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In his recent paper in this journal, Bradley Bateman (2021) breaks with the "standard view" of Frank Ramsey's influence on Jahn Maynard Keynes and argues that Ramsey's pragmatist philosophical thought underpinned both Keynes's acceptance of Ramsey's subjective theory of probability and Keynes's adoption of a narrative theory of the role of confidence in economic fluctuations in the General Theory. In this paper it is argued that Bateman is right both in emphasizing the influence of Ramsey's pragmatist philosophy on Keynes's thought during the development of the General Theory and afterwards and in arguing that the influence of Ramsey's pragmatist philosophy partly explains Keynes's emphasis on the importance of the state of confidence in Chapter 12 of the General Theory. However, it is argued that Ramsey's pragmatist philosophy had a much greater influence on Keynes than acknowledged by Bateman. Furthermore, contra Bateman, Keynes's move to a more pragmatist philosophical position does not imply that Keynes accepted Ramsey's subjective theory of (measurable) probability. [ABSTRACT FROM AUTHOR]

Sovereign defaults are associated with income and trade reductions and terms-of-trade deterioration. This paper develops a two-country model to study the interactions between income, trade, terms of trade, and foreign-debt default risk and default events. Such default risk and events are costly because they adversely affect the demand for a borrower country's intermediate goods exports and its income. Consequently, trade flows change due to the income loss and consumption home bias. The defaulter's terms of trade also deteriorate endogenously, which accelerates its income and trade losses. The model produces procyclical imports, exports, terms of trade, and other empirical features of emerging countries' business cycles and default episodes. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between credits and sector-level output dynamics in a sample of 41 advanced and developing countries. The existing literature shows that household credits are associated with boom-bust cycles in aggregate output, whereas business loans do not cause such output dynamics. The present paper expands these findings in terms of advanced versus developing countries and manufacturing versus services sectors. The new findings indicate that the resulting boom-bust cycles in the aggregate output in response to household credits are generally observed in the sample of developing countries, with no similar dynamics in the advanced countries. Another significant conclusion is that the boom-bust cycles are generated mostly in the services sector. No equivalent boom-bust dynamics are observed in the manufacturing sector, but the negative medium-run effects of household credits are larger in this sector. These findings indicate that credit mechanisms and consequences can significantly vary across countries and sectors. [ABSTRACT FROM AUTHOR]

The existing output gap measures for the US economy rely on aggregate data and assume a constant output gap over sectors (see Coibion et al. [(2018) Brookings Papers on Economic Activity , 333–441] and Owyang et al. [(2018) Federal Reserve Bank of St. Louis Review , 297–316]); however, each sector has its cycle, which does not necessarily match the business cycle (Burns and Mitchell [(1946) National Bureau of Economic Research]). By modeling sectoral cycles based on their investment cycles with a nonparametric method, I estimate output gaps of 20 US sectors over 1948–2020. The weighted mean output gap indicates a persistent spare capacity in the last business cycle, pointing to insufficient stabilization policies behind secular stagnation. Phillips curve estimations with the weighted quartiles of sectoral output gaps show that the output gap of bottleneck sectors (weighted Q3) is correlated strongly with inflation over 1950–2020. Policymakers can track bottleneck sectors to mitigate inflationary pressures while supporting the sectors with negative output gaps to stabilize the output at its potential. My findings show that it is possible to produce more output by sector-level demand supporting policies without generating inflation. [ABSTRACT FROM AUTHOR]

This paper studies the impact of immigration on the US macroeconomy. I identify structural vector autoregressions (SVARs) with time-varying parameters (TVPs) and stochastic volatility (SV) using a novel set of restrictions. The TVP-SV-SVARs are estimated on a quarterly sample including average labor productivity (ALP), hours worked, immigration, consumption, and term spread from 1953 to 2017. An immigration supply shock increases domestic ALP and hours worked over the business cycle horizons. Movements in immigration are explained by its own shock and to a lesser extent by the productivity and news shocks. IRFs driven by these shocks vary over the sample, especially around changes in immigration policy such as the Immigration Act of 1990. In contrast, the forecast error variance decompositions exhibit little change over the sample. Immigration plays an important role in the US macroeconomy. [ABSTRACT FROM AUTHOR]

