159 research outputs found
Numerical solution of dynamic equilibrium models under Poisson uncertainty
No full textWe propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the retarded type. We apply the Waveform Relaxation algorithm, i.e., we provide a guess of the policy function and solve the resulting system of (deterministic) ordinary differential equations by standard techniques. For parametric restrictions, analytical solutions to the stochastic growth model and a novel solution to Lucas' endogenous growth model under Poisson uncertainty are used to compute the exact numerical error. We show how (potential) catastrophic events such as rare natural disasters substantially affect the economic decisions of households. (C) 2013 Elsevier B.V. All rights reserved
Explaining Output Volatility: The Case of Taxation
No full textThis paper presents empirical evidence against the popular perception that macro volatility is exogenous. We obtain tax effects on macro aggregates in the stochastic neoclassical model. Taxes are shown to affect the second moment of output growth rates without affecting the first moment. Exploiting heterogeneity patterns in a panel of OECD countries, we estimate tax effects on macro volatility, explicitly modeling the unobserved variance process. We find a strong empirical link between taxes and output volatility. Accounting for non-stationarity of taxes and output volatility, we find empirical evidence of a cointegrating relationship.macroeconomic volatility, tax effects, continuous-time DSGE models
Fiskalpolitik in Allgemeinen Gleichgewichtsmodellen
No full textDas erste Kapitel meiner Dissertation hinterfragt den konventionellen keynesianischen
Standpunkt, dass antizyklische Fiskalpolitik reale Variablen über den Konjunkturzyklus
stabilisiert. Ich präsentiere empirische Ergebnisse eines strukturellen
VECM Modells die zeigen, dass Staatsschulden in den Vereinigten Staaten prozyklisch
mit dem Produktionsniveau verlaufen. Dieses Ergebnis mag wenig überraschend
sein, wenn man Korrelationen betrachtet, allerdings zeigt die Analyse einen kausalen
Zusammenhang auf. Anschließend modelliere ich Fiskalpolitik als Regeln, die durch
endogene Modellvariablen beeinflusst werden. Die Koeffizienten dieser Regeln werden
so kalibriert, dass sie mit dem prozyklischen Verhalten der Staatsschulden übereinstimmen.
Das Ergebnis ist, dass die Standardabweichung wichtiger makroökonomischer
Variablen deutlich niedriger ist, verglichen mit Regeln kalibriert auf antizyklischer
Staatsverschuldung. Der Grund ist ein Vermögenseffekt, der in diesem Modell
aufgrund der „perpetual-youth“ Struktur der Agenten entsteht. Daher hält die Ricardianische
Äquivalenz nicht mehr und Veränderungen der Staatsschulden haben
einen Effekt auf das Vermögen der Haushalte und, folgerichtig, auf ihre Konsum-
Freizeit Entscheidung. Dieser Vermögenskanal war insbesondere in der Great Recession
bedeutend. Meine Analyse zeigt einen neuen Weg für fiskalpolitische Entscheidungsträger
auf, Vermögenseffekte zu erzeugen und zwar dadurch, das Staatsschulden
als automatischer Stabilisator wirken.
Das zweite Kapitel der Dissertation beschäftigt sich mit den Interaktionen von
Geld- und Fiskalpolitik. Eine empirische Analyse zeigt, dass die Politik der FED
von dem gegenwärtigen Stand der Fiskalpolitik beeinflusst wird. Zunächst schätze
ich die Parameter einer Taylor-Zinsregel. Der Schwerpunkt der empirischen Analyse
ist allerdings die Schätzung zweier Markov-switching Modelle mit zeitvariablen Übergangswahrscheinlichkeiten.
Die Analyse zeigt, dass die Interaktion zwischen Geld und Fiskalpolitik sich über die Zeit verändert und zwischen unterstützenden und nicht-unterstützenden Regimen wechselt.
Kapitel drei, ein gemeinsames Projekt mit Olaf Posch von der Universität Hamburg
und Santanu Chatterjee von der University of Georgia, beschäftigt sich mit den
Wachstumseffekten von Verzögerungen in der Umsetzung von staatlichen Investitionsprojekten.
