{"title":"Is the working capital channel of the monetary policy quantitatively relevant? A structural estimation approach","authors":"Hamilton Galindo Gil","doi":"10.1017/s1365100524000233","DOIUrl":"https://doi.org/10.1017/s1365100524000233","url":null,"abstract":"Is the working capital channel big, and does it vary across industries? To answer this question, I estimate a dynamic stochastic macro-finance model using firm-level data. In aggregate, I find a partial channel —about three-fourths of firms’ labor bill are borrowed. However, the strength of this channel varies across industries, reaching as low as one-half for retail firms and as high as one for agriculture and construction. This provides evidence that monetary policy could have varying effects across industries through the working capital channel.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"14 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-05-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141192248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Uncertainty shocks and monetary policy rules in a small open economy","authors":"Sargam Gupta","doi":"10.1017/s1365100524000178","DOIUrl":"https://doi.org/10.1017/s1365100524000178","url":null,"abstract":"Post the great financial crisis (GFC) of 2008–2009, there has been a surge in the macroeconomics literature on aggregate uncertainty. Although the recent literature has recognized the adverse real effects of global uncertainty shocks in emerging market economies (EMEs), the role of monetary policy in offsetting these adverse effects and their link with the exchange rates is not explored in the literature. We find that the currently followed interest rate rules (IRRs) under a flexible inflation-targeting regime are ineffective in stabilizing the domestic economy during periods of high global uncertainty in the EMEs. Using a small open economy new Keynesian DSGE model with Epstein–Zin preferences and second-moment demand shocks, we compare and propose alternate monetary policy rules that significantly reduce welfare losses. We find that the best monetary policy rule in terms of welfare depends on the nature of shock that is, first-moment or second-moment shock.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"24 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-05-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141147318","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Economic resilience and the dynamics of capital stock","authors":"Francisco-Javier Escribá-Pérez, María-José Murgui-García, Jose-Ramon Ruiz-Tamarit","doi":"10.1017/s1365100524000208","DOIUrl":"https://doi.org/10.1017/s1365100524000208","url":null,"abstract":"The role of capital in measuring resilience is investigated. Focusing on the current short-run and potential long-run growth paths of the economic system, we propose new indexes to separately measure adaptability and resistance to shocks, which are the essence of a system’s resilience. Capital dynamics during the transition and along the balanced growth path are used here instead of employment to represent the evolution of the size and composition of the economy. Our indexes measure adaptability and resistance by comparing the two capital growth rates. They are built by mimicking the average and variance of the difference in growth rates. In this new setting, investment and depreciation flows play an important role in explaining what the partial index of adaptability reveals. The available data on the USA and Spanish capital allow us to empirically compute the indexes and draw conclusions about their ability to resist shocks and absorb their effects. We conclude that the US economy is more adaptable and has a greater capacity to absorb impacts than the Spanish economy, but it is less resistant to disturbances.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"140 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140941022","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Is the Hamilton regression filter really superior to Hodrick–Prescott detrending?","authors":"Reiner Franke, Jiri Kukacka, Stephen Sacht","doi":"10.1017/s136510052400018x","DOIUrl":"https://doi.org/10.1017/s136510052400018x","url":null,"abstract":"An article published in 2018 by J.D. Hamilton gained significant attention due to its provocative title, “Why you should never use the Hodrick-Prescott filter.” Additionally, an alternative method for detrending, the Hamilton regression filter (HRF), was introduced. His work was frequently interpreted as a proposal to substitute the Hodrick–Prescott (HP) filter with HRF, therefore utilizing and understanding it similarly as HP detrending. This research disputes this perspective, particularly in relation to quarterly business cycle data on aggregate output. Focusing on economic fluctuations in the United States, this study generates a large amount of artificial data that follow a known pattern and include both a trend and cyclical component. The objective is to assess the effectiveness of a certain detrending approach in accurately identifying the real decomposition of the data. In addition to the standard HP smoothing parameter of <jats:inline-formula> <jats:alternatives> <jats:inline-graphic xmlns:xlink=\"http://www.w3.org/1999/xlink\" mime-subtype=\"png\" xlink:href=\"S136510052400018X_inline1.png\"/> <jats:tex-math> $lambda = 1600$ </jats:tex-math> </jats:alternatives> </jats:inline-formula>, the study also examines values of <jats:inline-formula> <jats:alternatives> <jats:inline-graphic xmlns:xlink=\"http://www.w3.org/1999/xlink\" mime-subtype=\"png\" xlink:href=\"S136510052400018X_inline2.png\"/> <jats:tex-math> $lambda ^{star }$ </jats:tex-math> </jats:alternatives> </jats:inline-formula> from earlier research that are seven to twelve times greater. Based on three unique statistical measures of the discrepancy between the estimated and real trends, it is evident that both versions of HP significantly surpass those of HRF. Additionally, HP with <jats:inline-formula> <jats:alternatives> <jats:inline-graphic xmlns:xlink=\"http://www.w3.org/1999/xlink\" mime-subtype=\"png\" xlink:href=\"S136510052400018X_inline3.png\"/> <jats:tex-math> $lambda ^{star }$ </jats:tex-math> </jats:alternatives> </jats:inline-formula> consistently outperforms HP-1600.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"2012 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-05-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140837333","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. Palestrini, D. Delli Gatti, M. Gallegati, B. Greenwald
