Complete,perfect, and maximal controllability of discrete economic systems

Summary The purpose of this paper is to discuss three different concepts of controllability of discrete economic systems. Necessary and sufficient conditions for complete, perfect and maximal controllability are presented. The author demonstrates the logical interconnections between the dynamical and static theories of economic policy and shows that the concept of maximal controllability is of special interest for the theory of economic policy. Applications of the theoretical results to a macroeconomic decision model are presented at the end of this paper.The author wishes to thank Professor Dr. Helmut Kuhn, Göttingen, and two anonymous referees for valuable comments.     

Controllability and the theory of economic policy: A critical view

It is argued in this paper that the concept of controllability in spite of its intuitive appeal is of limited interest for the theory of economic policy. Controllability implies that a given target can be attained even if the number of instruments is less than the number of independent targets. But there is no guarantee that the economy will be able to stay there. Tirbergen's rule is concerned with the existence of a static equilibrium solution. The controllability concept is concerned with the existence of a dynamic path towards it. But it does not imply that controllability is a dynamic generalization of Tinbergen's rule.     

The Great Leap Forward, Economic Reforms, and the Unit Root Hypothesis: Testing for Breaking Trend Functions in China''s GDP Data

This paper has two related objectives. The first is to evaluate empirically whether annual data for China's GDP and its sectoral components from 1952 to 1998 can be modeled more accurately as a stationary process around a breaking trend function as opposed to a unit-root process. The second is to identify the long-run growth path of the Chinese economy and shocks that are big enough to have altered the path. The conclusion that China's major output time series are trend stationary with structural breaks has significant implications for the government in policy decisions for long-run growth and short-run stabilization. It also has implications for modeling comovements between output variables and other macroeconomic variables in cointegration analysis of the Chinese economy.J. Comp. Econom., December 2000, 28(4), pp. 814–827. Department of Commerce, Massey University (Albany), Auckland, New Zealand.     

The order of integration for quarterly macroeconomic time series: A simple testing strategy

An empirical example and a simulation study show that much more attention should be devoted to the practical issue of selecting the maximum admissible order of integration for quarterly macroeconomic time series. In fact, it is shown that when that order is too high, one may get (spurious) evidence for an excessive number of unit roots, resulting in an overdifferenced series. Besides introducing a simple and intuitive definition for the order of integration of quarterly time series, this paper also presents a simple testing strategy to determine that order for the case of macroeconomic data.Helpful comments and suggestions from João Santos Silva and Paulo Rodrigues are gratefully acknowledged. I am also grateful to two anonymous referees, whose comments and suggestions helped improving this paper. Obviously, the usual disclaimer applies. This work has also benefited from financial support from Fundação para a Ciência e Tecnologia (FCT), through Programa POCTI (ECO/33778/2000). A previous version of this paper was presented at the Royal Economic Society Conference, March 2002, Warwick.     

Reinvestigating the Nature of Persistence of Shocks in the Macroeconomic Variables Relating to the Indian Economy with Special Reference to Structural Changes and Seasonality

Over the last two decades, there is a substantial debate on the persistence of shocks, in terms of their transitory and permanent nature, caused to the macroeconomic aggregates. Macroeconomic variables with transitory shocks will revert back to the long-run deterministic path eventually, whereas variables with permanent shocks will move according to random walk having no fixed predetermined path. These two series known as Trend Stationary (TS) and Difference Stationary (DS), respectively, have their significance in the specification of the regression equation and testing competing economic theories. Consequently there are a good amount of studies to classify the macroeconomic aggregates as TS vs. DS. In this context, relatively new developments of seasonal integration and presence of structural breaks in the macro variables has aroused a need to reinvestigate these hypotheses afresh. This paper makes an attempt to examine some of these issues by making use of the Indian data.

