2 edition of Policy uncertainty, persistence and growth found in the catalog.
Policy uncertainty, persistence and growth
|Statement||Joshua Aizenman, Nancy Marion.|
|Series||NBER working papers series -- working paper no. 3848, Working paper series (National Bureau of Economic Research) -- working paper no. 3848.|
|Contributions||Marion, Nancy Peregrim., National Bureau of Economic Research.|
|The Physical Object|
|Pagination||31,  p. :|
|Number of Pages||31|
Of course, strong economic conditions are a good thing! Most fundamentally, our discussions of the pervasive uncertainty that we face as policymakers is a powerful reminder of the need for humility about our ability to forecast and manage the future course of the economy. As a result, consistent with the policy implication of Bill's model, the Federal Reserve like most other central banks today uses the overnight interbank rate as the principal operating target of monetary policy. However, an unknown risk does not have a known distribution of expected probabilities. How reliable are these estimates?
From to Bill was an economist on the staff of the Board's Division of Research and Statistics. Lucas, Robert Jr. Policies such as capital account openness and accumulation of foreign exchange reserves tend not to mitigate the impact of policy uncertainty shocks on portfolio inflows into EMEs. By how much is an open question and an active area of research. In contrast, Robert Lucas and others reached more dramatic conclusions, arguing that only unpredictable movements in monetary policy can affect the real economy and concluding that policy has no capacity to smooth the business cycle Lucas, ; Sargent and Wallace, We also find that firms in the defense, health care, and financial sectors are especially responsive to their own category-specific EPU measures, confirming the information value of these measures and providing additional evidence of policy uncertainty effects.
Evidence shows that the average frequency of price changes is relatively shorter in the high inflation regime than in the low regime. Other changes in the workforce since the late s seem less likely to have much affected the natural rate of unemployment. Specification, estimation and evaluation of smooth transition autoregressive models. Our index reflects the frequency of articles in 10 leading U. Return to text Last Update: June 20, The concept was tested by comparing the newspaper data to similar methodologies using the Fed's Beige Book reportsthe risk factors listed in company earnings reports and the CBOE Volatility Index.
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Uncertainty about the structure of the economy also received attention during that decade. To address these concerns, we evaluate our EPU index in several ways. These decisions naturally affect the firm's profits. Money demand relationships were relatively stable through the s and s, but, in the wake of dramatic innovations in banking and financial markets, short-term money-demand relationships became less predictable, at least in the United States.
Increased uncertainty arising from macro-level factors, then, can become an important factor for business investment and, thus, for the economy. Category-specific shocks and policy initiatives are clearly visible.
Regime uncertainty[ edit ] A related concept developed by Robert Higgs regime uncertainty is about more than the government's laws, regulations, and administrative decisions. These studies also show why central bank communications is a key component of monetary policy; in a world of uncertainty, informing the public about the central bank's objectives, plans, and outlook can affect behavior and macroeconomic outcomes Bernanke, ; and Orphanides and Williams, Please note that corrections may take a couple of weeks to filter through the various RePEc services.
Stock, and Mark W.
A historical comparison Because we have so little experience with very low unemployment, it is interesting to compare today's labor market with that earlier period.
The discrepancy between the human and computer-generated indices is uncorrelated with GDP growth rates and with the level of economic policy uncertainty. Google Scholar Copyright information. The U. Sargent, Thomas J. More services and features. Working under our close supervision, teams of University of Chicago students underwent a training process and then carefully read overlapping sets of articles, guided by a page reference manual and weekly team meetings.
For example, the Economic Report of the President from defined potential output as occurring when the unemployment rate is 4 percent.
But how significant is this precedent for today? However, the reduced price flexibility in the low inflation regime magnifies the household consumption growth increase due to expansionary monetary policy shocks.
Louis, so he is now approaching the completion of his second decade in the System. Second, what would be the consequences for inflation if unemployment were to run well below the natural rate for an extended period?
You can help correct errors and omissions. Growth is meaningfully above most estimates of its long-term trend--though admittedly, that trend is not as strong as we would like it to be. Dynamic-factor models, for example, provide a systematic approach to extracting information from real-time data at very high frequencies.
Princeton: Princeton University Press.
There is a high correlation between our human- and computer-generated indices 0. Firms like BlackRock have used the concept to construct their own in-house indexes, Davis said.(1) Policy uncertainty implies that there is a greater array of both threats and opportunities for affected firms (Kim, Pantzalis, and Park, ).
We proxy policy uncertainty here by the number of bills that have the potential to affect a firm's future business landscape. Economic policy uncertainty influences the dynamics in the lending rate margins, inflation expectations, credit, pass-through of the repo rate to bank lending rates and companies’ cash holdings.
The trade-off between output and inflation and output growth persistence vary with inflation regimes. We examine the effect of economic policy uncertainty on the relation between investment and the cost of capital.
Using the news-based index developed by Baker et al. () for twenty-one countries, we find that the strength of the negative relation between investment and the cost of capital decreases during times of high economic policy hildebrandsguld.com by: This study examines the effect of policy uncertainty on corporate debt maturity structure.
We find that elevated levels of policy uncertainty lead firms to shorten debt maturity, indicating that firms become more cautious to committing to long-term debt obligations and is suggestive of increased risk aversion during high policy uncertainty hildebrandsguld.com by: 1.
charts the evolution of US economic policy uncertainty sinceit is now close to its all-time high (see Figure 1). This policy uncertainty is a key factor stalling the recovery and threatening a return to recession. We construct our index of policy uncertainty by combining three types of information: the frequency of newspaper.
Downloadable! This paper explores links between policy uncertainty and growth. It provides evidence on the correlation between policy uncertainty and per capita real GDP for 46 developing countries over the period.
Cross-section regressions on growth suggest that after accounting for standard variables from the endogenous growth literature, policy uncertainty and growth are correlated.