fundamentals of taxing and spending. The an [...]
- Epargne et investissement au niveau mondial, les opposÃ©s s'attirent
by Fabien Candau in Blog@ge sur l'économie internationale, 2017-01-07 22:58:00 UTC
Pour quelle raison un pays se met-il à importer plus qu'il n'exporte? Précédemment nous avons discuté l'argument de compétitivité . Dans ce post, nous allons aborder l'argument de la "surabondance d'épargne au niveau mondial" (global saving glut), ses raisons et ses conséquences.
Dans le précédent post nous avons vu que la balance commerciale (export - import) s'égalise au différentiel d'épargne et d'investissement:
Balance commerciale= Epargne-Investissement
Il est "amusant" d'observer que ceux qui veulent à la fois plus d'investissement et une amélioration de la balance commerciale verron [...]
- Pregled literature â MIMIC modeli
by andee in V krizi smisla tiči misel, 2017-01-07 21:52:33 UTC
Nekaj začetnih del s področja MIMIC (Multiple Indicators Multiple Causes, t.j. multipli kazalniki multipli prediktorji/vzroki) modelov, v prvi vrsti glede na njihovo uporabo pri merjenju obsega sive ekonomije. Literatura se bo verjetno dodajala tudi sprotno. Modele uporabljam pri enem člankov, kjer sem soavtor, kolikor sem doslej razbral, je na področju precej malo pregledov dosedaj opravljenih del – v vsakem primeru pa bo tole služilo vsaj za lastno evidenco.
Aigner, D., Schneider, F., & Damayanti G. (1988). Me and my shadow: estimating the size of the US hidden economy from time series data [...]
- Moral Hazard and NBA Player Effort Before and After They Sign Long Term Contracts
by Matthew Kahn in Environmental and Urban Economics, 2017-01-06 16:14:00 UTC
Rick Barry and Nobel Laureate Bengt Holmstrom should write a principal-agent hidden effort paper together. Barry argues that the reason the NBA Portland Blazers are playing much worse as a team this year is because key players received long term contracts at the start the season and now these stars are no longer exerting effort. The more interesting piece in this article is Barry's points about a player's character. Barry argues that the Portland team's general manager is to blame here because if the GM had anticipated that certain players have a "costly effort" character then he should h [...]
- Economists in an alienated society
by chris in Stumbling and Mumbling, 2017-01-05 14:30:18 UTC
“The social power, ie the multiplied productive force”, wrote Marx, appears to people “not as their own united power but as an alien force existing outside them, of the origin and end of which they are ignorant, which they thus cannot control.”
I was reminded of this by a fine passage in The Econocracy in which the authors show that “the economy” in the sense we now know it is a relatively recent invention and that economists claim to be experts capable of understanding this alien force:
As increasing areas of political and social life are colonized by economic language and logic, the vast ma [...]
- Immigration & class struggle
by chris in Stumbling and Mumbling, 2017-01-04 14:06:39 UTC
James Bloodworth makes an important point here which I fear that some of his interlocutors don’t fully appreciate. He writes:
There does exist a discernible bien pensant willingness to pretend that immigration has no impact whatsoever on worker-employer relations…it is precisely the unwillingness on the part of liberals to acknowledge the challenges for the working class that migration brings…that is rendering the political climate gradually more inhospitable to those who want to find solutions that do not involve sealing off Britain's borders.
The error of which James accuses liberals here [...]
- El crecimiento econÃ³mico espaÃ±ol a largo plazo: Â¿QuÃ© muestra la contabilidad nacional histÃ³rica?
by admin in Nada Es Gratis, 2017-01-04 06:07:30 UTC
de Leandro Prados de la Escosura
Una versión previa de este artículo fue publicada en inglés en voxeu el 21 de diciembre de 2016.
¿Qué representa realmente el PIB? ¿Es una medida del progreso material o simplemente de la producción? Una reciente oleada de publicaciones críticas (Coyle, 2014; Masood, 2016; Philipsen, 2015, entre otras), rechaza la pretensión de que el PIB capte (y aún de modo incompleto) algo más que la producción, acentuando la visión crítica que acompaña a la contabilidad nacional desde sus orígenes (Engerman, 1997; Nordhaus y Tobin, 1972).
La novedad de estas críticas es d [...]