This paper provides estimates of the probability of an economy hitting its effective lower bound (ELB) on the nominal interest rate and of the expected duration of such an event for eight advanced economies. To that end, a mean-adjusted panel vector autoregression with static interdependencies and the possibility of regime change is estimated. The simulation procedure produces ELB risk estimates for both the short term, where the current phase of the business cycle plays an important role, and the medium term, where the occurrence of an ELB situation is determined mainly by the equilibrium values of macroeconomic variables. The paper also discusses the ELB event probability estimates with respect to previous approaches used in the literature. [ABSTRACT FROM AUTHOR]

Bernard Lonergan S.J. (1904–1984) is unusual among major theologians in engaging deeply with economic theory. In the 1940s he developed his own dynamic multisectoral macroeconomic model, informed by readings of Adam Smith, Karl Marx, John Maynard Keynes, Friedrich Hayek, Joseph Schumpeter, and later Michal Kalecki. Lonergan's economic research is little known because the economic manuscripts were not published in his lifetime and his interactions with professional economists were limited. In the 1970s, however, when he returned to economics he engaged with post-Keynesians and taught a graduate course on macroeconomics at Boston College until illness overtook him. This paper places Lonergan's economic research in the context of his overall intellectual project, outlines his macroeconomic model and associated theory of the business cycle, then evaluates his contribution in relation to mid-twentieth-century macroeconomics and considers whether it has anything to offer contemporary economists. Whatever view we take of his theoretical contributions, Lonergan's work opens up connections between economics and theology. [ABSTRACT FROM AUTHOR]

The expectational stability (E-stability) property of rational expectations equilibria (REE) in linear macroeconomic dynamic stochastic general equilibrium (DSGE) models is known to be sensitive to the information available to decision makers as well as the structure of the economic environment considered. Models featuring news shocks as a source of macroeconomic fluctuations depart from traditional assumptions regarding both the structure of the economy and the information set of agents. This paper investigates whether E-stability of REE is affected by either the inclusion of news shocks by themselves or the complementary structural changes. The main results find that the E-stability property of REE is robust to the inclusion (or exclusion) of news shocks and that well-known news-shock DSGE models permit REE which are simultaneously E-stable and capable of producing qualitatively realistic expectationally driven business cycles. [ABSTRACT FROM AUTHOR]

This paper estimates the causal impact of short-term aggregate fluctuations in Egypt, 1911–48, using global cotton price shocks. Firm entry was procyclical, and exit was acyclical. There were persistent differences between cohorts over the cycle; expansionary cohorts were of lower quality. The evidence supports models of firm entry with ex-ante heterogeneity. The findings highlight the extensive margin of entry as the primary adjustment mechanism. As a result, recessions had a strong "isolation" effect. This nature of firm entry amplified and propagated temporary price shocks. [ABSTRACT FROM AUTHOR]

Expectations are among the main driving forces for economic dynamics. Therefore, managing expectations has become a primary objective for monetary policy seeking to stabilize the business cycle. In this paper, we study whether central banks can manage private-sector expectations by means of publishing one-period ahead inflation projections in a New Keynesian learning-to-forecast experiment. Subjects in the experiment observe these projections along with the historic development of the economy and subsequently submit their own one-period ahead inflation forecasts. In this context, we find that the central bank can significantly manage private-sector expectations and that this management strongly supports monetary policy in stabilizing the economy. Moreover, published central bank inflation projections drastically reduce the probability of a deflationary spiral after strong negative shocks to the economy. [ABSTRACT FROM AUTHOR]

