energy consumption and economic growth nexus in tanzania an ardl bounds testing approach abstract in this paper we examine the intertemporal causal relationship between energy consumption and economic growth in tanzania during the period of 1971 2006 unlike the majority of the previous studies we employ the newly developed autoregressive distributed lag ardl bounds testing approach by pesaran et al 2001 bounds testing approaches to the analysis of level relationships journal of applied econometrics 16 289 326 to examine this linkage we also use two proxies of energy consumption namely total energy consumption per capita and electricity consumption per capita the results of the bounds test show that there is a stable long run relationship between each of the proxies of energy consumption and economic growth the results of the causality test on the other hand show that there is a unidirectional causal flow from total energy consumption to economic growth and a prima facie causal flow from electricity consumption to economic growth overall the study finds that energy consumption spurs economic growth in tanzania

the nexus between sectoral fdi and institutional quality empirical evidence from pakistan abstractthis study investigates short and long run bidirectional causality between institutional quality and sectoral level fdi in pakistan by using the ardl technique the results confirm that long run bidirectional causality exists between institutional quality and aggregate fdi the in depth sectoral level fdi analysis substantiates the presence of long run bidirectional causality between institutional quality and fdi in services and manufacturing sectors while no long run causality is observed between institutional quality and fdi inflows in primary sector furthermore the results in the study reveal short run bidirectional causality only between institutional quality and manufacturing fdi and report insignificant short run causal link between institutional quality and fdi in primary and services sectors the overall findings of the study suggest that in the long run institutional quality attract fdi and fdi inflows particularly to manufacturing and services sectors significantly enhance the qual

a permanent effect of temporary immigration on economic growth immigration can help to lessen the burden of ageing for the welfare states of most western economies to show this we develop a decomposition framework for gross domestic product gdp per capita which deals with the impact of both ageing and immigration on economic growth using a vector error correction model vecm for the netherlands during 1973 to 2009 we demonstrate the empirical relevance of some crucial interactions between elements of that decomposition the conclusion is that even temporary immigration may help to alleviate the ageing problem through a positive long term contribution to employment wages and gdp per capita as long as the immigrants are able to participate in the labour force in tandem with the native population unfavourable short term effects should be avoided through a gradual phasing in of immigration policies

global financial shocks and foreign asset repatriation do local investors play a stabilizing role we study the dynamic response of gross capital flows in emerging market economies to different global financial shocks using a panel vector autoregressive pvar approach our focus lies primarily on the potentially stabilizing role played by domestic investors in offsetting the response of foreign investors to adverse global shocks we find that while foreign investors tend to retrench from emerging markets in response to global risk aversion and monetary policy shocks foreign asset repatriation by resident investors does not always follow suit local investors play a meaningful stabilizing role in the face of global risk aversion shocks with sizeable asset repatriation largely offsetting the retrenchment of non residents in contrast foreign investor retrenchment in response to global monetary policy shocks is not mirrored by asset repatriation finally we find robust evidence that positive global real shocks tend to have a positive impact on net capital inflows to emerging markets our results shed light on the likely impact of the fed s qe tapering on capital flows to emerging market economies

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

uncertainty matters evidence from close elections abstract this paper uses a data rich environment to produce direct econometric estimates of macroeconomic and financial uncertainty for 11 advanced nations these indices exhibit significant independent variation from popular proxies and provide a refinement of the influential work of jurado et al 2015 that results in improved real time performance we use this new data in combination with narrative evidence to jointly identify macro uncertainty and financial shocks macro uncertainty shocks are identified with close elections and financial shocks with financial stress during financial crises we find that macro uncertainty shocks matter for the majority of countries and that the real effects of macro uncertainty shocks are generally larger conditioning on close elections these results are robust to controlling for news shocks and global uncertainty as well as a variety of shocks considered to be important drivers of the business cycle

demographic shocks and human capital accumulation in the uzawa lucas model abstract the uzawa lucas growth model is modified to incorporate unskilled labour as a distinct factor from human capital the modified model is then used to discuss the effects of demographic shocks on optimal growth and human capital investment