- Central Bank Independence: Growing Threats
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-01-02 12:35:56 UTC
“ The independence of the central bank to set a monetary course separate from the day-to-day of electoral politics is as fragile as it is essential .” Peter Conti-Brown The median FOMC participant forecasts that the Committee will raise the target range for the federal funds rate three times this year. That is, by the end of 2017, the range will be 1.25 to 1.50 percent. Assuming the FOMC follows through, this will be the first time in a decade that the policy rate has risen by 75 basis points in a year (see chart). It is natural to ask what sort of criticism the central bank will face and whet [...]
- have a happy 2017 recession
by Ivan Kitov in Economics as Classical Mechanics, 2017-01-02 10:24:00 UTC
Approximately 10 years ago we presented our macroeconomic model explaining the evolution of real GDP per capita in the USA [ 1 , 2 , 3 ] and other developed countries [ 4 ]. This model was formally tested by econometric tools for cointegration [ 5 ]. Standard tests have proven that the underlying concept is valid. Our model does explain the past measurements of real GDP as driven by the only population related variable – the influx of fresh blood - young people. Variations in the rate of growth for a given economy is fully defined by the change in the number of youngsters entering this econom [...]
- A new year's message
by ? in Stumbling and Mumbling, 2017-01-01 12:10:00 UTC
For those of you entering 2017 with dread at the prospect of Brexit and a Trump presidency, here’s some comfort: things rarely turn out as bad as they seem. This is not just a sentimental cliché. It’s supported by social science.
Back in [...]
- Reasons to be Cheerful -- 1, 2, 3 by Mark Harrison
by Mark Harrison in Mark Harrison's blog, 2016-12-31 16:26:29 UTC
Writing about web page http://www.metrolyrics.com/reasons-to-be-cheerful-part-3-lyrics-ian-dury-the-blockheads.html
I'll spend this New Year Eve with old friends. To keep our spirits up, we agreed some self-denying rules. Here are three things that we will not talking about around the dinner table:
This was not my suggestion. And in some ways you might think this would be hard on us, for we are all interested in the world of politics and policy, and those of us who will gather would all have something to say on such matters.
Yet, when it was [...]
- New Year's Reading
by Dave Giles in Econometrics Beat: Dave Giles' Blog, 2016-12-31 14:20:00 UTC
New Year's resolution - read more Econometrics! Bürgi, C. , 2016. What do we lose when we average expectations? RPF Working Paper No. 2016-013, Department of Economics, George Washington University. Cox, D.R. , 2016. Some pioneers of modern statistical theory:A personal reflection. Biometrika , 103, 747-759 Golden, R.M., S.S. Henley, H. White, & T.M. Kashner , 2016. Generalized information matrix tests for detecting model misspecification. Econometrics , 4, 46; doi: 10.3390/econometrics4040046 . Phillips, G.D.A. & Y. Xu , 2016. Almost unbiased variance estimation in simultaneous equations mod [...]
- Why Didn't the U.S Enact Carbon Cap and Trade in 2009? (and a Coasian Counter-Offer)
by Matthew Kahn in Environmental and Urban Economics, 2016-12-29 15:11:00 UTC
The NY Times has published an interesting piece about Exxon and its shifting position on climate change. �I want to discuss one section of the article. �Here is a direct quote: Ultimately,� the cap-and-trade bill was unsuccessful , passing the House in 2009, but failing to reach the Senate floor. The bill died for many reasons, including a struggling economy. But intense lobbying against the bill by energy companies, including Exxon, had an effect. In my 2013 paper, we study the determinants of ho w the U.S Congress voted on Waxman-Markey. � Representatives from �Congressional Districts that w [...]
- If Your Boss Could Do Your Job, Youâre More Likely to Be Happy at Work
by Benjamin Artz in HBR Blog Network, 2016-12-29 14:00:00 UTC
“People don’t quit bad jobs, they quit bad bosses,” according to an old saw. Our research suggests there’s truth behind this saying: bosses matter far more for employee job satisfaction than any other factor we measured. But what makes someone a great boss?
Studies of leaders often focus on their style or charisma, but we wanted to look at how workers are affected by their boss’s technical competence . That is, is the boss is a real expert in the core business of the organization? How much expertise does he or she have? Boss competence is, admittedly, a multifaceted concept. Hence we measured [...]
