Pub Date : 2012-12-01DOI: 10.1111/j.1467-9442.2012.01727.x
G. Natvik
In the body of literature concerning fiscal policy, a central result is that government spending might stimulate private consumption because only some households save, while others spend their entire income each period. Although such heterogeneity naturally causes inequality, this complication is commonly avoided by assuming that transfers redistribute steady‐state wealth. I show that this steady‐state assumption drives short‐run results. Without redistribution, the equilibrium is indeterminate, and the labor‐market structure that is imposed to support the expansive result is theoretically inconsistent. On a more positive note, I propose a labor‐market formulation under which the expansive effects of government spending might arise.
{"title":"Government Spending Shocks and Rule‐Of‐Thumb Consumers with Steady‐State Inequality","authors":"G. Natvik","doi":"10.1111/j.1467-9442.2012.01727.x","DOIUrl":"https://doi.org/10.1111/j.1467-9442.2012.01727.x","url":null,"abstract":"In the body of literature concerning fiscal policy, a central result is that government spending might stimulate private consumption because only some households save, while others spend their entire income each period. Although such heterogeneity naturally causes inequality, this complication is commonly avoided by assuming that transfers redistribute steady‐state wealth. I show that this steady‐state assumption drives short‐run results. Without redistribution, the equilibrium is indeterminate, and the labor‐market structure that is imposed to support the expansive result is theoretically inconsistent. On a more positive note, I propose a labor‐market formulation under which the expansive effects of government spending might arise.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"65 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2012-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88991814","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-10-01DOI: 10.1111/j.1468-0270.2012.02181.x
James R. Barth
This article provides a primer on budget deficits from the creation of the federal government. Today federal government spending is 24% of GDP (compared with its historical average of 8.8%), fuelling debt of historic levels. The only effective way to reduce debt levels is to cut entitlement programmes and then set a tax rate sufficient, over the course of the business cycle, to fund government spending.
{"title":"US Debt and Deficits: Time to Reverse the Trend","authors":"James R. Barth","doi":"10.1111/j.1468-0270.2012.02181.x","DOIUrl":"https://doi.org/10.1111/j.1468-0270.2012.02181.x","url":null,"abstract":"This article provides a primer on budget deficits from the creation of the federal government. Today federal government spending is 24% of GDP (compared with its historical average of 8.8%), fuelling debt of historic levels. The only effective way to reduce debt levels is to cut entitlement programmes and then set a tax rate sufficient, over the course of the business cycle, to fund government spending.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"92 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2012-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89967028","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper puts forward an intertemporal model of a small open economy to analyze the effects of money, government debt and real shocks on growth, inflation and external balance. The model is an endogenous growth, overlapping generations model, with money in the utility function, convex adjustment costs for investment, and perfect substitutability between domestic and foreign bonds. It is shown that the growth rate depends only on the world real interest rate, the productivity of domestic capital, the adjustment cost parameter for investment and the depreciation rate. It does not depend on money, budgetary policies or the preferences of domestic consumers. Consumption of goods and services and external balance, in addition to the world real interest rate and the domestic productivity of capital, depend on money, budgetary policies and the preferences of domestic consumers. The model is used to analyze the full effects of real and monetary shocks. Monetary growth is not superneutral in this model, as it affects domestic consumption and the net foreign position of the economy.
