Increase In Aggregate Demand Research Articles

Analisis Permintaan Agregat dan Penawaran Agregat: Perspektif Teori Dan Empiris

This research aims to analyze aggregate demand and aggregate supply from theoretical and empirical perspectives. A qualitative approach and literature study were used to collect relevant data. This research identifies factors that influence aggregate demand and supply. The research results show that increasing aggregate demand can encourage economic growth and create jobs, but also has the potential to cause inflation. On the other hand, an increase in aggregate supply can stabilize prices and increase production. Case studies in Indonesia show an increase in aggregate demand and supply from 2021 to 2023, with household consumption as the main driver. This research provides a deeper understanding of macroeconomic dynamics and can help policymakers in designing effective economic strategies.

Time-Varying Uncertainty of the Federal Reserve's Output Gap Estimate

AbstractA factor stochastic volatility model estimates the common component to output gap estimates produced by the staff of the Federal Reserve, its time-varying volatility, and time-varying, horizon-specific forecast uncertainty. The output gap estimates are uncertain even well after the fact. Nevertheless, the common component is clearly procyclical, and positive innovations to the common component produce movements in macroeconomic variables consistent with an increase in aggregate demand. Heightened macroeconomic uncertainty, as measured by the common component's volatility, leads to persistently negative economic responses.

The effects of refugees’ camps on hosting areas: Social conflicts and economic growth

In this paper we study the effects of the establishment of refugees’ camps in Africa on the occurrence of protests and social conflicts by using geo-referenced panel data (2000–2014). We use 50x50 km cells as units of analysis and match data on the frequency of protests, armed conflicts and other organized violence events (based on GDELT and GED databases) with information on the location of camps contained in the UNHCR Camp Mapping Database. By using a counterfactual empirical strategy, we find that refugee camps significantly increase the occurrence of protests only in the initial period (2 years) while no statistically significant effect is detected in subsequent years. We interpret these findings as the asynchronous effect of two shocks associated with the presence of refugee camps: a sudden population shock which initially increases social tensions with the host-communities and a growth effect spurred by the increase in aggregate demand due to a public-spending shock and the progressive participation of refugees in the host socio-economic system. To support this hypothesis, we analyze the effect of hosting a camp on economic growth in the surrounding area (within 10 km from the camp). We find evidence that, on average, camps positively affect economic growth.

The Trickling Up of Excess Savings

We provide a simple framework connecting the distribution of excess savings across households to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest marginal propensities to consume (MPCs) spend down their excess savings the fastest, increasing other households' incomes and their excess savings. This leads to a long-lasting increase in aggregate demand until, ultimately, excess savings have “trickled up” to the richest savers with the lowest MPCs, raising wealth inequality.

Time-Varying Relation between Oil Shocks and European Stock Market Returns

This paper considers a time-varying parameter vector autoregression model to analyze the varying impact of three types of structural oil shocks (the supply-side shock, the aggregate demand shock, and the oil-specific demand shock) on the European stock market since the 1990s. Our findings show that the three types of oil shocks heterogeneously influence stock market returns in the euro area, and that this influence considerably changes over time during the period considered. First, an unexpected increase in oil supply appears to exert a positive but generally declining effect in the period before the Global Financial Crisis (GFC) of 2007–2009, which descends into negative values after the GFC. Second, an unanticipated increase in aggregate demand triggers a generally positive effect on stock market returns in the euro area. However, in the period from 2003 to 2005, stock market returns responded negatively, which could be attributed to the so-called growth-retarding effect. Third, an unexpected increase in oil-specific demand instigates a negative response in the pre-GFC period (considering the response 4–5 months after the shock), although this changes to a positive effect thereafter. Interestingly, irrespective of the origin of oil price fluctuations, oil price increases are associated with positive European stock market returns after the GFC. This signals a greater degree of oil market financialization.

The Effect of Foreign Direct Investments on Trade Balance in Southeast Europe during the Period 2000–2018

This research analyzed the effect Foreign Direct Investments (FDI) have on the levels of exports, imports, and trade balance of six Western Balkan countries (Kosovo, Albania, North Macedonia, Bosnia and Hercegovina, and Serbia). The impact of FDI was measured using panel data for 2000–2018 for the analyzed countries, estimated using a fixed effects specification. We found that an increase in FDI as a percentage of Gross Domestic Product (GDP) had a positive and significant effect on the level of exports and imports expressed as a percentage of GDP, although the effect on imports was greater. Furthermore, when we assessed the impact of FDI on the trade balance of the analyzed countries, we found that FDI had a significant negative effect on the level of the trade balance expressed as a percentage of GDP. These results can be attributed, among other reasons, to the fact that FDI causes an increase in aggregate demand in the short run, which, in developing and middle-income countries, cannot be covered by the domestic market; thus, the demand for imports increases more rapidly than the capacity to increase exports.

