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Symposium: Macroeconomics a Decade after the Great Recession
"What Happened: Financial Factors inwards the Great Recession," past times Mark Gertler together with Simon Gilchrist
At the onslaught of the recent global financial crisis, the workhorse macroeconomic models assumed frictionless financial markets. These frameworks were thus non able to anticipate the crisis, nor to analyze how the disruption of credit markets changed what initially appeared similar a mild downturn into the Great Recession. Since that time, an explosion of both theoretical together with empirical enquiry has investigated how the financial crisis emerged together with how it was transmitted to the existent sector. The destination of this newspaper is to pull what nosotros take away maintain learned from this novel enquiry together with how it tin live on used to empathise what happened during the Great Recession. In the process, nosotros also introduce precisely about novel empirical work. We debate that a consummate description of the Great Recession must take away maintain business organisation human relationship of the financial distress facing both households together with banks and, every bit the crisis unfolded, nonfinancial firms every bit well. Exploiting both panel information together with fourth dimension serial methods, nosotros analyze the contribution of the theatre cost decline, versus the banking distress indicator, to the overall turn down inwards job during the Great Recession. We confirm a mutual finding inwards the literature that the family ease canvas channel is of import for regional variation inwards employment. However, nosotros also disclose that the disruption inwards banking was fundamental to the overall job contraction.
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"Finance together with Business Cycles: The Credit-Driven Household Demand Channel," by Atif Mian together with Amir Sufi
What is the role of the financial sector inwards explaining business organisation cycles? This inquiry is every bit erstwhile every bit the acre of macroeconomics, together with an extensive trunk of enquiry conducted since the Global Financial Crisis of 2008 has offered novel answers. The specific thought position forrad inwards this article is that expansions inwards credit supply, operating primarily through family demand, take away maintain been an of import driver of business organisation cycles. We telephone phone this the credit-driven family demand channel. While this channel helps explicate the recent global recession, it also describes economical cycles inwards many countries over the past times xl years.
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"Identification inwards Macroeconomics," by Emi Nakamura together with Jón Steinsson
This newspaper discusses empirical approaches macroeconomists job to reply questions like: What does monetary policy do? How large are the effects of financial stimulus? What caused the Great Recession? Why do precisely about countries grow faster than others? Identification of causal effects plays 2 roles inwards this process. In sure as shooting cases, progress tin live on made using the straight approach of identifying plausibly exogenous variation inwards a policy together with using this variation to assess the effect of the policy. However, external validity concerns bound what tin live on learned inwards this way. Carefully identified causal effects estimates tin also live on used every bit moments inwards a structural instant matching exercise. We job the term "identified moments" every bit a short-hand for "estimates of responses to identified structural shocks," or what applied microeconomists would telephone phone "causal effects." We debate that such identified moments are oftentimes powerful diagnostic tools for distinguishing betwixt of import classes of models (and thereby learning most the effects of policy). To illustrate these notions nosotros speak over the growing job of cross-sectional bear witness inwards macroeconomics together with consider what the best existing bear witness is on the effects of monetary policy.
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"The State of New Keynesian Economics: H5N1 Partial Assessment," past times Jordi Galí
In August 2007, when the outset signs emerged of what would come upward to live on the most damaging global financial crisis since the Great Depression, the New Keynesian epitome was dominant inwards macroeconomics. Ten years later, tons of ammunition has been fired against modern macroeconomics inwards general, together with against dynamic stochastic full general equilibrium models that construct on the New Keynesian framework inwards particular. Those criticisms notwithstanding, the New Keynesian model arguably remains the dominant framework inwards the classroom, inwards academic research, together with inwards policy modeling. In fact, i tin debate that over the past times x years the ambit of New Keynesian economic science has kept widening, past times encompassing a growing number of phenomena that are analyzed using its basic framework, every bit good every bit past times addressing precisely about of the criticisms raised against it. The introduce newspaper takes stock of the province of New Keynesian economic science past times reviewing precisely about of its master copy insights together with past times providing an overview of precisely about recent developments. In particular, I speak over precisely about recent operate on 2 real active enquiry programs: the implications of the null lower jump on nominal involvement rates together with the interaction of monetary policy together with family heterogeneity. Finally, I speak over what I see every bit precisely about of the master copy shortcomings of the New Keynesian model together with possible areas for time to come research.
