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As economic activities came to a standstill during the COVID-19 pandemic, the Philippines, like many economies across the globe, experienced rising inflation, currency depreciation and fluctuating capital markets. To manage these variables and stabilize the macroeconomy, the central bank resorted to monetary tightening. In the Philippines, a key mechanism that contributes to this stabilizing effect rests on remittances that have been cushioning the economy from the effects of volatilities and uncertainties in the global economy. During economic downturns and reduced capital flows, remittances provide support not only to recipient households but also to the country's financial sector. Using time series analysis, we estimate the response of remittance inflows on impulses from selected macroeconomic variables, namely interest rate, inflation rate and exchange rate. A common characteristic shared by the selected indicators is their influence on recipient households' consumption-related decisionmaking process. These findings warrant the need to redesign major institutional policies to manage remittances in light of their anticipated feedback effect on the economy. Keywords: Exchange rate, inflation, interest rate, remittances, the Philippines., 1. Introduction Asymmetries in global labour markets have compelled labour movement across economies (Katz and Stark 1987). Driven by business cycles, socio-economic inequalities, political rationales, environmental crises, demographic changes such [...]

Capital inflows have been pinpointed as an important pathway through which the low-income, poor savings and investment as well as widening resource-gap, characterised within the West African sub-region can be filled. Besides the above, the convergence hypothesis has been identified as an important model with which to confirm evidence of club-convergence among countries within the sub-region aimed to supporting or refuting the call for a single-currency or monetary union recently agreed upon by the individual Heads of State. To achieve the above, this study employed Panel Autoregressive Distributed Lagged (PARDL) Technique to examine the threshold effects of capital inflows and macroeconomic conditions, as well as their interactive effects, necessary to spur growth and facilitate convergence among WAMZ countries from 1980 to 2017. The findings revealed that index of macroeconomic conditions and capital inflows are substitutes. Also, thresholds of capital inflows and macroeconomic conditions equivalent to 2.2 percent and 6 percent of GDP respectively are required within each member countries in order to enhance growth and accelerate growth convergence. The study recommends that macroeconomic stability should be ensured, in order to maintain inflows of adequate dosage. In addition, governments of member countries should maintain a threshold of 2.17% and 5.99% of GDP for index of capital inflows (CAPIN) and macroeconomic conditions (MACRO) in order to attract and retain investible funds, reduce external shocks arising from volatility, which in turn enhance growth and convergence. Most significantly, policy-makers should not rely on capital inflows in the short run because it transmits negative signals into the WAMZ economies which militates against growth. Rather, deliberate efforts should be channelled at advancing human capital and trade facilitation through qualitative education and infrastructural financing. In order to extend this study, researchers interested in international macroeconomics can re-examine the capital inflows-macroeconomic conditions relation by adding institutional quality into the models. JEL Classifications: F4, E6, O4 Keywords: Macroeconomic Conditions, Capital Inflows, Growth Convergence, PARDL, INTRODUCTION In the sub-Saharan African (SSA) economies, the investible capital required to support medium and large-scale enterprise are found to often fall below the required benchmark. This might be as [...]

