governance and agricultural productivity a cross national analysis abstract in this study we examine the relationship between governance and agricultural performance by employing the world bank s aggregate governance indicators based on a cross country panel sample two methods are employed to test the hypothesis that better governance fosters agricultural productivity the empirical results of both methods support the hypothesis as for the first method the estimation results of the widely used inter country aggregate agricultural production function show that a country with better governance can produce more agricultural outputs given the same amounts of agricultural inputs the same education level and the same climate condition as for the second method the empirical results of a structural equation model reveal that given the same amounts of agricultural capital stock and land an agricultural worker in a country with better governance produces more better governance can indirectly improve agricultural productivity by driving agricultural capital accumulation our empirical work lends support to the claim of hayami and ruttan hayami y ruttan v 1985 agricultural development an international perspective john hopkins university press baltimore that governance is a basic factor explaining the poor economic performance of many developing countries in order to improve the agricultural performance of many developing countries apart from physical and education investments more emphasis should be placed on improving the governance infrastructure of these countries

financial market illiquidity shocks and macroeconomic dynamics evidence from the uk we examine the link between financial market illiquidity and macroeconomic dynamics by fitting a bayesian time varying parameter var with stochastic volatility to uk data from 1988q1 to 2016q4 we capture liquidity conditions in the stock market using a battery of illiquidity proxies this paper departs from previous studies examining macro financial linkages by using theoretically grounded sign restrictions and conducting structural inference in a non linear framework we document both statistically significant differences in the transmission of these shocks and substantial increases in the economic importance of these shocks during the 2008 recession

understanding the macroeconomic impact of illiquidity shocks in the united states in this paper we empirically investigate the role of stock market illiquidity shocks stemming from amihud s illiquidity measure in explaining u s macroeconomic fluctuations from 1973 to 2018 we find that the impact of illiquidity shocks on economic activity is substantial and historical decomposition analysis shows that cumulative illiquidity shocks were an essential contributor to the prolonged economic slump of the great recession moreover our identified illiquidity shocks represent a distinct source of macroeconomic instability this suggests that illiquidity shocks measured by the stock price impacts may contain more information than other types of shocks in recent studies such as financial shocks and uncertainty shocks jel c32 e32

endogenous incomplete contracts a bargaining approach in this paper we argue that by modelling the contracting process as a bargaining game one can endogenize the choice between complete and incomplete contracts this point is demonstrated within a stylized model in which agents can allocate an endowment stream either via a once for all bargain over the entire stream a long term contract or through a series of bargaining rounds a short term contract within this structure short term contracts arise as equilibrium outcomes under very general conditions because a short term contract implies reduced bargaining costs for one of the agents in essence reduced transaction costs produce a short term contract jel classification l14 c78

a flexible finite horizon alternative to long run restrictions with an application to technology shocks abstract recent studies using long run restrictions question the validity of the technology driven real business cycle hypothesis we propose an alternative identification that maximizes the contribution of technology shocks to the forecast error variance of labor productivity at a long but finite horizon in small sample monte carlo experiments our identification outperforms standard long run restrictions by significantly reducing the bias in the short run impulse responses and raising their estimation precision unlike its long run restriction counterpart when our max share identification technique is applied to u s data it delivers the robust result that hours worked responds negatively to positive technology shocks

investment specific news shocks and u s business cycles we provide robust evidence that news shocks about future investment specific technology ist constitute a significant force behind u s business cycles positive ist news shocks induce comovement that is raise output consumption investment and hours these shocks account for 70 of the business cycle variation in output hours and consumption and 60 of the variation in investment and have played an important role in 9 of the last 10 u s recessions our findings provide strong support for shifting focus to ist news shocks when investigating the role of news in driving u s business cycles

2002 lawrence r klein lecture liquidity and asset prices we broadly define liquid assets or monetary assets as any asset that can be readily sold in the market and can be held by a number of people in succession before maturity we ask in what environment is the circulation of liquid assets essential for the smooth running of the economy by developing a canonical model of a monetary economy i e where the circulation of liquid assets is essential we are able to examine the interaction between liquidity asset prices and aggregate economic activity

credit and economic activity credit regimes and nonlinear propagation of shocks in this paper we examine empirically whether credit plays a role as a nonlinear propagator of shocks this propagation takes the form of a threshold vector autoregression in which a regime change occurs if credit conditions cross a critical threshold using nonlinear impulseresponse functions we evaluate the dynamics implied by the threshold model these suggest that shocks have a larger effect on output in the tight credit regime than is normally the case and that contractionary monetary shocks typically have a larger effect than expansionary shocks finally using a nonlinear version of historical decompositions we attempt to determine the relative contribution to output growth of shocks and the nonlinear structure

