The affiliates of Economics for Policy produce innovative articles on a wide array of topics, ranging from international trade and macroeconomics to tax competition and econometric methods , among others. These have been published in internationally refereed journals and received comments in the general press.
Measuring Wage Inequality Under Right Censoring
There is a growing literature documenting that the persistence of time series may change over time, and as a consequence, shifts in the long-run equilibrium of macroeconomic variables are expected. An important example is the significant increase in public debt in certain periods of time due to increases in government expenditures which are not matched by revenue counterparts. In this paper, new residual-based Wald-type tests are proposed which are designed to detect segmented cointegration, i.e., subsamples during which equilibrium relations exist.
Transformed Regression-based Long-horizon Predictability Tests
We propose new tests for long-horizon predictability based on IVX estimation of a transformed regression which explicitly accounts for the over-lapping nature of the dependent variable in the long-horizon regression arising from temporal aggregation. To improve efficiency, we moreover incorporate the residual augmentation approach recently used in the context of short-horizon predictability testing by Demetrescu and Rodrigues (2022).
Tests for Segmented Cointegration: An Application to US Governments Budgets
There is a growing literature documenting that the persistence of time series may change over time, and as a consequence, shifts in the long-run equilibrium of macroeconomic variables are expected. An important example is the significant increase in public debt in certain periods of time due to increases in government expenditures (…)
The Effect of Monetary Policy on Household Consumption Expenditures in Portugal: A Decomposition of the Transmission Channel
We follow Slacalek et al. (2020) monetary transmission decomposition approach to investigate the effects of monetary policy shocks on household consumption expenditures in Portugal since joining the euro area. Extending their analysis to Portugal, we quantify the monetary policy transmission channels using (…)
Forgetting Approaches to Improve Forecasting
There is widespread evidence of parameter instability in the literature. One way to account for this feature is through the use of time-varying parameter (TVP) models that discount older data in favor of more recent data. This practice is often known as forgetting and can be applied in several different ways. (…)
Climate Policy in an Unequal World: Assessing the Cost of Risk on Vulnerable Households
Policy makers concerned with setting optimal values for carbon instruments to address climate change externalities often employ integrated assessment models (IAMs). In the past, these tools have relied on representative agent assumptions or other restrictive behaviour and welfare aggregations. (…)
The Virus that devastated Tourism: The impact of Covid-19 on the Housing Market
We study the causal impact of the negative shock on short-term rentals caused by covid-19 in the tourist-intensive city centre of Lisbon. Our difference-in-differences strategy uses a parish-level treatment relying on the pre-pandemic intensity of short-term rentals, using data between Q3 2018 and Q3 2020. The results suggest that landlords relocated properties into the long-term rental market, in which prices de-crease 4.1%, while listed quantities increase 20% in the treated civil parishes vis-`a-vis comparison ones. We also find evidence of an incremental negative impact on sale prices of 4.8% in treated areas. Our results are robust to the inclusion of Porto.
Extensions to IVX Methods of Inference for Return Predictability
The contribution of this paper is threefold. First, we demonstrate that, provided either a suitable bootstrap implementation is employed or heteroskedasticity-consistent standard errors are used, the IVX-based predictability tests of Kostakis et al. (2015) retain asymptotically valid inference under the null hypothesis under considerably weaker assumptions on the innovations than are required by Kostakis et al. (2015). Second, under the same assumptions, we develop asymptotically valid bootstrap implementations of the IVX tests. (…)
Rent Sharing in China: Magnitude, Heterogeneity and Drivers
Do firms in China share rents with their workers? We address this question by examining firm-level panel data covering virtually all manufacturing firms over the period 2000–2007, representing an average of 52 million workers per year. We find evidence of rent sharing (RS), with wage–profit elasticities of between 4% and 6%. These results are based on multiple instrumental variables, including firm-specific international trade shocks.