The macroeconomics and traditional stock market nexus is widely explored in the extant literature, but few studies have focused on the impact of macroeconomics on Islamic stock markets. In fact, to our knowledge, only one or two prior studies have looked into both conventional and Islamic stock markets at the same time to see the impact of macroeconomics for comparison purposes. However, these studies have found differing views. Besides, no study has looked into the issue from the standpoint of Bangladesh. To close the gap, the study primarily explores the effect of macroeconomic variables on Islamic and conventional stock indices. Also, it looks at which index (Islamic or conventional) is more susceptible to macroeconomic shocks. The DSEX Shariah Index and the DSE Broad Index of the Dhaka Stock Exchange (DSE) are chosen as Islamic and conventional stock indices, respectively. In contrast, inflation rate, money supply, interest rate, and exchange rate are selected as proxies of macroeconomic variables. Using autoregressive distributed lag (ARDL) and Granger causality approaches for the monthly data from January 2014 to June 2021, our findings indicate that aggregate money supply has a positive long-term influence on both Islamic and conventional indices, whereas interest rates have a negative impact. Conversely, in the short run, the interest rate has a favorable impact on both indices. However, inflation only has a short-term impact on the Islamic stock index. Overall, the findings suggest that both indices behave almost analogously with the macroeconomic variables. Therefore, Islamic investors can undoubtedly choose Islamic stocks for their portfolios without sacrificing significant financial losses. Our study also provides some vital policy implications. Since our study finds a strong link between macroeconomics and stock markets, we urge the monetary authority to align their policies with those of the stock markets in Bangladesh because there were previously some inconsistencies in the policies of the monetary authority and stock markets, which appeared to be partly responsible for the recent stock market crash in Bangladesh in 2010-2011. JEL Classifications: G11, G12, G14, G15 Keywords: Islamic index, conventional index, macroeconomic variables, effect, long-run, short-run Contact author's email address: Email: bokhtiar_bank@yahoo.com, INTRODUCTION Understanding the relationship between a country's macroeconomic condition and stock market movement is crucial since stock indices' change is likely to respond to macroeconomic fundamentals shifts (Khan & Zaman [...]

Some studies on developed economies have revealed that the impacts of oil price shocks have decreased while conclusions about China remain occluded. We investigate the changing effects of oil price shocks on China's macroeconomy and discuss the causes. A time-varying parameter vector autoregressive (VAR) model reveals that impacts of oil price shocks on China's economy have shown a downward trend since 1997. The responses of the real output are much greater and last longer than those of inflation. Then a new Keynesian dynamic stochastic general equilibrium model is developed to synthetically explore the causes. The results indicate that decreasing oil intensity and monopoly power reduce the effects of oil price shocks, while increasing capital intensity in production amplifies them. Other factors-such as changing price stickiness, deregulation of refined oil prices, and shifts in monetary policy targets-have limited effects on the relationship between oil price shocks and China's macroeconomy. Keywords: Oil price shocks, Macroeconomy, China, Dynamic stochastic general equilibrium model, Time varying, 1. INTRODUCTION The effects of oil price shocks on the macroeconomy have attracted much attention. Many oil-importing countries see a correlation between increases in oil prices and subsequent economic downturns [...]

The publication of The General Theory of Employment, Interest, and Money (hereafter GT) in 1936 by John Maynard Keynes (1883-1946) marks one of the great watersheds in the history of [...]

It is important for the policy makers to know what kinds of shocks are responsible for macroeconomic fluctuations or recession to formulate appropriate policy responses. This paper exploits a stylized model to identify the sources of macroeconomic and exchange rate fluctuations in the US. The model consists of a productivity equation, a demand function, an exchange rate augmented Phillips curve, a monetary policy rule and an exchange rate equation (uncovered interest parity (UIP) condition). The stylized model implies a set of short-run restrictions that allow for the identification of the structural shocks in a vector autoregression model in order to test the model's consistency with data. We use real GDP for output, GDP deflator for price, Federal fund rate (FF) as monetary policy. The other two variables are unemployment rate and Nominal effective exchange rate (NEER). Throughout the analyses oil price is used as an exogenous variable. The Sample period starts from 1980q1, and ends at 2008 q2 to avoid possible non-linearity arise from 2008 financial crisis. Results show that more than half of the fluctuation in unemployment and output is explained by two shocks namely productivity/technology shock and aggregate demand shock. Monetary policy shock can explain around 15 per cent while supply and exchange rate shock explain less than 10 percent of the variation in unemployment and output. These results from our simple model are compatible with those from more sophisticated models found in current literature. Hence, our model is more appealing to the policy makers. Further, to gauge the importance of monetary policy in stabilizing the economy, a counterfactual simulation exercise is performed. The exercise shows that monetary policy has stabilized inflation and unemployment, though at the cost of increasing variability in output. The findings of this paper emphasize that policy makers should be aware of the importance of demand side shocks such as policy uncertainty and money supply. A positive uncertainty shock (an increase in uncertainty) may reduce investment and may slow the economic recovery. On the other hand, a prolong period of expansionary monetary policy may make the inflation expectations less anchored. Therefore, the policy makers should try to keep the impact of policy uncertainty at the minimum level and should follow prudent monetary policy. JEL Classifications: E32, E37 Keywords: Macroeconomic Fluctuations, Productivity Shock, Monetary Policy, Structural VAR, Counterfactual Simulation Contact author's email address: mailtorafayet@gmail.com, INTRODUCTION It is important for the policy makers to know what kinds of shocks are responsible for macroeconomic fluctuations or recession to formulate appropriate policy responses. The main body of [...]

