2015年6月2日火曜日
2014年6月19日木曜日
2014年6月9日月曜日
business cycle volatility and welfare
Furceri, D. and G. Karras. 2007. "Country Size and Business Cycle Volatility: Scale Really Matters." Journal of the Japanese and International Economies, 21(4), 424-34.
----<quote>---
Is business-cycle volatility worthy to be considered as an indicator of economic performance, along such other established measures as economic growth and income per capita? While in the highly influential monograph Models of Business Cycles Robert Lucas (1987) famously argued that the costs associated with business cycles are virtually nonexistent, more recent research has challenged Lucas’s conclusions. For example, Mendoza (2000), Jones (1999), Matheron and Maury (2000), Epaulard and Pommeret (2003) showed that business cycle volatility reduces welfare, not least because of its negative effect on growth. Krusell and Smith (1999), and Storesletten et al. (2001) showed that in a model with heterogeneous agents the benefits from eliminating business cycle fluctuations are sizeable. More recently, Barlevy (2004) argues that economic fluctuations remarkably decrease welfare by affecting the growth rate of consumption. At the same time, a growing empirical literature starting with Ramey and Ramey (1995) has showed that cyclical volatility negatively affects growth and investment.We conclude that business-cycle volatility matters. Thus, if country size can be shown to have a significant effect on volatility, it follows that country size matters too.
---<unquote>---
----<quote>---
Is business-cycle volatility worthy to be considered as an indicator of economic performance, along such other established measures as economic growth and income per capita? While in the highly influential monograph Models of Business Cycles Robert Lucas (1987) famously argued that the costs associated with business cycles are virtually nonexistent, more recent research has challenged Lucas’s conclusions. For example, Mendoza (2000), Jones (1999), Matheron and Maury (2000), Epaulard and Pommeret (2003) showed that business cycle volatility reduces welfare, not least because of its negative effect on growth. Krusell and Smith (1999), and Storesletten et al. (2001) showed that in a model with heterogeneous agents the benefits from eliminating business cycle fluctuations are sizeable. More recently, Barlevy (2004) argues that economic fluctuations remarkably decrease welfare by affecting the growth rate of consumption. At the same time, a growing empirical literature starting with Ramey and Ramey (1995) has showed that cyclical volatility negatively affects growth and investment.We conclude that business-cycle volatility matters. Thus, if country size can be shown to have a significant effect on volatility, it follows that country size matters too.
---<unquote>---
2014年3月31日月曜日
Financial Cycle
http://www.norges-bank.no/pages/95810/Staff_memo_2013_13.pdf
The length of financial cycles are roughly 3-4 times longer than that of business cycles
The length of financial cycles are roughly 3-4 times longer than that of business cycles
2014年2月9日日曜日
Risk Shocks
Christiano, L. J.; R. Motto and M. Rostagno. 2014. "Risk Shocks." American Economic Review, 104(1), 27-65.
- Bernanke-Gertler-Gilchrist financial accelerator model with cross-sectional idiosyncratic uncertainty
- idiosyncratic risk shock
"After purchasing capital, each N-type entrepreneur experiences an idiosyncraticshock, ω, which converts capital, K_ t+1 N, into efficiency units, ω K_ t+1 N. Following BGG,we assume that ω has a unit-mean log normal distribution that is independentlydrawn across time and across entrepreneurs. Denote the period t standard deviationof log ω by σ_t . The risk shock, σ_t , characterizes the extentof cross-sectional dispersion in ω. We allow σ_t to vary stochastically over time, andwe discuss its law of motion below."
- Bernanke-Gertler-Gilchrist financial accelerator model with cross-sectional idiosyncratic uncertainty
- idiosyncratic risk shock
"After purchasing capital, each N-type entrepreneur experiences an idiosyncraticshock, ω, which converts capital, K_ t+1 N, into efficiency units, ω K_ t+1 N. Following BGG,we assume that ω has a unit-mean log normal distribution that is independentlydrawn across time and across entrepreneurs. Denote the period t standard deviationof log ω by σ_t . The risk shock, σ_t , characterizes the extentof cross-sectional dispersion in ω. We allow σ_t to vary stochastically over time, andwe discuss its law of motion below."
