credit demand and supply shocks in italy during the great recession in this article we use structural var analysis to disentangle credit demand and supply shocks and their effect on real economic activity in italy during the 2008 to 2014 crisis period the three e

household debt consumption and inequality abstract this paper examines the link between household credit shocks consumption and income inequality at the national level empirically we use country specific var models to estimate the dynamic responses of aggregate consumption to household credit shocks we then show in cross country regressions that the consumption response is more sensitive to such shocks in countries with higher levels of inequality even after controlling for financial development theoretically we construct and simulate a dynamic model based on the effect of inequality on the incidence of credit constraints to illustrate potential causal mechanisms

a computable general equilibrium analysis of brexit barriers to trade and immigration restrictions this paper estimates the economic effects of different types of restrictions on trade and immigration in the uk after brexit regarding trade restrictions we focus on the increase in tariffs and ntbs with respect to the eu we also analyze a scenario in which the uk removes all tariffs on its trade to all its trading partners concerning immigration we run a 5 year cumulative annual reduction in net migrants by 87 000 workers following oecd estimations the study is conducted using a 21 sector 5 region uk reu us china row computable general equilibrium cge model which allows us to estimate the impact on gdp welfare wages and capital remuneration together with sectoral output and trade flows our estimates suggest that brexit would negatively affect the uk much more than the eu welfare reductions would be between 0 38 and 1 94 for the uk while they would be between 0 03 and 0 17 in the eu this is because the eu is a crucial trade partner for the uk which cannot be easily substituted through trade with other regions in the world restrictions on migrants would bring about additional reductions in the range between 0 55 and 0 35 of gdp depending on whether they affect skilled or unskilled workers respectively

sources of fluctuations in hours worked for canada germany japan and the u s a sign restriction var approach abstractthis study empirically examines the sources of fluctuations in hours worked in canada germany japan and the u s it is particularly motivated by gali s 1999 var study which demonstrates that a positive technology shock reduces hours worked at least in the short run however in the present study a technology shock is identified without recourse to gali s long run restriction which has been subject to active controversy furthermore this study uncovers other important sources of fluctuations in hours worked to reflect the concern raised by numerous studies that technology shocks leave most variations in hours worked unexplained specifically there are six shocks underlying our model and they are identified using a set of sign restrictions the empirical results confirm that in all four countries a positive technology shock significantly reduces hours worked this technology shock along with labor supply and demand shocks accounts for most of the short term variations in hours worked

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

identifying noise shocks abstract we study identifying restrictions that allow news and noise shocks to be recovered empirically within a bayesian structural varma framework in population the identification scheme we consider exactly recovers news and noise shocks monte carlo evidence further demonstrates its excellent performance as it recovers the key features of the postulated data generation process the real business cycle model of barsky and sims 2011 augmented with noise shocks about future total factor productivity tfp with great precision in an empirical application evidence suggests that tfp noise shocks play a minor role in macroeconomic fluctuations

revisions in utilization adjusted tfp and robust identification of news shocks this paper documents large revisions in a widely used series of utilization adjusted total factor productivity tfp by fernald 2014 and shows that these revisions can materially affect empirical

weak condorcet winner s revisited a strong condorcet winner scw is an alternative x that a majority of voters rank higher than z for every other alternative z a weak condorcet winner wcw is an alternative y that no majority of voters rank below any other alternative z but is not a scw there has been some confusion in the voting social choice literature as to whether particular voting rules that are scw consistent are also wcw consistent the purpose of this paper is to revisit this issue clear up the confusion that has developed and determine whether three additional scw consistent voting rules that as far as we know have not been investigated to date regarding their possible wcw consistency are indeed wcw consistent

redistributive shocks and productivity shocks abstract a productivity innovation reduces labor share at impact making it countercyclical it subsequently produces a long lasting increase that peaks five years later at a level larger in absolute terms than the initial drop before slowly returning to average i e labor share overshoots we estimate a bivariate shock process to the production function that under competition in factor markets accounts for this overshooting we pose this process in an otherwise standard real business cycle economy and we find that the contribution of productivity innovations to the variance of hours is 1 of that in the standard rbc model

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

the dynamics of hours worked and technology the response of hours worked to technology shocks in the postwar us economy has increased over time we offer a structural interpretation of this important time varying macroeconomic moment the time varying patterns captured by a structural var are consistent with those obtained from a parsimonious rbc model with a less than unitary elasticity of substitution between capital and labour the observed changes in the response of hours are attributable to increases in the magnitude of the degree of capital labour substitution finally we conjecture that the observed time variation in is related to changes in the skill composition of the work force and biases in technological change

technology shocks and job flows we consider a version of the solow growth model where technological progress can be investment specific or investment neutral the labour market is subject to search frictions and the existing productive units may fail to adopt the most recent technological advances technological progress can lead to the destruction of technologically obsolete jobs and cause unemployment we calibrate the model to replicate the high persistence that characterizes the dynamics of firms neutral technology and the frequency of firms capital adjustment we find that neutral technological advances increase job destruction and job reallocation and reduce aggregate employment investment specific technological advances reduce job destruction have mild effects on job creation and are expansionary hence neutral technological progress prompts schumpeterian creative destruction while investment specific technological progress operates essentially as in the standard neoclassical growth model using structural var models we provide support to the key dynamic implications of the model copyright 2007 wiley blackwell

