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Symposium: Macroeconomics a Decade after the Great Recession
"What Happened: Financial Factors inwards the Great Recession," past times Mark Gertler in addition to Simon Gilchrist
At the onrush 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 in addition to empirical enquiry has investigated how the financial crisis emerged in addition to how it was transmitted to the existent sector. The destination of this newspaper is to depict what nosotros receive got learned from this novel enquiry in addition to how it tin last used to sympathize what happened during the Great Recession. In the process, nosotros also acquaint about novel empirical work. We scrap that a consummate description of the Great Recession must receive got business organisation human relationship of the financial distress facing both households in addition to banks and, equally the crisis unfolded, nonfinancial firms equally well. Exploiting both panel information in addition to fourth dimension serial methods, nosotros analyze the contribution of the theatre toll decline, versus the banking distress indicator, to the overall reject inwards job during the Great Recession. We confirm a mutual finding inwards the literature that the position residual sail channel is of import for regional variation inwards employment. However, nosotros also unwrap that the disruption inwards banking was key to the overall job contraction.
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"Finance in addition to Business Cycles: The Credit-Driven Household Demand Channel," by Atif Mian in addition to Amir Sufi
What is the role of the financial sector inwards explaining business organisation cycles? This inquiry is equally one-time equally the land of macroeconomics, in addition to an extensive trunk of enquiry conducted since the Global Financial Crisis of 2008 has offered novel answers. The specific thought seat forrad inwards this article is that expansions inwards credit supply, operating primarily through position demand, receive got been an of import driver of business organisation cycles. We telephone band this the credit-driven position 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 in addition to Jón Steinsson
This newspaper discusses empirical approaches macroeconomists job to respond questions like: What does monetary policy do? How large are the effects of financial stimulus? What caused the Great Recession? Why do about countries grow faster than others? Identification of causal effects plays 2 roles inwards this process. In sure enough cases, progress tin last made using the straight approach of identifying plausibly exogenous variation inwards a policy in addition to using this variation to assess the effect of the policy. However, external validity concerns bound what tin last learned inwards this way. Carefully identified causal effects estimates tin also last used equally moments inwards a structural 2nd matching exercise. We job the term "identified moments" equally a short-hand for "estimates of responses to identified structural shocks," or what applied microeconomists would telephone band "causal effects." We scrap that such identified moments are oftentimes powerful diagnostic tools for distinguishing betwixt of import classes of models (and thereby learning near the effects of policy). To illustrate these notions nosotros verbalize over the growing job of cross-sectional prove inwards macroeconomics in addition to consider what the best existing prove 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 upwards to last 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, in addition to 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, in addition to inwards policy modeling. In fact, 1 tin scrap that over the past times 10 years the ambit of New Keynesian economics has kept widening, past times encompassing a growing number of phenomena that are analyzed using its basic framework, equally good equally past times addressing about of the criticisms raised against it. The acquaint newspaper takes stock of the province of New Keynesian economics past times reviewing about of its mind insights in addition to past times providing an overview of about recent developments. In particular, I verbalize over about recent move on 2 real active enquiry programs: the implications of the nothing lower saltation on nominal involvement rates in addition to the interaction of monetary policy in addition to position heterogeneity. Finally, I verbalize over what I catch equally about of the mind shortcomings of the New Keynesian model in addition to possible areas for futurity research.
Full-Text Access | Supplementary Materials
"On DSGE Models," by Lawrence J. Christiano, Martin S. Eichenbaum in addition to Mathias Trabandt
The final result of whatever of import macroeconomic policy alter is the cyberspace effect of forces operating on dissimilar parts of the economy. H5N1 key challenge facing policymakers is how to assess the relative strength of those forces. Economists receive got a attain of tools that tin last used to brand such assessments. Dynamic stochastic full general equilibrium (DSGE) models are the leading tool for making such assessments inwards an opened upwards in addition to transparent manner. We review the province of mainstream DSGE models earlier the financial crisis in addition to the Great Recession. We in addition to so depict how DSGE models are estimated in addition to evaluated. We address the inquiry of why DSGE modelers—like most other economists in addition to policymakers—failed to predict the financial crisis in addition to the Great Recession, in addition to how DSGE modelers responded to the financial crisis in addition to its aftermath. We verbalize over how electrical flow DSGE models are truly used past times policymakers. We in addition to so provide a brief response to about criticisms of DSGE models, amongst special emphasis on criticism past times Joseph Stiglitz, in addition to offering about final remarks.
