Roland Straub - Academia.edu (original) (raw)

Papers by Roland Straub

views expressed in this paper are those of the authors and do not necessarily reflect those of th... more views expressed in this paper are those of the authors and do not necessarily reflect those of the ECB, the Eurosystem, any institutions with which the authors are affiliated, or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

SSRN Electronic Journal, 2013

Are capital controls and macroprudential measures successful in achieving their objectives? Asses... more Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures from 2009 to 2011 for 60 countries. Results show that macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals-but most popular measures are not "good for" accomplishing their stated aims.

SSRN Electronic Journal, 2012

The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy ... more The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy measures since 2007. First, we find that Fed measures in the early phase of the crisis (QE1), but not since 2010 (QE2), were highly effective in lowering sovereign yields and raising equity markets in the US and globally across 65 countries. Yet Fed policies functioned in a pro-cyclical manner for capital flows to EMEs and a counter-cyclical way for the US, triggering a portfolio rebalancing across countries out of emerging markets (EMEs) into US equity and bond funds under QE1, and in the opposite direction under QE2. Second, the impact of Fed operations, such as Treasury and MBS purchases, on portfolio allocations and asset prices dwarfed those of Fed announcements, underlining the importance of the market repair and liquidity functions of Fed policies. Third, we find no evidence that FX or capital account policies helped countries shield themselves from these US policy spillovers, but rather that responses to Fed policies are related to country risk. The results thus illustrate how US monetary policy since 2007 has contributed to portfolio reallocation as well as a repricing of risk in global financial markets.

SSRN Electronic Journal, 2013

The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy ... more The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy measures. First, we find that Fed measures in the early phase of the crisis (QE1) were highly effective in lowering sovereign yields and raising equity markets, especially in the US relative to other countries. Fed measures since 2010 (QE2) boosted equities worldwide, while they had muted impact on yields across countries. Yet Fed policies functioned in a procyclical manner for capital flows to emerging markets (EMEs) and a counter-cyclical way for the US, triggering a portfolio rebalancing across countries out of EMEs into US equity and bond funds under QE1, and in the opposite direction under QE2. Second, the impact of Fed operations, such as Treasury and MBS purchases, on portfolio allocations and asset prices dwarfed those of Fed announcements, underlining the importance of the market repair and liquidity functions of Fed policies. Third, we find no evidence that FX or capital account policies helped countries shield themselves from these US policy spillovers, but rather that responses to Fed policies are related to country risk. The results thus illustrate how US unconventional measures have contributed to portfolio reallocation as well as a re-pricing of risk in global financial markets.

Journal of Economic Dynamics and Control, 2012

Recent estimates of the output Euler equation for the United States indicate that the elasticity ... more Recent estimates of the output Euler equation for the United States indicate that the elasticity of aggregate demand to interest rates is not significantly different from zero. We first argue that this result may hide a structural break: the estimated elasticity is a convolution of two coefficients with opposite signs across the samples 1965-1979 and 1982-2003. The sign of the coefficient in the earlier sample is inconsistent with standard economic theory and intuition. We outline a model with limited asset markets participation that can generate this change in sign when asset market participation changes from low to high, and provide institutional evidence for such a change in the United States in the late 70s and early 80s.

The paper shows that monetary policy shocks exert a substantial effect on the size and compositio... more The paper shows that monetary policy shocks exert a substantial effect on the size and composition of capital flows and the trade balance for the United States, with a 100 basis point easing raising net capital inflows and lowering the trade balance by 1% of GDP, and explaining about 20-25% of their time variation. Monetary policy easing causes positive returns

The views expressed in this paper are those of the author(s) only, and the presence of them, or o... more The views expressed in this paper are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the paper.

The paper analyses the relationship between asset prices and current account positions for a broa... more The paper analyses the relationship between asset prices and current account positions for a broad set of 42 industrialized and emerging market countries. It presents a small two-country DSGE model, which models asset price shocks as news shocks to expectations about future fundamentals, in order to derive identi…cation restrictions, and uses a Bayesian VAR with sign restrictions to empirically test for their e¤ect. Such shocks are found to exert sizeable e¤ects on the current account positions of countries. Moreover, the e¤ects are highly heterogeneous across countries, for instance with a 10% shock to domestic equity prices relative to the rest of the world worsening the US trade balance by 1.2 percentage points, but much less so for most other economies. We …nd that this heterogeneity appears to be linked to the …nancial market depth and equity home bias of countries. Moreover, the channels via wealth e¤ects and via the real exchange rate are important for understanding the heterogeneity in the transmission.

The views expressed in this paper are those of the author(s) only, and the presence of them, or o... more The views expressed in this paper are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the paper.

