Macroeconomic Shocks and Their Propagation

Ramey, Valerie A.

doi:10.1016/bs.hesmac.2016.03.003

Cited by 668 publications

(460 citation statements)

References 200 publications

(268 reference statements)

Supporting

Mentioning

424

Contrasting

Unclassified

Order By: Relevance

“…24 As discussed in Section 2, the use of all (as opposed to exogenous) legislated tax rate changes is subject to misidenti…cation.…”

Section: Basic Resultsmentioning

confidence: 99%

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach

Gunter¹,

Riera‐Crichton²,

Végh³

et al. 2017

View full text Add to dashboard Cite

Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Guillermo VuletinInter-American Development Bank March 4, 2017 AbstractWe estimate the e¤ect of worldwide tax changes on output following the narrative approach developed for the United States by Romer and Romer (2010). We use a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014 to identify 96 tax changes. We then use contemporaneous economic records to classify such changes as endogenous or exogenous to current (or prospective) economic conditions. In line with existing theoretical distortion-based arguments -and based on the exogenous tax changes -we …nd that the e¤ect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and much larger (in absolute terms) as the initial tax rate and the size of the change in the tax rate increases. We also show that the bias introduced by misidenti…cation of tax shocks critically depends on the procyclical or countercyclical nature of endogenous tax changes. We simultaneously evaluate the relevance of our arguments both for our global sample and for Romer and Romer's U.S. dataset.JEL Classi…cation: E32, E62, H20.

show abstract

“…24 As discussed in Section 2, the use of all (as opposed to exogenous) legislated tax rate changes is subject to misidenti…cation.…”

Section: Basic Resultsmentioning

confidence: 99%

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach

Gunter¹,

Riera‐Crichton²,

Végh³

et al. 2017

View full text Add to dashboard Cite

show abstract

“…This literature is in its early stages and is subject to many of the perceived shortcomings of the traditional approach reviewed by Ramey (2016). Nevertheless the similarity in the findings across distinct identification strategies is striking.…”

Section: Evidence From Varsmentioning

confidence: 99%

“…Ramey (2016) discusses the challenges to identifying monetary policy shocks when this assumption is violated and Campbell et al (2012) find that a substantial fraction of the residual variation in an estimated policy rule is forecastable. So this assumption is not innocuous.…”

Section: Evidence From Varsmentioning

confidence: 99%

Forward Guidance and Macroeconomic Outcomes since the Financial Crisis

Campbell

Fisher

Justiniano

et al. 2017

NBER Macroeconomics Annual

148

153

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper studies the effects of FOMC forward guidance. We begin by using high frequency identification and direct measures of FOMC private information to show that puzzling responses of private sector forecasts to movements in federal funds futures rates on FOMC announcement days can be attributed entirely to Delphic forward guidance. However a large fraction of futures rates' variability on announcement days remains unexplained, leaving open the possibility that the FOMC has successfully communicated Odyssean guidance. We then examine whether the FOMC used Odyssean guidance to improve macroeconomic outcomes since the financial crisis. To this end we use an estimated medium-scale New Keynesian model to perform a counterfactual experiment for the period 2009q1-2014q4, in which we assume the FOMC did not employ any Odyssean guidance and instead followed its reaction function from before the crisis as closely as possible while respecting the effective lower bound. We find that a purely rule-based policy would have delivered better outcomes in the years immediately following the crisis than FOMC forward guidance did in practice. However starting toward the end of 2011, after the Fed's introduction of "calendar-based" communications, the FOMC's Odyssean guidance appears to have boosted real activity and moved inflation closer to target. We show that our results do not reflect Del Negro, Giannoni, and Patterson (2015)'s forward guidance puzzle. JEL Codes: E0. Terms of use: Documents in

show abstract

“…This provides a benchmark for gauging the importance of MPU shocks. Our strategy is to take a VAR model that is considered conventional in the literature and add MPU to it (see Ramey (2015) for a recent review). Since our sample period includes the ZLB, our disturbances of interest also include shocks to forward guidance.…”

Section: Response Of Mpu To Monetary Policy Shocksmentioning

confidence: 99%

Monetary Policy Uncertainty

Husted

Rogers

Sun

2017

internationalfinance

View full text Add to dashboard Cite

We construct new measures of uncertainty about Federal Reserve policy actions and their consequences -monetary policy uncertainty (MPU) indexes. We show that, under a variety of VAR identification schemes, positive shocks to uncertainty about monetary policy robustly raise credit spreads and reduce output. The effects are of comparable magnitude to those of conventional monetary policy shocks. We evaluate the usefulness of our MPU indexes, and examine the influence of Fed communication. Our analysis suggests that policy rate normalization that is accompanied by reduced uncertainty can help neutralize the contractionary effects of the rate increases themselves.

show abstract

Macroeconomic Shocks and Their Propagation

Cited by 668 publications

References 200 publications

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach

Forward Guidance and Macroeconomic Outcomes since the Financial Crisis

Monetary Policy Uncertainty

Contact Info

Product

Resources

About

Macroeconomic Shocks and Their Propagation

Cited by 668 publications

References 200 publications

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach ﻿

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach ﻿

Forward Guidance and Macroeconomic Outcomes since the Financial Crisis

Monetary Policy Uncertainty

Contact Info

Product

Resources

About

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach

Non-Linear Distortion-Based Effects of Tax Changes on Output: A Worldwide Narrative Approach