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"On DSGE Models," by Lawrence J. Christiano, Martin S. Eichenbaum together with Mathias Trabandt
The final result of whatever of import macroeconomic policy alter is the internet effect of forces operating on dissimilar parts of the economy. H5N1 fundamental challenge facing policymakers is how to assess the relative strength of those forces. Economists take away maintain a arrive at of tools that tin live on used to brand such assessments. Dynamic stochastic full general equilibrium (DSGE) models are the leading tool for making such assessments inwards an opened upward together with transparent manner. We review the province of mainstream DSGE models earlier the financial crisis together with the Great Recession. We together with so pull how DSGE models are estimated together with evaluated. We address the inquiry of why DSGE modelers—like most other economists together with policymakers—failed to predict the financial crisis together with the Great Recession, together with how DSGE modelers responded to the financial crisis together with its aftermath. We speak over how electrical flow DSGE models are genuinely used past times policymakers. We together with so provide a brief response to precisely about criticisms of DSGE models, with special emphasis on criticism past times Joseph Stiglitz, together with offering precisely about in conclusion remarks.
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"Evolution of Modern Business Cycle Models: Accounting for the Great Recession," Patrick J. Kehoe, Virgiliu Midrigan together with Elena Pastorino
Modern business organisation bicycle theory focuses on the study of dynamic stochastic full general equilibrium (DSGE) models that generate aggregate fluctuations similar to those experienced past times actual economies. We speak over how these modern business organisation bicycle models take away maintain evolved across 3 generations, from their roots inwards the early on existent business organisation bicycle models of the slowly 1970s through the turmoil of the Great Recession iv decades later. The outset generation models were existent (that is, without a monetary sector) business organisation bicycle models that primarily explored whether a modest number of shocks, oftentimes i or two, could generate fluctuations similar to those observed inwards aggregate variables such every bit output, consumption, investment, together with hours. These basic models disciplined their key parameters with micro bear witness together with were remarkably successful inwards matching these aggregate variables. H5N1 2d generation of these models incorporated frictions such every bit glutinous prices together with wages; these models were primarily developed to live on used inwards fundamental banks for short-term forecasting purposes together with for performing counterfactual policy experiments. H5N1 tertiary generation of business organisation bicycle models contain the rich heterogeneity of patterns from the micro data. H5N1 defining characteristic of these models is non the heterogeneity with model agents they adjust nor the micro-level bear witness they rely on (although both are common), but rather the insistence that whatever novel parameters or characteristic included live on explicitly disciplined past times straight evidence. We present how 2 versions of this latest generation of modern business organisation bicycle models, which are existent business organisation bicycle models with frictions inwards labor together with financial markets, tin account, respectively, for the aggregate together with the cross-regional fluctuations observed inwards the U.S.A. during the Great Recession.
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"Microeconomic Heterogeneity together with Macroeconomic Shocks," by Greg Kaplan together with Giovanni L. Violante
In this essay, nosotros speak over the emerging literature inwards macroeconomics that combines heterogeneous agent models, nominal rigidities, together with aggregate shocks. This literature opens the door to the analysis of distributional issues, economical fluctuations, together with stabilization policies—all inside the same framework. In response to the limitations of the illustration agent approach to economical fluctuations, a novel framework has emerged that combines key features of heterogeneous agents (HA) together with New Keynesian (NK) economies. These HANK models offering a much to a greater extent than accurate representation of family consumption deportment together with tin generate realistic distributions of income, wealth, and, albeit to a lesser degree, family ease sheets. At the same time, they tin adjust many sources of macroeconomic fluctuations, including those driven past times aggregate demand. In sum, they provide a rich theoretical framework for quantitative analysis of the interaction betwixt cross-sectional distributions together with aggregate dynamics. In this article, nosotros outline a state-of-the-art version of HANK together with its illustration agent counterpart, together with bring 2 broad messages most the role of family heterogeneity for the response of the macroeconomy to aggregate shocks: 1) the similarity betwixt the Representative Agent New Keynesian (RANK) together with HANK frameworks depends crucially on the daze beingness analyzed; together with 2) sure as shooting of import macroeconomic questions concerning economical fluctuations tin exclusively live on addressed inside heterogeneous agent models.
