Download This PDF is a selection from a published volume from... Bureau of Economic Research Volume Title: NBER International Seminar on Macroeconomics

This PDF is a selection from a published volume from the National
Bureau of Economic Research
Volume Title: NBER International Seminar on Macroeconomics
2011
Volume Author/Editor: Jeffrey Frankel and Christopher Pissarides,
organizers
Volume Publisher: University of Chicago Press
Volume ISBN: 0-226-26035-6; 978-0-226-26034-1 (cloth);
978-0-226-26035-8 (paper)
Volume URL: http://www.nber.org/books/fran11-1
Conference Date: June 17-18, 2011
Publication Date: May 2012
Chapter Title: Front matter, abstracts
Chapter Author(s): Jeffrey Frankel, Christopher Pissarides
Chapter URL: http://www.nber.org/chapters/c12478
Chapter pages in book: (p. iii - xvi)
NBER International Seminar on Macroeconomics 2011
Published annually by The University of Chicago Press.
© 2012 by the National Bureau of Economic Research.
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Abstracts
1
Long-Term Barriers to the International Diffusion of Innovations
Enrico Spolaore and Romain Wacziarg
We document an empirical relationship between the cross-country
adoption of technologies and the degree of long-term historical relatedness between human populations. Historical relatedness is measured
using genetic distance, a measure of the time since two populations’ last
common ancestors. We find that the measure of human relatedness that
is relevant to explain international technology diffusion is genetic distance relative to the world technological frontier (“relative frontier distance”). This evidence is consistent with long-term historical relatedness acting as a barrier to technology adoption: societies that are more
distant from the technological frontier tend to face higher imitation
costs. The results can help explain current differences in total factor productivity and income per capita across countries.
2
Firm Heterogeneity, Endogenous Entry, and the Business Cycle
Gianmarco I. P. Ottaviano
This paper investigates the role that the entry and exit of heterogeneous
firms plays in shaping aggregate fluctuations in economic activity. In so
doing, it develops a dynamic stochastic general equilibrium model in
which procyclical entry and countercyclical exit along a real business
cycle lead to endogenous cyclical movements in average firm productivity. These movements stem from a composition effect due to the reallocation of market shares among firms with different levels of efficiency
and affect the propagation of exogenous technological shocks. Numerical analysis suggests that existing models with representative firms
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Abstracts
xiii
may overstate the actual role of procyclical entry and exit in imperfectly
competitive markets as a propagation mechanism of exogenous technology shocks. The reason is that procyclical entry and countercyclical
exit disproportionately involve less efficiency firms whose impact on
aggregate economic activity is hampered by their smaller size.
3 The Risk Content of Exports: A Portfolio View of
International Trade
Julian di Giovanni and Andrei A. Levchenko
It has been suggested that countries whose exports are in especially
risky sectors will experience higher output volatility. This paper develops a measure of the riskiness of a country’s pattern of export specialization, and illustrates its features across countries and over time. The
exercise reveals large cross-country differences in the risk content of
exports. This measure is strongly correlated with the volatility of
terms-of-trade, total exports, and output, but does not exhibit a close
relationship to the level of income, overall trade openness, or other
country characteristics. We then propose an explanation for what determines the risk content of exports, based on the theoretical literature
exemplified by Turnovsky (1974). Countries with a comparative advantage in safe sectors or a strong enough comparative advantage in risky
sectors will specialize, whereas countries whose comparative advantage in risky sectors is not too strong will diversify their export structure to insure against export income risk. We use both nonparametric
and semiparametric techniques to demonstrate that these theoretical
predictions are strongly supported by the data.
4 The Cyclical Behavior of Equilibrium Unemployment and
Vacancies in the United States and Europe
Alejandro Justiniano and Claudio Michelacci
We set up a real business cycle model with search and matching frictions driven by several shocks, which nests full Nash bargaining and
wage rigidity as special cases and includes other transmission mechanisms suggested by the literature for the propagation and amplification
of disturbances. The model is estimated using full information methods
for two Anglo-Saxon countries (the United States and the United Kingdom), two Continental European countries (France and Germany), and
two Scandinavian countries (Norway and Sweden). We conduct infer-
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xiv
Abstracts
ence with mixed frequency data, combining quarterly series for unemployment, vacancies, GDP, consumption, and investment with annual
data on unemployment flows. Parameters and shocks are estimated
separately for each country, which can then vary in terms of search and
hiring costs, workers’ bargaining power, unemployment benefits levels,
wage rigidity, and the stochastic properties of disturbances. Overall, the
structural model accounts reasonably well for differences in labor market dynamics observed between the two sides of the Atlantic and within
Europe. Our estimates indicate that there is considerable cross-country
variation in the contribution of technology shocks to the cyclical fluctuations of the labor market. Technology shocks alone replicate remarkably well the volatility in vacancies, unemployment, and finding probabilities observed in the United States, with mixed success in Europe. In
contrast, matching shocks and job destruction shocks play a larger role
in most European countries relative to the United States.
