Search Results
Showing results 1 to 10 of approximately 14.
(refine search)
Working Paper
Entrepreneurial tail risk: implications for employment dynamics
New businesses are important for job creation and have contributed more than proportionally to the expansion in the 1990s and the decline of employment after the 2007 recession. This paper provides a framework for analyzing determinants of business creation in a world where new business owners are exposed to idiosyncratic risk due to initial imperfect diversification. This paper uses this framework to analyze how entrepreneurial risk has changed over time and how this has affected employment in the US. Conditions are provided under which entrepreneurial risk can be identified using micro data ...
Journal Article
Just How Important Are New Businesses?
New businesses are major job generators, so disappointing trends in firm formation have raised concern. Thorsten Drautzburg discusses why at least some of the worry might be misplaced.
Working Paper
Alternative Strategies: How Do They Work? How Might They Help?
Several structural developments in the U.S. economy—including lower neutral interest rates and a flatter Phillips curve—have challenged the ability of the current monetary policy framework to deliver on the Federal Open Market Committee’s (FOMC) dual-mandate goals. This paper explores whether makeup strategies, in which policymakers seek to stabilize average inflation around the inflation target over some horizon, could strengthen the FOMC’s ability to fulfill its dual mandate. The quantitative analysis discussed here suggests that credible makeup strategies may provide some moderate ...
Journal Article
Why Are Recessions So Hard to Predict? Random Shocks and Business Cycles
Economists are like doctors, not soothsayers. They can't predict recessions, but they can help us understand why one is happening. And that can make all the difference for policymaking.
Working Paper
Fiscal stimulus and distortionary taxation
We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act of 2009. We extend the benchmark Smets-Wouters New Keynesian model (Smets and Wouters, 2007), allowing for credit-constrained households, the zero lower bound, government capital, and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.52 and modestly negative long-run multipliers around -0.42. The multiplier is sensitive to the fraction of transfers given to credit-constrained households, the duration of the zero lower bound, and the capital. The stimulus ...
Working Paper
Accounting for the Sources of Macroeconomic Tail Risks
Using a multi-industry real business cycle model, we empirically examine the microeconomic origins of aggregate tail risks. Our model, estimated using industry-level data from 1972 to 2016, indicates that industry-specific shocks account for most of the third and fourth moments of GDP growth.
Working Paper
Partisanship and Fiscal Policy in Economic Unions: Evidence from U.S. States
In economic unions the fiscal authority consists not of one, but many governments. We analyze whether partisanship of state-level politicians affects federal policies, such as fiscal stimulus in the U.S. Using data from close elections, we find partisan differences in the marginal propensity to spend federal transfers: Republican governors spend less. This partisan difference has tended to increase with measures of polarization. We quantify the aggregate effects in a New Keynesian model of Republican and Democratic states in a monetary union: Lowering partisan differences to levels ...
Working Paper
IDENTIFICATION THROUGH HETEROGENEITY
We analyze set identification in Bayesian vector autoregressions (VARs). Because set identification can be challenging, we propose to include micro data on heterogeneous entities to sharpen inference. First, we provide conditions when imposing a simple ranking of impulse-responses sharpens inference in bivariate and trivariate VARs. Importantly; we show that this set reduction also applies to variables not subject to ranking restrictions. Second, we develop two types of inference to address recent criticism: (1) an efficient fully Bayesian algorithm based on an agnostic prior that directly ...
Working Paper
Political Distribution Risk and Aggregate Fluctuations
We argue that political distribution risk is an important driver of aggregate fluctuations. To that end, we document significant changes in the capital share after large political events, such as political realignments, modifications in collective bargaining rules, or the end of dictatorships, in a sample of developed and emerging economies. These policy changes are associated with significant fluctuations in output and asset prices. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks cause movements in output, unemployment, and sectoral asset prices. To ...
Working Paper
A narrative approach to a fiscal DSGE model
This version: March 28, 2016 First version: February 2014 {{p}} Structural DSGE models are used both for analyzing policy and the sources of business cycles. Conclusions based on full structural models are, however, potentially affected by misspecification. A competing method is to use partially identified VARs based on narrative shocks. This paper asks whether both approaches agree. First, I show that, theoretically, the narrative VAR approach is valid in a class of DSGE models with Taylor-type policy rules. Second, I quantify whether the two approaches also agree empirically, that is, ...