Milton Friedman's presidential address, “The Role of Monetary Policy,” which was delivered 50 years ago in December 1967 and published in the March 1968 issue of the American Economic Review, is ...unusual in the outsized role it has played. What explains the huge influence of this work, merely 17 pages in length? One factor is that Friedman addresses an important topic. Another is that it is written in simple, clear prose, making it an ideal addition to the reading lists of many courses. But what distinguishes Friedman's address is that it invites readers to reorient their thinking in a fundamental way. It was an invitation that, after hearing the arguments, many readers chose to accept. Indeed, it is no exaggeration to view Friedman's 1967 AEA presidential address as marking a turning point in the history of macroeconomic research. Our goal here is to assess this contribution, with the benefit of a half-century of hindsight. We discuss where macroeconomics was before the address, what insights Friedman offered, where researchers and central bankers stand today on these issues, and (most speculatively) where we may be heading in the future.
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CEKLJ, IZUM, KILJ, NUK, ODKLJ, PILJ, SAZU, UL, UM, UPUK
•Determinants of the attention dedicated to the forecasts of macroeconomic indicators.•Measures of attention based on: “active participation” and “update forecasts”•Routines, incentives, risk, and ...information releases affect attention.•Inflation is the macroeconomic indicator that attracts more attention.
This article analyzes the daily determinants of the degree of attention dedicated to the forecasts of three macroeconomic indicators: inflation, exchange rate, and output growth. Based on micro-data of expectations provided by the Central Bank of Brazil, we calculated two measures of the degree of attention: “active participation” and “update forecasts”. In addition, we present various stylized facts and perform several regressions that explain the daily degree of attention dedicated to forecasts taking into account: routine and horizons, incentives, risk, and information release events. The findings show that the main aspects that can increase the attention are: routines, incentive events, and releases of direct information regarding the macroeconomic indicator under consideration. Moreover, information concerning monetary policy decisions increases the degree of attention.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
The 800 pound gorilla in the room of macroeconomics is the question of why the overlapping generations model didn't become the central workhorse model for macroeconomics, as opposed to the ...neoclassical growth model. The authors here explore the co-evolution of the two models.
This paper performs the nowcasting of GDP growth rate and inflation expectation in China with traditional macroeconomic and novel textual data estimated by the latent Dirichlet allocation (LDA) ...model. We combine the MIDAS model with various machine learning techniques to handle the mixed-frequency and high-dimensional problems. Our empirical findings are threefold. First, we collected 866234 articles published over 20 years of Chinese economic newspapers. We systemically decomposed the textual data into news attention time series, which provide narrative descriptions of the economic and social conditions. Second, news attention data can provide similar or even better precision for nowcast, especially for inflation expectation compared with traditional macroeconomic data. Random forest delivers the most accurate forecast among the three machine learning methods, even for longer horizons. Thirdly, the most informative predictors for the nowcast align with existing literature, and news attention variables provide narrative realism for the forecast targets.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This paper presents a method for creating machine learning models, specifically a gradient boosting model and a random forest model, to forecast real GDP growth. This study focuses on the real GDP ...growth of Japan and produces forecasts for the years from 2001 to 2018. The forecasts by the International Monetary Fund and Bank of Japan are used as benchmarks. To improve out-of-sample prediction, the cross-validation process, which is designed to choose the optimal hyperparameters, is used. The accuracy of the forecast is measured by mean absolute percentage error and root squared mean error. The results of this paper show that for the 2001–2018 period, the forecasts by the gradient boosting model and random forest model are more accurate than the benchmark forecasts. Between the gradient boosting and random forest models, the gradient boosting model turns out to be more accurate. This study encourages increasing the use of machine learning models in macroeconomic forecasting.
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CEKLJ, EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, KILJ, KISLJ, MFDPS, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
36.
The Macroeconomics of the Greek Depression Chodorow-Reich, Gabriel; Karabarbounis, Loukas; Kekre, Rohan
The American economic review,
09/2023, Volume:
113, Issue:
9
Journal Article
Peer reviewed
Open access
Greece experienced a boom until 2007, followed by a collapse of unprecedented magnitude and persistence. We assess the sources of the boom and the bust, using a rich estimated dynamic general ...equilibrium model. External demand and government consumption fueled the boom in production, whereas transfers fueled the boom in consumption. Different from the standard narrative, wages and prices declined substantially during the bust. Tax policy accounts for the largest fraction of the bust in production, whereas uninsurable risk accounts for the bust in consumption and wages. We assess how the composition of fiscal adjustment and bailouts affected the crisis. (JEL E21, E23, E24, E32, E62, F41, H20)
We find a significant positive relation between changes in policy uncertainty and changes in credit spreads. Macroeconomic conditions, including general uncertainty, do not explain this result, which ...also holds when we use instrumental variables to address endogeneity issues. The impact of policy uncertainty is greater for firms that operate in regulation-intensive industries, face high tax rates, or are dependent on government spending. It is also stronger for firms that engage in political activities or rely on external financing. We conclude that policy uncertainty has a significant effect on firms’ borrowing costs, with exposure to government policies representing an important channel.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This paper investigates the macroeconomic impact of uncertainty by using three recently constructed US economic uncertainty proxies. Emphasis is placed on examining the informational value of these ...indicators and their ability to better predict economic activity. We focus on the direct and/or indirect transmission chains of economic uncertainty on US macroeconomic aggregates, the magnitude of the forecast improvement induced by economic uncertainty and the strength of the observed dynamic relations. Our results show that macroeconomic uncertainty can help in forecasting key macroeconomic aggregates across multiple horizons, and this predictive power is economically and statistically significant. The two macroeconomic uncertainty measures anticipate industrial production and consumption directly, and investment and employment indirectly, with a time-delay. The transmission chains for investment include consumption and the stock market as intermediate variables, and for employment consumption and investment. No substantial evidence of feedback effects from real activity to macroeconomic uncertainty is found. Moreover, asymmetry in macroeconomic uncertainty is found to be important. Upside and downside uncertainty produce significant macroeconomic effects, yet downside uncertainty produces the strongest impact. Results from a “news-based” economic policy uncertainty measure are weaker.
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