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

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

do tfp and the relative price of investment share a common i 1 component abstract results from cointegration tests clearly suggest that tfp and the relative price of investment rpi are not cointegrated evidence on the alternative possibility that they may nonetheless contain a common i 1 component generating long horizon co variation between them crucially depends on the fact that i structural breaks are or are not allowed for and ii the precise nature and timing of such breaks not allowing for breaks evidence points towards the presence of a common component inducing positive long horizon covariation which is compatible with the notion that the technology transforming consumption goods into investment goods is non linear and the rpi is also impacted upon by neutral shocks allowing for breaks evidence suggests that long horizon covariation is either nil or negative assuming for illustrative purposes that the two series contain a common component inducing negative long horizon covariation evidence based on structural vars shows that this common shock i plays an important role in macroeconomic fluctuations explaining sizeable fractions of the forecast error variance of main macro series and ii generates disinflationary booms characterized by transitory increases in hours and decreases in inflation

sticky prices fair wages and the co movements of unemployment and labor productivity growth abstract this paper studies the co movements of unemployment and labor productivity growth for the u s economy measures of co movements in the frequency domain indicate that co movements between variables differ strongly according to the frequency first long term and business cycle co movements are larger than short term co movements second co movements are negative in the short and long run but positive over the business cycle a new keynesian model that combines nominal rigidity on the goods market sticky prices and real rigidity on the labor market fair wages is shown to be quantitatively consistent with the observed co movements both in the long term and over the business cycle however the model fails to explain the short term co movements

an assessment of voting system simulations in applying the results of the social choice theory to voting procedures the question arises as to how often the various anomalies can be expected to occur computer simulations and probability modelling are common approaches to address this problem this article is an attempt to find out the robustness of the so called impartial culture assumption for this purpose first a major perturbation of the impartial culture assumption is considered and thereafter we focus on a few minor modifications of the assumption

do shocks to animal spirits cause output fluctuations we evaluate whether shocks to animal spirits affect real outcomes at business cycle frequencies using data on consumer confidence and region and state level coincident activity indexes in a vector autoregression var with long run restrictions we assume that animal spirits shocks do not affect the long run level of activity innovations in fundamentals explain most variation in the level of activity but animal spirits have economically significant effects at business cycle frequencies a positive innovation in animal spirits causes real activity to rise by between 0 2 and 0 6 in the medium term and animal spirits may explain up to about half of real fluctuations in the medium run

what drives aggregate investment evidence from german survey data abstract the ifo investment survey asks firms in the german manufacturing sector about the importance of sales technological factors finance return expectations and macroeconomic policy for their investment activity in a given year we show that these subjective investment determinants 1 capture economically what their labels suggest and 2 have strong explanatory power for aggregate manufacturing investment growth fluctuations in a second step we use these determinants to identify aggregate demand and aggregate technology shocks and argue that the bulk of the variance of both aggregate manufacturing investment and output growth fluctuations as much as approximately two thirds in both cases is explained by aggregate demand shocks consistent with neoclassical views however technological factors are the most important investment determinant on average

how do us credit supply shocks propagate internationally a gvar approach abstract we study how us credit supply shocks are transmitted to other economies we use the recently developed gvar approach to model financial variables jointly with macroeconomic variables in 33 countries for the period 1983 2009 we experiment with inter country links based on bilateral trade portfolio investment foreign direct investment and banking exposures capturing both bilateral trade and financial exposures in a gvar fits the data better than using trade weights only we use sign restrictions on the short run impulse responses in the us model to identify the credit supply shocks we find that negative credit supply shocks have strong negative effects on us and foreign gdp credit and equity markets in several countries respond clearly to the shocks exchange rate responses are consistent with a flight to quality to the us dollar the credit supply shocks explain about a fifth of one year ahead output forecast error variance in the us and about a tenth in the euro area and the uk but considerably less elsewhere

a note on nanson s rule e j nanson in 1883 proposed a voting rule designed mainly to select the condorcet winner unfortunately much of the collective choice literature has misstated nanson s rule this note shows that the misstated versions of the rule and nanson s actual rule can yield different outcomes and it provides a counter example which shows that nanson s rule although it satisfies the strong condorcet condition does not satisfy the weak condorcet condition