the quantitative importance of news shocks in estimated dsge models we estimate a dynamic stochastic general equilibrium dsge model with several frictions and both unanticipated and news shocks using quarterly u s data from 1954 to 2004 and bayesian methods we find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output consumption and investment growth interest rate and the relative price of investment the unanticipated shock to the marginal efficiency of investment is the dominant shock accounting for over 45 of the variance in output growth news shocks account for less than 15 of the variance in output growth within the set of news shocks nontechnology sources of news dominate technology news with wage markup news shocks accounting for about 60 of the variance share of both hours and inflation we find that in the estimated dsge model i the presence of endogenous countercyclical price and wage markups due to nominal frictions substantially diminishes the importance of news shocks relative to a model without these frictions and ii while there is little change in the estimated contributions of technology news when we restrict wealth effects on labor supply the contributions of nontechnology news shocks are relatively more sensitive

news sovereign debt maturity and default risk abstract leading into a debt crisis interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity suggesting that news about future economic developments may play an important role in these episodes an empirical var estimation shows that a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity a quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical var estimates the dynamics of the economy after a bad news shock share some features of a productivity shock and some features of sudden stop events however unlike during sudden stop episodes long term debt does not shield the country from bad news shocks and it may even exacerbate default risk finally an increase in the precision of news allows the government to improve its debt maturity management especially during periods of high stress in credit markets and thus face lower yield spreads while increasing the amount of debt

presidents and the u s economy an econometric exploration the us economy has performed better when the president of the united states is a democrat rather than a republican almost regardless of how one measures performance for many measures including real gdp growth our focus the performance gap is large and significant this paper asks why the answer is not found in technical time series matters nor in systematically more expansionary monetary or fiscal policy under democrats rather it appears that the democratic edge stems mainly from more benign oil shocks superior total factor productivity tfp performance a more favorable international environment and perhaps more optimistic consumer expectations about the near term future jel d72 e23 e32 e65 n12 n42 an extensive and well known literature of scholarly research documents and explores the fact that macroeconomic performance is a strong predictor of us presidential election outcomes scores of papers find that better performance boosts the vote of the incumbent s party 1 in stark contrast economists have paid scant attention to predictive power running in the opposite direction from election outcomes to subsequent macroeconomic performance the answer while hardly a secret is not nearly as widely known as it should be 2 the us economy performs much better when a democrat is president than when a republican is

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

stock market returns and inflation evidence from other countries this paper investigates the relation between common stock returns and inflation in twenty six countries for the postwar period our results do not support the fisher hypothesis which states that real rates of return on common stocks and expected inflation rates are independent and that nominal stock returns vary in one to one correspondence with expected inflation there is a consistent lack of positive relation between stock returns and inflation in most of the countries

the effects of surprise and anticipated technology changes on international relative prices and trade abstract this paper argues that it is important to distinguish surprise and anticipated components of total factor productivity tfp when we study the international transmission of tfp shocks we document that surprise and anticipated shocks to us tfp induce distinct dynamics for international relative prices the real exchange rate and the terms of trade and international trade real exports real imports and the trade balance our empirical findings can reconcile some conflicting empirical results in the literature and hence lead to a better understanding of the international transmission of tfp shocks in addition we evaluate a standard international macroeconomic model and discuss the mechanisms that may help to replicate our empirical findings

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

news and monetary shocks at a high frequency a simple approach we develop a simple approach to identify economic news and monetary shocks at a high frequency the approach is used to examine financial market developments in the united states following the federal reserve s may 22 2013 taper talk suggesting that it would begin winding down its quantitative easing program our findings show that the sharp rise in 10 year treasury bond yields immediately after the taper talk was largely due to monetary shocks with positive economic news becoming increasingly important in subsequent months

energy consumption prices and economic growth in three ssa countries a comparative study in this paper we examine the causal relationship between energy consumption and economic growth in three sub saharan african countries namely south africa kenya and congo drc we incorporate prices as an intermittent variable in a bivariate setting between energy consumption and economic growth thereby creating a simple trivariate framework using the ardl bounds testing procedure we find that the causality between energy consumption and economic growth varies significantly across the countries under study the results show that for south africa and kenya there is a unidirectional causal flow from energy consumption to economic growth however for congo drc it is economic growth that drives energy consumption these findings have important policy implications insofar as energy conservation policies are concerned in the case of congo drc for example the implementation of energy conservation policies may not significantly affect economic growth because the country s economy is not entirely energy dependent however for south africa and kenya there is a need for more energy supply augmentations in order to cope with the long run energy demand in the short run however the two countries should explore more efficient and cost effective sources of energy in order to address the energy dependency problem