{"title":"Money, Growth and External Balance in a Small Open Economy","authors":"G. Alogoskoufis","doi":"10.2139/ssrn.2360271","DOIUrl":"https://doi.org/10.2139/ssrn.2360271","url":null,"abstract":"This paper puts forward an intertemporal model of a small open economy to analyze the effects of money, government debt and real shocks on growth, inflation and external balance. The model is an endogenous growth, overlapping generations model, with money in the utility function, convex adjustment costs for investment, and perfect substitutability between domestic and foreign bonds. It is shown that the growth rate depends only on the world real interest rate, the productivity of domestic capital, the adjustment cost parameter for investment and the depreciation rate. It does not depend on money, budgetary policies or the preferences of domestic consumers. Consumption of goods and services and external balance, in addition to the world real interest rate and the domestic productivity of capital, depend on money, budgetary policies and the preferences of domestic consumers. The model is used to analyze the full effects of real and monetary shocks. Monetary growth is not superneutral in this model, as it affects domestic consumption and the net foreign position of the economy.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"59 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2012-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89187711","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-09-01DOI: 10.1111/j.1467-8462.2012.00695.x
P. McDonald
The demographic assumptions and outcomes in the three successive Intergenerational Reports have differed enormously. This has brought a degree of derision upon the production of these reports in the serious press. Furthermore, the Intergenerational Reports’ projections of labour force participation rates have proven to be very wrong in the short term. The fourth Intergenerational Report will need to address this credibility gap. This article analyses the reasons that the Intergenerational Reports’ projections have been wide of the mark and makes suggestions about future approaches.
{"title":"The Population Dimension in the Intergenerational Reports","authors":"P. McDonald","doi":"10.1111/j.1467-8462.2012.00695.x","DOIUrl":"https://doi.org/10.1111/j.1467-8462.2012.00695.x","url":null,"abstract":"The demographic assumptions and outcomes in the three successive Intergenerational Reports have differed enormously. This has brought a degree of derision upon the production of these reports in the serious press. Furthermore, the Intergenerational Reports’ projections of labour force participation rates have proven to be very wrong in the short term. The fourth Intergenerational Report will need to address this credibility gap. This article analyses the reasons that the Intergenerational Reports’ projections have been wide of the mark and makes suggestions about future approaches.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"20 2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2012-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78083184","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-06-01DOI: 10.1111/j.1467-9442.2011.01690.x
F. Carlsson, Åsa Löfgren, T. Sterner
Using papers submitted to an international conference on economics held in Sweden in 2008, we analyze how gender, as well as other characteristics of the authors and reviewers, affects the grading of these papers by the reviewers. Correcting for other variables, including the country and research field, as well as the academic level of the author, we focus on the difference in grades between blind and non-blind review treatments. We find that non-blind reviewing has little effect, and there is no significant evidence of gender discrimination. Furthermore, we do not find any significant difference between the average grading by female and male reviewers.
{"title":"Discrimination in Scientific Review: A Natural Field Experiment on Blind Versus Non‐Blind Reviews","authors":"F. Carlsson, Åsa Löfgren, T. Sterner","doi":"10.1111/j.1467-9442.2011.01690.x","DOIUrl":"https://doi.org/10.1111/j.1467-9442.2011.01690.x","url":null,"abstract":"Using papers submitted to an international conference on economics held in Sweden in 2008, we analyze how gender, as well as other characteristics of the authors and reviewers, affects the grading of these papers by the reviewers. Correcting for other variables, including the country and research field, as well as the academic level of the author, we focus on the difference in grades between blind and non-blind review treatments. We find that non-blind reviewing has little effect, and there is no significant evidence of gender discrimination. Furthermore, we do not find any significant difference between the average grading by female and male reviewers.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"124 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2012-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87896803","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-04-01DOI: 10.1111/j.1467-9442.2012.01708.x
R. Luttens, Marie‐Anne Valfort
We endow individuals that differ in skill levels and tastes for working with altruistic preferences for redistribution in a voting model where a unidimensional redistributive parameter is chosen by majority voting in a direct democracy. When altruistic preferences are desert-sensitive, i.e. when there is a reluctance to redistribute from the hard-working to the lazy, we show that lower levels of redistribution emerge in political equilibrium. We provide empirical evidence, based on the ISSP 1992 dataset, that preferences for redistribution are not purely selfish and that desert-sensitive motivations play a significant role. We estimate that preferences for redistribution are significantly more desert-sensitive in the US than in Europe. We believe that differences in desert-sensitive preferences for redistribution help explain the different social contracts that prevail in both continents.
