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Working Paper
Fair weather or foul? the macroeconomic effects of El Niño
This paper employs a dynamic multi-country framework to analyze the international macroeconomic transmission of El Nio weather shocks. This framework comprises 21 country/region-specific models, estimated over the period 1979Q2 to 2013Q1, and accounts for not only direct exposures of countries to El Nio shocks but also indirect effects through third-markets. We contribute to the climate-macroeconomy literature by exploiting exogenous variation in El Nio weather events over time, and their impact on different regions cross-sectionally, to causatively identify the effects of El Nio shocks on ...
Working Paper
The U.S. oil supply revolution and the global economy
This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Set-identification of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, ...
Working Paper
Growth at Risk From Climate Change
How will climate change affect risks to economic activity? Research on climate impacts has tended to focus on effects on the average level of economic growth. I examine whether climate change may make severe contractions in economic activity more likely using quantile regressions linking growth to temperature. The effects of temperature on downside risks to economic growth are large and robust across specifications. These results suggest the growth at risk from climate change is large—climate change may make economic contractions more likely and severe and thereby significantly ...
Working Paper
A staggered pricing approach to modeling speculative storage: implications for commodity price dynamics
This paper embeds a staggered price feature into the standard speculative storage model of Deaton and Laroque (1996). Intermediate goods inventory speculators are added as an additional source of intertemporal linkage, which helps us to replicate the stylized facts of the observed commodity price dynamics. Incorporating this type of friction into the model is motivated by its ability to increase price stickiness which, gives rise to a higher degree of persistence in the first two conditional moments of commodity prices. The structural parameters of our model are estimated by the simulated ...
Working Paper
Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility?
This paper studies the impact of commodity terms of trade (CToT) volatility on economic growth (and its sources) in a sample of 69 commodity-dependent countries, and assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their long-term growth performance. Using annual data over the period 1981-2014, we employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL) methodology for estimation to account for cross-country heterogeneity, cross-sectional dependence, and feedback effects. We find that while CToT volatility exerts a negative impact on ...
Working Paper
Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers
This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961-2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our ...
Working Paper
Industrialization and the demand for mineral commodities
This paper uses a new data set extending back to 1840 to investigate how industrialization affects the derived demand for mineral commodities. I establish that there is substantial heterogeneity in the long-run effect of manufacturing output on demand across five commodities after controlling for sectoral change, substitution and technological development. My results imply substantial differences across commodities with regard to future demand from industrializing countries and with regard to the effect of demand shocks on prices. Models should include non-Gormand preferences to account for ...
Working Paper
Capital-Skill Complementarity in Manufacturing: Lessons from the US Shale Boom
This paper tests the existence of capital-skill complementarity in the manufacturing sector using quasi-experimental increases in the relative price of low-skill labor induced by the US shale boom. I find that in response to the shale boom, local manufacturing firms decreased their relative usage of low-skill labor while increasing their capital expenditures. These endogenous changes in the input mix allowed manufacturers to maintain the value added despite the increase in the price of low-skill labor, avoiding the potential short-term crowding-out effects of the natural resource boom. ...
Working Paper
Nonlinear Pricing in Village Economies
This paper examines the price of basic staples in rural Mexico. We document that nonlinear pricing in the form of quantity discounts is common, that quantity discounts are sizable for typical staples, and that the well-known conditional cash transfer program Progresa has significantly increased quantity discounts, although the program, as documented in previous studies, has not affected on average unit prices. To account for these patterns, we propose a model of price discrimination that nests those of Maskin and Riley (1984) and Jullien (2000), in which consumers differ in their tastes and, ...
Working Paper
Understanding Climate Damages: Consumption versus Investment
Existing climate-economy models assume climate change has equal impacts on the productivity of firms that produce consumption and investment goods and services. We develop a model of structural change to show that the split between damage to consumption and investment productivity matters for the aggregate consequences of climate change. When investment is more vulnerable to climate, we find smaller short-run consumption losses than leading models suggest, but larger long-run consumption losses. We provide a quantitative illustration of these effects for one type of climate damage in the U.S. ...