Showing posts with label Macro Demystified.   Show all posts

A Fertility Patterns Flip-flop

From Conversable Economist:

“For some decades now, the world has been following the patterns of a demographic transition with life expectancies rising and birth rates falling, as we head for a world where the elderly are a much larger share of the global population. However, Matthias Doepke, Anne Hannusch, Fabian Kindermann, and Michèle Tertilt argue that it’s time for “The New Economics of Fertility” (IZA Discussion Paper #15224, April 2022). For a short readable overview of the main themes, you can check their shorter discussion at the VoxEU website (June 11, 2022).

From the abstract of the academic paper, the authors write:

In this survey, we argue that the economic analysis of fertility has entered a new era. First-generation models of fertility choice were designed to account for two empirical regularities that, in the past, held both across countries and across families in a given country: a negative relationship between income and fertility, and another negative relationship between women’s labor force participation and fertility. The economics of fertility has entered a new era because these stylized facts no longer universally hold. In high-income countries, the income-fertility relationship has flattened and in some cases reversed, and the cross-country relationship between women’s labor force participation and fertility is now positive.

A couple of pictures may help, here. It used to be that countries with higher incomes had lower fertility rates, but among high-income countries, this pattern no longer holds. Here’s a figure taken from the VoxEU overview. The top panel shows that within the group of high-income countries in 1980, countries with higher per capita GDP had lower fertility, but by 2000, countries in this group with higher per capita income had higher fertility.”

Continue reading here.

From Conversable Economist:

“For some decades now, the world has been following the patterns of a demographic transition with life expectancies rising and birth rates falling, as we head for a world where the elderly are a much larger share of the global population. However, Matthias Doepke, Anne Hannusch, Fabian Kindermann, and Michèle Tertilt argue that it’s time for “The New Economics of Fertility” (IZA Discussion Paper #15224,

Read the full article…

Posted by at 6:09 AM

Labels: Macro Demystified

China’s Financial System and Economy: A Review

From a NBER paper by Zhiguo He & Wei Wei:

“China’s financial system has been integral to its spectacular economic growth over the past 40 years. We review the recent literature on China’s financial system and its connections to the Chinese economy based on the categories of Aggregate Financing to the Real Economy (AFRE), a broad measure of the nation’s yearly flow of liquidity accounting for unique features of China’s financial system. While early work on China’s financial system emphasizes the state-owned enterprise (SOE) reform, the recent literature explores other more market-based financing channels—including shadow banking—that grew rapidly after 2010 and have become important components of AFRE. These new financing channels are not only intertwined with each other, but more importantly often ultimately tied back to the dominant banking sector in China. Understanding the mechanisms behind these channels and their intrinsic connections is crucial to alleviate capital allocation distortion and mitigate potential systemic financial risk in China.”

From a NBER paper by Zhiguo He & Wei Wei:

“China’s financial system has been integral to its spectacular economic growth over the past 40 years. We review the recent literature on China’s financial system and its connections to the Chinese economy based on the categories of Aggregate Financing to the Real Economy (AFRE), a broad measure of the nation’s yearly flow of liquidity accounting for unique features of China’s financial system. While early work on China’s financial system emphasizes the state-owned enterprise (SOE) reform,

Read the full article…

Posted by at 10:17 PM

Labels: Macro Demystified

Fiscal Histories

From a NBER paper by John H. Cochrane:

“The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the present value of surpluses drives unexpected inflation. I use fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s, the long quiet zero bound of the 2010s, and the reemergence of inflation in 2021, as well as to analyze the gold standard, currency pegs, the ends of hyperinflations, currency crashes, and the success of inflation targets. Going forward, fiscal theory warns that inflation will have to be tamed by coordinated monetary and fiscal policy. I thank Erik Hurst, Ed Nelson, Nina Pavcnik, and Timothy Taylor for helpful comments.”

From a NBER paper by John H. Cochrane:

“The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the present value of surpluses drives unexpected inflation. I use fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s,

Read the full article…

Posted by at 10:16 PM

Labels: Macro Demystified

Globotics and Macroeconomics: Globalisation and Automation of the Service Sector

From a NBER paper by Richard Baldwin:

“Globalisation affects the functioning of the macroeconomy. The macroeconomy’s functioning, in turn, conditions the conduct and impact of monetary policy. This is why globalisation matters for central banks. It is also why central bankers should pay attention to the evolution of globalisation. And evolve it has. This paper argues that the future of trade is trade in services – especially trade in intermediate services. Barriers are radically higher and falling radically faster for services versus goods, and, unlike farm and factory goods, there is no capacity constraint when it comes to the export of intermediate services from emerging markets. Undertaking the macroeconomic analysis for services trade that was done in the 2000s for goods trade, however, will require a substantial upgrading of the data available.”

From a NBER paper by Richard Baldwin:

“Globalisation affects the functioning of the macroeconomy. The macroeconomy’s functioning, in turn, conditions the conduct and impact of monetary policy. This is why globalisation matters for central banks. It is also why central bankers should pay attention to the evolution of globalisation. And evolve it has. This paper argues that the future of trade is trade in services – especially trade in intermediate services.

Read the full article…

Posted by at 10:14 PM

Labels: Macro Demystified

Climate Change Around the World

From a NBER paper by Per Krusell & Anthony A. Smith Jr:

“The economic effects of climate change vary across both time and space. To study these effects, this paper builds a global economy-climate model featuring a high degree of geographic resolution. Carbon emissions from the use of energy in production increase the Earth’s (average) temperature and local, or regional, temperatures respond more or less sensitively to this increase. Each of the approximately 19,000 regions makes optimal consumption-savings and energy-use decisions as its climate (or regional temperature) and, consequently, its productivity change over time. The relationship between regional temperature and regional productivity has an inverted U-shape, calibrated so that the high-resolution model replicates estimates of aggregate global damages from global warming. At the global level, then, the high-resolution model nests standard one-region economy-climate models, while at the same time it features realistic spatial variation in climate and economic activity. The central result is that the effects of climate change vary dramatically across space—with many regions gaining while others lose—and the global average effects, while negative, are dwarfed quantitatively by the differences across space. A tax on carbon increases average (global) welfare, but there is a large disparity of views on it across regions, with both winners and losers. Climate change also leads to large increases in global inequality, across both regions and countries. These findings vary little as capital markets range from closed (autarky) to open (free capital mobility).”

From a NBER paper by Per Krusell & Anthony A. Smith Jr:

“The economic effects of climate change vary across both time and space. To study these effects, this paper builds a global economy-climate model featuring a high degree of geographic resolution. Carbon emissions from the use of energy in production increase the Earth’s (average) temperature and local, or regional, temperatures respond more or less sensitively to this increase. Each of the approximately 19,000 regions makes optimal consumption-savings and energy-use decisions as its climate (or regional temperature) and,

Read the full article…

Posted by at 10:11 PM

Labels: Macro Demystified

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