The rise in inequality after pandemics: Can fiscal support play a mitigating role?

Major epidemics of the last two decades (SARS, H1N1, MERS, Ebola, and Zika) have been followed by increases in inequality [Furceri et al. (2020), COVID Economics, 12, 138-157]. In this article, we show that the extent of fiscal consolidation in the years following the onset of these pandemics has played an important role in determining the extent of the increase in inequality. Episodes marked by extreme austerity - measured using either the government's fiscal balance, health expenditures, or redistribution - have been associated with an increase in the Gini measure of inequality three times as large as in episodes where fiscal policy has been more supportive. We survey the evidence thus far on the distributional impacts of the COVID-19 pandemic, which suggests that inequality is likely to increase in the absence of strong policy actions. We review the case made by many observers [IMF (2020), Fiscal Monitor; Stiglitz (2020), Finance & Development, Fall 2020; Sandbu (2020b), Financial Times, 26 November 2020)] that fiscal support should not be withdrawn prematurely despite understandable concerns about high public debt-to-GDP ratios

Capital mobility and the output-inflation tradeoff

Identifying determinants of the output-inflation tradeoff has been a key issue in business cycle research. We provide evidence that in countries with greater restrictions on capital mobility, a given reduction in the inflation rate is associated with a smaller loss in output. This result is shown to be consistent with the predictions of a version of the Mundell-Fleming model. Restrictions on capital mobility are measured using the IMF's Annual Report on Exchange Rate Arrangements and Exchange Restrictions. Estimates of the output-inflation tradeoff are taken from previous studies (viz., Lucas [Am. Econ. Rev. 63 (1973)] and Ball, Mankies and Romer 19 (1988)). © 2001 Elsevier Science B.V. All rights reserved.preprin

Conference on Housing, Stability, and the Macroeconomy: International Perspectives

This article provides an introduction to the JMCB special issue on housing bubbles, the global financial crisis, and the ensuing recessions in countries that experienced housing busts. We focus on five themes that are important for policymakers and researchers alike: the domestic and international factors driving housing booms and busts, the relevance of the housing sector for the real economy, how monetary policy should react to housing booms and busts, how housing and mortgage finance reform could affect financial stability, and the broad lessons learned for macroeconomics and macroprudential policy

Truth or precision? Some reflections on the economists’ failure to predict the financial crisis

The failure of professional economic forecasters to predict the financial crises has led many to question the credibility of modern economics as a reliable foundation for economic policy. If economists were unable to foresee so big a crisis, how can they be trusted to cure or prevent it? Several accounts of this failure exist. The paper offers a tentative answer based on the lessons that may be drawn from the wisdom of a short list of past and present economists: Hayek, Neville Keynes, Mankiw, Tinbergen, Maynard Keynes and Lucas. The glue to keep such an odd bunch together is the distinction between truth and precision provided by science historian Ted Porter

Is time-variant information stickiness state-dependent?

This paper estimates information stickiness with regard to inflation expectations in the United States and the Eurozone for the 1981/06–2015/12 and 1998/Q4–2015/Q2 periods, respectively, and further investigates whether such information stickiness is state- dependent. Based on a bootstrap sub-sample rolling-window estimation, we find that information stickiness varies over time, which contradicts the strict time dependency implied under sticky-information theory. We provide evidence that information stickiness depends on inflation volatility, which indicates that information stickiness is state-dependent and that it has a time trend. Using a threshold model, we estimate structural changes in the state- dependence and time-trend of information stickiness. The results show that information stickiness has been more dependent on inflation volatility and has had a higher time-trend in both regions following the 2008 financial crisis.info:eu-repo/semantics/publishedVersio