This paper examines how wealth and income inequality dynamics are related to fluctuations in the functional income distribution over the business cycle. In a panel estimation for OECD countries between 1970 and 2016, although inequality is, on average countercyclical and significantly associated with the capital share, one-third of the countries display a pro- or noncyclical relationship. To analyze the observed pattern, we incorporate distributive shocks into an RBC model, where agents are ex ante heterogeneous with respect to wealth and ability. We find that whether wealth and income inequality behave countercyclically or not depends on the elasticity of intertemporal substitution and the persistence of shocks. We match the model to quarterly US data using Bayesian techniques. The parameter estimates point toward a non-monotonic relationship between productivity and inequality fluctuations. On impact, inequality increases in response to TFP shocks but subsequently declines. Furthermore, TFP shocks explain 17% of inequality fluctuations. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to focus directly on the phase shift. For one thing, we ask whether a New Keynesian sticky-price model economy can account for both countercyclical prices and procyclical inflation. We present findings in which the price level is countercyclical and the inflation rate is procyclical. We proceed to use the model economy as an identification mechanism. What set of individual shocks are necessary to account for the phase shift? That set contains the price markup shock. Next, we ask what set of shocks are sufficient to account for the phase shift. This set contains three elements: the price markup and wage markup shocks along with the government spending shock. The results are important as a building block. We infer that price stickiness is an important model feature; without price stickiness, we are in the real business cycle economies that Cooley and Hansen studied. But, it raises further questions. For instance, is price stickiness of the Calvo form—the one used here—necessary to explain the phase shift? [ABSTRACT FROM AUTHOR]

This paper proposes a new conceptualization of business model (BM) that rigorously exploits the important insights this notion offers and links them to related views developed in economics and business studies. We develop the foundations of a BM concept consistent with the principles of generalized Darwinism (GD) and with contributions already developed within this framework. Thus, we demonstrate the relevance of GD as a unifying framework for developing the evolutionary theory of firm and industry. We suggest analysing BM as a generative replicator hosted by the firm, which structures interactions between the members of this organization and the social entities of its industrial environment. We argue that GD allows us to clarify the nature and boundaries of the BM concept and to specify its relationships to other key evolutionary concepts, such as organizational routines. [ABSTRACT FROM AUTHOR]

This paper investigates the quantitative implications of real wage rigidities and heterogeneity for two long-lasting puzzles in the business cycle literature: the low correlation between total hours worked and labor productivity and the large volatility of the labor wedge, defined as a gap between the marginal rate of substitution of aggregate leisure for aggregate consumption and the marginal product of aggregate labor. I shed light on these issues by extending a heterogeneous-agent model with an indivisible labor supply choice to real wage rigidities. I find that a small amount of real wage stickiness would be sufficient to resolve both anomalies when long-term wage contracts and heterogeneity are taken into account. [ABSTRACT FROM AUTHOR]

This paper estimates an enriched version of the mainstream medium-scale dynamic stochastic general equilibrium model, which features nonseparability between consumption and real money balances in utility and a systematic response of the policy rate to money growth. Estimation results show that money is a significant factor in the monetary policy rule. As a consequence, econometric analysis that omits money from Taylor rules may lead to biased estimates of the model parameters. In contrast to earlier studies that rely on small-scale models, the paper stresses the merits of using a sufficiently rich model. First, it delivers different results, such as the role of nonseparability between consumption and money in utility. Second, the rich dynamics embedded in the model allow us to explore the responses of a larger set of macroeconomic variables, making the model more informative on the effects of shocks and more useful for understanding the sources of business cycles. Third and most importantly, it reveals the possible pitfalls of relying on small-scale models when studying money's role in business cycles. [ABSTRACT FROM AUTHOR]

