scholarly journals Decomposition of the Business Cycle Shock and the Default Rate of SMEs in Korea

2019 ◽  
Vol 27 (4) ◽  
pp. 401-423
Author(s):  
Jaesung James Park ◽  
Joonkyo Hong ◽  
Sumi Na
Keyword(s):  
Business Cycle ◽  
Capital Accumulation ◽  
Structural Var ◽  
Technology Shocks ◽  
Empirical Results ◽  
Long Run ◽  
Default Rate ◽  
Technology Shock ◽  
The Business Cycle ◽  
The Impact

This paper, through a structural VAR identified by a long-run restriction which is imposed by a neoclassical growth model, decomposes the real price index of capital accumulation (= deflator for fixed capital accumulations/consumption expenditure deflator), labor productivity (= real GDP/total employee hours), and total employee hours into three business cycle shocks: (i) investment-specific technology shock, (ii) neutral technology shock, and (iii) non-technology shock, and explores which shock has played a significant role in contributing to decreases in the default rate of SMEs. Empirical results drawn from Korean data spanning from 2000:Q1 to 2016:Q2 indicate that when the two technology shocks arise by 1%p, the default rate decreases by 0.03%p to 0.05%p permanently. In contrast, the impact of the non-technology shock on the default rate is highly transitory : the default rate decreases by 0.02%p in response to the 1%p increment in non-technology shock but turns back to its initial level after about three quarters. These imply the technology shocks could account for the most of variations in the default rate of SMEs. Our empirical results, therefore, deliver the policy implication that SME financing should focus on innovative firms with aggressive funding.

scholarly journals CAUSES AND CHARACTERISTICS OF BUSINESS CYCLE IN LITHUANIA: A STRUCTURAL VARAPPROACH

Ekonomika ◽  
2012 ◽  
Vol 91 (1) ◽  
pp. 41-58 ◽  
Author(s):  
Aurelija Proškutė
Keyword(s):  
Business Cycle ◽  
Positive Impact ◽  
Labour Productivity ◽  
Working Hours ◽  
Developed Countries ◽  
Output Growth ◽  
Structural Var ◽  
Technology Shocks ◽  
Technology Shock ◽  
The Business Cycle

We investigate the structural disturbances underlying the business cycle in Lithuania in the bivariate time series framework. In the structural VAR model constructed productivity, hours of work and output fluctuations over the business cycle are composed of technology and non-technology shocks. We find that a technology shock has a persistent positive effect on all three variables. Non-technology disturbance has a long-term impact on working hours and output, but it has a negligible short-run effect on productivity.Differently from Gali (1999), the study has revealed no significant correlation between productivity and working hours under the effects of technology shocks on Lithuanian data. In contrast with the results of developed countries, non-technology shocks result in a significant negative correlation between the working hours and labour productivity in Lithuania.Historical decomposition of output, productivity and working hours series allows distinguishing four different episodes of Lithuanian economy during the analysed timeline. In 1999, negative technology shocks played the biggest role in pushing the output down. During the period 2001–2004, the real GDP growth was supported by productivity increase due to technology shocks; in 2005–2008, non-technology shocks and the higher working hours were fuelling output growth together with a positive impact of the technology shock on productivity growth. Finally, 2008–2011 is the period of negative technology and non-technology shocks.

scholarly journals LABOR MARKET DYNAMICS UNDER TECHNOLOGY SHOCKS: THE ROLE OF SUBSISTENCE CONSUMPTION

2021 ◽  
pp. 1-29
Author(s):  
Sangyup Choi ◽  
Myungkyu Shim
Keyword(s):  
Labor Market ◽  
Business Cycle ◽  
Developing Economies ◽  
Structural Var ◽  
Market Dynamics ◽  
Technology Shocks ◽  
Structural Factors ◽  
Long Run ◽  
Labor Market Dynamics ◽  
Short Run

This paper establishes new stylized facts about labor market dynamics in developing economies, which are distinct from those in advanced economies, and then proposes a simple model to explain them. We first show that the response of hours worked and employment to a technology shock—identified by a structural VAR model with either short-run or long-run restrictions—is substantially smaller in developing economies. We then present compelling empirical evidence that several structural factors related to the relevance of subsistence consumption across countries can jointly account for the relative volatility of employment to output and that of consumption to output. We argue that a standard real business cycle (RBC) model augmented with subsistence consumption can explain the several salient features of business cycle fluctuations in developing economies, especially their distinct labor market dynamics under technology shocks.

IMPERFECT TRANSMISSION OF TECHNOLOGY SHOCKS AND THE BUSINESS CYCLE CONSEQUENCES

2012 ◽  
Vol 18 (2) ◽  
pp. 418-437 ◽  
Author(s):  
Hamilton B. Fout ◽  
Neville R. Francis
Keyword(s):  
Business Cycle ◽  
American Economic Review ◽  
Two Dimensions ◽  
Adjustment Cost ◽  
Temporary Increase ◽  
Technology Shocks ◽  
Initial Wealth ◽  
Technology Shock ◽  
The Business Cycle ◽  
Sustained Increase

We investigate the business cycle effects of imperfect transmission of technology shocks within a basic real business cycle (RBC) model along two dimensions. First, we assume that agents cannot distinguish a temporary increase in productivity growth from a sustained increase in the underlying growth rate of productivity and instead must conduct signal extraction exercises and update beliefs about the source of aggregated shocks. Second, we propose a technology adjustment cost resulting in the slow diffusion of technological innovations into the production process. Both of these impediments to the transmission of technology result in a large initial wealth effect, increasing investment and hours less, relative to the usual RBC model without these frictions. Furthermore, each of these features is capable of producing a decline in hours on impact of the technology shock matching the negative response in hours found in the data by such works as Gali [American Economic Review89(1), 249–271 (1999)].

scholarly journals Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?

