ANIMAL SPIRITS, ECONOMIC POLICIES AND BUSINESS CYCLES: THE THREE MUSKETEERS OF THE ECONOMIC WORLD

2020 ◽  
Vol 20 (01) ◽  
pp. 2050004
Author(s):  
AZHAR IQBAL ◽  
SHANNON SEERY
Keyword(s):  
Indirect Effects ◽  
Fiscal Policies ◽  
Economic Policies ◽  
Direct Effects ◽  
Policy Changes ◽  
Asymmetric Effects ◽  
Animal Spirits ◽  
Key Drivers ◽  
The Business Cycle ◽  
Three Musketeers

This study quantifies animal spirits by constructing an index using information from major sectors of the economy. The key drivers of the animal spirits are the monetary/fiscal policies and the stage of the business cycle and therefore the effect of these drivers on animal spirits is also estimated. Furthermore, the effect of changes in the animal spirits index is generated to examine which sector is affected the most by animal spirits. In other words, we test whether animal spirits produce asymmetric effects on the economy. Our work suggests a policy change (and a shock/recession) produces dual effects on the economy which are (a) direct effects and (b) indirect effects, which is brought about by animal spirits. Therefore, it is crucial for policymakers to estimate the direct and indirect effects of policy changes as well as shocks/recessions on the economy to gauge the accumulative effect, rendering them more to design effective policies.

Global Networks and Domestic Policy Convergence: A Network Explanation of Policy Changes

2012 ◽  
Vol 64 (3) ◽  
pp. 375-425 ◽  
Author(s):  
Xun Cao
Keyword(s):  
Fiscal Policies ◽  
Economic Policies ◽  
Policy Changes ◽  
Global Networks ◽  
Policy Convergence ◽  
Regulatory Policies ◽  
Latent Space ◽  
National Economies ◽  
The Empirical Analysis ◽  
Portfolio Investments

National economies are embedded in complex networks such as trade, capital flows, and intergovernmental organizations (IGOs). These globalization forces impose differential impacts on national economies depending on a country's network positions. This article addresses the policy convergence-divergence debate by focusing on how networks at the international level affect domestic fiscal, monetary, and regulatory policies. The author presents two hypotheses: first, similarity in network positions induces convergence in domestic economic policies as a result of peer competitive pressure. Second, proximity in network positions facilitates policy learning and emulation, which result in policy convergence. The empirical analysis applies a latent-space model for relational/dyadic data and indicates that position similarity in the network of exports induces convergence in fiscal and regulatory policies; position similarity in the network of transnational portfolio investments induces convergence in fiscal policies; and position proximity in IGO networks is consistently associated with policy convergence in fiscal, monetary, and regulatory policies.

Rational Expectations and Inflation

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
World War I ◽  
French Revolution ◽  
Rational Expectations ◽  
Ronald Reagan ◽  
Fiscal Policies ◽  
Economic Policies ◽  
Budget Deficits ◽  
Nobel Lecture ◽  
Economic Decisions ◽  
The French Revolution

This collection of essays uses the lens of rational expectations theory to examine how governments anticipate and plan for inflation, and provides insight into the pioneering research for which the author was awarded the 2011 Nobel Prize in economics. Rational expectations theory is based on the simple premise that people will use all the information available to them in making economic decisions, yet applying the theory to macroeconomics and econometrics is technically demanding. This book engages with practical problems in economics in a less formal, noneconometric way, demonstrating how rational expectations can satisfactorily interpret a range of historical and contemporary events. It focuses on periods of actual or threatened depreciation in the value of a nation's currency. Drawing on historical attempts to counter inflation, from the French Revolution and the aftermath of World War I to the economic policies of Margaret Thatcher and Ronald Reagan, the book finds that there is no purely monetary cure for inflation; rather, monetary and fiscal policies must be coordinated. This fully expanded edition includes the author's 2011 Nobel lecture, “United States Then, Europe Now.” It also features new articles on the macroeconomics of the French Revolution and government budget deficits.