news shocks and inflation abstract this paper shows that the empirically documented disinflationary nature of news shocks is consistent with the implications of a sensibly modified version of a new keynesian model even if capital is introduced to the model the modification proposed in the current paper however is different from those already known in the literature in the presence of capital the newly proposed modification is better capable of fitting the data

stock prices news and economic fluctuations comment beaudry and portier 2006 propose an identification scheme to study the effects of news shocks about future productivity in vector error correction models vecms this comment shows that when applied to their vecms with more than two variables the identification scheme does not have a unique solution the problem arises from a particular interplay of cointegration assumptions and longrun restrictions jel e32 e44 g12 g14 in a highly influential paper beaudry and portier 2006 estimate vector error correction models vecms on us data and find that shocks generating a stock market boom but no contemporaneous movement in total factor productivity tfp henceforth called tfp news are closely related to shocks driving long run variations in tfp moreover these tfp news shocks lead to increases in consumption investment output and hours on impact and constitute an important source of business cycle fluctuations these results run counter to basic dynamic stochastic general equilibrium models and have sparked a new literature attempting to generate news driven positive comovement among macroeconomic aggregates 1 this comment shows that in the vecms with more than two variables estimated by beaudry and portier 2006 their identification scheme fails to determine tfp news yet these higher dimension systems are crucial to quantify the business cycle effects of tfp news 2 the identification problem arises from the interplay of two assumptions first the beaudry portier identification scheme called bp restrictions from here on requires that one of the nonnews shocks has no permanent impact on either tfp or consumption second the vecms estimated by beaudry and portier 2006 impose that tfp and consumption are cointegrated this cointegration means that tfp and consumption have the same permanent component which makes one

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

monetary news shocks we pursue an empirical strategy to identify a monetary news shock in the u s economy we use a monetary policy residual along with other variables in a vector autoregression var and identify a monetary news shock as the linear combination of reduced form innovations that is orthogonal to the current residual and that maximizes the sum of contributions to its forecast error variance over a finite horizon real gdp declines in a persistent manner after a positive monetary news shock this contraction in economic activity is accompanied by a fall in inflation and a rapid increase in the nominal interest rate

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

news disaster risk and time varying uncertainty abstract standard real business cycle models are often unable to replicate three empirical facts positive output in response to good news stochastic volatility of macro variables and asymmetric business cycles this paper proposes a unified basis for understanding these facts in a tractable dynamic stochastic general equilibrium dsge model in which the key is the interaction of information flows and disaster risk information flows fluctuate between two regimes with different precision levels for signals regarding future economic fundamentals a shift in forecast precision changes the probability of entering an economic disaster high disaster risk leads to low expected capital returns and a decline in hours investment and output changing information structures results in different volatility and skewness over the business cycle simple theory makes the two expectation effects through information flows and disaster risk transparent quantitatively the model suggests that the interaction of the two expectation effects plays a significant role in accounting for the higher order moments of the business cycle

are predictable improvements in tfp contractionary or expansionary implications from sectoral tfp we investigate the effects of predictable changes in tfp at the sectoral level our findings can reconcile the seemingly contradictory findings in the literature shocks to predictable changes in investment sector tfp are also found important for us business cycle fluctuations

inflation risk taxes and the demand for owner occupied housing a bstract a portfolio choice model is formulated which focuses on the possibility of inflation hedging motives in housing demand in the 1970s an asset demand equation is used to estimate the capitalization of inflation expectations into house prices through tax mortgage and hedging effects the empirical results indicate that even after accounting for tax and mortgage effects the hedging motive was significant in bidding up house prices one implication is that the tax effects of inflation may have been overstated in previous research that ignored inflation risk

do changes in oil prices affect welfare programs evidence from kern county abstract in this paper the intertemporal causal relationship between oil prices and welfare programs in kern county is studied using monthly data between 1999 7 and 2016 8 results from the autoregressive distributed lag ardl bounds testing approach show that there is stable long run equilibrium relationship between calfresh caseloads oil prices and unemployment they also show that adjustment in calfresh participation due to changes in oil prices and unemployment is slow and a 10 increase in unemployment led to a 3 3 increase in calfresh enrollment results from a modified granger causality method indicated causality running from unemployment to calworks and no causality from oil prices to calworks participation the girf confirmed that calworks is more responsive to changes in unemployment than to oil price shocks the fevdc results demonstrated that contributions of the oil price shocks in explaining variations in calworks were negligible