The empirical importance of news shocks—anticipated future shocks—in business cycle fluctuations has been explored by using only actual data when estimating models augmented with news shocks. This paper additionally exploits forecast data to identify news shocks in a canonical dynamic stochastic general equilibrium model. The estimated model shows new empirical evidence that technology news shocks are a major source of fluctuations in US output growth. Exploiting the forecast data not only generates more precise estimates of news shocks and other parameters in the model, but also increases the contribution of technology news shocks to the fluctuations. [ABSTRACT FROM AUTHOR]

This paper establishes new stylized facts about labor market dynamics in developing economies, which are distinct from those in advanced economies, and then proposes a simple model to explain them. We first show that the response of hours worked and employment to a technology shock—identified by a structural VAR model with either short-run or long-run restrictions—is substantially smaller in developing economies. We then present compelling empirical evidence that several structural factors related to the relevance of subsistence consumption across countries can jointly account for the relative volatility of employment to output and that of consumption to output. We argue that a standard real business cycle (RBC) model augmented with subsistence consumption can explain the several salient features of business cycle fluctuations in developing economies, especially their distinct labor market dynamics under technology shocks. [ABSTRACT FROM AUTHOR]

As our understanding of the process of resilience has become more culturally and contextually grounded, researchers have had to seek innovative ways to account for the complex, reciprocal relationship between the many systems that influence young people's capacity to thrive. This paper briefly traces the history of a more contextualized understanding of resilience and then reviews a social–ecological model to explain multisystemic resilience. A case study is then used to show how a multisystemic understanding of resilience can influence the design and implementation of resilience research. The Resilient Youth in Stressed Environments study is a longitudinal mixed methods investigation of adolescents and emerging adults in communities that depend on oil and gas industries in Canada and South Africa. These communities routinely experience stress at individual, family, and institutional levels from macroeconomic factors related to boom-and-bust economic cycles. Building on the project's methods and findings, we discuss how to create better studies of resilience which are able to capture both emic and etic accounts of positive developmental processes in ways that avoid the tendency to homogenize children's experience. Limitations to doing multisystemic resilience research are also highlighted, with special attention to the need for further innovation. [ABSTRACT FROM AUTHOR]

This paper explores the effect of fiscal policy on the welfare of heterogeneous agents with different income sources over the business cycle. Policy experiments allow the government to choose the cyclical properties of fiscal policy instruments conditional on long-run levels to separately maximize the welfare of entrepreneurs and workers. This policy choice creates welfare conflicts between the two groups, which is confirmed by empirical evidence. The government maximizes workers' welfare by choosing procyclical capital income tax rates and countercyclical labor income tax rates while it optimizes entrepreneurs' welfare with countercyclical capital income tax rates and strongly countercyclical labor income tax rates. The socially optimal policy is a tradeoff between the welfare of entrepreneurs and workers. The welfare conflict holds when the government modifies the cyclical behavior of policy in a crisis, or it adjusts the long-run level and cyclical behavior at the same time. [ABSTRACT FROM AUTHOR]

The need of further research on the interlink between culture and institutions has been strongly advocated by economists and institutionalists alike. However, bringing together culture and institutions within an organic framework, though, is a non-trivial operation. This is due to the complexity of the synergies between cultural aspects and institutional devices. This special issue attempts to start filling this gap and to build an ad-hoc systemic platform for disseminating such a debate. To this purpose, it brings together an organic collection of contributions in well-established conceptualisations of both culture and institutions, supported by robust and consistent methodological applications. The essays presented in this work provide consistent evidence and conceptual perspectives supporting the idea that the synergies between cultural and institutional aspects are of paramount importance to understand human behaviour, individuals' choices and societies' patterns. They also improve the theoretical, empirical and methodological understanding of the role of institutions and culture in different geopolitical and socio-economic realms. By doing so, these contributions place this special issue as prelude to further research on the co-evolution of culture and institutions and on its possible implications on different societal aspects, human development and well-being. [ABSTRACT FROM AUTHOR]

