Should We Use Linearized Models To Calculate Fiscal Multipliers?
Jesper Lindé, Mathias Trabandt
Journal of Applied Econometrics,
Nr. 7,
2018
Abstract
We calculate the magnitude of the government consumption multiplier in linearized and nonlinear solutions of a New Keynesian model at the zero lower bound. Importantly, the model is amended with real rigidities to simultaneously account for the macroeconomic evidence of a low Phillips curve slope and the microeconomic evidence of frequent price changes. We show that the nonlinear solution is associated with a much smaller multiplier than the linearized solution in long‐lived liquidity traps, and pin down the key features in the model which account for the difference. Our results caution against the common practice of using linearized models to calculate fiscal multipliers in long‐lived liquidity traps.
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Markt, Umwelt und Wirtschaftswachstum – ein Trilemma?
Oliver Holtemöller
Wirtschaftsdienst,
Nr. 7,
2023
Abstract
Funktioniert Marktwirtschaft ohne Wirtschaftswachstum?Ist langfristiges Wirtschaftswachstum mit endlichen Ressourcen und Umweltschutz vereinbar? Passen Marktwirtschaft und Umweltschutz zusammen? Die Beantwortung dieser Fragen hängt stark davon ab, was man unter den einzelnen Schlagwörtern Markt, Umwelt und Wirtschafts-wachstum versteht.
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Economic Development after German Unification and Implications for Korea
Hyung-Gon Jeong, Gerhard Heimpold
H.-G. Jeong, G. Heimpold (Hrsg.), Economic Development after German Unification and Implications for Korea. Policy References 18-08. Sejong: Korea Institute for International Economic Policy,
2018
Abstract
The situation on the Korean Peninsula entered a new phase following the 2018 Winter Olympics, further evolving through the April 27 inter-Korean summit and June 12 Singapore summit between the U.S. and North Korea. Expectations are high for new exchanges and cooperation that would potentially lead to peace and prosperity on the Korean Peninsula. This would be a great chance to depart from hostility that has lasted over decades. However, it is expected to take some time until economic cooperation between the two Koreas resumes, as the negotiations for denuclearization still remain unresolved.
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Technological Innovation and the Bank Lending Channel of Monetary Policy Transmission
Iftekhar Hasan, Xiang Li, Tuomas Takalo
IWH Discussion Papers,
Nr. 14,
2021
Abstract
This paper studies whether and how banks’ technological innovations affect the bank lending channel of monetary policy transmission. We first provide a theoretical model in which banks’ technological innovation relaxes firms’ earning-based borrowing constraints and thereby enlarges the response of banks’ lending to monetary policy changes. To test the empirical implications, we construct a patent-based measurement of bank-level technological innovation, which can specify the nature of technology and tell whether it is related to the bank’s lending business. We find that lending-related innovations significantly strengthen the transmission of the bank lending channel.
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The Financial Channel of Wage Rigidity
Benjamin Schoefer
Econometrics Laboratory (EML),
April
2022
Abstract
I propose a financial channel of wage rigidity. In recessions, rigid average wages squeeze cash flows, forcing firms to cut hiring due to financial constraints. Indeed, empirical cash flows and profits would turn acyclical if wages were only moderately more procyclical. I study this channel in a search and matching model with financial constraints and wage rigidity among incumbent workers (but flexible new hires’ wages). While neither feature generates amplification individually, their interaction can account for much of the empirical labor market fluctuations—breaking the neutrality of incumbents’ wages for hiring, and showing that financial amplification of business cycles requires wage rigidity.
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Nested Models and Model Uncertainty
Alexander Kriwoluzky, Christian A. Stoltenberg
Scandinavian Journal of Economics,
Nr. 2,
2016
Abstract
Uncertainty about the appropriate choice among nested models is a concern for optimal policy when policy prescriptions from those models differ. The standard procedure is to specify a prior over the parameter space, ignoring the special status of submodels (e.g., those resulting from zero restrictions). Following Sims (2008, Journal of Economic Dynamics and Control 32, 2460–2475), we treat nested submodels as probability models, and we formalize a procedure that ensures that submodels are not discarded too easily and do matter for optimal policy. For the United States, we find that optimal policy based on our procedure leads to substantial welfare gains compared to the standard procedure.
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The Characteristics and Geographic Distribution of Robot Hubs in U.S. Manufacturing Establishments
Erik Brynjolfsson, Catherine Buffington, Nathan Goldschlag, J. Frank Li, Javier Miranda, Robert Seamans
Abstract
We use data from the Annual Survey of Manufactures to study the characteristics and geography of investments in robots across U.S. manufacturing establishments. We find that robotics adoption and robot intensity (the number of robots per employee) is much more strongly related to establishment size than age. We find that establishments that report having robotics have higher capital expenditures, including higher information technology (IT) capital expenditures. Also, establishments are more likely to have robotics if other establishments in the same Core-Based Statistical Area (CBSA) and industry also report having robotics. The distribution of robots is highly skewed across establishments’ locations. Some locations, which we call Robot Hubs, have far more robots than one would expect even after accounting for industry and manufacturing employment. We characterize these Robot Hubs along several industry, demographic, and institutional dimensions. The presence of robot integrators and higher levels of union membership are positively correlated with being a Robot Hub.
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What Makes the Difference? Microfinance Versus Commercial Banks
Afsheen Abrar, Iftekhar Hasan, Rezaul Kabir
Borsa Istanbul Review,
Nr. 4,
2023
Abstract
We make a comparison of microfinance banks (MBs) and commercial banks (CBs) in terms of efficiency, business orientation, stability, and asset quality by analyzing a large sample of banks from 60 countries around the world. Our findings indicate that microfinance banks have higher intermediation, non-interest income, wholesale funding and liquidity, but lower efficiency and asset quality. These significant variations are influenced by smaller microfinance banks and are driven mostly to African and Latin American microfinance banks.
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The Real Impact of Ratings-based Capital Rules on the Finance-Growth Nexus
Iftekhar Hasan, Gazi Hassan, Suk-Joong Kim, Eliza Wu
International Review of Financial Analysis,
January
2021
Abstract
We investigate whether ratings-based capital regulation has affected the finance-growth nexus via a foreign credit channel. Using quarterly data on short to medium term real GDP growth and cross-border bank lending flows from G-10 countries to 67 recipient countries, we find that since the implementation of Basel 2 capital rules, risk weight reductions mapped to sovereign credit rating upgrades have stimulated short-term economic growth in investment grade recipients but hampered growth in non-investment grade recipients. The impact of these rating upgrades is strongest in the first year and then reverses from the third year and onwards. On the other hand, there is a consistent and lasting negative impact of risk weight increases due to rating downgrades across all recipient countries. The adverse effects of ratings-based capital regulation on foreign bank credit supply and economic growth are compounded in countries with more corruption and less competitive banking sectors and are attenuated with greater political stability.
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