- On Black Money, Corruption, and Demonetization
by paragwaknis in Musings of the Sorts, 2016-12-29 03:03:07 UTC
Money facilitates more trades and improves welfare than what is possible without it. Monetary theorists would call this as money being ‘essential’ because the total volume and value of transactions achievable with money is much bigger than the one achievable without money (see pp. 47, Nosal and Rocheteau, 2011 ). From this perspective, demonetization of November 8, 2016 definitely reduced economic well-being of Indian people at large overnight. However, the effect may not be just this as temporary one-time reduction in the achievable set of transactions but also the ones in immediate future. W [...]
- Pollution Self Protection Investment in China and Quality of Life Inequality
by Matthew Kahn in Environmental and Urban Economics, 2016-12-28 14:27:00 UTC
Cong Sun, Siqi Zheng and I have just published a good paper � that studies how households combine public goods (clean air) with private goods (air filters and masks) to produce "household goods" such as safety and comfort. �Our paper adds to Gary Becker's Household Production Function approach. �The figure below was cut from the paper because we did a bad job explaining it to the reviewers but in this blog I will try again to explain it. �In the back of my mind, I was thinking about Figure 1 in this old Peltzman JPE paper. Chinese urbanites want to breathe clean air. � Both across Chinese citi [...]
- More on the History of Distributed Lag Models
by Dave Giles in Econometrics Beat: Dave Giles' Blog, 2016-12-28 13:41:00 UTC
In a follow-up to my recent post about Irving Fisher's contribution to the development of distributed lag models, Mike Belongia emailed me again with some very interesting material. He commented: "While working with Peter Ireland to create a model of the business cycle based on what were mainstream ideas of the 1920s (including a monetary policy rule suggested by Holbrook Working), I ran across this note on Fisher's "short cut" method to deal with computational complexities (in his day) of non-linear relationships. I look forward to your follow-up post on Almon lags and hope Fisher's ol [...]
- China's Awkward Exchange Rate Regime: an Update
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2016-12-26 12:18:37 UTC
As 2016 draws to a close, it’s natural to look back over the year’s posts. With all the swirling concerns about China-U.S. relations—including the selection of the protectionist co-author of Death by China to head a new White House National Trade Council—we wondered whether our February doubts about China’s exchange rate regime remain intact. The answer is yes, but for reasons radically inconsistent with President-elect Trump’s promise to declare China a currency manipulator on his first day in office. Like any country with a fixed exchange rate, China’s central bank intervenes actively to mai [...]
- Annual Review 2016
by email@example.com (David Stern) in Stochastic Trend, 2016-12-26 11:08:00 UTC
I've been doing these annual reviews since 2011. They're mainly an exercise for me to see what I accomplished and what I didn't in the previous year. The big change this year mentioned at the end of last year's review is that we had a baby in February. I ended up taking six weeks leave around the birth. Since then, I've been trying to adjust my work-life balance :) I'm trying to get more efficient at doing things, dropping things that aren't really necessary to do, trying to schedule work time more. None of these things are that easy, at least for me. It's mainly anything that isn't work, baby [...]
- Vrednotenje ekonomskih uÄinkov kulturnih dogodkov â nova metoda
by andee in V krizi smisla tiči misel, 2016-12-25 17:16:50 UTC
Ob novem letu je prav pogledati tudi, kaj ga je najbolj zaznamovalo. Vsaj zame zagotovo kar malce nepričakovan dvig metode ex-post ekonometrične verifikacije kot nove metode vrednotenja ekonomskih učinkov kulturnih dogodkov. Metoda, ki smo jo sami pričeli uporabljati pri ocenjevanju ekonomskih učinkov EPK Maribor 2012, in je potem kar nekaj časa “samevala”, je pričela “migati” v lanskem letu, dokončno pa se je pričela prebijati v zanimanje strokovne javnosti v tem letu.
Vse skupaj terja malce kronologije. Tema mojega magisterija na Fakulteti za družbene vede v Ljubljani je bila ekonomsko vredn [...]
- Food will be getting cheaper during the next decade
by Ivan Kitov in Economics as Classical Mechanics, 2016-12-25 13:30:00 UTC
We did not report on the difference between the core consumer price index (cCPI) and the index for food (less beverages) since 2013 , when we reported the overall fall in food price in the USA. This update is a bit late considering our promise to update at an annual rate, but the current trend in the discussed difference is so strong and indicative that we could not miss the opportunity to praise the success of our 8-year-old prediction. So we continue reporting on and predicting the evolution of the difference between the core consumer price index (cCPI) and the index for food (less beverages [...]
