Fluctuations In Economic Activity Research Articles

The correlation between unemployment and economic growth in Latin America – Okun's law estimates by country

The authors question the validity of Okun's law in Latin America in this paper. Based on several econometric models, they show that fluctuations in economic activity have a lesser impact on unemployment rates in Latin American countries than in other, more advanced economies. Instead of stimulus policies focused on reducing unemployment in general, these countries need targeted policies that encourage job creation in specific sectors. That being said, the unemployment—output ratio differs from one Latin American country to another. Where the ratio is weak or non‐existent, cyclical variations adversely affect the quality of employment – another aspect that must also be addressed by economic policy.

Sentiment-driven business cycle dynamics: An elementary macroeconomic model with animal spirits

We propose an elementary macroeconomic model with animal spirits in which aggregate investment expenditure depends on firms’ sentiment. Firms display one of three sentiment states. When national income increases (decreases) strongly, firms are optimistic (pessimistic) and aggregate investment expenditure is high (low). Otherwise, firms are neutral and aggregate investment expenditure is normal. A rigorous mathematical analysis of our elementary macroeconomic model sheds new light on how animal spirits may contribute to fluctuations in economic activity. In particular, we show that a bidirectional feedback process between national income and investor sentiment may create endogenous business cycles that coevolve with waves of optimism and pessimism.

Business cycle theories after Keynes: A brief review considering the notions of equilibrium and instability

In this paper, we review the theories of business cycles in the 20th century after the work of John Maynard Keynes. Fluctuations in economic activity have been observed with considerable regularity since the beginning of the last century, motivating empirical efforts to, identify, measure, and understand business cycles, contributing to the identification of stylized facts on business cycles, facts the business cycle theories should try to explain. Theories however have been very distinct through the years. Despite the different explanations for the sources of cycles, in mainstream economics, there was the underlying hypothesis of stability and equilibrium as a main characteristic of the economic system. The heterodox view on business cycles, in contrast, starts with Keynes pre-dynamic theory, considering the intrinsic instability of the system and extends through several other authors and theories. In this paper, we use the concepts of equilibrium and instability as a demarcating guide to separate theories in two groups: the mainstream view and the heterodox view. We notice however that, even though different authors and theories might share similar views on the self-equilibrating property of the economic system, there is no coherent integration between similar theories. We conclude the paper with some methodological insights that might lead to a coherent and integrated approach to explain business cycles in the heterodox view, requiring new and complex methods and tools.

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A theory of procyclical market liquidity

This paper presents a theory of liquidity cycles based on endogenous fluctuations in economic activity and the availability of informed capital. Risky assets are illiquid due to adverse selection. The degree of adverse selection and hence the liquidity of these assets depends on the endogenous information structure in the market. Liquidity provision is modeled as a repeated game with imperfect public monitoring. We construct a trigger-strategy equilibrium along the lines of Green and Porter (1984) that is characterized by stochastic fluctuations in liquidity. Liquidity is procyclical in our economy. Periods of economic growth are associated with more liquid asset markets.

Analisis Pengaruh Alat Pembayaran Menggunakan Kartu (APMK), Pendapatan Nasional, dan Inflasi Terhadap Konsumsi di Indonesia

There are many reasons why macroeconomic analysis needs to pay attention to household consumption in depth. The first reason, household consumption provides income to the National Income. In most countries, expenditures account for about 60-75 percent of National Income. The second reason is that household consumption has an impact in determining fluctuations in economic activity from one time to another. This study aims:1) To determine and analyze the effect of non- cash transactions, national income, and inflation simultaneously on consumption; and 2) To find out and analyze the effect of non-cash transactions, national income, and inflation partially on consumption. The data used is secondary data in the formof quarterly time series data from 2010-2019 with quantitative data types. analysis technique used is the method of multiple linear regression analysis with the Ordinary Least Square (OLS) model. The results of the study show that: 1) Card- Based Payment Instruments (CBPI), national income, and inflation simultaneously affect consumption in Indonesia; and 2) Card-Based Payment Instruments (CBPI), national income, and inflation partially have a positive and significant effect on consumption in Indonesia.