Supply Chain Operational Reference untuk Perancangan Indikator Kinerja Rantai Pasok Farmasi

Warehouses have an important role in the supply chain. The pharmaceutical industry is no exception. Pharmacy Warehouse functions as a place to store drugs and medical devices before being distributed to health facilities such as community health centers, clinics, and hospitals. One of the Pharmacy Warehouse Technical Implementation Units located in Dairi Regency, North Sumatra, has several problems that occur along its supply chain. These problems, among others, are related to time, cost, and the number of products shipped. In addition, there was also an increase in aggregate demand for drugs and medical devices in 2018-2019. This increase in demand reinforces the need for designing pharmaceutical supply chain performance measurements. In designing the supply chain performance measurement, the framework used is the Supply Chain Operational Reference (SCOR) which includes the plan, source, make, delivery, and return processes, which are then translated into a number of criteria based on the attributes of reliability, responsiveness, agility, costs, and assets to a number of Key Performance Indicators (KPI). In weighting KPI, the method used is Analytical Hierarchy Process (AHP). Based on data processing and analysis, a supply chain performance measurement design was obtained with 11 performance indicators. Based on the AHP results, it was found that the highest weight value of 0.750 was obtained on the indicators of accuracy and delivery speed, while the lowest weight value of 0.117 was obtained on the order picking accuracy indicator.

Analysis of Inflation Persistence and Sources of Inflationary Pressure in Java, Indonesia

Inflation disaggregation across all provinces in Java is persistent. Mapping results show that all provinces fall into the category of low inflation and high persistence. This study aims to analyze inflation persistence and sources of inflationary pressure in Java Island. The sample includes six provinces, observed from 2015 to 2019. The variables are inflation, consumer price index, money supply, and government spending. The method used is Autoregressive dan Davidson-Mackinnon Panel Data Regression. This study finds that inflation in Java Island is persistent in terms of general inflation, disaggregation of inflation, inflation in expenditure groups by COICOP, and inflation in the 5 volatile food commodities that have the largest weight. In general, inflation in Java falls into the category of low inflation and high persistence. This study also finds that the source of inflationary pressure in Java Island was monetary behavior. The results of this study are in accordance with the quantity theory which states that the money supply has a role in the process of increasing prices. Theoretically, if the money supply increases, while the aggregate supply is considered constant, then inflation will occur. An increase in the money supply reflects an increase in aggregate demand, but because the stock of goods and services remains constant, producers will increase prices. In general, the contribution of government spending to GDP in Java is indeed far below consumption and investment, so government spending cannot explain inflationary behavior in Java.

Vizija novog ekonomskog sistema posle prelaska pandemije u endemiju iz perspektive Srbije

Vizija novog ekonomskog sistema posle prelaska pandemije u endemiju iz perspektive Srbije

The Role of Zakat in Overcoming Inflation and Unemployment: Revisiting the Trade-Off Theory

The present study aims to examine the role of zakat in addressing unemployment and inflation, while also revisiting A.W. Phillips’ trade-off theory. The study adopts a qualitative methodology, using library research to critically analyse how zakat could address unemployment and inflation. The study argues that the optimal application of zakat could overcome the issue of unemployment while maintaining price stability. This is true since zakat can be distributed in two forms: consumptive and productive. Therefore, an increase in aggregate demand will always be followed by a rise in aggregate supply; the distribution of zakat in the consumptive form will increase aggregate demand, while the distribution of zakat for a productive purpose will increase aggregate supply. An increase in aggregate demand would in turn increase production, thus absorbing more labour as a result. This is where zakat addresses unemployment. On the other hand, a rise in aggregate demand will initially inflate the aggregate price. However, since the increase in aggregate demand is simultaneously followed by an increase in aggregate supply due to the distribution of zakat in its productive form, the price remains stable. Aggregate demand and aggregate supply cross at an equilibrium point. More importantly, the price is stable while the quantity of production is at its highest level. The findings of the study serve as a reference point for regulators formulating fiscal policy embedded in the zakat system.

Monetary Policy, Income Inequality, and Inflation — What’s the Link?

This paper studies the link in Canada between monetary policy, income inequality, and inflation. What are the effects of monetary policy on income inequality? and why and how does inflation play a role? Income inequality largely increased from the time the Bank of Canada began targeting inflation, through the late 1990s to the early 2000s, and flattened or decreased after the 2008 financial crisis. On the whole, income inequality today is greater than it was when the Bank of Canada became an inflation-targeting central bank. Against this backdrop, our analysis shows that expansionary monetary policy shocks, triggered by a lower than expected bank rate, lead to increasing income inequality, while contractionary monetary policy shocks reduce income inequality. We then show that these effects are asymmetric with expansionary shocks having a greater impact on income inequality than contractionary shocks. Expansionary monetary policy shocks result in a higher share of national income shifting to higher income households, who consume less as a percentage of their income, dampening the increase in aggregate demand, and, therefore, inflation. Our results lead to one particularly important conclusion for monetary policy: namely, that the Bank of Canada needs to account for the impact of income inequality when modeling how inflation will respond to a change in the overnight rate.

