Dynamic Scoring in a Romer-style Economy

This paper explores the dynamic behavior of a Romer-style endogenous growth model, analyzing how changes in tax rates affect government revenue in the short run and the long run. I show that in this environment lowering taxes on financial income is unlikely to stimulate tax revenue in the long run and has modest effects on the tax base, contrary to some other studies of the dynamic response of revenue to tax rates. Calibrations of the model that suggest Laffer curve effects can be substantial require implausibly low values for the elasticity of substitution between varieties of intermediate goods. For more plausible parameter values, I find that around 20% of a tax cut would be self-financing due to an expansion in the tax base.

Commodity Price Responses to Monetary Policy Surprises

Commodity prices are important both as a source of shocks and for the propagation of shocks originating elsewhere in the economy. Many vector autoregression (VAR) studies estimate a gradual response of commodity prices to monetary policy shocks. Exploiting information in high-frequency financial market data, and using the methods of Rigobon and Sack (2004) I find that a 10 basis point surprise change in interest rates causes commodity prices to fall immediately by about 0.5%. This is about two-thirds of the estimated response of the S&P500, and about five times larger than the response in a VAR 12 months after the shock. Metals prices tend to respond more than agricultural commodities. The point estimate for oil prices is similar to other commodities, but is estimated imprecisely.

Commodity Price Responses to Monetary Policy Surprises

Commodity prices are important both as a source of shocks and for the propagation of shocks originating elsewhere in the economy. Many vector autoregression (VAR) studies estimate a gradual response of commodity prices to monetary policy shocks. Exploiting information in high-frequency financial market data, and using the methods of Rigobon and Sack (2004) I find that a 10 basis point surprise change in interest rates causes commodity prices to fall immediately by about 0.5%. This is about two-thirds of the estimated response of the S&P500, and about five times larger than the response in a VAR 12 months after the shock. Metals prices tend to respond more than agricultural commodities. The point estimate for oil prices is similar to other commodities, but is estimated imprecisely

ECON 252

This class provides a survey of questions and models in macroeconomics, including long-run features of the economy, short-run fluctuations, and international aspects of the macroeconomy, plus the current macroeconomic situation and outlook

ECON 386

This class examines fundamental questions about why economies grow over time, and why some countries are so much more productive than others. It provides a theoretical framework for thinking about economic growth, discusses a variety of empirical studies on the subject, and explores economic policies directed at growth. Students will 1. become more familiar with facts about long-run economic changes and the large variations across countries 2. practise giving oral presentations 3. enhance their ability to appreciate and critique empirical analysis 4. gain command of issues central to policy debat

The Steady-State Growth Theorem: A Comment on Uzawa (1961)

This brief note revisits the proof of the Steady-State Growth Theorem, first provided by Uzawa (1961). We provide a clear statement of the theorem and a new version of Uzawa's proof that makes the intuition underlying the result more apparent.

Health Consequences of Easier Access to Alcohol: New Zealand Evidence

We evaluate the health effects of a reduction in New Zealand\u27s minimum legal purchase age for alcohol. Difference-in-differences (DD) estimates show a substantial increase in alcohol-related hospitalizations among those newly eligible to purchase liquor, around 24.6% (s.e.=5.5%) for males and 22% (s.e.=8.1%) for females. There is less evidence of an effect among ineligible younger cohorts. There is little evidence of alcohol either complementing or substituting for drugs. We do not find evidence that earlier access to alcohol is associated with learning from experience. We also present regression discontinuity estimates, but emphasize DD estimates since in a simulation of a rational addiction model DD estimates are closer than regression discontinuity estimates to the policy\u27s true effect

Dynamic Scoring in a Romer-style Economy

This paper analyzes how changes in tax rates affect government revenue in a Romer-style endogenous growth model. Lower tax rates on financial income (returns to physical capital and intellectual property) do increase the tax base in this environment, but not enough to expand revenue from this tax alone. Lower financial income taxes stimulate innovation and enhance labor productivity in the long run. For plausible parameter values, this generates higher overall tax revenue for the government in response to a reduction in the financial income tax rate. The analysis reveals the dynamics of the economy to be very sluggish and for some variables non-monotonic. Halflives for many variables are on the order of decades, rather than years

Hot and Cold Seasons in the Housing Market: Comment

Using American Housing Survey data from 1999 only, Ngai and Tenreyro (2014) show households who move in the summer occupy their home for longer and have fewer and less costly renovations soon after purchase, pointing to superior match quality during the thicker summer market. However, applying the same methods to other years of the American Housing Survey eliminates or substantially weakens these results. Furthermore, Ngai and Tenreyro’s result on duration of occupancy is driven in part by the particular way Ngai and Tenreyro measure duration in years, rather than months

Exchange rate volatility and Currency Union: Some theory and New Zealand evidence

This paper considers the effect of currency union on exchange rate volatility. At a theoretical level, a simple framework is developed for thinking about volatility and exchange rate arrangements and some inferences are drawn from it. Empirically, the interaction between currency areas and exchange rate volatility is analysed by constructing counterfactual exchange rate series for the scenarios of currency union with Australia or with the United States from 1985 to 2001. We cannot confidently conclude that New Zealand's quarter-to-quarter exchange rate volatility would have been lower in a currency union with the United States or Australia. By contrast, cyclical variability in the New Zealand exchange rate has been greater over the last sixteen years than it would have been in a currency union with either Australia or the United States.