Monetary Policy Expectations and Economic Fluctuations at the Zero Lower Bound

Using a panel of survey‐based measures of future interest rates from the Survey of Professional Forecasters, we study the dynamic relationship between shocks to monetary policy expectations and fluctuations in economic activity and inflation. We propose a small‐ scale structured recursive vector autoregression (VAR) model to identify the macroeconomic effects of changes in expectations about monetary policy. Our results show that when interest rates are away from the zero‐lower bound, a perception of higher future interest rates leads to a significant rise in current measures of inflation and a rise in economic activity. However, when interest rates approach zero, the effect on economic activity is the opposite, with significant but lagged decreases in economic activity following an upward revision to expected future interest rates. The impact of changes in expectations about monetary policy is robust when we control for other features of the transmission mechanism (e.g., long‐term interest rates, quantitative easing, exchange rate movements and even oil price shocks). Our findings also show that monetary policy expectations contribute up to 34 percent to the variability of economic activity (and 24 percent on inflation) while policy rates are fixed at the zero‐lower bound. This evidence points to the importance of managing monetary policy expectations (forward guidance) as a crucial policy tool for stimulating economic activity at the zero‐lower bound.

MEXICAN DEMAND FOR RICE IMPORTS (ORYZA SATIVA L.) DURING NAFTA: EVIDENCE FROM A NARDL MODEL WITH STRUCTURAL CHANGE AND OUTLIERS

ABSTRACT 
 Objective:
 This study aimed to determine which model best captures the behaviour of rice imports during the North America Free Trade Agreement (NAFTA) regime (1994–2018).
 Methodology 
 Mexican demand for rice imports is estimated with Autoregressive Distributed Lag Model (ARDL) and Nonlinear Autoregressive Distributed Lag Model (NARDL), both with and without structural change and outliers.
 Results
 It starts with the ARDL and NARDL models, obtaining non-cointegration, as well as diagnosis and specification problems. Subsequently an ARDL model is proposed with structural change and outliers, which represents an improvement but still has specification problems. Finally, the best model is obtained incorporating non-linearity.
 Limitations/Implications 
 It is a study for a specific grain, so the results obtained are only valid for rice imports. Nevertheless, it must be considered that it is a basic grain. Moreover, a new methodology is used to estimate the import demand function.
 Findings 
 There is evidence of an asymmetric response of rice imports to fluctuations in economic activity and the exchange rate in the short run, and only in the long run for the latter. An increase in rice imports with NAFTA is also confirmed, as well as two extraordinary variations of rice imports during the study period.
 Keywords
 Rice imports; ARDL; NARDL; structural change; outliers 

Methodological Approach to the Organization of Monitoring of Cash Flow Volatility

The study presents the author’s approach to monitoring the volatility of cash flows. The relevance of the study is due to the fact that a high increase in volatility can have a negative impact on the stability of individual economic entities; therefore, central banks are faced with the task of organizing a system for monitoring cash flow volatility, as well as developing approaches to their regulation. The purpose of the study is to develop a methodological approach to organizing the monitoring of cash flow volatility. Statistical methods , including fractal analysis, are used in the study. The study determines the approach to classifying different levels of cash flow volatility. Three main types of cash flow — moderate, transient, and turbulent,—are defined. The study confirmed two hypotheses. First, it is proven that the volatility of cash flows is more the result of behavioural factors than institutional ones. Second, it is established that the turbulent type of cash flow occurs in more rare cases than the moderate or transient types. It is shown that the volatility of the cash flow is the result of behavioral reactions of economic entities to fluctuations in economic activity. Institutional factors determine the limits of cash flow volatility, but fluctuations within these limits are the result of the reaction of economic actors to changes in the external environment. The turbulent type of cash flows occurs during the period of simultaneous actions of all economic entities. Based on the three-sigma rule, a methodological approach to determine confidence intervals classifying cash flows by the type of movement was suggested. It is concluded that since the turbulent type of cash flows has the greatest negative impact on the stability of the economy, it should be of significant interest for monitoring and subsequent regulation by the Bank of Russia. A promising direction for further research may be the development by the Bank of Russia of a specialized refinancing instrument to compensate for the shortage of funds due to the increased level of cash flow volatility.

