Macroeconomic Effects Research Articles

The natural outcome of neoliberal globalism and the experience of empirical forecasting of the macroeconomic consequences of the special military operation of the Armed Forces of the Russian Federation in Ukraine

Subject. This article discusses the issues of economic confrontation between Russia and the NATO bloc and the problems of implementing a new model of economic growth. Objectives. The article aims to develop an optimal mechanism for the implementation of the economic, resource, human, and intellectual potential of Russia, capable of ensuring the military security of the State and the implementation of plans for the development of the country. Methods. For the study, we used the general scientific research methods. Results. The article finds that an optimal, harmonious combination of elements of State capitalism and a mobilization economy only, as well as an increase in the contribution of small and medium-sized businesses to the development of the regions of Russia and the country as a whole, can become the basis of a promising model of economic growth. Conclusions. Contrary to pessimistic forecasts, Russia is confidently overcoming the sanctions pressure.

Pathway to Decarbonization Through Industrial Energy Efficiency: Micro and Macro Perspectives from Compressed Air Usage

Energy audits directly provided the industrial sector with reduced energy costs and avoided emissions. Still, they also lead to far-reaching indirect and induced local, regional, and national benefits. This paper aims to present the techno-economic-environmental analysis to achieve decarbonization through implementing industrial energy efficiency at micro and macro levels. An integrated techno-economic-environmental methodology is developed. Case studies of micro-level carbon reduction efforts through industrial energy efficiency technologies are presented. The broader macroeconomic and environmental effects of technology on society are analyzed using data from 206 energy audits of industrial compressed air systems conducted over 13 years. The impacts show that energy-efficient improvements lead to direct cost savings for manufacturers, boost economic activity across sectors, and affect carbon dioxide emissions both short-term and long-term in the region. Given their extensive benefits, energy audits significantly influence policymaking. We devised a methodology to link micro-level energy audit data with macroeconomic and environmental analyses to quantify these cascading benefits. The economic scenario analysis shows that $228 M has been saved from direct industrial energy savings from implementing all compressed air recommendations in the studied periods and the region. In addition, the investment made through manufacturers would create 2,025 jobs and $383 M annually, cascading regional economic impacts. The environmental analysis shows that the regional manufacturers have directly avoided about 2.8 M metric tons of carbon dioxide emissions.

The Macroeconomic Effects of the Federal Reserve’s Conventional and Unconventional Monetary Policies

The Macroeconomic Effects of the Federal Reserve’s Conventional and Unconventional Monetary Policies

Distributional Effects of Expected Climate Mitigation Policies in Russia

Objective: The importance of assessing the socio-economic impacts of climate policies is growing as regulations are being adopted to promote decarbonization processes. Since Russia has committed to carbon neutrality by 2060, a large and diverse policy package should be launched to attain this goal. The policies need to be based on the effectiveness, equality and motivation. This paper presents the results of the first-of-a-kind research aimed to assess the impact of individual decarbonization policies on the distribution of consumer incomes and expenses for Russia. Methods: A system of simulation models was used to estimate prospective greenhouse gases (GHG) emissions pathway for Development Driven by Decarbonization and Democratization (4D scenario) and related macroeconomic effects (evolution of prices, incomes, employment and energy expenditures across major economic sectors and industries), which were used as inputs to the simulation model distributional effect of national decarbonization (DEFEND), which was specially developed to estimate the effects of climate policies at the household level split by income deciles. Results: This paper shows that only low carbon transition will sustain Russian economic growth by promoting reduced concentration of wealth and less centralized political system, whereas maintaining the extraction-based administratively ruled economic model will cause GDP to decline and form a “shagreen skin” economy. Conclusion: The paper concludes that many of the explored policies have regressive distributional effects, but sophisticated socio-economic engineering can tailor neutral climate mitigation policies to help to at least maintain the balance of income and expenses compared to the basic trajectory. This study identifies data and knowledge gaps in calibrating the models that look into the distributional effects.