The literature on international business cycles has employed dynamic factor models (DFMs) to disentangle global from group-specific and national factors in countries' macroeconomic aggregates. Therefore, the countries have simply been classified ex ante as belonging to the same region or the same level of development. This paper estimates a DFM for a sample of 106 countries and three variables (output, consumption, investment) over the period 1960–2014, in which the countries are classified according to the outcome of a cluster analysis. By comparing the results with those obtained by the previous grouping approaches, we show substantial deviations in the importance of global and group-specific factors. Remarkably, when the groups are defined properly, the "global business cycle" accounts for only a very small fraction of macroeconomic fluctuations, most evidently in the industrialized world. The group-specific factors, on the other hand, play a much greater role for national business cycles than previously thought—also in the pre-globalization period. [ABSTRACT FROM AUTHOR]

In this paper, we identify the technology shock at business cycle frequencies to improve the performance of structural vector autoregression models in small samples. To this end, we propose a new identification method based on the spectral decomposition of the variance, which targets the contributions of the shock in theoretical models. Results from a Monte-Carlo assessment show that the proposed method can deliver a precise estimate of the response of hours in small samples. We illustrate the application of our methodology using US data and a standard Real Business Cycle model. We find a positive response of hours in the short run following a non-significant, near-zero impact. This result is robust to a large set of credible parameterizations of the theoretical model. [ABSTRACT FROM AUTHOR]

This paper analyzes the effect of the sectoral composition of government spending on the stability properties of a two-sector economy with a progressive tax structure. The results suggest that indeterminacy is more likely to occur if the fraction of government spending on consumption goods increases. This study also finds that, under progressive taxation, a sufficiently high public-consumption share is needed to generate indeterminacy. It is shown that, with the benchmark parameterization, a higher fraction of government spending on consumption goods needs to be implemented with a more progressive tax scheme to stabilize the economy. Moreover, it is emphasized that belief-driven economic fluctuations may indeed be a feature of the U.S. economy. [ABSTRACT FROM AUTHOR]

We propose a macroeconomic model in which adverse selection in investment amplifies macroeconomic fluctuations, in line with the prominent role played by the credit crunch during the financial crisis. Endogenous lending standards emerge due to an informational asymmetry between borrowers and lenders about the riskiness of borrowers. By using loan approval probability as a screening device, banks ration credit following increases in lending risk, generating large endogenous movements in TFP, explaining why productivity often falls during crises. Furthermore, the mechanism implies that financial instability is heightened when interest rates are low. [ABSTRACT FROM AUTHOR]

In theory, financial markets promote innovation by selectively allocating capital to high-quality projects. In this article, I show that equity markets can also inhibit innovation. In public firms, I find that short-term equity market declines cause pharmaceutical companies to abandon early-stage drug developments, irrespective of drug quality or changes in a firm's stock price. I show that financing constraints drive this behavior, highlighting that even short-term market fluctuations can have long-term effects on pharmaceutical innovation and prevent potentially life-saving drugs from progressing to the market. [ABSTRACT FROM AUTHOR]

It has been shown that progressive income taxation may stabilize an otherwise standard representative-agent real business cycle model with an indeterminate steady state against aggregate fluctuations caused by agents' animal spirits. By contrast, within an identical model that allows for sustained economic growth, progressive taxation could lead to equilibrium indeterminacy and sunspot-driven fluctuations. In the context of household heterogeneity that gives rise to income and asset inequality, the fiscal authority has (at least) two options of setting the baseline level of taxable income: (i) the economy-wide average level of income and (ii) the economy's steady-state level of per capita income. I show that the adoption of a fiscal rule (i) invalidates the effects that a progressive tax can exert on the model's local stability properties. Progressive income taxation thus no longer operates as an automatic stabilizer that mitigates belief-driven cyclical fluctuations in a no-growth economy, nor as an automatic destabilizer that leads to local indeterminacy in a sustained-growth economy. If a tax policy rule (ii) is instead adopted, then the existing literature's findings of the (de)stabilizing roles of progressive taxation are robust to the inclusion of household heterogeneity. [ABSTRACT FROM AUTHOR]