{"title":"Adaptive agents may be smarter than you think: unbiasedness in adaptive expectations","authors":"A. Palestrini, D. Delli Gatti, M. Gallegati, B. Greenwald","doi":"10.1017/s1365100524000129","DOIUrl":"https://doi.org/10.1017/s1365100524000129","url":null,"abstract":"Experimental evidence shows that human subjects frequently rely on adaptive heuristics to form expectations but their forecasting performance in the lab is not as inadequate as assumed in macroeconomic theory. In this paper, we use an agent-based model (ABM) to show that the average forecasting error is indeed close to zero even in a complex environment if we assume that agents augment the canonical adaptive algorithm with a <jats:italic>Belief Correction</jats:italic> term which takes into account the previous trend of the variable of interest. We investigate the reasons for this result using a streamlined nonlinear macro-dynamic model that captures the essence of the ABM.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"25 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140563493","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abdulaleem Isiaka, Alexander Mihailov, Giovanni Razzu
{"title":"Fiscal policy and inequality in middle- and high-income countries: redistributive effects of tax and spending shocks","authors":"Abdulaleem Isiaka, Alexander Mihailov, Giovanni Razzu","doi":"10.1017/s1365100524000142","DOIUrl":"https://doi.org/10.1017/s1365100524000142","url":null,"abstract":"Motivated by the sharp increases in public spending following the global financial crisis, we employ the GMM Panel VAR approach at annual frequency between 2004 and 2014 to investigate the dynamic response of alternative income distribution variables to shocks imposed on tax revenues and three key components of social expenditures: social protection, health, and education. We confirm the potential of fiscal policy to reduce income inequality in the medium to longer run, but point to the differential approaches to pursue such a goal in middle- versus high-income countries. We find that the particular expenditure component under consideration matters in terms of the dynamic effect on inequality and on different parts of the income distribution, as well as in terms of the implied time profile. In middle-income countries, positive education spending shocks are the most effective in achieving better distributional outcomes over a medium run of several years. By contrast, in high-income countries, positive health spending and tax shocks have a more pronounced favorable dynamic distributional effect.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"43 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140564027","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Monetary policy in advanced and emerging economies","authors":"Apostolos Serletis, Cosmas Dery","doi":"10.1017/s1365100524000105","DOIUrl":"https://doi.org/10.1017/s1365100524000105","url":null,"abstract":"We are motivated by central bank responses to the rise in inflation in the aftermath of the coronavirus pandemic and investigate monetary policy behavior in advanced and emerging economies. We speak to the debate on whether the conduct of monetary policy in emerging economies is fundamentally different from that in advanced economies. We also address the issue of whether the common practice of using market rates (instead of policy rates) to proxy for the stance of monetary policy leads to different conclusions regarding the cyclicality of monetary policy in emerging economies. Using time series data for the G7 and EM7 countries, we show that the conventional wisdom that monetary policy in emerging economies is different from monetary policy in advanced economies still holds.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"25 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140563496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Embodied technological progress, heterogeneous multiworker firms, and unemployment","authors":"Kosho Tanaka","doi":"10.1017/s1365100524000130","DOIUrl":"https://doi.org/10.1017/s1365100524000130","url":null,"abstract":"This paper studies the impact of technological progress on unemployment in a search-matching model with heterogeneous multiworker firms. In the model, some firms continue to reap rewards from new technologies over time and contribute to job creation, while other firms obsolesce and reduce their employment. Thus, the model captures an endogenous change in the aggregate composition of firms (the firm-composition effect). Considering this effect along with the two canonical effects—the capitalization and creative-destruction effects—I examine the importance of each through a simulation. The results show that the firm-composition effect explains almost all the variation in unemployment in the model, mainly through shrinking the number of obsolescing firms relative to surviving firms and increasing the aggregate technology adoption rate when technology progresses rapidly.","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"50 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140563456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Bankruptcy law as an alternative to fiscal policy in a Woodford model with a productivity shock","authors":"Aloísio Araújo, Vitor Costa","doi":"10.1017/s1365100524000099","DOIUrl":"https://doi.org/10.1017/s1365100524000099","url":null,"abstract":"<p>We show that trade credit contracts between sectors can provide a useful alternative to fiscal transfers during a major productivity shock. Defaults in credit contracts function as transfers between sectors, which can be implemented through a bankruptcy law or through credit renegotiation. Transfers implemented through defaults allow for a reduction in the size of the fiscal policy that restores the economy to the optimal allocation, constituting a relevant alternative to economies without an available fiscal space to implement the optimal policy.</p>","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"5 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140563900","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Does household debt affect the size of the fiscal multiplier?","authors":"Juan Zurita","doi":"10.1017/s1365100524000075","DOIUrl":"https://doi.org/10.1017/s1365100524000075","url":null,"abstract":"<p>Does household debt affect the size of the fiscal multiplier? We investigate the effects of household debt on government spending multipliers using a smooth transition vector autoregression model. Through generalized impulse response functions, we measure whether the effect of government spending on GDP is conditioned by different levels of household debt in Australia, Sweden, and Norway, three countries with high levels of household indebtedness, and in the world’s seven largest economies. Our results indicate that the short-term effects of government spending tend to be higher if fiscal expansion takes place during periods of low household debt. On average, the fiscal multiplier (on impact) is 0.70, 0.61, and 0.79 (percent of GDP) larger when the increase in government spending takes place during periods of low household debt for Australia, Norway, and the United States.</p>","PeriodicalId":18078,"journal":{"name":"Macroeconomic Dynamics","volume":"24 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2024-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140034213","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}