Optimal Trend Inflation

2019 ◽  
Vol 109 (2) ◽  
pp. 702-737 ◽  
Author(s):  
Klaus Adam ◽  
Henning Weber
Keyword(s):  
Inflation Rate ◽  
Heterogeneous Firms ◽  
Census Bureau ◽  
Firm Level ◽  
Us Economy ◽  
Trend Inflation ◽  
The Us ◽  
Heterogeneous Firm ◽  
Heterogeneous Firm Model ◽  
Firm Model

Sticky price models featuring heterogeneous firms and systematic firm-level productivity trends deliver radically different predictions for the optimal inflation rate than their popular homogenous-firm counterparts: (i) the optimal steady-state inflation rate generically differs from zero and (ii) inflation optimally responds to productivity disturbances. We show this by aggregating a heterogeneous-firm model with sticky prices in closed form. Using firm-level data from the US Census Bureau, we estimate the historically optimal inflation path for the US economy: the optimal inflation rate ranges between 1 percent and 3 percent per year and displays a downward trend over the period 1977–2015. (JEL C51, D24, D25, E31, E52)

Venting Out: Exports during a Domestic Slump

2021 ◽  
Vol 111 (11) ◽  
pp. 3611-3662
Author(s):  
Miguel Almunia ◽  
Pol Antràs ◽  
David Lopez-Rodriguez ◽  
Eduardo Morales
Keyword(s):  
Negative Impact ◽  
Firm Level ◽  
Export Markets ◽  
Demand Shocks ◽  
The Great Recession ◽  
Marginal Costs ◽  
Heterogeneous Firm ◽  
Heterogeneous Firm Model ◽  
Using Data ◽  
Firm Model

We study the relationship between domestic-demand shocks and exports using data for Spanish manufacturing firms in 2002–2013. Exploiting plausibly exogenous geographical variation caused by the Great Recession, we find that firms whose domestic sales declined by more experienced a larger increase in export flows, controlling for firms’ supply determinants. This result illustrates the capacity of export markets to counteract the negative impact of local demand shocks. By structurally estimating a heterogeneous-firm model of exporting with nonconstant marginal costs of production, we conclude that these firm-level responses accounted for half of the spectacular increase in Spanish goods exports over the period 2009–2013. (JEL D22, E32, F14, L60)

scholarly journals Trade and Management

2020 ◽  
pp. 1-44
Author(s):  
Nicholas Bloom ◽  
Kalina Manova ◽  
John Van Reenen ◽  
Stephen Teng Sun ◽  
Zhihong Yu
Keyword(s):  
Randomized Control Trial ◽  
Production Efficiency ◽  
Management Practices ◽  
Export Performance ◽  
Effective Management ◽  
Randomized Control ◽  
Heterogeneous Firm ◽  
Heterogeneous Firm Model ◽  
Firm Model

We study how management practices shape export performance using matched productiontrade-management data for Chinese and American firms and a randomized control trial in India. Better managed firms are more likely to export, sell more products to more destinations, and earn higher export revenues and profits. They export higher-quality products at higher prices and lower quality-adjusted prices. They import a wider range of inputs and inputs of higher quality and price, from more advanced countries. We rationalize these patterns with a heterogeneous-firm model in which effective management improves performance by raising production efficiency and quality capacity.

Optimal Inflation for the US Economy

2011 ◽  
Vol 3 (3) ◽  
pp. 29-52 ◽  
Author(s):  
Roberto M Billi
Keyword(s):  
Inflation Rate ◽  
Low Cost ◽  
Policy Instrument ◽  
New Keynesian ◽  
Worst Case ◽  
Us Economy ◽  
Keynesian Model ◽  
Long Run ◽  
The Us ◽  
The Government