Staatsausgaben, die den öffentlichen Kapitalstock erhöhen werden als
überlegen zu puren staatlichen Konsumausgaben angesehen, da sie Effekte entlang
der Angebotsseite erzeugen. Während entwickelte Länder diese Ausgaben nutzen um
die negativen Effekte von Rezession abzumildern und um ihr Wachstum zu stärken,
nutzen Entwicklungsländer diese Ausgaben um die Voraussetzungen für Wachstum
zu schaffen. Staatliche Investitionsprojekte sind insbesondere durch lange Umsetzungsverzögerungen gekennzeichnet durch die erforderliche Planung, Ausschreibung, Vertrags- und Bauphase.In the first of the three chapters of my dissertation I challenge the conventional
Keynesian view that countercyclical fiscal policy stabilizes real variables over
the business cycle. I present empirical evidence that government debt moves procyclical
with output in the United States using a structural vector error correction
model.
Then, I model fiscal policy via fiscal rules with feedback to endogenous variables.
Calibrating those rules with coefficients in line with procyclical debt gives us sizably
lower standard deviations compared to a model with coefficients that would generate
countercyclical debt. The reason for this finding is a wealth channel that emerges
in my model because of the introduction of a perpetual-youth structure. Hence, the
Ricardian equivalence is broken and movements in debt affect household’s wealth
and, therefore, the consumption-leisure decision. This wealth channel proofed to be
particularly important in the Great Recession and my analysis suggests a new way
governments can generate wealth effects, by using government debt as an automatic
stabilizer.
The striking and provocative consequence is that classical (countercyclical) Keynesian fiscal policy destabilizes the business cycle in this basic framework. Remarkably, this
channel plays a role for the propagation of all shocks that affect output and, hence,
is important even in the absence of exogenous fiscal policy innovations.
The second chapter addresses the interactions between monetary and fiscal policy.
Empirically, I show that the FED’s policy is affected by the stance of fiscal
policy. I do so by estimating a state-of-the art Taylor-type interest rate rule. Then,
I estimate Markov-switching models allowing for time-varying transition probabilities
showing that those interactions vary over time between accommodative and
non-accommodative regimes. Along the theoretical dimension, I use a cheap talk
game between central bank and government to microfound policy interactions and
regime switches. Exogenous (or, potentially, endogenous) changes in the expectation
of agents trigger policy shifts. For example, if a Ricardian government increase government
spending this might trigger the expectation that the government becomes
Non-Ricardian. Since debt matters for the conduct of monetary policy, the central
bank reacts by changing its responsiveness to debt in the Taylor rule. Put differently,
changes in the prior beliefs within this game, the pendant to the estimated Markovswitching
probabilities, can trigger different outcomes and, hence, different weights
in the Taylor-rule. This will have effects on the transmission of shocks and, hence,
on the quantitative and qualitative results.
Chapter three, joint work with Olaf Posch from the University of Hamburg and
Santanu Chatterjee from the University of Georgia, discusses the (growth) effects of
implementation delays in the accumulation of the public capital stock. Government
expenditures into public capital is considered superior to wasteful government consumption
expenditures as they trigger supply-side effects. While developed countries
use government investment expenditures to counter adverse effects of Recessions and
to foster growth, developing countries use investment into public capital to remove
the bottlenecks for economic growth. Public infrastructure programs, in particular,
are subject to large implementation delays (or lags) due to the required planning, bidding,
contracting, and construction process. We add to the literature on fiscal policy
in endogenous growth models by building a stochastic endogenous growth model in
continuous time with public capital. In this model, implementation lags generate
uncertainty in the public capital accumulation process: the government continuously
spends but the completion of the public investment project is unknown. We provide a
numerical solution calibrated on the U.S. economy. We find that the implementation
lags in the accumulation of public capital have sizable effects on agents’ behavior.