     

Determinants of the income velocity of money in Portugal: 1891–1998

This paper performs a long-run time series analysis of the behaviour of the income velocity of money in Portugal between 1891 and 1998 by assessing the importance of both macroeconomic and institutional factors and looking for particularities in the Portuguese case. We estimate two cointegration vectors for the income velocity of money, macroeconomic variables and institutional variables. It is apparent that one of these vectors reflects the relationship between income velocity and macroeconomic variables, while the other reflects the relationship between income velocity and institutional variables. Moreover, a regression analysis reveals that the usual U-shaped pattern is displayed with a relatively late inflection point located around 1970, which is consistent with the Spanish case. It is further noted that this is a feature of countries with a late economic and institutional development process.     

金融周期对宏观经济稳定的影响异质性分析*

宏观经济稳定长期以来作为中国宏观调控的重要目标，在“新常态”时期被更加广泛关注。金融稳定作为宏观经济稳定的必要条件，以洞悉金融周期为前提，要求细究金融周期变量对宏观经济运行的影响，为政策精准性提供支持。本文利用相关金融周期和宏观经济变量季度数据，使用滤波方法找出宏观经济的波动和平稳时期，运用机器学习算法验证所选输入变量与输出变量的匹配度，并测度各输入变量对输出变量的重要度。本文发现波动期和平稳时期宏观经济表现虽有不同，但资产价格指数和信贷水平对各宏观经济变量的重要度之和都达到50%以上，而其他金融周期变量如利差、杠杆率和金融机构风险暴露的重要度则有限。这表明相关政策需有的放矢，相较于无差别的大规模释放流动性，可将重心置于维护资产价格稳定和优化信贷政策配给，为宏观经济稳定保驾护航。     

Testing the exogeneity of economic time series: an application of innovation accounting

This paper proposes and presents an testable sufficient condition for testing the exogeneity of economic time series using Sims' (1980a) innovation accounting within an unconstrained vector autoregressive model. It is demonstrated that if each explanatory variable of a model is sequentially placed in the last position of the ordering of variables during orthogonalization, then strict exogeneity of the dependent variable with respect to each explanatory variable can be tested without any a priorirestrictions. The test is not biased by conditional correlations of other variables included in the model. The empirical demonstration within the VAR framework is based on a set of variables obtained by solving a macroeconomic model.     

金融周期对宏观经济稳定的影响异质性分析*

宏观经济稳定长期以来作为中国宏观调控的重要目标，在“新常态”时期被更加广泛关注。金融稳定作为宏观经济稳定的必要条件，以洞悉金融周期为前提，要求细究金融周期变量对宏观经济运行的影响，为政策精准性提供支持。本文利用相关金融周期和宏观经济变量季度数据，使用滤波方法找出宏观经济的波动和平稳时期，运用机器学习算法验证所选输入变量与输出变量的匹配度，并测度各输入变量对输出变量的重要度。本文发现波动期和平稳时期宏观经济表现虽有不同，但资产价格指数和信贷水平对各宏观经济变量的重要度之和都达到50%以上，而其他金融周期变量如利差、杠杆率和金融机构风险暴露的重要度则有限。这表明相关政策需有的放矢，相较于无差别的大规模释放流动性，可将重心置于维护资产价格稳定和优化信贷政策配给，为宏观经济稳定保驾护航。     

Structural Change and Generalized Balanced Growth

This paper addresses the criticism that balanced growth models are inconsistent with the dynamics of structural change characterizing the process of economic development. Using a sectoral disaggregated version of a research-driven growth model, we develop the concept of a generalized balanced growth path (GBGP). Along a GBGP, macroeconomic variables grow at constant rates while disaggregated variables grow at non-constant rates. As a result, balanced growth in macroeconomic aggregates and structural change can occur simultaneously. Received April 3, 2001; revised version received February 20, 2002 Published online: November 11, 2002     

Assessing the predictive power of financial spreads in the euro area: does parameters instability matter?