Gemeinschaftsdiagnose: Pandemie verz\xf6gert Aufschwung \u2014 Demografie bremst Wachstum

ZusammenfassungDas erste Jahr der Corona-Pandemie stand in Deutschland im Zeichen extremer Schwankungen der ökonomischen Aktivität und einer massiv gelähmten Binnenwirtschaft. In ihrem Frühjahrsgutachten gehen die Institute davon aus, dass der derzeitige Shutdown zunächst fortgesetzt und ab Mitte Mai bis zum Ende des dritten Quartals nach und nach aufgehoben wird. Im Zuge der Lockerungen wird sich vor allem der private Konsum kräftig erholen. Insgesamt dürfte das Bruttoinlandsprodukt in diesem Jahr um 3,7 % und im kommenden Jahr um 3,9 % zulegen.

Reprint: Is China fudging its GDP figures? Evidence from trading partner data

We use Chinese imports, measured as reported exports of trading partners, as a benchmark to gauge the accuracy of alternative Chinese indicators (including GDP) of fluctuations in economic activity. Externally-reported imports are likely to be relatively well-measured and free from domestic manipulation. Using principal components, we derive activity indices from a wide range of indicators. We choose a preferred index of eight non-GDP indicators based on their fit to Chinese imports, which we call the China Cyclical Activity Tracker (or C-CAT). We find that Chinese statistics have broadly become more reliable in measuring cyclical fluctuations over time. However, measured GDP has been excessively smooth since 2013, and adds little information relative to combinations of other indicators.

Measuring Economic Uncertainty in China†

ABSTRACT This study develops a new economic uncertainty (EU) index based on Chinese newspapers to address the media coverage bias of existing measures. We investigate how the EU affects China’s macroeconomy. Our results suggest that the EU reduces aggregate output. We find that uncertainty predicts fluctuations in economic activity and actual economic activity also predicts EU, but nonlinearly. Furthermore, we show that uncertainty in the United States leads to uncertainty in China, implying that negative EU on the Chinese economy is coming from the U.S. Finally, we conduct some asset-pricing tests, showing that EU can predict stock returns and commands risk premium. Our results are helpful for both researchers and policymakers to stabilize the economy and financial markets in China.

ЕКОНОМІЧНА КРИЗА 2020 І ШОСТИЙ ТЕХНОЛОГІЧНИЙ УКЛАД: ВЗАЄМОЗВ'ЯЗОК І ЗАКОНОМІРНОСТІ

It is justified that the economic crisis is cyclical and is associated with a change in technological paradigm. The economic crisis is a process characterized by fluctuations in economic activity and it manifests itself in economic, social, environmental and political disruptions. In the sixth technological paradigm, economic growth ensured by the introduction of fundamentally new forms of combining tools and labor items that can ensure the maximum productivity in use of resources. The “core” of the sixth technological paradigm is alternative and nuclear energy, healthcare, education, aviation-, ship- and machine tool engineering, electrical engineering, telecommunications, etc., and “key factors” – information and communication technologies, biotechnology, nanotechnology. The formation of the sixth technological paradigm significantly transforms the structure of productive forces and the system of industrial relations, it change the product and the process of its advancement in various areas: health, education, energy, public services, etc. As a result, the quality characteristics of services and goods are significantly changed, as well as, the level of accessibility to material and intangible benefits of all groups of the population is increased. In this regard, effectiveness of inclusive initiatives requires the consolidation of the efforts of civil society, the State and business, the reform of the education system and the creation of conditions for increasing the level of motivation and social responsibility of society.

