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2023-01-30

• Money, e-money and consumer welfare
  by Christian Zimmermann in NEP-DGE blog, 2023-01-30 14:19:00 UTC

  By Francesco Carli and Burak Uras http://d.repec.org/n?u=RePEc:zbw:bofrdp:152022&r=dge We develop a micro-founded monetary model to inquire the role of a privately provided e-money instrument for household consumption smoothing and welfare. Different from fiat money, e-money users pay electronic transaction fees, but in turn e-money reduces spatial separation frictions and enables risk-sharing. We characterize the conditions that promotes e-money to be Pareto improving and the conditions when e-money reduces its users’ welfare – despite for the consumption-smoothing it induces. We calibrate ou [...]

2023-01-26

• Cycles in lending standards : Data from the senior loan officer opinion survey
  by ? in FRED blog, 2023-01-26 14:00:00 UTC

  FRED recently added more data from the Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) . The survey, conducted by the Board of Governors, is currently sent to 124 domestic banks and US branches and agencies of foreign banks. The senior loan officers at those organizations answer a series of questions about their opinions on current lending practices. This qualitative information is used by monetary policymakers to gauge credit market and banking conditions. The FRED graph above shows the fraction of domestic banks that reported having tightened their lending standards min [...]

2023-01-24

• Job Ladder, Human Capital, and the Cost of Job Loss
  by Christian Zimmermann in NEP-DGE blog, 2023-01-24 18:13:03 UTC

  By Richard Audoly, Federica De Pace and Giulio Fella http://d.repec.org/n?u=RePEc:fip:fednsr:95392&r=dge High-tenure workers losing their job experience a large and prolonged fall in wages and earnings. The aim of this paper is to understand and quantify the forces behind this empirical regularity. We propose a structural model of the labor market with (i) on-the-job search, (ii) general human capital, and (iii) firm specific human capital. Jobs are destroyed at an endogenous rate due to idiosyncratic productivity shocks and the skills of workers depreciate during periods of non-employment. Th [...]

2023-01-17

• The Dynamics of the Racial Wealth Gap
  by Christian Zimmermann in NEP-DGE blog, 2023-01-17 16:46:36 UTC

  By Dionissi Aliprantis, Daniel Carroll and Eric Young http://d.repec.org/n?u=RePEc:hka:wpaper:2022-044&r=dge What drives the dynamics of the racial wealth gap? We answer this question using a dynamic stochastic general equilibrium heterogeneous-agents model. Our calibrated model endogenously produces a racial wealth gap matching that observed in recent decades along with key features of the current cross-sectional distribution of wealth, earnings, intergenerational transfers, and race. Our model predicts that equalizing earnings is by far the most important mechanism for permanently closing th [...]

• Homelessness
  by Christian Zimmermann in NEP-DGE blog, 2023-01-17 16:15:45 UTC

  By Ayşe İmrohoroğlu and Kai Zhao http://d.repec.org/n?u=RePEc:uct:uconnp:2022-17&r=dge This paper examines the effectiveness of several policies in reducing the aggregate share of homeless in a dynamic general equilibrium model. The model economy is calibrated to capture the most at-risk groups and generates a diverse population of homeless with a significant fraction becoming homeless for short spells due to labor market shocks and a smaller fraction experiencing chronic homelessness due to health shocks. Our policy experiments show housing subsidies to be more effective in reducing the agg [...]

2023-01-13

• China and the Sovereign-Debt Bomb
  by Anne O. Krueger in Project Syndicate, 2023-01-13 14:05:37 UTC

  WASHINGTON, DC – International capital flows have long been a major source of economic growth. Savings in higher-income countries have financed high-yielding investments in low-income countries, generating benefits for all. After World War II, capital flows under the Marshall Plan drove the rapid reconstruction of Europe, and after those countries recovered, they extended their own foreign aid and other official financial flows to the developing world. Private financing also increased substantially; by the 1990s, it accounted for over half of total capital flows to developing countries. Some [...]

2023-01-11

• The full employment challenge
  by chris in Stumbling and Mumbling, 2023-01-11 13:44:09 UTC

  Many technocrats think the UK is at or around full employment. What they don't say is that this requires some radical thinking about economic policy. The Bank's chief economist Huw Pill recently said that the labour market so tight that higher interest rates might be needed to cut aggregate demand and inflation. And Sir Keir Starmer says : "We’re going to have to be fiscally disciplined." The only charitable reading of this is that it means he thinks he's going to inherit a reasonably tight labour market (albeit perhaps not as much so as now) and so a fiscal expansion would be inflationary. W [...]