The World Economy, 2011

NON-TECHNICAL SUMMARY 5 4 ESTIMATING THE POTENTIAL CONSEQUENCES OF A PROTECTIONIST BACKLASH: REVI... more NON-TECHNICAL SUMMARY 5 4 ESTIMATING THE POTENTIAL CONSEQUENCES OF A PROTECTIONIST BACKLASH: REVIEW OF THE LITERATURE AND SIMULATION RESULTS 3 3 4.1 Protectionism of trade in goods: a brief review of the literature 33 4.2 Assessing the macroeconomic effects of protectionism: a scenario analysis using the multi-country version of the ECB's New Area-Wide Model 34 4.3 Impact on competitiveness 37 4.4 Financial protectionism 42 5 CONCLUSIONS 4 4 REFERENCES 4 5 EUROPEAN CENTRAL BANK OCCASIONAL PAPER SERIES SINCE 2008 5 0 LIST OF BOXES Box 1 Institutional arrangements regulating international trade 11 Box 2 Mechanisms of fi rms' adjustments to a change in trade barriers 41

The World Economy, 2010

A view of global imbalances from the fi nancial angle 29 4.1.2 Global economic and fi nancial int... more A view of global imbalances from the fi nancial angle 29 4.1.2 Global economic and fi nancial integration 31 4.1.3 The role of institutions and fi nancial development 33 4.1.4 Financial imperfections and precautionary savings 34 4.1.5 Business cycle moderation, economic policies and precautionary savings 36 4.2 Cyclical factors 37 4.2.1 Private sector savings/ investment imbalances 38 4.2.2 Public sector savings/ investment imbalances 41 5 CONCLUSION 4 4 REFERENCES 4 6 EUROPEAN CENTRAL BANK OCCASIONAL PAPER SERIES 50 BOX A review of past episodes of global imbalances 15 4

American Economic Review, 2012

How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We... more How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.

Review of Economics of the Household, 2007

The diversity of potential relationships between child labor and health makes the empirical disen... more The diversity of potential relationships between child labor and health makes the empirical disentanglement of the causal relationship a difficult exercise. This paper examines the long run impact of child labour on health by controlling for unobserved household specific characteristics. In order to control for the unobserved households specific effect, we estimate a conditional fixed effect model using data on siblings constructed from the Guatemalan National Survey of Living Condition. The estimation results reinforce the conventional wisdom that child labor is harmful for health in the long run. The results can be interpreted as a lower bound of the true impact since healthier children are most likely to offer themselves for employment and to be appointed. Keywords Child labor AE Health AE Conditional fixed effects logit JEL Classifications I12 AE J13 AE R20 1 Introduction International conventions define activities that children should not be allowed to carry out also in terms of the consequences of such activities rather than on The views expressed in this paper are those of the authors and do not necessarily represent those of IMF and IMF policy.

Journal of Money, Credit and Banking, 2013

We analyze the relationship between asset prices and current account positions estimating a Bayes... more We analyze the relationship between asset prices and current account positions estimating a Bayesian VAR for a broad set of 42 industrialized and emerging market countries. To derive model-based identifying restrictions, we model asset price shocks as news shocks about future productivity in a two-country DSGE model. Such shocks are found to exert sizeable e¤ects on the current account positions of countries. Moreover, the e¤ects are highly heterogeneous across countries, for instance following a 10 percent shock to domestic equity prices relative to the rest of the world the US trade balance will worsen by 1.0 percentage points, but much less so for most other economies. We …nd that this heterogeneity appears to be linked to the …nancial market depth and equity home bias of countries. Moreover, the channels via wealth e¤ects and via the real exchange rate are important for understanding the heterogeneity in the transmission.

Journal of Monetary Economics, 2012

Non-technical summary 1 Introduction 2 Time variation in wage dynamicsempirical evidence 2.1 A Ba... more Non-technical summary 1 Introduction 2 Time variation in wage dynamicsempirical evidence 2.1 A Bayesian VAR with time-varying parameters 2.2 Wage indexation over timesome reduced form evidence 2.3 Impact of technology shocksstylized facts 3 Explaining the stylized facts 3.1 Interpretation of the evidence 3.2 Dynamic effects of technology shocks in a DSGE model

Journal of Economic Theory, 2008

This paper argues that limited asset market participation is crucial in explaining U.S. macroecon... more This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. In an otherwise conventional sticky-price model, standard aggregate demand logic is inverted at low enough asset market participation: interest rate increases become expansionary; passive monetary policy ensures equilibrium determinacy and maximizes welfare. This suggests that Federal Reserve policy in the pre-Volcker era was better than conventional wisdom implies. We provide empirical evidence consistent with this hypothesis, and study the relative merits of changes in structure and shocks for reproducing the conquest of the Great In ‡ation and the Great Moderation.

views expressed in this paper are those of the authors and do not necessarily reflect those of th... more views expressed in this paper are those of the authors and do not necessarily reflect those of the ECB, the Eurosystem, any institutions with which the authors are affiliated, or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

SSRN Electronic Journal, 2013

Are capital controls and macroprudential measures successful in achieving their objectives? Asses... more Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures from 2009 to 2011 for 60 countries. Results show that macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals-but most popular measures are not "good for" accomplishing their stated aims.

