The 2022 Energy Crisis: horizontal and vertical impacts of policy interventions in Australia’s National Electricity Market
The war in Ukraine and the associated 2022 energy crisis has had far-reaching effects with seaborne prices for coal and gas reaching multiples (5-6x) of their historic averages. While Europe was the epicentre, countries as far away as Australia were impacted. As a major exporter of coal and gas, domestic markets are linked to seaborne prices. Consequently, forward prices for 2023 delivery in Australia’s National Electricity Market surged from ~$48 in 2021 to $156/MWh in 2022 at one point peaking at $247/MWh. Household electricity tariffs were set to in-crease by 11% in 2023 and 35% in 2024. In late-2022, the Commonwealth Government intervened by setting fuel price caps of $125/t and $..
Energy EconomicsTechnology Boom, Labor Reallocation, and Human Capital Depreciation
We study the long-run effect on productivity of labor reallocation during a technology boom. Using French matched employer-employee data, we examine the large cohort of workers who enter the information and communication technology sector during the late 1990s boom. Despite starting with 5% higher wages, these workers experience lower wage growth and end up with 6% lower wages fifteen years out, relative to similar workers who started in other sectors. The long-run wage discount is concentrated on STEM occupations, consistent with a skill obsolescence mechanism. Other moments of the wage distribution are inconsistent with selectioneffects and negative demand shocks.
MacroeconomicsStrong Demand, Limited Supply, and Rising Prices: The Economics of Pandemic-Era Housing
The Federal Reserve Bank of Cleveland regularly surveys a broad cross-section of businesses in the region it serves and convenes business advisory councils in eight of the region’s major metropolitan areas. The information collected through these surveys and conversations points to trends that are not yet apparent in the data and fills gaps in researchers’ understanding of our region’s economy. The information is helpful to Federal Reserve policymakers during their discussions about the nation’s monetary policy. Anecdotes herein have been edited for length and clarity.
Urban and Real Estate EconomicsA market-design response to the European energy crisis
Due to surges in gas and electricity prices in Europe, many households will struggle to heat their homes this winter. This paper provides high-level guidance on designing a relief policy in a way that optimally trades off equity and efficiency. We argue that, contrary to conventional economic intuitions, an optimal policy may involve directly controlling prices. Because governments do not have perfect information about households' needs, price controls could improve the targeting of relief through screening out the most vulnerable by offering them discounts for reducing consumption. This could be achieved by “threshold price caps" that lower the price of all energy units below some con..
Energy EconomicsFiscal Situation of General Government: Net Lending/borrowing for Palau
Percent of Fiscal Year GDP, Annual, Not Seasonally Adjusted
FRED > Economic DataBoard Gender Diversity and the Cost of Equity: What difference does gender quota legislation make?
This study examines the relationship between women directors and the cost of equity (COE). Investigating the French firm's sample, we find a significant negative effect of women directors on the cost of equity. Our results also document that the effect of women directors on reducing the cost of equity is significant for firms that have a critical mass of at least four women directors. Using the difference-in-difference (DID) and propensity score matching (PSM) approach, we find that the relationship between female directors and lower equity costs is significant for the period following the Copé–Zimmermann gender quota law. The results show that women directors' presence on corporate board..
Law and EconomicsModelling physical activity profiles in COPD patients: a new approach to variable-domain functional regression models
Motivated by the increasingly common technology for collecting data, like cellphones, smartwatches, etc, functional data analysis has been intensively studied in recent decades, and along with it, functional regression models. However, the majority of functional data methods in general and functional regression models, in particular, are based on the fact that the observed datapresent the same domain. When the data have variable domain it needs to be aligned or registered in order to be fitted with the usual modeling techniques adding computational burden. To avoid this, a model that contemplates the variable domain features of the data is needed, but this type of models are scarce and its e..
EconometricsDifference-in-Differences via Common Correlated Effects
We study the effect of treatment on an outcome when parallel trends hold conditional on an interactive fixed effects structure. In contrast to the majority of the literature, we propose identification using time-varying covariates. We assume the untreated outcomes and covariates follow a common correlated effects (CCE) model, where the covariates are linear in the same common time effects. We then demonstrate consistent estimation of the treatment effect coefficients by imputing the untreated potential outcomes in post-treatment time periods. Our method accounts for treatment affecting the distribution of the control variables and is valid when the number of pre-treatment time periods is sma..