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

trend breaks long run restrictions and contractionary technology improvements abstract structural vector autoregressions with long run restrictions are extraordinarily sensitive to low frequency correlations recent literature finds that the estimated effects of technology shocks are sensitive to how one treats hours per capita however after allowing for statistically and economically significant trend breaks in productivity results are much less sensitive hours fall when technology improves the issue is that the common high low high pattern of productivity growth and hours i e the low frequency correlation inevitably leads to a positive estimated response the trend breaks control for this correlation this example suggests a practical need for care in using long run restrictions

what does a technology shock do a var analysis with model based sign restrictions abstract this paper estimates the effects of technology shocks in var models of the u s identified by imposing restrictions on the sign of impulse responses these restrictions are consistent with the implications of a popular class of dsge models with both real and nominal frictions and with sufficiently wide ranges for their parameters this identification strategy thus substitutes theoretically motivated restrictions for the atheoretical assumptions on the time series properties of the data that are key to long run restrictions stochastic technology improvements persistently increase real wages consumption investment and output in the data hours worked are very likely to increase displaying a hump shaped pattern contrary to most of the related var evidence results are not sensitive to a number of specification assumptions including those on the stationarity properties of variables

a dynamic small open economy model with involuntary unemployment it is well known that real business cycle small open economy soe models rely on greenwood hercowitz and huffman 1988 preferences to match the countercyclical trade balance observed in open economies as well as other second moments while standard preferences a la king plosser and rebelo 1988 are commonly labelled ineffective owing to their inability to yield the countercyclical trade balance in this paper i show that an soe model with standard preferences and involuntary unemployment with efficient risk sharing can obtain a countercyclical trade balance and match main empirical regularities in small open economies il est bien connu que les modeles de cycles d affaires reels dans une petite economie ouverte peo comptent sur des preferences a la greenwood hercowitz et huffman 1988 pour etre compatibles avec la balance commerciale contre cyclique observee dans les economies ouvertes ainsi que sur d autres second moments alors que les preferences standards a la king plosser et rebelo 1988 sont considerees comme ineffectives a cause de leur inhabilitea engendrer la balance commerciale contre cyclique dans ce texte l auteur montre qu un modele de peo avec preferences standards et chomage involontaire et partage efficient du risque peut engendrer une balance commerciale contre cyclique et s arrimer aux principales regularites observees dans les petites economies ouvertes

labor hoarding and the business cycle this paper investigates the sensitivity of solow residual based measures of technology shocks to labor hoarding behavior using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption we estimate the fraction of the variability of the solow residual that is due to technology shocks our results support the view that a significant proportion of movements in the solow residual are artifacts of labor hoarding behavior specifically we estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models in addition our results suggest that existing real business cycle studies substantially overstate the extent to which technology shocks account for the variability of postwar aggregate u s output

missing gains from trade the theoretical result that there are gains from trade is a central tenet of international economics assuming perfect competition and no market failures trade acts like a technological improvement that expands the set of feasible allocations and enables pareto superior outcomes to be achieved a recent body of research has sought to quantify the magnitude of these welfare gains in a class of standard trade models that satisfy a constant elasticity gravity equation the welfare gains from trade can be computed using only aggregate data the open economy domestic trade share and the elasticity of trade with respect to variable trade costs see arkolakis costinot and rodriguez clare 2012 one of the main findings from this literature is that the welfare gains from trade are relatively modest for example in a study of 19 oecd countries eaton and kortum 2002 find that the welfare cost of moving to autarky ranges from 0 2 10 3 percent many extensions to this quantitative approach have been considered including the introduction of input output linkages e g caliendo and parro 2012 and multiple sectors e g ossa 2012 some of these extensions can substantially increase the predicted welfare gains from trade as surveyed in costinot and rodriguezclare forthcoming which reports a range of potential values for the welfare gains from trade in this paper we suggest a channel for welfare gains that the standard quantitative approach

vertical specialization and gains from trade multi stage production is widely recognized as an important feature of the modern global economy this feature has been incorporated into many state of the art quantitative trade models and has been shown to deliver significant additional gains from international trade

what do vars tell us about the impact of a credit supply shock in the aftermath of the recent financial crisis a variety of structural var models have been proposed to identify credit supply shocks using a monte carlo experiment we show that the performance of these models can vary substantially with some identification schemes producing particularly misleading results when applied to us data the estimates from the best performing var models indicate on average that credit supply shocks that raise spreads by 10 basis points reduce gdp growth and inflation by 1 after one year these shocks were important during the great recession accounting for about half the decline in gdp growth this article is protected by copyright all rights reserved

