This paper presents a novel and unique measure of cross-sectional uncertainty constructed from stock options on individual firms. Cross-sectional uncertainty varied little between 1980 and 1995 and subsequently had three distinct peaks—during the tech boom, the financial crisis, and the coronavirus epidemic. Cross-sectional uncertainty has had a mixed relationship with overall economic activity, and aggregate uncertainty is much more powerful for forecasting aggregate growth. The data and moments can be used to calibrate and test structural models of the effects of uncertainty shocks. In international data, we find similar dynamics and a strong common factor in cross-sectional uncertainty. (JEL D21, D81, E23, E24, E32, G13, O34)
{"title":"Cross-Sectional Uncertainty and the Business Cycle: Evidence from 40 Years of Options Data","authors":"Ian Dew-Becker, Stefano W Giglio","doi":"10.1257/mac.20210136","DOIUrl":"https://doi.org/10.1257/mac.20210136","url":null,"abstract":"This paper presents a novel and unique measure of cross-sectional uncertainty constructed from stock options on individual firms. Cross-sectional uncertainty varied little between 1980 and 1995 and subsequently had three distinct peaks—during the tech boom, the financial crisis, and the coronavirus epidemic. Cross-sectional uncertainty has had a mixed relationship with overall economic activity, and aggregate uncertainty is much more powerful for forecasting aggregate growth. The data and moments can be used to calibrate and test structural models of the effects of uncertainty shocks. In international data, we find similar dynamics and a strong common factor in cross-sectional uncertainty. (JEL D21, D81, E23, E24, E32, G13, O34)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136041436","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What are the short-term effects of an import-competition shock on capital reallocation and aggregate productivity? To address this question, we develop a quantitative model with heterogeneous firms and capital-reallocation frictions. We discipline the model with micro data on investment dynamics of Peruvian manufacturing firms and trade flows between China and Peru. Because of large frictions in firm downsizing and exit, an import-competition shock induces a temporary aggregate-productivity loss and larger dispersion in marginal products, due to investment inaction and exit of some productive firms. Empirical evidence on the effects of trade shocks on capital reallocation supports the model mechanism. (JEL E22, E23, F14, L60, O14, O16, O19)
{"title":"Capital-Reallocation Frictions and Trade Shocks","authors":"Andrea Lanteri, Pamela Medina, Eugene Tan","doi":"10.1257/mac.20200429","DOIUrl":"https://doi.org/10.1257/mac.20200429","url":null,"abstract":"What are the short-term effects of an import-competition shock on capital reallocation and aggregate productivity? To address this question, we develop a quantitative model with heterogeneous firms and capital-reallocation frictions. We discipline the model with micro data on investment dynamics of Peruvian manufacturing firms and trade flows between China and Peru. Because of large frictions in firm downsizing and exit, an import-competition shock induces a temporary aggregate-productivity loss and larger dispersion in marginal products, due to investment inaction and exit of some productive firms. Empirical evidence on the effects of trade shocks on capital reallocation supports the model mechanism. (JEL E22, E23, F14, L60, O14, O16, O19)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136186791","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pablo A. Guerron-Quintana, Tomohiro Hirano, Ryo Jinnai
We analyze the ups and downs in economic growth in recent decades by constructing a model with recurrent bubbles, crashes, and endogenous growth. Once realized, bubbles crowd in investment and stimulate economic growth, but expectation about future bubbles crowds out investment and reduces economic growth. We identify bubbly episodes by estimating the model using the US data. Counterfactual simulations suggest that the IT and housing bubbles not only caused economic booms but also lifted US GDP by almost 2 percentage points permanently, but the economy could have grown even faster if people had believed that asset bubbles would never arise. (JEL E22, E23, E32, E44, G14, R31)
{"title":"Bubbles, Crashes, and Economic Growth: Theory and Evidence","authors":"Pablo A. Guerron-Quintana, Tomohiro Hirano, Ryo Jinnai","doi":"10.1257/mac.20220015","DOIUrl":"https://doi.org/10.1257/mac.20220015","url":null,"abstract":"We analyze the ups and downs in economic growth in recent decades by constructing a model with recurrent bubbles, crashes, and endogenous growth. Once realized, bubbles crowd in investment and stimulate economic growth, but expectation about future bubbles crowds out investment and reduces economic growth. We identify bubbly episodes by estimating the model using the US data. Counterfactual simulations suggest that the IT and housing bubbles not only caused economic booms but also lifted US GDP by almost 2 percentage points permanently, but the economy could have grown even faster if people had believed that asset bubbles would never arise. (JEL E22, E23, E32, E44, G14, R31)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135274914","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies price-setting decisions under rational inattention. Prices are set by tracking an unobserved target whose distribution is also unknown. Information acquisition is dynamic and fully flexible since, given information acquired previously, price setters choose the amount of information they collect as well as how they want to learn about both the outcome and its distribution. We show that by allowing for imperfect information to be the unique source of rigidity, the model can reconcile stylized facts in the microeconomic evidence on price setting while simultaneously being consistent with empirical results on state-dependent attention. (JEL D21, D82, D83, E32, L11, L25)
