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We study the role of exchange rates in industrial policy. We construct an open-economy macroeconomic framework with production externalities and show that the desirability of these policies critically depends on the dynamic patterns of externalities. When they are stronger in earlier stages of...
Persistent link: https://www.econbiz.de/10014544799
U.S.-specific uncertainty, modeled as higher volatility in U.S. assets, leads to higher risk premia in both countries …. This occurs because higher uncertainty leads to deleveraging pressure on U.S. intermediaries, triggering higher global risk … premia and lower global asset values. Moreover, when U.S. uncertainty rises, the exchange rate in the foreign country vis …
Persistent link: https://www.econbiz.de/10013210054
China's remarkable run of persistently high growth in recent decades is all the more stunning in light of the country's low levels of financial and institutional development, state-dominated economy, and nondemocratic government. Notwithstanding the inefficient and risky growth model, the...
Persistent link: https://www.econbiz.de/10014250169
By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up because the policy eliminates the danger. Mechanically, high taxes...
Persistent link: https://www.econbiz.de/10014436959
After decades of rising global economic integration, the world economy is now fragmenting. To measure this phenomenon, we introduce an index of geopolitical fragmentation derived from various empirical indicators. This index is developed using a flexible dynamic factor model with time-varying...
Persistent link: https://www.econbiz.de/10014576667
We find that variation in expected U.S. productivity explains over half of U.S. dollar/G7 exchange rate fluctuations. Both correctly-anticipated changes in productivity and expectational noise, which influences the expectation of productivity but not its eventual realization, have large effects....
Persistent link: https://www.econbiz.de/10014576625
We introduce information frictions into a tractable quantitative multi-country multi-sector model with global value chains. Producers in a sector do not perfectly observe contemporaneous shocks to other countries and sectors, and their output decisions respond to their idiosyncratic beliefs...
Persistent link: https://www.econbiz.de/10013210061
How does growing international financial diversification affect firm-level and aggregate labor shares? We study this question using a novel framework of firm labor choice in the face of aggregate risk. The theory implies a cross-section of labor risk premia and labor shares that appear as...
Persistent link: https://www.econbiz.de/10014250185
We study the aggregate effects of supply-chain disruptions in the post-pandemic period in a heterogeneous-firm, general equilibrium model with input-output linkages and a rich set of supply chain frictions: uncertain shipping delays, fixed order costs, and storage costs. Firms optimally hold...
Persistent link: https://www.econbiz.de/10013537743
I develop a stylized model of multi-stage production in which the time length of each stage is endogenously determined. Letting the production process mature for a longer period of time increases labor productivity, but it comes at the cost of higher working capital needs for firms. Under...
Persistent link: https://www.econbiz.de/10013537793