Initial Gross Domestic Product (GDP) announcements are important economic signals that convey information on the state of the economy but contain substantial estimation error. We investigate how GDP estimation errors affect firms’ real decisions and profitability. Consistent with theoretical predictions from the literature on macroeconomic signal errors, we find that GDP estimation errors are positively associated with one-quarter-ahead changes in firms’ capital investments, production, inventory, and profitability. Stronger profitability responses to GDP signal errors are observed for firms that are more sensitive to macroeconomic fluctuations. We also observe a reversal in future quarters’ corporate profits, consistent with initial over (under) production being met with declines (increases) in future profitability.
{"title":"Firms’ Response to Macroeconomic Estimation Errors","authors":"Oliver Binz, William J. Mayew, Suresh Nallareddy","doi":"10.2139/ssrn.3151764","DOIUrl":"https://doi.org/10.2139/ssrn.3151764","url":null,"abstract":"Initial Gross Domestic Product (GDP) announcements are important economic signals that convey information on the state of the economy but contain substantial estimation error. We investigate how GDP estimation errors affect firms’ real decisions and profitability. Consistent with theoretical predictions from the literature on macroeconomic signal errors, we find that GDP estimation errors are positively associated with one-quarter-ahead changes in firms’ capital investments, production, inventory, and profitability. Stronger profitability responses to GDP signal errors are observed for firms that are more sensitive to macroeconomic fluctuations. We also observe a reversal in future quarters’ corporate profits, consistent with initial over (under) production being met with declines (increases) in future profitability.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"99 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128081869","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 : 2019-12-01DOI: 10.21799/frbp.wp.2020.10
C. Hulten, L. Nakamura
The information revolution currently underway has changed the economy in ways that are hard to measure using conventional GDP procedures. The information available to consumers has increased dramatically as a result of the Internet and its applications, and new mobile communication devices have greatly increased the speed and reach of its accessibility. An individual now has an unprecedented amount of information on which to base consumption choices, and the “free” nature of the information provided means that the resulting benefits largely bypass GDP and accrue directly to consumers. This disconnect introduces a wedge between the growth in real GDP and the growth in consumer well-being, with the result that a slower rate of growth of the former does not necessarily imply a slower rate of the latter. The conceptual framework for this analysis is developed in a previous paper (Hulten and Nakamura (2017), which extended the conventional framework of GDP to include a separate technology for consumer decisions based on Lancaster (1966b), and developed the idea of Expanded GDP (or EGDP). In this paper, we use this framework to provide a detailed critique of existing GDP and price measurement procedures and summarize the existing evidence on the size of the wedge between GDP and EGDP.
{"title":"Expanded GDP for Welfare Measurement in the 21st Century","authors":"C. Hulten, L. Nakamura","doi":"10.21799/frbp.wp.2020.10","DOIUrl":"https://doi.org/10.21799/frbp.wp.2020.10","url":null,"abstract":"The information revolution currently underway has changed the economy in ways that are hard to measure using conventional GDP procedures. The information available to consumers has increased dramatically as a result of the Internet and its applications, and new mobile communication devices have greatly increased the speed and reach of its accessibility. An individual now has an unprecedented amount of information on which to base consumption choices, and the “free” nature of the information provided means that the resulting benefits largely bypass GDP and accrue directly to consumers. This disconnect introduces a wedge between the growth in real GDP and the growth in consumer well-being, with the result that a slower rate of growth of the former does not necessarily imply a slower rate of the latter. The conceptual framework for this analysis is developed in a previous paper (Hulten and Nakamura (2017), which extended the conventional framework of GDP to include a separate technology for consumer decisions based on Lancaster (1966b), and developed the idea of Expanded GDP (or EGDP). In this paper, we use this framework to provide a detailed critique of existing GDP and price measurement procedures and summarize the existing evidence on the size of the wedge between GDP and EGDP.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126641616","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}
Digital Economy is offering various opportunities these days. As an economic function digital platforms are helping nations to increase their revenues and reduce inequalities among the people. Similarly development banks are also working in this direction by providing finances and reducing infrastructure inefficiencies. In this paper an attempt has been made to assess the sustainability of digital economy among the top beneficiaries of Asian Development Bank. In this regard secondary data has been collected from various sources. T-distribution test is applied to prove the hypothesis. The study concluded that the digital adoption among selected Asian Development Bank members is significantly on par with world countries.