Timing of receiving information
Christiano, L. J.; R. Motto and M. Rostagno. 2014. "Risk Shocks." American Economic Review, 104(1), 27-65.
<quote>
We now discuss the timing assumptions that govern when agents learn aboutshocks. A standard assumption in estimated equilibrium models is that a shock’s statisticalinnovation (i.e., the one-step-ahead error in forecasting the shock based onthe history of its past realizations) becomes known to agents only at the time that theinnovation is realized. Recent research casts doubt on this assumption. For example, Alexopoulos (2011) and Ramey (2011) use US data to document that people receive information about the period t statistical innovation in technology and governmentspending, respectively, before the innovation is realized.
<unquote>
<quote>
We now discuss the timing assumptions that govern when agents learn aboutshocks. A standard assumption in estimated equilibrium models is that a shock’s statisticalinnovation (i.e., the one-step-ahead error in forecasting the shock based onthe history of its past realizations) becomes known to agents only at the time that theinnovation is realized. Recent research casts doubt on this assumption. For example, Alexopoulos (2011) and Ramey (2011) use US data to document that people receive information about the period t statistical innovation in technology and governmentspending, respectively, before the innovation is realized.
<unquote>
2014年2月2日日曜日
2014年1月19日日曜日
Notes to the Economic Outlook Annex Tables (OECD)
http://www.oecd.org/economy/outlook/notestotheeconomicoutlookannextables.htm
Active population
Economically active population comprises all persons of either sex who furnish the supply of labour for the production of economic goods and services as defined by the United Nations System of National Accounts during a specified time-reference period.
http://stats.oecd.org/glossary/detail.asp?ID=730
Labor force = Employment + Unemployment
Participation rates = Labor force / Working-age population (15-64)
http://www.oecd.org/economy/outlook/eosources-notestostatisticalannextables11-19wagescostsunemploymentandinflation.htm#t_13
Active population
Economically active population comprises all persons of either sex who furnish the supply of labour for the production of economic goods and services as defined by the United Nations System of National Accounts during a specified time-reference period.
http://stats.oecd.org/glossary/detail.asp?ID=730
Labor force = Employment + Unemployment
Participation rates = Labor force / Working-age population (15-64)
http://www.oecd.org/economy/outlook/eosources-notestostatisticalannextables11-19wagescostsunemploymentandinflation.htm#t_13
Hours worked for OECD countries
Ohanian, L. E. and A. Raffo. 2012. "Aggregate Hours Worked in Oecd Countries: New Measurement and Implications for Business Cycles." Journal of Monetary Economics, 59(1), 40-56.
---<quote>---
Specifically, we show that employment is a poor proxy for labor input in many OECD countries, as changes in hours per worker are about as large as changes in employment. We also find that employment-based labor wedges are much too large in Europe, given high European firing costs, while hours-based labor wedges are comparatively too small. Finally, we find that the Great Recession is a substantial puzzle in Europe, as both employment-based and hours-based labor wedges are nearly zero in many European countries. This stands in sharp contrast to labor wedges in the U.S. during the Great Recession, or labor wedges in other European recessions, both of which are an order of magnitude larger.
---<unquote>---
---<quote>---
Specifically, we show that employment is a poor proxy for labor input in many OECD countries, as changes in hours per worker are about as large as changes in employment. We also find that employment-based labor wedges are much too large in Europe, given high European firing costs, while hours-based labor wedges are comparatively too small. Finally, we find that the Great Recession is a substantial puzzle in Europe, as both employment-based and hours-based labor wedges are nearly zero in many European countries. This stands in sharp contrast to labor wedges in the U.S. during the Great Recession, or labor wedges in other European recessions, both of which are an order of magnitude larger.
