scholarly journals The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem

Econometrica ◽  
2019 ◽  
Vol 87 (4) ◽  
pp. 1155-1203 ◽  
Author(s):  
David Rezza Baqaee ◽  
Emmanuel Farhi
Keyword(s):  
Returns To Scale ◽  
The United States ◽  
Reduced Form ◽  
Average Output ◽  
Aggregate Output ◽  
First Order ◽  
Point Reduction ◽  
Sectoral Shocks ◽  
Long Run ◽  
Macroeconomic Impact

We provide a nonlinear characterization of the macroeconomic impact of microeconomic productivity shocks in terms of reduced‐form nonparametric elasticities for efficient economies. We also show how microeconomic parameters are mapped to these reduced‐form general equilibrium elasticities. In this sense, we extend the foundational theorem of Hulten (1978) beyond the first order to capture nonlinearities. Key features ignored by first‐order approximations that play a crucial role are: structural microeconomic elasticities of substitution, network linkages, structural microeconomic returns to scale, and the extent of factor reallocation. In a business‐cycle calibration with sectoral shocks, nonlinearities magnify negative shocks and attenuate positive shocks, resulting in an aggregate output distribution that is asymmetric (negative skewness), fat‐tailed (excess kurtosis), and has a negative mean, even when shocks are symmetric and thin‐tailed. Average output losses due to short‐run sectoral shocks are an order of magnitude larger than the welfare cost of business cycles calculated by Lucas (1987). Nonlinearities can also cause shocks to critical sectors to have disproportionate macroeconomic effects, almost tripling the estimated impact of the 1970s oil shocks on world aggregate output. Finally, in a long‐run growth context, nonlinearities, which underpin Baumol's cost disease via the increase over time in the sales shares of low‐growth bottleneck sectors, account for a 20 percentage point reduction in aggregate TFP growth over the period 1948–2014 in the United States.

scholarly journals Some Evidence on Secular Drivers of US Safe Real Rates

2019 ◽  
Vol 11 (4) ◽  
pp. 113-139 ◽  
Author(s):  
Kurt G. Lunsford ◽  
Kenneth D. West
Keyword(s):  
United States ◽  
Interest Rates ◽  
Overlapping Generations ◽  
The United States ◽  
Standard Theory ◽  
Reduced Form ◽  
Annual Data ◽  
Real Interest Rates ◽  
Real Rate ◽  
Long Run

We study long-run correlations between safe real interest rates in the United States and over 30 variables that have been hypothesized to influence real rates. The list of variables is motivated by an intertermporal IS equation, by models of aggregate savings and investment, and by reduced-form studies. We use annual data, mostly from 1890 to 2016. We find that safe real interest rates are correlated as expected with demographic measures. For example, the long-run correlation with labor force hours growth is positive, which is consistent with overlapping generations models. For another example, the long-run correlation with the proportion of 40 to 64 year-olds in the population is negative. This is consistent with standard theory where middle-aged workers are high savers who drive down real interest rates. In contrast to standard theory, we do not find productivity to be positively correlated with real rates. Most other variables have a mixed relationship with the real rate, with long-run correlations that are statistically or economically large in some samples and by some measures but not in others. (JEL E21, E22, E24, E43, E52)

scholarly journals Mobility Reduction and Covid-19 Transmission Rates

2020 ◽  
Author(s):  
Nittai K. Bergman ◽  
Ram Fishman
Keyword(s):  
United States ◽  
The United States ◽  
Data Availability ◽  
Reduced Form ◽  
Transmission Rates ◽  
Fine Grained ◽  
Mobility Data ◽  
Point Reduction ◽  
International Panel ◽  
Preventative Measures

AbstractAssessing the contribution of mobility restrictions to the control of Covid-19 diffusion is an urgent challenge of global import. We analyze the relation between transmission rates (estimated effective reproduction numbers) and societal mobility levels using fine-grained daily mobility data from Google and Apple in an international panel of 87 countries and a panel of all states in the United States. Reduced form regression estimates that flexibly control for time trends suggest that a 10 percentage point reduction in mobility is associated with a 0.04-0.09 reduction in the value of the effective reproduction number, R(t), depending on geographical region and modelling choice. According to these estimates, to avoid the critical value of R = 1, easing mobility restrictions may have to be limited to below pre-pandemic levels or delayed until other non-mobility related preventative measures reduce R to a level of 0.55–0.7 in Europe, a level of 0.64–0.76 in Asia, and a level of 0.8 in the United States. Given gaps in data availability and inference challenges, these estimates should be interpreted with caution.

