What are the effects of fiscal policy shocks? Mountford, Andrew; Uhlig, Harald
Journal of applied econometrics (Chichester, England),
September/October 2009, Letnik:
24, Številka:
6
Journal Article
Recenzirano
Odprti dostop
We propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions. Specifically, we use sign restrictions to identify a government revenue shock as well as a ...government spending shock, while controlling for a generic business cycle shock and a monetary policy shock. We explicitly allow for the possibility of announcement effects, i.e., that a current fiscal policy shock changes fiscal policy variables in the future, but not at present. We construct the impulse responses to three linear combinations of these fiscal shocks, corresponding to the three scenarios of deficit-spending, deficit-financed tax cuts and a balanced budget spending expansion. We apply the method to US quarterly data from 1955 to 2000. We find that deficit-financed tax cuts work best among these three scenarios to improve GDP, with a maximal present value multiplier of five dollars of total additional GDP per each dollar of the total cut in government revenue 5 years after the shock.
This paper proposes to estimate the effects of monetary policy shocks by a new agnostic method, imposing sign restrictions on the impulse responses of prices, nonborrowed reserves and the federal ...funds rate in response to a monetary policy shock. No restrictions are imposed on the response of real GDP to answer the key question in the title. I find that “contractionary” monetary policy shocks have no clear effect on real GDP, even though prices move only gradually in response to a monetary policy shock. Neutrality of monetary policy shocks is not inconsistent with the data.
Some simple bitcoin economics Schilling, Linda; Uhlig, Harald
Journal of monetary economics,
October 2019, 2019-10-00, Letnik:
106
Journal Article
Recenzirano
Odprti dostop
•We provide a model of an endowment economy with two competing, but intrinsically worthless currencies (Dollar, Bitcoin) serving as medium of exchange.•We show a fundamental pricing equation, which ...in its simplest form implies that Bitcoin prices form a martingale.•“Mutual impatience” rules out Bitcoin speculation. Price volatility does not invalidate the medium-of-exchange function.•The Bitcoin block rewards are not a tax on Bitcoin holders: they are financed with a Dollar tax.•We discuss monetary policy implications, Bitcoin production via the proof-of-work competition, taxation of Bitcoin production, welfare implications and entry of new cryptocurrencies. We characterize the range of equilibria and provides specific examples.
We provide a model of an endowment economy with two competing, but intrinsically worthless currencies (Dollar, Bitcoin). Dollars are supplied by a central bank to achieve its inflation target, while the Bitcoin supply grows deterministically. Our fundamental pricing equation implies in its simplest form that Bitcoin prices form a martingale. “Mutual impatience” implies absence of speculation. Price volatility therefore does not invalidate the medium-of-exchange function. Bitcoin block rewards are not a tax on Bitcoin holders: they are financed with a Dollar tax. We discuss monetary policy implications, Bitcoin production, taxation, welfare and entry, and characterize the range of equilibria.
This paper studies how the Hodrick-Prescott filter should be adjusted when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, ...demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the observation frequency ratios. This yields an HP parameter value of 6.25 for annual data given a value of 1600 for quarterly data. The relevance of the suggestion is illustrated empirically.
Some Fiscal Calculus Uhlig, Harald
The American economic review,
05/2010, Letnik:
100, Številka:
2
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This paper calculates fiscal multipliers in a baseline neoclassical growth model with endogenous labor supply and fiscal policy, allowing for government spending transfers, government debt, and ...distortionary taxes on labor and capital income. The policy experiments are conducted holding transfers, consumption taxes, and capital income fixed, i.e., changes in taxation require changes in distortionary labor tax. This paper argues that short run fiscal multipliers can be dramatically misleading. Typical fiscal stimulus debates concentrate on output effects and not on the consequences for overall welfare. This paper follows that practice. The results point to potentially drastic long term consequences of fiscal stimuli. These long term consequences ought to receive more and sufficient attention in the debates. Without their discussion, these debates appear to be severely incomplete.
Motivated by the recent European debt crisis, this paper investigates the scope for a bailout guarantee in a sovereign debt crisis. Defaults may arise from negative income shocks, government ...impatience or a “sunspot”-coordinated buyers strike. We introduce a bailout agency, and characterize the strategy with the minimal actuarially fair intervention which guarantees the no-buyers-strike fundamental equilibrium, relying on the market for residual financing. The intervention makes it cheaper for governments to borrow, inducing them borrow more, leaving default probabilities possibly rather unchanged. The maximal backstop will be pulled precisely when fundamentals worsen.
•An actuarially fair bailout agency may eliminate multiple equilibria.•The bailout agency does not need to incur losses in expectation.•The agency may need to potentially purchase nearly the entire debt issuances.•Overall, the policy leads to higher debt levels and small changes in default rates.•Defaults arise only from fundamental reasons, and the agency should not intervene.
On Digital Currencies Uhlig, Harald
Atlantic economic journal,
03/2024, Letnik:
52, Številka:
1
Journal Article
Recenzirano
I discuss private and central-bank-issued digital currencies, summarizing my prior research. I argue that prices of private digital currencies such as bitcoin follow random walks or, more generally, ...risk-adjusted martingales. For central bank digital currencies, I argue that they enhance the trilemma facing a central bank. Of the three objectives, price stability, efficiency, and monetary trust, the central bak can achieve at most two.
We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark medium-scale New Keynesian model, allowing for credit-constrained ...households, the zero lower bound, government capital, and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.53 and modestly negative long-run multipliers around −0.36. We compare and relate recent literature multiplier calculations to ours. We explain the central empirical findings with the help of a simple three equation New Keynesian model with sticky wages and credit-constrained households.
This paper is an overview from a personal perspective on the various ways Lucas has shaped today's economics in general and in terms of 'Chicago economics' in particular. In honor of the 50th ...anniversary of its publication, much focus is given to his 1972 neutrality paper and its impact. I discuss how the paper was a trigger of the subsequent emergence of rational expectations macroeconomics. Further, I touch upon his fundamental contributions to growth theory, asset pricing and the characteristic use of the Bellman equations. After covering these topics, the paper concludes with a portrayal of the Money and Banking Workshop to describe the environment that Lucas established at the Chicago department, and to illustrate his enduring influence on the culture of teaching and discussing macroeconomics at the University of Chicago.
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