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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. All rights reserved. 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ISSN: 1932-8796 ISBN-13: 978-0-226-26034-1 (hc.:alk.paper) ISBN-10: 0-226-26035-8 (hc.:alk.paper) 10 9 8 7 6 5 4 3 2 1 This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:37 PM All use subject to JSTOR Terms and Conditions NBER Board of Directors Officers Kathleen B. Cooper, Chairman Martin B. Zimmerman, Vice Chairman James M. Poterba, President and Chief Executive Officer Robert Mednick, Treasurer Kelly Horak, Controller and Assistant Corporate Secretary Alterra Milone, Corporate Secretary Gerardine Johnson, Assistant Corporate Secretary Directors at Large Peter C. Aldrich Elizabeth E. Bailey John H. Biggs John S. Clarkeson Don R. Conlan Kathleen B. Cooper Charles H. Dallara George C. Eads Jessica P. Einhorn Mohamed El-Erian Linda Ewing Jacob A. Frenkel Judith M. Gueron Robert S. Hamada Peter Blair Henry Karen N. Horn John Lipsky Laurence H. Meyer Michael H. Moskow Alicia H. Munnell Robert T. Parry James M. Poterba John S. Reed Marina v. N. Whitman Martin B. Zimmerman Directors by University Appointment George Akerlof, California, Berkeley Jagdish Bhagwati, Columbia Timothy Bresnahan, Stanford Alan V. Deardorff, Michigan Ray C. Fair, Yale Franklin Fisher, Massachusetts Institute of Technology John P. Gould, Chicago Mark Grinblatt, California, Los Angeles Bruce Hansen, Wisconsin–Madison Marjorie B. McElroy, Duke Joel Mokyr, Northwestern Andrew Postlewaite, Pennsylvania Uwe E. Reinhardt, Princeton Craig Swan, Minnesota David B. Yoffie, Harvard Directors by Appointment of Other Organizations Bart van Ark, The Conference Board Christopher Carroll, American Statistical Association Jean-Paul Chavas, Agricultural and Applied Economics Association Martin Gruber, American Finance Association Ellen L. Hughes-Cromwick, National Association for Business Economics Thea Lee, American Federation of Labor and Congress of Industrial Organizations William W. Lewis, Committee for Economic Development Robert Mednick, American Institute of Certified Public Accountants Alan L. Olmstead, Economic History Association John J. Siegfried, American Economic Association Gregor W. Smith, Canadian Economics Association Directors Emeriti Andrew Brimmer Glen G. Cain Carl F. Christ George Hatsopoulos Saul H. Hymans Lawrence R. Klein Paul W. McCracken Rudolph A. Oswald Peter G. Peterson Nathan Rosenberg This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:39 PM All use subject to JSTOR Terms and Conditions Relation of the Directors to the Work and Publications of the NBER 1. The object of the NBER is to ascertain and present to the economics profession, and to the public more generally, important economic facts and their interpretation in a scientific manner without policy recommendations. The Board of Directors is charged with the responsibility of ensuring that the work of the NBER is carried on in strict conformity with this object. 2. The President shall establish an internal review process to ensure that book manuscripts proposed for publication DO NOT contain policy recommendations. This shall apply both to the proceedings of conferences and to manuscripts by a single author or by one or more coauthors but shall not apply to authors of comments at NBER conferences who are not NBER affiliates. 3. No book manuscript reporting research shall be published by the NBER until the President has sent to each member of the Board a notice that a manuscript is recommended for publication and that in the President’s opinion it is suitable for publication in accordance with the above principles of the NBER. 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In case of dispute, all members of the Board shall be notified, This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:42 PM All use subject to JSTOR Terms and Conditions viii Relation of the Directors to the Work and Publications of the NBER and the President shall appoint an ad hoc committee of the Board to decide the matter; thirty days additional shall be granted for this purpose. 5. The President shall present annually to the Board a report describing the internal manuscript review process, any objections made by Directors before publication or by anyone after publication, any disputes about such matters, and how they were handled. 6. Publications of the NBER issued for informational purposes concerning the work of the Bureau, or issued to inform the public of the activities at the Bureau, including but not limited to the NBER Digest and Reporter, shall be consistent with the object stated in paragraph 1. They shall contain a specific disclaimer noting that they have not passed through the review procedures required in this resolution. The Executive Committee of the Board is charged with the review of all such publications from time to time. 7. NBER working papers and manuscripts distributed on the Bureau’s web site are not deemed to be publications for the purpose of this resolution, but they shall be consistent with the object stated in paragraph 1. Working papers shall contain a specific disclaimer noting that they have not passed through the review procedures required in this resolution. The NBER’s web site shall contain a similar disclaimer. The President shall establish an internal review process to ensure that the working papers and the web site do not contain policy recommendations, and shall report annually to the Board on this process and any concerns raised in connection with it. 8. Unless otherwise determined by the Board or exempted by the terms of paragraphs 6 and 7, a copy of this resolution shall be printed in each NBER publication as described in paragraph 2 above. This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:42 PM All use subject to JSTOR Terms and Conditions 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 This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:45 PM All use subject to JSTOR Terms and Conditions 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- This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:45 PM All use subject to JSTOR Terms and Conditions 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 This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:45 PM All use subject to JSTOR Terms and Conditions 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. This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:45 PM All use subject to JSTOR Terms and Conditions 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. This content downloaded from 128.135.181.197 on Fri, 30 May 2014 15:50:45 PM All use subject to JSTOR Terms and Conditions