Econ 116 Studies Flashcards
Reinhart and Rogoff “Growth in a Time of Debt” (19)
For advanced countries, public debt has no effect on inflation, while for developing countries, inflation rises as debt increases. R&R also found that debt to GDP ratios above 90% caused decreased GDP growth rates.
“Assessing Early Warning Systems: How Have They Worked in Practice?” by Andrew Berg, Eduardo Borensztein, and Catherine Pattillo (20)
Only the IMF Early Warning was at all accurate. However, it often had too many false alarms. All the private models consistently failed. None of the EWSs would have been useful to predict the 2008 crisis.
“Did Securitization Lead to Lax Screening? Evidence From Subprime Loans”, Benjamin J. Keys, Tanmoy Mukherjee, Amit Seru and, Vikrant Vig (21)
Borrowers with FICO = 621 defaults 1.2 times more over two years than FICO =619. Borrowers needed a 620 or higher score to have their mortgages easily securitized.
What Makes a good forecaster (22)
Forecasters who received even a very brief (1 hour training session in basic probabilistic reasoning) performed 1/6 of s.d. better than the rest. Cultivating this skills matter.
Experience matters (more experienced forecasters did better)
Desire to make forecasts precise matters hugely: the difference between “estimative verbs” and a 7-step forecast is worth 20-30% of improvement of a typical forecast
Most importantly, desire to revise forecasts
This is also a trait of Superforecasters (to 2%)
Reinhart-Rogoff “The aftermath of the financial crises” (22)
Recovery takes: 6 years for housing prices, 3.4 years for equity prices, 4.8 years for unemployment, 1.9 years for GDP.
Optimal taxes on fossil fuel in general equilibrium, by Mikhail Golosov, John Hassler, Per Krusell, and Aleh Tsyvinski (23)
Determined specific carbon taxes needed depending on castrophic, uncertain, or moderate effect of climate change. All of these taxes were quite high.
Jones & Klenow: “Beyond GDP: Welfare across Countries and Time (2)
“Veil of ignorance” used to talk about gdp as a measure of welfare between countries like the US or france. Used to talk about “consumption equivalents”.
Atkeson and Kehoe (5)
Finding a link between deflation and depression: huge study of a negative inflation rate (deflation) and negative real growth rate (depression). NO LINK between deflation and depression except for great depression.
Hagedorn, Karahan, Manovski, MItman (2013) (7)
Unemployment Benefit extensions. Finding: Unemployment benefits increase unemployment. Issue: ENDOGENEITY problem. - hard to measure change in unemployment by extending unemployment benefits. Solution: comparing unemployment in different states but close counties.
Hagedorn, Manovski, Mitman (2015) (7)
Finding: 1% drop in unemployment benefit extension leads to a statistically significant decrease in unemployment.
Haitiwanger, Jarmin, Miranda (2012) (7)
Inverse relationship between size of firm and net growth rates. Smaller firms grow faster. However, controlling for age, young firms fail much more but end up growing faster if successful.
Acemoglu, Johnson, Robinson (10)
Extractive institutions: In places where europeans faced high mortality rates, instead of settling they were more likely to set up extractive institutions. Still continues to this day. These differences in mortality rates have large effects on income per capita.
Eichengreen, et al. (10)
Middle Income Trap: Slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and a significant amount of advanced technology.
Pritchett and Summers (10)
Middle income trap does not exist: Mean reverssion. Countries entering the trap got there because of high growth. They are just regressing to the normal level of growth now.
Ramey (fiscal multiplier)
Study:
Defense news shock vs. government spending (1939-2008)
Conclusions:
Implied government spending multipliers: 0.6-1.1
Barro and Redlick (fiscal multiplier)
Focus on defense spending, temporary vs. permanent
Temporary: 0.4-0.5 (contemporaneously) / 0.6-0.7 (over 2 years)
Permanent: +0.1-0.2
Romer & Romer (fiscal multiplier)
Federal tax legislation (19455-2007)
Exogenous: -2.5
All legislated tax changes: -1.8
Ramey Zubairy (fiscal multiplier)
No evidence that the multiplier on government purchases is higher during high unemployment states
0.6-1.0
Little evidence that the multiplier is higher at the zero lower bound
Ramey, “Comments on ‘Roads to Prosperity or Bridges to Nowhere?’”
No money is being disbursed by governments at the time that construction companies are hiring workers and buying materials
If companies are financing their projects with credit, does this crowd out loans for other private companies?
Labor costs represent only 8 percent of the expenditures on road construction because it is so capital intensive
Price Stickiness: due to Firms
Blinder et al. (1998): 200 firms
The median firm adjusted prices about once a year.
Hall, Walsh, and Yates (2000): 654 British firms
58% adjusted prices once a year or more
Price Stickiness: due to Consumers
Cecchetti (1986): 38 magazines
The number of years since the last price change ranged from 1.8 to 14 years.
Kashyap (1995): 12 mail-order catalog goods
An average of 14.7 months between price changes.
MacDonald and Aaronson (2001): restaurant pricing
Prices display a median duration of about 10 months.
Bills & Klenow (2004) (Price Stickiness
Examine the frequency of price changes for 350 categories of goods and services covering about 70 percent of consumer spending
Finds much more frequent price changes, with half of prices lasting less than 4.3 months
Even excluding sales, half of prices last 5.5 months or less
Differs dramatically across goods (laundry machine vs. gasoline)
Dhyne et al. (2006): Euro Area (price stickiness)
Bottom line: prices are not very sticky, but it depends on the type of goods and services
The average duration of a price spell in the euro area ranges from four to five quarters, which is about twice as long as in the United States
The frequency of price changes varies substantially across products
No evidence of general downward price rigidity
Atkeson & Ohanian
Phillips Curve
Naïve model: inflation over the next year will be equal to inflation over the previous year
All three sets of Phillips curve-based inflation forecasts have been no more accurate than the naïve model
Bottom line: Phillips curve is not a useful forecasting tool
