Productivity Shocks Research Articles

Climate Change, Technology Shocks and the US Equity Real Estate Investment Trusts (REITs)

Given the renewed interest in Real Estate Investment Trusts (REITs), we are keenly focused on exploring the possible connection between climate change and return volatility of US equity REITs, as well as the role of technology innovation for environmental sustainability in the nexus. While climate change might pose some threat to the REIT business, it is necessary to know the direction in which technological innovation can mitigate this impact. As a way to validate our evidence, we offer some additional analyses with alternative measures of technology shocks and the replacement of technology shocks with global economic expansion, as improvement in global economic activity could offer more investment options for investors to diversify their investment portfolio away from climate-prone assets. For completeness, the analyses are replicated for US mortgage REITs. Overall, we show that climate change heightens the return volatility of US equity REITs and that the former contains some predictive content for the latter. When the role of technology is examined, our results show that technology shock indeed reverses the cheering impact of temperature anomaly on the return volatility of US equity REITs. We show that these results are robust to alternative measures of economic shock and that the results equally hold for mortgage REITs. We further document some important implications of our findings for investors and policymakers alike.

Technology Shocks and Predictable Minsky Cycles

Abstract Big technological improvements in a new, secondary sector lead to a period of excitement about the future prospects of the overall economy, generating boom-bust dynamics propagating through credit markets. Increased future capital prices relax collateral constraints today, leading to a boom before the realisation of the shock. But reallocation of capital toward the secondary sector when the shock hits leads to a bust going forward. These cycles are perfectly foreseen in our model, making them markedly different from the typical narrative about unexpected financial shocks used to explain crises. Our dynamics obtain without a departure from rational expectations. In fact, these cycles echo Minsky’s original narrative for financial cycles, according to which ‘financial trauma occur [sic] as normal functioning events in a capitalistic economy’ (Minsky, 1980, p. 21).

Complementarities among types of education in affecting firms' productivity

AbstractThis article uses Swiss firm‐level panel data to show that complementarities among workers with different types of education affect firms' productivity. We consider workers with four different types of education: no post‐secondary education, upper secondary vocational education and training (VET), tertiary professional education, and tertiary academic education. To account for possible endogeneity, we exploit within‐firm variation and employ a structural estimation technique that uses intermediate inputs as a proxy for unobserved productivity shocks. Our results suggest that workers with an upper secondary VET education are complementary to workers with a tertiary academic education, while workers with no post‐secondary education are complementary to workers with a tertiary professional education. Altogether, our findings highlight the importance of vertical and horizontal education diversity within firms.

Housing Market Dynamics in Kazakhstan: An Estimated DSGE Model

This study investigates the drivers of housing price fluctuations in Kazakhstan by using a dynamic stochastic general equilibrium (DSGE) model with the housing market. We estimate the model by using Bayesian methods with data for the period of 2010Q1 to 2020Q4. We find that housing preference shocks play a crucial role in explaining for housing market fluctuations. These shocks account for a substantial portion of housing price and consumption behavior variations. Surprisingly, monetary policy, government spending, productivity and markup shocks show limited explanatory power for housing price fluctuations. Our findings suggest the importance of monitoring potential housing bubbles, as well as the impact of housing market fluctuations on the broader economy, thus highlighting the housing wealth effect. Additionally, our analysis indicates that the pension withdrawal policy has a minor long-term effect on business-cycle fluctuations in Kazakhstan. Overall, technology shocks are key drivers of gross domestic product (GDP) variance, while inflation rate variation is mainly explained by monetary policy and foreign demand shocks.

How can technology significantly contribute to climate change mitigation?

