International Economic Review最新文献

The consequences of costly information acquisition for sovereign risk are explored in a quantitative sovereign default model. We identify information costs empirically using Bloomberg news-heat data. The calibrated model microfounds heteroskedasticity in the country risk spread as measured by a novel metric we call the Crisis Volatility Ratio (CVR). Crises are endogenously more volatile because more information is acquired and priced. Recalibrated extant models do not generate CVRs in the empirical range, but ours does. Because effective risk tolerance depends on the information set, the model also suggests that risk premia fall with information costs.

This study addresses the large bias in chained price indices that persists even at lower frequencies. The bias arises from intertemporal substitution caused by consumer hoarding, and is problematic for purchase-based data. In order to resolve this issue, we propose a method for calculating changes in inventories and consumption using retailer scanner data. We construct a partial equilibrium model to estimate inventories and consumption and show that the model accurately predicts the sign and size of the bias. We also demonstrate that the bias is smaller for consumption-based data and propose a particular type of price index that eliminates intertemporal substitution bias.

We study business cycles with cyclical returns to scale. Contrary to tightly parameterized conventional production functions, we empirically identify strong input complementarity that leads to procyclical returns to scale. We, therefore, propose a flexible translog production function that allows complementarity-induced procyclical returns to scale. We integrate this function into a standard medium-scale dynamic stochastic general equilibrium model. Our estimated model with input complementarity (i) features procyclical returns to scale and acyclical price markups, (ii) better matches the cyclicality of factor shares, and (iii) significantly decreases the contribution of markup shocks to output fluctuations relative to those of the standard model.

This study presents an overlapping generations model to analyze the impact of population aging on fiscal policy and intergenerational fiscal burden. Aging populations incentivize governments to increase capital and labor income tax rates and the public debt-to-GDP ratio, consistent with OECD evidence. Our model-based simulation for Japan and the United States (2000–2070) reveals that Japan will experience higher labor income tax rates, a greater public debt-to-GDP ratio, and a lower government expenditure-to-GDP ratio compared to the United States. From 2040 onward, Japan is predicted to surpass the United States in terms of the capital tax rate.

This article studies labor supply in the extended household (composed of two families living together). The extended household structure affects the incentives to work of household members for at least three reasons: economies of scale, cash transfers between the families living in the extended household, and easier childcare arrangements. We develop a structural model incorporating these components and taking into account the self-selection process into extended households. We then estimate this model with South African data and provide an explanation for the differences in participation rates between nuclear and extended households.

We introduce a framework to theoretically and empirically examine electoral maldistricting—the intentional drawing of electoral districts to advance partisan objectives, compromising voter welfare. We identify the legislatures that maximize voter welfare and those that maximize partisan goals, and incorporate them into a maldistricting index. This index measures the intent to maldistrict by comparing distances from the actual legislature to the nearest partisan and welfare-maximizing legislatures. Using 2008 presidential election data and 2010 census-based district maps, we find a Republican-leaning bias in district maps. Our index tracks court rulings in intuitive ways.

This article analyzes the role of credit frictions in a trade model where producers differ in their capabilities to conduct process and quality innovations and require external finance for investments. Accounting for cost-based and quality-based sorting of firms in a unified framework allows us to demonstrate that the reactions of prices and commonly used productivity measures do not necessarily reflect welfare implications. Credit frictions lead to distortions through aggravated access to finance and endogenous price adjustments so that the responses of quantity-based and revenue-based productivity differ substantially. In counterfactual scenarios, we show that these differential effects are quantitatively important.

I analyze a model of monopoly insurance contracting where the consumer has access to endogenous, costly evidence of his risk type. I characterize when the consumer is worse off if the insurer is allowed to condition contracts on evidence and when the ability to contract on evidence leads to a Pareto improvement. I compare the results to an analogous setting with perfect competition: Under perfect competition, when evidence acquisition costs are low, the ability to contract on evidence is always Pareto improving. For intermediate costs, I uncover a new source of unraveling.

Historians have suggested that there were waves of inflation or price revolutions in the United Kingdom (and earlier England) in the 13th, 16th, and 18th centuries, prior to the ongoing inflation since 1935. We study retail price inflation since 1251 and model its dynamics. The model is an AR(n) but allows for gradually evolving or drifting parameters and stochastic volatility. The long-horizon forecasts suggest only one inflation wave, that of the 20th century. We also use the model to measure inflation predictability and price-level instability from the beginning of the sample and to provide measures of real interest rates since 1695.

We construct a simple rational greater-fool bubble model, where the motive for trade is intertemporal consumption smoothing. This yields an easy-to-understand bubble model with three states of the world, instead of the five required previously. Bubbles are more likely when asset sellers have profitable investment opportunities, but little wealth, so they sell shares in those opportunities to wealthier investors. “Bad sellers” then pretend to sell similar investment opportunities, creating potential bubble assets. Bubbles are possible even if alternative means of consumption smoothing are available. Also, antibubble policy can reduce the welfare of even the greater fools it is supposed to protect.