scholarly journals The Marginal Propensity to Consume over the Business Cycle

2020 ◽  
Vol 12 (2) ◽  
pp. 351-384 ◽  
Author(s):  
Tal Gross ◽  
Matthew J. Notowidigdo ◽  
Jialan Wang
Keyword(s):  
Business Cycle ◽  
Unemployment Rate ◽  
Great Recession ◽  
Credit Card ◽  
Credit Score ◽  
The Great Recession ◽  
Marginal Propensity To Consume ◽  
Marginal Propensity ◽  
Credit Report ◽  
The Business Cycle

We estimate how the marginal propensity to consume (MPC) out of liquidity varies over the business cycle. Ten years after a Chapter 7 bankruptcy, the bankruptcy flag is removed from the filer’s credit report, generating an increase in credit score. In the year following flag removal, credit card limits increase by $778 and credit card balances increase by $290, implying an MPC of 0.37. Using cohorts of flag removals, we find that the MPC was 20 to 30 percent higher during the Great Recession, increased during the 2001 recession, and is positively correlated with the local unemployment rate. (JEL E21, E24, E32, G51)

scholarly journals Autonomes Fahren statt Stop and Go: Vorschläge zur effektiven Gestaltung der deutschen Kurzarbeit

2019 ◽  
Vol 68 (3) ◽  
pp. 252-260
Author(s):  
Almut Balleer ◽  
Britta Gehrke ◽  
Brigitte Hochmuth ◽  
Christian Merkl
Keyword(s):  
Labor Market ◽  
Business Cycle ◽  
Great Recession ◽  
Timely Manner ◽  
Rule Based ◽  
The Great Recession ◽  
Stop And Go ◽  
Time Work ◽  
The Business Cycle ◽  
Short Time

Abstract This article argues that short-time work stabilized employment in Germany substantially during the Great Recession in 2008/09. The labor market instrument acted in timely manner, as it was used in a rule-based fashion. In addition, discretionary extensions were effective due to their interaction with the business cycle. To ensure that short-time work will be effective in the future, this article proposes an automatic facilitation of the access to short-time work in severe recessions. This reduces the likelihood of a too extensive use at the wrong point in time as well as structural instead of cyclical interventions.

Consumption, unemployment and the Great Recession

2016 ◽  
Vol 37 (4) ◽  
pp. 724-743
Author(s):  
Joaquín Alegre ◽  
Llorenç Pou
Keyword(s):  
Business Cycle ◽  
Great Recession ◽  
Job Loss ◽  
Consumption Smoothing ◽  
Content Type ◽  
The Great Recession ◽  
Household Members ◽  
The Business Cycle ◽  
Unemployment Spells ◽  
Unemployment Persistence

Purpose – The purpose of this paper is to test whether households with members that experience job loss shocks are able to protect their previous level of consumption. The paper also tests whether consumption protection is affected when spells persist through time. Design/methodology/approach – The paper estimates an intertemporal consumption model, where households try to smooth their marginal utility over time. For that purpose it analyses Spanish household budget surveys that span a long period, 1999-2012, including the Great Recession. Unlike most consumption datasets, this microdata is designed as a panel and provides detailed information for all consumption categories as well as household members’ labour status. Findings – The paper finds that consumption smoothing is dependent on the household member facing the unemployment transition. In particular, only main breadwinner’s unemployment transitions affects consumption smoothing. It also shows that the consumption drop persists beyond the period of the job loss for ongoing spells, although it follows a decreasing pattern. Finally, the estimation results are stable over the business cycle. Practical implications – The results suggest that Spanish households are not capable of fully insuring against main breadwinner’s unemployment shocks. Further, the results show that this effect remains up to two years for ongoing unemployment spells. Thus these results highlight a welfare loss by Spanish households with unemployed members. Originality/value – The paper extends the usual analysis of job loss shocks by the main breadwinner to include the cases of both the spouse and the rest of household members, who tend to account for most unemployment. Further, it tests for unemployment persistence. Finally, it checks the sensitivity of the results to the business cycle, including the Great Recession.

scholarly journals Real vs. nominal cycles: a multistate Markov-switching bi-factor approach

2014 ◽  
Vol 18 (5) ◽  
Author(s):  
Danilo Leiva-Leon
Keyword(s):  
Business Cycle ◽  
Great Recession ◽  
Probabilistic Model ◽  
Housing Demand ◽  
Real Activity ◽  
The Great Recession ◽  
Supply Shocks ◽  
The Business Cycle ◽  
The Impact ◽  
Simultaneous Inferences

AbstractThis paper proposes a probabilistic model based on comovements and nonlinearities useful to assess the type of shock affecting each phase of the business cycle. By providing simultaneous inferences on the phases of real activity and inflation cycles, contractionary episodes are dated and categorized into demand, supply and mix recessions. The impact of shocks originated in the housing market over the business cycle is also assessed, finding that recessions are usually accompanied by housing deflationary pressures, while expansions are mainly influenced by housing demand shocks, with the only exception occurred during the period surrounding the “Great Recession,” affected by expansionary housing supply shocks.

