Productivity shocks, stabilization policies and the dynamics of net foreign assets

Giorgio, Giorgio Di; Nisticò, Salvatore

doi:10.1016/j.jedc.2012.09.002

Cited by 15 publications

(25 citation statements)

References 43 publications

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“…This is in line with Kirsanova et al. (), whereas Di Giorgio and Nistico (), Ferrero (), and Gali and Monacelli () use contemporaneous feedback rules.…”

supporting

confidence: 88%

“…Government spending is financed either through lump‐sum taxes to domestic households T y or by nominal debt denominated in local currency B t . This yields the government's flow budget constraint, in nominal terms:

B_{t} = (1 + i_{t - 1}) B_{t - 1} + G_{H, t} - T_{t},

where G H , t − T t denotes the nominal primary deficit (Di Giorgio and Nisticò, ; Corsetti et al., ).…”

Section: The Modelmentioning

confidence: 99%

“…(), Forni et al. (), and Di Giorgio and Nisticò (), and introduce the term ω b b t –1 , which captures the degree to which the dynamics of public debt are of concern to the fiscal authorities. With this formulation we can not only ensure long‐run debt sustainability but can also account for the European Stability and Growth Pact, namely that the debt ceilings are in practice not strictly binding because of a number of provisional clauses.…”

Section: Monetary and Fiscal Policy Rulesmentioning

confidence: 99%

“…() analyze the effects of alternative monetary policy regimes on the behavior of aggregate variables under two different current account rebalancing scenarios, but without considering fiscal policy rules. Di Giorgio and Nisticò () study the role of stabilization policies for productivity shocks on the dynamics of net foreign assets in a two country DSGE model with overlapping generations. In addition to alternative monetary policy rules, they use a primary‐deficit feedback rule for fiscal policy with countercyclical response to the output gap and the stock of public debt.…”

Section: Introductionmentioning

confidence: 99%

“…Di Giorgio and Nisticò () estimate the persistence value of 0.7 for the euro area using quarterly HP‐filtered data on labor productivity for the period 1970:1–2005:4.…”

mentioning

confidence: 99%

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Fiscal Policy, Monetary Regimes and Current Account Dynamics

Herz¹,

Hohberger

2013

Rev International Economics

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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. © 2012 by Stefan Hohberger and Bernhard Herz. All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorization of the authors. Terms of use: Documents in AbstractThe serious current account imbalances which have developed within the euro area over the last decade are at the core of the current financial crisis. For the members of the currency union fiscal policy has gained in importance due to the loss of monetary policy as an autonomous policy instrument. Based on a small open economy DSGE model with fiscal feedback rules, we analyze dynamic macroeconomic responses in particular of the current account to different shocks under alternative exchange rate regimes. Our results indicate that entry into monetary union and the subsequent loss of national monetary policy make the economy more vulnerable to a productivity shock and leads to higher variability of the real exchange rate and the current account. On the contrary, for a risk premium shock, an entry into EMU implies lower variability of most macroeconomic variables, but a higher persistence in the adjustment process of the current account. For both shocks, a countercyclical fiscal response to the current account stabilizes most macroeconomic variables better than a conventional countercyclical response to output, independently of the underlying exchange rate regime. Stabilizing the current account via fiscal policy intervention comes at the price of higher variability of output in the short-run, however. JEL classification: E61, E62, E52, F41

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“…This is in line with Kirsanova et al. (), whereas Di Giorgio and Nistico (), Ferrero (), and Gali and Monacelli () use contemporaneous feedback rules.…”

supporting

confidence: 88%

B_{t} = (1 + i_{t - 1}) B_{t - 1} + G_{H, t} - T_{t},

where G H , t − T t denotes the nominal primary deficit (Di Giorgio and Nisticò, ; Corsetti et al., ).…”

Section: The Modelmentioning

confidence: 99%

Section: Monetary and Fiscal Policy Rulesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“…Di Giorgio and Nisticò () estimate the persistence value of 0.7 for the euro area using quarterly HP‐filtered data on labor productivity for the period 1970:1–2005:4.…”

mentioning

confidence: 99%

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Fiscal Policy, Monetary Regimes and Current Account Dynamics

Herz¹,

Hohberger

2013

Rev International Economics

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Fiscal shocks and helicopter money in open economy

Giorgio

Traficante

2018

Economic Modelling

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When old meets young? Germany's population ageing and the current account

Schön

Stähler

2020

Economic Modelling

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Research Question Germany has high and persistent current account surpluses since the start of the millennium. To many, (projected) population ageing in Germany is one of the most important drivers for these developments. In an ageing society, people want to prepare for increased longevity by augmenting savings. As these savings cannot all be invested domestically, net foreign assets and the current account surplus rise. Contribution We analyze the effects of population ageing in a three-region New Keynesian life-cycle model. Two of the regions form a monetary union. The model is calibrated to Germany, the rest of the Eurozone and the remaining OECD countries. In an additional analysis, we add China to the latter region. Results We find that population ageing in Germany is indeed a significant driver of net foreign asset developments. It has the potential of generating current account surpluses of up to 15% of GDP. However, this only happens when the demographic trends of the ageing region (Germany) and its trading partners are unsynchronized. Put differently, this happens when Germany ages while the demographic structure in the rest of the world remains constant. Assuming Germany's most important trading partners to be the other Euro area member states and the remaining OECD countries (and potentially China), we see that these regions face a similar, but delayed ageing process. Feeding these developments into our model reduces the average current account-to-GDP ratio from 2000 to 2018 in Germany to 2.8% (1.2% when taking into account China). It turns negative around 2035.

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Productivity shocks, stabilization policies and the dynamics of net foreign assets

Cited by 15 publications

References 43 publications

Fiscal Policy, Monetary Regimes and Current Account Dynamics

Fiscal Policy, Monetary Regimes and Current Account Dynamics

Fiscal shocks and helicopter money in open economy

When old meets young? Germany's population ageing and the current account

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