ABSTRACT This paper highlights how technology can contribute to reaching the 2015 Paris Agreement goals of net zero carbon dioxide (CO2) emissions and global warming below 2°C in 2100. It uses the Advanced Climate Change Long-term model (ACCL), particularly adapted to quantify the consequences of energy price and technology shocks on CO2 emissions, temperature, climate damage and Gross Domestic Product (GDP). The simulations show that without climate policies the warming may be +5°C in 2100, with considerable climate damage. An acceleration in ‘usual’ technical progress not targeted at reducing CO2- even worsens global warming and climate damage. According to our estimates, the world does not achieve climate goals in 2100 without ‘green’ technologies. Intervening only via energy prices, e.g. a carbon tax, requires challenging hypotheses of international coordination and price increase for polluting energies. We assess a multi-lever climate strategy combining energy efficiency gains, carbon sequestration, and a decrease of 3% per year in the relative price of ‘clean’ electricity with a 1 to 1.5% annual rise in the relative price of polluting energy sources. None of these components alone is sufficient to reach climate objectives. Our last and most important finding is that our composite scenario achieves the climate goals.

Are all economic fluctuations bad for consumers?

Are business cycles always costly? This paper sheds new light on this question in the context of a two-sector neoclassical business cycle model by focusing on the roles of the origin of shocks and the degree of real frictions that restrict factor reallocation both inter-temporally (investment adjustment cost) and intra-temporally (inter-sectoral factor immobilities). We find that under the benchmark parameterization, investment-specific technology shocks are welfare-improving while consumption-specific technology shocks are welfare-detrimental, regardless of the degree of real frictions. While aggregate TFP shocks can be both depending on the degree of real frictions, welfare-improving business cycles are not supported by empirical evidence.

Commodity prices and business cycles in small open economies: the role of news shocks

PurposeThe authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective.Design/methodology/approachThe authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components.FindingsThe authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy.Practical implicationsGiven the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices.Originality/valueThis paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.

Do more frequent price adjustments guarantee less effective monetary stimulus when uncertainty rises?

Probably not. When firms face higher uncertainty, they may reset their prices more frequently, but this does not necessarily mean that monetary policy is less effective in boosting real activity. In fact, the real effect of monetary policy may be strengthened because firms shift their attention away from the monetary policy shock to productivity shocks to minimize profit loss due to suboptimal price-setting. This conjecture is supported by a model with an information processing capacity constraint, which shows that monetary policy becomes more effective in stimulating the economy during periods of high uncertainty. Moreover, the model’s key characteristics and moments of price distribution match those observed in the micro price data.

On Bernard Ramm, "Evangelical Theology and Technological Shock" (JASA 23, no. 2 [1971]: 52–56)

On Bernard Ramm, "Evangelical Theology and Technological Shock" (JASA 23, no. 2 [1971]: 52–56)

Extreme weather impacts do not improve conflict predictions in Africa

Quantitative climate and conflict research has thus far considered the role of biophysical extreme weather impacts in conflict dynamics only to a limited extent. We do not fully understand if and if so how, extreme weather impacts can improve conflict predictions. Addressing this gap, we use the Generalized Random Forest (GRF) algorithm to evaluate whether detailed information on extreme weather impacts improves conflict forecasts made with well known conflict predictors such as socio-economic, governance, and history of conflict indicators. We integrate data on biophysical extreme weather impacts such as droughts, floods, crop production shocks, and tropical cyclones from the Inter-Sectoral Impact Model Intercomparison Project 2a (ISIMIP2a) project into predictive models of conflict in mainland Africa between 1994 and 2012. While we find that while extreme weather impacts alone predict violent conflicts modestly well, socio-economic and conflict history indicators remain the strongest individual predictors of conflicts. Finally, fully specified forecast models including conflict history, governance, and socio-economic variables are not improved by adding extreme weather impacts information. Some part of this can be explained by spatial correlations between extreme weather impacts and other socioeconomic and governance conditions. We conclude that extreme weather impacts do not contain any unique information for forecasting annual conflict incidence in Africa, which calls into question its usefulness for early warning.

