Business Cycles and Growth: An Extended Model

Business Cycles and Growth: An Extended Model

This post was written in collaboration between Mikael Nordin and Ricardo Lima.

We end our investigation of the link between business cycles and growth by extending our empirical model to a cross-country type of regression. In this model we consider variables that have been excluded in the previous post's analysis, but could help to explain a country's long-term growth such as human capital and government share of GDP.

Business Cycles and Growth: First Results

Business Cycles and Growth: First Results

This post was written in collaboration between Mikael Nordin and Ricardo Lima.

In this post we establish measures of the volatility and the persistence of business cycles and empirically investigate if these features constitute a link to long-term growth. The results indicate that volatility and long-term growth are negatively correlated whereas higher persistence of the short-term fluctuations is associated with higher long-term growth.

 

A Comparison of Systematic and Non-Systematic Monetary Policy in the US, the UK and Canada

A Comparison of Systematic and Non-Systematic Monetary Policy in the US, the UK and Canada

This post was written in collaboration between Mikael Nordin and Markus Peters.

We end the series of non-systematic and systematic monetary policy by comparing monetary policy between the US, the UK and Canada for the time period 1979 - 2015. We find similarities in the non-systematic monetary policy between the US and the UK. Moreover, the systematic monetary policy in all countries seems to have stronger short-term responses to changes in unemployment than to changes in inflation.

Systematic and Non-Systematic Monetary Policy in the US

Systematic and Non-Systematic Monetary Policy in the US

This post was written in collaboration between Mikael Nordin and Markus Peters.

 

We investigate systematic and non-systematic monetary policy in the US between 1966-2015 by employing the strategy presented in our previous post. Although less accurate, our rolling regression analysis seems to in this case lead to similar results as those presented by Primiceri.

A Strategy For Analyzing Systematic and Non-Systematic Monetary Policy

A Strategy For Analyzing Systematic and Non-Systematic Monetary Policy

This post was written in collaboration between Mikael Nordin and Markus Peters.

 

Does the degree of activity against inflationary pressure and changes in unemployment depend on the chairmanship of different central bank governors? Departing from the seminal paper by Primiceri (2005), we present a simple strategy for analyzing time-variation in systematic and non-systematic monetary policy.

Secular stagnation part III

Secular stagnation part III

The past years’ economic conditions, with negligible growth and extraordinary low interests rates, have incited a number of prominent economists to join the debate on secular stagnation. This post is a follow-up to my two earlier inputs on the topic [here and here]. It reviews the argument that, while there might be some merit to the secular stagnation arguments brought forward as drivers of the current economic environment, such as changing demographics and distorted savings-investment decisions, they are essentially missing the target.

International Reserve Accumulation

International Reserve Accumulation

International reserve holdings by central banks around the world have taken on exorbitant large amounts during the past 15 years. Emerging market economies (EMEs), particularly Asian economies, are mostly responsible for this massive increase. Now the question is what reasons lie behind this phenomenon. To find out more about this accumulation, I take a look at the reasons why countries hold international reserves in the first place.

A Poor Man's Model for Estimating the Time-Varying Feedback Between the Financial and the Real Sector

A Poor Man's Model for Estimating the Time-Varying Feedback Between the Financial and the Real Sector

This post was written in collaboration between Ricardo Lima and Markus Peters.

 

We present a simple approach that can be used to get important intuition about time variation in the structural behaviour of economic variables. This approach will later on be applied on financial variables in order to estimate time variation in the response between financial variables and GDP.

Choosing Proxies for Financial-to-real Transmission Channels

Choosing Proxies for Financial-to-real Transmission Channels

In order to study how the financial sector amplifies macroeconomic shocks, we need to define relevant variables that capture such effects. One way to do this is to depart from the concept of financial-to-real transmission channels. I take a look on how this was done by the Swedish Ministry of Finance in one of their recent reports on financial stability policy.

Secular stagnation part II

Secular stagnation part II

The notion of secular stagnation has regained interest in recent years, as growth prospects remain sluggish and interest rates steadily keep trending downwards. The absence of strong recovery after the financial crisis has only seemed to fuel the discussion that there are fundamental (secular) factors holding the economy back, and that this is likely to be the case also in the medium term ahead.

Secular stagnation part I

Secular stagnation part I

The secular stagnation hypothesis was originally formulated by Alvin Hansen in the late 1930’s. Worried about the weak recovery after the Great Depression, Hansen predicted impaired US growth prospects ahead, particularly driven by lower population growth and weaker productivity trends. Essentially, his glum prophecy postulated that the days of strong economic growth were over. Instead, he believed the US to be entering a prolonged period of sluggishness (which by the way did not happen but that is a different story). The idea of secular stagnation has now regained interest in the aftermath of the financial crisis and engages a large number of prominent economists worldwide.

Complacency at the Fed

Complacency at the Fed

This post was written by Julius Probst, Phd Student in Economic History at Lund University.

 

The Fed under Ben Bernanke has been one of the most proactive Central Banks since the outbreak of the financial crisis and the US recovery has been relatively strong as a result. In this post I will argue that monetary policy has gone off course since Janet Yellen became the chairman of the Fed. A more accommodative policy stance would be required if the Fed was serious about achieving its inflation target of two percent. 

About Monetary Policy, Financial Stability and Equity - Part II

About Monetary Policy, Financial Stability and Equity - Part II

Does a lower repo rate necessarily undermine the stability of the financial system? The Swedish households’ indebtedness has been concerning the Riksbank for some time, as it might potentially undermine the financial stability of the Swedish economy. Because of this the Riksbank has earlier justified a lack of rate cut by the perception that a lower interest rate would increase household debt. In this post, which follows from a post I wrote earlier, I will try to answer the above question by evaluating how household equity is affected by a change in the repo rate. This by comparing the effect of a change in the repo rate on household assets, using a VAR-model, to previous studies on household debt. 

Forecasting using the Phillips curve II: Model comparison

Forecasting using the Phillips curve II: Model comparison

This is a continuation on my previous post where I concluded that there are two opposing sides on whether the Phillips curve is useful to utilize or not when forecasting unemployment. I try to answer this by estimating and comparing  standard and more complicated models in which inflation is included. Lastly, I compare my forecasted results for unemployment to the Federal Reserve's forecast.

The Role of Money in Inflation Forecasting

The Role of Money in Inflation Forecasting

According to a monetarist point of view, money is a key variable in monetary policy. Excess liquidity would mean that there is too much money chasing too few goods, putting an upward pressure on prices. Today, the New Keynesian framework plays a prominent role in monetary policy and there is no separate channel for money in the transmission mechanism. Accordingly, money has no role in determining future inflation rates. Even though excess liquidity may not cause inflation, it may add other information about the state of the economy. In this post I aim to test if money could help predict future inflation rates.