We develop a New Keynesian model featuring staggered price and wage contracts to study welfare costs of exogenous variations in trend inflation. The analyses show that the consequences of constant positive trend inflation and shifting trend inflation are severe, especially when trend inflation is high. Among two channels, staggered wage contracts play a vital role in transmitting adverse impacts of constant and shifting trend inflation into the economy. Without the staggered wage channel, these costs are modest. We also conduct exercises to examine the sensitivity of welfare costs to a wide range of plausible parameters. The results show that if the price and wage friction are sufficiently large, the price and wage indexation level are sufficiently small, or there is upward biased trend inflation process, the welfare costs become larger.
{"title":"Welfare Costs of Shifting Trend Inflation: Staggered Wage and Price Contracts","authors":"Thanh Hà Lê, Trung-Thanh To, N. Doan","doi":"10.1111/boer.12190","DOIUrl":"https://doi.org/10.1111/boer.12190","url":null,"abstract":"We develop a New Keynesian model featuring staggered price and wage contracts to study welfare costs of exogenous variations in trend inflation. The analyses show that the consequences of constant positive trend inflation and shifting trend inflation are severe, especially when trend inflation is high. Among two channels, staggered wage contracts play a vital role in transmitting adverse impacts of constant and shifting trend inflation into the economy. Without the staggered wage channel, these costs are modest. We also conduct exercises to examine the sensitivity of welfare costs to a wide range of plausible parameters. The results show that if the price and wage friction are sufficiently large, the price and wage indexation level are sufficiently small, or there is upward biased trend inflation process, the welfare costs become larger.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"4 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86367582","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}
E. Brynjolfsson, A. Collis, Erwin Diewert, Felix Eggers, Kevin J. Fox
The welfare contributions of the digital economy, characterized by the proliferation of new and free goods, are not well-measured in our current national accounts. We derive explicit terms for the welfare contributions of these goods and introduce a new metric, GDP-B which quantifies their benefits, rather than costs. We apply this framework to several empirical examples including Facebook and smartphone cameras and estimate their valuations through incentive-compatible choice experiments. For example, including the welfare gains from Facebook would have added between 0.05 and 0.11 percentage points to GDP-B growth per year in the US.
{"title":"Gdp-B: Accounting for the Value of New and Free Goods in the Digital Economy","authors":"E. Brynjolfsson, A. Collis, Erwin Diewert, Felix Eggers, Kevin J. Fox","doi":"10.2139/ssrn.3356697","DOIUrl":"https://doi.org/10.2139/ssrn.3356697","url":null,"abstract":"The welfare contributions of the digital economy, characterized by the proliferation of new and free goods, are not well-measured in our current national accounts. We derive explicit terms for the welfare contributions of these goods and introduce a new metric, GDP-B which quantifies their benefits, rather than costs. We apply this framework to several empirical examples including Facebook and smartphone cameras and estimate their valuations through incentive-compatible choice experiments. For example, including the welfare gains from Facebook would have added between 0.05 and 0.11 percentage points to GDP-B growth per year in the US.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78330464","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}
The routes to a macro social report are the social indicators movement, the refinements in national income accounting, and the increasing role of accounting in achieving economic development. This article examines each of these routes.
{"title":"A Macro Social Report","authors":"A. Riahi‐Belkaoui","doi":"10.2139/ssrn.3318623","DOIUrl":"https://doi.org/10.2139/ssrn.3318623","url":null,"abstract":"The routes to a macro social report are the social indicators movement, the refinements in national income accounting, and the increasing role of accounting in achieving economic development. This article examines each of these routes.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"210 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80604665","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}
Ilan Noy, Nguyen Doan, Benno Ferrarini, Donghyun Park
We measure the economic risk of epidemics at a geo-spatially detailed resolution. In addition to data about the epidemic hazard prediction, we use data from 2014-2019 to compute measures for exposure, vulnerability, and resilience of the local economy to the shock of an epidemic. Using a battery of proxies for these four concepts, we calculate the hazard (the zoonotic source of a possible epidemic), the principal components of exposure and vulnerability to it, and of the economy’s resilience (its ability of the recover rapidly from the shock). We find that the economic risk of epidemics is particularly high in most Africa, the Indian subcontinent, China, and Southeast Asia. These results are consistent when comparing an ad-hoc (equal) weighting algorithm for the four components of the index, with one based on an estimation algorithm using Disability-Adjusted Life Years associated with communicable diseases.