External and Internal Factors of Cross-Border Capital Flows in Russia

The literature on the assessment of factors affecting cross-border capital flows is usually characterised by distinguishing of external and internal factors. The former as a rule include international indices of the global economic growth rate, interest rates and other indicators of profitability (for certain types of financial assets). The latter include domestic indices of the growth rate of the national economy, interest rates and the profitability of financial instruments, sovereign credit ratings. Since the beginning of the 21st century, cross-border capital flows in Russia have followed the same trends as capital flows in other emerging markets. A distinguishing feature of Russia was the negative impact of sanctions on the level of its financial openness. We estimated regressions, designed to evaluate the factors affecting the individual components of cross-border capital flows in Russia. Regressions for the three types of flows (liabilities of direct investment and portfolio investment liabilities, and assets) demonstrate good results. Among external factors, the dynamics of oil prices turned out to be significant, as well as the global stock index (for portfolio investment assets). Among internal factors, an increase in aggregate demand helps to attract foreign direct investment, and an increase in the yield of Russian financial assets (stocks and bonds) — to attract portfolio investments. The difference in interest rates is the determinant of all analysed capital flows. Our estimations confirmed the significance of the “round-tripping” movement of foreign direct investment in Russia.

Universal Basic Income and Inclusive Capitalism: Consequences for Sustainability

Over the past forty years, income growth for the middle and lower classes has stagnated, while the economy (and with it, economic inequality) has grown significantly. Early automation, the decline of labor unions, changes in corporate taxation, the financialization and globalization of the economy, deindustrialization in the U.S. and many OECD countries, and trade have contributed to these trends. However, the transformative roles of more recent automation and digital technologies/artificial intelligence (AI) are now considered by many as additional and potentially more potent forces undermining the ability of workers to maintain their foothold in the economy. These drivers of change are intensifying the extent to which advancing technology imbedded in increasingly productive real capital is driving productivity. To compound the problem, many solutions presented by industrialized nations to environmental problems rely on hyper-efficient technologies, which if fully implemented, could further advance the displacement of well-paid job opportunities for many. While there are numerous ways to address economic inequality, there is growing interest in using some form of universal basic income (UBI) to enhance income and provide economic stability. However, these approaches rarely consider the potential environmental impact from the likely increase in aggregate demand for goods and services or consider ways to focus this demand on more sustainable forms of consumption. Based on the premise that the problems of income distribution and environmental sustainability must be addressed in an integrated and holistic way, this paper considers how a range of approaches to financing a UBI system, and a complementary market solution based on an ownership-broadening approach to inclusive capitalism, might advance or undermine strategies to improve environmental sustainability.

The short- and long-term effects of the Six Day War on the Israeli economy

ABSTRACTThis article examines the short- and long-term effects of the 1967 Six Day War on the Israeli economy. In the short run, the war led to a very big increase in aggregate demand (mainly military expenditures). This got the economy out of a Keynesian recession that prevailed before the war. There were several long-term effects. The French embargo on arms shipments to Israel, following the war, induced the development of a large military industrial base, which later became the basis for the impressive development of the high-tech industry. The influx of Palestinian workers into Israel depressed wages of unskilled workers, which slowed down the shift to more efficient production techniques (especially in construction). It also increased the dependency of the Palestinian economy on income earned by Palestinian workers in Israel.

Impact of uncoordinated plug-in electric vehicle charging on residential power demand

Electrification of transport offers opportunities to increase energy security, reduce carbon emissions, and improve local air quality. Plug-in electric vehicles (PEVs) are creating new connections between the transportation and electric sectors, and PEV charging will create opportunities and challenges in a system of growing complexity. Here, I use highly resolved models of residential power demand and PEV use to assess the impact of uncoordinated in-home PEV charging on residential power demand. While the increase in aggregate demand might be minimal even for high levels of PEV adoption, uncoordinated PEV charging could significantly change the shape of the aggregate residential demand, with impacts for electricity infrastructure, even at low adoption levels. Clustering effects in vehicle adoption at the local level might lead to high PEV concentrations even if overall adoption remains low, significantly increasing peak demand and requiring upgrades to the electricity distribution infrastructure. This effect is exacerbated when adopting higher in-home power charging. Electrification of transport offers many benefits for the energy transition but introduces a number of complexities around the electric system. This study undertakes modelling of residential power demand and electric vehicle use to understand the impact of uncoordinated vehicle charging on the electricity load.