scholarly journals Endogenous Liquidity and the Business Cycle

2015 ◽  
Vol 105 (6) ◽  
pp. 1883-1927 ◽  
Author(s):  
Saki Bigio
Keyword(s):  
Asymmetric Information ◽  
Business Cycle ◽  
Great Recession ◽  
Financial Constraints ◽  
Aggregate Fluctuations ◽  
The Great Recession ◽  
The Business Cycle ◽  
The Cost

I study an economy where asymmetric information about the quality of capital endogenously determines liquidity. Liquid funds are key to relaxing financial constraints on investment and employment. These funds are obtained by selling capital or using it as collateral. Liquidity is determined by balancing the costs of obtaining liquidity under asymmetric information against the benefits of relaxing financial constraints. Aggregate fluctuations follow increases in the dispersion of capital quality, which raise the cost of obtaining liquidity. An estimated version of the model can generate patterns for quantities and credit conditions similar to the Great Recession. (JEL D82, E22, E24, E32, E44, G01)

Does overconfidence pay off when things go well? CEO overconfidence, firm performance, and the business cycle

2020 ◽  
pp. 147612702093065
Author(s):  
Tomas Reyes ◽  
Roberto S Vassolo ◽  
Edgar E Kausel ◽  
Diamela Peña Torres ◽  
Stephen Zhang
Keyword(s):  
Firm Performance ◽  
Business Cycle ◽  
Great Recession ◽  
Positive Relationship ◽  
Positive Impact ◽  
Return On Equity ◽  
The Great Recession ◽  
The Business Cycle ◽  
Positive Effect ◽  
Dot Com

We investigate the moderating effect of the business cycle on the positive relationship between CEO overconfidence and firm performance. We propose that the expansion years of the business cycle enhance the positive impact of overconfident CEOs on firms’ performance. However, this effect is reduced during recession periods. We analyze the effect of CEO overconfidence on the Return on Equity of publicly listed US firms from 1992 to 2015, a period that includes the bursting of the dot-com bubble in 2001 and the Great Recession of 2008–2009. The empirical findings support the hypotheses that expansion periods increase the positive relationship between overconfident CEOs and firms’ performance, but this positive effect weakens during recessions.

scholarly journals Innovations’ Success and Failure in the Business Cycle

2019 ◽  
Vol 11 (15) ◽  
pp. 4187
Author(s):  
Vicente Salas-Fumás ◽  
Javier Ortiz
Keyword(s):  
Business Cycle ◽  
Great Recession ◽  
Research Methodology ◽  
Aggregate Demand ◽  
Technological Innovations ◽  
The Great Recession ◽  
Innovation Projects ◽  
The Business Cycle

This paper examines three channels of influence of the business cycle in the propensity of firms to introduce technological innovations: Aggregate demand (firms initiate more innovation projects in expansion than in recession; risk (the probability that initiated projects fail is higher in contraction than in expansion); and obstacles to innovate (more firms perceive the obstacles to innovate as high in recessions than in expansions and the high obstacles implies lower propensity to initiate innovation projects). With Spanish CIS data we find evidence that the three channels contributed to the fall in the proportion of firms that introduce technological innovations during the Great Recession, compared with the proportion of innovators in the years of expansion. The research methodology consists on estimating a multiprobit model with the probability that firms introduce technological innovations, the probability that firms abandon ongoing innovation projects, and the probability that firms perceive the obstacles to innovate as high.

The CPS Redesign's Effects on Measured Unemployment Duration in the Great Recession

2012 ◽  
Vol 12 (1) ◽  
Author(s):  
Michael E. Busch
Keyword(s):  
Business Cycle ◽  
Median Duration ◽  
Great Recession ◽  
Population Survey ◽  
Unemployment Duration ◽  
Adjustment Factor ◽  
The Great Recession ◽  
The Business Cycle ◽  
Using Data ◽  
Recessionary Periods

Abstract During the Great Recession, reported unemployment duration has increased to much higher levels than during earlier severe recessions. Previous studies using data from non-recessionary periods have found that part of this increase was caused by a 1994 redesign in the way the Current Population Survey measures unemployment duration. This paper uses data from recessionary and non-recessionary periods to determine how the size of the redesign’s effect on the distribution of unemployment duration changes over the business cycle. I find that, for most measures of unemployment duration, the redesign effect is relatively constant across business cycle conditions, but the redesign effect on median unemployment duration tends to shrink during recessionary periods. This suggests a constant adjustment factor will adequately correct for the CPS redesign for most variables I consider, but for median duration the use of a constant adjustment factor will lead to underestimating the true median duration during high unemployment periods such as the Great Recession.

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