A new discussion paper by Miguel León-Ledesma and Jaime Orrillo, KDPE 1610, October 2016
The cyclical behaviour of firm bankruptcy displays a clear counter-cyclical pattern: firms tend to go bankrupt in recessions. This leads to an amplification of business cycles and has important consequences to understand asset prices and the evolution of other macro variables like employment. However, macroeconomic models in which firms are allowed to go out of business are scarce. In this paper, we take a step in the direction of understanding the general equilibrium effects of default and bankruptcy.
A new discussion paper by Jean-Pascal Nganou, Juste Somé and Guy Tchuente, KDPE 1609, September 2016
This paper estimates government spending multiplier for natural resource-rich lowincome countries (LICs). The government spending multiplier is the ratio of a change in national income to any autonomous change in government spending.
A new discussion paper by Marine Carrasco and Guy Tchuente, KDPE 1608, September 2016
In many empirical works in economics, the aim of the researcher is to establish a causal or a noncausal relationship between two variables. Because unobserved variables affect most economics variables, identification and estimation of parameters of interest suffer from the endogeneity problem. In presence of endogeneity, identification of the causal parameter of interest is achieved using instrumental variables. The instrumental variables are assumed to be highly correlated with the right-hand side endogenous variables (strong) and uncorrelated with the structural error (valid or respecting the exclusion restriction).
A new discussion paper by Guy Tchuente, KDPE 1607, July 2016
This paper considers the estimation of social interaction models with network structures and the presence of endogenous, contextual, correlated and group fixed effects. In network models, an agent's behavior may be influenced by peers' choices (the endogenous effect), by peers' exogenous characteristics (the contextual effect), and/or by the common environment of the network (the correlated effect) (see Manski (1993) for a description of these models).
A new discussion paper by Florian Gerth and Keisuke Otsu, KDPE 1606, September 2016
Nearly a decade has passed since the onset of the Great Recession. However, European countries have shown very little recovery. Economists collectively agree that the financial market turmoil initiated by the subprime loan crisis in the US is the source of the Great Recession. However, there is little consensus about the propagation mechanism through which the initial shock led to a steep and persistent drop in key economic variables...