Estimates of the macroeconomic costs of cyber‐attacks

This paper estimates the macroeconomic losses related to the cyber‐attacks originating from the information and communications technology (ICT) and the financial sectors. The study accounts for the interdependency of various economic sectors and looks to the cascading effect of cyber‐attacks on production network in the United States and leading Organisation for Economic Co‐operation and Development countries with the help of the input–output methodology and the World Input–Output Database. Our results suggest that cyber‐attacks that affect the ICT and finance sectors result in losses which also impact different economic sectors, due to cascading effects.     

Revisiting unemployment in intermediate macroeconomics: A new approach for teaching Diamond-Mortensen-Pissarides

The authors present a version of the Diamond-Mortensen-Pissarides model of unemployment that is accessible to undergraduates and preserve the dynamic structure of the original model. The model is solvable in closed form using basic algebra and admits a graphical representation useful for illustrating a variety of comparative statics. They show how to use the model to teach the effects of labor market policies, advancements in Internet technology, and labor market dynamics. Supplementary materials such as teaching tips, a classroom experiment, and online resources including a JavaScript-based simulation tool, U.S. data used to make figures, and practice problems are provided.     

Public capital in the 21st century: as productive as ever?

The global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe. In the ensuing fiscal adjustment process, public investments were severely reduced in many countries. How harmful is this for growth perspectives? Our main objective is to find out whether the importance of public capital for long run output growth has changed in recent years. To this end, we expand time series on public capital stocks for 20 OECD countries and estimate country-specific recursive vector autoregressive (VAR) models. Results show that the effect of public capital shocks on economic growth has not increased in general, although results differ widely between countries. This suggests that the current level of public investments generally does not pose an immediate threat to potential output. Of course, this could change if low investment levels are sustained for a long time.     

Is the exchange rate a shock absorber or a source of shocks? Evidence from the U.S.

We examine the stabilization role of the exchange rate in the U.S. economy using a factor augmented vector autoregression model. We find that exchange rate shock explains a large fraction of the variation in exchange rate and transmits major disturbances to the real economy. Further, we find that demand and supply shocks explain less than a quarter of the exchange rate movement. We provide robust evidence that although the exchange rate plays some role as a shock absorber, its role as an independent source of shocks is more dominant for the U.S. economy. The foreign exchange market breeds its own shocks which are destabilizing not only to the value of the dollar but to the overall economy as well. Our results suggest that policymakers need to take foreign exchange market fluctuations into account when making macroeconomic policy decisions.     

Integrating graphing assignments into a money and banking course using FRED

Over the course of one semester, six empirical assignments that utilize FRED are used to introduce students of money and banking courses to the economic analysis required for the conduct of monetary policy. The first five assignments cover the following topics: inflation, bonds and stocks, monetary aggregates, the Taylor rule, and employment. Students learn to gather and analyze data using the concepts and theories covered during lectures. The sixth homework is a short paper in which students synthesize the data from the previous assignments to make a policy recommendation for the upcoming Federal Open Market Committee meeting. The overarching purpose of this exercise is to prepare students for the College Fed Challenge, and, more generally, to introduce them to economic data and policy analysis.     

Does the foreign sector help forecast domestic variables in DSGE models?

This paper evaluates the forecasting performances of several small open-economy DSGE models relative to a closed-economy benchmark using a long span of data for Australia, Canada and the United Kingdom. We find that opening the model economy usually does not improve the quality of point and density forecasts for key domestic variables, and can even cause it to deteriorate. We show that this result can be attributed largely to an increase in the forecast error due to the more sophisticated structure of the extended setup, which is not compensated for by a better model specification. This claim is based on a Monte Carlo experiment in which an open-economy model fails to beat its closed-economy benchmark consistently even if the former is the true data generating process.     

Disequilibrium as the origin,originality, and challenges of Clower's microfoundations of monetary theory

Abstract

Robert W. Clower's article “A Reconsideration of the Microfoundations of Monetary Theory” (1967) deeply influenced the course of modern monetary economics. On the one hand, it questioned Don Patinkin's (1956) project to integrate monetary and Walrasian value theory. On the other hand, it was the fountainhead of the cash-in-advance models à la Robert J. Lucas (1980), one of the most widely used approaches to monetary theory since the 1980s. Despite this influence, Clower's project to integrate monetary and value theory remains an enigma. My paper intends to resolve it. This is a difficult task since Clower never completed the monetary theory outlined in his 1967 article. To overcome this difficulty, I characterise the intellectual context from which Clower's contribution emerged and have recourse to a reconstruction of his project. This reconstruction is based on the analysis of published and unpublished materials, written by Clower before and after the 1967 article. It is argued that Clower sought to elaborate a disequilibrium monetary theory whilst retaining the two pillars of Patinkin's integration, i.e., the introduction of money into utility functions and the real-balance effect. I trace the origins, account for the originality, and discuss the challenges of this project.     

关于宏观经济学的微观基础问题

当前,西方经济学界的各派经济学家大都已经将微观问题的研究作为宏观经济学研究的基础和重点,甚至还有完全以微观分析方法来分析宏观经济问题的现象.关于宏观经济学的微观基础有三种观点.西方国家流行的主要是以微观分析代替宏观分析的观点,而且其价值论的观点和方法存在着矛盾和倒退.但这些做法也引发了一些新的问题,如对经济人理性的假定、将微观个量直接加总为宏观总量、关于完全竞争的假定等都存在明显问题.总之,对于宏观经济学的微观基础问题,我们必须作进一步的思考.     

Sequential coordination,higher-order belief dynamics and the E-stability principle

This paper explores convergence in higher-order beliefs – otherwise called eductive stability – when coordination is sequential, that is, when each agent of a given type fixes his own actions after observing the ones of earlier types in a given order. The presence of sequential types enhances expectational coordination in the case of strategic substitutability, but not in the case of strategic complementarity. In particular, eductive stability can be obtained for any degree of substitutability, provided the number of sequential types is large enough. Therefore, sequential coordination opens up to the possibility that eductive convergence occurs at the same conditions of adaptive convergence, in accordance to the E-stability principle.     

Agent based-stock flow consistent macroeconomics: Towards a benchmark model

The paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the DSGE community. Although several recent improvements have enhanced the realism of standard models, we argue that major drawbacks still undermine their reliability. In particular, DSGE models still fail to recognize the complex adaptive nature of economic systems, and the implications of money endogeneity. The paper argues that a coherent and exhaustive representation of the inter-linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the Agent Based and Stock Flow Consistent approaches. The papers aims at contributing to the nascent AB-SFC literature under two fundamental respects: first, we develop a fully decentralized AB-SFC model with several innovative features, and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications. Results suggest that the properties of the model match many empirical regularities, ranking among the best performers in the related literature, and that these properties are robust across different parameterizations. Second, the paper has also a methodological purpose in that we try to provide a set or rules and tools to build, calibrate, validate, and display AB-SFC models.