2023-01-07

• Weekend reading links
  by noreply@blogger.com (Urbanomics) in Urbanomics, 2023-01-07 14:36:00 UTC

  1. Industrial policy in the US The chips and Science Act , a $280bn effort to shore up America’s microchips industry... the administration eventually compromised enough to overcome the resistance of Joe Manchin of West Virginia, often the swing Democrat in a 50-50 Senate, to pass a more modest, inaptly named Inflation Reduction Act , promising spending of $369bn over a decade. Its climate spending will be the most substantial in American history. Together with an infrastructure package passed in November 2021, the trio of bills will make for annual spending of nearly $100bn on industrial polic [...]

2022-12-26

• Long-Term Economic Implications of Demeny Voting: A Theoretical Analysis
  by Christian Zimmermann in NEP-DGE blog, 2022-12-26 17:11:29 UTC

  By Luigi Bonatti and Lorenza Alexandra Lorenzetti http://d.repec.org/n?u=RePEc:ces:ceswps:_10039&r=dge This paper places itself at the intersection between the literature on “Demeny voting” (the proposal of letting custodial parents exercise their children’s voting rights until they come of age) and the vast literature on formal models with endogenous fertility that address the problem of fiscal redistribution between young and old cohorts in the presence of an aging population. Linking these issues to the process of economic growth through a simple overlapping generations model, we show that [...]

• New indicators of perceived inflation in France based on media data
  by raphael.moncomble in Eco Notepad, 2022-12-26 14:31:41 UTC

  Published on 12/27/2022 By Jean-Charles Bricongne , Olivier de Bandt , Annabelle de Gaye, Julien Denes, Paul Hubert , Pierre-Antoine Robert The recent rise in inflation could affect households' and businesses' perception of inflation. This post describes new indicators of perceived inflation in France constructed from alternative data: newspaper articles and messages from the social network Twitter. The advantage of such data is that they are available at high frequency and in real time. Billet_299_VE.pdf Chart 1. Indicators of perceived inflation based on media data (standardised and re [...]

2022-12-23

• Optimal GDP-indexed Bonds
  by Christian Zimmermann in NEP-DGE blog, 2022-12-23 05:04:59 UTC

  By Yasin Kürsat Önder http://d.repec.org/n?u=RePEc:rug:rugwps:22/1056&r=dge I investigate the introduction of GDP-indexed bonds as an additional source of government borrowing in a quantitative default model. The idea of linking debt payments to developments in GDP resurfaced with the 1980s debt crisis and peaked with the COVID-19 outbreak. I show that the gains from this idea depend on the underlying indexation method and are highest if payments are symmetrically tied to developments in GDP. Optimized indexed debt can eradicate default risk, halve consumption volatility, and increase asset pr [...]

2022-12-18

• Annual Review 2022
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2022-12-18 02:45:00 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.    This was the second year since I have been back living in Canberra in 2007 that I spent the entire year in the Canberra region (extending to the coast) and the second year since 1991 that I didn't fly on a plane. I also haven't been outside of Australasia since 2018. It's pretty hard to travel for any length of time without taking the family and with two small children neither of us feels like traveling anywhere very far. I think we can finall [...]

2022-12-15

• Why economists need history
  by chris in Stumbling and Mumbling, 2022-12-15 09:25:06 UTC

  Should economists pay more attention to intellectual history? I'm prompted to ask by Jan Eeckhout's book, The Profit Paradox . His thesis is that, since the early 80s, many industries have become dominated by a handful of superstar companies whose increased market power allows them to enjoy higher profit margins. The result is higher prices than would otherwise be the case which in turn means lower output, lower demand for labour and lower real interest rates. It's not just workers who suffer from this but also smaller companies who face tougher competition from giant firms and higher costs fr [...]