Trophic Cascades in Grasslands

2018 ◽  
Author(s):  
Brian J. Wilsey
Keyword(s):  
Indirect Effects ◽  
Prey Species ◽  
Trophic Levels ◽  
Herbaceous Plant ◽  
Direct Effects ◽  
Temperate Grasslands ◽  
Cascading Effect ◽  
Top Predators ◽  
Invertebrate Predators ◽  
Ecology Of Fear

Top predators have effects that can ‘cascade down’ on lower trophic levels. Because of this cascading effect, it matters how many trophic levels are present. Predators are either ‘sit and wait’ or ‘active’. Wolves are top predators in temperate grasslands and can alter species composition of smaller-sized predators, prey, and woody and herbaceous plant species, either through direct effects or indirect effects (‘Ecology of Fear’). In human derived grasslands, invertebrate predators fill a similar ecological role as wolves. Migrating populations of herbivores tend to be more limited by food than non-migratory populations. The phenology and synchrony of births vary among prey species in a way that is consistent with an adaptation to predation. Precocious species have highly synchronous birth dates to satiate predators. Non-precocious species (‘hiders’) have asynchronous births. Results from studies that manipulate both predators and food support the hypothesis that bottom-up and top-down effects interact.

Government spending shocks and economic growth: additional evidence from cyclical behavior of fiscal policy

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olumide Olusegun Olaoye ◽  
Ukafor Ukafor Okorie ◽  
Oluwatosin Odunayo Eluwole ◽  
Mahmood Butt Fawwad
Keyword(s):  
Economic Growth ◽  
Business Cycle ◽  
Government Spending ◽  
Generalized Method Of Moments ◽  
The State ◽  
Fiscal Policies ◽  
Asymmetric Effect ◽  
Content Type ◽  
Spending Shocks ◽  
The Business Cycle

PurposeThis study examines the asymmetric effect of government spending on economic growth in Nigeria over the period 1980–2017. Specifically, this study investigates whether the response of economic growth to government spending shocks differs according to the nature of shocks on them. In addition, the authors examine whether the stabilizing effects of fiscal policies are dependent on the state of the business cycle.Design/methodology/approachThe study adopts the linear fiscal reaction function in addition to the nonlinear regression model of Hatemi-J (2011, 2012), Granger and Yoon (2002), which allows us to separate negative shocks from positive shocks to government spending. Similarly, the authors adopt the generalized method of moments (GMM) techniques of Hansen (1982) to account for simultaneity and endogeneity problems inherent in dynamic model.FindingsThe authors’ findings reveal that there is evidence of asymmetry in the government spending–economic growth nexus in Nigeria over the period of study. Specifically, the authors find that the response of economic growth to government spending shocks differs according to the nature of shocks on them. More specifically, the study established that the stabilizing effects of fiscal policies are dependent on the state of the business cycle.Originality/valueUnlike the traditional method of modeling asymmetry, which adopts the simple inclusion of a squared government spending term or by the inclusion of a cubic government spending term, the model adopted in this study allows us to model shocks and show how the responses of economic growth to government expenditure differ according to the nature of shocks on them.

scholarly journals Asymmetric effects of monetary policy in Brazil

2009 ◽  
Vol 39 (2) ◽  
pp. 277-300 ◽  
Author(s):  
Edilean Kleber da Silva Bejarano Aragón ◽  
Marcelo Savino Portugal
Keyword(s):  
Monetary Policy ◽  
Monetary Shocks ◽  
Monetary Policies ◽  
The Real ◽  
Asymmetric Effects ◽  
Real Effects ◽  
Markov Switching Models ◽  
Switching Models ◽  
The Business Cycle ◽  
Negative Shock

In this paper, we check whether the effects of monetary policy actions on output in Brazil are asymmetric. Therefore, we estimate Markov-switching models that allow positive and negative shocks to affect the growth rate of output in an asymmetric fashion in expansion and recession states. In general, results show that: i) the real effects of negative monetary shocks are larger than those of positive shocks in an expansion; ii) in a recession, the real effects of positive and negative shocks are the same; iii) there is no evidence of asymmetry between the effects of countercyclical monetary policies; and iv) it is not possible to assert that the effects of a positive (or negative) shock are dependent upon the phase of the business cycle.