In the empirical literature there is wide consensus that financial spreads cannot constitute a broadly based assessment on future output growth and inflation because the bivariate estimated regressions are not stable over time and lead to relatively poor out-of-sample forecasting performance (e.g. J Econ Liter 41:788–829, 2003). This conclusion arised for the USA, as well as for several European countries. In this paper we check whether the marginal predictive content of some financial spreads (the slope of the yield curve, the reverse yield gap and the credit spread) for macroeconomic forecasting in the euro area can be recovered using techniques taking into account potential parameters instability. We set up a quarterly Bayesian vector autoregression model with time-varying coefficients, comprising both target variables, as well as other monetary policy indicators, to serve as a benchmark. Then, the properties of the spreads as leading indicators are assessed by augmenting this benchmark BVAR with the spreads, one at a time. We find time variation of the coefficients to be a relevant issue in our model, especially for forecasting output growth, but financial spreads continue to have no or negligible marginal predictive content for both output growth and inflation. Overall, our results confirm that there is no ready-to-use financial spread that can replace an encompassing multivariate model for the prediction of target variables in the euro area.      

‘JUMPS’ IN MACROECONOMIC MODELS: AN EXAMPLE WHEN EIGENVALUES ARE COMPLEX‐VALUED*

The dynamic properties of continuous‐time macroeconomic models are typically characterised by having a combination of stable and unstable eigenvalues. In a seminal paper, Blanchard and Kahn showed that, for linear models, in order to ensure a unique solution, the number of discontinuous or ‘jump’ variables must equal the number of unstable eigenvalues in the economy. Assuming no zero eigenvalues and that all eigenvalues are distinct, this also means that the number of predetermined variables, otherwise referred to as continuous or non‐ ‘jump’ variables, must equal the number of stable eigenvalues. In this paper, we investigate the application of the Blanchard and Kahn results and establish that these results also carry through for linear dynamical systems where some of the eigenvalues are complex‐valued. An example with just one complex conjugate pair of stable eigenvalues is presented. The Appendix contains a general n‐dimensional model.     

中国提前碳达峰情景及其宏观经济影响

第75届联合国大会上中国提出了2030年前碳达峰、2060年前碳中和的目标,引领了全球应对气候变化的进程,引起了国内外的广泛关注和热评。因此,对强化的提前碳达峰目标的实现路径及其宏观经济影响研究,具有重要的现实意义和学术价值。本文采用动态可计算一般均衡模型TECGE定量分析了强化碳达峰承诺对我国未来宏观经济的影响。设定了四个情景包括2030、2027、2025和2023年碳达峰,峰值分别为108亿吨、107亿吨、105.8亿吨和103.6亿吨,考察提前碳达峰情景与2030年碳达峰情景相比对宏观经济的影响。研究表明,提前碳达峰情景相比2030年基准情景,越早碳达峰,要求碳税价格越高,GDP和其他宏观经济变量如总消费、总进出口等都有所下降,但是第三产业占比有所上升。越早碳达峰,宏观经济变量下降越多,第三产业占比上升得越多。根据CGE模型对宏观经济影响的定量分析,本文为提前实现碳达峰目标、推进经济高质量发展提出了相关的政策建议。     

On the existence and uniqueness of solution to the Lucas–Uzawa model

In this paper we define the concept of admissible solution and then provide closed-form solutions for all variables of the model along the transitional dynamics path. We present numerical simulations and compare our results with those obtained through the methods developed by Boucekkine and Ruiz-Tamarit and, Barro and Sala-I-Martin.     

Fiscal policy and the Spanish business cycle

A main result of the RBC literature is that technological factors drive fluctuations of macroeconomic variables around its long-run growth path. Nevertheless, it has been shown that in some countries fluctuations of some fiscal variables may explain some of the business cycle fluctuations. In this paper I show that a result of this sort can be obtained for the Spanish economy. Specifically, I use both technological and fiscal shocks to reproduce the observed volatility of hours of work to output, hours of work to average productivity, and the negative correlation between hours and average productivity.     

The Effects of Monetary Policy Shocks in the USA: A Forecast‐Augmented VAR Approach

This paper formulates a forward‐looking monetary policy function for the USA in a structural vector autoregression (VAR) model, by using forecasts of key macroeconomic variables, in addition to the ex post realised variables used in a standard VAR. Since this forecast‐augmented VAR (FOAVAR) uses both forecasted and realised variables, and the standard VAR uses only realised variables, the standard VAR is nested in the FOAVAR. I find that the Fed responds to forecasted macroeconomic variables more significantly than realised variables. I also find that the monetary policy shock in the FOAVAR generates impulse responses of variables that are consistent with the predictions of economic theories, while the policy shock in the standard VAR causes a price puzzle: an increase in the price level due to a contractionary policy shock. These results suggest that a monetary policy function identified in a standard VAR, by using only realised macroeconomic variables, may incorrectly represent the Fed's policy function.     