This paper investigates macroeconomic interactions in sub-Saharan African (SSA) countries, and more specifically, in the franc CFA zone. The CFA monetary zone is a unique case study because it is the only one that uses a common currency pegged to another currency, namely the euro. Additionally, the SSA region is heavily dependent on raw commodities. How monetary policy constraints affect trade, competitiveness and growth level of commodity-dependent economies? We estimate a Panel Vector Auto-Regressive model using four key macroeconomic variables: growth, current account, real exchange rate, foreign direct investment and the terms of trade. The analysis relies on a sample of 25 SSA countries including 14 belonging to the CFA zone. Two key results emerge from our analysis. First, the results show that foreign investments in CFA countries fail to generate the same positive spillover effects in the extra-CFA countries, highlighting the adverse effect of capital flight. Secondly, this paper shows that the Marshall-Lerner condition is not verified in the CFA context. As a consequence, nominal devaluation could not be used to stimulate the CFA trade balance. In terms of public policy, the most efficient ways to address the challenges generated by raw commodity dependence are through the close monitoring of foreign inbound investments, as well as complimentary domestic investments dedicated to sectors contributing to diversification and long-term growth. Keywords Peg * CFA * Commodity * Investment * SSA JEL Classification C22 * E52 * F45 013 * Q02, Introduction Two African economic and monetary communities, the 'West African Economic and Monetary Union' (WAEMU) and the 'Central African Economic and Monetary Community' (CAEMC) have been using the franc CFA [...]

We introduce a macroeconomic model with heterogeneous households and an aggregate banking sector in order to analyze the impact of rising income inequality under different credit scenarios. Growing inequality produces debt-led consumption boom dynamics when the banking sector is characterized by a lower capital requirement and a higher willingness to lend. Instead, when inequality rises but the banking sector is highly regulated, aggregate demand and output fall. Our results also yield new insights on the appropriate fiscal policy reaction to stabilize the economy: acting on the progressivity of the tax system seems more effective than a proactive countercyclical fiscal policy. (JEL C63, D31, E62, G01), I. INTRODUCTION It is widely established that inequality increased substantially both in developed and in emerging economies, starting from the late 1970s (Alvaredo et al. 2018; Atkinson, Piketty, and Saez [...]

We identify, quantify, and explain the impact of incentive-induced early retirement (ER) of husbands on their wives' probability to retire within 1 year, using administrative data from the Netherlands. Our identification strategy is based on a policy intervention by which targeted individuals working at the central government level became unexpectedly and temporarily eligible for very generous ER benefits. This retirement window of opportunity implied for interested workers that transitions from the current job into full retirement had to be effected swiftly and irreversibly. We find that induced ER of husbands increased their wives' probability to retire by 10 percentage points. This is a strong and robust local average treatment effect. Partly, the effect runs through wives at ages when they may have been eligible for ER programs themselves. (JEL C26, J26, J120, J140), I. INTRODUCTION Large changes across Organisation for Economic Co-operation and Development countries are being observed in labor force participation and retirement patterns of older workers. In particular, average ages at [...]