This paper studies the optimal long-run inflation rate (OIR) in a small New Keynesian model, where the only policy instrument is a short-term nominal interest rate that may occasionally run against a zero lower bound (ZLB). The model allows for worst-case scenarios of misspecification. The analysis shows first, if the government optimally commits, the OIR is below 1 percent annually. Second, if the government re-optimizes each period, the OIR rises markedly to 17 percent. Third, if the government commits only to an inertial Taylor rule, the inflation bias is eliminated at very low cost in terms of welfare for the representative household. (JEL E12, E31, E43, E52, E58)

scholarly journals Global Firms

2018 ◽  
Vol 56 (2) ◽  
pp. 565-619 ◽  
Author(s):  
Andrew B. Bernard ◽  
J. Bradford Jensen ◽  
Stephen J. Redding ◽  
Peter K. Schott
Keyword(s):  
International Trade ◽  
Monopolistic Competition ◽  
Firm Characteristics ◽  
Export Markets ◽  
Market Shares ◽  
International Participation ◽  
Heterogeneous Firm ◽  
Heterogeneous Firm Model ◽  
Firm Model ◽  
The Impact

Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now-standard heterogeneous firm model posits measure-zero firms that compete under monopolistic competition and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and account for substantial shares of aggregate trade. We develop a new theoretical framework that allows firms to have large market shares and decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. Using US firm and trade transactions data, we provide strong evidence in support of this framework's main predictions of interdependencies and complementarities between these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics and increasing their shares of aggregate trade. (JEL D22, F14, F23, L60, R32)

scholarly journals Heterogeneous firm-level responses to the US 2018 tariff announcement

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yafeng Qin ◽  
Zikai Yang ◽  
Min Bai
Keyword(s):  
Hong Kong ◽  
Stock Market ◽  
Mainland China ◽  
Chinese Stock Market ◽  
Firm Level ◽  
Content Type ◽  
Us Economy ◽  
The Us ◽  
The Usa ◽  
The Impact

PurposeThis study examines the impact of the $60 billion tariff announcement of the US government on the Chinese exporting firms. In particular, it focuses on the firms whose revenues are highly dependent on the US economy.Design/methodology/approachThis study uses an experimental analysis and the event study methodology. The sample includes firms listed in mainland China and Hong Kong Stock Exchanges that have the highest revenues from exporting to the USA. The data are obtained from China Stock Market and Accounting Research (CSMAR) and DataStream.FindingsThe authors find that the tariff announcement has significantly negative impacts on stock performance both before and after the announcement, and the impacts are heterogeneous across all sample firms. For A shares listed in Mainland China, firms with more revenues from the US experience greater price drops on the announcement day, regardless of being in the targeted industry or not. But such finding is absent from H shares listed in Hong Kong. The authors also find that for all the firms, greater pricing power can alleviate the impacts of the tariff announcement.Research limitations/implicationsThe results provide implications to investors, policymakers and regulators on the further US-China cooperation in the future.Originality/valueThis is the first study documenting the heterogeneity of the impact of the tariff announcement and thus contributes to the prosperous studies on the varied firm-level responses in the Chinese stock market, and to the burgeoning literature by filling the gap of the financial market responses to the protectionist policy announcement.

scholarly journals Monetary Policy, Trend Inflation, and the Great Moderation: An Alternative Interpretation

2011 ◽  
Vol 101 (1) ◽  
pp. 341-370 ◽  
Author(s):  
Olivier Coibion ◽  
Yuriy Gorodnichenko
Keyword(s):  
Alternative Interpretation ◽  
New Keynesian ◽  
Positive Trend ◽  
Us Economy ◽  
Trend Inflation ◽  
The Us ◽  
Before And After ◽  
New Keynesian Models ◽  
Policy Trend ◽  
Theoretical Results

With positive trend inflation, the Taylor principle does not guarantee a determinate equilibrium. We provide new theoretical results on determinacy in New Keynesian models with positive trend inflation and new empirical findings on the Federal Reserve's reaction function before and after the Volcker disinflation to find that, (i) while the Fed likely satisfied the Taylor principle before Volcker, the US economy was still subject to self-fulfilling fluctuations in the 1970s, (ii) the US economy switched to determinacy during the Volcker disinflation, and (iii) the switch reflected changes in the Fed's response to macroeconomic variables and the decline in trend inflation. (JEL E12, E23, E31, E32, E52)

Sign in / Sign up

Export Citation Format

Share Document