The rate cuts helped drive down bond yields with 10-year US T-bond yields decreasing from 6.45% p.a.at the end of 1999 to 3.37% by May 2003, though the reduction in 30-year yields was smaller, falling from 6.48% p.a.at the end of 1999 to 4.59% by May 2003. The fall in UK Gilt yields was more muted, with 10-year yields falling from 5.38% p.a. at the end of 1999 to 4.16% by May 2003 while the 25-year yield was generally higher over the period than 4.23% at end 1999. In conclusion, based on the Global Financial Crisis, there is likely to be a medium/high correlation between downward movements in highly rated government bond yields in a market crisis, though this will not be perfect as central banks will react in different ways, and flight to quality may drive down US T-bond and perhaps German Bund yields lower than say UK Gilts. Real yields at other terms also rose in this period - from August to October 2008, US 5- and 20-year yields rose by +235bps and +106bps, while from August to November 2008, UK 5- and 20-year real yields rose by +292bps and +83bps respectively. Sovereign spread rises are likely to be correlated with both downward shocks to yields of highly rated government bonds arising from responses to market crises, and also upward shocks to yields on these bonds. [Extracted from the article]

We present evidence that short sellers alternate between stock picking during expansions and market timing during recessions. First, firm-level short interest is a much stronger negative predictor of the cross-section of stock returns during expansions than it is during recessions. High short interest also only predicts negative future earnings announcement returns during expansions. We attribute these findings to short sellers' emphasis on collecting firm-specific signals. Second, short sellers appear to make factor bets more so during recessions than during expansions. These bets tend to pay off as we observe a strong negative relation between the betas of highly shorted stocks and future stock market returns, a result that disappears during expansions. Together, these findings are consistent with theories of information acquisition under attention constraints, endogenous information production, as well as theories of time variation in aggregate overconfidence amongst traders. [ABSTRACT FROM AUTHOR]

These studies show, quite contrary to the economic historians' previous understanding of the early state that embedded a "redistributive" economy, the perspective of an early stage of a commodity economy, based on mass-production of ritual or everyday objects in huge factories.[37] The studies also show that it is beneficial, and indeed necessary, for the archaeologists who deal with matters in economy to conduct research under agendas developed by social historians, so the meaning of their material evidence can be fully appreciated by historians in cross-cultural analyses. Simply speaking, the ancient Chinese economy since the Bronze Age had the strong characteristics of that of a "domain state", in which the royal house and the state produced large proportions of the material provision that it needed to survive, and made its budget (if any) based on it.[30] It can also be considered a lineage economy in which the whole economy was sliced into many largely independent domains organized by the lineages. The evidence suggests that the private economy was not only supplemental to the state economy, but was indispensable to the healthy operation of the state economy. If there is an overall argument about the early Chinese economy in the book, it is the view of the two editors that the ancient Chinese economy differs from the Polanyi-Finley model of substantivist economy for its strong trend towards market exchange, commercialization of its products, and manipulation of prices (1-2). [Extracted from the article]

We examine the start date of the Great Recession across OECD countries. The Sahm Rule identifies the start of recession in the US to the beginning of 2008 but in most other OECD countries it identifies the start after that identified by two successive falls in quarterly GDP. We establish our own rule for predicting recession using the fear of unemployment series to predict recession. We show a 10-point rise in the series compared to its previous 12 month low predicted the onset of the Great Recession in both the United States and Europe. [ABSTRACT FROM AUTHOR]

Emissions are directly linked to economic output and consequently subject to business cycle fluctuations. The present study analyses the interactions between climate policies and business cycles through the lens of a New Keynesian dynamic stochastic general equilibrium model. We compare a static cap-and-trade policy with a dynamically adjusting policy in terms of macroeconomic stabilisation, welfare and emissions price dynamics. The results of the quantitative evaluation suggest that a constant policy leads to lower aggregate volatility but is associated with larger welfare costs. In contrast, under the dynamic policy emissions prices and labour markets display less variations. [ABSTRACT FROM AUTHOR]