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Symposium: Incentives inwards the Workplace
"Compensation together with Incentives inwards the Workplace," past times Edward P. Lazear
Labor is supplied because most of us must operate to live. Indeed, it is called "work" inwards role because without compensation, the overwhelming bulk of workers would non otherwise perform the tasks. The theme of this essay is that incentives touching deportment together with that economic science every bit a scientific discipline has made skilful progress inwards specifying how compensation together with its shape influences worker effort. This is a broad topic, together with the role hither is non a comprehensive literature review on each of many topics. Instead, a sample of precisely about of the most applicable papers are discussed with the destination of demonstrating that compensation, incentives, together with productivity are inseparably linked.
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"Nonmonetary Incentives together with the Implications of Work every bit a Source of Meaning," by Lea Cassar together with Stephan Meier
Empirical enquiry inwards economic science has begun to explore the thought that workers tending most nonmonetary aspects of work. An increasing number of economical studies using survey together with experimental methods take away maintain shown that nonmonetary incentives together with nonpecuniary aspects of one's task take away maintain substantial impacts on task satisfaction, productivity, together with labor supply. By drawing on this bear witness together with relating it to the literature inwards psychology, this newspaper argues that operate represents much to a greater extent than than precisely earning an income: for many people, operate is a source of meaning. In the adjacent section, nosotros give an economical interpretation of meaningful operate together with emphasize how it is affected past times the mission of the organisation together with the extent to which task blueprint fulfills the 3 psychological needs at the footing of self-determination theory: autonomy, competence, together with relatedness. We betoken to the bear witness that non everyone cares most having a meaningful task together with speak over potential sources of this heterogeneity. We sketch a theoretical framework to start to formalize operate every bit a source of pregnant together with retrieve most how to contain this thought into means theory together with labor furnish models. We speak over how workers' search for pregnant may touching the blueprint of monetary together with nonmonetary incentives. We conclude past times suggesting precisely about insights together with opened upward questions for time to come research.
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"The Changing (Dis-)utility of Work," past times Greg Kaplan together with Sam Schulhofer-Wohl
We study how changes inwards the distribution of occupations take away maintain affected the aggregate non-pecuniary costs together with benefits of working. The physical toll of operate is less forthwith than inwards 1950, with workers shifting away from occupations inwards which people written report experiencing tiredness together with pain. The emotional consequences of the changing business distribution vary substantially across demographic groups. Work has travel happier together with to a greater extent than meaningful for women, but to a greater extent than stressful together with less meaningful for men. These changes seem to live on concentrated at lower didactics levels.
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Individual Articles
"Social Connectedness: Measurement, Determinants, together with Effects," by Michael Bailey, Rachel Cao, Theresa Kuchler, Johannes Stroebel together with Arlene Wong
Social networks tin shape many aspects of social together with economical activity: migration together with trade, job-seeking, innovation, consumer preferences together with sentiment, populace health, social mobility, together with more. In turn, social networks themselves are associated with geographic proximity, historical ties, political boundaries, together with other factors. Traditionally, the unavailability of large-scale together with illustration information on social connecter betwixt individuals or geographic regions has posed a challenge for empirical enquiry on social networks. More recently, a trunk of such enquiry has begun to emerge using information on social connecter from online social networking services such every bit Facebook, LinkedIn, together with Twitter. To date, most of these enquiry projects take away maintain been built on anonymized administrative microdata from Facebook, typically past times working with coauthor teams that include Facebook employees. However, at that spot is an inherent bound to the number of researchers that volition live on able to operate with social network information through such collaborations. In this paper, nosotros so innovate a novel mensurate of social connecter at the US county level. Our Social Connectedness Index is based on friendship links on Facebook, the global online social networking service. Specifically, the Social Connectedness Index corresponds to the relative frequency of Facebook friendship links betwixt every county-pair inwards the United States, together with betwixt every US county together with every unusual country. Given Facebook's scale every bit good every bit the relative representativeness of Facebook's user body, these information provide the outset comprehensive mensurate of friendship networks at a national level.
