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Identifying Aggregate Shocks With Micro Level Heterogeneity
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Book Synopsis Identifying Aggregate Shocks with Micro-level Heterogeneity by : Xing Guo
Download or read book Identifying Aggregate Shocks with Micro-level Heterogeneity written by Xing Guo and published by . This book was released on 2020 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper identifies the aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 1.1% of the variation in U.S. public firms' aggregate investment. The negligible aggregate relevance of financial shocks mainly results from the interaction between firm-level heterogeneity and general equilibrium effects. Following a contractionary financial shock, financially constrained firms are directly forced to cut investment, which dampens the aggregate investment demand and lowers the capital good price. The lower capital good price motivates the financially unconstrained firms to invest more, which largely cancels out the financial shock's direct effect in aggregation. If the firm-level heterogeneity is removed, the implied relevance of financial shocks to aggregate investment will be 50 times larger. This sharp difference indicates that representative firm models could overstate the relevance of financial shocks in driving the business cycle fluctuation and highlights the importance of micro-level heterogeneity in identifying the aggregate shocks"--Abstract, page ii.
Book Synopsis Uncertainty, Heterogeneous Beliefs, and Business Cycles by : Calvin Dun Jia
Download or read book Uncertainty, Heterogeneous Beliefs, and Business Cycles written by Calvin Dun Jia and published by . This book was released on 2016 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides empirical evidence both at the aggregate and the micro level to demonstrate that the survey-based forecast dispersion series helps identify a different type of second moment shocks, which affect the distribution of firms' beliefs regardless of whether those beliefs are backed by economic fundamentals. Having jointly identified the “informational disagreement shocks” and the standard uncertainty shocks, innovations that enlarge the forecast dispersion lead to a persistent decline in aggregate investment, employment, and production followed by a slow recovery. Conversely, when the uncertainty is measured by the variability of future firm-specific productivity innovations, the classic “wait and see” effect of uncertainty kicks in such that a quick “rebound-overshoot” ensuing a short-run contraction. Firm-level evidence suggests that those more productive firms increase the investments given larger uncertainty, whereas the investments are cut when they hold more heterogeneous beliefs about future business well-beings. Thus, the heightened uncertainty promotes while rises in the belief heterogeneity hinders the capital reallocation among firms. The results hold with the endogeneity issue corrected with instruments constructed from the USPTO patent data. Identifying the informational second moment shocks implies that a slow recovery does not have to be a result of the combined adverse first moment and second moment shocks that shift the economic fundamentals.
Author :Martin Eichenbaum Publisher :University of Chicago Press Journals ISBN 13 :9780226577661 Total Pages :0 pages Book Rating :4.5/5 (776 download)
Book Synopsis NBER Macroeconomics Annual 2017 by : Martin Eichenbaum
Download or read book NBER Macroeconomics Annual 2017 written by Martin Eichenbaum and published by University of Chicago Press Journals. This book was released on 2018-05-22 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volume 32 of the NBER Macroeconomics Annual features six theoretical and empirical studies of important issues in contemporary macroeconomics, and a keynote address by former IMF chief economist Olivier Blanchard. In one study, SeHyoun Ahn, Greg Kaplan, Benjamin Moll, Thomas Winberry, and Christian Wolf examine the dynamics of consumption expenditures in non-representative-agent macroeconomic models. In another, John Cochrane asks which macro models most naturally explain the post-financial-crisis macroeconomic environment, which is characterized by the co-existence of low and nonvolatile inflation rates, near-zero short-term interest rates, and an explosion in monetary aggregates. Manuel Adelino, Antoinette Schoar, and Felipe Severino examine the causes of the lending boom that precipitated the recent U.S. financial crisis and Great Recession. Steven Durlauf and Ananth Seshadri investigate whether increases in income inequality cause lower levels of economic mobility and opportunity. Charles Manski explores the formation of expectations, considering the efficacy of directly measuring beliefs through surveys as an alternative to making the assumption of rational expectations. In the final research paper, Efraim Benmelech and Nittai Bergman analyze the sharp declines in debt issuance and the evaporation of market liquidity that coincide with most financial crises. Blanchard’s keynote address discusses which distortions are central to understanding short-run macroeconomic fluctuations.
