the dynamics of the leverage cycle abstract we present a simple agent based model of a financial system composed of leveraged investors such as banks that invest in stocks and manage their risk using a value at risk constraint based on historical observations of asset prices the value at risk constraint implies that when perceived risk is low leverage is high and vice versa a phenomenon that has been dubbed pro cyclical leverage we show that this leads to endogenous irregular oscillations in which gradual increases in stock prices and leverage are followed by drastic market collapses i e a leverage cycle this phenomenon is studied using simplified models that give a deeper understanding of the dynamics and the nature of the feedback loops and instabilities underlying the leverage cycle we introduce a flexible leverage regulation policy in which it is possible to continuously tune from pro cyclical to countercyclical leverage when the policy is sufficiently countercyclical and bank risk is sufficiently low the endogenous oscillation disappears and prices go to a fixed point while there is always a leverage ceiling above which the dynamics are unstable countercyclical leverage policies can be used to raise the ceiling we also study the impact on leverage cycles of direct temporal control of the bank s riskiness via the bank s required value at risk quantile under such a rule the regulator relaxes the value at risk quantile following a negative stock price shock and tightens it following a positive shock while such a policy rule can reduce the amplitude of leverage cycles its effectiveness is highly dependent on the choice of parameters finally we investigate fixed limits on leverage and show how they can control the leverage cycle

the crowding hypothesis and comparable worth although women s pay and occupational distribution have improved during the past few years it is still true that women earn considerably less than men and that their occupational distribution is substantially different because progress has been slow toward equality in the labor market some have called for a comparable worth policy proponents of this approach argue that occupational segregation contributes to the earnings disparity between women and men one theoretical justification for this position is the crowding hypothesis this paper first explains this theory and presents a method used to test its principal hypothesis it then describes an extension of this design for estimating the phenomenon that comparable worth policies address empirical studies conducted in this area are viewed and new findings are presented finally limitations of this analysis are discussed i introduction

network models and financial stability abstract systemic risk is a key concern for central banks charged with safeguarding overall financial stability in this paper we investigate how systemic risk is affected by the structure of the financial system we construct banking systems that are composed of a number of banks that are connected by interbank linkages we then vary the key parameters that define the structure of the financial system including its level of capitalisation the degree to which banks are connected the size of interbank exposures and the degree of concentration of the system and analyse the influence of these parameters on the likelihood of knock on defaults first we find that the better capitalised banks are the more resilient is the banking system against contagious defaults and this effect is non linear second the effect of the degree of connectivity is non monotonic i e initially a small increase in connectivity increases the contagion effect but after a certain threshold value connectivity improves the ability of a banking system to absorb shocks third the size of interbank liabilities tends to increase the risk of knock on default even if banks hold capital against such exposures fourth more concentrated banking systems are shown to be prone to larger systemic risk all else equal in an extension to the main analysis we study how liquidity effects interact with banking structure to produce a greater chance of systemic breakdown we finally consider how the risk of contagion might depend on the degree of asymmetry tiering inherent in the structure of the banking system a number of our results have important implications for public policy which this paper also draws out

international bank lending channel of monetary policy abstract how does domestic monetary policy in systemic countries spillover to the rest of the world this paper examines the transmission channel of domestic monetary policy in the cross border context we use exogenous shocks to monetary policy in systemically important economies including the u s and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross border bank lending we find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross border bank lending the effect is weakened during periods of high uncertainty in contrast the effect is found to not vary according to the degree of borrower country riskiness further weakening support for the international portfolio rebalancing channel

how debt markets have malfunctioned in the crisis the financial crisis that began in 2007 is especially a crisis in debt markets a full understanding of what happened in the financial crisis requires investigation into the plumbing of debt markets during a financial crisis when funds often cannot be raised easily or quickly the fundamental values for certain assets can become separated for a time from market prices with consequences that can echo into the real economy this article will explain in concrete ways how debt markets can malfunction with deleterious consequences for the real economy after a quick overview of debt markets i discuss three areas that are crucial in all debt markets decisions risk capital and risk aversion repo financing and haircuts and counterparty risk in each of these areas feedback effects can arise so that less liquidity and a higher cost for finance can reinforce each other in a contagious spiral i will document the remarkable rise in the premium that investors placed on liquidity during the crisis next i will show how these issues caused debt markets to break down indeed fundamental values and market values seemed to diverge across several markets and products that were far removed from the toxic subprime mortgage assets at the root of the crisis finally i will discuss briefly four steps that the federal reserve took to ease the crisis and how each was geared to a specific systemic fault that arose during the crisis

