Social Security,Unemployment, and Growth

The paper develops an overlapping generations model that highlights interactions between social security, unemployment and growth. The social security system has two components: old age pensions and unemployment insurance. Pensions have a direct effect on economic growth. Both pensions and unemployment benefits influence equilibrium unemployment caused by wage bargaining. Since unemployment deteriorates growth, both types of social security have an indirect negative effect on growth.JEL Code: E24, H55, J51     

Pollution Externalities in a Model of Endogenous Fertility and Growth

An endogenous growth model with human capital formation, pollution caused by production of consumption goods, and endogenous fertility decisions made by altruistic agents with infinite horizons is presented. Consequences for optimal policy of modelling fertility as an explicit decision variable are examined. Because ordinary lump-sum transfers to individuals are no longer neutral, either revenue from a pollution tax must be redistributed to dynasties (working as an implicit tax on child births), or lump-sum transfers must be supplemented with an explicit fertility tax. Alternatively, the government can avoid distortions of the fertility decisions by maintaining an appropriate public debt. When abatement is highly productive, it can be optimal to subsidize fertility in order to increase total production.     

Consumption Taxation and Endogenous Growth in a Model with New Generations

This article studies the implications of consumption taxation on capital accumulation in a one-sector endogenous growth model with finite horizons. A tax on consumption, when tax revenues are lump-sum rebated to consumers, redistributes income between living generations and future, still unborn, generations, and therefore depresses aggregate consumption and raises saving, stimulating capital accumulation and economic growth. If however the resources from taxation are used for financing unproductive public spending, the effect of the consumption tax on the endogenous growth rate disappears as no intergenerational redistribution of income occurs. Finally, a consumption tax hike accompanied by a compensatory reduction of public debt increases long-run economic growth and reduces the consumption-output ratio. Our results on consumption taxation differ substantially from those obtained within the endogenous growth literature.     

Monetary Shocks in a Model with Skill Loss

Unemployment shows persistent and long‐lasting responses to nominal and real shocks. Standard real business cycle models with search frictions but a homogeneous labor force are able to generate some volatility and persistence, but not enough to match the empirical evidence. Moreover, empirical studies emphasize the importance of the heterogeneity of the unemployment pool to fully understand unemployment dynamics. In particular, in most European countries the incidence of long‐term unemployment is large and well known. One of the possible causes/consequences of long‐term unemployment is the skill deterioration of the unemployment pool. In this paper, we introduce the skill loss mechanism, and therefore a heterogeneous labor force, in a New Keynesian framework with search frictions. Calibrating the model for the Spanish economy, we show that while the skill loss mechanism helps to explain the magnitude of the response of unemployment to monetary shocks, it does not improve the performance of the homogeneous worker model in terms of the persistence of the response, especially for short‐ and long‐term unemployment.     

Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment

In this paper we analyze growth and welfare effects of fiscal policy in an endogenous growth model along the balanced growth path. As to the model we assume that sustained per capita growth results from public investment. The government uses its tax revenue for investment in public capital, for investment subsidy and for transfer payments. We then analyze how the balanced growth rate reacts to variations in those policy variables. Further, we study welfare effects of varying the fiscal parameters and demonstrate that, in general, maximizing economic growth is not equivalent to maximizing welfare on the balanced growth path.     

Fiscal Sustainability in a New Keynesian Model

Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady‐state debt to follow a random walk. In this paper we consider the nature of the time inconsistency involved in such a policy and its implication for discretionary policymaking. We show that governments are tempted, given inflationary expectations, to utilize their monetary and fiscal instruments in the initial period to change the ultimate debt burden they need to service. We demonstrate that this temptation is only eliminated if following shocks, the new steady‐state debt is equal to the original (efficient) debt level even though there is no explicit debt target in the government's objective function. Analytically and in a series of numerical simulations we show which instrument is used to stabilize the debt depends crucially on the degree of nominal inertia and the size of the debt stock. We also show that the welfare consequences of introducing debt are negligible for precommitment policies, but can be significant for discretionary policy. Finally, we assess the credibility of commitment policy by considering a quasi‐commitment policy, which allows for different probabilities of reneging on past promises.     

