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Author:Drautzburg, Thorsten 

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.
Economic Insights , Volume 1 , Issue 4 , Pages 1-7

Working Paper
A Structural Approach to Combining External and DSGE Model Forecasts

This note shows that combining external forecasts such as the Survey of Professional Fore casters can significantly increase DSGE forecast accuracy while preserving the interpretability in terms of structural shocks. Applied to pseudo real-time from 1997q2 onward, the canonical Smets and Wouters (2007) model has significantly smaller forecast errors when giving a high weight to the SPF forecasts. Incorporating the SPF forecast gives a larger role to risk premium shocks during the global financial crisis. A model with financial frictions favors a larger weight on the DSGE model forecast.
Working Papers , Paper 23-10

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 ...
Working Papers , Paper 13-45

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.
Economic Insights , Volume 4 , Issue 1 , Pages 1-8

Working Paper
Refining Set-Identification in VARs through Independence

Identification in VARs has traditionally mainly relied on second moments. Some researchers have considered using higher moments as well, but there are concerns about the strength of the identification obtained in this way. In this paper, we propose refining existing identification schemes by augmenting sign restrictions with a requirement that rules out shocks whose higher moments significantly depart from independence. This approach does not assume that higher moments help with identification; it is robust to weak identification. In simulations we show that it controls coverage well, in ...
Working Papers , Paper 21-31

Working Paper
Bargaining Shocks and Aggregate Fluctuations

We argue that social and political risk causes significant aggregate fluctuations by changing bargaining power. 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. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks cause movements in output and unemployment. To quantify the ...
Working Papers , Paper 20-11

Working Paper
Polarized Contributions but Convergent Agendas

The political process in the United States appears to be highly polarized: Data show that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme donor groups and are directed to the most extreme candidates. Is the rise in campaign contributions the cause of the growing political polarization? In this paper, we show that, in standard models of campaign contributions and electoral competition, a free-rider problem among potential contributors leads naturally to polarization of campaign contributors but without any ...
Working Papers , Paper 22-29

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 Papers , Paper 17-25

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 ...
FRB Atlanta CQER Working Paper , Paper 2011-01

Journal Article
Politics and Income Distribution

We take a closer look at how political reforms affect labor’s share of national income.
Economic Insights , Volume 7 , Issue 2 , Pages 11-18

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