word of mouth communication and percolation in social networks this paper develops a model of demand pricing and advertising in the presence of social learning via word of mouth communication between friends in the model consumers must receive information about a monopolist s product in order to consider purchasing it the presence of word of mouth is not sufficient for demand to be more elastic and prices to be lower compared to an informed population i derive the comparative static results of connectivity mean preserving spread of friendships and clustering of friends on prices the optimal targets for advertising are not generically the individuals with the most friends jel l12 l14 a fundamental issue for economists is understanding the process by which demand is formed through social learning by consumers this article develops a framework based on random graphs for understanding the ways social learning via

the effects of comparable worth in the public sector on public private occupational relative wages if as appears likely comparable worth programs are confined to the public sector the level of publiclprivate relative pay may change and the structure of publiclprivate relative wages within occupations will almost certainly change the nature of these changes will determine the degree to which public wages conform more or less closely to the prevailing wage standard which requires that wages for public jobs be equivalent to wages for similar private sector jobs thus there will be implications for economic efficiency this study analyzes alternative scenarios involving comparable worth in the state and local government slg sector the results suggest that when comparable worth is implemented through special wage increases public sector wages are moved further from compliance with the prevailing wage standard this is because public wages are on average already on a par with privatesector wages however comparable worth tends to provide larger wage increases to those occupations where publiclprivate wages are relatively low and when the payroll budget under comparable worth is fixed at the same size as the payroll budget before comparable worth public wages could be moved closer to compliance with the prevailing wage norm

comparable worth in a decentralized labour market the case of ontario we document the application of pro active pay equity legislation to the private sector of the canadian province of ontario in the early 1990s we report substantial lapses in compliance among smaller firms where the majority of men and women work we also find that the pay equity law had no effect on aggregate wages in female jobs or on the gender wage gap this experience provides unique perspectives on 1 the tensions between the workings of a decentralized labour market and the principles of comparable worth and 2 the obstacles to its extension to the private sector jel classification j7 j3 l equite salariale dans un marche du travail decentralise le cas de l ontario les auteurs documentent l application de la loi d equite salariale mise en vigueur dans le secteur prive en ontario au debut des annees 1990 on fait etat de defaillances substantielles dans la mise en uvre de cette politique aupres des pme ou la majorite des hommes et des femmes travaillent l analyse revele que au niveau agrege la loi d equite salariale n a pas eu d effets sur les salaires dans les emplois feminins ou sur l ecart salarial entre les hommes et les femmes l experience ontarienne fournit des perspectives eclairantes sur 1 les tensions entre le fonctionnement d un marche du travail decentralise et les principes de salaire egal pour un travail de valeur comparable et 2 sur les obstacles a l extension de ces principes au secteur prive

assessing systemic risk due to fire sales spillover through maximum entropy network reconstruction abstract monitoring and assessing systemic risk in financial markets is of great importance but it often requires data that are unavailable or available at a very low frequency for this reason systemic risk assessment with partial information is potentially very useful for regulators and other stakeholders in this paper we consider systemic risk due to fire sales spillovers and portfolio rebalancing by using the risk metrics defined by greenwood et al 2015 by using a method based on the constrained minimization of the cross entropy we show that it is possible to assess aggregated and single bank s systemicness and vulnerability using only the information on the size of each bank and the capitalization of each investment asset we also compare our approach with an alternative widespread application of the maximum entropy principle allowing to derive graph probability distributions and generating scenarios and we use it to propose a statistical test for a change in banks vulnerability to systemic events