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"Recommendations for Further Reading," by Timothy Taylor
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Sumber http://conversableeconomist.blogspot.com/
This newspaper discusses empirical approaches macroeconomists job to reply questions like: What does monetary policy do? How large are the effects of financial stimulus? What caused the Great Recession? Why do precisely about countries grow faster than others? Identification of causal effects plays 2 roles inwards this process. In sure as shooting cases, progress tin live on made using the straight approach of identifying plausibly exogenous variation inwards a policy together with using this variation to assess the effect of the policy. However, external validity concerns bound what tin live on learned inwards this way. Carefully identified causal effects estimates tin also live on used every bit moments inwards a structural instant matching exercise. We job the term "identified moments" every bit a short-hand for "estimates of responses to identified structural shocks," or what applied microeconomists would telephone phone "causal effects." We debate that such identified moments are oftentimes powerful diagnostic tools for distinguishing betwixt of import classes of models (and thereby learning most the effects of policy). To illustrate these notions nosotros speak over the growing job of cross-sectional bear witness inwards macroeconomics together with consider what the best existing bear witness is on the effects of monetary policy.
Full-Text Access | Supplementary Materials
"The State of New Keynesian Economics: H5N1 Partial Assessment," past times Jordi Galí
In August 2007, when the outset signs emerged of what would come upward to live on the most damaging global financial crisis since the Great Depression, the New Keynesian epitome was dominant inwards macroeconomics. Ten years later, tons of ammunition has been fired against modern macroeconomics inwards general, together with against dynamic stochastic full general equilibrium models that construct on the New Keynesian framework inwards particular. Those criticisms notwithstanding, the New Keynesian model arguably remains the dominant framework inwards the classroom, inwards academic research, together with inwards policy modeling. In fact, i tin debate that over the past times x years the ambit of New Keynesian economic science has kept widening, past times encompassing a growing number of phenomena that are analyzed using its basic framework, every bit good every bit past times addressing precisely about of the criticisms raised against it. The introduce newspaper takes stock of the province of New Keynesian economic science past times reviewing precisely about of its master copy insights together with past times providing an overview of precisely about recent developments. In particular, I speak over precisely about recent operate on 2 real active enquiry programs: the implications of the null lower jump on nominal involvement rates together with the interaction of monetary policy together with family heterogeneity. Finally, I speak over what I see every bit precisely about of the master copy shortcomings of the New Keynesian model together with possible areas for time to come research.
Full-Text Access | Supplementary Materials
"On DSGE Models," by Lawrence J. Christiano, Martin S. Eichenbaum together with Mathias Trabandt
The final result of whatever of import macroeconomic policy alter is the internet effect of forces operating on dissimilar parts of the economy. H5N1 fundamental challenge facing policymakers is how to assess the relative strength of those forces. Economists take away maintain a arrive at of tools that tin live on used to brand such assessments. Dynamic stochastic full general equilibrium (DSGE) models are the leading tool for making such assessments inwards an opened upward together with transparent manner. We review the province of mainstream DSGE models earlier the financial crisis together with the Great Recession. We together with so pull how DSGE models are estimated together with evaluated. We address the inquiry of why DSGE modelers—like most other economists together with policymakers—failed to predict the financial crisis together with the Great Recession, together with how DSGE modelers responded to the financial crisis together with its aftermath. We speak over how electrical flow DSGE models are genuinely used past times policymakers. We together with so provide a brief response to precisely about criticisms of DSGE models, with special emphasis on criticism past times Joseph Stiglitz, together with offering precisely about in conclusion remarks.