Monetary Policy in a Schumpeterian Growth Model with Vertical R&D Sectors

We explore the growth and welfare effects of monetary policy in a Schumpeterian economy with cash-in-advance (CIA)-constrained research and development (R&D) investment in both the upstream and downstream sectors. We show that the nominal interest rate can have an inverted-U relation with economic growth due to its effects on labor allocations between manufacturing and R&D and between the R&D sectors. Furthermore, aggregate R&D overinvestment is generally sufficient but not necessary for the Friedman rule of zero nominal interest rates to be suboptimal. Calibrated using data from U.S. manufacturing firms, our model features a positive welfare-maximizing nominal interest rate despite aggregate R&D underinvestment.     

Real Wage Rigidities and the New Keynesian Model

Most central banks perceive a trade‐off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade‐off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare‐relevant output gap. In this paper, we argue that this property of the new Keynesian framework, which we call the divine coincidence, is due to a special feature of the model: the absence of nontrivial real imperfections. We focus on one such real imperfection, namely, real wage rigidities. When the baseline new Keynesian model is extended to allow for real wage rigidities, the divine coincidence disappears, and central banks indeed face a trade‐off between stabilizing inflation and stabilizing the welfare‐relevant output gap. We show that not only does the extended model have more realistic normative implications, but it also has appealing positive properties. In particular, it provides a natural interpretation for the dynamic inflation–unemployment relation found in the data.     

Output Gap Estimation and Monetary Policy in China

Using the Bayesian multivariate Beveridge-Nelson decomposition method, this paper estimates China's output gap based on a multivariate dynamic model featuring distinct interactions among real output, inflation, money, and the exchange rate in China during the period 1980-2010. The authors compare the statistical nature and potential forecasting effects of the resulting multivariate gap measure on monetary policy with those of the output gap measures based on univariate models. The empirical results show that only the measure based on the multivariate system significantly predicts monetary policy, which indicates that the output gap estimated by the multivariate system contains more information than the traditional measures for macroeconomic policy adjustments do.     

确定情形下的货币、利率与内生经济增长

通过对消费和资本投入施加预付现金约束,在内生经济增长框架（AK模型）下建立了一个封闭的货币经济体,并构建了以利率为核心的分析框架。研究表明,在确定情形下,利率的改变会影响代理人的消费与投资,并进而对价格和经济总体的消费与投资产生影响,货币当局可以通过利率以间接控制货币供给;当货币供给变化时,经济总体的消费与投资等变量也会发生变化,货币不是中性的;通过比较最优利率政策与Friedman法则,发现两者惟一的区别仅在于最初期利率的不同。     

基于公共投资的内生增长：模型与政策

我国公共投资由各级政府部门主导,基于这一实践,文章在经典的拉姆齐-卡斯-库普曼斯模型的基础上,引入政府行政机构的最优化行为,说明在政府主导公共投资的增长方式下公共投资效率对经济增长和福利的影响。研究结果表明,存在一个公共投资效率的梯级,居民福利水平也呈现系列梯级分布,而且公共投资的生产效率梯级越高,居民福利水平梯级也越高。因此,在当前政府主导公共投资的增长方式下,采取有效措施提高公共投资的效率并使其位于关键值之上,这对于居民和政府机构是双赢的举措。     

Screening and Labor Market Flows in a Model with Heterogeneous Workers

We construct a model in which screening of heterogeneous workers by employers plays a central role in determining both the flows into and out of unemployment. Following a negative productivity shock, the share of low‐efficiency workers in the pool of unemployed rises, and this composition effect reduces the incentive of firms to post vacancies, lowering job opportunities for all workers. Heterogeneity in workers’ efficiency amplifies unemployment fluctuations in economies with small gross labor flows and leads to persistent buildups of unemployment and slow recoveries. The composition effect worsens the unemployment–inflation trade‐off faced by the monetary authority, leading to very large sacrifice ratios when a fall in productivity primarily affects low‐efficiency workers.     

Unemployment,Government Spending and the Laffer Effect*

The paper studies the effects of income tax rate changes in a general equilibrium model with frictional unemployment. Laffer curve effects, by which a tax rate reduction may increase the level of government spending or its share in output, are shown to be possible under certain conditions. These are the presence of unemployment benefit payments, government budget balance through fiscal spending adjustment and limited quantitative importance of labour reallocation costs. Endogenous government spending acts as a fiscal accelerator if the fiscal burden of unemployment benefit payments is large, but reduces the employment effects of tax rate cuts if it is low.     