- Oil price will not grow during the next 15 years
by Ivan Kitov in Economics as Classical Mechanics, 2016-12-25 12:06:00 UTC
In 2008, we published a paper on the presence of long-term sustainable trends in the differences between various components of the CPI in the USA. We started with the difference between the core CPI (i.e. CPI less food and energy) and the overall CPI. Two Figures below are borrowed from the paper: Figure 1. Linear regression of the difference between the core CPI and CPI for the period from 1981 to 1999.� The goodness-of-fit is 0.96, and the slope is 0.67. Figure 2. Linear regression of the difference between the core CPI and CPI after 2002.� The goodness-of-fit is 0.86, and the tangent is -1. [...]
- Holiday spending through an economistâs eyes
by thebusinesscycleblog in The business cycle blog, 2016-12-24 15:08:13 UTC
It is not Scroogenomics — here Jeff Larrimore analyzes what we can learn from how folks plan (financially) for Christmas. [...]
- Climatopolis on the Radio
by Matthew Kahn in Environmental and Urban Economics, 2016-12-24 15:04:00 UTC
Yesterday, I had the opportunity to talk to John Batchelor for 15 minutes on his radio show a bout my �Climatopolis work. �He likes my recent PERC publication: Climatopolis Revisited. � �I argue that rich, educated cities can handle all of t he challenges posed by climate change. � This adaptation will not be costless but through rational expectations and risk aversion, we will build a new set of robust and resilient structures such that urbanites will continue to thrive (think of Singapore today). �The developing world needs to urbanize faster to help it to adapt to the serious risks associat [...]
- Funding social housing through bust, boom and bust
by Michelle Norris in The Irish Economy, 2016-12-24 14:00:41 UTC
There is a lot of debate about the impact of the shortage of social housing at the moment, so I thought that this UCD Geary Institute for Public Policy working paper on the funding of this sector might be of interest:
In it my colleague Mick Byrne and I argue that the causes of our current difficulties in funding and delivering social housing are older and more complex than is commonly understood. Rather than policy decisions made during our most recent economic crisis, they are the result of reforms to social housing financing methods initiate [...]
- Testing part of a DSGE model by Indirect Inference
by Christian Zimmermann in NEP-DGE blog, 2016-12-21 16:16:52 UTC
By Patrick Minford, Michael Wickens and Yongdeng Xu
e propose a new type of test. Its aim is to test subsets of the structural equations of a DSGE model. The test draws on the statistical inference for limited information models and the use of indirect inference to test DSGE models. Using Monte Carlo experiments on two subsets of equations of the Smets-Wouters model we show that the model has accurate size and good power in small samples. In a test of the Smets-Wouters model on US Great Moderation data we reject the specification of the wa [...]
- A Tale of Two Wages: Spinners and the Industrial Revolution
by Thales ZP in NEP-HIS blog, 2016-12-21 13:01:13 UTC
Spinning the Industrial Revolution
by Jane Humphries (Oxford) and Benjamin Schneider (Cornell)
The prevailing explanation for why the Industrial Revolution occurred first in Britain is Robert Allen’s (2009) ‘high-wage economy’ view, which claims that the high cost of labour relative to capital and fuel incentivized innovation and the adoption of new techniques. This paper presents new empirical evidence on hand spinning before the Industrial Revolution and demonstrates that there was no such ‘high-wage economy’ in spinning, a leading sector of industrialization. We quantify the wor [...]
- Understanding Long-run Price Dispersion
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-20 22:56:00 UTC
- Cecchetti & Schoenholtz â Why a gold standard is a very bad idea
by firstname.lastname@example.org (Mike Norman) in Mike Norman Economics, 2016-12-20 17:03:00 UTC
The extraordinary monetary easing engineered by central banks in the aftermath of the 2007-09 financial crisis has fueled criticism of discretionary policy that has taken two forms. The first calls for the Federal Reserve to develop a policy rule and to assess policy relative to a specified reference rule . The second aims for a return to the gold standard (see here and here ) to promote price and financial stability. We wrote about policy rules recently . In this post, we explain why a restoration of the gold standard is a profoundly bad idea.... Money and Banking Why a gold standard is a ver [...]