the relation between stock prices and inflationary expectations the international evidence this paper provides empirical evidence on the relation between stock returns and inflationary expectations for nine countries over the period 1971 80 the fisherian assumption that real returns are independent of inflationary expectations is soundly rejected for each major stock market of the world using interest rates as a proxy for expected inflation our data provide consistent support for the geske and roll model whose basic hypothesis is that stock price movements signal negative revisions in inflationary expectations finally a weak real interest rate effect was found for some of these countries

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

what do inventories tell us about news driven business cycles there is widespread disagreement over the quantitative contribution of news shocks to business cycle fluctuations this paper provides a simple identifying restriction based on inventory dynamics that tightly pins down this contribution structural models predict that finished good inventories should fall when there is an increase in consumption and investment induced by news shocks a structural var with these sign restrictions indicates that news shocks account for at most 20 percent of output volatility since inventories comove positively with consumption and investment in the data shocks that generate negative comovement cannot account for the bulk of fluctuations

news shocks and the slope of the term structure of interest rates comment abstract kurmann and otrok 2013 establish that the effects on economic activity from news on future productivity growth are similar to the effects from unexpected changes in the slope of the yield curve this comment shows that these results become substantially weaker in the light of a recent update in the utilization adjusted total factor productivity series produced by fernald 2014 jel e23 e32 e43 e52 g12

liability dollarization exchange market pressure and fear of floating empirical evidence for turkey the objective of this article is to examine the relationship between liability dollarization and the exchange market pressure emp in turkey within an autoregressive distributed lag ardl and granger causality framework using monthly data from 1991 12 to 2006 08 the findings suggest that there exists a long term equilibrium relationship between emp and liability dollarization where liability dollarization granger causes emp both in the short and long run with no evidence of reverse causality this suggests that the predominance of foreign currency liabilities in the banks balance sheets in turkey induces a selling pressure in the exchange market as well as a fear of floating

structural shocks and the comovements between output and interest rates stylized facts on u s output and interest rates have so far proved hard to match with simple dsge models i estimate covariances between output nominal and real interest rate conditional on structural shocks since such evidence has largely been lacking in previous discussions of the output interest rate puzzle conditional on shocks to technology and monetary policy the results square with simple models moreover permanent inflation shocks accounted for the counter cyclical and inversely leading behavior of the real rate during the great inflation 1959 1979 over the great moderation 1982 2006 technology shocks were more dominant and the real rate has been pro cyclical

growth expectations undue optimism and short run fluctuations this paper proposes a two step procedure in order to identify belief shocks shocks to expectations about the current state of the economy first we use the survey of professional forecasters to me

stochastic technical progress smooth trends and nearly distinct business cycles this paper studies a model of random technical progress where technology diffuses at realistically slow rates it fits smooth trends to the sum of gdp series generated by this model and series representing transitory or cyclical fluctuations detrended gdp is then largely unrelated to technical progress the detrending method proposed by rotemberg 1999 reconstructs cyclical variations somewhat more accurately than the hp filter with sufficiently slow diffusion it is also more accurate than a method based on vars fitted to hours and gdp growth consistent with the model s predictions permanent shocks initially depress both hours and output in these vars

the long run phillips curve a structural var investigation both cointegration methods and non cointegrated structural vars identified based on either long run restrictions or a combination of long run and sign restrictions are used in order to explore the long run trade off between inflation and the unemployment rate in the post wwii u s u k euro area canada and australia overall neither approach produces clear evidence of a non vertical trade off the extent of uncertainty surrounding the estimates is however substantial thus implying that a researcher holding alternative priors about what a reasonable slope of the long run trade off might be will likely not see her views falsified

asset pricing and the propagation of macroeconomic shocks this paper considers the implications of habit formation and financial frictions for the propagation of macroeconomic shocks in a model that is capable of matching asset pricing moments a short lived shock that destroys a small fraction of the economy s stock of pledgeable collateral generates a persistent recession a stock market crash and a flight to safety effect this novel mechanism creates a tight link between the asset pricing implications of macroeconomic models and their ability to propagate and amplify the effects of macroeconomic shocks