Wells or Welfare? Macroeconomic implications of the Canadian oil subsidy

The study constructs a general equilibrium model to investigate the macroeconomic effects of oil production and investment subsidies. To make the model reflect real-life situations, the study incorporates Canadian economic data and uses a Bayesian method to fine-tune the model. Although subsidies boost the short-term economic effects of oil price shocks, they lead to overall losses in economic welfare over time, regardless of the channel through which they are provided. The study shows that a less aggressive headline inflation-targeting monetary policy combined with an efficient tax system is more beneficial in terms of welfare maximisation. The findings suggest three essential and complementary policies: a gradual phase-out of oil subsidies, starting with investment subsidies due to their relatively high welfare cost; increased investment in the green energy sector to reduce carbon footprints and offset the decline in oil and gas sectors; and improved coordination between fiscal and monetary policies.

Modeling the macroeconomic consequences of natural disasters: Capital stock, recovery dynamics, and monetary policy

Natural disasters can cause substantial damage to public and private sector infrastructure capital, generating macroeconomic losses through complex channels. These shocks must be managed and accounted for with macrofiscal and monetary policy to minimize their welfare impacts. To support this process, we adapt the World Bank Macrostructural Model to capture key transmission channels of natural (geophysical or climate-related) disasters and their immediate aftermath. The macroeconomic model is extended on several fronts: (1) a distinction is made between infrastructure and noninfrastructure capital; (2) the production function is adjusted to account for short-term complementarity across capital assets; (3) the reconstruction process is modeled to consider postdisaster constraints, with distinct processes for the reconstruction of public and private assets. Destroyed infrastructure capital makes the remaining noninfrastructure capital less productive, which means that disasters reduce the total stock of capital and its marginal productivity. Upon applying the model to Türkiye data, the welfare impact of a disaster — proxied by the discounted consumption loss — is found to increase nonlinearly with direct asset losses. Macroeconomic responses reduce the welfare impact of minor disasters but magnify it when direct asset losses exceed the economy’s absorption capacity. The welfare impact also depends on the preexisting economic situation, the ability of the economy to reallocate resources toward reconstruction, and the response of monetary policy. Appropriate macrofiscal and monetary policies offer cost-effective opportunities to mitigate the welfare impact of major disasters.

Corporate Governance and Macro-Economic Determinants Effect on Financial Performance: Evidence From Banks in Asian Countries

Corporate Governance and Macro-Economic Determinants Effect on Financial Performance: Evidence From Banks in Asian Countries

The Economic Consequences of Legal Framework

Abstract The legal origins of a state do influence significantly its economic growth. The current work verifies that countries whose legal framework is based on common law tend to have better economic results compared to countries based on civil law. It investigates the role of an effective regulatory framework in promoting economic growth and development in recent years. Regulation can have potentially significant macroeconomic consequences by helping or hampering the dynamics of economic restructuring and resource reallocation that characterize the growth process. Achieving good regulatory outcomes is almost always a co-operative effort: by the government, regulators, the regulated, and the broader community. In the European Union, the drivers to initiate better regulation strategies, varied from country to country. Nevertheless, economic growth, competitiveness and the needs of businesses have been the prominent reasons for engaging in better regulation policies. This paper has concluded that countries which have actively reformed their legal systems focusing on quality standards succeed in the creation of a solid social and economic environment.

The macroeconomic effects of universal basic income programs

I develop a heterogeneous agents overlapping generations model to assess the welfare effects of substituting the US income security system with a UBI policy. I study two counterfactual exercises: an expenditure-neutral reform and a large, policy-oriented UBI reform with a transfer equivalent to $1000 monthly, both financed by changes in the consumption tax. The first exercise has a moderate fiscal impact, induces increases in the aggregate output and employment, and reduces earnings and wealth inequality. The second exercise requires a large increase in the consumption tax rate, decreases employment and output, and increases earnings inequality, which moves sideways for wealth. In both cases, disposable income and consumption are more equally distributed, with less accrual at the top. The two economies generate positive welfare gains, with those for the generous UBI economy being larger.

Macroeconomic analysis of the child benefit: Fertility, demographic structure, and welfare

This paper examines the macroeconomic and welfare effects of the child benefit, using a general equilibrium overlapping generations model incorporating fertility choices. The model is calibrated to Japan and produces the benefit elasticity of fertility in line with the empirical estimates. Expanding the per-child payment leads to welfare gains for future generations in the long-run equilibrium. Notably, the long-run gains extend to individuals who are childless throughout their lives and do not receive child benefits. Higher fertility rates facilitated by the expansion and the resulting demographic change account for the results via several channels. However, reaching the new equilibrium takes approximately 100 years as the demographic change necessitates sufficient transition periods. The accrual of welfare gains is thus gradual and takes a long time.