sticky wages and sectoral labor comovement abstract a defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity standard models cannot account for this phenomenon this paper develops and estimates a two sector dynamic general equilibrium model that can account for this key regularity my model incorporates three shocks to the economy monetary policy shocks neutral technology shocks and embodied technology shocks in the capital producing sector the estimated model is able to account for the response of the u s economy to all three shocks using this model i argue that the key friction underlying sectoral comovement is rigidity in nominal wages

liquidity assets and business cycles abstract the objective here is to evaluate the quantitative importance of financial frictions in business cycles the analysis shows that a negative financial shock can cause aggregate investment employment and consumption to fall with output despite this realistic comovement among macro quantities a negative financial shock generates an equity price boom as the shock tightens firms financing constraint this counterfactual response of the equity price is robust to a wide range of variations in how financial frictions are modeled and whether financial shocks affect asset liquidity or firms collateral constraints some possible resolutions to this puzzle are discussed

liquidity shocks and real gdp growth evidence from a bayesian time varying parameter var we examine the dynamic impact of liquidity shocks resonating in stock and housing markets on real gdp growth we fit a bayesian time varying parameter var model with stochastic volatility to us data from 1970 to 2014 gdp becomes highly sensitive to house market liquidity shocks as disruptions in the sector start to emerge yet more resilient to stock market liquidity shocks throughout time we provide substantial evidence in favour of asymmetric responses of gdp growth both across the business cycle and among business cycle troughs stock and house market liquidity shocks explain on average 17 and 35 of the variation in gdp during the great recession respectively

macroeconomic dynamics in a model of goods labor and credit market frictions building a model with three imperfect markets goods labor and credit representing a product s life cyle we find that goods market frictions drastically change the qualitative and quantitative dynamics of labor market variables the calibrated model leads to a significant reduction in the gap with the data both in terms of persistence and volatility while search models of the labor market fail in one of the two dimensions two factors related to goods market frictions generate these results i the expected dynamics of consumers search for goods itself depending on the income redistributed by firms and the entry of new products and ii the expected dynamics of prices which alter future profit flows

do liquidity measures measure liquidity abstract given the key role of liquidity in finance research identifying high quality proxies based on daily as opposed to intraday data would permit liquidity to be studied over relatively long timeframes and across many countries using new measures and widely employed measures in the literature we run horseraces of annual and monthly estimates of each measure against liquidity benchmarks our benchmarks are effective spread realized spread and price impact based on both trade and quote taq and rule 605 data we find that the new effective realized spread measures win the majority of horseraces while the amihud 2002 illiquidity and stock returns cross section and time series effects journal of financial markets 5 31 56 measure does well measuring price impact

the employment effects of credit market disruptions firm level evidence from the 2008 9 financial crisis this article investigates the effect of bank lending frictions on employment outcomes i construct a new data set that combines information on banking relationships and employment at 2 000 nonfinancial firms during the 2008 9 crisis the article first verifies empirically the importance of banking relationships which imply a cost to borrowers who switch lenders i then use the dispersion in lender health following the lehman crisis as a source of exogenous variation in the availability of credit to borrowers i find that credit matters firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the lehman bankruptcy paid a higher interest rate if they did borrow and reduced employment by more compared to precrisis clients of healthier lenders consistent with frictions deriving from asymmetric information the effects vary by firm type lender health has an economically and statistically significant effect on employment at small and medium firms but the data cannot reject the hypothesis of no effect at the largest or most transparent firms abstracting from general equilibrium effects i find that the withdrawal of credit accounts for between one third and one half of the employment decline at small and medium firms in the sample in the year