Then, we evaluate the effects of three policy reforms
On the non-causal link between volatility and growth
No full textA model highlighting the endogeneity of both volatility and growth is presented. Volatility and growth are therefore correlated but there is no causal link from volatility to growth. This joint endogeneity is illustrated by working out the effects through which economies with different tax levels differ both in their volatility and growth. Using a continuous-time DSGE model with plausible parametric restrictions, we obtain closedform measures of macro volatility based on cyclical components and output growth rates. Given our results, empirical volatility-growth analysis should include controls in the conditional variance equation. Otherwise an omitted variable bias is likely.Tax effects, Volatility measures, Poisson uncertainty, Endogenous cycles and growth, Continuous-time DSGE models
On the Non-Causal Link between Volatility and Growth
No full textA model highlighting the endogeneity of both volatility and growth is presented. Volatility and growth are therefore correlated but there is no causal link from volatility to growth. This joint endogeneity is illustrated by working out the eects through which economies with dierent tax levels dier both in their volatility and growth. Using a continuous-time dynamic stochastic general equilibrium (DSGE) model with plausible parametric restrictions, we obtain closed-form measures of macro volatility based on cyclical components and output growth rates. Given our results, empirical volatility-growth analysis should include controls in the conditional variance equation. Otherwise an omitted variable bias is likely.Tax effects, Volatility measures, Poisson uncertainty, Endogenous cycles and growth, Continuous-time DSGE models
Numerical Solution of Dynamic Equilibrium Models under Poisson Uncertainty
No full textWe propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the retarded type. We apply the Waveform Relaxation algorithm, i.e., we provide a guess of the policy function and solve the resulting system of (deterministic) ordinary differential equations by standard techniques. For parametric restrictions, analytical solutions to the stochastic growth model and a novel solution to Lucas' endogenous growth model under Poisson uncertainty are used to compute the exact numerical error. We show how (potential) catastrophic events such as rare natural disasters substantially affect the economic decisions of households.continuous-time DSGE, Poisson uncertainty, waveform relaxation
Natural Volatility, Welfare and Taxation
No full textCyclical components are analytically computed in a theoretical model of stochastic endogenous fluctuations and growth. Volatility is shown to depend on the speed of convergence of the cyclical component, the expected length of a cycle and on the altitude of the slump. Taxes affect these channels and can therefore explain cross-country differences and breaks over time in volatility. With exogenous sources of fluctuations, a special case of our model, decentralized factor allocation is efficient. With endogenous fluctuations and growth, decentralized factor allocation is inefficient and (time-invariant) taxes can (de-) stabilize the economy. No unambiguous link exists between volatility and welfare.endogenous fluctuations and growth, welfare analysis, taxation, stochasticcontinuous time model, poisson uncertainty
Am Anfang war der Fluch, und der Fluch war das Öl: Ein erneuter Blick auf die Ökonomie des Rohstoff-Fluchs
No full textThe seminal papers of Sachs and Warner (1995, 2001) put forward as a stylized fact that “economies with abundant natural resources have tended to grow less rapidly than natural-resource-scarce economies” and gave a rise to what is known as “The Resource Curse”. More empirical evidence has then followed showing that point resources, espicially oil, have weakened countries' development courses particularly in Africa, Middle East and Latin America. This dissertation revisits key questions of the oil resource curse literature in four studies. The main aim is to shed the light on the underlying conditioning context, when evaluating the final impact of natural resource abundance on a country's political stability, tax revenues and economic activity. In particular, it shows that the existence of sizable shadow economies can mitigate the effect of negative oil price shocks on political instability and tax mobilization efforts. It also stresses on the importance of within-country disaggregation of resource boom effects among oil-producing sub-nationals and