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"Evolution of Modern Business Cycle Models: Accounting for the Great Recession," Patrick J. Kehoe, Virgiliu Midrigan in addition to Elena Pastorino
Modern business organisation bike 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 verbalize over how these modern business organisation bike models receive got evolved across 3 generations, from their roots inwards the early on existent business organisation bike models of the slow 1970s through the turmoil of the Great Recession 4 decades later. The outset generation models were existent (that is, without a monetary sector) business organisation bike models that primarily explored whether a pocket-sized number of shocks, oftentimes 1 or two, could generate fluctuations similar to those observed inwards aggregate variables such equally output, consumption, investment, in addition to hours. These basic models disciplined their key parameters amongst micro prove in addition to were remarkably successful inwards matching these aggregate variables. H5N1 2nd generation of these models incorporated frictions such equally pasty prices in addition to wages; these models were primarily developed to last used inwards key banks for short-term forecasting purposes in addition to for performing counterfactual policy experiments. H5N1 tertiary generation of business organisation bike models comprise the rich heterogeneity of patterns from the micro data. H5N1 defining characteristic of these models is non the heterogeneity amid model agents they conform nor the micro-level prove they rely on (although both are common), but rather the insistence that whatever novel parameters or characteristic included last explicitly disciplined past times straight evidence. We exhibit how 2 versions of this latest generation of modern business organisation bike models, which are existent business organisation bike models amongst frictions inwards labor in addition to financial markets, tin account, respectively, for the aggregate in addition to the cross-regional fluctuations observed inwards the US during the Great Recession.
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"Microeconomic Heterogeneity in addition to Macroeconomic Shocks," by Greg Kaplan in addition to Giovanni L. Violante
In this essay, nosotros verbalize over the emerging literature inwards macroeconomics that combines heterogeneous agent models, nominal rigidities, in addition to aggregate shocks. This literature opens the door to the analysis of distributional issues, economical fluctuations, in addition to stabilization policies—all inside the same framework. In response to the limitations of the instance agent approach to economical fluctuations, a novel framework has emerged that combines key features of heterogeneous agents (HA) in addition to New Keynesian (NK) economies. These HANK models offering a much to a greater extent than accurate representation of position consumption deportment in addition to tin generate realistic distributions of income, wealth, and, albeit to a lesser degree, position residual sheets. At the same time, they tin conform 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 in addition to aggregate dynamics. In this article, nosotros outline a state-of-the-art version of HANK together amongst its instance agent counterpart, in addition to bring 2 broad messages near the role of position heterogeneity for the response of the macroeconomy to aggregate shocks: 1) the similarity betwixt the Representative Agent New Keynesian (RANK) in addition to HANK frameworks depends crucially on the stupor existence analyzed; in addition to 2) sure enough of import macroeconomic questions concerning economical fluctuations tin exclusively last addressed inside heterogeneous agent models.
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Symposium: Incentives inwards the Workplace
"Compensation in addition to Incentives inwards the Workplace," past times Edward P. Lazear
Labor is supplied because most of us must move 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 impact deportment in addition to that economics equally a scientific discipline has made proficient progress inwards specifying how compensation in addition to its cast influences worker effort. This is a broad topic, in addition to the role hither is non a comprehensive literature review on each of many topics. Instead, a sample of about of the most applicable papers are discussed amongst the destination of demonstrating that compensation, incentives, in addition to productivity are inseparably linked.