{"title":"Measuring the Economic Risk of Epidemics","authors":"Ilan Noy, Nguyen Doan, Benno Ferrarini, Donghyun Park","doi":"10.2139/ssrn.3518964","DOIUrl":"https://doi.org/10.2139/ssrn.3518964","url":null,"abstract":"We measure the economic risk of epidemics at a geo-spatially detailed resolution. In addition to data about the epidemic hazard prediction, we use data from 2014-2019 to compute measures for exposure, vulnerability, and resilience of the local economy to the shock of an epidemic. Using a battery of proxies for these four concepts, we calculate the hazard (the zoonotic source of a possible epidemic), the principal components of exposure and vulnerability to it, and of the economy’s resilience (its ability of the recover rapidly from the shock). We find that the economic risk of epidemics is particularly high in most Africa, the Indian subcontinent, China, and Southeast Asia. These results are consistent when comparing an ad-hoc (equal) weighting algorithm for the four components of the index, with one based on an estimation algorithm using Disability-Adjusted Life Years associated with communicable diseases.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89755795","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}
The critical role of current account imbalances (CAI) is widely shared in the consensus narratives of the European crisis that followed the Great Recession. On the basis of this interpretation, new EU initiatives raised, in particular the so-called “Six Pack†adoption in 2011 and the establishment of the European Semester procedure to improve policy coordination in the EU beyond fiscal matters. This package includes the Macroeconomic Imbalances Procedure (MIP) that broadens the EU economic governance framework to include the surveillance of unsustainable macroeconomic trends. Although the widening of the CAI in the Euro Area is a matter of fact, and the consensus narrative contains elements of truth, alternative views have been put forward on mainly three issues: i) their relevance, ii) their causes and connection with the crisis, and iii) their policy implications. The aim of this paper is to examine these controversial points about the causes, meaning and consequences of CAI, and discuss the alternative policy prescriptions that emerge.
{"title":"Current Account Imbalances and the Euro Area. Alternative Views","authors":"Ronny Mazzocchi, R. Tamborini","doi":"10.2139/ssrn.3403678","DOIUrl":"https://doi.org/10.2139/ssrn.3403678","url":null,"abstract":"The critical role of current account imbalances (CAI) is widely shared in the consensus narratives of the European crisis that followed the Great Recession. On the basis of this interpretation, new EU initiatives raised, in particular the so-called “Six Pack†adoption in 2011 and the establishment of the European Semester procedure to improve policy coordination in the EU beyond fiscal matters. This package includes the Macroeconomic Imbalances Procedure (MIP) that broadens the EU economic governance framework to include the surveillance of unsustainable macroeconomic trends. Although the widening of the CAI in the Euro Area is a matter of fact, and the consensus narrative contains elements of truth, alternative views have been put forward on mainly three issues: i) their relevance, ii) their causes and connection with the crisis, and iii) their policy implications. The aim of this paper is to examine these controversial points about the causes, meaning and consequences of CAI, and discuss the alternative policy prescriptions that emerge.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87766034","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}
Abstract This paper contributes to the nascent literature on nowcasting and forecasting GDP in emerging market economies using big data methods. This is done by analyzing the usefulness of various dimension-reduction, machine learning and shrinkage methods, including sparse principal component analysis (SPCA), the elastic net, the least absolute shrinkage operator, and least angle regression when constructing predictions using latent global macroeconomic and financial factors (diffusion indexes) in a dynamic factor model (DFM). We also utilize a judgmental dimension-reduction method called the Bloomberg Relevance Index (BRI), which is an index that assigns a measure of importance to each variable in a dataset depending on the variable’s usage by market participants. Our empirical analysis shows that, when specified using dimension-reduction methods (particularly BRI and SPCA), DFMs yield superior predictions relative to both benchmark linear econometric models and simple DFMs. Moreover, global financial and macroeconomic (business cycle) diffusion indexes constructed using targeted predictors are found to be important in four of the five emerging market economies that we study (Brazil, Mexico, South Africa, and Turkey). These findings point to the importance of spillover effects across emerging market economies, and underscore the significance of characterizing such linkages parsimoniously when utilizing high-dimensional global datasets.
{"title":"Nowcasting and Forecasting GDP in Emerging Markets Using Global Financial and Macroeconomic Diffusion Indexes","authors":"Oğuzhan Çepni, I. Guney, Norman R. Swanson","doi":"10.2139/ssrn.3208812","DOIUrl":"https://doi.org/10.2139/ssrn.3208812","url":null,"abstract":"Abstract This paper contributes to the nascent literature on nowcasting and forecasting GDP in emerging market economies using big data methods. This is done by analyzing the usefulness of various dimension-reduction, machine learning and shrinkage methods, including sparse principal component analysis (SPCA), the elastic net, the least absolute shrinkage operator, and least angle regression when constructing predictions using latent global macroeconomic and financial factors (diffusion indexes) in a dynamic factor model (DFM). We also utilize a judgmental dimension-reduction method called the Bloomberg Relevance Index (BRI), which is an index that assigns a measure of importance to each variable in a dataset depending on the variable’s usage by market participants. Our empirical analysis shows that, when specified using dimension-reduction methods (particularly BRI and SPCA), DFMs yield superior predictions relative to both benchmark linear econometric models and simple DFMs. Moreover, global financial and macroeconomic (business cycle) diffusion indexes constructed using targeted predictors are found to be important in four of the five emerging market economies that we study (Brazil, Mexico, South Africa, and Turkey). These findings point to the importance of spillover effects across emerging market economies, and underscore the significance of characterizing such linkages parsimoniously when utilizing high-dimensional global datasets.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"25 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83310573","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}
The paper analyses the evolution of inequality in Italy from 1989 to 2014, focusing on three business-cycle phases: the 1992 currency crisis, the moderate growth from 1993 to 2007, and the double-dip recession from 2008 to 2013. Data from the national accounts and the Bank of Italy’s Survey on Household Income and Wealth are used. Results show that income inequality, as measured by the Gini coefficient, rose sharply during the recession of the early 1990s but much less during the recent double-dip recession, though the share of people at risk of poverty rose similarly during the two crises. The stability of (synthetic) distributive inequality measures is explained by the fact that the reduction in income during the double-dip recession hit the whole population. Despite this apparent stability, two changes stand out: the widening gap between the young and the elderly and the fact that the deterioration in living conditions was borne wholly by households whose primary earner was foreign born.