The relevance of domestic and foreign factors in driving Ghana’s business cycle

It is commonly assumed that external shocks dominate economic fluctuations in least-developed countries (LDCs), particularly commodity-exporting LDCs. Nonetheless, the magnitude and extent of the impact of such shocks compared to other domestic drivers of the business cycle in these countries remain unclear. This study employs a business cycle accounting model to empirically explore the relative contributions of domestic and external factors to Ghana’s post-independence business cycle. Contrary to widely held beliefs, our results suggest that external factors do not exert a predominant influence on Ghana’s business cycle. Instead, Ghana’s business cycle is driven largely by productivity shocks (or efficiency wedges), with the 1980s recession being an exception (which was largely driven by investment wedges). Furthermore, we also show that it is better to capture Ghana’s 2011 oil boom as a productivity shock rather than a government spending or an external shock (as some have done) when building a model of economic fluctuations for Ghana’s economy for that episode of the business cycle. These results have important implications for building models of economic fluctuations for Ghana’s economy.

Environmental policy, green trade and sustainable development in Europe: New perspective on the Porter hypothesis

This study tests the validity of the Porter hypothesis through the examination of the joint effects of green trade and environmental policy stringency on sustainable development in the European Economic Area. To achieve the study objective, data for 14 countries within the region between 2003 and 2015 is analyzed using advanced panel estimation techniques – panel method of moments quantile and nonparametric time-varying coefficient panel models. The empirical analysis yields a number of interesting results. In confirmation of the Porter hypothesis, the interaction term is positive and significant. Specifically, a percentage increase in environmental policy stringency raises the positive impact of green trade on sustainable development by 0.005%. This interactive effect also ranges between 0.002% and 0.007% across quantiles. This indicates that the higher the level of sustainable development, the higher the moderating impact of environmental policy stringency on the relationship between green trade and sustainable development. This suggests that stringent policies are able to induce green technological shocks that cause efficiency improvements and innovation, which in turn promote sustainable development either directly or indirectly through their interactions with green trade. Moreover, the individual and synergistic impacts of environmental policy stringency and green trade are time-varying and sensitive to economic conditions. They become more pronounced in periods of major regional/global economic events. Responsible use of strict environmental policies is advocated, and the removal of green trade barriers is encouraged.

Optimal monetary policy in developing countries: The role of informality

In this paper, I analyze optimal monetary policy in developing countries whose labor markets are characterized by the presence of a large informal sector. I develop a closed economy model with nominal price and wage rigidities, search and matching frictions, and a dual labor market: a formal one characterized by matching frictions and nominal wage rigidities, and an informal one where wages are fully flexible. Under this framework, a trade-off between price and wage inflation emerges. I find that informality increases the response of price and wage inflation to aggregate productivity shocks. As a result, the presence of an informal sector increases the inefficient fluctuations of labor market variables, such as unemployment, labor market tightness, and formal hiring rate. I find that optimal policy with informality features significant deviations from price stability in response to aggregate productivity shocks.

High Discounts and Low Fundamental Surplus: An Equivalence Result for Unemployment Fluctuations

We establish an observational equivalence between unemployment fluctuations of the Diamond-Mortensen-Pissarides search economy augmented with time varying risk premia and an otherwise identical economy without risk premia but with a time varying value of leisure. This equivalence holds for general risk premia processes and allows us to view the effects of different models of risk premia as operating through a single channel—one that alters the value of leisure. We derive simple expressions for semielasticities of labor market tightness with respect to productivity and risk premium shocks. We show wages can be used to detect misspecification in the discount rate process used in hiring decisions. This paper was accepted by Lukas Schmid, finance. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.03712 .

