Journal of Macroeconomics最新文献

Declining institutional trust is one of the central problems in modern societies. Identifying its determinants, among which inequality, is fundamental for designing suitable interventions to restore confidence in institutions and preserve the social contract. We study the relationship between the two phenomena for EU-28 countries over the period 2003–2019. We use OLS and IV estimations to show that increasing income inequality is significantly associated with reduced trust in national governments. We also find that citizens’ digital interaction with the public administrations represents a mitigating channel as it contributes to shrinking the adverse effect of inequality on institutional trust, especially for more vulnerable categories in society, such as individuals with low educational attainment and those who are unemployed. These new insights might be particularly helpful for the government's agenda to meet transparency goals and provide more digital public services. From a policy viewpoint, redistribution policies combined with a well-established e-relationship between citizens and governments may be the road to restore trust in institutions.

A key feature of many DSGE frameworks designed to model Quantitative Easing (QE) is that net worth only plays a relevant role on bank’s balance sheets. In reality, however, net worth of borrowers and lenders plays a relevant role in financing investment projects. I show that this equity tandem has important implications. Net worth of non-financial firms acts as a first line of defense, since non-financial firm’s balance sheets are hit in the first place by real sector shocks. Modeling the equity tandem increases the resilience of the model and, therefore, implies smaller gains of unconventional monetary policy. A novel insight from the simultaneous modeling of borrowers and lenders net worth is that by decreasing the cost of external finance a QE policy is redistributing net worth from banks to non-financial firms. Additionally, considering the reverse operation, a credibly announced Quantitative Tightening (QT), helps to stabilize the spread between the return to capital and the deposit rate during the zero lower bound period. However, different anticipated QT paths are shown to have little consequences for output and inflation.

What is the composition of total hours response to a technology shock in countries with different labor market institutions in terms of extensive and intensive margin movements? To answer this question, I identify technology shocks using structural vector autoregressions (SVARs) and decompose the responses of hours into adjustments along the extensive and intensive margins. I compare the adjustments along the two margins between groups of countries with strict and flexible labor market institutions. I find that both margins play a large role in accommodating technology shocks, with adjustments along the intensive margin being more important. Furthermore, countries with flexible labor market institutions display a larger drop in employment, whereas the results for the intensive margin are mixed. Finally, the cross-country differences in fluctuations along the two margins can be linked to the strictness of institutions that target quantity and price adjustments in the labor market.

Households appear to smooth consumption in the face of income shocks much more than implied by life-cycle versions of the standard incomplete market model under reference calibrations. In the current paper we explore in detail the role played by the life-cycle profile of wealth accumulation. We show that a standard model parameterized to match the latter can rationalize between 81 and 100 percent of the consumption insurance against permanent earnings shocks empirically estimated by Blundell, Pistaferri and Preston (2008), depending on the tightness of the borrowing limit.

Is there a magnifying role of the banking sector during depressions? How can a financial perturbation, possibly small-sized, create large impacts on output and enduring recessions? What is the role played by the massive stock of due claims brought about by a financial crisis? We address these questions by putting forth a general equilibrium model endowed with a banking system in which due claims – henceforth named due loans – and occasionally binding credit restrictions coexist and their effects reinforce each other. Under “bad” financially-driven perturbations due loans hike and the concomitant opportunity, holding, regulatory, and impairment costs trigger sizable increases in external finance premia and promote credit restrictiveness. Firms’ net worth collapses as they are called in to finance banks’ problems, and their ability to invest and accumulate capital becomes compromised. The amplification effect can be very large: the full-fledged banking model may only require a perturbation of one-tenth the size of a plain vanilla version to deliver the same output drop at the trough. Effects are non-linear, since credit restrictions remain slack on the boundary of the steady state, and asymmetric, since these restrictions play no role whatsoever under “good shocks.”

While low real interest rates and issuing public debt in fiat money safeguard against rising sovereign debt-to-GDP ratios, evidence shows that high debt often precedes default, and credit spreads may not signal imminent risk.

We offer a simple way to model the trade-offs using local martingales. On the one hand, it acknowledges that large debt overhangs tend to raise default risks. On the other hand, it allows sovereigns to roll over debt regardless of long-term fiscal solvency. The combination allows credit spreads to stay very low for decades, eventually spiral out of control and trigger a default. Hence, neither the reassurance of low spreads nor the alarm from growing overhang should automatically prevail.

To illustrate the trade-offs, we review the ebb and flow of US sovereign debt burdens since World War II. Between record peacetime debt-to-GDP ratios and weakened fiscal discipline, an exemplary double-or-triple-A credit rating for the US no longer seems justified. Moreover, the current outlook is poor, with debt growing much faster than GDP and scant prospects of contraction.

This paper analyzes the price and quantity effects of monetary policy statements in an emerging market economy. Surprises in monetary policy are identified using intraday data on asset prices around monetary policy announcements in Mexico. I find that asset prices and the portfolio flows of domestic and foreign investors respond strongly and persistently to both news about the policy rate and guidance about its future path communicated via statements. The ability to manage expectations about future policy via statements is thus not exclusive to central banks in advanced economies and does not require the zero lower bound to be binding.

This study examines the role of temperature as a driver of seasonal economic cycles. The study first presents a novel dataset of seasonal temperature and seasonal GDP. Stylised facts show that seasonal economic cycles are much more diverse than previous research suggested. The study then attributes seasonal economic cycles to temperature variability. For causal identification, the study proposes a novel econometric approach that accounts for expectations. The results suggest that seasonal temperature has a statistically significantly positive and economically large effect on seasonal GDP. Overall, a substantial share of seasonality in GDP timeseries appears to be due to weather. For a subsample of European countries, the effect of temperature can be attributed to sectors that are relatively more exposed to ambient environmental conditions. Projections of climate change suggest that seasonal economic cycles might substantially change in the future, with larger cycles expected for about half of the countries in the sample.

This paper examines the relationship between the utilization of short-time work, inflation dynamics and monetary policy. Using a New Keynesian general equilibrium model with search and matching frictions, this study is a first to point out that short-time work can give rise to deflationary tendencies which may impact its efficacy, contingent on the monetary environment. While aggressive inflation targeting supports the stabilizing employment effects of short-time work, only little stabilization is observed when monetary policy is constrained by the zero lower bound. Our analysis also indicates that expanding the eligibility criteria may not deliver additional stabilization, whilst lowering the costs of short-time work could enhance employment even more.

This study uses a narrative account of quarterly discretionary changes in tax liabilities from 1974Q4 to 2018Q2 in a VAR setting to examine whether legislative tax changes affect the trade balance in the US, Germany, and the UK. Six different types of legislative tax changes are considered, including indirect tax changes, personal income tax changes, and business tax changes. The results show that, in general, reductions in aggregated tax liabilities tend to reduce exports in the US and the UK, whereas imports tend to increase, leading to a fall in the net-exports-to-GDP ratio. However, this pattern does not necessarily hold for disaggregated tax changes. Moreover, the results for Germany differ from those for the US and the UK. Overall, the economic magnitude of the estimated effects of tax changes on trade variables is relatively small.