expectation driven business cycles with limited enforcement we explore shocks to expected future productivity in a model with limited enforcement of financial contracts a microfounded collateral constraint implies that good news about future productivity yield an increase in stock prices available credit and a general economic expansion

mood swings and business cycles evidence from sign restrictions this paper provides new evidence that bouts of optimism and pessimism are an important source of u s business cycles using the identification schemes based on sign restrictions we document that identified optimism and pessimism shocks account for about 30 of u s business cycle fluctuations in hours and output in addition our empirical findings are consistent with the intensive and extensive margin adjustments in the u s labor market over business cycles providing further support to optimism shocks being an important source of u s business cycles the identified optimism shocks are at least partially rational as total factor productivity is found to rise 8 12 quarters after an initial bout of optimism while this later finding is consistent with some previous findings in the news shock literature we cannot rule out that such episodes reflect self fulfilling beliefs

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

migration and labour markets in oecd countries a panel cointegration approach this article examines the interaction between immigration and the host labour market of 14 organization for economic co operation and development oecd countries using nonstationary panel data methodology we estimate a trivariate vector error correction model vecm and derive causality tests to simultaneously assess the long and short term macroeconomic impact of newcomers on wages and unemployment levels in the host country the results suggest that an increase of migrants is likely to increase wages in the destination countries in the short run but to increase them in the long run there is no evidence of adverse effects on unemployment due to immigration in short and long term except for anglo saxon countries in the short term our findings also show that immigration is conditioned by levels of unemployment and wages especially in anglo saxon countries

causality between economic growth and immigration an ardl bounds testing approach abstract this paper aims to investigate the causal relationship between immigration and per capita economic growth using the ardl approach to cointegration we find evidence of long run causality from per capita economic growth to immigration but not vice versa

inflation real returns and capital investment we find evidence for the hypothesis of mundell 1963 and tobin 1965 that the expected real return component of interest rates is negatively related to the expected inflation component in the mundell tobin model the variation in expected real returns is caused by the variation in expected inflation our evidence suggests however that the variation in expected real returns is more fundamentally an outcome of the capital expenditures process equilibrium expected real returns vary directly with capital expenditures in order to induce equilibrium allocations of resources between consumption and investment this positive relation between expected real returns and real activity which comes out of the real sector combines with a negative relation between expected inflation and real activity which is traced to the monetary sector thus inducing the negative relation between expected inflation and expected real returns predicted by mundell and tobin but explained in terms of a model much different from theirs

news shocks and labour market dynamics in matching models we enrich a baseline real business cycle rbc model with search and matching frictions on the labour market and real frictions that are helpful in accounting for the response of macroeconomic aggregates to shocks the analysis allows shocks to have an unanticipated and a news i e anticipated component the bayesian estimation of the model reveals that the model that includes news shocks on macroeconomic aggregates produces a remarkable fit of the data news shocks in stationary and non stationary tfp investment specific productivity and preference shocks significantly affect labour market variables and explain a sizeable fraction of macroeconomic fluctuations at medium and long run horizons historically news shocks have played a relevant role for output but they have had a limited influence on unemployment