2022-12-11

• Crisis Propagation in a Heterogeneous Self-Reflexive DSGE Model
  by Christian Zimmermann in NEP-DGE blog, 2022-12-11 16:20:33 UTC

  By Federico Guglielmo Morelli, Michael Benzaquen, Jean-Philippe Bouchaud and Marco Tarzia http://d.repec.org/n?u=RePEc:hal:journl:hal-03378921&r=dge We study a self-reflexive DSGE model with heterogeneous households, aimed at characterising the impact of economic recessions on the different strata of the society. Our framework allows to analyse the combined effect of income inequalities and confidence feedback mediated by heterogeneous social networks. By varying the parameters of the model, we find different crisis typologies: loss of confidence may propagate mostly within high income househo [...]

2022-11-30

• Credit Misallocation and Macro Dynamics with Oligopolistic Financial Intermediaries
  by Christian Zimmermann in NEP-DGE blog, 2022-11-30 22:04:48 UTC

  By Alessandro Villa http://d.repec.org/n?u=RePEc:fip:fedhwp:94920&r=dge Bank market power shapes firm investment and financing dynamics and hence affects the transmission of macroeconomic shocks. Motivated by a secular increase in the concentration of the US banking industry, I study bank market power through the lens of a dynamic general equilibrium model with oligopolistic banks and heterogeneous firms. The lack of competition allows banks to price discriminate and charge firm-specific markups in excess of default premia. In turn, the cross-sectional dispersion of markups amplifies the impac [...]

• QE with Chinese Characteristics?
  by Andrew Sheng in Project Syndicate, 2022-11-30 11:46:00 UTC

  HONG KONG – In 2020, Sebastian Mallaby of the Council on Foreign Relations announced the beginning of the “age of magic money,” in which advanced economies would “redefine the outer limits of their monetary and fiscal power.” By July 2022, Mallaby was predicting that this age was coming to an end. But, while most major central banks are now reversing quantitative easing (QE) and raising interest rates, China may need to head in the opposite direction. Observers often forget that QE was invented by the Bank of Japan in 2001 as a tool for dealing with balance-sheet deflation. Other tools incl [...]

2022-11-29

• Let the WTO Referee Carbon Border Taxes
  by Jeffrey Frankel in Project Syndicate, 2022-11-29 16:48:24 UTC

  CAMBRIDGE – Perhaps the most important task confronting the international order is enforcement of national limits on greenhouse-gas emissions, such as those that were negotiated in the 2015 Paris agreement. Carbon border adjustments could give these limits teeth, but fair application requires a revived World Trade Organization. Past attempts at curtailing carbon dioxide emissions have yielded limited results. China and other emerging and developing economies resist curbing their rapidly rising emissions, understandably arguing that the industrialized countries should go first because they cr [...]

2022-11-27

• Full-Information Estimation of Heterogeneous Agent Models Using Macro and Micro Data
  by Christian Zimmermann in NEP-DGE blog, 2022-11-27 16:00:33 UTC

  By Laura Liu and Mikkel Plagborg-Møller http://d.repec.org/n?u=RePEc:pri:econom:2022-21&r=dge We develop a generally applicable full-information inference method for heterogeneous agent models, combining aggregate time series data and repeated cross sections of micro data. To handle unobserved aggregate state variables that affect cross-sectional distributions, we compute a numerically unbiased estimate of the model-implied likelihood function. Employing the likelihood estimate in a Markov Chain Monte Carlo algorithm, we obtain fully efficient and valid Bayesian inference. Evaluation of the mi [...]

2022-11-25

• Quotation of the Day…
  by Don Boudreaux in Cafe Hayek, 2022-11-25 09:15:00 UTC

  (Don Boudreaux) Tweet … is from page 62 of Israel Kirzner’s March 1992 South African Journal of Economics paper, “ Subjectivism, Freedom and Economic Law ” as this paper 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 : Physical realities and constraints have, of course, enormously important consequences for economic outcomes. But the subjectivist must insist that economic outcomes are not determined by any objective physical phenomena whate [...]

2022-11-24

• Optimal carbon pricing with fluctuating energy prices – emission targeting vs. price targeting
  by Christian Zimmermann in NEP-DGE blog, 2022-11-24 16:48:05 UTC

  By Alkis Blanz, Ulrich Eydam, Maik Heinemann and Matthias Kalkuhl http://d.repec.org/n?u=RePEc:pot:cepadp:51&r=dge Prices of primary energy commodities display marked fluctuations over time. Market-based climate policy instruments (e.g., emissions pricing) create incentives to reduce energy consumption by increasing the user cost of fossil energy. This raises the question of whether climate policy should respond to fluctuations in fossil energy prices? We study this question within an environmental dynamic stochastic general equilibrium (E-DSGE) model calibrated on the German economy. Our res [...]