dynamical macroprudential stress testing using network theory the increasing frequency and scope of nancial crises have made global nancial stability one of the major concerns of economic policy and decision makers this has led to the understanding that nancial and banking supervision has to be thought of as a systemic task focusing on the interdependent relations among the institutions using network theory we develop a dynamic model that uses a bipartite network of banks and their assets to analyze the system s sensitivity to external shocks in individual asset classes and to evaluate the presence of features underlying the system that could lead to contagion as a case study we apply the model to stress test the venezuelan banking system from 1998 to 2013 the introduced model was able to capture monthly changes in the structure of the system and the sensitivity of bank portfolios to dierent external shock scenarios and to identify systemic vulnerabilities and their time evolution the model provides new tools for policy makers and supervision agencies to use for macroprudential dynamical stress testing

the trend in the male female wage gap in the united states despite the rise in the feminist movement the enactment of equal opportunity legislation and the rapid increase in women s labor force participation a substantial sex differential in wages has persisted in the united states for at least 4 decades measured by hourly earnings of year round workers this wage gap was 31 in 1955 widened to a 35 37 range by the 1960s and early 1970s and then narrowed to 33 by 1982 this paper examines the extent to which changes in the characteristics of men and women in the labor force and other factors can account for the observed pattern the main finding is that increases in women s labor force participation were initially associated with a declining skill level of employed women relative to employed men where skill is measured by years of schooling and job tenure more recently the work experience of employed women has been increasing which helps account for the recent narrowing trend in the wage gap during the 1970s the wage gap probably woul have narrowed m

changes in monetary regimes and the identification of monetary policy shocks narrative evidence from canada abstract using narrative evidence with a novel database of real time data and forecasts from the bank of canada s staff projections 1974 2015 we construct a new measure of monetary policy shocks and estimate the effects of monetary policy in canada we show it is crucial to account for the break in the conduct of monetary policy caused by the announcement of inflation targeting in 1991 a 100 basis point increase in our new shock series leads to a 1 0 percent peak decrease in real gdp and a 0 5 percent fall in the price level while not accounting for the break leads to a persistent decrease in gdp and a price puzzle albeit the change in monetary regime the effects of monetary policy have not changed much before and after it

private debt overhang and the government spending multiplier evidence for the united states using state dependent local projections and historical us data we find that government spending multipliers are considerably larger in periods of private debt overhang in particular while multipliers are below or close to one in low private debt states we find significant crowding in of private spending in periods of debt overhang resulting in multipliers that are much larger than one in high private debt episodes more government purchases even reduce the ratio of government debt to gross domestic product these results are robust for the type of shocks and when we control for the business cycle financial crises deleveraging episodes government debt overhang and the zero lower bound

can job evaluation improve women s wages systematic job evaluation or comparable worth programmes are often seen as a method to increase the relative wages of women this paper examines whether this is the case using two job evaluation studies from the university sector in sweden two different evaluation schemes were used in these studies the general result found in this analysis is that complete implementation of the evaluation results would lead to an increase in women s relative wages by between 2 and 6 this finding is however not uniform in the sense that all women would gain and all men would lose results indicate that about two thirds of women are winners and one third losers while the figures for men are approximately the reverse assuming that the job evaluations give a correct measure of productivity the results are also used in an analysis of wage discrimination and the crowding effect the findings indicate a significant crowding effect but are less conclusive with regard to discrimination

when micro prudence increases macro risk the destabilizing effects of financial innovation leverage and diversification by exploiting basic common practice accounting and risk management rules we propose a simple analytical dynamical model to investigate the effects of microprudential changes on macroprudential outcomes specifically we study the consequence of the introduction of a financial innovation that allows reducing the cost of portfolio diversification in a financial system populated by financial institutions having capital requirements in the form of value at risk var constraint and following standard mark to market and risk management rules we provide a full analytical quantification of the multivariate feedback effects between investment prices and bank behavior induced by portfolio rebalancing in presence of asset illiquidity and show how changes in the constraints of the bank portfolio optimization endogenously drive the dynamics of the balance sheet aggregate of financial institutions and thereby the availability of bank liquidity to the economic system and systemic risk the model shows that when fin

the permanent effects of fiscal consolidations abstract the global financial crisis has permanently lowered the path of gdp in all advanced economies at the same time and in response to rising government debt levels many of these countries have been engaging in fiscal consolidations that have had a negative impact on growth rates we empirically explore the connections between these two facts by extending to longer horizons the methodology of blanchard and leigh 2013 regarding fiscal policy multipliers our results provide support for the presence of strong hysteresis effects of fiscal policy the large size of the effects points in the direction of self defeating fiscal consolidations as suggested by delong and summers 2012 attempts to reduce debt via fiscal consolidations have very likely resulted in a higher debt to gdp ratio through their long term negative impact on output