---<unquote>---
2014年1月9日木曜日
Perpetual Inventory Method
http://faculty.apec.umn.edu/rsmith/documents/CreateCapitalStock.pdf
http://www.econ.umn.edu/~selis004/su11_3102/GrowthAccountingNotes.pdf
---<quote>---
When calculating real investment, it is best to collect data on nominal investment and then deflate the series by a GDP deflator. This procedure ensures the real investment series, and, thus, the capital stock series, and the real GDP series are deflatedby the same price index.
---<unquote>---
http://acta.mendelu.cz/pdf/actaun201361072367.pdf
http://www.econstor.eu/bitstream/10419/71091/1/73983858X.pdf
---<quote>---
Aware of this problem, HARBERGER (1978) uses three-year averages instead of a single year to generate more stable and reliable capital stock estimates. In a later application of the Steady State Approach, NEHRU and DHARESHWAR (1993) proposed an alternative procedure. In order to generate a reliable initial value of the investment time series they regress the time series of log investments on time and then use the fitted value for the first period to calculate the initial capital stock.
---<unquote>---
http://www.econ.umn.edu/~selis004/su11_3102/GrowthAccountingNotes.pdf
---<quote>---
When calculating real investment, it is best to collect data on nominal investment and then deflate the series by a GDP deflator. This procedure ensures the real investment series, and, thus, the capital stock series, and the real GDP series are deflatedby the same price index.
---<unquote>---
http://acta.mendelu.cz/pdf/actaun201361072367.pdf
http://www.econstor.eu/bitstream/10419/71091/1/73983858X.pdf
---<quote>---
Aware of this problem, HARBERGER (1978) uses three-year averages instead of a single year to generate more stable and reliable capital stock estimates. In a later application of the Steady State Approach, NEHRU and DHARESHWAR (1993) proposed an alternative procedure. In order to generate a reliable initial value of the investment time series they regress the time series of log investments on time and then use the fitted value for the first period to calculate the initial capital stock.
---<unquote>---
2013年12月21日土曜日
Study of asset returns in SGM
Naik, V. 1994. "Asset Prices in Dynamic Production Economies with Time-Varying Risk." Review of financial studies, 7(4), 781-801.
Model
(i) time-varying uncertainty of the marginal product of capital (productivity shocks),
(ii) the presence of capital adjustment costs,
(iii) the separation of intertemporal substitution and risk aversion (EZ preferences), and
(iv) the allowance for first-order risk aversion in investors' preferences.
Results
(i) the sensitivity of the price of the aggregate capital stock to shifts in risk is crucially dependent on the level of capital adjustment costs. The effect of shifts in uncertainty is significant only when capital adjustment costs are substantial.
(ii) Intertemporal substitution governs the direction of the effect of changes in risk on the value ofcapital stock. Risk aversion is important in the determination of the magnitude of this effect.
Campanale, C.; R. Castro and G. L. Clementi. 2010. "Asset Pricing in a Production Economy with Chew-Dekel Preferences." Review of Economic Dynamics, 13(2), 379-402.
<quote>
Tallarini (2000) showed that the first of the two issues just outlined can be addressed by disentangling risk aversionfrom the elasticity of intertemporal substitution. By assuming Epstein–Zin preferences, he was able to raise risk aversion at arbitrarily high levels, while keeping the elasticity of substitution anchored at 1. Tallarini went on to show the existence of RRA coefficients such that the market price of risk is consistent with the empirical evidence. However, the price of capital being constant at 1, his model essentially generates no equity premium. This issue was dealt with successfully by Jermann (1998) and Boldrin et al. (2001), who assumed that the allocation of capital cannot adjust immediately or costlessly to productivity shocks. Impediments to the smooth adjustment of capital imply that its price may vary away from 1. However, without limiting households’ willingness to substitute consumption intertemporally, this innovation results mainly in a higher volatility of consumption growth. Both Jermann (1998) and Boldrin et al. (2001) lower the IES by introducing habit formation. The resulting increase in the curvature of the Bernoulli utility function, by increasing risk aversion, also takes care of increasing the volatility of the stochastic discount factor.
