Interest In Macroeconomics Research Articles

Are Structural Fluctuations Natural or Policy-Induced? Analyzing Mises's and Schumpeter's Contributions to Business Cycle Theory

The 2007/8 financial crisis and economic recessions, much like the Great Depression of 1929, stimulated an increased interest in macroeconomics in general and business cycle theory in particular. Aside from a renewed interest in the various interpretations of Keynesianism, particular attention was devoted to the Austrian School. In the first half of the 20th century within the broader Austrian camp there existed two well-established theories that, despite their important insights, were neglected by the mainstream economics profession. However, Joseph Schumpeter and Ludwig von Mises—both members of the third generation of Austrian economists—built theories of economic depressions that, despite presenting some similarities on some particular issues, were fundamentally telling a different story. A closer look at their overall theoretical system seems to suggest that their fundamental divergences have their origin in methodological and epistemological questions. Enamoured with static equilibrium analysis, Schumpeter was led to construct a theory of booms and busts that saw these as the natural outburst of a capitalist system that was inherently disruptive and unstable. Mises on the other hand, focusing on the dynamic market process, was led to conceive of booms and busts as the inevitable consequence of systematic intervention into capitalist production by the government and its corollary, the banking system.

Is the Discretionary Income Effect of Oil Price Shocks a Hoax?

The transmission of oil price shocks has been a question of central interest in macroeconomics since the 1970s. There has been renewed interest in this question since the large and persistent fall in the real price of oil in 2014-16. In the context of this debate, Ramey (2017) makes the striking claim that the existing literature on the transmission of oil price shocks is fundamentally confused about the question of how to quantify the effect of oil price shocks. In particular, she asserts that the discretionary income effect on private consumption, which plays a central role in contemporary accounts of the transmission of oil price shocks to the U.S. economy, makes no economic sense and has no economic foundation. Ramey suggests that the literature has too often confused the terms-of-trade effect with this discretionary income effect, and she makes the case that the effects of the oil price decline of 2014-16 on private consumption are smaller for a multitude of reasons than suggested by empirical models of the discretionary income effect. We review the main arguments in Ramey (2017) and show that none of her claims hold up to scrutiny. Our analysis highlights the theoretical basis of the discretionary income effect. We also discuss improved regression-based estimates of this effect that allow for changes in the dependence on oil and gasoline imports, and we highlight the fact that alternative estimates used by policymakers involve strong simplifying assumptions.

#ECON1950: Integrating Twitter and Moodle to Reach Students outside the Classroom

Twitter is useful for academic economists to follow current research and public policy and to engage with their colleagues, students, and the general public. It is also a great place to gather information relevant to undergraduate economics courses. A course specific twitter hashtag embedded in a Learning Management System (LMS) is an easy way to share this supplemental information with students. This article contains a detailed, step-by-step guide to embedding a twitter feed within a LMS. Examples of how twitter can be used to share information to students in a Principles of Macroeconomics course are provided. Student survey results indicate that although most students did not access the shared information on a weekly basis, most thought that the twitter feed helped connect the course material to real-world and stimulated their interest in macroeconomics. Students who accessed the shared information at least monthly felt more strongly (than students who never or rarely accessed the information) that the twitter feed helped connect the course material to real-world examples, was worthwhile, and stimulated their interest in macroeconomics.

Is the Discretionary Income Effect of Oil Price Shocks a Hoax?

The transmission of oil price shocks has been a question of central interest in macroeconomics since the 1970s. There has been renewed interest in this question after the large and persistent fall in the real price of oil in 2014-16. In the context of this debate, Ramey (2017) makes the striking claim that the existing literature on the transmission of oil price shocks is fundamentally confused about the question of how to quantify the effect of oil price shocks. In particular, she asserts that the discretionary income effect on private consumption, which plays a central role in contemporary accounts of the transmission of oil price shocks to the U.S. economy, makes no economic sense and has no economic foundation. Ramey suggests that the literature has too often confused the terms-of-trade effect with this discretionary income effect, and she makes the case that the effects of the oil price decline of 2014-16 on private consumption are smaller for a multitude of reasons than suggested by empirical models of the discretionary income effect. We review the main arguments in Ramey (2017) and show that none of her claims hold up to scrutiny.

ISSUES IN FINANCE: CREDIT, CRISES AND POLICIES - AN OVERVIEW

ISSUES IN FINANCE: CREDIT, CRISES AND POLICIES - AN OVERVIEW

Exchange rate movements and monetary policy in Brazil: Econometric and simulation evidence

Abstract The literature on monetary economy has aroused growing interest in macroeconomics. Due to computational advancements, models have become increasingly more complex and accurate, allowing for an in-depth analysis of the relationships between real economic variables and nominal variables. Therefore, using a dynamic stochastic general equilibrium (DSGE) model, based on Gali and Monacelli (2005), we propose and estimate a model for the Brazilian economy by employing Bayesian methods so as to assess whether the Central Bank of Brazil takes exchange rate fluctuations into account in the conduct of monetary policy. The most striking result of the present study is that the Central Bank of Brazil does not directly change the interest rate path due to exchange rate movements. A simulation exercise is also used. Our conclusion is that the economy quickly accommodates shocks induced separately on the exchange rate, on the terms of trade, interest rate, and global inflation.

Is There Compelling Evidence against Increasing Returns to Matching in the Labour Market

Matching models of the labour market have been of particular interest in macroeconomics where the notion of 'thick-market' externalities can lead to multiple equilibria. This has led to some recent interest in constructing empirical estimates of labor-market matching functions. This paper argues that existing estimates do not provide compelling evidence against the hypothesis of increasing returns in matching. The assumption made in several studies, that the relevant pool of job searchers is proportional to the stock of unemployment, is a potentially important source of downward bias in returns-to-scale estimates. We show the source of this bias theoretically and illustrate its magnitude by estimating Canadian aggregate and regional labour-market matching functions over the period 1978-88. This evidence suggests significant increasing returns to labor-market matching.

A Fallacy in the Interpretation of the Cash Balance Effect

Today, when the interest in macro-economics has largely shifted from the Olympian controversies of the 'thirties on the determinants of employment and interest toward the techniques involved in the construction of growth and response models, a re-examination of some of these older issues might be thought of as a pastime somewhat wanting in urgency. This is far from being the case however. For if we unwittingly admit a serious ambiguity into what is acknowledged to be a key relationship in macro-economics--and this, in fact, is what has happened-somehow no amount of elaborating the basic relationships with respect to time, or anything else, can get us around this defect. Indeed, until we have this matter settled, we remain exposed to needless controversy and confusion in the future. The ambiguity in question, and the one which is to exercise us in this paper, exists within the concept of the cash balance effect, a concept not without some topical interest in view of Professor Patinkin's painstaking endeavours to establish a more general classical monetary theory in which the cash balance effect plays a key role.2 Since the ambiguity springs from a mistaken idenitification of the cash balance effect proper with the so-called Pigou effect,3 it will be the task of this paper to demonstrate: (1) that the two effects are quite different; (2) that the so-called Pigou effect, far from being a corrective mechanism in a classical-type monetary system, is operative only within a Keynesiantype monetary system-one in which the rate of interest is stabilised by institutional forces4; and (3) that although Patinkin adequately