trends in earnings differentials by gender 1971 1981 this paper clarifies trends in relative earnings by sex over the decade 1971 1981 and decomposes these trends to determine which factors contributed to a decline and which to an increase our analyses are based upon data from the annual demographic files of the current population survey for 1972 and 1982 this study is unique in that it estimates earnings functions in each year which are corrected for selectivity bias it is found that such a correction markedly raises the progress of white women relative to men among blacks the impact of the selectivity bias correction was to substantially lower the relative earnings increase of women however the coefficients on the selectivity variable were not significant the findings suggest declining sex role specialization and discrimination as conventionally measured over the decade on the other hand contrary to expectations the total effect of variables reflecting the sex composition of the individuals occupation worked to widen the sex differential over the period the sex differential was also adversely affected by a decline in the relative return to education especially for whites authors modified

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

implementing comparable worth a survey of recent job evaluation studies during the 1980 s equal pay for comparable worth has emerged as a major legislative issue especially at the state and local level in the wake of increasing implementation of comparable worth in the public sector efforts have been made to estimate the probable effect of nationwide implementation of comparable worth type legislation on the earnings gap between women and men see for example george johnson and gary solon 1984 these analyses have generally concluded that a comprehensive comparable worth policy would have very little effect on the sex based earnings gap this paper offers alternative estimates of the effect of comparable worth on the male female earnings gap based upon examination of four statelevel comparable worth studies iowa michigan minnesota and washington

austerity in the aftermath of the great recession abstract cross country differences in austerity defined as government purchases below forecast account for 75 of the observed cross sectional variation in gdp in advanced economies during 2010 2014 statistically austerity is associated with lower gdp lower inflation and higher net exports a multi country dsge model calibrated to 29 advanced economies generates effects of austerity consistent with the data counterfactuals suggest that eliminating austerity would have substantially reduced output losses in europe austerity was so contractionary that debt to gdp ratios in some countries increased as a result of endogenous reductions in gdp and tax revenue

a macroprudential approach to financial regulation many observers have argued that the regulatory framework in place prior to the global financial crisis was deficient because it was largely microprudential in nature a microprudential approach is one in which regulation is partial equilibrium in its conception and aimed at preventing the costly failure of individual financial institutions by contrast a macroprudential approach recognizes the importance of general equilibrium effects and seeks to safeguard the financial system as a whole in the aftermath of the crisis there seems to be agreement among both academics and policymakers that financial regulation needs to move in a macroprudential direction in this paper we offer a detailed vision for how a macroprudential regime might be designed our prescriptions follow from a specific theory of how modern financial crises unfold and why both an unregulated financial system as well as one based on capital rules that only apply to traditional banks is likely to be fragile we begin by identifying the key market failures at work why individual financial firms acting in their own interests deviate from what a social planner would have them do next we discuss a number of concrete steps to remedy these market failures we conclude the paper by comparing our proposals to recent regulatory reforms in the united states and to proposed global banking reforms

reconstructing and stress testing credit networks abstract financial networks are an important source of systemic risk but often only partial network information is available in this paper we use data on bank firm credit relationships in japan and conduct a horse race between different network reconstruction methods in terms of their ability to reproduce the actual credit networks we then compare the different reconstruction methods in terms of their implied levels of systemic risk based on a standard model of price mediated contagion we find that the observed credit network displays relatively high levels of systemic risk compared with most reconstruction methods lastly we explore whether different policies can improve the robustness of the system

comparable worth limited coverage and the exacerbation of inequality citing relevant judicial decisions the author argues that any application of the comparable worth remedy for gender discrimination is likely to cover only certain groups of workers most likely to be covered are women who work for governmental or large private employers in female dominated jobs and least likely to be covered are women who work for small private employers the implementation of comparable worth would cause the wages of noncovered workers to fall relative to those of covered workers and they might even fall absolutely an analysis of 1979 current population survey data suggests that the women most likely to gain from comparable worth are fewer in number better paid and subjected to no greater discrimination than the women most likely to lose