House Price Shock and Business Cycle: The French Case

This study examined the relationship between house prices and the business cycle. Specifically, we examined the effect of house price and stock price in the French business cycle. After presenting the transmission channels from house price to the business cycle, we analyzed the cyclical properties of house prices and compared them with the Gross Domestic Product (GDP) cycle. The question arises: are fluctuations in economic activity more sensitive to a real estate price shock (property wealth effect) or a stock price shock (stock market wealth effect)? We collected the data over the 1980Q1-2015Q4 period and investigated the effects of house price and stock price shocks on French GDP by employing the Structural VAR model. We found the evidence that house price strongly affects the GDP cycle. Indeed, their response is significantly more important than the stock price, suggesting that the housing market might contribute to the persistent propagation of the shocks hitting the economic system. The study has important implications for both academia and policymakers and offers new insights into the French experience.JEL Codes - A10; B4

REGIONAL INDUSTRY CYCLES AND RESILIENCE OF THE REGION'S ECONOMY

The growth and reduction of cycle times is a characteristic feature of modern economy. Increasingly, cyclical factor is cause of imbalance and violation of global and national economies stability. However, the question of regional industry cycles asynchrony has not been studied. It was previously believed that the regional industry cycle, its stages of growth and decline, is consistent with the national one. The work shows that it is precisely the asynchrony of regional industrial cycles that underlies imbalance and reduces stability of country's economic development. The study presented by the authors expands boundaries of understanding the laws of recessions and upswings in industry cycles, since it reveals the causes and consequences of asynchronism of industry cycles in Russian regions. Terminologically, the regional sectoral cycle should be interpreted as a dynamic process of fluctuations in economic activity within life cycle of industry, characterized by repeatability of successive stages of decline and rise in the region's industry. The authors developed a classification of main parameters of regional industry cycle according to their cyclic properties, including leading, lagging and coinciding indicators of the cycle dynamics. A generalization of scientific and methodological approaches to industry cycles as a risk factor for sustainable and balanced development of regions is presented. The causes and consequences of regional sectoral cycles for the sustainability of regional economy are determined. The measures proposed for regional authorities to prevent the negative consequences of phase shift of sectoral regional cycle will be of practical importance.

CUSTOMS POLICY OF UKRAINE IN THE CONTEXT OF CYCLICAL ECONOMIC DEVELOPMENT

Анотація. Визначено, що економічний розвиток України протягом усього періоду її функціонування був дуже нестабільним. У результаті порівняння тенденцій економічного розвитку України і країн ЄС було визначено, що українська економіка набагато більше схильна до різких коливань економічної активності, тоді як розвиток економік країн ЄС є більш стабільним і передбачуваним без стрімких стрибків економічного розвитку. Проведено аналіз основних факторів, що впливають на циклічність розвитку економіки України. Визначено значний вплив політичної ситуації на економічний розвиток України. Обґрунтовано істотний вплив зовнішньоекономічних факторів на розвиток економічних процесів в Україні. Визначено, що ефективна і виважена митна політика України може сприяти стрімкому розвиткові зовнішньої торгівлі, що допоможе подоланню негативних наслідків циклічності економічного розвитку. Розглянуто створення зони вільної торгівлі між Україною і країнами ЄС у контексті циклічності економічного розвитку. Виявлено основні переваги і вірогідні ризики зменшення тарифних і нетарифних бар’єрів при торгівлі України з країнами ЄС. Розглянуто обсяги торгових потоків між Україною та ЄС, обґрунтовано, що Україна має досить слабку позицію в торговельних відносинах із країнами ЄС, це проявляється у від’ємному сальдо зовнішньої торгівлі з країнами ЄС, а також у превалюванні експорту товарів із низькою доданою вартістю. Проаналізовано обсяги надходжень податків на міжнародну торгівлю до Державного бюджету України, на основі чого визначено, що лібералізація торговельних відноси з ЄС уже в перші періоди створення зони вільної торгівлі привела до досить істотного зниження надходжень мита до Державного бюджету України. Обґрунтовано, що створення зони вільної торгівлі з ЄС було б менш загрозливим з позиції інтересів економіки України, у тому разі якщо б воно відбувалося в період сталого економічно зростання. Ключові слова: економічний цикл, митна політика, мито, міжнародна торгівля, зона вільної торгівлі. Формул: 0; рис.: 3; табл.: 1; бібл.: 10.