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"Nonmonetary Incentives in addition to the Implications of Work equally a Source of Meaning," by Lea Cassar in addition to Stephan Meier
Empirical enquiry inwards economics has begun to explore the thought that workers attention near nonmonetary aspects of work. An increasing number of economical studies using survey in addition to experimental methods receive got shown that nonmonetary incentives in addition to nonpecuniary aspects of one's task receive got substantial impacts on task satisfaction, productivity, in addition to labor supply. By drawing on this prove in addition to relating it to the literature inwards psychology, this newspaper argues that move represents much to a greater extent than than exactly earning an income: for many people, move is a source of meaning. In the adjacent section, nosotros give an economical interpretation of meaningful move in addition to emphasize how it is affected past times the mission of the organisation in addition to the extent to which task blueprint fulfills the 3 psychological needs at the solid set down of self-determination theory: autonomy, competence, in addition to relatedness. We quest to the prove that non everyone cares near having a meaningful task in addition to verbalize over potential sources of this heterogeneity. We sketch a theoretical framework to start to formalize move equally a source of important in addition to shout out upwards near how to comprise this thought into way theory in addition to labor provide models. We verbalize over how workers' search for important may impact the blueprint of monetary in addition to nonmonetary incentives. We conclude past times suggesting about insights in addition to opened upwards questions for futurity research.
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"The Changing (Dis-)utility of Work," past times Greg Kaplan in addition to Sam Schulhofer-Wohl
We study how changes inwards the distribution of occupations receive got affected the aggregate non-pecuniary costs in addition to benefits of working. The physical toll of move is less straight off than inwards 1950, amongst workers shifting away from occupations inwards which people study experiencing tiredness in addition to pain. The emotional consequences of the changing business distribution vary substantially across demographic groups. Work has move happier in addition to to a greater extent than meaningful for women, but to a greater extent than stressful in addition to less meaningful for men. These changes look to last concentrated at lower pedagogy levels.
Full-Text Access | Supplementary Materials
Individual Articles
"Social Connectedness: Measurement, Determinants, in addition to Effects," by Michael Bailey, Rachel Cao, Theresa Kuchler, Johannes Stroebel in addition to Arlene Wong
Social networks tin shape many aspects of social in addition to economical activity: migration in addition to trade, job-seeking, innovation, consumer preferences in addition to sentiment, populace health, social mobility, in addition to more. In turn, social networks themselves are associated amongst geographic proximity, historical ties, political boundaries, in addition to other factors. Traditionally, the unavailability of large-scale in addition to instance information on social connector 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 connector from online social networking services such equally Facebook, LinkedIn, in addition to Twitter. To date, most of these enquiry projects receive got been built on anonymized administrative microdata from Facebook, typically past times working amongst coauthor teams that include Facebook employees. However, at that spot is an inherent bound to the number of researchers that volition last able to move amongst social network information through such collaborations. In this paper, nosotros thus innovate a novel mensurate of social connector 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, in addition to betwixt every US county in addition to every unusual country. Given Facebook's scale equally good equally 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 respond questions like: What does monetary policy do? How large are the effects of financial stimulus? What caused the Great Recession? Why do about countries grow faster than others? Identification of causal effects plays 2 roles inwards this process. In sure enough cases, progress tin last made using the straight approach of identifying plausibly exogenous variation inwards a policy in addition to using this variation to assess the effect of the policy. However, external validity concerns bound what tin last learned inwards this way. Carefully identified causal effects estimates tin also last used equally moments inwards a structural 2nd matching exercise. We job the term "identified moments" equally a short-hand for "estimates of responses to identified structural shocks," or what applied microeconomists would telephone band "causal effects." We scrap that such identified moments are oftentimes powerful diagnostic tools for distinguishing betwixt of import classes of models (and thereby learning near the effects of policy). To illustrate these notions nosotros verbalize over the growing job of cross-sectional prove inwards macroeconomics in addition to consider what the best existing prove 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 upwards to last 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, in addition to 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, in addition to inwards policy modeling. In fact, 1 tin scrap that over the past times 10 years the ambit of New Keynesian economics has kept widening, past times encompassing a growing number of phenomena that are analyzed using its basic framework, equally good equally past times addressing about of the criticisms raised against it. The acquaint newspaper takes stock of the province of New Keynesian economics past times reviewing about of its mind insights in addition to past times providing an overview of about recent developments. In particular, I verbalize over about recent move on 2 real active enquiry programs: the implications of the nothing lower saltation on nominal involvement rates in addition to the interaction of monetary policy in addition to position heterogeneity. Finally, I verbalize over what I catch equally about of the mind shortcomings of the New Keynesian model in addition to possible areas for futurity research.