The BNDES countercyclical role in the international economic crisis

http://dx.doi.org/10.5007/2175-8085.2016v19n2p39O artigo analisa o papel do Banco Nacional de Desenvolvimento Econômico e Social (BNDES) durante a crise deflagrada em 2008. É discutido, a partir de uma abordagem Keynesiana, o papel anticíclico da instituição financeira, com a disponibilização de recursos para financiamento de investimentos e seus efeitos sobre a expansão do emprego, renda e impostos. Em contraste as críticas, especialmente quanto aos subsídios advindos do Tesouro Nacional, pode-se concluir que foram positivos os efeitos da atuação do BNDES durante a crise e foi essencial para minimizar os impactos na economia brasileira. Os custos das operações financeiras com o Tesouro Nacional foram menores do que os benefícios produzidos, considerando-se o efeito multiplicador dos investimentos, bem como a demanda agregada, emprego e geração de impostos.

Demand Shocks and Interest Rates

Most macroeconomic models imply that increases in aggregate demand due to non-monetary forces cause real interest rates to rise, but empirical evidence from the US generally fails to support this prediction. We propose a novel explanation for how increases in aggregate demand (driven either by public or private shocks) can have a zero or negative effect on interest rates: when national income is demand-determined and cash is used to cover short-term needs, government or private spending shocks may generate an excess supply of loans. Our model has three key features: (1) demand-determined output, (2) portfolio heterogeneity (as we have both borrowers and lenders), and (3) asset market segmentation (different groups adjust using different asset classes). Data from the Treasury’s General Account and the Survey of Consumer Finances support our premise that spending shocks are often financed with money-like assets. Evidence from the Consumer Expenditure Survey corroborates a key implication of our theory: demand shocks of rich savers decrease interest rates.

Discussion of Evans and Honkapohja, 'Policy Interaction, Expectations, and the Liquidity Trap'

The result of Benhabib, Schmitt-Grohe, and Uribe (2001) is powerful because it relies only on three rather natural conditions: the Fisher equation, the convex Taylor rule, and the lower bound of the nominal interest rate. Their result is striking because the paper reveals the peril of the active Taylor rule, which has been shown to implement the target in a stable manner under various conditions. In a related paper, Benhabib, Schmitt-Grohe, and Uribe (2002) proposed a number of policies designed to avoid the liquidity trap outcome. One is to link government’s spending to the inflation rate. Subject to the intertemporal budget constraint, the government’s taxation on the private sector decreases as the inflation rate drops, causing the budget of the private sector to increase. Consequent increases in aggregate demand and the price level push the economy away from the liquidity trap. This sort of fiscal policy is considered “active” in the sense that the policy can increase the government budget deficit, in contrast to the “passive” fiscal policy which is designed to maintain or lower the budget deficit.

Aggregate Demand, Idle Time, and Unemployment *

AbstractThis article develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman (1971) but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets, both price and tightness adjust to equalize supply and demand. Since there are two equilibrium variables but only one equilibrium condition on each market, a price mechanism is needed to select an equilibrium. We focus on two polar mechanisms: fixed prices and competitive prices. When prices are fixed, aggregate demand affects unemployment as follows. An increase in aggregate demand leads firms to find more customers. This reduces the idle time of their employees and thus increases their labor demand. This in turn reduces unemployment. We combine the predictions of the model and empirical measures of product market tightness, labor market tightness, output, and employment to assess the sources of labor market fluctuations in the United States. First, we find that product market tightness and labor market tightness fluctuate a lot, which implies that the fixed-price equilibrium describes the data better than the competitive-price equilibrium. Next, we find that labor market tightness and employment are positively correlated, which suggests that the labor market fluctuations are mostly due to labor demand shocks and not to labor supply or mismatch shocks. Last, we find that product market tightness and output are positively correlated, which suggests that the labor demand shocks mostly reflect aggregate demand shocks and not technology shocks.

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

We assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to examine the drivers of heterogeneous incumbent firm adaptation following the industry-wide demand shock of September 11, 2001. This shock entailed not only an increase in aggregate demand but, more importantly, a shift in the relative attractiveness of individual product areas, resulting in the need for firms to reshuffle their product portfolios in response to changing demand conditions. The exogenous nature of the shock allows us to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes. We find that the locus of coordination inside a firm can explain differential postshock adaptation performance: because interdependencies spanning organizational boundaries are more difficult to manage than those contained within such boundaries, coordination across product areas creates greater adaptation challenges compared with coordination within product areas. We further investigate the moderating effects of product complementarity and organizational grouping, finding results consistent with our hypothesized mechanisms. As one of the first studies to empirically link a firm’s locus of coordination with its adaptation performance, this study contributes to our understanding of the role of interdependence and organization design in dynamic environments.