SSRN Electronic Journal, 2012

The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy ... more The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy measures since 2007. First, we find that Fed measures in the early phase of the crisis (QE1), but not since 2010 (QE2), were highly effective in lowering sovereign yields and raising equity markets in the US and globally across 65 countries. Yet Fed policies functioned in a pro-cyclical manner for capital flows to EMEs and a counter-cyclical way for the US, triggering a portfolio rebalancing across countries out of emerging markets (EMEs) into US equity and bond funds under QE1, and in the opposite direction under QE2. Second, the impact of Fed operations, such as Treasury and MBS purchases, on portfolio allocations and asset prices dwarfed those of Fed announcements, underlining the importance of the market repair and liquidity functions of Fed policies. Third, we find no evidence that FX or capital account policies helped countries shield themselves from these US policy spillovers, but rather that responses to Fed policies are related to country risk. The results thus illustrate how US monetary policy since 2007 has contributed to portfolio reallocation as well as a repricing of risk in global financial markets.

SSRN Electronic Journal, 2013

The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy ... more The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy measures. First, we find that Fed measures in the early phase of the crisis (QE1) were highly effective in lowering sovereign yields and raising equity markets, especially in the US relative to other countries. Fed measures since 2010 (QE2) boosted equities worldwide, while they had muted impact on yields across countries. Yet Fed policies functioned in a procyclical manner for capital flows to emerging markets (EMEs) and a counter-cyclical way for the US, triggering a portfolio rebalancing across countries out of EMEs into US equity and bond funds under QE1, and in the opposite direction under QE2. Second, the impact of Fed operations, such as Treasury and MBS purchases, on portfolio allocations and asset prices dwarfed those of Fed announcements, underlining the importance of the market repair and liquidity functions of Fed policies. Third, we find no evidence that FX or capital account policies helped countries shield themselves from these US policy spillovers, but rather that responses to Fed policies are related to country risk. The results thus illustrate how US unconventional measures have contributed to portfolio reallocation as well as a re-pricing of risk in global financial markets.

Journal of Economic Dynamics and Control, 2012

Recent estimates of the output Euler equation for the United States indicate that the elasticity ... more Recent estimates of the output Euler equation for the United States indicate that the elasticity of aggregate demand to interest rates is not significantly different from zero. We first argue that this result may hide a structural break: the estimated elasticity is a convolution of two coefficients with opposite signs across the samples 1965-1979 and 1982-2003. The sign of the coefficient in the earlier sample is inconsistent with standard economic theory and intuition. We outline a model with limited asset markets participation that can generate this change in sign when asset market participation changes from low to high, and provide institutional evidence for such a change in the United States in the late 70s and early 80s.

The paper shows that monetary policy shocks exert a substantial effect on the size and compositio... more The paper shows that monetary policy shocks exert a substantial effect on the size and composition of capital flows and the trade balance for the United States, with a 100 basis point easing raising net capital inflows and lowering the trade balance by 1% of GDP, and explaining about 20-25% of their time variation. Monetary policy easing causes positive returns

The views expressed in this paper are those of the author(s) only, and the presence of them, or o... more The views expressed in this paper are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the paper.

The paper analyses the relationship between asset prices and current account positions for a broa... more The paper analyses the relationship between asset prices and current account positions for a broad set of 42 industrialized and emerging market countries. It presents a small two-country DSGE model, which models asset price shocks as news shocks to expectations about future fundamentals, in order to derive identi…cation restrictions, and uses a Bayesian VAR with sign restrictions to empirically test for their e¤ect. Such shocks are found to exert sizeable e¤ects on the current account positions of countries. Moreover, the e¤ects are highly heterogeneous across countries, for instance with a 10% shock to domestic equity prices relative to the rest of the world worsening the US trade balance by 1.2 percentage points, but much less so for most other economies. We …nd that this heterogeneity appears to be linked to the …nancial market depth and equity home bias of countries. Moreover, the channels via wealth e¤ects and via the real exchange rate are important for understanding the heterogeneity in the transmission.

The views expressed in this paper are those of the author(s) only, and the presence of them, or o... more The views expressed in this paper are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the paper.