<unquote>
SGM; Stochastic Growth Model
Model
(i) time-varying uncertainty of the marginal product of capital (productivity shocks),
(ii) the presence of capital adjustment costs,
(iii) the separation of intertemporal substitution and risk aversion (EZ preferences), and
(iv) the allowance for first-order risk aversion in investors' preferences.
Results
(i) the sensitivity of the price of the aggregate capital stock to shifts in risk is crucially dependent on the level of capital adjustment costs. The effect of shifts in uncertainty is significant only when capital adjustment costs are substantial.
(ii) Intertemporal substitution governs the direction of the effect of changes in risk on the value ofcapital stock. Risk aversion is important in the determination of the magnitude of this effect.
Campanale, C.; R. Castro and G. L. Clementi. 2010. "Asset Pricing in a Production Economy with Chew-Dekel Preferences." Review of Economic Dynamics, 13(2), 379-402.
<quote>
Tallarini (2000) showed that the first of the two issues just outlined can be addressed by disentangling risk aversionfrom the elasticity of intertemporal substitution. By assuming Epstein–Zin preferences, he was able to raise risk aversion at arbitrarily high levels, while keeping the elasticity of substitution anchored at 1. Tallarini went on to show the existence of RRA coefficients such that the market price of risk is consistent with the empirical evidence. However, the price of capital being constant at 1, his model essentially generates no equity premium. This issue was dealt with successfully by Jermann (1998) and Boldrin et al. (2001), who assumed that the allocation of capital cannot adjust immediately or costlessly to productivity shocks. Impediments to the smooth adjustment of capital imply that its price may vary away from 1. However, without limiting households’ willingness to substitute consumption intertemporally, this innovation results mainly in a higher volatility of consumption growth. Both Jermann (1998) and Boldrin et al. (2001) lower the IES by introducing habit formation. The resulting increase in the curvature of the Bernoulli utility function, by increasing risk aversion, also takes care of increasing the volatility of the stochastic discount factor.
<unquote>
SGM; Stochastic Growth Model
2013年12月6日金曜日
2013年12月1日日曜日
Asset price leads business cycles
Backus, David K.; Routledge, Bryan R.; and Zin, Stanley E., "Asset Prices in Business Cycle Analysis" (2007). Tepper School of Business. Paper 414.
http://repository.cmu.edu/cgi/viewcontent.cgi?article=1414&context=tepper
http://repository.cmu.edu/cgi/viewcontent.cgi?article=1414&context=tepper
2013年11月29日金曜日
Unit Roots vs. Trend Stationary
Christiano, L. J. and M. Eichenbaum. 1990. "Unit Roots in Real Gnp: Do We Know, and Do We Care?" Carnegie-Rochester Conference Series on Public Policy
---<quote>---
Macroeconomists have traditionally viewed movements output as representing temporary fluctuations about a deterministic trend. According to this view, innovations to real gross national product (GNP) should have no impact on long-run forecasts of aggregate output. Increasingly, however, this view of aggregate fluctuations has been challenged, Following the provocative work of Nelson and Plosser (1982), numerous economists have argued that real GNP is best characterized as a stochastic process that does not revert to a deterministic trend path. Under these circumstances, innovations to real GNP should affect output forecasts into the indefinite future. In pursuing this interpretation of the data, various researchers have tried to measure the long-run response of real GNP to a shock. Estimates of this response are often referred to as the persistence of shocks to real GNP.
---<unquote>---
---<quote>---
Macroeconomists have traditionally viewed movements output as representing temporary fluctuations about a deterministic trend. According to this view, innovations to real gross national product (GNP) should have no impact on long-run forecasts of aggregate output. Increasingly, however, this view of aggregate fluctuations has been challenged, Following the provocative work of Nelson and Plosser (1982), numerous economists have argued that real GNP is best characterized as a stochastic process that does not revert to a deterministic trend path. Under these circumstances, innovations to real GNP should affect output forecasts into the indefinite future. In pursuing this interpretation of the data, various researchers have tried to measure the long-run response of real GNP to a shock. Estimates of this response are often referred to as the persistence of shocks to real GNP.