- How Will Boston Adapt to Climate Change Risk?
by Matthew Kahn in Environmental and Urban Economics, 2016-12-19 22:40:00 UTC
The City of Boston has published a forward looking and optimistic vision for how it will invest to protect itself from the emerging challenges of climate change. � This doesn't surprise me. �Boston is rich and educated and it has strong incentives to adapt (given its coastal location). � As I have said since 2010, urbanization will help us to adapt to climate change. �Read t his six year old document. I'm proud that it was ahead of its time. �If Boston fails to defend itself from sea level rise, then home prices will fall sharply. This provides strong incentives for the large numbers of home o [...]
- Understanding Interstate Trade Patterns
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-19 22:17:00 UTC
Understanding Interstate Trade Patterns [...]
- Why a gold standard is a very bad idea
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2016-12-19 13:51:14 UTC
“Far from being synonymous with stability, the gold standard itself was the principal threat to financial stability and economic prosperity between the wars.” Barry Eichengreen, Golden Fetters . The extraordinary monetary easing engineered by central banks in the aftermath of the 2007-09 financial crisis has fueled criticism of discretionary policy that has taken two forms. The first calls for the Federal Reserve to develop a policy rule and to assess policy relative to a specified reference rule . The second aims for a return to the gold standard (see here and here ) to promote price and fina [...]
- Gasoline Prices, Transport Costs, and the U.S. Business Cycles
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-19 01:35:00 UTC
� Gasoline Prices, Transport Costs, and the U.S. Business Cycles One sentence summary : Technology and monetary policy shocks have significant effects on the U.S. business cycles in the long run, while gasoline supply and demand shocks play an important role in the short run. The corresponding paper by Hakan Yilmazkuday has been published at Journal of Economic Dynamics and Control . The working paper version is available here. Abstract The effects of gasoline prices on the U.S. business cycles are investigated. In order to distinguish between gasoline supply and gasoline demand shocks, the pr [...]
- Pollution and Manufacturing Booms: Evidence from 19th Century England
by Matthew Kahn in Environmental and Urban Economics, 2016-12-17 14:52:00 UTC
During my 10 years on the UCLA faculty, I got to know many great economists. �One of my UCLA colleagues was Walker Hanlon . He�has just released a terrific new NBER Working Paper titled Coal Smoke and the Cost of the Industrial Revolution. � � This is a great piece of economic history whose results are relevant for President Trump today. Back in the 2nd half of the 19th century in England, different cities specialized in different industrial activities. �Some specialized in textiles while others specialized in making other goods. �These industries differed with respect to their energy intensit [...]
- Trade Partner Diversification and Growth: How Trade Links Matter
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-16 21:01:00 UTC
Trade Partner Diversification and Growth: How Trade Links Matter One sentence summary : On top of the standard trade openness measures, centrality measures for a country’s position in the international trade network (which we refer to as the Trade Partner Diversification-TPD) are shown to enter growth regressions positively and significantly, where one standard deviation increase in TPD is associated with a 1 to 1.5 percentage point increase in the annual growth rate. The corresponding paper by Ali Sina Önder and Hakan Yilmazkuday has been accepted for publication at Journal of Macroeconomics [...]
- The Role of Direct Flights in Trade Costs
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-15 21:58:00 UTC
The Role of Direct Flights in Trade Costs One sentence summary : The direct flights in line with bilateral air services agreements reduce trade costs. The corresponding paper by Demet Yilmazkuday and HakanYilmazkuday has been accepted for publication at Review of World Economics . The working paper version is available here. Abstract Effects of direct flights on trade costs are investigated using micro price data at the city level. After controlling for local retail/distribution costs, traded input prices are obtained to be further used in the measurement of trade costs across cities through a [...]
- Fortnightly links: inequality, Nicaragua, coconuts, Radi-Aid awards, Syria, and more
by Camilla Burkot and Terence Wood in Development Policy Blog, 2016-12-15 18:00:55 UTC
On Wednesday, UN Secretary-General Ban Ki-Moon briefed the Security Council on the fall of Aleppo and ensuing atrocities. According to a Guardian correspondent interviewed by the ABC, it was Iranian influence that scuppered plans to evacuate civilians trapped in eastern Aleppo. One account written by a Syrian mother who lost her child earlier this year provides a wrenching insight into the human cost of the conflict — a cost which is set to grow further still. If you are moved to do something, this article provides links to key charities working in Syria, including several which are Syrian-ba [...]