Book Synopsis Inference for Functional Data with Applications by : Lajos Horváth
Download or read book Inference for Functional Data with Applications written by Lajos Horváth and published by Springer Science & Business Media. This book was released on 2012-05-08 with total page 426 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents recently developed statistical methods and theory required for the application of the tools of functional data analysis to problems arising in geosciences, finance, economics and biology. It is concerned with inference based on second order statistics, especially those related to the functional principal component analysis. While it covers inference for independent and identically distributed functional data, its distinguishing feature is an in depth coverage of dependent functional data structures, including functional time series and spatially indexed functions. Specific inferential problems studied include two sample inference, change point analysis, tests for dependence in data and model residuals and functional prediction. All procedures are described algorithmically, illustrated on simulated and real data sets, and supported by a complete asymptotic theory. The book can be read at two levels. Readers interested primarily in methodology will find detailed descriptions of the methods and examples of their application. Researchers interested also in mathematical foundations will find carefully developed theory. The organization of the chapters makes it easy for the reader to choose an appropriate focus. The book introduces the requisite, and frequently used, Hilbert space formalism in a systematic manner. This will be useful to graduate or advanced undergraduate students seeking a self-contained introduction to the subject. Advanced researchers will find novel asymptotic arguments.
Book Synopsis Linear Processes in Function Spaces by : Denis Bosq
Download or read book Linear Processes in Function Spaces written by Denis Bosq and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main subject of this book is the estimation and forecasting of continuous time processes. It leads to a development of the theory of linear processes in function spaces. Mathematical tools are presented, as well as autoregressive processes in Hilbert and Banach spaces and general linear processes and statistical prediction. Implementation and numerical applications are also covered. The book assumes knowledge of classical probability theory and statistics.
Book Synopsis Technology Shocks and Aggregate Fluctuations by : Mr.Pau Rabanal
Download or read book Technology Shocks and Aggregate Fluctuations written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2004-12-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.
Book Synopsis Foreign Shocks as Granular Fluctuations by : Julian Di Giovanni
Download or read book Foreign Shocks as Granular Fluctuations written by Julian Di Giovanni and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual" -- the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
Book Synopsis Essays in International and Macroeconomics by : Junhyong Kim
Download or read book Essays in International and Macroeconomics written by Junhyong Kim and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation analyzes micro-level data and employs a general equilibrium model to study heterogeneous firm-level responses to aggregate shocks, underlying sources of the observed difference in firm's decisions, and industry and country-level implications. The first chapter investigates how cross-sectional micro-uncertainty influences the investment of small and large firms and discusses the aggregate implications of the heterogeneity in their investment decisions. Empirically, we find that large firms show less investment decline in times of heightened uncertainty. We provide empirical evidence for the underlying driver of the observed size effect: the heterogeneous responses across firms are in fact the consequence of large firms operating in multiple markets rather than their size per se. To interpret these findings, we build a heterogeneous firm model with single- and multi-unit firms subject to (i) unit-level real frictions, i.e., fixed and convex investment adjustment costs and (ii) firm-level financial frictions, i.e., costly equity issuance. In the model with unit-level frictions, an increase in uncertainty lowers the investment of both single and multi-unit firms through a `wait-and-see' effect. For a multi-unit firm, on the other hand, firm-level financial frictions generate the interdependence of investment across units within a firm, i.e., a fall in investment in one unit enlarges internal funds and so relaxes the constraint on the amount a firm can invest in the other unit. Therefore, upon uncertainty shocks, multi-unit firms lower their investment by less than single-unit firms. This is because the `wait-and-see' effect is partially offset by the relaxation of financial constraints due to the availability of larger internal funds when investment in one unit decreases. To examine the aggregate implications due to the heterogeneity in firms' responses, we compare the benchmark economy to a counterfactual economy with only single-unit firms. The result shows that the contribution of multi-unit firms is sizable in alleviating the impact of uncertainty shocks on aggregate investment. In the second chapter, with Korean firm-level and aggregated industry-level data, we uncover a balance sheet channel through which the exchange rate shock translates into domestic prices. Exploiting the quasi-natural experiment environment during the Asian Financial Crisis, we investigate how exposure to foreign currency debt prior to the crisis leads to different price dynamics. Our empirical finding suggests that when a sector had a higher level of short-term foreign currency debt ratio prior to the crisis, the price increase is more pronounced. Based on this empirical result, we build a heterogeneous firm model to study the transition path upon an unexpected real exchange rate shock, calibrated to match the real exchange rate changes in the 1996-98 period in Korea. In our model, a currency depreciation inflates the domestic value of foreign currency debt. As a consequence, firms, with a high share of their debt in foreign currency, face tighter working capital constraint and reduce their investment more, leading to higher costs of production and higher prices. The model is able to generate qualitatively consistent and quantitatively sizeable price increase upon a large depreciation of the currency, and furthermore, explain the cross-sectional variation in the sectoral price changes across industries. We also find that the interaction of strategic complementarity in firms' price settings and heterogeneity in foreign currency debt holdings across firms within an industry play an important role in amplifying the negative balance sheet effect on industry-level price dynamics.