{"title":"Voting for Redistribution Under Desert‐Sensitive Altruism","authors":"R. Luttens, Marie‐Anne Valfort","doi":"10.1111/j.1467-9442.2012.01708.x","DOIUrl":"https://doi.org/10.1111/j.1467-9442.2012.01708.x","url":null,"abstract":"We endow individuals that differ in skill levels and tastes for working with altruistic preferences for redistribution in a voting model where a unidimensional redistributive parameter is chosen by majority voting in a direct democracy. When altruistic preferences are desert-sensitive, i.e. when there is a reluctance to redistribute from the hard-working to the lazy, we show that lower levels of redistribution emerge in political equilibrium. We provide empirical evidence, based on the ISSP 1992 dataset, that preferences for redistribution are not purely selfish and that desert-sensitive motivations play a significant role. We estimate that preferences for redistribution are significantly more desert-sensitive in the US than in Europe. We believe that differences in desert-sensitive preferences for redistribution help explain the different social contracts that prevail in both continents.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"14 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2012-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75234612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In response to the sharp decline in prices of financial stocks in the fall of 2008, regulators in a number of countries banned short selling of particular stocks and industries. Evidence suggests that these bans did little to stop the slide in stock prices, but significantly increased costs of liquidity. In August 2011, the U.S. market experienced a large decline when Standard and Poor’s announced a downgrade of U.S. debt. Our cross-sectional tests suggest that the decline in stock prices was not significantly driven or amplified by short selling. Short selling does not appear to be the root cause of recent stock market declines. Furthermore, banning short selling does not appear to prevent stock prices from falling when firm-specific or economy-wide economic fundamentals are weak, and may impose high costs on market participants.
为应对2008年秋季金融股价格的急剧下跌，许多国家的监管机构禁止卖空特定股票和行业。有证据表明，这些禁令对阻止股价下跌几乎没有作用，反而显著增加了流动性成本。2011年8月，标准普尔(Standard and Poor 's)宣布下调美国国债评级，导致美国市场大幅下跌。我们的横断面检验表明，股票价格的下跌并没有明显地被卖空所驱动或放大。卖空似乎不是近期股市下跌的根本原因。此外，当特定公司或整体经济基本面疲弱时，禁止卖空似乎并不能阻止股价下跌，而且可能会给市场参与者带来高昂的成本。
{"title":"Market Declines: Is Banning Short Selling the Solution?","authors":"","doi":"10.2139/SSRN.1939884","DOIUrl":"https://doi.org/10.2139/SSRN.1939884","url":null,"abstract":"In response to the sharp decline in prices of financial stocks in the fall of 2008, regulators in a number of countries banned short selling of particular stocks and industries. Evidence suggests that these bans did little to stop the slide in stock prices, but significantly increased costs of liquidity. In August 2011, the U.S. market experienced a large decline when Standard and Poor’s announced a downgrade of U.S. debt. Our cross-sectional tests suggest that the decline in stock prices was not significantly driven or amplified by short selling. Short selling does not appear to be the root cause of recent stock market declines. Furthermore, banning short selling does not appear to prevent stock prices from falling when firm-specific or economy-wide economic fundamentals are weak, and may impose high costs on market participants.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"33 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2011-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73090078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Although much of the debate between Hayek and Keynes is today portrayed in terms of policy differences, those are not the most fundamental divisions between their conceptions of economics. I argue that their economics diverges most significantly in how they understand the role of capital in a market economy, and how capital relates to issues of savings and investment. Specifically, Hayek’s Austrian conception of capital provides a very different, and very much disaggregated, vision of the market process that can help identify the flaws in Keynesian theory and policy. When capital is seen as reflective of human plans and where it is understood to have multiple but not an infinite number of uses, the economist is forced to consider the microeconomic foundations of macroeconomic phenomena in a way that validates Hayek’s complaint that Keynes’s aggregates conceal the fundamental mechanisms of change.