Assessment of placenta accreta spectrum at vaginal birth after cesarean delivery

Previous cesarean delivery is a risk factor for developing placenta accreta spectrum in a subsequent pregnancy and patients with antenatally suspected placenta accreta spectrum frequently undergo planned cesarean hysterectomy. There is a paucity of data regarding unsuspected placenta accreta spectrum among patients undergoing trial of labor after cesarean delivery for attempted vaginal birth after cesarean delivery. This study aimed to investigate the incidence, characteristics, and delivery outcomes of patients with placenta accreta spectrum diagnosed at the time of vaginal birth after cesarean delivery. The Healthcare Cost and Utilization Project's National Inpatient Sample was retrospectively queried to examine 184,415 patients with a history of low transverse cesarean delivery who had vaginal delivery in the current index hospital admission between 2017 and 2020. Those with placenta previa, previous vertical cesarean delivery, other uterine scars, and uterine rupture were excluded. This study identified placenta accreta spectrum cases using the World Health Organization International Classification of Disease, Tenth Revision, codes of O43.2. Coprimary outcomes were (1) the incidence rate of placenta accreta spectrum at vaginal birth after cesarean delivery; (2) clinical and pregnancy characteristics related to placenta accreta spectrum, assessed with multivariable binary logistic regression model; and (3) delivery outcomes associated with placenta accreta spectrum by fitting propensity score adjustment. The secondary outcome was to conduct a systematic literature review using 3 public search engines (PubMed, Cochrane, and Scopus). Data on incidence rate and maternal morbidity related to placenta accreta spectrum at vaginal birth after cesarean delivery were evaluated. The incidence rate of placenta accreta spectrum at vaginal birth after cesarean delivery was 8.1 per 10,000 deliveries. Most placenta accreta spectrum cases were placenta accreta (83.3%). In a multivariable analysis, older maternal age, tobacco use, preeclampsia, multifetal pregnancy, fetal anomaly, preterm premature rupture of membrane, chorioamnionitis, low-lying placenta, and preterm delivery were associated with an increased risk of placenta accreta spectrum (all, P<.05). Of these factors, low-lying placenta had the largest odds for placenta accreta spectrum (526.3 vs 7.3 per 10,000 deliveries; adjusted odds ratio, 35.02; 95% confidence interval, 18.19-67.42). Patients in the placenta accreta spectrum group were more likely to have postpartum hemorrhage (80.0% vs 5.5%), blood product transfusion (23.3% vs 1.0%), shock or coagulopathy (20.0% vs 0.2%), and hysterectomy (43.3% vs <0.1%) than those without placenta accreta spectrum (all, P<.001). In a systematic literature review, a total of 212 studies were screened, and none of these studies examined the incidence and morbidity of placenta accreta spectrum at vaginal birth after cesarean delivery. This nationwide assessment suggests that although placenta accreta spectrum with vaginal birth after cesarean delivery is uncommon (1 of 1229 cases), the diagnosis of placenta accreta spectrum at vaginal birth after cesarean delivery is associated with significant maternal morbidity. In addition, the data suggest that low-lying placenta in the setting of previous low transverse cesarean delivery warrants careful evaluation for possible placenta accreta spectrum before a trial of labor.

Knowledge Interdependence as a Double-edged Sword for Innovation:The Role of Technological Shocks

Knowledge Interdependence as a Double-edged Sword for Innovation:The Role of Technological Shocks

Traversing the Macroeconomic Terrain: An Exploration of South Korea’s Economic Responsiveness to Cross-Border E-Commerce Production Technology Alterations in the Global Arena

The principal aim of this study is to discern the implications of technology shocks in the sphere of cross-border e-commerce on the macroeconomic indices of South Korea. Leveraging Bayesian estimation techniques, we scrutinized quarterly data from the inaugural quarter of 2000 through to the first quarter of 2022 to perform an empirical exploration. Deductions drawn from the impulse response function indicate that a positive perturbation in the technology of sustainable cross-border e-commerce production instigated a swell in output and investment for both non-tradable and cross-border e-commerce goods producers. Conversely, the sector of traditional tradable goods exhibited a decrease in output and investment. Additionally, this favorable technology shock appears to have amplified household consumption and employment, along with wages in the non-tradable and sustainable cross-border e-commerce goods sectors. In stark contrast, the traditional tradable sector demonstrated a decline in household consumption, employment, and wages. Intriguingly, the technology shock also exerted an influence on the pricing system, causing a rise in the prices of non-tradable goods and cross-border e-commerce goods. On the other hand, the prices of traditional tradable goods experienced a downward turn. These insights provide a pathway to an understanding of how advancements in sustainable e-commerce technology can mold an array of macroeconomic factors in a digitally evolved economy such as South Korea.

