Survey data on inflation expectations show that: (i) private sector forecasts and central bank forecasts are not fully aligned and (ii) private sector forecasters disagree about inflation expectations. To reconcile these two facts we introduce dispersed information in a New Keynesian model, where as a result, inflation expectations differ between the private sector and the central bank. We show that output and inflation responses change markedly when the central bank responds to private sector inflation expectations rather than to their own.
This paper proposes a new perspective on international capital flows and countries' long-run external asset position. Cross-sectional evidence for 84 developing countries shows that over the last three decades countries that have had on average higher volatility of output growth (1) accumulated higher external assets in the long-run and (2) experienced more procyclical capital outflows over the business cycle than those countries with a same growth rate but a more stable output path. To explain this finding we provide a theoretical mechanism within a stochastic real business cycle growth model in which higher uncertainty of the income stream increases the precautionary savings motive of households. They have a desire to save more when the variance of their expected income stream is higher. We show that in the model the combination of income risk and a precautionary savings motive will lead to procyclical capital out ows at business cycle frequency and a higher long-run external asset position.
Since 1991, survey expectations of long-run output growth for the U. S. relative to the rest of the world exhibit a pattern strikingly similar to that of the U. S. current account, and thus also to global imbalances. We show that this finding can to a large extent be rationalized in a two-region stochastic growth model simulated using expected trend growth filtered from observed productivity. In line with the intertemporal approach to the current account, a major part of the buildup of the U. S. current account deficit appears to be driven by the optimal response of households and firms to improved growth prospects.
We provide an analysis that might help distinguish rationally justified movements in house prices from potentially non-rational movements, using a two-sector business cycle model, in which investment in housing is subject to collateral constraints. A large portion of the evolution of U. S. house prices during the past 20 years can be reproduced when expectations of future income growth as published in surveys are used as an input into the model. Changes in growth expectations translate into corresponding changes in house prices, since the value of housing must be linked to expected aggregate income. Only since about 2005 do actual and model-implied house prices clearly diverge, calling for explanations not based on economic fundamentals.
Mathias Hoffmann (geb. 1954) ist einer der eher stillen, bescheiden auftretenden Stars im Design-Universum, kein von den Medien gehypter Designer mit den Allüren manch eines seiner berühmteren Kollegen. Doch hat der Sohn der renommierten deutschen Textildesignerin Gertrud Hoffmann ein Werk und Repertoire an Gestaltung vorzuweisen – darunter einige wohlbekannte Klassiker und Bestseller –, das seinesgleichen sucht. In seiner über 30-jährigen Tätigkeit hat er zahllose Sofas und Sessel für weltbekannte Marken wie u. a Rolf Benz, Brown Jordan, de Sede oder Gervasoni entworfen – ergänzt durch Stühle, Tische, Betten, Leuchten, Teppiche, Vasen und andere Wohnaccessoires sowie Kinder- und Outdoor-Möbel. Hoffmann setzt bevorzugt langlebige, ökologisch positive oder recycelbare Materialien ein, seien diese natürlichen Ursprungs oder High-tech, und schafft dabei Werke, die im Zusammenspiel zwischen Material, Form, Verarbeitung, Farbe und Funktion eine gelungene Einheit bilden. Mit der Zuordnung von Skizze, Foto und Kurzbeschreibung versucht das Buch, dem Leser und Betrachter die Entstehung dieser Objekte nahezubringen und ihm Anregungen beim Einrichten der eigenen Wohnung zu geben. Mathias Hoffmanns Motto heißt „Emotionen fürs Wohnen“. Mit seinen Arbeiten hat er für ein modernes Wohnen, in dem man sich wirklich wohl fühlt, einen enormen Beitrag geleistet – auch ohne große Worte.
We discuss how the welfare ranking of fixed and flexible exchange rate regimes in a New Open Economy Macroeconomics model depends on the interplay between the degree of exchange rate pass-through and the elasticity of substitution between home and foreign goods. We identify combinations of these two parameters for which flexible and for which fixed exchange rates are superior with respect to welfare as measured by a representative household's utility level. We estimate the two parameters for six non-EMU European countries (Czech Republic, Hungary, Poland, Slovakia, Sweden, United Kingdom) using a heterogeneous dynamic panel approach. -- Elasticity of substitution between home and foreign goods ; exchange rate pass-through ; exchange rate regime choice ; expenditure switching effect ; heterogeneous dynamic panel ; New Open Economy Macroeconomics
How does international financial integration affect national price levels? To analyze this question, this paper formulates a two-country open economy sticky-price model under either segmented or complete asset markets. It is shown that the effect of financial integration, i.e. moving from segmented to complete asset markets, is regime-dependent. Under managed exchange rates, financial integration raises the national price level. Under floating exchange rates, however, financial integration lowers national price levels. Thus, the paper proposes a novel argument to rationalize systematic deviations from PPP. Panel evidence for 54 countries supports the main findings. A 10% larger ratio of foreign assets and liabilities to GDP, our measure of international financial integration, increases the national price level by 0.27 percentage points under fixed and intermediate exchange rate regimes and lowers the price level by 0.3 percentage points under floating exchange rates.