the transmission of monetary policy and technology shocks in the euro area this article analyses the response of a set of euro area macroeconomic variables to monetary policy and technology shocks based on structural vector auto regressions vars the data set runs from 1970 1 until 2006 4 and includes a novel long run series for hours worked per capita in the euro area we find that real macroeconomic variables follow a hump shaped response after monetary policy shocks and jump on impact after technology shocks we also provide evidence that hours worked fall after a positive technology shock these conclusions are robust to different sample periods and specifications of the variables

gains from trade and the sovereign bond market abstract increasing international flows of goods services and financial assets have been shown to increase a country s welfare through various channels this paper studies how a country s access to a bond market affects its welfare gains from international trade we do so by incorporating a sovereign bond market into a simple armington 1969 s trade model while standard trade models suggest surprisingly small gains from trade our model implies that introducing channels through a sovereign bond market greatly magnifies the gains from trade key mechanisms in the model are confirmed by data and the results are found to be robust to a variety of considerations

technology shocks and robust sign restrictions in a euro area svar we use a model based identification strategy to estimate the impact of technology shocks on hours worked and employment in the euro area the sign restrictions applied in the vector autoregression var analysis are consistent with a large class of dynamic stochastic general equilibrium dsge models and are robust to parameter uncertainty the results are in line with the conventional real business cycle rbc interpretation that hours worked rise as a result of a positive technology shock by comparing the sign restrictions method to the long run restriction approach of gali quaterly journal of economics 1992 709 38 we show that the results do not depend on the stochastic specification of the hours worked series or the data sample but only on the identification scheme

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

house prices and job losses why are house prices 80 correlated with job losses over the uk business cycle my paper studies this striking fact together with the strong comovements between house prices and labour market variables in general first a regional panel is estimated to quantify the impact of house prices on the unemployment job finding and job separation rates whereby rejection rates of planning applications are used as instruments to find exogenous variation in house prices second an orthogonalised var is used to estimate the aggregate impact of house price shocks both methods confirm the large impact of house price shocks on labour market variables and credit supply to understand the mechanism a general equilibrium model with collateral constraints endogenous job separation and housing shocks is confronted with macroeconomic data via bayesian methods the results suggest that shocks to house prices i explain about 10 of output fluctuations and about 20 of fluctuations in corporate credit unemployment and job separation rates via the collateral channel over the forecast horizon and ii were a major cause in triggering the 1990 and 2008 recessions in the uk

on the role of technology shocks as a source of business cycles some new evidence i provide some new evidence that reinforces the conclusion in gal o 1999 that exogenous variations in technology play a very limited role if any as sources of the business cycle first i provide evidence that supports the identie cation of technology shocks proposed in that paper second i show that similar e ndings obtain when the same approach is implemented for the euro area using a newly available data set jel e32 e24

commodity price shocks and the business cycle structural evidence for the u s this paper evaluates the relative importance of commodity price shocks in the u s business cycle therefore we extend the standard set of business cycle shocks to include unexpected changes in commodity prices the resulting svar shows that commodity price shocks are a very important driving force of macroeconomic fluctuations second only to investment specific technology shocks particularly with respect to inflation neutral technology shocks and monetary policy shocks on the other hand seem less relevant at business cycle frequencies neutral technology shocks rather play an important role at low frequencies

sensitivity of impulse responses to small low frequency comovements reconciling the evidence on the effects of technology shocks this article clarifies the empirical source of the debate on the effect of technology shocks on hours worked we find that the contrasting conclusions from levels and differenced vector autoregression specifications documented in the literature can be explained by a small low frequency comovement between hours worked and productivity growth that gives rise to a discontinuity in the solution for the structural coefficients identified by long run restrictions whereas the low frequency comovement is allowed for in the levels specification it is implicitly set to 0 in the differenced vector autoregression consequently even when the root of hours is very close to 1 and the low frequency comovement is quite small removing it can give rise to biases of sufficient size to account for the empirical difference between the two specifications

skill biased technological change and the business cycle over the past two decades technological progress in the united states has been biased towards skilled labor what does this imply for business cycles we construct a quarterly skill premium from the cps and use it to identify skill biased technology shocks in a var with long run restrictions hours fall in response to skill biased technology shocks indicating that at least part of the technology induced fall in total hours is due to a compositional shift in labor demand investment specific technology shocks reduce the skill premium indicating that capital and skill are not complementary in aggregate production

the effects of technology shocks on hours and output a robustness analysis we analyze the effects of neutral and investment specific technology shocks on hours and output long cycles in hours are removed in a variety of ways hours robustly fall in response to neutral shocks and robustly increase in response to investment specific shocks the percentage of the variance of hours output explained by neutral shocks is small large the opposite is true for investment specific shocks news shocks are uncorrelated with the estimated technology shocks copyright 2009 john wiley sons ltd