Job Uncertainty and Deep Recessions

We study a model where households are subject to uninsurable unemployment risk, price setting is subject to nominal rigidities, and the labor market is characterized by matching frictions and inflexible wages. Higher risk of job loss and worsening job finding prospects during unemployment depress goods demand because of a precautionary savings motive. Lower goods demand reduces job vacancies and the job finding rate producing motion an amplification mechanism due to endogenous countercyclical income risk. Amplification derives from the combination of incomplete financial markets and frictional goods and labor markets. The model can account for key features of the Great Recession

The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar U.S. Housing Credit Policy

We document the portfolio activity of federal housing agencies and provide evidence on its impact on mortgage markets and the economy. Through a narrative analysis, we identify historical policy changes leading to expansions or contractions in agency mortgage holdings. Based on those regulatory events that we classify as unrelated to short-run cyclical or credit market shocks, we find that an increase in mortgage purchases by the agencies boosts mortgage lending, in particular refinancing, and lowers mortgage rates. Agency purchases also influence prices in other asset markets, stimulate residential investment, and expand homeownership. We compare these effects to those of conventional monetary policy shocks, and we provide evidence on the interactions between housing credit and monetary policies

The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States: Reply

In this reply to a comment by Jentsch and Lunsford, we show that the evidence for economic and statistically significant macroeconomic effects of tax changes in Mertens and Ravn (2013) remains present for a range of asymptotically valid inference methods

The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and on expenditure components

Growth and cycles of the Italian economy since 1861: the new evidence

Based on a newly-available large set of historical national accounts, the paper revisits the main features of economic growth and cycles in Italy for the post-Unification period 1861-2011. Alongside the structural changes in growth dynamics, the main sources of output and productivity growth are identified. As regards the analysis of the underlying cyclical component, a business cycle chronology is first established and then both the specific patterns of individual cycles and the co-movements of output with key macroeconomic variables are investigated. In the 150 years since its political Unification, Italy's economic growth was mainly propelled by consumption and investments, whereas on the supply side the industry and services sectors were by far the main contributors, also because of the positive effect of labour reallocation to nonfarm activities. Over the same period, Italy experienced approximately 20 business cycles of varying duration and amplitude. Output fluctuations were dominated by the short-term variability of agricultural production before World War II and by fluctuations of the industry sector thereafter. The cyclical behaviour exhibited by aggregate demand components conforms quite well to that evidenced in the standard international business cycle literature, although some exceptions arise in the pre-World War II years

The Incidence of New Vertebral Compression Fractures in Women after Kyphoplasty and Factors Involved

PURPOSE: To identify the incidence of new vertebral compression fractures in women after kyphoplasty and to analyze influential factors in these patients. MATERIALS AND METHODS: One hundred and eleven consecutive female patients with osteoporotic vertebral compression fractures (VCFs) underwent kyphoplasty at 137 levels. These patients were followed for 15.2 months postoperatively. For the survey of new vertebral compression fractures, medical records and x-rays were reviewed, and telephone interviews were conducted with all patients. RESULTS: During that time 20 (18%) patients developed new VCFs. The rate of occurrence of new VCFs in one year was 15.5% using a Kaplan-Meier curve. Body mass index (BMI), symptom duration and kyphoplasty level were the statistically significant factors between the patient groups both with and without new VCFs after kyphoplasty. In the comparison between the adjacent and remote new VCF groups, the adjacent new VCF group showed a larger amount of polymethyl methacrylate (PMMA) use during kyphoplasty (p<0.05). Before kyphoplasty, 9.9% of the patients had been prescribed medication for osteoporosis, and 93.7% of the patients started or continued medication after kyphoplasty. The development of new VCFs was affected by the number of vertebrae involved in the kyphoplasty. However, the lower incidence rate (15.5%) of new compression fractures might be due to a greater percentage (93.7% in our study) of patients taking anti-osteoporotic medication before and/or after kyphoplasty. CONCLUSION: When kyphoplasty is planned for the management of patients with osteoporotic VCFs, the application of a small amount of PMMA can be considered in order to lower the risk of new fractures in adjacent vertebrae. The postoperative use of anti- osteoporotic medication is recommended for the prevention of new VCFs.ope

On economic growth and minimum wages

We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a simple one-sector overlapping generations economy where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth, in the case of both homogeneous and heterogeneous (i.e., skilled and unskilled) labour. Assuming also the existence of unemployment benefits financed with consumption taxes not conditioned on age at a balanced budget, it is shown that minimum wages may stimulate economic growth and welfare despite the unemployment occurrence. Moreover, a growth-maximising minimum wage can exist. A straightforward message, therefore, is that a combination of minimum wage and unemployment benefit policies can appropriately be used to promote balanced growth and welfare

Fiscal Policy in an Expectations-Driven Liquidity Trap

We study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule. In a liquidity trap caused by a self-fulfilling state of low confidence, higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding. Instead, cuts in marginal labour tax rates are inflationary and become more expansionary when the zero lower bound is binding. These findings contradict a popular view, based on a liquidity trap caused by a fundamental shock such as a taste shock, that higher government spending is inflationary and can therefore be associated with large multipliers at the zero lower bound, while lower marginal tax rates are deflationary and therefore counterproductive