stability analysis of financial contagion due to overlapping portfolios abstract common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis we develop a network approach to the amplification of financial contagion due to the combination of overlapping portfolios and leverage and we show how it can be understood in terms of a generalized branching process this can be used to compute the stability for any particular configuration of portfolios by studying a stylized model we estimate the circumstances under which systemic instabilities are likely to occur as a function of parameters such as leverage market crowding diversification and market impact although diversification may be good for individual institutions it can create dangerous systemic effects and as a result financial contagion gets worse with too much diversification there is a critical threshold for leverage below it financial networks are always stable and above it the unstable region grows as leverage increases note that our model assumes passive portfolio management during a crisis however we show that dynamic deleveraging during a crisis can amplify instabilities the financial system exhibits robust yet fragile behavior with regions of the parameter space where contagion is rare but catastrophic whenever it occurs our model and methods of analysis can be calibrated to real data and provide simple yet powerful tools for macroprudential stress testing

a structural model of social security s disability determination process we estimate a multistage sequential logit model reflecting the structure of the disability determination process of the social security administration ssa the model is estimated using household survey information exact matched to ssa records on disability adjudications from 1989 to 1993 under program provisions different criteria dictate outcomes at different steps of the determination process we find that without the multistaged structural approach effects of many important health disability and vocational factors are not readily discernible as a result split sample predictions of overall allowance rates from the sequential model perform considerably better than do those for the conventional allowed denied logit regression

the effect of the interbank network structure on contagion and common shocks abstract this paper proposes a dynamic multi agent model of a banking system with central bank banks optimize a portfolio of risky investments and riskless excess reserves according to their risk return and liquidity preferences they are linked via interbank loans and face stochastic deposit supply comparing different interbank network structures it is shown that money centre networks are more stable than random networks evidence is provided that the central bank stabilizes interbank markets in the short run only systemic risk via contagion is compared with common shocks and it is shown that both forms of systemic risk require different optimal policy responses

fiscal multipliers and the level of economic activity a structural threshold var model for the uk this article examines the impact of fiscal policy shocks in the uk economy using a nonlinear structural threshold vector autoregression tvar model which links gross domestic product gdp govern

monitoring indirect contagion abstract we propose two indicators for quantifying the potential exposure of financial institutions to indirect contagion arising from deleveraging of assets in stress scenarios the first indicator the endogenous risk index eri captures spillovers across portfolios arising from deleveraging in stress scenarios the second indicator the indirect contagion index ici measures the systemic importance of a bank by quantifying the loss its distressed liquidation would inflict on other institutions both are computable from portfolio holdings of financial institutions and measures of market depth for the assets held in the portfolio we discuss the micro foundation of these indicators and apply them to the analysis of the vulnerability of the european banking system to indirect contagion using data on portfolio holdings of european banks we show that our indicators correlate to the magnitude of fire sales losses in simulated stress scenarios thus providing a simple to compute proxy for the outcome of stress tests we also show that the information provided by our indicators on the systemic importance of banks is different from indicators based on size thereby providing a measure of interconnectedness complementary to those currently used by supervisors

labor market reforms and the monetary policy environment abstract do labor market reforms initiated in periods of loose monetary policy yield different outcomes from those that were introduced in periods when monetary tightening prevailed the answer to this question is a firm yes we document the vital role of accommodative monetary policy for an increase in unemployment benefits spending on active labor market policies and labor market deregulation to boost growth and reduce unemployment it was found that if interest rates cannot be reduced then unemployment benefits should be lowered a more rigid labor market it was further found can deliver expansionary effects especially during the crisis period

forward looking solvency contagion abstract solvency contagion risk is a key channel through which systemic risk can come about we introduce a model that accounts not only for losses transmitted after banks default but also for losses due to the fact that creditors revalue their exposures when probabilities of default of their counterparties change we apply the model to run a series of simplified stress tests of the uk banking system from 2008 to 2016 based on two datasets of real interbank exposures between the seven major uk banks we show that risks due to solvency contagion decrease markedly from the peak of the crisis to the point of becoming negligible we also characterise the distributions of both vulnerabilities and systemic importances of individual banks thereby tracking the evolution of risk concentration