money prices interest rates and the business cycle the mechanisms governing the relationship of money prices and interest rates to the business cycle are the most studied and most disputed topics in macroeconomics in this paper we first document key empirical aspects of this relationship we then ask how well three benchmark rational expectations macroeconomic models a real business cycle model a sticky price model and a liquidity effect model account for these central facts while the models have diverse successses and failures none can account for the fact that real and nom inal interest rates are inverted leading indicators of real economic activity that is none of the models captures the post war u s business cycle fact that a high real or nominal interest rate in the current quarter predicts a low level of real economic activity two to four quarters in the future i introduction the positive correlation of monetary aggregates and real economic activity over the course of many business cycles is a key empirical fact about the u s economy indeed the dynamic dimension of this covariation is so strong and stable that a monetary variable has long been included in the commerce department s index of leading economic indica tors while this pattern of cyclical comovement is widely agreed upon its interpretation is not some macroeconomists view money as purely passive with a positive response to varying levels of economic activity producing the positive correlation others view changes in the quantity of money as an important perhaps dominant source of economic fluctua tions frequently the real effects of monetary changes are suggested to arise from frictions in commodity labor or financial markets in economic theories that describe the influence of these frictions the transmission mechanism from monetary changes to real activity is typically viewed as involving interest rates and the price level the primary goal of this paper is to evaluate three models that explain the link between money prices interest rates and the business cycle we do this in three steps first we docu ment the cyclical behavior of these variables in the united states over the postwar period second we construct three quantitative rational expectations models of macroeconomic activity i a real business cycle model with endogenous money ii a model of commodity market frictions with mon etary non neutralities arising from gradual adjustment of goods prices and iii a model of financial market frictions with monetary non neutralities arising from gradual adjust ments of portfolios finally we compare the models predic tion for the business cycle behavior of money prices and interest rates with the data in exploring the predictions of these models we take the stock of money to be one of several exogenous variables in the system all of our models are capable of generating a forecasting role for money relative to real economic activity similar to that found in the u s data in the real business model monetary changes can forecast real activity because productivity is related to many underlying sources of shocks and because these real shocks also affect the money stock in the models with sticky prices and liquidity effects short hand names for the models with frictions in the com modity and financial markets monetary changes have an additional direct positive effect on aggregate output the outline of the paper is as follows section ii describes the data and documents its business cycle characteristics section iii outlines the three macroeconomic models and develops the particular quantitative versions of the models used in our analysis our main empirical results are pre sented in section iv and section v summarizes our results and concludes

the role of uncertainty sentiment and cross country interactions in g7 output dynamics output fluctuations in the g7 are characterised using a var model of countries actual and expected outputs and uncertainty over these new measures are developed to quantify the relative importance of economic prospects versus uncertainty global versus national effects and fundamentals versus sentiment for countries persistent output movements national and global contributions are found to be equally important across the g7 although considerable differences exist between countries uncertainty and especially cross country uncertainty is important in propagating the effects of shocks and generates around 20 of countries persistent output movements on average fundamentals dominate output movements although with an 80 20 split sentiment plays a non negligible role

exchange rate volatility economic growth nexus in uganda abstractthe global financial crisis has disrupted trade and capital flows in most developing economies resulting in an increased volatility of exchange rates we develop an autoregressive distributed lag model to investigate the effect of exchange rate volatility on economic growth in uganda using data spanning the period 1960 2011 we find that exchange rate volatility positively affects economic growth in uganda in both the short run and the long run however in the short run political instability negatively moderates the exchange rate volatility economic growth nexus these results are robust to alternative specifications of the economic growth model

an exploration into pigou s theory of cycles abstract this paper explores a theory of business cycles in which recessions and booms arise due to difficulties encountered by agents in properly forecasting the economy s future needs in terms of capital the idea has a long history in the macroeconomic literature as reflected by the work of pigou industrial fluctuation macmillan london 1926 the contribution of this paper is twofold first we illustrate the type of general equilibrium structure that can give rise to such phenomena second we examine the extent to which such a model can explain the observed pattern of u s recessions frequency depth without relying on technological regress we argue that such a model offer a framework for understanding elements of both the recent u s recession and of the asia downturns of the late 1990s

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

impact of terrorism on tourism in turkey empirical evidence from turkey this article aims at investigating the causal impact of terrorist attacks on the tourism industry in turkey based on the autoregressive distributed lag ardl bounds testing procedure for the period between 1986 and 2006 the ardl bounds test reveals that tourism is in a long run equilibrium level relationship with terrorism the evidence obtained from the long run and short run parameter estimates indicates the existence of a negative causal effect of terrorism on tourism

no news in business cycles this paper uses a structural large dimensional factor model to evaluate the role of news shocks shocks with a delayed eect on productivity in generating the business cycle