scholarly journals A first formal approach to animal spirits beyond uncertainty

2015 ◽  
Vol 4 (2) ◽  
pp. 104
Author(s):  
Gerasimos T. Soldatos ◽  
Erotokritos Varelas
Keyword(s):  
Policy Maker ◽  
Rational Expectations ◽  
Income Redistribution ◽  
Well Being ◽  
Optimal Decision ◽  
Status Change ◽  
Formal Approach ◽  
Interest Rate Policy ◽  
Animal Spirits ◽  
The Business Cycle

Standard Macroeconomics treats animal spirits as a source of uncertainty disturbing otherwise rational expectations. But, Keynesian animal spirits ensue from suboptimal emotional responses to socioeconomic status change beyond matters of uncertainty. This paper identifies such spirits with the disturbance from the optimal decision-making implied by an emotional well-being utility function. The introduction of a policy-maker, holding its own view of private welfare in a society of emotional individuals, generates by itself, i.e. in the absence of animal spirits, uniform business fluctuations. This is the result of the income redistribution needed to reconcile the policy-maker’s with the emotional individual’s view of private welfare. Consequently, if animal-spirits induced fluctuations are already present when a policy-maker is introduced in the economy, the aim of policy intervention should be the design of that income redistribution that would not aggravate the business cycle but that would end up in uniform only cycles, with the aid perhaps of discretionary interest rate policy. Nevertheless, if animal spirits do not exist when the policy-maker enters the system, the income-redistribution induced cycles may incite such spirits by themselves in which case the cycles will not be of the uniform type. All comes down to “income and emotion”, to an ageless and ecumenical fact of life, complicated purposefully or not by authority.

scholarly journals Possible Traffic Safety Effects of the Implementation of Section Control in Hungary

2020 ◽  
Vol 13 (4) ◽  
pp. 309-323
Author(s):  
Zsolt Sándor
Keyword(s):  
Traffic Safety ◽  
Indirect Effects ◽  
Social Cost ◽  
Cost Savings ◽  
International Studies ◽  
Direct Effects ◽  
Implementation Cost ◽  
Short Term ◽  
Environmental Loads

This article presents the anticipated safety effects of the implantation of section control in Hungary. The proposed results were originated from international studies and the local circumstances. Effects are depending on the control coverage and the magnitude of the sanctions. Direct (short term benefits) and indirect effects (long term benefits) can be identified. Direct effects are the decreasing of accident numbers, while indirect effects are the decrease of other externalities of transport like environmental loads. Based on the results the implementation cost of the enforcement system is measureable with the proposed social cost savings come from the decreasing number of accidents.

The Interaction of Reactions and Transport Part II: Combined Reactors and Exchangers

2007 ◽  
Vol 5 (1) ◽  
Author(s):  
Stuart W. Churchill
Keyword(s):  
Indirect Effects ◽  
Molecular Level ◽  
Chemical Reactor ◽  
Complex Behavior ◽  
Geometrical Configuration ◽  
Direct Effects ◽  
Optimal Conditions ◽  
Chemical Reactors ◽  
And Performance ◽  
Transport Part

The interactions between chemical reactions and transport may be divided into direct effects, for example on the molecular level, and indirect effects, for example those arising from the geometrical configuration of the integrated reactor/exchanger. Attention herein is focused on the latter, although in many instances the direct effects must be accounted for as well. Particular attention is given to the identification of behavior that does not arise in chemical reactors not connected to an exchanger or in exchangers not connected to a chemical reactor, as well as to optimal conditions and configurations of combined reactors and exchangers. Generalizations are difficult to formulate for such complex behavior and equipment, necessitating a primary reliance on illustrative examples. However, some general conclusions are drawn concerning the occurrence, identification, and performance of interactive designs.

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