asset commonality debt maturity and systemic risk we develop a model in which asset commonality and short term debt of banks interact to generate excessive systemic risk banks swap assets to diversify their individual risk two asset structures arise in a clustered structure groups of banks hold common asset portfolios and default together in an unclustered structure defaults are more dispersed portfolio quality of individual banks is opaque but can be inferred by creditors from aggregate signals about bank solvency when bank debt is short term creditors do not roll over in response to adverse signals and all banks are ine ciently liquidated this information contagion is more likely under clustered asset structures in contrast when bank debt is long term welfare is the same under both asset structures

the impact of systemic and illiquidity risk on financing with risky collateral abstract repurchase agreements repos are one of the most important sources of funding liquidity for many financial investors and intermediaries in a repo some assets are given by a borrower as collateral in exchange of funding the capital given to the borrower is the market value of the collateral reduced by an amount termed as haircut or margin the haircut protects the capital lender from loss of value of the collateral contingent on the borrower s default for this reason the haircut is typically calculated with a simple value at risk estimation of the collateral for the purpose of preventing the risk associated to volatility however other risk factors should be included in the haircut and a severe undervaluation of them could result in a significant loss of value of the collateral if the borrower defaults in this paper we present a stylized model of the financial system which allows us to compute the haircut incorporating the liquidity risk of the collateral and most important possible systemic effects these are mainly due to the similarity of bank portfolios excessive leverage of financial institutions and illiquidity of assets the model is analytically solvable under some simplifying assumptions and robust to the relaxation of these assumptions as shown through monte carlo simulations we also show which are the most critical model parameters for the determination of haircuts

measuring network systemic risk contributions a leave one out approach abstract the aim of this paper is to propose a new network measure of systemic risk contributions that combines the pair wise granger causality approach with the leave one out concept this measure is based on a conditional granger causality test and consists of measuring how far the proportion of statistically significant connections in the system breaks down when a given financial institution is excluded we analyse the performance of our measure of systemic risk by considering a sample of the largest banks worldwide over the 2003 2018 period we obtain three important results first we show that our measure is able to identify a large number of banks classified as global systemically important banks g sibs by the financial stability board fsb second we find that our measure is a robust and statistically significant early warning indicator of downside returns during the last financial crisis finally we investigate the potential determinants of our measure of systemic risk and find similar results to the existing literature in particular our empirical results suggest that the size and the business model of banks are significant drivers of systemic risk

male female wage differentials and policy responses without implicating them for any of the contents of the paper i am grateful to the following for helpful discussions or comments andrea beller university of illinois david bloom harvard and columnbia glen cain university of wisconsin ron ehrenberg cornell victor fuchs stanford bob gregory australian national university jonathan leonard university of california berkeley roberta robb brock university and paul weiler harvard financial support of the humanities and social sciences committee of the research board of the universitu of toronto is eratefullu acknowlede ed

austerity and private debt this study provides empirical evidence that the costs of austerity crucially depend on the level of private indebtedness in particular fiscal consolidations lead to severe contractions when implemented in high private debt states contrary fiscal consolidations have no significant effect on economic activity when private debt is low these results are robust to alternative definitions of private debt overhang the composition of fiscal consolidations and controlling for the state of the business cycle and government debt overhang i show that deterioration in household balance sheets is important to understand private debt dependent effects of austerity

the effects of income distribution and fiscal policy on aggregate demand investment and the budget balance the case of europe this paper develops a multi country post kaleckian model that incorporates the role of the government one key novelty of the model is that it integrates cross country effects of both changes in income distribution and fiscal policy the model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in eu15 countries the results show that a simultaneous increase in the wage share in all eu15 countries would increase demand and the primary budget balance in all countries a simultaneous increase in government spending turns out to boost economic activity in all the eu15 countries indicating the positive economic effects of expansionary fiscal policy moreover a progressive tax policy that would be implemented simultaneously at the eu level would lead to an increase in output in all countries