Full-Text Access | Supplementary Materials
"Evolution of Modern Business Cycle Models: Accounting for the Great Recession," Patrick J. Kehoe, Virgiliu Midrigan together with Elena Pastorino
Modern business organisation bicycle theory focuses on the study of dynamic stochastic full general equilibrium (DSGE) models that generate aggregate fluctuations similar to those experienced past times actual economies. We speak over how these modern business organisation bicycle models take away maintain evolved across 3 generations, from their roots inwards the early on existent business organisation bicycle models of the slowly 1970s through the turmoil of the Great Recession iv decades later. The outset generation models were existent (that is, without a monetary sector) business organisation bicycle models that primarily explored whether a modest number of shocks, oftentimes i or two, could generate fluctuations similar to those observed inwards aggregate variables such every bit output, consumption, investment, together with hours. These basic models disciplined their key parameters with micro bear witness together with were remarkably successful inwards matching these aggregate variables. H5N1 2d generation of these models incorporated frictions such every bit glutinous prices together with wages; these models were primarily developed to live on used inwards fundamental banks for short-term forecasting purposes together with for performing counterfactual policy experiments. H5N1 tertiary generation of business organisation bicycle models contain the rich heterogeneity of patterns from the micro data. H5N1 defining characteristic of these models is non the heterogeneity with model agents they adjust nor the micro-level bear witness they rely on (although both are common), but rather the insistence that whatever novel parameters or characteristic included live on explicitly disciplined past times straight evidence. We present how 2 versions of this latest generation of modern business organisation bicycle models, which are existent business organisation bicycle models with frictions inwards labor together with financial markets, tin account, respectively, for the aggregate together with the cross-regional fluctuations observed inwards the U.S.A. during the Great Recession.
Full-Text Access | Supplementary Materials
"Microeconomic Heterogeneity together with Macroeconomic Shocks," by Greg Kaplan together with Giovanni L. Violante
In this essay, nosotros speak over the emerging literature inwards macroeconomics that combines heterogeneous agent models, nominal rigidities, together with aggregate shocks. This literature opens the door to the analysis of distributional issues, economical fluctuations, together with stabilization policies—all inside the same framework. In response to the limitations of the illustration agent approach to economical fluctuations, a novel framework has emerged that combines key features of heterogeneous agents (HA) together with New Keynesian (NK) economies. These HANK models offering a much to a greater extent than accurate representation of family consumption deportment together with tin generate realistic distributions of income, wealth, and, albeit to a lesser degree, family ease sheets. At the same time, they tin adjust many sources of macroeconomic fluctuations, including those driven past times aggregate demand. In sum, they provide a rich theoretical framework for quantitative analysis of the interaction betwixt cross-sectional distributions together with aggregate dynamics. In this article, nosotros outline a state-of-the-art version of HANK together with its illustration agent counterpart, together with bring 2 broad messages most the role of family heterogeneity for the response of the macroeconomy to aggregate shocks: 1) the similarity betwixt the Representative Agent New Keynesian (RANK) together with HANK frameworks depends crucially on the daze beingness analyzed; together with 2) sure as shooting of import macroeconomic questions concerning economical fluctuations tin exclusively live on addressed inside heterogeneous agent models.
Full-Text Access | Supplementary Materials
Symposium: Incentives inwards the Workplace
"Compensation together with Incentives inwards the Workplace," past times Edward P. Lazear
Labor is supplied because most of us must operate to live. Indeed, it is called "work" inwards role because without compensation, the overwhelming bulk of workers would non otherwise perform the tasks. The theme of this essay is that incentives touching deportment together with that economic science every bit a scientific discipline has made skilful progress inwards specifying how compensation together with its shape influences worker effort. This is a broad topic, together with the role hither is non a comprehensive literature review on each of many topics. Instead, a sample of precisely about of the most applicable papers are discussed with the destination of demonstrating that compensation, incentives, together with productivity are inseparably linked.