---<unquote>---
2013年10月25日金曜日
2013年9月30日月曜日
GHH preferences
Greenwood-Hercowitz-Huffman(1988)AER
<quote>
Fluctuations in investment played a key role in Keynes' view of the trade cycle. There, shifts in the marginal efficiency of investment impact on investment, aggregate demand and therefore, given the disequilibrium in the labor market, employment and output. The quintessential case of this type is when there is an increase in the marginal efficiency of newly produced capital that does not affect the productivity of the capital stock already on line. When a shock of this type occurs in a standard neoclassical model, employment and output also tend to rise, but the mechanism is very different. The increase in the rate of return on investment stimulates current labor effort and output through an intertemporal substitution effect on leisure. A potential problem with this mechanism, as discussed by Robert Barro and Robert King (1984), is that intertemporal substitution which induces individuals to postpone leisure, also works to cut consumption. This effect would tend to make consumption move countercyclically, which contradicts the evidence. Labor productivity would tend to move in the " wrong" direction, too. An expansion of labor effort, given the fixed supply of capital in the short run, causes labor's productivity to decline.
In contrast to the intertemporal substitution effect mentioned above, the transmission mechanism of the investment shocks works in the present model through the optimal utilization of capital and its positive effect on the marginal productivity of labor. As will be seen, an important aspect of such a change in labor productivity is that it creates intratemporal substitution, away from leisure and toward consumption, generating procyclical effects on consumption and labor effort. Additionally, average labor productivity responds procyclically to these shocks.
That is, labor effort is determined independently of the intertemporal consumption-savings choice, which is very convenient in obtaining results from the model. As a consequence, the intertemporal substitution effect on labor effort, a central ingredient in many macroeconomic models, is eliminated. Rather than being a drawback, this implication of the utility function has the advantage of emphasizing the alternative transmission of investment shocks being studied here. When analyzing fluctuations in labor effort, this framework stresses shifts in the productivity of labor brought about by changes in the optimal rate of capacity utilization, as opposed to intertemporal substitution effects stressed by others.
<unquote>
<quote>
Fluctuations in investment played a key role in Keynes' view of the trade cycle. There, shifts in the marginal efficiency of investment impact on investment, aggregate demand and therefore, given the disequilibrium in the labor market, employment and output. The quintessential case of this type is when there is an increase in the marginal efficiency of newly produced capital that does not affect the productivity of the capital stock already on line. When a shock of this type occurs in a standard neoclassical model, employment and output also tend to rise, but the mechanism is very different. The increase in the rate of return on investment stimulates current labor effort and output through an intertemporal substitution effect on leisure. A potential problem with this mechanism, as discussed by Robert Barro and Robert King (1984), is that intertemporal substitution which induces individuals to postpone leisure, also works to cut consumption. This effect would tend to make consumption move countercyclically, which contradicts the evidence. Labor productivity would tend to move in the " wrong" direction, too. An expansion of labor effort, given the fixed supply of capital in the short run, causes labor's productivity to decline.
In contrast to the intertemporal substitution effect mentioned above, the transmission mechanism of the investment shocks works in the present model through the optimal utilization of capital and its positive effect on the marginal productivity of labor. As will be seen, an important aspect of such a change in labor productivity is that it creates intratemporal substitution, away from leisure and toward consumption, generating procyclical effects on consumption and labor effort. Additionally, average labor productivity responds procyclically to these shocks.
That is, labor effort is determined independently of the intertemporal consumption-savings choice, which is very convenient in obtaining results from the model. As a consequence, the intertemporal substitution effect on labor effort, a central ingredient in many macroeconomic models, is eliminated. Rather than being a drawback, this implication of the utility function has the advantage of emphasizing the alternative transmission of investment shocks being studied here. When analyzing fluctuations in labor effort, this framework stresses shifts in the productivity of labor brought about by changes in the optimal rate of capacity utilization, as opposed to intertemporal substitution effects stressed by others.