Effects of extreme heat on milk quantity and quality

CONTEXTHeat exposure, particularly when co-occurring with extreme humidity levels, is amongst the most pronounced and challenging extreme weather conditions in European dairy production. Since these conditions are expected to increase in magnitude and frequency due to climate change, it is crucial to better understand the actual impact under managed production within the European dairy farm population. OBJECTIVEIn this paper, we estimate the impact of heat stress, i.e. hot and humid weather conditions on milk quantity and quality in Flanders, a high intensity dairy production region in Belgium. The novelty of our approach is twofold. First, we provide insights in the non-linear response of dairy production (quantity and quality) to extreme heat using farm-level production data. Second, using data from the entire population of farmers in Flanders, and covering 6 years (N = 178.843), our results provide a maximum of representativeness and allows to infer on economic relevance of the effects. METHODSWe use monthly milk deliveries within the grazing season for the period 2009 to 2014, which we match with temperature and humidity conditions at the barn-level. Using fixed effects regression, we particularly focus on heat shocks, i.e. the deviations from the average climate at the barn location, on production shocks, i.e. deviations from the average production of the barn. We use non-linear restricted cubic splines regression to estimate the response of milk quality and quantity to hourly temperature-humidity (THI) exposure. RESULTS AND CONCLUSIONWe find reductions of milk quantity and protein contents under hot and humid conditions, while milk fat content appears unaffected. These results are in contrast to earlier findings of heat exposure on dairy production in two ways. First, we find the critical temperature-humidity threshold above which production is affected to be substantially higher than in earlier/experimental studies. Second, not all quality components are affected by these conditions. We conclude that under managed conditions, farmers seem to be partly able to adapt their production to moderate heat exposure. SIGNIFICANCEOur results deliver important implications for policy makers and agricultural practitioners. While we find that farmers seem to be able to cope with moderate heat conditions, milk quality and quantity drop under extreme heat conditions. These impacts are economically relevant.

The State of Grain Trade between China and Russia: Analysis of Growth Effect and Its Influencing Factors

As two influential countries in the global grain production and marketing system, China and Russia have increasingly strengthened their agricultural, economic, and trade cooperation. There are few papers that have considered trade relations from the perspective of the growth effect of grain exports, and it is necessary to fill this gap by systematically sorting the grain trade between the two countries and clarifying the growth effect and influencing factors in this paper. By comparing and analyzing the quantitative and structural characteristics of grain trade between China and Russia between 1996 and 2020, this study used the H–K marginal analysis method to explore the growth path and influencing factors of the export trade of grain products between China and Russia. The results show that the main driving force of the export growth of Russian and Chinese grain products is the price margin, which presents a growth pattern dominated by price and complemented by type and quantity. The empirical analysis of the gravity model shows that the size of the agricultural economy, grain productivity, trade cost, and economic shocks have significant impacts on bilateral trade. In view of this, the status of international agricultural cooperation between China and Russia will be further optimized if they can optimize trade policies to improve the quality of trade development, build cross-border cooperation parks to construct the layout of the whole industrial chain, strengthen infrastructure construction, and deepen and expand interconnectivity.

RETRACTED: Green innovations and patents in OECD countries

Green transition is important for the economics of the OECD countries and their transition to cleaner production. This paper estimates a knowledge production function consisting of a system of innovation inputs, innovation outputs, and productivity with feedback effect from productivity on innovation investments. The model accounts for productivity shock, endogeneity of inputs, and their simultaneity and interdependence. Productivity shock is a latent unobserved component that is specified in terms of observable factors. The model is estimated using Bayesian methods organized around Marco Chain Sequential Monte Carlo iteration techniques also known as Particle Filtering. For the empirical part, the paper uses balanced panel data covering 27 OECD countries' green innovation and patents activities observed during the period 1990–2018. Our empirical results show evidence of significant heterogeneity in productivity and its relationship with its identified determinants. The paper also discusses the implications of these results for OECD countries’ green growth strategies.