EconometricsThe Importance of Sound Monetary Policy: Some Lessons for Today from Canada’s Experience with Floating Exchange Rates since 1950
In this paper we revisit the Canadian experience with floating exchange rates since 1950. Canada was a pioneer in successfully adopting a floating exchange rate during the Bretton Woods pegged exchange rate regime. Since then, most advanced countries have followed the Canadian example. A key finding of our paper based on historical narrative and econometric analysis is that economic performance under floating depended on its monetary policy performance as Milton Friedman originally argued in his seminal 1953 article making the case for floating exchange rates. Canadian monetary policy achieved low and stable inflation once it adopted inflation targeting as a nominal anchor. Also, Canadaâ€..
Monetary EconomicsThe Importance of Sound Monetary Policy: Some Lessons for Today from Canada’s Experience with Floating Exchange Rates since 1950
In this paper we revisit the Canadian experience with floating exchange rates since 1950. Canada was a pioneer in successfully adopting a floating exchange rate during the Bretton Woods pegged exchange rate regime. Since then, most advanced countries have followed the Canadian example. A key finding of our paper based on historical narrative and econometric analysis is that economic performance under floating depended on its monetary policy performance as Milton Friedman originally argued in his seminal 1953 article making the case for floating exchange rates. Canadian monetary policy achieved low and stable inflation once it adopted inflation targeting as a nominal anchor. Also, Canadaâ€..
Business, Economic and Financial HistoryThe Importance of Sound Monetary Policy: Some Lessons for Today from Canada’s Experience with Floating Exchange Rates since 1950
In this paper we revisit the Canadian experience with floating exchange rates since 1950. Canada was a pioneer in successfully adopting a floating exchange rate during the Bretton Woods pegged exchange rate regime. Since then, most advanced countries have followed the Canadian example. A key finding of our paper based on historical narrative and econometric analysis is that economic performance under floating depended on its monetary policy performance as Milton Friedman originally argued in his seminal 1953 article making the case for floating exchange rates. Canadian monetary policy achieved low and stable inflation once it adopted inflation targeting as a nominal anchor. Also, Canadaâ€..
Open Economy MacroeconomicsSovereign Risk and Dutch Disease
I study how, in the presence of default risk, the Dutch disease amplifies an inefficiency in the sectoral allocation of capital. I develop a sovereign default model with production of tradable and non-tradable goods, and endowments of commodities. Default incentives increase when more capital is allocated to non-traded production. Households do not internalize this effect, giving rise to over-investment in the non-traded sector. Commodity windfalls amplify this inefficiency through the classic Dutch disease mechanism and an increased desire to borrow. Policies that reduce the returns of non-traded capital, such as exchange rate sterilization, ameliorate the degree of over-investment during c..
Open Economy MacroeconomicsExpansionary Fiscal Consolidation Under Sovereign Risk
We study how debt limits can be expansionary in economies facing sovereign risk. We develop a sovereign debt model with capital accumulation, long-term debt, and fiscal rules that features two distortions: debt dilution and a pecuniary externality of private investment on spreads. The optimal debt limit increases capital accumulation due to lower sovereign risk, generating an economic expansion in the long run. Welfare gains are a result of lower sovereign spreads due to expectations about future borrowing and investment. We present evidence of a positive (negative) relation between debt limits and investment (spreads), consistent with the predictions of the model.
Open Economy MacroeconomicsUnderinvestment and Capital Misallocation Under Sovereign Risk
Capital and its sectoral allocation affect default incentives. Under general assumptions, default risk is decreasing in the total stock of capital and increasing in the share of capital allocated to non-tradable production. This implies that when competitive households make all investment decisions capital has two externalities: a capital-stock externality and a portfolio externality. These hamper the ability of a benevolent government to make optimal borrowing and default decisions and are exacerbated during periods of distress. Competitive equilibria feature underinvestment, larger non-traded sectors, more default, and lower debt and consumption than a centralized planner's allocation. Sel..