Full-Text Access | Supplementary Materials
"On DSGE Models," by Lawrence J. Christiano, Martin S. Eichenbaum in addition to Mathias Trabandt
The final result of whatever of import macroeconomic policy alter is the cyberspace effect of forces operating on dissimilar parts of the economy. H5N1 key challenge facing policymakers is how to assess the relative strength of those forces. Economists receive got a attain of tools that tin last used to brand such assessments. Dynamic stochastic full general equilibrium (DSGE) models are the leading tool for making such assessments inwards an opened upwards in addition to transparent manner. We review the province of mainstream DSGE models earlier the financial crisis in addition to the Great Recession. We in addition to so depict how DSGE models are estimated in addition to evaluated. We address the inquiry of why DSGE modelers—like most other economists in addition to policymakers—failed to predict the financial crisis in addition to the Great Recession, in addition to how DSGE modelers responded to the financial crisis in addition to its aftermath. We verbalize over how electrical flow DSGE models are truly used past times policymakers. We in addition to so provide a brief response to about criticisms of DSGE models, amongst special emphasis on criticism past times Joseph Stiglitz, in addition to offering about final remarks.
Full-Text Access | Supplementary Materials
"Evolution of Modern Business Cycle Models: Accounting for the Great Recession," Patrick J. Kehoe, Virgiliu Midrigan in addition to Elena Pastorino
Modern business organisation bike 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 verbalize over how these modern business organisation bike models receive got evolved across 3 generations, from their roots inwards the early on existent business organisation bike models of the slow 1970s through the turmoil of the Great Recession 4 decades later. The outset generation models were existent (that is, without a monetary sector) business organisation bike models that primarily explored whether a pocket-sized number of shocks, oftentimes 1 or two, could generate fluctuations similar to those observed inwards aggregate variables such equally output, consumption, investment, in addition to hours. These basic models disciplined their key parameters amongst micro prove in addition to were remarkably successful inwards matching these aggregate variables. H5N1 2nd generation of these models incorporated frictions such equally pasty prices in addition to wages; these models were primarily developed to last used inwards key banks for short-term forecasting purposes in addition to for performing counterfactual policy experiments. H5N1 tertiary generation of business organisation bike models comprise the rich heterogeneity of patterns from the micro data. H5N1 defining characteristic of these models is non the heterogeneity amid model agents they conform nor the micro-level prove they rely on (although both are common), but rather the insistence that whatever novel parameters or characteristic included last explicitly disciplined past times straight evidence. We exhibit how 2 versions of this latest generation of modern business organisation bike models, which are existent business organisation bike models amongst frictions inwards labor in addition to financial markets, tin account, respectively, for the aggregate in addition to the cross-regional fluctuations observed inwards the US during the Great Recession.
Full-Text Access | Supplementary Materials
"Microeconomic Heterogeneity in addition to Macroeconomic Shocks," by Greg Kaplan in addition to Giovanni L. Violante
In this essay, nosotros verbalize over the emerging literature inwards macroeconomics that combines heterogeneous agent models, nominal rigidities, in addition to aggregate shocks. This literature opens the door to the analysis of distributional issues, economical fluctuations, in addition to stabilization policies—all inside the same framework. In response to the limitations of the instance agent approach to economical fluctuations, a novel framework has emerged that combines key features of heterogeneous agents (HA) in addition to New Keynesian (NK) economies. These HANK models offering a much to a greater extent than accurate representation of position consumption deportment in addition to tin generate realistic distributions of income, wealth, and, albeit to a lesser degree, position residual sheets. At the same time, they tin conform 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 in addition to aggregate dynamics. In this article, nosotros outline a state-of-the-art version of HANK together amongst its instance agent counterpart, in addition to bring 2 broad messages near the role of position heterogeneity for the response of the macroeconomy to aggregate shocks: 1) the similarity betwixt the Representative Agent New Keynesian (RANK) in addition to HANK frameworks depends crucially on the stupor existence analyzed; in addition to 2) sure enough of import macroeconomic questions concerning economical fluctuations tin exclusively last addressed inside heterogeneous agent models.