- Bilateral versus Multilateral Free Trade Agreements: A Welfare Analysis
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-15 01:32:00 UTC
- Opportunity to Move: Macroeconomic Effects of Relocation Subsidies
by Christian Zimmermann in NEP-DGE blog, 2016-12-14 18:07:39 UTC
By Andrii Parkhomenko
The unemployment insurance system in the U.S. does not provide incentives to look for jobs outside local labor markets. In this paper I introduce relocation subsidies as a supplement to unemployment benefits, and study their effects on unemployment, productivity and welfare. I build a job search model with heterogeneous workers and multiple locations, in which migration is impeded by moving expenses, cross-location search frictions, borrowing constraints, and utility costs. I calibrate the model to the U.S. economy, and [...]
- Trade and Cities
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-13 15:53:00 UTC
Trade and Cities One sentence summary: Following the Uruguay Round, a significant and robust correlation exists between tariff reductions and declines in urban concentration. The corresponding paper by Cem Karayalcin and Hakan Yilmazkuday titled " Trade and Cities " has been published in World Bank Economic Review . Click here to see the corresponding World Bank Blog. Click here to download the corresponding working paper. Abstract Many developing countries display remarkably high degrees of urban concentration that are incommensurate with their levels of urbanization. The cost of excessively [...]
- Lo que deberÃa preocuparnos de PISA
by MarÃa Ramos in Politikon, 2016-12-13 09:21:00 UTC
La semana pasada se presentaron los resultados del conocido informe PISA de la OCDE , que evalúa el nivel de competencias de alumnos de 15 años en más de 70 países alrededor del mundo. Al igual que con anteriores informes, estos días en los medios y en las redes sociales se ha hablado insistentemente de la posición de España respecto a otros países del entorno y de las diferencias en las puntuaciones de las distintas Comunidades Autónomas. Pero como ya advertimos en Politikon la semana anterior, las puntuaciones y las diferencias entre ellas (muchas por cierto, estadísticamente no significativ [...]
- The Economics of California's AB32 Revisted
by Matthew Kahn in Environmental and Urban Economics, 2016-12-12 16:05:00 UTC
The LA Times has published a thoughtful piece asking whether California's pursuit of the low carbon economy will be costly for the state. Mary Nichols, Severin Borenstein and Jim Sweeney all make reasonable points. Permit me to make some points (since the reporter didn't call me). Since 2008, I have been concerned that California's unilateral efforts to reduce its emissions would lower the purchasing power of our middle class as the price of electricity and gasoline will rise here due to AB32 regulation. Read my 2008 discussion here. As documented in my 2015 paper i n JAERE, California's [...]
- What Do Google Data Centers and Texas Wind Farms Have in Common?
by Matthew Kahn in Environmental and Urban Economics, 2016-12-12 15:44:00 UTC
Today's New York Times f eatures a great piece documenting how Pryor Oklahoma has benefited from Google's decision to locate a data center there. As Google has offered free Wifi and given $ to the local schools, it has improved local quality of life but the Data Center creates few new jobs. The same issue arises when a rural area attracts a large wind farm. These findings mirror a set of results I published in this 2013 paper , Local non-market quality of life dynamics in new wind farms communities "The environmental benefits from generating electricity using renewable power are well known. [...]
- Dodd-Frank, the CHOICE Act and Small Banks
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2016-12-12 14:34:17 UTC
Critics of the Dodd-Frank Act argue that the new regulatory regime has weakened small banks (see, for example, Peirce, Robinson, and Stratmann ). This criticism is echoed in the Financial CHOICE Act —proposed by House Financial Services Chair Jeb Hensarling—that would largely scrap the current oversight of large systemic intermediaries in part to reduce the regulatory burden on “community financial institutions” (those with fewer than $10 billion in assets). We share the goal of ensuring that regulation is cost effective for small banks that pose no threat to the financial system. However, we [...]
- Three Thoughts About Regulation and U.S Competitiveness
by Matthew Kahn in Environmental and Urban Economics, 2016-12-10 14:38:00 UTC
For those with a high value of time, permit me to summarize this blog post. �Local land use regulation along the coasts, and labor unions in the non-Right to Work states have significantly raised the cost of "doing business" in the United States. �By cleaning up the air and water in our major cities, the EPA has increased U.S competitiveness by raising our urban quality of life and helping "knowledge workers" to be more productive (since a clean environment and thinking and learning go hand in hand). So, I believe that land and labor regulations have reduced U.S competitiveness while environme [...]
