What Japan, the US, and Europe have in common is growing popular anger over the economy despite high stock prices and low unemployment.
Why ruling parties were defeated in US and Japanese elections
Negative economic shocks can cause waves of investor pessimism about the resilience of banks, which, in turn, generate additional adverse macroeconomic effects. This is commonly cited as an explanation for the economic havoc wrought by the global financial crisis of 2007-08. We introduce the notion of pessimism in a real business cycle model, which is a standard framework for business cycle analysis. The possibility of waves of pessimism generates countercyclical demand from banks for liquid assets (e.g., bank reserves).
The projected increase in extreme climate events in the coming decades is likely to exacerbate the existing productivity and demographic challenges facing Europe. We study the dynamic, medium-run macroeconomic effects of heatwaves, droughts and floods in 1160 EU regions through the lens of a local projections, difference in difference framework. Summer heatwaves and droughts lower medium-term output, but the impact from floods depends on regional income levels. High-income regions witness reconstruction activity, less wealthy regions do not.
This paper demonstrates that empirically grounding the discount factor significantly influences the determination of the carbon price. Using two complementary nonlinear statistical approaches, we assess which utility formulations and corresponding stochastic discount factors best align with U.S. data. We provide evidence that habit formation is essential for capturing the time variation in the stochastic discount factor necessary to match the data. This increased time variation raises the carbon price by 32% and makes it five times more procyclical compared to standard models.
The firehose of affluent consumption continues to drive inflation, not the stimulus package
It must be the Wall Street Journal’s DNA. Nothing else easily explains why the normally careful Nick Timiraos would focus so much of his account of “How the Democrats Blew It on Inflation” on the hoary argument that the “Biden Stimulus” somehow triggered worldwide inflation back in 2021.
Earlier investments make large-scale emission reductions easier to do over time because their unit costs drop
Everyone recognizes that the costs of automobiles, washers, jet planes, and hundreds of other products usually drop with mass production. Most products get cheaper when they stream out of workplaces not by the dozens, but by the tens of thousands, or even millions.
Lincoln Mitchell, Political Science Professor at Columbia University, discusses the increasingly powerful fascist movement in the US., outlining the elements of fascism present in the MAGA movement, including its dependence on a strongman leader, the scapegoating of minorities, threats of violence and curtailing of freedoms of speech and assembly.
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This paper documents the extension of the system-wide stress testing framework of the ECB with the insurance sector for a more thorough assessment of risks to financial stability. The special nature of insurers is captured by the modelling of the liability side and its loss absorbing capacity of technical provisions as the main novel feature of the model.