1979–2001: A Greek great depression through the lens of neoclassical growth theory

This paper focuses on the performance of the Greek economy during the period 1979–2001. Following the work of Cole and Ohanian (1999) and Kehoe and Prescott (2002, 2007) this twenty year episode can be characterized as a great depression. We use this methodology and ask whether, given the observed exogenous path of total factor productivity (TFP), the neoclassical growth model can generate an equilibrium behavior that has growth accounting characteristics similar to those in the data. The answer is affirmative: Changes in TFP are crucial in accounting for the Greek great depression. Our model economy predicts a big decline of economic activity during the 80s and until the mid-90s and a strong recovery for the period 1995–2001. This is exactly what happened in Greece. Moreover, the model successfully mimics the actual data with respect to the timing of peaks and troughs and the time paths of most key macroeconomic variables. However, puzzles between theory's predictions and the observed data are not missing. For instance, things are (not surprisingly for the neoclassical growth model) less successful when it comes to the labor factor.     

货币政策、金融周期及其宏观经济效应

本文综合金融市场的多维信息,利用主成分分析法合成我国的金融周期指数。在此基础上,构建TVP SV VAR模型研究2003—2017年间我国货币政策、金融周期及宏观经济变量间的时变互动关系。研究发现：（1）我国货币政策、金融周期和宏观经济变量之间存在显著的时变互动关系。（2）金融传导渠道可能扭曲货币政策效力,通过金融传导渠道,货币政策不仅会抑制经济增长,还可能加剧通货膨胀。（3）金融周期对货币政策产出效应的影响滞后于对价格效应的影响。短期来看,货币政策产出效应的时变特征与金融传导渠道无太大关联,但随时间推移,金融繁荣对产出的负面影响可能最终使货币政策产出效应发生反转。货币当局应警惕金融繁荣对货币政策效力的扭曲,审慎操作,且不宜承担过多刺激产出的任务。     

CREDIBILITY, MACROECONOMIC FUNDAMENTALS AND MARKOV REGIME SWITCHES IN THE EMS

The main objective of this paper is to use the Markov regime‐switching modelling framework to describe and analyse the credibility of a number of countries participating in the European Monetary System during 1980–1998. Our credibility indicator, based on Hughes Hallet et al.'s (1997) methodology, is subject to discrete regime shifts and is made dependent on macroeconomic fundamentals. We carry out extensive testing to assess the specification of the Markov regime‐switching model and the potential existence of permanent breaks. A contribution of our paper is the specification of a multivariate Markov switching model that allows us to examine whether macroeconomic variables have asymmetric effects on credibility. Another contribution is the specification of a regime‐switching model with time‐varying transition probabilities, which enables us to determine whether changes in macroeconomic variables can trigger switches between the low and high credibility regimes. We find strong evidence of regime switching behaviour in all countries. Both the level of credibility and the transition probabilities display an asymmetric response to changes in macroeconomic variables, with the stance of fiscal policy exerting the most systematic influence in all countries.     

International macroeconomic dynamics: A factor vector autoregressive approach

In this paper international comovements among a set of key real and nominal macroeconomic variables in the US, UK, Canada, Japan and the Euro area have been investigated for the 1980–2005 period, using a factor vector autoregressive approach. We present evidence that comovements in macroeconomic variables do not concern only real activity, but are an important feature also of stock market returns, inflation rates, interest rates and, to a smaller extent, monetary aggregates. Both common sources of shocks and similar transmission mechanisms explain international comovements, with the only exception of Japan, where the idiosyncratic features seem to dominate. Finally, concerning the origin of global shocks, evidence of both global supply-side and demand-side disturbances is found.