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The literature has recently asked whether the effects of fiscal policy vary with the state of the economy (Christiano, Eichenbaum, and Rebelo 2011; Rendahl 2014; Auerbach and Gorodnichenko 2012). We study this question in the cont...
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The literature has recently asked whether the effects of fiscal policy vary with the state of the economy (Christiano, Eichenbaum, and Rebelo 2011; Rendahl 2014; Auerbach and Gorodnichenko 2012). We study this question in the context of vector autoregression (VAR) estimation. We show formally that, if (asymptotically) the parameters of the reduced-form VAR differ, then the dynamic effects of fiscal policy differ as well, generically and for any set of identification assumptions. Thus, in theory, the econometrician can detect these differences (either across time or space) generically just by relying on reduced-form VAR estimation.
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This paper investigates the time delay in the transmission of oil price shocks using disaggregated manufacturing data on inventories and sales. VAR estimates indicate that industry-level inventories and sales respond faster to an ...
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This paper investigates the time delay in the transmission of oil price shocks using disaggregated manufacturing data on inventories and sales. VAR estimates indicate that industry-level inventories and sales respond faster to an oil price shock than aggregate gross domestic product, especially in industries that are energy-intensive. In response to an unexpected oil price increase, sales drop and inventories are accumulated. This leads to future reductions in production. We estimate a modified linear-quadratic inventory model to inquire whether the patterns observed in the VAR impulse responses are consistent with rational behavior by the firms. Estimation results suggest that three mechanisms play a role in the industry-level dynamics. First, oil prices act as a negative demand shock. Second, the shock catches manufacturers by surprise, resulting in higher-than-anticipated inventories. Third, because of their desire to smooth production, manufacturers deviate from the target level of inventories and spread the decline in production over various quarters; hence the delay in the response of aggregate output.
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Although a significant portion of migration is temporary, comprehension of factors at destination that can shorten or extend migrants' stays abroad is still limited. One such unexplored factor is the macroeco-nomic fluctuation at ...
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Although a significant portion of migration is temporary, comprehension of factors at destination that can shorten or extend migrants' stays abroad is still limited. One such unexplored factor is the macroeco-nomic fluctuation at the destination. Are migrants' return functions of macroeconomic fluctuations at the destination countries? The question is explored empirically using the variation in Gross Domestic Product per capita growth rates between 2000 and 2009 in the multitude of destinations that Nepali migrants work. Return of Nepali migrants increases as the economy at the destination expands relative to that at home. Additionally, the magnitude and timing of the response vary respectively across foreign earning distribution and contexts. (c) 2021 Elsevier Ltd. All rights reserved.
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Abstract This paper extends the conventional DSGE literature by developing a New Keynesian DSGE model featuring imperfect financial markets with various friction costs, which allows for the study of macroeconomic dynamics under di...
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Abstract This paper extends the conventional DSGE literature by developing a New Keynesian DSGE model featuring imperfect financial markets with various friction costs, which allows for the study of macroeconomic dynamics under different levels of financial integration. We conduct Bayesian estimation and draw implications on the macroeconomic effects of gradual financial integration using the Chinese economy as an example. We find that macroeconomic fluctuations vary with different levels of financial integration and the specific relationship depends on the nature of exogenous shocks. Variance decomposition analysis shows that as financial integration increases, the contribution of foreign exchange shocks declines while that of domestic shocks increases. We also find that there is a notable enhancement of welfare associated with improvement in financial integration, and the effectiveness of monetary policy in emerging market economies would be weakened as financial integration increases.
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This paper investigates the sources of macroeconomic fluctuations in Brunei Darussalam from 2003Q1 to 2014Q3 using a structural vector autoregression (SVAR) model. Shocks are identified by imposing block exogeneity and long-run re...
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This paper investigates the sources of macroeconomic fluctuations in Brunei Darussalam from 2003Q1 to 2014Q3 using a structural vector autoregression (SVAR) model. Shocks are identified by imposing block exogeneity and long-run restrictions motivated by an open economy model that includes oil prices. The results show that oil price shocks account for only a small proportion of output fluctuations while productivity shocks have the largest share. Real exchange rate movements are largely driven by demand shocks while monetary shocks explain most of the variability in prices. Economic policies should focus on productivity improvement and capital investment to increase output in the long run, and the conduct of fiscal policy should take into account the impact on real exchange rate volatility.
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This article develops an open economy DSGE model which takes into account the effects of financial openness and the associated financial frictions on macroeconomic fluctuations by introducing a modified version of interest parity....
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This article develops an open economy DSGE model which takes into account the effects of financial openness and the associated financial frictions on macroeconomic fluctuations by introducing a modified version of interest parity. Evidence from the Chinese economy shows that the model provides a reasonable description of China's financial openness and financial frictions during the sample period. Further evidence from comparative analysis shows that in most cases an increase in financial openness, usually accompanied by a decrease in financial frictions, leads to flatter volatility patterns with respect to domestic shocks but sharper volatility patterns in the presence of foreign shocks.
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In this paper we introduce a microfounded macromodel with endogenous market structure, where macroeconomic fluctuations may be determined by firms' strategic interactions, entry and exit. All the agents have the same preferences b...
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In this paper we introduce a microfounded macromodel with endogenous market structure, where macroeconomic fluctuations may be determined by firms' strategic interactions, entry and exit. All the agents have the same preferences but may differ in their budget constraints and change their social status according to idiosyncratic stochastic shocks that trigger entry, while exit is caused by firms' bankruptcies. Our numerical simulations show that birth and death of firms (associated with entry and exit) can generate macroeconomic fluctuations without technology shocks.
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This study finds that the impact of an oil price shock on the Singapore economy is marginal. Both impulse response and variance decomposition analysis provide reasonable grounds to believe that the impact only had an insignificant...
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This study finds that the impact of an oil price shock on the Singapore economy is marginal. Both impulse response and variance decomposition analysis provide reasonable grounds to believe that the impact only had an insignificant adverse effect on Singapore's gross domestic product (GDP), inflation and unemployment rates. Further analysis on two oil vulnerability measures supports the finding: the declining trend of oil intensity in Singapore since 1989 and the declining shares of the Singapore's expenditure on oil consumption as a percentage of its nominal GDP. This study identifies, however, that the impact of an oil price shock on the Singapore economy should not be considered negligible even though it is small.
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Research of influence of macroeconomic fluctuations on stock markets suggests different kinds of relationship between them. This paper aims to analyze the relationship between Shanghai Composite Index and China’s macroeconomic in...
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Research of influence of macroeconomic fluctuations on stock markets suggests different kinds of relationship between them. This paper aims to analyze the relationship between Shanghai Composite Index and China’s macroeconomic indexes applying cointegration method and different metrics of money supply: M1 and M2. The time period of data in this paper spans from Quarter 1, 1995 to Quarter 4, 2018. The Vector Error Correction Model (VECM) constituted suggests that: 1) there is a long-run equilibrium between these variables; 2) in the long run, despite of different measures of money supply, real GDP is negatively correlated with SCI, implicating a deviation of a stock market from real economy; 3) in the short run, no matter what measure of money supply we use, real GDP seems to have no significant effect on SCI, which again verifies the deviation of the stock market from real economy. The impulse response analysis suggests the totally opposite direction of effect that money supply and interest rate have on SCI in different specifications, and the forecast-error decomposition analysis indicates that SCI cannot fully reflect macroeconomic fluctuations once again.
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