Full-Text Access | Supplementary Materials
"Nonmonetary Incentives together with the Implications of Work every bit a Source of Meaning," by Lea Cassar together with Stephan Meier
Empirical enquiry inwards economic science has begun to explore the thought that workers tending most nonmonetary aspects of work. An increasing number of economical studies using survey together with experimental methods take away maintain shown that nonmonetary incentives together with nonpecuniary aspects of one's task take away maintain substantial impacts on task satisfaction, productivity, together with labor supply. By drawing on this bear witness together with relating it to the literature inwards psychology, this newspaper argues that operate represents much to a greater extent than than precisely earning an income: for many people, operate is a source of meaning. In the adjacent section, nosotros give an economical interpretation of meaningful operate together with emphasize how it is affected past times the mission of the organisation together with the extent to which task blueprint fulfills the 3 psychological needs at the footing of self-determination theory: autonomy, competence, together with relatedness. We betoken to the bear witness that non everyone cares most having a meaningful task together with speak over potential sources of this heterogeneity. We sketch a theoretical framework to start to formalize operate every bit a source of pregnant together with retrieve most how to contain this thought into means theory together with labor furnish models. We speak over how workers' search for pregnant may touching the blueprint of monetary together with nonmonetary incentives. We conclude past times suggesting precisely about insights together with opened upward questions for time to come research.
Full-Text Access | Supplementary Materials
"The Changing (Dis-)utility of Work," past times Greg Kaplan together with Sam Schulhofer-Wohl
We study how changes inwards the distribution of occupations take away maintain affected the aggregate non-pecuniary costs together with benefits of working. The physical toll of operate is less forthwith than inwards 1950, with workers shifting away from occupations inwards which people written report experiencing tiredness together with pain. The emotional consequences of the changing business distribution vary substantially across demographic groups. Work has travel happier together with to a greater extent than meaningful for women, but to a greater extent than stressful together with less meaningful for men. These changes seem to live on concentrated at lower didactics levels.
Full-Text Access | Supplementary Materials
Individual Articles
"Social Connectedness: Measurement, Determinants, together with Effects," by Michael Bailey, Rachel Cao, Theresa Kuchler, Johannes Stroebel together with Arlene Wong
Social networks tin shape many aspects of social together with economical activity: migration together with trade, job-seeking, innovation, consumer preferences together with sentiment, populace health, social mobility, together with more. In turn, social networks themselves are associated with geographic proximity, historical ties, political boundaries, together with other factors. Traditionally, the unavailability of large-scale together with illustration information on social connecter betwixt individuals or geographic regions has posed a challenge for empirical enquiry on social networks. More recently, a trunk of such enquiry has begun to emerge using information on social connecter from online social networking services such every bit Facebook, LinkedIn, together with Twitter. To date, most of these enquiry projects take away maintain been built on anonymized administrative microdata from Facebook, typically past times working with coauthor teams that include Facebook employees. However, at that spot is an inherent bound to the number of researchers that volition live on able to operate with social network information through such collaborations. In this paper, nosotros so innovate a novel mensurate of social connecter at the US county level. Our Social Connectedness Index is based on friendship links on Facebook, the global online social networking service. Specifically, the Social Connectedness Index corresponds to the relative frequency of Facebook friendship links betwixt every county-pair inwards the United States, together with betwixt every US county together with every unusual country. Given Facebook's scale every bit good every bit the relative representativeness of Facebook's user body, these information provide the outset comprehensive mensurate of friendship networks at a national level.
Full-Text Access | Supplementary Materials
"Recommendations for Further Reading," by Timothy Taylor
Full-Text Access | Supplementary Materials
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