{"title":"An Analysis of Sustainability of Digital Economy in Select Member Countries of Asian Development Bank","authors":"Devendra Jarwal","doi":"10.2139/ssrn.3461763","DOIUrl":"https://doi.org/10.2139/ssrn.3461763","url":null,"abstract":"Digital Economy is offering various opportunities these days. As an economic function digital platforms are helping nations to increase their revenues and reduce inequalities among the people. Similarly development banks are also working in this direction by providing finances and reducing infrastructure inefficiencies. In this paper an attempt has been made to assess the sustainability of digital economy among the top beneficiaries of Asian Development Bank. In this regard secondary data has been collected from various sources. T-distribution test is applied to prove the hypothesis. The study concluded that the digital adoption among selected Asian Development Bank members is significantly on par with world countries.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127349305","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}
Previous criticisms of comparative advantage theory have mainly stressed the inapplicability of its theoretical assumptions. This article focuses on the dilemma involved in using it as a guide to practical policy. Since its inception, comparative advantage theory has gradually split into two schools, representing two ways of thinking and two methodologies. Economic policy based on comparative advantage may succeed in the short run but fail in the long run, because the development model based on this approach has an inherent destructive mechanism.
{"title":"Why Comparative Advantage is a Problematic Guide to Practical Policy","authors":"Sherman Xie","doi":"10.1111/ecaf.12347","DOIUrl":"https://doi.org/10.1111/ecaf.12347","url":null,"abstract":"Previous criticisms of comparative advantage theory have mainly stressed the inapplicability of its theoretical assumptions. This article focuses on the dilemma involved in using it as a guide to practical policy. Since its inception, comparative advantage theory has gradually split into two schools, representing two ways of thinking and two methodologies. Economic policy based on comparative advantage may succeed in the short run but fail in the long run, because the development model based on this approach has an inherent destructive mechanism.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"71 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127161689","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 investigates the effect of transport infrastructure on the spatial distribution of population over two millennia. Focusing on the Sui Canal, one of history's greatest infrastructure projects, we show that its completion in the 7th century CE led to a strong increase in population concentration along the newly established transport artery. We exploit the fact that large parts of the canal fell into disrepair after the 12th century to analyze the persistence of this effect. We find that in 2010, more than 800 years after the Sui Canal fell into disuse, regions once directly connected to the canal are still more populous than areas that never had access. However, this population concentration is not mirrored in economic development. GDP per capita is lower in areas that lay along the course of the canal. One potential explanation for this finding is a change in the value of locational fundamentals as well as a shift in investments to the benefit of coastal regions since the initiation of the Open Door Policy in 1978.