1999 ◽  
Vol 89 (1) ◽  
pp. 249-271 ◽  
Author(s):  
Jordi Galí
Keyword(s):  
Simple Model ◽  
Business Cycles ◽  
Business Cycle ◽  
Monopolistic Competition ◽  
Real Business Cycle ◽  
Technology Shocks ◽  
Aggregate Fluctuations ◽  
G7 Countries ◽  
Technology Shock ◽  
The Business Cycle

I estimate a decomposition of productivity and hours into technology and non-technology components. Two results stand out: (a) the estimated conditional correlations of hours and productivity are negative for technology shocks, positive for nontechnology shocks; (b) hours show a persistent decline in response to a positive technology shock. Most of the results hold for a variety of model specifications, and for the majority of G7 countries. The picture that emerges is hard to reconcile with a conventional real-business-cycle interpretation of business cycles, but is shown to be consistent with a simple model with monopolistic competition and sticky prices. (JEL E32, E24)

THE HOURS WORKED–PRODUCTIVITY PUZZLE: IDENTIFICATION IN A FRACTIONAL INTEGRATION SETTING

2014 ◽  
Vol 19 (7) ◽  
pp. 1593-1621 ◽  
Author(s):  
Yuliya Lovcha ◽  
Alejandro Perez-Laborda
Keyword(s):  
Business Cycle ◽  
Fractional Integration ◽  
Real Business Cycle ◽  
Data Sets ◽  
Sampling Uncertainty ◽  
Hours Worked ◽  
Long Run ◽  
The Hours ◽  
Short Run ◽  
Technology Shock

A recent finding of the SVAR literature is that the response of hours worked to a (positive) technology shock depends on the assumed order of integration of the hours. In this work we relax this assumption, allowing fractional integration in hours and productivity. We find that the sign and magnitude of the estimated responses depend crucially on the identification assumptions employed. Although the responses of hours recovered with short-run (SR) restrictions are positive in all data sets, long-run (LR) identification results in negative, although sometimes not significant responses. We check the validity of these assumptions with the Sims procedure, concluding that both LR and SR are appropriate to recover responses in a fractionally integrated VAR. However, the application of the LR scheme always results in an increase in sampling uncertainty. Results also show that even the negative responses found in the data could still be compatible with real business cycle models.

Human capital accumulation, income distribution, and economic growth: a demand-led analytical framework

2021 ◽  
Vol 9 (3) ◽  
pp. 319-336
Author(s):  
Gilberto Tadeu Lima ◽  
Laura Carvalho ◽  
Gustavo Pereira Serra
Keyword(s):  
Human Capital ◽  
Capital Accumulation ◽  
Analytical Framework ◽  
Output Growth ◽  
Human Capital Accumulation ◽  
Capital Utilization ◽  
Tax Rate ◽  
Long Run ◽  
The Impact ◽  
Long Run Equilibrium

This paper incorporates human capital accumulation through provision of universal public education by a balanced-budget government to a demand-driven analytical framework of functional distribution and growth of income. Human capital accumulation positively impacts on workers’ productivity in production and their bargaining power in wage negotiations. In the long-run equilibrium, a rise in the tax rate (which also denotes the share of output spent in human capital formation) lowers the pre- and after-tax wage share and physical capital utilization, and thus raises (lowers) the output growth rate when the latter is profit-led (wage-led). The impact of a higher tax rate on the employment rate (which also measures human capital utilization) in the long-run equilibrium is negative (ambiguous) when output growth is wage-led (profit-led). In any case, the supply of higher-skilled workers does not automatically create its own demand.

Foreign Capital, Natural Resource Rents and Financial Development: A New Approach

2020 ◽  
pp. 097215092096136
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Ali Aboutorabi ◽  
Farzaneh Ahmadian Yazdi
Keyword(s):  
Financial Development ◽  
Natural Resource ◽  
Capital Accumulation ◽  
Foreign Capital ◽  
New Approach ◽  
Resource Rents ◽  
Long Run ◽  
Natural Resource Rents ◽  
Rich Countries ◽  
The Impact

This article explores the impact of financial development on the ‘natural resources rents–foreign capital accumulation nexus’ in selected natural resource–rich countries during 1970Q1–2016Q4. In doing so, we propose a new approach by applying the autoregressive distributed lag (ARDL) rolling regression technique for our empirical purpose. The results show that financial development has a positive and significant effect on the way natural resource rents affect foreign capital in the case of Australia, Chile, Ecuador, Egypt and Peru in both the short run and the long run. We achieve the same results in the case of Colombia and Iran too, but just in the long run. Also, short-term and long-term negative effects of financial development on the rents–foreign capital nexus are witnessed just in the case of Algeria. We provide some empirical evidence for further robustness of our findings. Finally, we suggest that there is a necessity for the development of the financial system in natural resource–rich countries to reach higher levels of foreign capital, which has a crucial role in their economic growth.

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