Book Synopsis Asset Prices and Monetary Policy by : John Y. Campbell
Download or read book Asset Prices and Monetary Policy written by John Y. Campbell and published by University of Chicago Press. This book was released on 2008-11-15 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.
Book Synopsis Stochastic Economic Dynamics by : Bjarne S. Jensen
Download or read book Stochastic Economic Dynamics written by Bjarne S. Jensen and published by Copenhagen Business School Press DK. This book was released on 2007 with total page 464 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book analyses stochastic dynamic systems across a broad spectrum in economics and finance. The major unifying theme is the coherent and rigorous treatment of uncertainty and its implications for describing stochastic processes by the stochastic differential equations of the fundamental models in various fields. Pertinent subjects are interrelated, juxtaposed, and examined for consistency in theoretical and empirical contexts. The volume consists of three parts: Developments in Stochastic Dynamics; Stochastic Dynamics in Basic Economic Growth Models; Intertemporal Optimisation in Consumption, Finance, and Growth. Key topics include: fractional Brownian motion in finance; moment evolution of Gaussian and geometric Wiener diffusions; stochastic kinematics and stochastic mechanics; stochastic growth in continuous time; time delays and Hopf bifurcation; consumption and investment strategies; differential systems in finance and life insurance; uncertainty of technological innovations; investment and employment cycles; stochastic control theory; and risk aversion. The works collected in this book serves to bridge the "old" deterministic dynamics and the "new" stochastic dynamics. The collection is important for scholars and advanced graduate students of economics, statistics, and applied mathematics.
Book Synopsis Foreign Shocks as Granular Fluctuations by : Julian Di Giovanni
Download or read book Foreign Shocks as Granular Fluctuations written by Julian Di Giovanni and published by . This book was released on 2020 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the “foreign granular residual” -- the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
Book Synopsis Idiosyncratic and Common Shocks to Investment Decisions by : Mark Schankerman
Download or read book Idiosyncratic and Common Shocks to Investment Decisions written by Mark Schankerman and published by . This book was released on 2001 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Credit Supply and Productivity Growth by : Francesco Manaresi
Download or read book Credit Supply and Productivity Growth written by Francesco Manaresi and published by International Monetary Fund. This book was released on 2019-05-17 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.
Book Synopsis The New Palgrave Dictionary of Economics by :
Download or read book The New Palgrave Dictionary of Economics written by and published by Springer. This book was released on 2016-05-18 with total page 7493 pages. Available in PDF, EPUB and Kindle. Book excerpt: The award-winning The New Palgrave Dictionary of Economics, 2nd edition is now available as a dynamic online resource. Consisting of over 1,900 articles written by leading figures in the field including Nobel prize winners, this is the definitive scholarly reference work for a new generation of economists. Regularly updated! This product is a subscription based product.
Book Synopsis Interaction and Market Structure by : Domenico Delli Gatti
Download or read book Interaction and Market Structure written by Domenico Delli Gatti and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a collection of essays which examine how the properties of aggregate variables are influenced by the actions and interactions of heterogenous individuals in different economic contexts. The common denominator of the essays is a critique of the representative agent hypothesis. If this hypothesis were correct, the behaviour of the aggregate variable would simply be the reproduction of individual optimising behaviour. In the methodology of the hard sciences, one of the achievements of the quantum revolution has been the rebuttal of the notion that aggregate behaviour can be explained on the basis of the behaviour of a single unit: the elementary particle does not even exist as a single entity but as a network, a system of interacting units. In this book, new tracks in economics which parallel the developments in physics mentioned above are explored. The essays, in fact are contributions to the analysis of the economy as a complex evolving system of interacting agents.
Book Synopsis The World Bank Research Observer by :
Download or read book The World Bank Research Observer written by and published by . This book was released on 2003 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data by : Ms. Elif C Arbatli Saxegaard
Download or read book U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data written by Ms. Elif C Arbatli Saxegaard and published by International Monetary Fund. This book was released on 2022-09-16 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.
