1,721,047 research outputs found
Is the Friedman Rule Stabilizing? Some Unpleasant Results in a Heterogeneous Expectations Framework
No full text``The recent economic crisis gave proof of the fact that the Taylor rule is no more that good instrument as it was thought to be just ten years ago; this might be due to the fact that agents acting in the economy hold Heterogeneous Expectations (HE).
In a recent paper Anufriev et al. (2013) suggest that a way to force stability on the economic system is to adopt a more aggressive Taylor rule.
In the present paper a standard NK-DSGE is considered in order to investigate whether a Friedman k-percent monetary policy rule may be a valid instrument to counteract the instability created by the presence of HE in a framework à la Brock and Hommes (1997).
The model here presented suggests that when such a money supply rule is adopted by the Central Bank, stability strongly depends on the intensity of choice, which represents the ability of the agents to switch toward the best available predictor.'
Can You Jump This High? Quantifying Barriers to Market Participation
No full textWe develop a new method to estimate the parameters of threshold distributions for market participation based on an agent-specific attribute and its decision outcome. This method requires few behavioral assumptions, is not data demanding, and can adapt to various parametric distributions. An application to export decisions by French firms shows that threshold distributions are generally right-skewed. We then reveal the asymmetric effects of past policies over different quantiles of the threshold distributions
Carbon Taxation and Electricity Price Dynamics: Empirical Evidence from the Australian Market
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A Method for Agent-Based Models Validation
Full text linkThis paper proposes a new method to empirically validate simulation models that generate artificial time series data comparable with real-world data. The approach is based on comparing structures of vector autoregression models which are estimated from both artificial and real-world data by means of causal search algorithms. This relatively simple procedure is able to tackle both the problem of confronting theoretical simulation models with the data and the problem of comparing different models in terms of their empirical reliability. Moreover the paper provides an application of the validation procedure to the agent-based macroeconomic model proposed by Dosi et al. (2015)
Optimal firm’s dividend and capital structure with mean reverting profitability
No full textWe model a risk-averse decision maker who maximizes the inter-temporal expected utility of a firm’s dividend payouts, choosing both dividends and leverage. The firm’s value and profitability are both stochastic state variables. Motivated by empirical evidence, we model profitability using a mean reverting process. The problem has a quasi-explicit solution. When calibrating the model to actual U.S. data, we show that the optimal dividend policy is smooth and that leverage is, on average, stable over time, in line with empirical evidence. We highlight that these results are related to the strength of profitability’ s mean reversion without the need to account for either asymmetric information or other frictions
The age distribution of business firms
No full textWe investigate upon the shape and the determinants of the age distribution of business firms. By employing a novel dataset covering the population of French businesses, we highlight that a geometric law provides a reasonable approximation for the age distribution. However, relevant systematic deviations and sectoral heterogeneity appear. We develop a stochastic model of firm dynamics to explain the mechanisms behind this evidence and relate them to business dynamism. Results reveal a long-term decline in entry rates and lower survival probabilities of young firms. Our findings bear important implications for aggregate outcomes, notably employment growth
The Janus-Faced Nature of Debt: Results from a Data-Driven Cointegrated SVAR Approach
Full text linkIn this paper, we investigate the causal effects of public and private debts on U.S. output dynamics. We estimate a battery of Cointegrated Structural Vector Autoregressive models, and we identify structural shocks by employing Independent Component Analysis, a data-driven technique which avoids ad-hoc identification choices. The econometric results suggest that the impact of debt on economic activity is Janus-faced. Public debt shocks have positive and persistent influence on economic activity. In contrast, rising private debt has a milder positive impact on GDP, but it fades out over time. The analysis of the possible transmission mechanisms reveals that public debt crowds-in private consumption and investment. In contrast, mortgage debt fuels consumption and output in the short-run, but shrinks them in the medium-run
The Anatomy of Government Bond Yields Synchronization in the Eurozone
Full text linkWe investigate the synchronization of Eurozone's government bond yields at different maturities. For this purpose, we combine principal component analysis with random matrix theory. We find that synchronization depends upon yields maturity. Short-term yields are not synchronized. Medium- and long-term yields, instead, were highly synchronized early after the introduction of the Euro. Synchronization then decreased significantly during the Great Recession and the European Debt Crisis, to partially recover after 2015. We show the existence of a duality between our empirical results and portfolio theory and we point to divergence trades and flight-to-quality effects as a source of the self-sustained yield asynchronous dynamics. Our results envisage synchronization as a requirement for the smooth transmission of conventional monetary policy in the Eurozone
Unconventional Monetary Policy in the USA and in Europe
No full textCentral banks reacted to the financial crisis through sets of unconventional monetary policies that encompass the use of market operations, forward guidance and negative interest rates. We discuss the phenomena that have characterized balance sheet-based policies in the USA and in the EU, and we relate the effects of these policies to the financial stability objective. Our interpretation of the available empirical evidence is that QE lowered long-term yields and eased credit conditions, but had only mild effects on macroeconomic fundamentals. Also, the recent tapering process might lead to potentially dangerous contingencies. Among them, we discuss the portfolio reallocation toward riskier stocks, the possibility of asset prices bubbles, a lower central bank independence and a reduced distance between monetary and fiscal policies
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