Raising America’s future: Search for optimal child-related transfers

The US differs from other OECD countries in terms of family policy size and composition. This study examines the welfare and macroeconomic effects of family policy reforms. I explore three policy instruments: child-related tax credits, childcare subsidies, and child allowances. The children are merit good due to pay-as-you-go social security structure. I show that expanding family policy, like the American Rescue Plan, improves welfare. I also define the optimal family policy for the United States. It accounts for about 3% of GDP, three times larger than the existing policy, and primarily focused on childcare subsidies. Family policy structure is critical for welfare evaluation because similar expenditure levels can result in contrasting welfare outcomes depending on policy composition. This study emphasizes the importance of carefully designed family policies, as well as the need for ongoing research and policy innovation to maximize societal benefits and promote equitable economic growth.

Pollution Havens in South-East Asia: Examining Japanese Multinational Enterprises in the Philippines

Pollution Havens in South-East Asia: Examining Japanese Multinational Enterprises in the Philippines

On the time-varying impact of China's bilateral political relations on its trading partners: “Doux commerce” or “trade follows the flag”?

We assess the impact of China's bilateral political relations with three main trading partners—the US, Germany, and the UK—on current account balances and exchange rates, over the 1960Q1–2022Q4 period. Relying on the lag-augmented VAR approach with time-varying Granger causality tests, we find that political relationships with China strongly matter in explaining the dynamics of current accounts and exchange rates, supporting the “trade follows the flag” view. Such relationships cause the evolution of the exchange rate (except in the UK) and the current account; these causal links being time-varying for the US and the UK and robust over the entire period for Germany. These findings suggest that policymakers should account for bilateral political relationships to understand the global macroeconomic consequences of political tensions.

Fuel Subsidy Removal and Macroeconomic Performance in Nigeria

The government of Nigeria removed fuel subsidy on the premise that fuel subsidy is a drain on government finances, causes macroeconomic instability, and generates adverse social welfare in the country. The objective of this paper is to examine the effect of fuel subsidy removal on macroeconomic performance in Nigeria. The paper adopts a desk review method and obtains secondary data from the documents of reputable organizations such as the Central Bank of Nigeria, the National Bureau of Statistics, and the Nigerian National Petroleum Company Ltd. Descriptive statistics was employed for the analysis of data. The study found out that the removal of fuel subsidy resulted in the increase of premium motor spirit price across the country generating inflationary trend. It improved revenue generation for government expenditure, curtailed cross border smuggling and corruption inherent in the downstream sector of the petroleum sector. It was based on these findings that the paper recommends a proper coordination of the fiscal policies and the Central Bank of Nigeria to effectively manage the macroeconomic effect of the subsidy removal. It is also important for the government to develop an effective communication strategy to engage stakeholders on the necessity for the subsidy removal and put in place an effective palliative measure to alleviate the attendant adverse conditions that it generated.

Macroeconomic, energy, and emission effects of solar PV deployment at utility and distributed scales in Saudi Arabia

For the first time, this paper assesses the macroeconomic, energy, and emission impacts of solar photovoltaic (PV) deployment in Saudi Arabia by linking an energy-and-environment-sector augmented macroeconometric model with a power model and a distributed generation model while distinguishing between utility scale and distributed-generation scale of the PV deployment. We analyze three policy scenarios of deploying 5.5 TWh PV for the period 2021–2030: (S1) fully government-funded utility-scale PV deployment, (S2) half-government-funded utility-scale PV deployment, and (S3) household-funded distributed generation scale PV deployment with little government support. We find that: S1 is best suited if the objective is fiscal expansion, 2 is best suited to improve non-oil fiscal positions, increase non-oil value added and employment, and increase household consumption, and S3 is best suited to reduce energy consumption and associated emissions and enhance international trade. We show that government and foreign investment play an important role, and it would be desirable for the Saudi government to partner in financing renewable energy projects, saving budgetary resources to invest in other projects to support economic growth.