local deficits and local jobs can u s states stabilize their own economies abstract using a sample of the 48 mainland us states for the period 1973 2009 we study the ability of us states to expand their own state employment through the use of state deficit policies the analysis allows for the facts that us states are part of a wider monetary and economic union with free factor mobility across all states and that state residents and firms may purchase goods from neighboring states those purchases may generate economic spillovers across neighbors estimates suggest that states can increase their own state employment by increasing their own deficits there is evidence of spillovers to employment in neighboring states defined by common cyclical patterns among state economies for large states aggregate spillovers to its economic neighbors are approximately two thirds of the large state s job growth because of significant spillovers and possible incentives to free ride there is a potential case to actively coordinate i e centralize the management of stabilization policies finally the job effects of a temporary increase in state own deficits persist for at most one to two years and there is evidence of a negative impact on state jobs when these deficits are scheduled for repayment

the implementation process of comparable worth winners and losers this paper provides a unique opportunity to observe how a public policy affected the earnings of various interest groups at different stages of implementation specifically we examine how the earnings of women union members and supervisory and professional staff were affected by various proposed and implemented comparable worth pay plans in iowa we find that large relative gains to women in the original proposed plans were reduced as the process evolved as a result some of the original gains to women were redistributed to union members supervisors and professionals

nonlinear effects of fiscal policy over the business cycle abstract is fiscal policy more effective measured by the government spending multiplier or the tax multiplier when the economy is weak than when it is strong results in the empirical literature have been mixed using local projection techniques i estimate the impulse responses of real output and real government spending to a shock to military spending i also estimate the responses of real output and real tax revenues to a shock in taxes in both cases i allow for nonlinearity in the effects according to whether the unemployment rate is above or below a given threshold value i find that raising the threshold unemployment rate incrementally leads to a higher multiplier on government purchases in the bad state of the world though it is not significantly greater than 1 the results for tax changes are even less precisely estimated due to lower instrument relevance of the exogenous tax shocks

output spillovers from changes in sovereign credit ratings this research examines how a sovereign rating revision of one country influences the economic growth rates of other countries rating revisions have significant output spillover effects a one notch upgrade downgrade prompts on average a significant downward revision of about 0 03 0 07 in the consensus forecast of annual economic growth rates of other countries in the two month period after the event the spillovers are transmitted through direct and indirect trade and financial linkages between event and non event countries the evidence indicates that a predominance of differential common spillovers leads upgrades downgrades to produce adverse output effects for other countries

capital regulation under price impacts and dynamic financial contagion abstract we construct a continuous time model for price mediated contagion precipitated by a common exogenous stress to the banking book of all firms in the financial system in this setting firms are constrained so as to satisfy a risk weight based capital ratio requirement we use this model to find analytical bounds on the risk weights for assets as a function of the market liquidity under these appropriate risk weights we find existence and uniqueness for the joint system of firm behavior and the asset prices we further consider an analytical bound on the firm liquidations which allows us to construct exact formulas for stress testing the financial system with deterministic or random stresses numerical case studies are provided to demonstrate various implications of this model and analytical bounds

markets in hierarchies organizational and market influences on gender inequality in a state pay system a pivotal issue in sociological theories of labor markets as well as legal and policy debates on pay equity is the relative importance of market and organizational forces in determining pay differences between jobs held predominantly by men and those held predominantly by women this article develops two models of the market organization relationship an administered efficiency model and a bureaucratic politics model quantitative analyses of individual and job level data in a state government pay system indicate that the administered efficiency model does not adequately explain malefemale earnings differences documentary testimonial and interview data strongly suggest the significance of bureaucratic politics in the pay determination process we conclude that market forces influence wage rates but are heavily mediated by organizational factors unrelated to efficiency considerations in the type of organization studied here

heterogeneous government spending multipliers in the era surrounding the great recession abstract we use novel quarterly data of u s states to examine the dynamics of relative spending multipliers in the decade surrounding the great recession while multipliers were around 1 in expans

systemic risk in financial systems we consider default by firms that are part of a single clearing mechanism the obligations of all firms within the system are determined simultaneously in a fashion consistent with the priority of debt claims and the limited liability of equity we first show via a fixed point argument that there always exists a clearing payment vector that clears the obligations of the members of the clearing system under mild regularity conditions this clearing vector is unique next we develop an algorithm that both clears the financial system in a computationally efficient fashion and provides information on the systemic risk faced by the individual system firms finally we produce qualitative comparative statics for financial systems these comparative statics imply that in contrast to single firm results even unsystematic nondissipative shocks to the system will lower the total value of the system and may lower the value of the equity of some of the individual system firms