EMPIRICAL ANALYSIS OF INDIA’S FOREIGN TRADE AND ECONOMIC GROWTH

2020 ◽  
Vol 8 (10) ◽  
pp. 105-111
Author(s):  
Khujan Singh ◽  
Anil Kumar
Keyword(s):  
Time Series Data ◽  
Unit Root Test ◽  
Series Data ◽  
Significant Implication ◽  
Causality Test ◽  
First Order ◽  
Long Run ◽  
Directional Relation ◽  
Augmented Dickey Fuller ◽  
Vecm Granger Causality

The present study is an attempt to examine long run relationship among India’s GDP, Exports and Imports for which yearly time series data from 1995 to 2018 has been collected. Data for India’s GDP has been collected from RBI website and India’s export and import data has been collected form Ministry of Commerce and Industry website. The Augmented Dickey-Fuller unit root test for stationarity found that studied variables become stationary at first order of difference. While, Johnson cointegration test revealed long run cointegration between India’s GDP, exports and imports. The results of VECM Granger causality test exhibited bi-directional relationship between India’s GDP and India’s exports, whereas uni-directional relation has been found between India’s GDP and India’s imports. These results have significant implication for India’s export import policy and to achieve a target of $5 trillion economy till 2024-2025.

The Impact of Monetary and Fiscal Policies on the Stock Market in the United States (U.S); Evidence from Linear ARDL Framework

2020 ◽  
Vol 11 (1) ◽  
pp. 132-132
Author(s):  
Aref Emamian
Keyword(s):  
United States ◽  
Stock Market ◽  
The United States ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Fiscal Policies ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
The Impact

This study examines the impact of monetary and fiscal policies on the stock market in the United States (US), were used. By employing the method of Autoregressive Distributed Lags (ARDL) developed by Pesaran et al. (2001). Annual data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, the results show that both policies play a significant role in the stock market. We find a significant positive effect of real Gross Domestic Product and the interest rate on the US stock market in the long run and significant negative relationship effect of Consumer Price Index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Keywords: ARDL, monetary policy, fiscal policy, stock market, United States

China's Western Horizon

2020 ◽  
Author(s):  
Daniel S. Markey
Keyword(s):  
Political Influence ◽  
The United States ◽  
The Political ◽  
Regional Politics ◽  
National Wealth ◽  
Long Run ◽  
Political Implications ◽  
Foreign Policies ◽  
Belt And Road ◽  
Infrastructure Investments

This book explains how China’s new foreign policies like the vaunted “Belt and Road” Initiative are being shaped by local and regional politics outside China and assesses the political implications of these developments for Eurasia and the United States. It depicts the ways that President Xi Jinping’s China is zealously transforming its national wealth and economic power into tools of global political influence and details these developments in South Asia, Central Asia, and the Middle East. Drawing from extensive interviews, travels, and historical research, it describes how perceptions of China vary widely within states like Pakistan, Kazakhstan, and Iran. Eurasia’s powerful and privileged groups often expect to profit from their connections to China, while others fear commercial and political losses. Similarly, statesmen across Eurasia are scrambling to harness China’s energy purchases, arms sales, and infrastructure investments as a means to outdo their strategic competitors, like India and Saudi Arabia, while negotiating relations with Russia and America. The book finds that, on balance, China’s deepening involvement will play to the advantage of regional strongmen and exacerbate the political tensions within and among Eurasian states. To make the most of America’s limited influence along China’s western horizon (and elsewhere), it argues that US policymakers should pursue a selective and localized strategy to serve America’s aims in Eurasia and to better compete with China over the long run.

U.S. ELASTICITIES OF SUBSTITUTION AND FACTOR AUGMENTATION AT THE INDUSTRY LEVEL

2012 ◽  
Vol 17 (4) ◽  
pp. 861-897 ◽  
Author(s):  
Andrew T. Young
Keyword(s):  
Manufacturing Sector ◽  
Weighted Average ◽  
Value Added ◽  
The United States ◽  
Large Majority ◽  
Elasticity Of Substitution ◽  
Constant Elasticity ◽  
Constant Elasticity Of Substitution ◽  
First Order ◽  
Industry Level

We provide industry-level estimates of the elasticity of substitution (σ) between capital and labor in the United States. We also estimate rates of factor augmentation. Aggregate estimates are produced. Our empirical model comes from the first-order conditions associated with a constant–elasticity of substitution production function. Our data represent 35 industries at roughly the 2-digit SIC level, 1960–2005. We find that aggregate U.S. σ is likely less than 0.620. σ is likely less than unity for a large majority of individual industries. Evidence also suggests that aggregate σ is less than the value-added share-weighted average of industry σ's. Aggregate technical change appears to be net labor–augmenting. This also appears to be true for the large majority of individual industries, but several industries may be characterized by net capital augmentation. When industry-level elasticity estimates are mapped to model sectors, the manufacturing sector σ is lower than that of services; the investment sector σ is lower than that of consumption.