This article contributes to the literature analysing the role of public banks in crises. Taking the case of Spain, it analyses the behaviour of the public bank (ICO) between 1971 and 2015, specifically during two crises: the crisis of the 1970s, when Spain was an economically backward country coming out of a dictatorship; and that of 2008–13, by which time it had integrated into the international economy. Public credit underwent sweeping privatization in 1991, which translated into major downsizing. From then on, a gradual process of modernization began, mainly characterized by institutional changes in governance and access to resources. Our results indicate that public and private credit behave differently during recessions. Private credit always remains closely synchronized with the business cycle, but public credit less so. [ABSTRACT FROM AUTHOR]

This study examines the driving forces behind the strong decline in German unemployment from 2005 onwards and the exceptionally small increase during the Great Recession. Structural vector autoregressions (VARs) with sign restrictions show that wage moderation in the aftermath of labor market reforms was the dominant factor of the unemployment decline, and that improved matching and shrinking labor supply also contributed to it. The adjustment to business cycle shocks (Great Recession), on the other hand, is to a large extent borne by the intensive margin, which can be explained by institutional aspects of the German labor market. [ABSTRACT FROM AUTHOR]

This article provides an overview of different models and approaches used to analyze transition risk for corporate bonds. It discusses the two-factor model and the Vašíček model, which are commonly used in credit risk calculations. The article also mentions the use of historic transition matrices, probability distributions, and copulas to create risk distributions for parameters. The K-means clustering algorithm is introduced as a non-parametric model for analyzing transition matrices. The article emphasizes the importance of considering historical data and the challenges of modeling financial and non-financial firms separately. Further research is needed to improve understanding and application of these models. [Extracted from the article]

Instead, state authorities either limit economic activities (working to prevent or punish outlawed transactions) or play a parasitic role (demanding bribes, for example, in exchange for allowing illegal exchanges to take place).[1] If we define illegal markets as arenas of competitive exchange in which the state cannot or refuses to secure property rights, resolve conflicts, or provide other market-related supports, then we have to look elsewhere for these ordering arrangements. Whereas commodities might be variously rendered legal or illegal over time (type 1) and regulations can change (type 5), the legalization of a market for stolen goods cannot happen unless the property rights regime that forms the basis for the market is reworked, if not completely overhauled. From a consumer perspective, illegal actions in legal markets are somewhat similar to markets for stolen goods (type 2) and markets for counterfeits, pirated goods, and forgeries (type 3) in the sense that buyers may be uninterested in the production or procurement process and more concerned with the product's price, availability, or value. This collection of articles features field-based research on illegal markets across Latin America, with special attention to the expectations and representations of the future that surround and emerge from people's involvement in illegal economic activities. We therefore ask: If participation in legal and socially legitimate capitalist markets tends to inculcate people with a shared future imaginary, how might futurity differ among populations who view governments, legal regimes, and corporate power with greater suspicion?. [Extracted from the article]

The monetary authority's choice of operating procedure has significant implications for the role of monetary aggregates and interest rate policy on the business cycle. Using a dynamic general equilibrium model, we show that the type of endogenous monetary regime, together with the interaction between money supply and demand, does well to capture the actual behavior of a monetary economy—the USA. The results suggest that the evolution toward a stricter interest rate-targeting regime renders central bank balance sheet expansions ineffective. In the context of the 2007–2009 Great Recession, a more flexible interest rate-targeting regime would have led to a significant monetary expansion and more rapid economic recovery in the USA. [ABSTRACT FROM AUTHOR]