Full-Text Access | Supplementary Materials
Symposium: Incentives inwards the Workplace
"Compensation in addition to Incentives inwards the Workplace," past times Edward P. Lazear
Labor is supplied because most of us must move 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 impact deportment in addition to that economics equally a scientific discipline has made proficient progress inwards specifying how compensation in addition to its cast influences worker effort. This is a broad topic, in addition to the role hither is non a comprehensive literature review on each of many topics. Instead, a sample of about of the most applicable papers are discussed amongst the destination of demonstrating that compensation, incentives, in addition to productivity are inseparably linked.
Full-Text Access | Supplementary Materials
"Nonmonetary Incentives in addition to the Implications of Work equally a Source of Meaning," by Lea Cassar in addition to Stephan Meier
Empirical enquiry inwards economics has begun to explore the thought that workers attention near nonmonetary aspects of work. An increasing number of economical studies using survey in addition to experimental methods receive got shown that nonmonetary incentives in addition to nonpecuniary aspects of one's task receive got substantial impacts on task satisfaction, productivity, in addition to labor supply. By drawing on this prove in addition to relating it to the literature inwards psychology, this newspaper argues that move represents much to a greater extent than than exactly earning an income: for many people, move is a source of meaning. In the adjacent section, nosotros give an economical interpretation of meaningful move in addition to emphasize how it is affected past times the mission of the organisation in addition to the extent to which task blueprint fulfills the 3 psychological needs at the solid set down of self-determination theory: autonomy, competence, in addition to relatedness. We quest to the prove that non everyone cares near having a meaningful task in addition to verbalize over potential sources of this heterogeneity. We sketch a theoretical framework to start to formalize move equally a source of important in addition to shout out upwards near how to comprise this thought into way theory in addition to labor provide models. We verbalize over how workers' search for important may impact the blueprint of monetary in addition to nonmonetary incentives. We conclude past times suggesting about insights in addition to opened upwards questions for futurity research.
Full-Text Access | Supplementary Materials
"The Changing (Dis-)utility of Work," past times Greg Kaplan in addition to Sam Schulhofer-Wohl
We study how changes inwards the distribution of occupations receive got affected the aggregate non-pecuniary costs in addition to benefits of working. The physical toll of move is less straight off than inwards 1950, amongst workers shifting away from occupations inwards which people study experiencing tiredness in addition to pain. The emotional consequences of the changing business distribution vary substantially across demographic groups. Work has move happier in addition to to a greater extent than meaningful for women, but to a greater extent than stressful in addition to less meaningful for men. These changes look to last concentrated at lower pedagogy levels.
Full-Text Access | Supplementary Materials
Individual Articles
"Social Connectedness: Measurement, Determinants, in addition to Effects," by Michael Bailey, Rachel Cao, Theresa Kuchler, Johannes Stroebel in addition to Arlene Wong
Social networks tin shape many aspects of social in addition to economical activity: migration in addition to trade, job-seeking, innovation, consumer preferences in addition to sentiment, populace health, social mobility, in addition to more. In turn, social networks themselves are associated amongst geographic proximity, historical ties, political boundaries, in addition to other factors. Traditionally, the unavailability of large-scale in addition to instance information on social connector 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 connector from online social networking services such equally Facebook, LinkedIn, in addition to Twitter. To date, most of these enquiry projects receive got been built on anonymized administrative microdata from Facebook, typically past times working amongst coauthor teams that include Facebook employees. However, at that spot is an inherent bound to the number of researchers that volition last able to move amongst social network information through such collaborations. In this paper, nosotros thus innovate a novel mensurate of social connector 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, in addition to betwixt every US county in addition to every unusual country. Given Facebook's scale equally good equally 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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