{"title":"Contrasting Concepts of Capital: Yet Another Look at the Hayek-Keynes Debate","authors":"S. Horwitz","doi":"10.2139/ssrn.1801532","DOIUrl":"https://doi.org/10.2139/ssrn.1801532","url":null,"abstract":"Although much of the debate between Hayek and Keynes is today portrayed in terms of policy differences, those are not the most fundamental divisions between their conceptions of economics. I argue that their economics diverges most significantly in how they understand the role of capital in a market economy, and how capital relates to issues of savings and investment. Specifically, Hayek’s Austrian conception of capital provides a very different, and very much disaggregated, vision of the market process that can help identify the flaws in Keynesian theory and policy. When capital is seen as reflective of human plans and where it is understood to have multiple but not an infinite number of uses, the economist is forced to consider the microeconomic foundations of macroeconomic phenomena in a way that validates Hayek’s complaint that Keynes’s aggregates conceal the fundamental mechanisms of change.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"103 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2011-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76701824","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Thanks to recent findings based on survey data, it is now well known that firms differ from each other with respect to their price-reviewing strategies. While some firms review their prices at fixed intervals of time, others prefer to perform price revisions in response to changes in economic conditions. In order to explain this fact, some theories have been suggested in the literature. However, empirical evidence on the relative importance of the factors determining firms' different strategies is virtually nonexistent. This paper contributes to filling this gap by investigating the factors that explain why firms follow time-, state- or time- and state-dependent price-reviewing rules. We find that firms' strategies vary with firm characteristics that have a bearing on the importance of information costs, the variability of the optimal price and the sensitivity of profits to non-optimal prices. Menu costs, however, do not seem to play a significant role.
{"title":"Choosing between Time and State Dependence: Micro Evidence on Firms' Price‐Reviewing Strategies","authors":"Daniel A. Dias, Carlos Robalo Marques, F. Martins","doi":"10.1111/sjoe.12023","DOIUrl":"https://doi.org/10.1111/sjoe.12023","url":null,"abstract":"Thanks to recent findings based on survey data, it is now well known that firms differ from each other with respect to their price-reviewing strategies. While some firms review their prices at fixed intervals of time, others prefer to perform price revisions in response to changes in economic conditions. In order to explain this fact, some theories have been suggested in the literature. However, empirical evidence on the relative importance of the factors determining firms' different strategies is virtually nonexistent. This paper contributes to filling this gap by investigating the factors that explain why firms follow time-, state- or time- and state-dependent price-reviewing rules. We find that firms' strategies vary with firm characteristics that have a bearing on the importance of information costs, the variability of the optimal price and the sensitivity of profits to non-optimal prices. Menu costs, however, do not seem to play a significant role.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"63 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2011-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87027234","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops and estimates a multi-sector sticky-price model with heterogeneous households and incomplete markets. I show that household heterogeneity amplifies the persistence and volatility of business cycle fluctuations by generating strategic complementarities in firms' pricing decision. Moreover this effect of household heterogeneity, when combined with sectoral heterogeneity in price stickiness, is even stronger. As a consequence, the nominal rigidities required to explain the observed characteristics of the U.S. time series, such as persistent and volatile output fluctuations and inertial inflation, is reduced relative to conventional sticky-price models with a representative household, which makes the model more consistent with microeconomic evidences on frequency of price changes.
{"title":"Heterogeneous Households, Real Rigidity, and Estimated Duration of Price Contract in a Sticky-Price DSGE Model","authors":"Jae Won Lee","doi":"10.2139/ssrn.1546681","DOIUrl":"https://doi.org/10.2139/ssrn.1546681","url":null,"abstract":"This paper develops and estimates a multi-sector sticky-price model with heterogeneous households and incomplete markets. I show that household heterogeneity amplifies the persistence and volatility of business cycle fluctuations by generating strategic complementarities in firms' pricing decision. Moreover this effect of household heterogeneity, when combined with sectoral heterogeneity in price stickiness, is even stronger. As a consequence, the nominal rigidities required to explain the observed characteristics of the U.S. time series, such as persistent and volatile output fluctuations and inertial inflation, is reduced relative to conventional sticky-price models with a representative household, which makes the model more consistent with microeconomic evidences on frequency of price changes.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"681 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2010-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78686062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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