Is China fudging its GDP figures? Evidence from trading partner data

We use Chinese imports, measured as reported exports of trading partners, as a benchmark to gauge the accuracy of alternative Chinese indicators (including GDP) of fluctuations in economic activity. Externally-reported imports are likely to be relatively well-measured and free from domestic manipulation. Using principal components, we derive activity indices from a wide range of indicators. We choose a preferred index of eight non-GDP indicators based on their fit to Chinese imports, which we call the China Cyclical Activity Tracker (or C-CAT). We find that Chinese statistics have broadly become more reliable in measuring cyclical fluctuations over time. However, measured GDP has been excessively smooth since 2013, and adds little information relative to combinations of other indicators.

The impact of poverty cycles on economic research: evidence from econometric analysis

Poverty is a global problem, and fighting it is a historical task faced by humanity. The outbreak of poverty crises has a certain cyclicality, and the development of economic research may react to poverty cycles. To validate this view, we take the United States as an empirical example and establish a quantitative research architecture based on the bibliometrics and econometrics. In the first place, we conduct a bibliometric analysis of selected search terms relevant to poverty cycles. After that, the time-series data in the actual economy are collected for reflecting the trends and fluctuations in economic activity affected by poverty cycles. Meanwhile, with both bibliometric and economic data, a detrending measure via the band-pass (BP) filter is performed to estimate cycles. Finally, the Granger causality tests are implemented to explore the interaction between poverty cycles and economic research directly. As a supplement, this paper also provides a quantitative evaluation analysis, namely impulse-response functions, to investigate the influence of economic variables on bibliometric ones. The final results show there indeed exists an impact of poverty cycles in economic activity on relevant discussions in the scientific literature.

GDP Dynamics as a Superposition of N. D. Kondratieff Technological Waves

A review of publications on the theory of long waves by Kondratieff–Schumpeter has shown that one of the imperfect elements of this theory in the case of modeling on their basis of GDP dynamics is the correlation of the dynamics of these waves with the dynamics of the observed values of GDP. The point is that the mathematical models currently used to describe periodic fluctuations in economic activity under this theory have a horizontal trend, and when moving to describe the growing (or declining) dynamics of GDP, it is necessary to include an exogenous trend that is not related to this theory in any way. This situation violates its integrity and often serves as one of the arguments against the adequacy of this theory to real economic processes. This article proposes a model of GDP dynamics based on the superposition of long Kondratieff waves and does not require the inclusion of exogenous trend. In this model, in addition to the generally accepted parameters of long waves, namely, the beginning and length of the wave period, two new parameters arise: the magnitude of its amplitude and the rate of change of this amplitude. These parameters allow you to configure the GDP model to describe the dynamics of the GDP of different countries, taking into account their real differences in the size of GDP. The problems of verification of the parameters of the proposed model arising in connection with the multi-extremality of the function describing this model are considered. Verification of the parameters of this model on specific data is carried out on the values of US GDP for the period from 1790 to 2018. The results of testing the model showed that the superposition of long Kondratieff–Schumpeter waves well describe the dynamics of US GDP over the entire period, and the model parameters are quite consistent with their generally recognized values.

Agency business cycles

We develop a theory of endogenous and stochastic fluctuations in economic activity. Individual firms choose to randomize over firing or keeping workers who performed poorly in the past to give them an ex ante incentive to exert effort. Different firms choose to correlate the outcome of their randomization to reduce the probability with which they fire nonperforming workers. Correlated randomization leads to aggregate fluctuations. Aggregate fluctuations are endogenous—they emerge because firms choose to randomize and they choose to randomize in a correlated fashion—and they are stochastic—they are the manifestation of a randomization process. The hallmark of a theory of endogenous and stochastic fluctuations is that the stochastic process for aggregate “shocks” is an equilibrium object.