The Impact of Uncertainty Shocks on the UK Economy
The Impact of Uncertainty Shocks on the UK Economy

Author: MissStephanie Denis

Publisher: International Monetary Fund

Published: 2013-03-08

Total Pages: 46

ISBN-13: 161635562X

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This paper quantifies the economic impact of uncertainty shocks in the UK using data that span the recent Great Recession. We find that uncertainty shocks have a significant impact on economic activity in the UK, depressing industrial production and GDP. The peak impact is felt fairly quickly at around 6-12 months after the shock, and becomes statistically negligible after 18 months. Interestingly, the impact of uncertainty shocks on industrial production in the UK is strikingly similar to that of the US both in terms of the shape and magnitude of the response. However, unemployment in the UK is less affected by uncertainty shocks. Finally, we find that uncertainty shocks can account for about a quarter of the decline in industrial production during the Great Recession.

Alternative Economic Indicators
Alternative Economic Indicators

Author: C. James Hueng

Publisher: W.E. Upjohn Institute

Published: 2020-09-08

Total Pages: 133

ISBN-13: 0880996765

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Policymakers and business practitioners are eager to gain access to reliable information on the state of the economy for timely decision making. More so now than ever. Traditional economic indicators have been criticized for delayed reporting, out-of-date methodology, and neglecting some aspects of the economy. Recent advances in economic theory, econometrics, and information technology have fueled research in building broader, more accurate, and higher-frequency economic indicators. This volume contains contributions from a group of prominent economists who address alternative economic indicators, including indicators in the financial market, indicators for business cycles, and indicators of economic uncertainty.

Unequal We Stand
Unequal We Stand

Author: Jonathan Heathcote

Publisher: DIANE Publishing

Published: 2010-10

Total Pages: 61

ISBN-13: 1437934919

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The authors conducted a systematic empirical study of cross-sectional inequality in the U.S., integrating data from various surveys. The authors follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. They document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Charts and tables. This is a print-on-demand publication; it is not an original.

Fiscal Foresight and Information Flows
Fiscal Foresight and Information Flows

Author: Eric M. Leeper

Publisher: International Monetary Fund

Published: 2012-06-01

Total Pages: 65

ISBN-13: 1475558244

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News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non-fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows. Different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non-uniqueness problem endemic to moving average representations.

United Kingdom
United Kingdom

Author: International Monetary Fund. European Dept.

Publisher: International Monetary Fund

Published: 2016-06-16

Total Pages: 65

ISBN-13: 1475560400

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This paper aims to provide European Union (EU), while recognizing that the choice of whether to remain in the EU is for U.K. voters to make and that their decisions will reflect both economic and noneconomic factors. The question of EU membership is both a political and an economic issue, and the referendum has sparked a wide-ranging debate on the United Kingdom’s role in the EU. Given the range of plausible alternative arrangements with the EU, the number of channels by which countries could be affected and the range of possible effects on the United Kingdom and other economies are broad.

International Dimensions of Monetary Policy
International Dimensions of Monetary Policy

Author: Jordi Galí

Publisher: University of Chicago Press

Published: 2010-03-15

Total Pages: 663

ISBN-13: 0226278875

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United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.

United Kingdom
United Kingdom

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2012-07-19

Total Pages: 107

ISBN-13: 1475506465

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This 2012 Article IV Consultation reports that the United Kingdom's economic recovery has been sluggish, as the needed hand-off from public to private demand-led growth has not fully materialized. Economic activity is projected to gain modest momentum in future, but the pace of expansion is expected to be weak relative to the scale of underutilized resources. Executive Directors have welcomed the authorities’ efforts aimed at economic rebalancing. However, they have cautioned that a stalling recovery, high unemployment, and uncertain external conditions continue to present significant challenges.

The Oxford Handbook of Bayesian Econometrics
The Oxford Handbook of Bayesian Econometrics

Author: John Geweke

Publisher: Oxford University Press

Published: 2011-09-29

Total Pages: 576

ISBN-13: 0191618268

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Bayesian econometric methods have enjoyed an increase in popularity in recent years. Econometricians, empirical economists, and policymakers are increasingly making use of Bayesian methods. This handbook is a single source for researchers and policymakers wanting to learn about Bayesian methods in specialized fields, and for graduate students seeking to make the final step from textbook learning to the research frontier. It contains contributions by leading Bayesians on the latest developments in their specific fields of expertise. The volume provides broad coverage of the application of Bayesian econometrics in the major fields of economics and related disciplines, including macroeconomics, microeconomics, finance, and marketing. It reviews the state of the art in Bayesian econometric methodology, with chapters on posterior simulation and Markov chain Monte Carlo methods, Bayesian nonparametric techniques, and the specialized tools used by Bayesian time series econometricians such as state space models and particle filtering. It also includes chapters on Bayesian principles and methodology.

Investment under Uncertainty
Investment under Uncertainty

Author: Robert K. Dixit

Publisher: Princeton University Press

Published: 2012-07-14

Total Pages: 484

ISBN-13: 1400830176

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How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.

Policy Uncertainty in Japan
Policy Uncertainty in Japan

Author: Ms.Elif C Arbatli

Publisher: International Monetary Fund

Published: 2017-05-30

Total Pages: 48

ISBN-13: 1484302362

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We develop new economic policy uncertainty (EPU) indices for Japan from January 1987 onwards building on the approach of Baker, Bloom and Davis (2016). Each index reflects the frequency of newspaper articles that contain certain terms pertaining to the economy, policy matters and uncertainty. Our overall EPU index co-varies positively with implied volatilities for Japanese equities, exchange rates and interest rates and with a survey-based measure of political uncertainty. The EPU index rises around contested national elections and major leadership transitions in Japan, during the Asian Financial Crisis and in reaction to the Lehman Brothers failure, U.S. debt downgrade in 2011, Brexit referendum, and Japan’s recent decision to defer a consumption tax hike. Our uncertainty indices for fiscal, monetary, trade and exchange rate policy co-vary positively but also display distinct dynamics. VAR models imply that upward EPU innovations foreshadow deteriorations in Japan’s macroeconomic performance, as reflected by impulse response functions for investment, employment and output. Our study adds to evidence that credible policy plans and strong policy frameworks can favorably influence macroeconomic performance by, in part, reducing policy uncertainty.