2022-11-23

• How well have ECB rate hikes been transmitted to the money market?
  by aurelie.dossantos in Eco Notepad, 2022-11-23 16:06:17 UTC

  Published on 11/25/2022 By Benoit Nguyen and Miklos Vari Since July, the ECB increased its key interest rates by 200 basis points in total (once by 50bps and twice by 75 bps). These are the largest single rate hikes of the ECB key interest rates. In this post, we examine to what extent these changes of policy rates passed through to the money market, the first step of monetary policy transmission. Transmission has been nearly complete in the unsecured market (e.g. on €STR) but subdued in the secured market (i.e. on repo transactions). billet_292_ve.pdf Graph 1: Changes for unsecured mone [...]

2022-11-21

• The macroeconomics of establishing a basic income grant in South Africa
  by Christian Zimmermann in NEP-DGE blog, 2022-11-21 16:27:17 UTC

  By Daan Steenkamp, Roy Havemann and Hylton Hollander http://d.repec.org/n?u=RePEc:pra:mprapa:114614&r=dge This paper quantifies the effect of fiscal transfers on the trade-off between social relief and debt accumulation, and discusses the economic growth and fiscal implications of different combinations of expanded social support and funding choices. Given South Africa’s already high level of public debt, the opportunity to fund a basic income grant through higher debt is limited. Using a general equilibrium model, the paper shows that extending the social relief of distress grant could be fis [...]

2022-11-18

• Useful Microeconomics
  by Francesc Trillas in Real Progress, 2022-11-18 16:31:00 UTC

   Microeconomics does not need to be a distant topic. My design of the Applied Microecnomics course  (taught jointly with Javier Asensio) at the Master in Applied Research in Economics and Business of my university combines theory and discussion of empirical papers in top journals. I paste the syllabus here. As we finish the current edition and we prepare the next one, I would most welcome suggestions of topics, references and discussion papers.  Objectives -Learn the basic skills to understand and be able to use the basic models and theories (old and new) in microeconomics, to better analyze b [...]

2022-11-16

• Can civic nationalism help reduce corruption? Insights from Solomon Islands
  by Grant Walton in Development Policy Blog, 2022-11-16 19:00:10 UTC

  In many parts of the world “nationalism” has earned itself a bad rap. Ethnic cleansing, war, genocide and other atrocities have been committed in its name. In recent years we’ve seen political leaders, like Donald Trump, whip up a toxic form of nationalist sentiment defined by race and a disdain for foreigners. On the other hand, nationalism can be a force for good; a devotion to one’s nation can encourage solidarity, pride and belonging. And for some practitioners, policymakers and academics, a certain type of nationalism – civic nationalism – has the potential to help address corruption in p [...]

• Some Links
  by Don Boudreaux in Cafe Hayek, 2022-11-16 16:00:57 UTC

  (Don Boudreaux) Tweet Phil Magness and Michael Makovi report on their important research showing that Karl Marx’s reputation was given a real boost by the ‘success’ of the Bolshevik revolution . A slice: In his classic book the Logic of Collective Action, Mancur Olson observed a peculiar feature about socialist political organizing. Marxist theory envisions itself as a manifestation of collective class interests, with the proletarian class being the most numerous. Yet as Olson noted, “the ‘Marxian’ revolutions that have taken place have been brought about by small conspiratorial elites tha [...]

2022-11-13

• Recent Behavioural Science and Policy Links November 13th
  by Liam Delaney in Economics, Psychology and Policy, 2022-11-13 20:01:00 UTC

  It is still very difficult to know fully what to do about posting on twitter. I have not deleted my account. I am not actively posting. I RT'd the happy announcement of one of our PhD students passing their viva on the basis that many people on my timeline know the student and would want to celebrate. My current mood with it is basically to see this as a transition phase before something new emerges.  I have continued to engage with mastodon ( link here ). It has been exciting to see various people and groups move there and I highly recommend trying it out but it is clearly still open as to wh [...]

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