The World Economy, 2011

NON-TECHNICAL SUMMARY 5 4 ESTIMATING THE POTENTIAL CONSEQUENCES OF A PROTECTIONIST BACKLASH: REVI... more NON-TECHNICAL SUMMARY 5 4 ESTIMATING THE POTENTIAL CONSEQUENCES OF A PROTECTIONIST BACKLASH: REVIEW OF THE LITERATURE AND SIMULATION RESULTS 3 3 4.1 Protectionism of trade in goods: a brief review of the literature 33 4.2 Assessing the macroeconomic effects of protectionism: a scenario analysis using the multi-country version of the ECB's New Area-Wide Model 34 4.3 Impact on competitiveness 37 4.4 Financial protectionism 42 5 CONCLUSIONS 4 4 REFERENCES 4 5 EUROPEAN CENTRAL BANK OCCASIONAL PAPER SERIES SINCE 2008 5 0 LIST OF BOXES Box 1 Institutional arrangements regulating international trade 11 Box 2 Mechanisms of fi rms' adjustments to a change in trade barriers 41

The World Economy, 2010

A view of global imbalances from the fi nancial angle 29 4.1.2 Global economic and fi nancial int... more A view of global imbalances from the fi nancial angle 29 4.1.2 Global economic and fi nancial integration 31 4.1.3 The role of institutions and fi nancial development 33 4.1.4 Financial imperfections and precautionary savings 34 4.1.5 Business cycle moderation, economic policies and precautionary savings 36 4.2 Cyclical factors 37 4.2.1 Private sector savings/ investment imbalances 38 4.2.2 Public sector savings/ investment imbalances 41 5 CONCLUSION 4 4 REFERENCES 4 6 EUROPEAN CENTRAL BANK OCCASIONAL PAPER SERIES 50 BOX A review of past episodes of global imbalances 15 4

American Economic Review, 2012

How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We... more How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.

Review of Economics of the Household, 2007

The diversity of potential relationships between child labor and health makes the empirical disen... more The diversity of potential relationships between child labor and health makes the empirical disentanglement of the causal relationship a difficult exercise. This paper examines the long run impact of child labour on health by controlling for unobserved household specific characteristics. In order to control for the unobserved households specific effect, we estimate a conditional fixed effect model using data on siblings constructed from the Guatemalan National Survey of Living Condition. The estimation results reinforce the conventional wisdom that child labor is harmful for health in the long run. The results can be interpreted as a lower bound of the true impact since healthier children are most likely to offer themselves for employment and to be appointed. Keywords Child labor AE Health AE Conditional fixed effects logit JEL Classifications I12 AE J13 AE R20 1 Introduction International conventions define activities that children should not be allowed to carry out also in terms of the consequences of such activities rather than on The views expressed in this paper are those of the authors and do not necessarily represent those of IMF and IMF policy.

Journal of Money, Credit and Banking, 2013

We analyze the relationship between asset prices and current account positions estimating a Bayes... more We analyze the relationship between asset prices and current account positions estimating a Bayesian VAR for a broad set of 42 industrialized and emerging market countries. To derive model-based identifying restrictions, we model asset price shocks as news shocks about future productivity in a two-country DSGE model. Such shocks are found to exert sizeable e¤ects on the current account positions of countries. Moreover, the e¤ects are highly heterogeneous across countries, for instance following a 10 percent shock to domestic equity prices relative to the rest of the world the US trade balance will worsen by 1.0 percentage points, but much less so for most other economies. We …nd that this heterogeneity appears to be linked to the …nancial market depth and equity home bias of countries. Moreover, the channels via wealth e¤ects and via the real exchange rate are important for understanding the heterogeneity in the transmission.

Journal of Monetary Economics, 2012

Non-technical summary 1 Introduction 2 Time variation in wage dynamicsempirical evidence 2.1 A Ba... more Non-technical summary 1 Introduction 2 Time variation in wage dynamicsempirical evidence 2.1 A Bayesian VAR with time-varying parameters 2.2 Wage indexation over timesome reduced form evidence 2.3 Impact of technology shocksstylized facts 3 Explaining the stylized facts 3.1 Interpretation of the evidence 3.2 Dynamic effects of technology shocks in a DSGE model

Journal of Economic Theory, 2008

This paper argues that limited asset market participation is crucial in explaining U.S. macroecon... more This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. In an otherwise conventional sticky-price model, standard aggregate demand logic is inverted at low enough asset market participation: interest rate increases become expansionary; passive monetary policy ensures equilibrium determinacy and maximizes welfare. This suggests that Federal Reserve policy in the pre-Volcker era was better than conventional wisdom implies. We provide empirical evidence consistent with this hypothesis, and study the relative merits of changes in structure and shocks for reproducing the conquest of the Great In ‡ation and the Great Moderation.