The Friedman Rule in a Model with Endogenous Growth and Cash‐in‐Advance Constraint

This paper introduces money into an overlapping‐generations model with endogenous growth. The main message of the paper is that as long as the modified golden rule is attained, the Friedman rule is optimal. The result holds regardless of the ability of the government to internalize the externality and control the level of human capital. Other results include: (i) violation of the Friedman rule for a different second‐best environment wherein human capital accumulation is controlled but not physical capital accumulation and (ii) existence of a negative relationship between money growth rate and the economy’s endogenous growth rate.     

Environmental policy,pollution, unemployment,and endogenous growth

The paper develops a model of endogenous economic growth with pollution externalities and a labor market distorted by union monopoly power and by taxes and transfers. We study the optimal second-best pollution tax and abatement policy and find that a shift toward greener preferences will tend to reduce unemployment, although it will hamper growth. We also find that greater labor-market distortions call for higher pollution tax rates. Finally, we show that a switch from quantity control of pollution combined with grandfathering of pollution rights to regulation via emission charges has the potential to raise employment, growth, and welfere without damaging the environment.     

低利率环境下的政府债务成本与财政政策选择

在未来较长时间内,名义利率和实际利率可能保持低位,低利率压缩了货币政策操作空间,较低的财政成本和较高财政收入,意味着财政政策应该且能够更多发挥更大作用。在政府债务稳定与产出稳定的权衡中,应更多关注产出稳定。     

Inflation,Output Growth,and Their Uncertainties: Empirical Evidence for a Causal Relationship from European Emerging Economies

In this paper, we analyze the causality among inflation, output growth, and their uncertainties in all European countries with emerging economies. For these countries, high uncertainty regarding economic growth during the current economic and financial crisis that started in 2008 caused their governments to increase their efforts to sustain growth, and to maintain a low level of inflation. Of the twelve possible hypotheses regarding the causal relationships among inflation, output growth, and their uncertainties, we consider five relationships for which we find strong theoretical arguments and empirical evidence in the literature. The empirical evidence strongly supports the Friedman-Ball hypothesis that inflation Granger-causes inflation uncertainty. For the other four tested hypotheses, fewer significant causal relationships are obtained.     

Sectoral Comovement,Monetary Policy Shocks,and Input–Output Structure

The comovement of output across the sector producing nondurables (i.e., nondurable goods and services) and the sector producing durables is well established in the monetary business cycle literature. However, standard sticky‐price models that incorporate sectoral heterogeneity in price stickiness (i.e., sticky nondurables prices and flexible durables prices) cannot generate this feature. We argue that an input–output (I–O) structure provides a solution to this problem. Here, we develop a two‐sector model with an I–O structure, which is calibrated to the U.S. economy. In the model, each sector’s output affects those of the others by acting as an intermediate input. This connection between the sectors provides a channel through which sectoral comovement is induced.     

Predation,Protection, and Accumulation: Endogenous Property Rights in an Overlapping Generations Growth Model

We study a simple growth model with overlapping generations in which property rights are insecure. Insecurity of property rights leads to predation. Due to predation some of the resources are used for protection purposes. Both predation and protection remove resources from the accumulation process. In the model individuals allocate their labor between working for firms and appropriating output from them. Firms allocate their capital between production and protection. Without government, the model generates a unique but inefficient equilibrium. We show that in this equilibrium the level of output is increasing in the rate of effectiveness of protection, the relative utility of honesty, and the discount rate. Further, the equilibrium level of output is dynamically inefficient. We then extend the model to include a government as the sole provider of the public good “protection”. Protection is assumed to be financed by a capital tax imposed on firms. The model then yields multiple equilibria, with both a stable high-protection low-predation equilibrium, and a stable low-protection high-predation equilibrium. Which equilibrium a country is most likely to achieve, and how difficult it is for a country to move to the more desirable low-predation high-protection equilibrium, depend crucially on the parameters of the model describing the economy’s institutional structure. Hence, the results of the model support the emphasis placed by the World Bank on the importance for growth of strengthening institutional structures in developing countries.JEL Code: D23, D90, O41