Open Economy MacroeconomicsThe Sovereign Default Risk of Giant Oil Discoveries
I study the impact of giant oil field discoveries on default risk. I document that interest rate spreads of emerging economies increase by 1.3 percentage points following a discovery of median size. I develop a sovereign default model with investment, three-sector production, and oil discoveries. Following a discovery, borrowing and investment increase. Capital reallocates from manufacturing toward oil and non-traded sectors, increasing the volatility of tradable income. Borrowing increases default risk and higher volatility increases the risk premium, both of which increase spreads. Discoveries generate welfare gains of 0.44 percent. Insurance against low oil prices increases these gains to..
Open Economy MacroeconomicsNavigating by Falling Stars:Monetary Policy with Fiscally Driven Natural Rates
We study a new type of monetary-fiscal interaction in a heterogeneous-agent New Keynesian model with a fiscal block. Due to household heterogeneity, the stock of public debt affects the natural interest rate, forcing the central bank to adapt its monetary policy rule to the fiscal stance to guarantee that inflation remains at its target. There is, however, a minimum level of debt below which the steady-state inflation deviates from its target due to the zero lower bound on nominal rates. We analyze the response to a debt-financed fiscal expansion and quantify the impact of different timings in the adaptation of the monetary policy rule, as well as the performance of alternative monetary poli..
Monetary EconomicsHealthcare system efficiency and drivers: Re-evaluation of OECD countries for COVID-19
The Covid-19 pandemic has raised concerns about the resilience of health systems. The aim of this study is twofold: i) to measure and compare the resilience of health system efficiency of OECD countries before and during Covid-19 and ii) to determine the healthcare efficiency drivers (e.g., socioeconomic) of health system performance. Using a dataset of 31 OECD countries for 2018 and 2020, we first estimate bias-adjusted efficiency scores, followed by a double bootstrap truncated regression procedure to study the drivers associated with health system efficiency. We find that the health system efficiency overall score decreased among OECD countries during the Covid-19 pandemic compared to bef..
Health EconomicsHealthcare system efficiency and drivers: Re-evaluation of OECD countries for COVID-19
The Covid-19 pandemic has raised concerns about the resilience of health systems. The aim of this study is twofold: i) to measure and compare the resilience of health system efficiency of OECD countries before and during Covid-19 and ii) to determine the healthcare efficiency drivers (e.g., socioeconomic) of health system performance. Using a dataset of 31 OECD countries for 2018 and 2020, we first estimate bias-adjusted efficiency scores, followed by a double bootstrap truncated regression procedure to study the drivers associated with health system efficiency. We find that the health system efficiency overall score decreased among OECD countries during the Covid-19 pandemic compared to bef..
Transition EconomicsLost in the green transition? Measurement and stylized facts
Greening the economy entails jobs contracting in “high-polluting” economic activities and expanding in environment-friendly activities. Minimizing the corresponding transition costs is crucial to accelerate decarbonisation and reduce displacement...
OECD > Economics Department Working PapersA new measurement approach for identifying high-polluting jobs across European countries
This paper develops a novel classification of high-polluting occupations for a large sample of European countries. Unlike previous efforts in the literature, the classification exploits country-level data on air polluting emission intensity by...
OECD > Economics Department Working PapersAchieving the transition to net zero in Australia
Australia has committed to achieving net zero greenhouse gas emissions by 2050 and more recently outlined a more ambitious intermediate target for emission reductions by 2030. However, achieving these targets will be challenging given a historical...
OECD > Economics Department Working PapersFully realising the economic potential of women in Australia
Gender inequalities in Australia have steadily declined, but remain particularly visible in the labour market. Women in Australia have lower employment rates, hourly wages and hours worked than their male counterparts. Childbirth is particularly...
OECD > Economics Department Working PapersAddressing demographic headwinds in Japan: A long-term perspective
Japan faces serious demographic headwinds. Under current fertility, employment and immigration rates, the population would fall by 45% by 2100 and employment by 52%. Given the challenges of a shrinking and ageing population, the government has...
OECD > Economics Department Working Papers