Hanging Out to Dry? Long-term Macroeconomic Effects of Drought in Fragile and Conflict-Affected States

Hanging Out to Dry? Long-term Macroeconomic Effects of Drought in Fragile and Conflict-Affected States

The macroeconomic effects of public debt booms during recessions - evidence from advanced and emerging market economies

ABSTRACT Public debt is often widely used during economic recessions to provide additional financial support for expansionary fiscal expenditures. Based on the macroeconomic data of 54 advanced and emerging market economies, this paper reveals that public debt booms during recessions have a nonlinear impact on economic growth. Initially, the impact appears weakly positive because additional debt financing supports a more expansionary fiscal policy. However, as the debt escalation leads to fiscal imbalances, fiscal consolidation becomes an involuntary endeavour, and its impact on economic growth turns negative subsequently. Moreover, this effect is particularly severe for emerging market economies and heavily indebted economies.

Monetary policy rule under rare events: With implications by digital finance development

This article studies the macroeconomic impacts of rare events and the choice of monetary policy rule in an estimated DSGE model using Chinese data. We quantify the characteristics of adverse macroeconomic effects on both the supply and demand side and explore the suitable monetary policy response in the context of digital finance development. The results show that the early stage of severe negative macroeconomic impacts amplified by financial frictions requires quantity-based tools to restore macroeconomic stability. After the impediment of financial frictions and the early impact of rare events are mitigated, price-based tools are more effective than quantity-based tools in achieving a rapid recovery. Therefore, a mixed monetary policy rule shows the advantage of flexibility and results in the highest welfare. In addition, digital finance development reduces financial frictions and stabilizes money demand, thus enhancing the relative importance of price-based tools.

The Estimation of Macroeconomic Effects of Tax Cuts and Fee Reductions: An Analysis from the Perspective of Consumer Income and Expenditure

This paper analyses the macroeconomic effects of China's Tax Cuts and Fee Reduction policies (TC&FR) from the perspective of consumer income and expenditure. It combines factors such as local and central government, population structure and consumption, household savings and corporate investment. The paper then draws three conclusions: firstly, that China's TC&FR reforms have had significant effects; secondly, that the reforms have had a greater impact on the younger consumer group than on the older one; and thirdly, that the goal of multiplying fiscal effects can be achieved by expanding the proportion of middle-income groups. The continuous improvement of the legal taxation and fee collection mechanism has enhanced the governance level of local governments, enabling the policies to be implemented steadily and far-reaching. Secondly, the implementation of TC&FR should focus on the young consumer group and emphasize the protection of welfare for the elderly group. This will help to achieve the goal of multiplying fiscal effects by expanding the proportion of middle-income groups. Thirdly, the difference between China and Western countries lies in China's higher per capita willingness to save. Consequently, TC&FR can be expected to perform optimally when coupled with monetary policies designed to stabilize market investment expectations.

Total Costs Coefficients in the Basic Input-Output Tables

The article presents the results of the author's research devoted to the improvements in domestic developments of Input-Output Tables (IO Tables), significantly increasing their analytical potential. According to the author, the level of development of Russian statistics in the field of Input-Output Tables is quite high – the basic accounts contain not only the symmetrical IO Tables, but also symmetrical tables of domestic products and imports that they are derived from. This is the main condition for implementing the methodology and methodological solutions described and elaborated in the article for compiling the tables with the coefficients of total costs of domestic products and the total need for import of intermediate imports estimates.In the first part of the article, the author characterizes conceptually different versions of the intersectoral model with the features of the technological matrix corresponding to these versions – the basis for estimating the values of total costs coefficients in the national economy. Three «extreme» variants of the economy model representation of indicative country are studied. They define the economy as a part of a global economy within the framework of an inter-country model; in the form of a national model without the allocation of the import matrix in a symmetrical IO Tables (traditional method) and in the form of a national model with the possibility of such allocation (alternative method). The substantial differences in the values of total costs coefficients for the options are described and their preference for study of the country's economy is emphasizedThe second part of the article presents the results of a quantitative analysis based on the basic IO Tables for 2016 data. It contains the estimates of the measure of discrepancy in total costs coefficients values according to traditional and alternative methods; the differences in the associated indicators of intermediate products total costs distribution by specific dimensions of final demand. The analytical possibilities of the alternative method are described, the estimates for the decomposition of final products cost into domestic and imported value added are provided.The author explains the analytical relevance of total costs coefficients using an alternative method in forecasting practice and in the macroeconomic effects of management decisions assessment and proposes to supply the basic IO Tables for 2021 with tables with these coefficients and with the necessary methodological explanations