when panic makes you blind a chaotic route to systemic risk abstract we present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems building on corsi et al 2016 we model a set of financial institutions having value at risk capital requirements and investing in a portfolio of risky assets whose prices evolve stochastically in time and are endogenously driven by the trading decisions of financial institutions assuming that they use adaptive expectations of risk we show that the evolution of the system is described by a slow fast random dynamical system which can be studied analytically in some regimes the model shows how the risk expectations play a central role in determining the systemic stability of the financial system and how wrong risk expectations may create panic induced reduction or over optimistic expansion of balance sheets specifically when investors are myopic in estimating the risk the fixed point equilibrium of the system breaks into leverage cycles and financial variables display a bifurcation cascade eventually leading to chaos we discuss the role of financial policy and the effects of some market frictions as the cost of diversification and financial transaction taxes in determining the stability of the system in the presence of adaptive expectations of risk

output spillovers from fiscal policy in this paper we estimate the cross country spillover effects of government purchases on output for a large number of oecd countries following the methodology in auerbach and gorodnichenko 2012a b we allow these multipliers to vary smoothly according to the state of the economy and use real time forecast data to purge policy innovations of their predictable components we also consider the responses of other key macroeconomic variables our findings suggest that cross country spillovers have an important impact and also confirm those of our earlier papers that fiscal shocks have a larger impact when the affected country is in recession

financial contagion and economic development an epidemiological approach abstract we develop an epidemiological approach to analyze how financial contagion may affect and be affected by economic activity we show that according to specific parameter values the economy may converge either to a non speculative or to a speculative equilibrium in the former situation the level of per capita income is maximal while in the latter it is reduced by financial contagion the presence of economic and financial feedback effects may also give rise to macroeconomic fluctuations during the transitional path clearly showing that such economic and financial links are an important driver of the short run macroeconomic performance by extending the analysis to a spatial dimension we also show that financial contagion in some specific region may propagate quickly also in regions far away from those in which the contagion initially occurs highlighting the role of regional policy coordination to avoid interregional contagion

estimating fiscal multipliers news from a non linear world we estimate non linear vars to assess to what extent fiscal spending multipliers are countercyclical in the us we deal with the issue of non fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures this measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending results based on generalised impulse responses suggest that fiscal spending multipliers in recessions are greater than one but not statistically larger than those in expansions however non linearities arise when focusing on extreme events that is deep recessions versus strong expansionary periods

oil prices and inflation dynamics evidence from advanced and developing economies abstract we study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015 we find that a 10 increase in global oil inflation increases on average domestic inflation by about 0 4 percentage points on impact with the effect vanishing after two years and being similar between advanced and developing economies we also find that the effect is asymmetric with positive oil price shocks having a larger effect than negative ones the impact of oil price shocks however has declined over time due in large part to a more credible monetary policy and less reliance on energy imports we further examine the transmission channels of oil price shocks on domestic inflation during the recent decades by making use of a monthly dataset from 2000 to 2015 the results suggest that the share of transport in the cpi basket and energy subsidies are the most robust factors in explaining cross country variations in the effects of oil price shocks during the period

interbank loans collateral and modern monetary policy this study develops a novel agent based model of the interbank market with endogenous credit risk formation mechanisms we allow banks to exchange funds through unsecured and secured transactions which facilitates the flow of funds to the most profitable investment projects risk premiums result from banks forecasting rules and depend on past performance of the benchmark risk factors and interest rates our model confirms basic stylized facts of the interbank interest rates and volumes we also find that network structures within the secured market segment are characterized by the presence of dealer banks while we do not observe similar patterns in the unsecured market we perturb the model with exogenous shocks and policy scenarios which correspond to unconventional monetary policies

comparable worth wage adjustments and female employment in the state and local sector our paper simulates the likely effects of a comparable worth wage adjustment policy in the state and local sector on female employment in the sector the simulation is based on estimates of within occupation male female substitution and across occupation occupational employment substitution that we obtain using data from the 1980 census of population