The Impact of Food Price Shocks in Uganda: First-Order Versus Long-Run Effects

2013 ◽  
Author(s):  
Bjorn Van Campenhout ◽  
Karl Pauw ◽  
Nicholas Minot
Keyword(s):  
Food Price ◽  
Price Shocks ◽  
First Order ◽  
Long Run ◽  
The Impact

scholarly journals The world market for soybeans: price transmission into Brazil and effects from the timing of crop and trade

Nova Economia ◽  
2007 ◽  
Vol 17 (2) ◽  
pp. 241-270 ◽  
Author(s):  
Mario A. Margarido ◽  
Frederico A. Turolla ◽  
Carlos R. F. Bueno
Keyword(s):  
United States ◽  
Forecast Error ◽  
The United States ◽  
World Market ◽  
Price Transmission ◽  
Long Run ◽  
Cointegration Tests ◽  
The World ◽  
The Law ◽  
The One

This paper investigates the price transmission in the world market for soybeans using time series econometrics models. The theoretical model developed by Mundlack and Larson (1992) is based on the Law of the One Price, which assumes price equalization across all local markets in the long run and allows for deviations in the short run. The international market was characterized by three relevant soybean prices: Rotterdam Port, Argentina and the United States. The paper estimates the elasticity of transmission of these prices into soybean prices in Brazil. There were carried causality and cointegration tests in order to identify whether there is significant long-term relationship among these variables. There was also calculated the impulse-response function and forecast error variance decomposition to analyze the transmission of variations in the international prices over Brazilian prices. An exogeneity test was also carried out so as to check whether the variables respond to short term deviations from equilibrium values. Results validated the Law of the One Price in the long run. In line with many studies, this paper showed that Brazil and Argentina can be seen as price takers as long as the speed of their adjustment to shocks is faster than in the United States, the latter being a price maker.

United States Strategic Interests in Latin America: An Assessment

1997 ◽  
Vol 39 (1) ◽  
pp. 45-57 ◽  
Author(s):  
Albert R. Coll
Keyword(s):  
United States ◽  
Latin America ◽  
The United States ◽  
Second World War ◽  
Economic Prosperity ◽  
World War ◽  
Long Run ◽  
The Us ◽  
Areas Of Concern ◽  
Second World

As of 1997, the United States faces an unprecedented degree of security, stability, and economic prosperity in its relations with Latin America. Never before have US strategic interests in Latin America been as well-protected or have its prospects seemed, at least on the surface, so promising. Yet while the US strategic interests are in better shape — militarily, politically, and economically — this decade than at any time since the end of the Second World War, some problems remain. Over the long run, there is also the risk that old problems, which today seem to have ebbed away, will return. Thus, the positive tone of any contemporary assessment must be tempered with an awareness of remaining areas of concern as well as of possible future crises.

scholarly journals Sample-Selection Biases and the Historical Growth Pattern of Children

2020 ◽  
Vol 44 (3) ◽  
pp. 417-444 ◽  
Author(s):  
Eric B. Schneider
Keyword(s):  
Selection Bias ◽  
Growth Pattern ◽  
Sample Selection ◽  
The United States ◽  
Growth Spurt ◽  
Long Run ◽  
Considerable Controversy ◽  
Institutional Ecology ◽  
Selection On Unobservables ◽  
Adult Stature

ABSTRACTBodenhorn et al. (2017) have sparked considerable controversy by arguing that the fall in adult stature observed in military samples in the United States and Britain during industrialization was a figment of selection on unobservables in the samples. While subsequent papers have questioned the extent of the bias (Komlos and A’Hearn 2019; Zimran 2019), there is renewed concern about selection bias in historical anthropometric datasets. Therefore, this article extends Bodenhorn et al.’s discussion of selection bias on unobservables to sources of children’s growth, specifically focusing on biases that could distort the age pattern of growth. Understanding how the growth pattern of children has changed is important because these changes underpinned the secular increase in adult stature and are related to child stunting observed in developing countries today. However, there are significant sources of unobserved selection in historical datasets containing children’s and adolescents’ height and weight. This article highlights, among others, three common sources of bias: (1) positive selection of children into secondary school in the late nineteenth and early twentieth centuries; (2) distorted height by age profiles created by age thresholds for enlistment in the military; and (3) changing institutional ecology that determines to which institutions children are sent. Accounting for these biases adjusts the literature in two ways: evidence of a strong pubertal growth spurt in the nineteenth century is weaker than formerly acknowledged and some long-run analyses of changes in children’s growth are too biased to be informative, especially for Japan.

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