{"title":"State-Dependent Attention and Pricing Decisions","authors":"Javier Turén","doi":"10.1257/mac.20210038","DOIUrl":"https://doi.org/10.1257/mac.20210038","url":null,"abstract":"This paper studies price-setting decisions under rational inattention. Prices are set by tracking an unobserved target whose distribution is also unknown. Information acquisition is dynamic and fully flexible since, given information acquired previously, price setters choose the amount of information they collect as well as how they want to learn about both the outcome and its distribution. We show that by allowing for imperfect information to be the unique source of rigidity, the model can reconcile stylized facts in the microeconomic evidence on price setting while simultaneously being consistent with empirical results on state-dependent attention. (JEL D21, D82, D83, E32, L11, L25)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"518 1","pages":""},"PeriodicalIF":6.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77168421","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Chaoran Chen, Diego Restuccia, Raül Santaeulàlia-Llopis
Using detailed household-level data from Malawi on physical quantities of agricultural outputs and inputs, we measure farm total factor productivity (TFP), controlling for land quality, rain, and transitory shocks. We find that operated land size and capital are essentially unrelated to farm TFP, implying substantial factor misallocation. The agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor between 1.7- and 2.8-fold. We provide suggestive evidence connecting misallocation with the extent of land markets and illustrate how an efficient allocation via rental markets can substantially reduce agricultural income inequality and poverty. (JEL D24, D31, I32, O13, O15, Q12, Q15)
{"title":"Land Misallocation and Productivity","authors":"Chaoran Chen, Diego Restuccia, Raül Santaeulàlia-Llopis","doi":"10.1257/mac.20170229","DOIUrl":"https://doi.org/10.1257/mac.20170229","url":null,"abstract":"Using detailed household-level data from Malawi on physical quantities of agricultural outputs and inputs, we measure farm total factor productivity (TFP), controlling for land quality, rain, and transitory shocks. We find that operated land size and capital are essentially unrelated to farm TFP, implying substantial factor misallocation. The agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor between 1.7- and 2.8-fold. We provide suggestive evidence connecting misallocation with the extent of land markets and illustrate how an efficient allocation via rental markets can substantially reduce agricultural income inequality and poverty. (JEL D24, D31, I32, O13, O15, Q12, Q15)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"234 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135945985","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Marco Bonomo, Carlos Carvalho, René Garcia, Vivian Malta, Rodolfo Rigato
We propose a model that reconciles microeconomic evidence of frequent and large price changes with sizable monetary non-neutrality. Firms incur separate lump-sum costs to change prices and to gather and process some information about marginal costs. Additional relevant information is continuously available and can be factored into pricing decisions at no cost. We estimate the model by Simulated Method of Moments, using price-setting statistics for the US economy. The model with free idiosyncratic and costly aggregate information fits well both targeted and untargeted microeconomic moments and generates almost three times as much monetary non-neutrality as the Calvo model. (JEL D21, D83, E23, E31, L11)
{"title":"Persistent Monetary Non-neutrality in an Estimated Menu Cost Model with Partially Costly Information","authors":"Marco Bonomo, Carlos Carvalho, René Garcia, Vivian Malta, Rodolfo Rigato","doi":"10.1257/mac.20190241","DOIUrl":"https://doi.org/10.1257/mac.20190241","url":null,"abstract":"We propose a model that reconciles microeconomic evidence of frequent and large price changes with sizable monetary non-neutrality. Firms incur separate lump-sum costs to change prices and to gather and process some information about marginal costs. Additional relevant information is continuously available and can be factored into pricing decisions at no cost. We estimate the model by Simulated Method of Moments, using price-setting statistics for the US economy. The model with free idiosyncratic and costly aggregate information fits well both targeted and untargeted microeconomic moments and generates almost three times as much monetary non-neutrality as the Calvo model. (JEL D21, D83, E23, E31, L11)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135275095","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The concentration of risk within the financial system leads to systemic instability. We propose a theory to explain the structure of the financial system and show how it alters the risk-taking incentives of financial institutions when the government optimally intervenes during crises. By issuing interbank claims, risky institutions endogenously become large and interconnected. This concentrated structure enables institutions to share the risk of systemic crises in a privately optimal way but leads to excessive risk taking even by peripheral institutions. Interconnectedness and excessive risk taking reinforce one another. Macroprudential regulation that limits the interconnectedness of risky institutions improves welfare. (JEL D82, E44, G01, G21, G28)
{"title":"Collective Moral Hazard and the Interbank Market","authors":"Levent Altinoglu, Joseph E. Stiglitz","doi":"10.1257/mac.20210333","DOIUrl":"https://doi.org/10.1257/mac.20210333","url":null,"abstract":"The concentration of risk within the financial system leads to systemic instability. We propose a theory to explain the structure of the financial system and show how it alters the risk-taking incentives of financial institutions when the government optimally intervenes during crises. By issuing interbank claims, risky institutions endogenously become large and interconnected. This concentrated structure enables institutions to share the risk of systemic crises in a privately optimal way but leads to excessive risk taking even by peripheral institutions. Interconnectedness and excessive risk taking reinforce one another. Macroprudential regulation that limits the interconnectedness of risky institutions improves welfare. (JEL D82, E44, G01, G21, G28)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135275125","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