A growing literature in macroeconomics and finance has found important economic effects of variations in risk, in particular shocks to the volatility of key macroeconomic variables (such as total factor [...]

Aggregate housing demand shocks are an important source of house price fluctuations in the standard macroeconomic models, and through the collateral channel, they drive macroeconomic fluctuations. These reduced-form shocks, however, fail to generate a highly volatile price-to-rent ratio that comoves with the house price observed in the data (the 'price-rent puzzle'). We build a tractable heterogeneous-agent model that provides a microeconomic foundation for housing demand shocks. The model predicts that a credit supply shock can generate large comovements between the house price and the price-to-rent ratio. We provide empirical evidence from cross-country and cross-MSA data to support this theoretical prediction. JEL classification: E21, E44, G21 Key words: price-rent puzzle, heterogeneity, marginal agent, cutoff point, liquidity premium, price-to-rent ratio, collateral constraint, I. INTRODUCTION The 2008 financial crisis was triggered by a collapse of the U.S. housing market. The empirical macroeconomic literature suggests that housing demand shocks be the primary driving force [...]

Abstract Discussions of Modern Monetary Theory elicit surprisingly strong passions. Many of the critiques of MMT by conventional macroeconomists are valid, yet there is a resistance to giving MMT the [...]

Abstract Oil price shocks have had significant effects on the U.S. economy, keeping energy supply, energy policy, and energy security always in focus. The U.S. energy industry has become more [...]

In this paper we examine plausible macroeconomic responses to the ex ante (planned but not implemented yet) reforms in the labor market, taking a currently proposed Social Model in Lithuania as an example. We contribute not only to the current debate on the efficacy of announced structural reforms, but also to the literature on policy evaluation, by assessing reforms from a global perspective. Taking trade linkages and openness into account, we demonstrate macroeconomic reactions to shocks in unemployment benefits, active labor market policies, and tax wedge on the reforming economy. In particular, we show that the omission of an international dimension could lead to seriously biased results on policy effects for any open and small economy. Using a satellite model for the intermediate trade, we link the global framework with the sectoral extensive margin, which changes some of the results derived from the aggregate data. (JEL C33, C54, E62, J38), Economists agree about economics--and that's a science--and they disagree about economic policy because that's a value judgment... I have had profound disagreements on policy with the famous Milton Friedman. But, [...]

Using CARR: Community, Accountability, Relevance, and Reflection to Drive Classroom Instruction. Mark Francek, Central Michigan UniversityLearn how to incorporate 'CARR' to drive instructional practice: C stands for community, A for [...]

We modify NiGEM in order to study the macroeconomic effects of imposing import tariffs in the US under different assumptions regarding the long-run price setting behaviour of exporters. Overall, the [...]

Exchange rate fluctuations have been particularly large since mid-2014, displaying divergent developments across the period. The nominal effective exchange rate of the dollar has appreciated by 15 per cent since [...]

This paper introduces a special issue of the Review on how the National Institute Global Econometric Model (NiGEM) is being used to navigate uncertain times. NiGEM is the leading global [...]

The decline in Latin America's skill premium and income inequality during the 2000s was partly driven by an economic expansion that favored low-skill-intensive service sectors. Evidence shows inequality becomes countercyclical in the 2000s, and unlike previous expansions, the boom was concentrated on services while manufacturing lagged behind. I build an open economy general equilibrium model that features a low-skill-intensive nontradable sector. The model suggests that favorable shocks to commodity prices and international interest rate spreads, such as those that buffeted Latin America in the 2000s, account for about a fifth of the observed decline in the skill premium. (JEL D31, E32, F41, 015, 054), I. INTRODUCTION At least since the first half of the twentieth century, Latin America has been the most unequal region in the world (Williamson 2010). It is well known, however, [...]