{"title":"Inequality Amid Income Stagnation: Italy Over the Last Quarter of a Century","authors":"A. Brandolini, R. Gambacorta, A. Rosolia","doi":"10.2139/ssrn.3212653","DOIUrl":"https://doi.org/10.2139/ssrn.3212653","url":null,"abstract":"The paper analyses the evolution of inequality in Italy from 1989 to 2014, focusing on three business-cycle phases: the 1992 currency crisis, the moderate growth from 1993 to 2007, and the double-dip recession from 2008 to 2013. Data from the national accounts and the Bank of Italy’s Survey on Household Income and Wealth are used. Results show that income inequality, as measured by the Gini coefficient, rose sharply during the recession of the early 1990s but much less during the recent double-dip recession, though the share of people at risk of poverty rose similarly during the two crises. The stability of (synthetic) distributive inequality measures is explained by the fact that the reduction in income during the double-dip recession hit the whole population. Despite this apparent stability, two changes stand out: the widening gap between the young and the elderly and the fact that the deterioration in living conditions was borne wholly by households whose primary earner was foreign born.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"46 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89412541","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 determines optimal public debt in a life cycle model with incomplete markets that matches the empirically observed variation in consumption, labor, and savings. We find that public savings—not public debt—equal to 168 percent of output is optimal, primarily due to the influence of the life cycle on household decision-making. By inducing a lower interest rate, public savings slow consumption and leisure growth over an average household’s lifetime, and the resulting flatter allocation of lifetime consumption and leisure improves welfare. These life cycle welfare benefits are large—on net, they outweigh the transitional costs from a tax-financed public debt elimination. (JEL D15, D52, E21, E43, E62, G51, H63)
{"title":"Optimal Public Debt with Life Cycle Motives","authors":"William B. Peterman, E. Sager","doi":"10.17016/FEDS.2018.028","DOIUrl":"https://doi.org/10.17016/FEDS.2018.028","url":null,"abstract":"This paper determines optimal public debt in a life cycle model with incomplete markets that matches the empirically observed variation in consumption, labor, and savings. We find that public savings—not public debt—equal to 168 percent of output is optimal, primarily due to the influence of the life cycle on household decision-making. By inducing a lower interest rate, public savings slow consumption and leisure growth over an average household’s lifetime, and the resulting flatter allocation of lifetime consumption and leisure improves welfare. These life cycle welfare benefits are large—on net, they outweigh the transitional costs from a tax-financed public debt elimination. (JEL D15, D52, E21, E43, E62, G51, H63)","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"30 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90378245","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 : 2018-04-16DOI: 10.1007/978-3-030-00181-0_38
A. Field
{"title":"Historical Measures of Economic Output","authors":"A. Field","doi":"10.1007/978-3-030-00181-0_38","DOIUrl":"https://doi.org/10.1007/978-3-030-00181-0_38","url":null,"abstract":"","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74776408","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}
Leighton Vaughan Williams, M. Sung, P. Fraser-Mackenzie, J. Peirson, Johnnie E. V. Johnson
Evidence of differential returns to bets placed with different probabilities of success has revealed a broadly systematic tendency for low/high probability events to be relatively over/under-bet, a phenomenon known as the favourite-longshot bias. While most of the literature focuses on sports, especially horse racing, we report here the existence of the same phenomenon in online poker games. We find that misperception rather than risk-love offers the best explanation for the behaviour we identify. The paper contributes to the more general literature explaining betting behaviour as well as the prevalence of the favourite-longshot bias in betting markets.
{"title":"Towards an Understanding of the Origins of the Favourite–Longshot Bias: Evidence from Online Poker Markets, a Real‐Money Natural Laboratory","authors":"Leighton Vaughan Williams, M. Sung, P. Fraser-Mackenzie, J. Peirson, Johnnie E. V. Johnson","doi":"10.1111/ecca.12200","DOIUrl":"https://doi.org/10.1111/ecca.12200","url":null,"abstract":"Evidence of differential returns to bets placed with different probabilities of success has revealed a broadly systematic tendency for low/high probability events to be relatively over/under-bet, a phenomenon known as the favourite-longshot bias. While most of the literature focuses on sports, especially horse racing, we report here the existence of the same phenomenon in online poker games. We find that misperception rather than risk-love offers the best explanation for the behaviour we identify. The paper contributes to the more general literature explaining betting behaviour as well as the prevalence of the favourite-longshot bias in betting markets.","PeriodicalId":18164,"journal":{"name":"Macroeconomics: National Income & Product Accounts eJournal","volume":"2008 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86230588","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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