When surveys rely on repeat participants, this raises the possibility that survey participation may affect future responses, perhaps by prompting information acquisition between survey waves. We show that these “learning-through-survey” effects are large for household inflation expectations. Repeat survey participants generally have lower inflation expectations and uncertainty, particularly if their initial uncertainty was high. Consequently, repeat participants may be more informed about or attentive to inflation. This has important implications: for example, inflation expectations of new participants are more influenced by oil prices, and estimates of the elasticity of intertemporal substitution are lower for new participants. (JEL C83, D84, E31, E37, E58)
{"title":"Learning-through-Survey in Inflation Expectations","authors":"Gwangmin Kim, Carola Binder","doi":"10.1257/mac.20200387","DOIUrl":"https://doi.org/10.1257/mac.20200387","url":null,"abstract":"When surveys rely on repeat participants, this raises the possibility that survey participation may affect future responses, perhaps by prompting information acquisition between survey waves. We show that these “learning-through-survey” effects are large for household inflation expectations. Repeat survey participants generally have lower inflation expectations and uncertainty, particularly if their initial uncertainty was high. Consequently, repeat participants may be more informed about or attentive to inflation. This has important implications: for example, inflation expectations of new participants are more influenced by oil prices, and estimates of the elasticity of intertemporal substitution are lower for new participants. (JEL C83, D84, E31, E37, E58)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"88 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136163640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Konstantin Kucheryavyy, Gary Lyn, Andres Rodriguez-Clare
We propose a model to study the role of industry-level external economies of scale in open economies. If the elasticity governing the strength of external economies is below the inverse of the trade elasticity in each industry, then specialization under frictionless trade is consistent with comparative advantage, the model is tractable even with trade frictions, and all countries gain from trade. External economies lower gains from trade except if the country specializes in industries with high scale economies, and they amplify the gains from further trade liberalization except if it leads to specialization in industries with low scale economies. (JEL D24, F11, F12, F13)
{"title":"Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale","authors":"Konstantin Kucheryavyy, Gary Lyn, Andres Rodriguez-Clare","doi":"10.1257/mac.20190156","DOIUrl":"https://doi.org/10.1257/mac.20190156","url":null,"abstract":"We propose a model to study the role of industry-level external economies of scale in open economies. If the elasticity governing the strength of external economies is below the inverse of the trade elasticity in each industry, then specialization under frictionless trade is consistent with comparative advantage, the model is tractable even with trade frictions, and all countries gain from trade. External economies lower gains from trade except if the country specializes in industries with high scale economies, and they amplify the gains from further trade liberalization except if it leads to specialization in industries with low scale economies. (JEL D24, F11, F12, F13)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135945992","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study measures the effects of monetary policy in the euro area using a small number of sign and magnitude restrictions on the residuals of a structural vector autoregression. We derive the dates and directions of these shocks from high-frequency financial market data around official European Central Bank policy announcements. Based on an in-depth narrative analysis and a comparison of the results with those of a standard high-frequency approach, we argue that our approach is purged from central bank information effects. Despite our rather agnostic identification strategy, we find clear and conclusive effects of monetary policy shocks on a wide range of macroeconomic variables. (JEL C32, E43, E44, E52, E58, F33, G14)
{"title":"Measuring Monetary Policy in the Euro Area Using SVARs with Residual Restrictions","authors":"Harald Badinger, Stefan Schiman","doi":"10.1257/mac.20210035","DOIUrl":"https://doi.org/10.1257/mac.20210035","url":null,"abstract":"This study measures the effects of monetary policy in the euro area using a small number of sign and magnitude restrictions on the residuals of a structural vector autoregression. We derive the dates and directions of these shocks from high-frequency financial market data around official European Central Bank policy announcements. Based on an in-depth narrative analysis and a comparison of the results with those of a standard high-frequency approach, we argue that our approach is purged from central bank information effects. Despite our rather agnostic identification strategy, we find clear and conclusive effects of monetary policy shocks on a wide range of macroeconomic variables. (JEL C32, E43, E44, E52, E58, F33, G14)","PeriodicalId":47991,"journal":{"name":"American Economic Journal-Macroeconomics","volume":"16 1","pages":""},"PeriodicalIF":6.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90474558","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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