{"title":"Transport Infrastructure, Growth and Persistence: The Rise and Demise of the Sui Canal","authors":"M. Flückiger, Markus Ludwig","doi":"10.1111/caje.12378","DOIUrl":"https://doi.org/10.1111/caje.12378","url":null,"abstract":"This paper investigates the effect of transport infrastructure on the spatial distribution of population over two millennia. Focusing on the Sui Canal, one of history's greatest infrastructure projects, we show that its completion in the 7th century CE led to a strong increase in population concentration along the newly established transport artery. We exploit the fact that large parts of the canal fell into disrepair after the 12th century to analyze the persistence of this effect. We find that in 2010, more than 800 years after the Sui Canal fell into disuse, regions once directly connected to the canal are still more populous than areas that never had access. However, this population concentration is not mirrored in economic development. GDP per capita is lower in areas that lay along the course of the canal. One potential explanation for this finding is a change in the value of locational fundamentals as well as a shift in investments to the benefit of coastal regions since the initiation of the Open Door Policy in 1978.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"43 13","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113993514","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 spread of global value chains (GVCs) has given rise to new statistical tools, the Inter-Country Input-Output tables and new analytical frameworks aimed at properly identifying production linkages between and within economies. However, several important questions remain unaddressed. This paper proposes a new toolkit for value-added accounting of trade flows at the aggregate, bilateral, and sectoral levels that can be used to investigate a broad set of empirical questions -- including an assessment of the share of trade related to GVCs. The paper shows how different empirical issues require distinct accounting perspectives, and maps these methodologies onto the economic questions they are best suited to address. In this way, in addition to providing novel tools, the paper brings a large part of the related literature under one comprehensive framework.
{"title":"Measuring What Matters in Global Value Chains and Value-Added Trade","authors":"A. Borin, Michele Mancini","doi":"10.1596/1813-9450-8804","DOIUrl":"https://doi.org/10.1596/1813-9450-8804","url":null,"abstract":"The spread of global value chains (GVCs) has given rise to new statistical tools, the Inter-Country Input-Output tables and new analytical frameworks aimed at properly identifying production linkages between and within economies. However, several important questions remain unaddressed. This paper proposes a new toolkit for value-added accounting of trade flows at the aggregate, bilateral, and sectoral levels that can be used to investigate a broad set of empirical questions -- including an assessment of the share of trade related to GVCs. The paper shows how different empirical issues require distinct accounting perspectives, and maps these methodologies onto the economic questions they are best suited to address. In this way, in addition to providing novel tools, the paper brings a large part of the related literature under one comprehensive framework.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115471133","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}
While the literature on theoretical macroeconomic models adopting the stock–flow consistent (SFC) approach is flourishing, few contributions cover the methodology for building an SFC empirical model for a whole country. Most contributions simply try to feed national accounting data into a theoretical model inspired by Godley/Lavoie (2007), albeit with different degrees of complexity. In this paper we argue instead that the structure of an empirical SFC model should start from a careful analysis of the specificities of a country's sectoral balance sheets and flow-of-funds data, compared to the relevant research question to be addressed. We illustrate our arguments with examples for Greece and Italy. We also provide some suggestions on how to consistently use the financial and non-financial accounts of institutional sectors, showing the link between SFC accounting structures and national accounting rules.
{"title":"On the Design of Empirical Stock-Flow-Consistent Models","authors":"G. Zezza, F. Zezza","doi":"10.2139/ssrn.3317789","DOIUrl":"https://doi.org/10.2139/ssrn.3317789","url":null,"abstract":"While the literature on theoretical macroeconomic models adopting the stock–flow consistent (SFC) approach is flourishing, few contributions cover the methodology for building an SFC empirical model for a whole country. Most contributions simply try to feed national accounting data into a theoretical model inspired by Godley/Lavoie (2007), albeit with different degrees of complexity. In this paper we argue instead that the structure of an empirical SFC model should start from a careful analysis of the specificities of a country's sectoral balance sheets and flow-of-funds data, compared to the relevant research question to be addressed. We illustrate our arguments with examples for Greece and Italy. We also provide some suggestions on how to consistently use the financial and non-financial accounts of institutional sectors, showing the link between SFC accounting structures and national accounting rules.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123910542","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}
We investigate the question of whether macroeconomic variables contain information about future stock volatility beyond that contained in past volatility. We show that forecasts of GDP growth from the Federal Reserve's Survey of Professional Forecasters predict volatility in a cross-section of 49 industry portfolios. The expectation of higher growth rates is associated with lower stock volatility. Our results are in line with both counter-cyclical volatility in dividend news as well as in expected returns. Inflation forecasts predict higher or lower stock volatility depending on the state of the economy and the stance of monetary policy. Forecasts of higher unemployment rates are good news for stocks during expansions and go along with lower stock volatility. Our results hold in- as well as out-of-sample and pass various robustness checks.