their neighbors. Finally, it reconsiders the role of oil rents in prolonging autocratic regime survival after taking into account the type of posed mass threat, the dictator's time horizon (short run vs. long run) and the size of oil wealth.Die bahnbrechenden Arbeiten von Sachs und Warner (1995, 2001) stellten als stilisierte Tatsache fest, dass "Volkswirtschaften mit reichlich natürlichen Ressourcen dazu neigen, weniger schnell zu wachsen als rohstoffarme Volkswirtschaften", und gaben Anlass zu dem, was als "Ressourcenfluch" bekannt ist. Es folgten weitere empirische Belege, die zeigen, dass Ressourcen, insbesondere Erdöl, den Entwicklungskurs von Ländern, insbesondere in Afrika, dem Nahen Osten und Lateinamerika, beeinträchtigen. In dieser Dissertation werden die Schlüsselfragen der Literatur über den Fluch der Ölressourcen in vier Studien aufgegriffen. Das Hauptziel besteht darin, den zugrunde liegenden Kontext zu beleuchten, wenn es darum geht, die endgültigen Auswirkungen des Reichtums an natürlichen Ressourcen auf die politische Stabilität, die Steuereinnahmen und die Wirtschaftstätigkeit eines Landes zu bewerten. Insbesondere wird gezeigt, dass das Vorhandensein umfangreicher Schattenwirtschaften die Auswirkungen negativer Ölpreisschocks auf die politische Instabilität und die Bemühungen um die Mobilisierung von Steuern abschwächen kann. Ferner wird betont, wie wichtig es ist, die Auswirkungen des Ressourcenbooms innerhalb eines Landes zwischen den ölproduzierenden Ländern und ihren Nachbarn aufzuschlüsseln. Schließlich wird die Rolle der Öleinkünfte bei der Verlängerung des Überlebens autokratischer Regime unter Berücksichtigung der Art der Massenbedrohung, des Zeithorizonts des Diktators (kurzfristig vs. langfristig) und des Umfangs des Ölreichtums erneut untersucht
Natural volatility, welfare and taxation
No full textCyclical components are analytically computed in a theoretical model of stochastic endogenous fluctuations and growth. Volatility is shown to depend on the speed of convergence of the cyclical component, the expected length of a cycle and on the altitude of the slump. Taxes affect these channels and can therefore explain cross-country differences and breaks over time in volatility. With exogenous sources of fluctuations, a special case of our model, decentralized factor allocation is efficient. With endogenous fluctuations and growth, decentralized factor allocation is inefficient and (time-invariant) taxes can (de-) stabilize the economy. No unambiguous link exists between volatility and welfare.Endogenous fluctuations and growth, welfare analysis, taxation, stochastic continuous time model, Poisson uncertainty
Probing the relationship between electromagnetic ion cyclotron waves and plasmaspheric plumes near geosynchronous orbit
No full textPlasmaspheric plumes created during disturbed geomagnetic conditions have been suggested as a major cause of increased occurrences of electromagnetic ion cyclotron (EMIC) waves at these times. We have catalogued occurrences of strong Pc1 EMIC waves from 1996 through 2003 at three automated geophysical observatories operated by the British Antarctic Survey at auroral zone latitudes in Antarctica (L = 6.28, 7.68, and 8.07) and have compared them to the occurrence of plasmaspheric plumes in space, using simultaneous data from the Magnetospheric Plasma Analyzer on the Los Alamos National Laboratory 1990-095 spacecraft, in geosynchronous orbit at the same magnetic longitude. A superposed epoch analysis of these data was conducted for several categories of disturbed geomagnetic conditions, including magnetic storms, high-speed streams, and storm sudden commencements. We found only a weak correspondence between the occurrence of strong Pc1 waves observed on the ground and either plasmaspheric plumes or intervals of extended plasmasphere at geosynchronous orbit before, during, or after the onset of any of these categories. Strong Pc1 activity peaked near or slightly after local noon during all storm phases, consistent with equatorial observations by the Active Magnetospheric Particle Tracer Explorers/Charge Composition Explorer satellite at these L shells. The highest Pc1 occurrence probability was at or 1-2 days before storm onset and during the late recovery phase. Occurrence was lowest during the early recovery phase, consistent with the decrease in solar wind pressure often seen at this time. The peak at onset is consistent with earlier observations of waves in the outer magnetosphere stimulated by sudden impulses and magnetospheric compressions
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