The sharing of macroeconomic risk: Who loses (and gains) from macroeconomic shocks This paper addresses the often neglected question of how macroeconomic risk is shared across and within economies, and identifies reforms that could contribute towards achieving more desirable risksharing outcomes. For risk-sharing across countries, the paper discusses possibilities for international insurance as well as shock-spreading and risk-mitigating policies. Within countries, it assesses the possibilities for individuals to protect their wealth, labour and capital income against various forms of macroeconomic risk and discusses the desirable boundaries between private and government-sponsored risk-sharing institutions. The paper then presents new empirical and model-based evidence about how the short-term impact of selected macroeconomic shocks (including financial crises) is shared across different groups of agents, and analyses how such distributional effects are shaped by differences in institutions. For example, individuals on low incomes, and especially young people, seem in general to lose most from adverse macroeconomic shocks. Also, it appears that across countries two broad types of institutions can be identified that facilitate risk sharing between high and low income earners, namely "social protection" and "reallocation-facilitating" institutions. Based on countries' reliance on these types of institutions, four broad "models" of risk sharing are identified across the OECD and the BRIICS.

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JT03304774This paper addresses the often neglected question of how macroeconomic risk is shared across and within economies, and identifies reforms that could contribute towards achieving more desirable risksharing outcomes. For risk-sharing across countries, the paper discusses possibilities for international insurance as well as shock-spreading and risk-mitigating policies. Within countries, it assesses the possibilities for individuals to protect their wealth, labour and capital income against various forms of macroeconomic risk and discusses the desirable boundaries between private and government-sponsored risk-sharing institutions. The paper then presents new empirical and model-based evidence about how the short-term impact of selected macroeconomic shocks (including financial crises) is shared across different groups of agents, and analyses how such distributional effects are shaped by differences in institutions. For example, individuals on low incomes, and especially young people, seem in general to lose most from adverse macroeconomic shocks. Also, it appears that across countries two broad types of institutions can be identified that facilitate risk sharing between high and low income earners, namely "social protection" and "reallocation-facilitating" institutions. Based on countries' reliance on these types of institutions, four broad "models" of risk sharing are identified across the OECD and the BRIICS.JEL Codes: D31; D63; E60; F55; G22; H11; I38

Israel’s monetary policy framework is broadly sound. Inflation targeting was introduced in the early 1990s, and low single-digit inflation was established by the end of the decade. However, fast transmission from the exchange rate to inflation means the operational challenges differ somewhat from those in many OECD countries. Also, the Bank of Israel has been intervening heavily in the foreign-exchange market, marking a departure from standard practice in inflation targeting. Past progress in fiscal consolidation has been affected by several economic shocks, including the recent downturn. The government’s strategy of lowering tax rates on corporate profits and on personal income is assessed. Also, various avenues for raising revenues on other fronts are suggested. Primary civilian spending is now relatively low in international comparison, the room for savings has narrowed, and many of the necessary future structural reforms probably require initial fiscal outlays. In budgeting, which is strongly controlled by the Ministry of Finance, there is room for various process improvements. This Working Paper relates to the 2009 OECD Economic Survey of Israel (www.oecd.org/eco/surveys/israel). Les politiques monétaire et budgétaire en Israël Le cadre de la politique monétaire d’Israël est globalement solide. Le ciblage de l’inflation a été introduit au début des années 1990 et l’inflation s’est maintenue à un niveau nettement inférieur à 10 % dès la fin de cette même décennie. Une transmission rapide du taux de change à l’inflation signifie cependant que les problèmes opérationnels sont assez différents de ceux de la plupart des pays de l’OCDE. Par ailleurs, la Banque d’Israël intervient sur le marché des changes, rompant ainsi avec la pratique habituellement suivie pour cibler l’inflation. Les progrès réalisés dans l’assainissement des finances publiques ont été compromis par plusieurs chocs économiques, et notamment la dernière récession. Nous dressons le bilan de la stratégie du gouvernement de réduire l’impôt sur les sociétés et les tranches supérieures de l’impôt sur le revenu des personnes physiques et proposons plusieurs moyens d’augmenter les recettes sur d’autres fronts. Les dépenses civiles primaires sont désormais relativement faibles par rapport aux autres pays, les possibilités de réaliser des économies se sont réduites et beaucoup de réformes structurelles nécessaires obligeront à faire des dépenses budgétaires initiales. Enfin il y a des améliorations à apporter au processus d’élaboration du budget, qui est étroitement contrôlé par le ministère des Finances. Ce document de travail se rapporte à l’étude économique d’Israël publié par l'OCDE en 2010 (www.oecd.org/eco/surveys/israel).taxation, public debt, OECD, monetary policy, public spending, macroeconomic policies, inflation targeting, Israel, government deficit, budget rules, fiscal policy, politique monétaire, ciblage de l’inflation, fiscalité, dette publique, déficit des administrations publiques, Israël, règles budgétaires, politique macro-économique, ...

This paper examines how the the distributive impact of macroeconomic shocks is shaped by selected institutions. It uses a dynamic stochastic general equilibrium (DSGE) framework with heterogeneous agents and an endogenous collateral constraint. The model is based on the "credit view" of business cycles, where shocks affect the real economy also via their impact on the borrowing capacity of economic agents. In this framework a positive shock to credit spreads, as seen in the recent crisis, redistributes from capital to labour as well as from from equity to bond holders. In contrast, both productivity and inflation shocks redistribute towards capital or equity holders. Distributive impacts are shown to be shaped by institutions. More sophisticated financial markets are found to amplify the redistributive impact of shocks, whereas more flexible wages, a more elastic labour supply, and a more reactive central bank are found to dampen it.