{"title":"'Deja Vol' Revisited: Survey Forecasts of Macroeconomic Variables Predict Volatility in the Cross-Section of Industry Portfolios","authors":"Christian Conrad, A. Glas","doi":"10.2139/ssrn.3186567","DOIUrl":"https://doi.org/10.2139/ssrn.3186567","url":null,"abstract":"We investigate the question of whether macroeconomic variables contain information about future stock volatility beyond that contained in past volatility. We show that forecasts of GDP growth from the Federal Reserve's Survey of Professional Forecasters predict volatility in a cross-section of 49 industry portfolios. The expectation of higher growth rates is associated with lower stock volatility. Our results are in line with both counter-cyclical volatility in dividend news as well as in expected returns. Inflation forecasts predict higher or lower stock volatility depending on the state of the economy and the stance of monetary policy. Forecasts of higher unemployment rates are good news for stocks during expansions and go along with lower stock volatility. Our results hold in- as well as out-of-sample and pass various robustness checks.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132182881","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 In this paper we analyze the impact of hosting the FIFA Soccer World Cup on GDP per capita in a worldwide sample of countries using a transparent statistical methodology for data-driven case studies ⿿ the synthetic control method. Using country level annual-data covering all events occurring in the period between 1978 (Argentina) and 2006 (Germany), we show that the estimated average treatment effect was either zero or negative for all but one of the countries analyzed. Our results, therefore, support the general claim that World Cups are not statistically associated to development and economic growth.
{"title":"Does the World Cup Get the Economic Ball Rolling? Evidence from a Synthetic Control Approach","authors":"Jorge H. N. Viana, A. Barbosa, B. Sampaio","doi":"10.2139/ssrn.3160934","DOIUrl":"https://doi.org/10.2139/ssrn.3160934","url":null,"abstract":"Abstract In this paper we analyze the impact of hosting the FIFA Soccer World Cup on GDP per capita in a worldwide sample of countries using a transparent statistical methodology for data-driven case studies ⿿ the synthetic control method. Using country level annual-data covering all events occurring in the period between 1978 (Argentina) and 2006 (Germany), we show that the estimated average treatment effect was either zero or negative for all but one of the countries analyzed. Our results, therefore, support the general claim that World Cups are not statistically associated to development and economic growth.","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130450078","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 this paper we examine whether or not the Great Recession had a temporary or permanent effect on output growth volatility after years of low macroeconomic volatility since the early eighties. Based on break detection methods applied to a set of advanced countries, our empirical results do not give evidence to the end of the Great Moderation period but rather that the Great Recession is characterized by a dramatic short‐lived effect on the output growth but not on its volatility. We show that neglecting the breaks both in mean and in variance can have large effects on output volatility modeling based on GARCH specifications
{"title":"Does the Great Recession Imply the End of the Great Moderation? International Evidence","authors":"Amélie Charles, Olivier Darné, L. Ferrara","doi":"10.1111/ecin.12551","DOIUrl":"https://doi.org/10.1111/ecin.12551","url":null,"abstract":"In this paper we examine whether or not the Great Recession had a temporary or permanent effect on output growth volatility after years of low macroeconomic volatility since the early eighties. Based on break detection methods applied to a set of advanced countries, our empirical results do not give evidence to the end of the Great Moderation period but rather that the Great Recession is characterized by a dramatic short‐lived effect on the output growth but not on its volatility. We show that neglecting the breaks both in mean and in variance can have large effects on output volatility modeling based on GARCH specifications","PeriodicalId":398400,"journal":{"name":"ERN: Other Macroeconomics: National Income & Product Accounts (Topic)","volume":"94 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133103915","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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