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Working Paper
Escaping the Middle-Income Trap: A Cross-Country Analysis on the Patterns of Industrial Upgrading
Wen, Yi; Wang, Lili (2018-01-16)
With rapid industrial upgrading along the global value chain of manufactured goods, China has transformed, within one generation, from an impoverished agrarian society to a middle-income nation as well as the largest manufacturing powerhouse in the world. This article identifies the pattern of China?s industrial upgrading and compares it with those of other successfully industrialized economies and the failed ones. We find that (i) China (since 1978) followed essentially the same path of industrial upgrading as that of Japan and the ?Asian Tigers.? These economies succeeded in catching up ...
Working Papers , Paper 2018-1

Report
Openness and Growth: A Comparison of the Experiences of China and Mexico
Kehoe, Timothy J.; Xu, Xing (2025-08-21)
In the late 1980s, Mexico opened itself to international trade and foreign investment, followed in the early 1990s by China. China and Mexico are still the two countries characterized as middle-income by the World Bank with the highest levels of merchandise exports. Although their measures of openness have been comparable, these two countries have had sharply different economic performances: China has achieved spectacular growth, whereas Mexico’s growth has been disappointingly modest. In this article, we extend the analysis of Kehoe and Ruhl (2010) to account for the differences in these ...
Staff Report , Paper 673

Working Paper
The Welfare Costs of Business Cycles Unveiled: Measuring the Extent of Stabilization Policies
Barros, Fernando; Luduvice, Andre; Gomes, Fabio (2022-04-21)
How can we measure the welfare benefit of ongoing stabilization policies? We develop a methodology to calculate the welfare cost of business cycles taking into account that observed consumption is partially smoothed. We propose a decomposition that disentangles consumption in a mix of laissez-faire (absent policies) and riskless components. With a novel identification strategy, we estimate the span of stabilization power. Our results show that the welfare cost of total fluctuations is 11 percent of lifetime consumption, of which 82 percent is smoothed by the status quo policies, yielding a ...
Working Papers , Paper 21-14r

Working Paper
Money, Banking, and Old-School Historical Economics
Velde, Francois R.; Monnet, Eric (2020-11-13)
We review developments in the history of money, banking, and financial intermediation over the last twenty years. We focus on studies of financial development, including the role of regulation and the history of central banking. We also review the literature of banking and financial crises. This area has been largely unaffected by the so-called new econometric methods that seek to prove causality in reduced form settings. We discuss why historical macroeconomics is less amenable to such methods, discuss the underlying concepts of causality, and emphasize that models remain the backbone of our ...
Working Paper Series , Paper WP-2020-28

Working Paper
Loose Monetary Policy and Financial Instability
Grimm, Maximilian; Jordà, Òscar; Schularick, Moritz; Taylor, Alan M. (2023-02-06)
Do periods of persistently loose monetary policy increase financial fragility and the likelihood of a financial crisis? This is a central question for policymakers, yet the literature does not provide systematic empirical evidence about this link at the aggregate level. In this paper we fill this gap by analyzing long run historical data. We find that when the stance of monetary policy is accommodative over an extended period, the likelihood of financial turmoil down the road increases considerably. We investigate the causal pathways that lead to this result and argue that credit creation and ...
Working Paper Series , Paper 2023-06

Working Paper
Low Interest Rates and the Predictive Content of the Yield Curve
Bordo, Michael D.; Haubrich, Joseph G. (2021-12-21)
Does the yield curve's ability to predict future output and recessions differ when interest rates and inflation are low, as in the current global environment? We explore the issue using historical data going back to the 19th century for the US. This paper is similar in spirit to Ramey and Zubairy (2018), who look at the government spending multiplier in times of low interest rates. If anything, the yield curve tends to predict output growth better in low interest rate environments, though this result is stronger for RGDP than for IP.
Working Papers , Paper 20-24R

Working Paper
Central banks as lender of last resort: experiences during the 2007-2010 crisis and lessons for the future
Domanski, Dietrich; Moessner, Richhild; Nelson, William R. (2014-05-14)
During the 2007-2010 financial crisis, central banks accumulated a vast amount of experience in acting as lender of last resort. This paper reviews the various ways that central banks provided emergency liquidity assistance (ELA) during the crisis, and discusses issues for the design of ELA arising from that experience. In a number of ways, the emergency liquidity assistance since 2007 has largely adhered to Bagehot's dictums of lending freely against good collateral to solvent institutions at a penalty rate. But there were many exceptions to these rules. Those exceptions illuminate the ...
Finance and Economics Discussion Series , Paper 2014-110

Working Paper
Riders on the Storm
Taylor, Alan M.; Jordà, Òscar (2019-09-06)
Interest rates in major advanced economies have drifted down and in greater unison over the past few decades. A country?s rate of interest can be thought of as reflecting movements in the global neutral rate of interest, the domestic neutral rate, and the stance of monetary policy. Only the latter is controlled by the central bank. Estimates from a state space New Keynesian model show that central bank policy explains less than half of the variation in interest rates. The rest of the time, the central bank is catching up to trends dictated by productivity growth, demography, and other factors ...
Working Paper Series , Paper 2019-20

Working Paper
Low Interest Rates, Policy, and the Predictive Content of the Yield Curve
Bordo, Michael D.; Haubrich, Joseph G. (2020-08-06)
Does the yield curve’s ability to predict future output and recessions differ when interest rates are low, as in the current global environment? In this paper we build on recent econometric work by Shi, Phillips, and Hurn that detects changes in the causal impact of the yield curve and relate that to the level of interest rates. We explore the issue using historical data going back to the 19th century for the United States and more recent data for the United Kingdom, Germany, and Japan. This paper is similar in spirit to Ramey and Zubairy (2018), who look at the government spending ...
Working Papers , Paper 20-24

Working Paper
Longer-Run Economic Consequences of Pandemics
Taylor, Alan M.; Singh, Sanjay R.; Jordà, Òscar (2020-03-26)
How do major pandemics affect economic activity in the medium to longer term? Is it consistent with what economic theory prescribes? Since these are rare events, historical evidence over many centuries is required. We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 12 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed. In ...
Working Paper Series , Paper 2020-09

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