- Tiebout Revisited: What Happens if the Federal EPA is Gutted?
by Matthew Kahn in Environmental and Urban Economics, 2016-12-09 15:01:00 UTC
The N Y Times isn't optimistic about the path that the EPA will take under the leadership of Scott Pruitt. � His policy shifts (relative to President Obama's team) will allow future environmental economists �to study whether "national policy maters" in causing environmental quality progress. �In this old JEEM paper, Michael Greenstone argued that the EPA wasn't the main cause of the major cause of the air pollution (as measured by sulfur dioxide) progress observed over a 30 year period. � In my Rust Belt work, I have argued that the phase out of old power plants and steel plants and heavy manu [...]
- Mismeasurement of Distance Effects: The Role of Internal Location of Production
by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog, 2016-12-08 15:27:00 UTC
Mismeasurement of DistanceEffects: The Role of Internal Location of Production � One sentence summary : The overestimation of distance effects in gravity studies is an aggregation problem due to ignoring the internal location of production, which can be fixed by a corrective distance index based on the dispersion of economic activity within the exporter country and its remoteness from the rest of the world. The corresponding paper by Hakan Yilmazkuday has been published at Review of International Economics . The working paper version is available here. [...]
- Quantitative Impact of Reducing Barriers to Skilled Labor Immigration: The Case of the US H-1B Visa
by Christian Zimmermann in NEP-DGE blog, 2016-12-07 14:37:54 UTC
By Hyun Lee
In this paper, I develop a novel two-country general equilibrium model of immigration and return migration with incomplete markets and heterogeneous agents. I use the model to quantify the short-run and the long-run macroeconomic impacts of permanently doubling the US H-1B visa quota. In the short-run, I find huge endogenous increase in visa application by less talented skilled foreigners, which increases the probability of obtaining the H-1B visa by only 11 percentage points. In the long-run, US experiences a modest gain in out [...]
- Better capitalized banks lend more and lend better
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2016-12-05 13:49:01 UTC
Many people seem to think that when authorities increase capital requirements, banks lend less. The advocates of this view go on to argue that, since credit is essential for economic growth, we should not impose overly tough constraints on banks. Put another way, a number of people believe that we have gone too far in making the financial system safe and the cost is lower growth and employment. Treasury Secretary-designate Steven Mnuchin appears to share the view that financial regulation has restrained the supply of credit: in a recent interview , he is quoted as saying “The number one proble [...]
- A Comment on Prof. Krugman's New "Trade Paper"
by Matthew Kahn in Environmental and Urban Economics, 2016-12-04 16:33:00 UTC
Dr. Krugman posted a short note� �arguing that China is not responsible for the decline of U.S manufacturing. �With one graph, he shows that a simple negative linear trend does a great job of explaining the share of people working in manufacturing from 1950 to 2010 and that this share has been roughly constant over the last 6 years. In absolute terms, �5 million fewer people now work in manufacturing relative to back in the 1970s. Dr. K wants to approach the "manufacturing's dynamics question" from the perspective of macroeconomics but this is a mistake. �Wisconsin, Michigan, PA , Ohio voters [...]
- High-skilled migrants matter â and weâre not winning
by Johan Fourie in Johan Fourie's Blog, 2016-12-03 04:38:47 UTC
One of the baffling things in explaining the Industrial Revolution is that education, that pillar most economists believe to be critical for economic growth, seems to have played a relatively minor role. Universal public education was a consequence rather than a cause of the Industrial Revolution. Eighteenth-century England did not first have a skilled population before they had an economic transformation; the uncomfortable truth is that it was the other way round.
This uncomfortable truth does not suggest that formal education was completely unimportant. It suggests, instead, that much of wh [...]
- QED69: Tu l'as voulu FranÃ§ois Dandin...
by Alberto Bagnai in Goofynomics, 2016-12-02 07:29:00 UTC
Tanti tanti anni or sono, avevo una regazzetta del Villaggio Olimpico. Lei non era rustica, ma le sue amiche abbastanza. Ricordo un giorno una di loro chiedere a un'altra: "Che profumo hai messo?" Et l'autre de repondre: " Anè Anè ". Ignorava, la rustichella, che sulle "i" va sempre messo un puntino, anche (e soprattutto) quando le "i" sono tante ( una cosa tipo 888 . A proposito, com'era quella cosa dell'euro che ci difende dai fire sales ?), ma qualche volta ne vanno messi due, e la scelta non è casuale. So che non ci crederete, ma non corressi la rustichella. Detesto l'abuso di posizione do [...]