This article proposes a historical assessment of harmonic analysis of business cycles and its ability to both decompose and build cycles, as received at the Moscow Conjuncture Institute. It traces how the Fourier transform arrived at the Institute, mediated by Henry L. Moore, in the works and actions of Albert Vainshtein, Nikolai Chetverikov, and Nikolai Kondratiev, ultimately leading to Eugen Slutsky's well-known 1927 article "The Summation of Random Causes as the Source of Cyclic Processes." Although the evidence does not warrant the assumption that there was an orchestrated effort at the Institute to push forward a research agenda on harmonic analysis of business cycles, it certainly unfolded as more than the summation of random events and individual incursions. Moreover, the Institute as a whole could have produced much more on this matter if it had escaped Stalinist oppression for at least a few more years. [ABSTRACT FROM AUTHOR]

In a standard overlapping generations model, we show how the health effects of pollution impact the balanced-growth path (BGP) and the transition dynamics of the economy. The key driver is the differential between physical and human capital accumulation. The differential occurs because pollution alters the incentives to save and to invest in education via reductions in longevity and alters the effectiveness of education expenditures via impaired cognitive learning. Two predictions of the model are noteworthy. The first prediction is the existence of two stable BGPs with a separating saddle path. One BGP is desirable featuring high economic growth and low pollution, whereas the other should be avoided because it is associated with low economic growth and high pollution. The second prediction is that economic and environmental cycles may emerge, implying inequality between generations. These theoretical results are supported by empirical evidence and imply a role for government to steer the economy toward the desirable BGP and eliminate the cycles. [ABSTRACT FROM AUTHOR]

We introduce business-to-business (B2B) relationships into an otherwise standard model to revisit two aspects of price dynamics in a unified analysis. On one side, the pass-through of cost shocks to prices is empirically incomplete. On the other side, the literature contains conjectures that long-term relationships may reduce the allocative role of price changes. After a partial equilibrium analysis of these aspects, we consider the general equilibrium effects. The formation of B2B relationships implies that the trade of intermediate goods depends on search, bargaining, and the adjustment along the intensive margin as opposed to the extensive margin. We find that, when this adjustment is costly, retailers have a relatively high bargaining power, and mismatch shocks are possible, the model can account for the second moments of the US producer price index and other variables. In this case, although its allocative role is low, the intermediate goods price affects the allocation of goods through the search externalities and is sufficiently volatile. The analysis includes several sensitivity tests and comparisons. [ABSTRACT FROM AUTHOR]

We develop an N-regime Markov-switching model in which the latent state variable driving the regime switching is endogenously determined with the model disturbance term. The models structure captures a wide variety of patterns of endogeneity and yields a simple test of the null hypothesis of exogenous switching. We derive an iterative filter that generates objects of interest, including the model likelihood function and estimated regime probabilities. Using simulation experiments, we demonstrate that the maximum likelihood estimator performs well in finite samples and that a likelihood ratio test of exogenous switching has good size and power properties. We provide results from two applications of the endogenous switching model: a three-state model of US business cycle dynamics and a three-state volatility model of US equity returns. In both cases, we find statistically significant evidence in favor of endogenous switching. [ABSTRACT FROM AUTHOR]

This study revisits the relationship between economic variables and alcohol consumption from a macro perspective. Focusing explicitly on the asymmetries of the responsiveness of alcohol consumption during the expansion and contraction phases of the business cycle, asymmetric panel estimators are employed. We employ a nonlinear autoregressive distributed lag model for a panel of 24 countries for the period 1961 to 2014. Findings show that expansion leads to a long-term increase in average alcohol consumption, while during contraction, the level of average alcohol consumption persists. Expansion, together with a pronounced reduction in the unemployment rate could, however, lead to a net reduction of gross alcohol and wine consumption. Nonetheless, if the recession corresponds with a surge in unemployment, this leads to a long-run increase in the level of total gross alcohol consumption but a decrease in wine and beer consumption. Reduction in unemployment does not lead to a reduction in beer consumption, as pre-expansion levels of beer consumption persist. (JEL Classifications: E32, I19, L66) [ABSTRACT FROM AUTHOR]