<unquote>
Solow residual correlations across countries and industries
Costello(1993)JPE
<quote>
I find that aggregate output growth is correlated across countries, but aggregate productivity growth is only weakly correlated across countries. At the industry level, productivity growth is significantly correlated across industries within a country but is less correlated across countries for any individual industry. In the error-components framework, the estimated nation effects are as important as, and sometimes more important than, industry effects.
The evidence suggests that short-run productivity growth is more similar across industries in one nation than across countries for a particular industry. The results are consistent with the presence of labor hoarding if labor hoarding is truly a national occurrence. The results are also consistent with observing nation-specific technology shocks to the extent that they represent excluded factors such as human capital or the infrastructure in a country.
<unquote>
<quote>
I find that aggregate output growth is correlated across countries, but aggregate productivity growth is only weakly correlated across countries. At the industry level, productivity growth is significantly correlated across industries within a country but is less correlated across countries for any individual industry. In the error-components framework, the estimated nation effects are as important as, and sometimes more important than, industry effects.
The evidence suggests that short-run productivity growth is more similar across industries in one nation than across countries for a particular industry. The results are consistent with the presence of labor hoarding if labor hoarding is truly a national occurrence. The results are also consistent with observing nation-specific technology shocks to the extent that they represent excluded factors such as human capital or the infrastructure in a country.
<unquote>
2013年9月28日土曜日
Convergence or non-convergence in output across countries
Cheung and Pascual (2004) Oxford Economic Papers
- it cannot be determined by statistical methods in common use.
- it depends on the null hypothesis of convergence or no convergence.
<quote>
The study of cross-country output dynamics from both viewpoints gives an equal opportunity for both convergence and no convergence to be validated by the data as the null hypothesis.
Our empirical results suggest that the inference about output convergence can be dictated by the choice of a null hypothesis. A conclusion of no output convergence can be reached just because no convergence is considered as the null hypothesis. Further, the no-convergence result reported in previous studies pursuing the time- series definition may be attributed to the low power of the test procedures being used. While short output data series or the use of univariate unit root procedures yields very limited support for the convergence hypothesis, the combination of long sample and efficient panel procedures delivers a more favorable result for the same hypothesis.
<unquote>
- it cannot be determined by statistical methods in common use.
- it depends on the null hypothesis of convergence or no convergence.
<quote>
The study of cross-country output dynamics from both viewpoints gives an equal opportunity for both convergence and no convergence to be validated by the data as the null hypothesis.
Our empirical results suggest that the inference about output convergence can be dictated by the choice of a null hypothesis. A conclusion of no output convergence can be reached just because no convergence is considered as the null hypothesis. Further, the no-convergence result reported in previous studies pursuing the time- series definition may be attributed to the low power of the test procedures being used. While short output data series or the use of univariate unit root procedures yields very limited support for the convergence hypothesis, the combination of long sample and efficient panel procedures delivers a more favorable result for the same hypothesis.
<unquote>
2013年8月8日木曜日
2013年7月4日木曜日
Feldstein-Horioka Pazzle
The national saving rate is highly correlated with its domestic investment rate, which is not supported by the standard economic theory assuming open international financial economy.
Baxter and Crucini (1993) "Explaining Saving Investment Correlations"
"Saving-investment correlations are higher for larger countries."
COUNTRY SIZE AND SAVING-INVESTMENT CORRELATIONS
Country GNP(1985 U.S. $) S-I correlation
United States 3,994 0.86
Japan 1,365 0.80
Germany 667 0.68
France 527 0.31
Italy 372 0.39
Canada 347 0.61
Australia 171 0.54
Switzerland 106 0.65
Baxter and Crucini (1993) "Explaining Saving Investment Correlations"
"Saving-investment correlations are higher for larger countries."
COUNTRY SIZE AND SAVING-INVESTMENT CORRELATIONS
Country GNP(1985 U.S. $) S-I correlation
United States 3,994 0.86
Japan 1,365 0.80
Germany 667 0.68
France 527 0.31
Italy 372 0.39
Canada 347 0.61
Australia 171 0.54
Switzerland 106 0.65
登録:
投稿 (Atom)