5
Toward a Political Economy of Macroeconomic Thinking
Gilles Saint-Paul
This paper investigates, in a simplified macro context, the joint determination of the (incorrect) perceived model and the equilibrium. I assume
that the model is designed by a self-interested economist who knows
the true structural model, but reports a distorted one so as to influence
outcomes. This model influences both the people and the government;
the latter tries to stabilize an unobserved demand shock and will make
different inferences about that shock depending on the model it uses.
The model’s choice is constrained by a set of autocoherence conditions
that state that, in equilibrium, if everybody uses the model then it must
correctly predict the moments of the observables. I then study, in particular, how the models devised by the economists vary depending on
whether they are “progressive” versus “conservative.” The predictions
depend greatly on the specifics of the economy being considered. But in
many cases, they are plausible. For example, conservative economists
will tend to report a lower Keynesian multiplier, and a greater longterm inflationary impact of output expansions. On the other hand, the
economists’ margin of manoeuver is constrained by the autocoherence
conditions. Here, a “progressive” economist who promotes a Keynesian
multiplier larger than it really is, must, to remain consistent, also claim
that demand shocks are more volatile than they really are. Otherwise,
people will be disappointed by the stabilization performance of fiscal
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Abstracts
xv
policy and reject the hypothesized value of the multiplier. In some
cases, autocoherence induces the experts to make, loosely speaking,
ideological concessions on some parameter values. The analysis is illustrated by empirical evidence from the Survey of Professional Forecasters.
6 The Fiscal Stimulus of 2009–2010: Trade Openness, Fiscal Space,
and Exchange Rate Adjustment
Joshua Aizenman and Yothin Jinjarak
This paper studies the cross-country variation of the fiscal stimulus and
the exchange rate adjustment propagated by the global crisis of 2008–
2009, identifying the role of economic structure in accounting for the
heterogeneity of response. We find that greater de facto fiscal space
prior to the global crisis and lower trade openness were associated with
a higher fiscal stimulus / GDP during 2009–2010 (where the de facto fiscal space is the inverse of the average tax-years it would take to repay
the public debt). Lowering the 2006 public debt / average tax base from
the level of low-income countries (5.94) down to the average level of the
Euro minus the Euro-area peripheral countries (1.97), was associated
with a larger crisis stimulus in 2009–2011 of 2.78 GDP percentage
points. Joint estimation of fiscal stimuli and exchange rate depreciations
indicates that higher trade openness was associated with a smaller fiscal stimulus and a higher depreciation rate during the crisis. Overall,
the results are in line with the predictions of the neo-Keynesian openeconomy model.
7 Flexing Your Muscles: Abandoning a Fixed Exchange Rate for
Greater Flexibility
Barry Eichengreen and Andrew K. Rose
We identify 51 instances since 1957 when an economy abandoned a
fixed exchange rate for greater flexibility and saw its currency appreciate or remain broadly unchanged. These economies experienced a wide
variety of macroeconomic responses. Those with high investment rates
and rapidly growing trade experienced declines in growth, while more
open economies and countries with more international reserves tended
to experience falls in inflation. These patterns have obvious implications for the current economic circumstances and prospects of China.
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xvi
Abstracts
8 Traded and Nontraded Goods Prices and International Risk
Sharing: An Empirical Investigation
Giancarlo Corsetti, Luca Dedola, and Francesca Viani
Accounting for the pervasive evidence of limited international risk
sharing is an important hurdle for open-economy models, especially
when these are adopted in the analysis of policy trade-offs likely to be
affected by imperfections in financial markets. Key to the literature is
the evidence, at odds with efficiency, that consumption is relatively
high in countries where its international relative price (the real exchange rate) is also high. We reconsider the relation between
cross-country consumption differentials and real exchange rates by decomposing it into two components reflecting the prices of tradable and
nontradable goods, respectively. We document that, as a common pattern among Organization of Economic Cooperation and Development
(OECD) countries, both components tend to contribute to the overall
lack of risk sharing, with the tradable price component playing the
dominant role in accounting for efficiency deviations. We relate these
findings to two mechanisms proposed by the literature to reconcile
open economy models with the data. One features strong
Balassa-Samuelson effects on nontradable prices due to productivity
gains in the tradable sector, with a muted offsetting response of tradable prices. The other, endogenous income effects, causes nontradable
but especially tradable prices to appreciate with a rise in domestic consumption demand.
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