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

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

high inflation and returns on residential real estate evidence from turkey this study examines the hedging behaviour of real estate investment in a high inflationary environment the hypothesis that the real estate investment hedges both expected and unexpected inflation is tested the returns of investment on residential apartments in several neighbourhoods in the capital of turkey are used in the analysis expected inflation is measured by three proxies it is found that in a high inflationary environment real estate investment does not provide hedge against inflation a reverse causality between returns on real estate and changes in expected inflation is not observed however a relationship between real returns and changes in inflationary expectations seem to be different in relatively low and relatively high income neighbourhoods

bootstrapping the autoregressive distributed lag test for cointegration we propose a bootstrap autoregressive distributed lag ardl test by applying the appropriate bootstrap method some weaknesses underlying the pesaran shin and smith ardl bounds test are addresse

inflation and housing demand a new perspective abstract the effects of inflation on the housing market are investigated in this study of new house prices in 42 u s metropolitan areas from 1971 to 1978 the results show that estimates of the elasticity of real house prices with respect to the real user cost have been biased sharply downward owing to an errors in variables problem when the error term in estimating expected inflation is recognized explicitly the negative relationship between real house prices and real user cost is found to be very strong this analysis helps to resolve the conflict in the literature between the negative cash flow effects and the positive untaxed capital gains and declining real payment effects resulting from inflation

information animal spirits and the meaning of innovations in consumer confidence we show that unexplained innovations in several variables representing survey responses to forwardlooking questions on the michigan survey of consumers have powerful prognostic implications for the future paths of macroeconomic variables we attempt to distinguish the hypothesis that these impulse responses indicate a causal channel from autonomous movements in sentiment to economic outcomes the animal spirits view from the alternative interpretation that the surprise confidence movements summarize information about future economic prospects the information view in natural rate models animal spirits shocks are associated with overshooting of among other variables consumption that attenuates when agents come to grips with their overreaction while information shocks about the long future are followed by gradual movements in macroeconomic variables that are not subsequently reversed in a baseline vector autoregression involving consumption income and confidence the data come down sharply in favor of the information view the impulse responses of consumption and gdp show no tendency to attenuate even after a number of years further confidence innovations have strong implications for labor productivity many quarters into the future in somewhat larger vars with an information block that includes inflation and or stock prices the impulse responses to confidence innovations continue to have the permanent shape that defines information shocks but they are smaller in magnitude we demonstrate that this is due to the fact that both inflation and stock price innovations have prognostic implications for future productivity that are very similar to the implications of innovations in confidence addition of unemployment to the system induces a transitory component that changes the shape of the impulse responses and somewhat weakens the previously airtight case against animal spirits but it does not provide constructive evidence of such effects

the inflation hedging properties of turkish reits this study empirically tests the inflation hedging abilities of turkish reits in comparison to the indices of common stocks listed on the istanbul stock exchange ise over the period december 1999 to december 2004 two main factors motivate this study first compared to their counterparts in developed capital markets turkish reits have some important tax incentives as well as flexibility in managing their portfolios second the turkish economy provides a rare and good opportunity to test the hedging behaviour of real estate stocks in periods of both high and moderate inflation rates the empirical results show that turkish reits in general provide a better hedge against both actual and expected inflation than do the ise common stock indices dividing the entire sample period into the high and moderate inflation sub periods we find that the hedging ability of reits is better under high inflation than under moderate inflation

what can we learn about news shocks from the late 1990s and early 2000s boom bust period this is a substantially revised version of the paper previously circulated as a new var based approach to identifying news shocks

chronicle of a war foretold the macroeconomic effects of anticipated defence spending shocks we identify us defense news shocks as shocks that best explain future movements in defense spending over a ve year horizon and are orthogonal to current defense spending our identied shocks are strongly correlated with the ramey 2011 news shocks but explain a larger share of macroeconomic uctuations and have signicant demand eects fiscal news induces signicant and persistent increases in output consumption investment hours and the interest rate standard dsge models fail to produce such a pattern we propose a sticky price model with distortionary taxation variable capital utilization capital adjustment costs and rule of thumb consumers that replicates the empirical ndings

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

the impact of chinese monetary policy on co movements between money and capital markets from 2010 to 2017 with interest rate liberalization and capital market development in china the impact of monetary policies on china s financial markets underwent continuous evolution using the

is currency seigniorage exogenous for inflation tax in turkey this paper discusses the implications of the validity of the conditioning hypothesis for the maintained money demand equation for an inflation tax analysis we also test the validity of the quantity theoretical inflation tax model for the post 1980 quarterly turkish data by using johansen cointegration techniques the results suggest that the tax rate inflation is weakly exogenous for the parameters of the long run money demand tax base equation this result consistent with a keynesian endogenous seigniorage exogenous inflation tax rate theory prior does not support the hypothesis that the turkish inflation can be explained by the conventional inflation tax revenue maximizing motive alone