- Some Airplane Energy Demand Economics
by Matthew Kahn in Environmental and Urban Economics, 2016-12-01 16:55:00 UTC
Before I talk about airplanes, I want to thank USC's media team for writing this very nice article about the� The USC Economics Review �(our new undergraduate economics journal). �Two weeks ago, J erry Nickelsberg a nd I released a new NBER Working Paper �titled " An Economic Analysis of U.S Airline Fuel Economy Dynamics from 1991 to 2015" Airline transport generates a growing share of global greenhouse gas emissions but as of late 2016, this sector has not faced U.S. fuel economy or emissions regulation. At any point in time, airlines own and lease a set of durable vehicles and have invested [...]
- Can mobile money increase investment by businesses?
by Asif Islam in Let's Talk Development, 2016-12-01 15:45:00 UTC
Investment is one of the pillars of private sector development. The acquisition of assets enables firms to increase their capacity and improve their efficiency, unlocking avenues of growth. Promoting firms’ growth is especially critical in Sub-Saharan African countries that have predominantly low levels of economic development and high rates of poverty. Against this backdrop, there has been a rapid increase in mobile money use - that is the use of mobile phones for financial transfers. At the end of 2015, mobile money services were available in 93 countries -with a total of over 411 million r [...]
- Elites or people?
by chris in Stumbling and Mumbling, 2016-12-01 13:13:41 UTC
The votes for Trump and Brexit have highlighted a division between “elites” and the “people”. For me, though, this is the wrong dichotomy. The question instead is: under what conditions are the people right, and under what conditions are elites right?
Both can sometimes go wrong. Experts are prone not just to professional deformation (pdf) – the tendency for perceptions to be warped by their training – but also groupthink. For example, the replication crisis – which is by no means confined to psychology – suggests that peer review fails to weed out poor academic research and might even enhance [...]
- Si pagamos a los estudiantes por sus notas Â¿quiÃ©n mejora?
by admin in Nada Es Gratis, 2016-11-30 06:00:24 UTC
de Cristina Bellés
Tener estudios universitarios es beneficioso tanto desde un punto de vista económico (mayor salario futuro) como social (mejor salud y mayor participación cívica, por ejemplo). Entonces, ¿por qué hay un gran porcentaje de estudiantes que abandona o tarda mucho más tiempo del establecido en terminar los estudios? En España, por ejemplo, el 22.5% de los estudiantes universitarios de primer año abandonan los estudios y casi la mitad de los estudiantes necesitan dos o más años adicionales para terminar la carrera . Estos números son igual de preocupantes en otros países. Un 45% [...]
- Gender, Marriage, and Life Expectancy
by Christian Zimmermann in NEP-DGE blog, 2016-11-29 21:33:18 UTC
By Margherita Borella, Mariacristina De Nardi and Fang Yang
Wages and life expectancy, as well as labor market outcomes, savings, and consumption, differ by gender and marital status. In this paper we compare the aggregate implications of two dynamic structural models. The first model is a standard, quantitative, life-cycle economy, in which people are only heterogenous by age and realized earnings shocks, and is calibrated using data on men, as typically done. The second model is one in which people are also heterogeneous by gender, marital [...]
- Financial Regulation in a Quantitative Model of the Modern Banking System
by Christian Zimmermann in NEP-DGE blog, 2016-11-29 21:33:00 UTC
By Tim Landvoigt and Juliane Begenau
This paper builds a quantitative general equilibrium model with commercial banks and shadow banks to study the unintended consequences of capital requirements. In particular, we investigate how the shadow banking system responds to capital regulation changes for traditional banks. A key feature of our model are defaultable bank liabilities that provide liquidity services to households. In case of default, commercial bank debt is fully insured and thus provides full liquidity services. In contrast, shadow ba [...]
- Ending Too Big to Fail
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2016-11-28 13:33:26 UTC
“We very, very much did not want to make the loan.” Ben Bernanke testimony (October 10, 2014) regarding the Federal Reserve’s emergency provision of credit to AIG in September, 2008. More than six years after the Dodd-Frank Act passed in July 2010, the controversy over how to end “too big to fail” (TBTF) remains a key focus of financial reform. Indeed, TBTF—which led to the troubling bailouts of financial behemoths in the crisis of 2007-2009—is still one of the biggest challenges in reducing the probability and severity of financial crises. By focusing on the largest, most complex, most interc [...]