This paper describes a new monetary open-economy model where firms have market power due to search frictions in the goods market, and endogenous search effort by consumers mitigates this market power. The optimal inflation rate generally depends positively on the cost of search effort, the cost of firm entry, and the cost of trade. Higher inflation always improves a country's terms-of-trade against its trading partners. I also characterize a general class of matching processes which offer a novel approach to modeling firm sales. (JEL D43, E40, F12), I. INTRODUCTION Models of price dispersion and the endogenous choice of search effort have found application to many macroeconomic questions, but have been limited to closed economies, and to environments [...]

ABSTRACT The relationship between macroeconomic risk and security returns has been central to financial economics. A well-known concept in capital asset pricing theory is that only systematic risk factors affect [...]

It is a great honor, as well as a personal pleasure and privilege, to be invited to deliver the Feldstein Lecture. I have known Marty and Kate for almost 50 [...]

This article shows that unfavorable economic conditions at graduation decrease the likelihood of a good job-worker match over a worker's subsequent career. Mismatch is quantified in terms of overeducation by both industry and occupation. The German Socio-Economic Panel and region-level unemployment rates from 1994 to 2012 are used. Instrumental variables estimates account for endogenous graduation timing. A single percentage point increase in regional unemployment causes an increase in the probability of overeducation of 1.6-1.7 percentage points for university graduates. Effects for technical tertiary education and apprenticeship graduates are smaller. Labor market entry conditions affect workers for up to 9 years after graduation. (JEL J23,322, E32,123), I. INTRODUCTION Research has identified the importance that initial career conditions, such as graduation during recessions, have on workers' long-term earning capability (Kahn 2010; Oreopoulos, von Wachter, and Heisz 2012). [...]

Uncertainty about the future course of the economy is a potential driver of aggregate fluctuations. To identify the distinct dimensions of uncertainty in the macroeconomy, we construct a large dataset covering all types of economic uncertainty. We then identify two fundamental factors that account for the common dynamics in this dataset. These factors are interpreted as macroeconomic uncertainty. The first factor captures business cycle uncertainty, while the second factor represents oil and commodity price uncertainty. While both types of uncertainty generate a decline in output, time-varying oil and commodity price uncertainty is more important for fluctuations in real activity. However, nonlinearities seem to amplify the effect of business cycle uncertainty during the global financial crisis. (JEL C32, C38, E32), I. INTRODUCTION Uncertainty about the future course of the economy is identified as a potential driving force of business cycle fluctuations in recent research (see Bachmann, Elstner, and Sims 2013; [...]

ABSTRACT The intermediation role of banks which is vital for the development of any nation can be adversely affected by non-performing loans. This study investigated the macroeconomic determinants of non-performing [...]

ABSTRACT The interaction between macroeconomic variables and share returns has been a debatable topic since decades. Much of the earlier studies have talked about significant relationships between stock market and [...]

The Covid-19 crisis is unique in several respects. This devastating recession does not have an economic origin, will dance largely to the tune of non-economic factors, and is truly global. The policy response has been equally unique, in terms of speed, size and scope, eliciting an unprecedented concerted effort combining monetary, fiscal and prudential policies. This has contained the fallout. At the time of writing, financial markets have rebounded to the point of looking exuberant, but it all feels more like a truce than a peace treaty. The crisis is transitioning from the liquidity to the solvency phase in a context of limited and shrinking room for policy manoeuvre. All this raises difficult near- and longer-term challenges. Rebuilding policy buffers in all policy areas is likely to be the policy challenge of the decade ahead. Keywords COVID-19 * Macroeconomic policies * Illiquidity * Insolvency * Debt * Inflation, Thank you for the invitation to speak at this event; I am glad to be back. In the next 20 minutes or so, I would like to reflect on the [...]

We examine whether prosperous economic times have both immediate and lasting implications for corporate misconduct among chief executive officers (CEOs). Drawing on research suggesting that prosperous times are associated with [...]

Academic researchers and commentators have drawn attention to the potential link between heightened uncertainty experienced in a presidential election year and slower real economic activity. Our analysis looks at some [...]