are the effects of monetary policy asymmetric huntley schaller by building on the hamilton 1989 markov switching model we examine questions like does monetary policy have the same effect in expansions and recessions given that the economy is currently in a recession does a fall in interest rates increase the probability of an expansion does monetary policy have an incremental effect on the growth rate within a given state or does it only affect the economy if it is sufficiently strong to induce a state change e g from recession to expansion as suggested by models with sticky prices or finance constraints interest rate changes have larger effects during recessions jel e52 e32 much of the recent work in macroeconomics has proceeded under the assumption that variables follow linear stochastic processes with constant coefficients as a result some of the richness of the burns mitchell analysis such as its focus on asymmetries between recessions and expansions may well have been lost blanchard and fischer 1989 7 i introduction for decades macroeconomists have debated whether monetary policy has the same effect on real output in expansions and recessions as far back as the 1930s keynes and pigou debated whether monetary policy would have less effect on output during a severe economic downturn in the 1960s there were active debates on a very different proposition namely whether the rightward portion of the aggregate supply curve was vertical so that monetary policy would have less effect on real output during expansions in this article we provide a new type of evidence on whether monetary policy has different effects depending on whether the economy is in an expansion or recession empirical evidence on this issue is particularly relevant in light of new theoretical work in macroeconomics that predicts asymmetric effects of demand shocks conditional on the state of the economy two examples of this work are s s type models of price adjustment and models in which there are agency costs of financial intermediation 1 the intuition for the latter class of models is simple 2 when there is information asymmetry in financial markets agents may behave as if they were constrained for a variety of reasons these finance constraints are more likely to bind during recessions when the net worth of agents is low an increase in interest rates will then have two effects on investment the standard effect of increasing the cost of capital and therefore reducing investment demand and an additional effect of reducing liquidity e g by increasing debt service obligations and thus reducing investment demand for constrained agents as a result monetary policy actions that change interest rates will have greater effects during a recession 3 the s s type price adjustment models of ball and mankiw 1994 caballero and engel 1992 and tsiddon 1993 lead to a convex aggregate supply curve and therefore also imply that monetary policy will have stronger effects during recessions one of the more frequently cited empirical papers on the potentially asymmetric effects of monetary policy is cover 1992 which finds evidence that positive monetary shocks have different effects from negative monetary shocks we are looking at a different type of asymmetry namely between booms and recessions we study asymmetries using an extension of the markov switching model developed by hamilton 1989 estimated over the period 1955 93 in hamilton s econometric specification the growth rate of output depends on a state variable that corresponds to an expansion or recession this approach has several advantages first unlike linear projections it allows for nonlinearities and asymmetries second in estimating the recession coefficients it gives greater relative weight to observations that most clearly correspond to recessions and similarly for the expansion coefficients

news shocks and business cycles abstract this paper proposes and implements a novel structural var approach to the identification of news shocks about future technology the news shock is identified as the shock orthogonal to the innovation in current utilization adjusted tfp that best explains variation in future tfp a favorable news shock leads to an increase in consumption and decreases in output hours and investment on impact more suggestive of standard dsge models than of recent extensions designed to generate news driven business cycles though news shocks account for a significant fraction of output fluctuations at medium frequencies they contribute little to our understanding of recessions

do technology shocks lead to a fall in total hours worked this paper contributes to the debate initiated by gali in 1999 i provide a theory with capital income taxation labor hoarding as well as long run shifts in the social attitudes to the workplace modelled as leisure at the workplace to argue that there are other shocks that may influence labor productivity in the long run i introduce medium run identification and show it to be superior to long run identification or standard short run identification when applied to artificial data with u s data and medium run identification i find the robust result that technology shocks lead to a hump shaped response of total hours worked which is mildly positive following a near zero initial response jel e32 e24 c32 c15 copyright c 2004 the european economic association

liquidity business cycles and monetary policy this paper presents a model of monetary economy with dier ences in liquidity across assets our purpose is to study how aggre gate production and asset prices uctuate with shocks to productivity and liquidity in so doing we examine what role government policy might have through open market operations that change the mix of assets held by the private sector we also show that certain apparent anomalies of asset markets are in fact normal features of a monetary economy in which the circulation of money is essential for a better allocation of resources

measuring the reaction of monetary policy to the stock market movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy however little is known about the magnitude of the federal reserve s reaction to the stock market in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate this paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market we find a significant policy response with a 5 percent rise fall in the s p 500 index increasing the likelihood of a 25 basis point tightening easing by about a half

liquidity shocks business cycles and asset prices abstract in the aftermath of the great recession macro models that feature financing constraints have attracted increasing attention among these kiyotaki et al 2012 is a prominent example in this paper we investigate whether the liquidity shocks and financial frictions proposed by kiyotaki et al 2012 can improve the asset pricing predictions of the frictionless rbc model we study the quantitative business cycle and asset pricing properties in an economy in which agents feature recursive preferences are subject to a liquidity constraint and suffer liquidity shocks we find that the model predicts highly nonlinear time variation and levels of risk premia which are driven by endogenous fluctuations in equity prices however the model fails to account for a basic fact periods of scarce liquidity are associated with high asset prices and low expected returns

stock and bond market liquidity a long run empirical analysis this paper establishes liquidity linkage between stock and treasury bond markets there is a lead lag relationship between illiquidity of the two markets and bidirectional granger causality the effect of stock illiquidity on bond illiquidity is consistent with flight toquality or flight to liquidity episodes monetary policy impacts illiquidity the evidence indicates that bond illiquidity acts as a channel through which monetary policy shocks are transferred into the stock market these effects are observed across illiquidity of bonds of different maturities and are especially pronounced for illiquidity of short term maturities the paper provides evidence of illiquidity integration between stock and bond markets