Dr Maria Garcia-Alonso was a guest lecturer at the Third EU Summer University on Strategic Trade Control and Non-Proliferation in Alpbach, Austria from 9-16 August. The event was part of the EU Partner-to-Partner Export Control Programme for dual use goods (https://export-control.jrc.ec.europa.eu/). The European Union is a long-standing provider of capacity-building activities aimed at the overall strengthening of export controls worldwide.
by Florian Gerth, discussion paper KDPE 1714, September 2017.
Research shows that financial crises are accompanied by severe and long-lasting drops in TFP. The most recent Global Financial Crisis does not seem to be any different from this pattern. On the contrary, Gerth and Otsu (2017) find significant correlations between financial variables and long-lasting drops in aggregate productivity measures for a myriad of European countries. This finding matches a branch of structural models that saw their advent in the aftermath of the financial crisis that began by the end of 2007. Even though each of these models chooses different measures to indicate financial distress in the economy, the mechanism how a financial shocks propagates is uniform. That is, through resource misallocation. This study therefore tries to empirically determine whether these models are valid to explain the behaviour of the UK economy during the last 8 years. In order to do this, the paper relies on the FAME dataset. This is a micro-level dataset that contains more than 9 million firms within the UK.
by Anthony Savagar, discussion paper KDPE 1713, August 2017.
Traditionally macroeconomists assume that the number of firms in an economy adjusts instantaneously to arbitrage profits. This assumption ignores ‘slow’ fluctuations in firm entry and exit over the business cycle. This paper develops a model of firm dynamics in the macroeconomy with sunk costs that cause firms to respond slowly to economic shocks, hence entry and exit decisions are non-instantaneous. The resulting firm adjustment towards zero profit causes endogenous fluctuations in profits, competition and business allocation that helps to explain business cycle productivity dynamics.
Research by Christian Siegel from the School of Economics featured in an article in The Guardian on Sunday 20 August on the rise of robots and automation: ‘Robots will not lead to fewer jobs – but the hollowing out of the middle class’ by Larry Elliott.
Read the full article here.
A new discussion paper by Sylvain Barde and Sander van der Hoog, KDPE 1712, July 2017.
Despite recent advances in bringing agent-based models (ABMs) to the data, the estimation or calibration of model parameters remains a challenge, especially when it comes to large-scale agent-based macroeconomic models. Most methods, such as the method of simulated moments (MSM), require in-the-loop simulation of new data, which may not be feasible for models that are computationally heavy to simulate. Nevertheless, because ABMs are becoming an important tool for policy making it is a relevant issue to be able to validate them properly, so that they can be compared to other policy-related models.