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Working Paper
Human capital and technology diffusion
This paper generalizes the Nelson-Phelps catch-up model of technology diffusion. We allow for the possibility that the pattern of technology diffusion can be exponential, which would predict that nations would exhibit positive catch-up with the leader nation, or logistic, in which a country with a sufficiently small capital stock may exhibit slower total factor productivity growth than the leader nation. ; We derive a nonlinear specification for total factor productivity growth that nests these two specifications. We estimate this specification for across-section of nations from 1960 through ...
Journal Article
A look at China's new exchange rate regime
In this Economic Letter, the author reviews several characteristics of the new renminbi regime. He also examines how the renminbi might have moved in the past if this regime had been in place. Because the PBOC provided only guidelines, and not specifics, about the composition and trade weights of the reference basket, he constructs three likely indexes and compares their movements with each other and with the bilateral renminbi-U.S. dollar exchange rate. He finds that movements in China's trade-weighted exchange rate indexes over the long term are relatively insensitive to currency ...
Working Paper
\"Burden sharing\" in sovereign debt reduction
We examine a concerted debt reduction deal between a sovereign debtor, a private creditor, and an official creditor, who insures the deposits of the commercial bank. Our results show that a weakening of the financial position of the commercial bank reduces the contribution of the commercial bank and increases that of the official creditor, without affecting the net terms faced by the debtor. This result is robust to changes in seniority. Moreover, leaving both creditor values unchanged requires that commercial banks retire debt at "unfairly" high prices, while official creditors make a net ...
Working Paper
Inflation Expectations, Liquidity Premia and Global Spillovers in Japanese Bond Markets
We provide market-based estimates of Japanese inflation expectations using an arbitrage-free dynamic term structure model of nominal and real yields that accounts for liquidity premia and the deflation protection afforded by Japanese inflation-indexed bonds, known as JGBi’s. We find that JGBi liquidity premia exhibit significant variation, and even switch sign. Properly accounting for them significantly lowers the estimated value of the indexed bonds’ deflation protection and affects inflation risk premium estimates. After liquidity adjustment, long-term Japanese inflation expectations ...
Working Paper
Modernization and Discrete Measures of Democracy
We reassess the empirical evidence for a positive relationship between income and democracy, commonly known as the ?modernization hypothesis,? using discrete democracy measures. While discrete measures have been advocated in the literature, they pose estimation problems under fixed effects due to incidental parameter issues. We use two methods to address these issues, the bias-correction method of Fernandez-Val, which directly computes the marginal effects, and the parameterized Wooldridge method. Estimation under the Fernandez-Val method consistently indicates a statistically and ...
Journal Article
Monetary and financial integration: evidence from the EMU
Working Paper
Persistent Effects of the Paycheck Protection Program and the PPPLF on Small Business Lending
Using bank-level U.S. Call Report data, we examine the longer-term effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility on small business (SME) lending. Our sample runs through the end of 2023H1, by which time almost all PPP loans were forgiven or repaid. To identify a causal impact of program participation, we instrument based on historical bank relationships with the Small Business Administration and the Federal Reserve discount window prior to the onset of the pandemic. Elevated bank participation in both programs was positively associated with a substantial ...
Journal Article
Has China’s economy become more “standard”?
Financial liberalization in China has broad implications, including changing how its central bank?s monetary policy affects the nation?s economy. An estimate of Chinese economic activity and inflation based on a broad set of indicators suggests that the way policy is transmitted to China?s economy has become more like Western market economies in the past decade. Although Chinese monetary policy may actually have exacerbated its economic downturn during the global financial crisis, a move toward stimulatory policy has helped ease its slower growth more recently.
Journal Article
What monetary regime for post-war Iraq?
Journal Article
The EMU effect on the currency denomination of international bonds
This Economic Letter reviews recent work that focuses on micro-level data to study the impact of the launch of the EMU on the currency denomination of international bonds.