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This paper examines the comovement of prices with the cyclical component of output. It argues that determining the cyclical behavior of prices by applying the same stationarity-inducing transformation to the levels of both output and prices, and examining the correlations of the resulting series, can be misleading. A more appropriate procedure is to examine the correlations between the rate of inflation and the level of the cyclical component of output. In post-war U.S. data the correlations between similarly transformed price and output data are consistently and often strongly negative, as reported recently by a number of authors as evidence of countercyclical price behavior. The rate of inflation, however, is consistently and usually strongly positively correlated with various measures of the cyclical component of output.

Inflation --- Macroeconomics --- Economic Theory --- Price Level --- Deflation --- Business Fluctuations --- Cycles --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Economic theory & philosophy --- Economic growth --- Supply shocks --- Business cycles --- Sticky prices --- Economic theory --- Supply and demand --- United States

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The effect of membership of the ERM on macroeconomic performance is analyzed using vector autoregression techniques. The results indicate that while the ERM has had little effect on the nature of the shocks hitting the economies, it has had a significant effect on the response of member countries to these shocks. In addition, long-time members of the ERM have significantly more correlated shocks than other countries. These results conform to the thesis that the ERM represents a move by countries with relatively similar underlying shocks to coordinate macroeconomic policy.

Agriculture: Aggregate Supply and Demand Analysis --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Conventional peg --- Currency --- Economic theory & philosophy --- Economic Theory --- Economic theory --- Exchange rate arrangements --- Exchange rate flexibility --- Financial Aspects of Economic Integration --- Floating exchange rates --- Foreign Exchange --- Foreign exchange --- International Monetary Arrangements and Institutions --- Prices --- Stabilization --- Supply and demand --- Supply shocks --- Treasury Policy --- United States

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This paper considers the extent to which the North American Free Trade Area (NAFTA) meets the criteria for a common currency area. NAFTA is compared with the EC, a regional grouping for which initial plans for a monetary union are already in place. Most of the anticipated benefits from a monetary union in the EC apply with equal force to NAFTA. However, because the underlying disturbances are more diverse across members of NAFTA, the costs of abandoning the exchange rate instrument are likely to be higher. This is particularly true when NAFTA is compared to the EC’s continental core.

Agriculture: Aggregate Supply and Demand Analysis --- Conventional peg --- Currency --- Economic Integration --- Economic integration --- Economic theory & philosophy --- Economic Theory --- Economic theory --- Exchange rates --- Exports and Imports --- Financial Aspects of Economic Integration --- Foreign Exchange --- Foreign exchange --- Government and the Monetary System --- International economic integration --- International economics --- International Monetary Arrangements and Institutions --- Monetary Systems --- Monetary unions --- Payment Systems --- Prices --- Regimes --- Standards --- Supply and demand --- Supply shocks --- Canada

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Reconciling the high frequency of price changes at the micro level and their apparent rigidity at the aggregate level has been the subject of considerable debate in macroeconomics recently. In this paper I show that incorporating production chains in a standard New- Keynesian model replicates two stylized facts about the data. First, sectoral prices respond with significantly different speeds to aggregate shocks. Meanwhile, the responses to sectorspecific shocks are similar. Second, the standard price setting models are unable to quantitatively match the amount of monetary non-neutrality observed in the data. I argue, First, that the input-output linkages in production generate different responses to aggregate shocks across sectors. Second, calibrating this model to the US data can create five times more monetary non-neutrality in response to nominal shocks compared to an equivalent homogeneous economy with intermediate inputs. Finally, the model implies that upstream industries respond faster to aggregate shocks compared to downstream industries. I show that this prediction is supported by the data.

Prices --- Cost. --- Government policy. --- Costs (Economics) --- Expenses --- Economics --- Contingent fees --- Government price policy --- Wage-price policy --- Macroeconomics --- Economic Theory --- Price Level --- Inflation --- Deflation --- Macroeconomics: Consumption --- Saving --- Wealth --- Energy: Demand and Supply --- Agriculture: Aggregate Supply and Demand Analysis --- Economic theory & philosophy --- Price adjustments --- Consumption --- Oil prices --- Supply shocks --- Sticky prices --- Supply and demand --- United States

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We estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost-minimization and measure each firm’s liquidity shortfall during and after COVID-19. Our framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. We estimate a large increase in the failure rate of SMEs under COVID-19 of nearly 9 percentage points, ab-sent government support. Accommodation & Food Services, Arts, Entertainment & Recreation, Education, and Other Services are among the most affected sectors. The jobs at risk due to COVID-19 related SME business failures represent 3.1 percent of private sector employment. Despite the large impact on business failures and employment, we estimate only moderate effects on the financial sector: the share of Non Performing Loans on bank balance sheets would increase by up to 11 percentage points, representing 0.3 percent of banks’ assets and resulting in a 0.75 percentage point decline in the common equity Tier-1 capital ratio. We evaluate the cost and effectiveness of various policy interventions. The fiscal cost of an intervention that narrowly targets at risk firms can be modest (0.54% of GDP). However, at a similar level of effectiveness, non-targeted subsidies can be substantially more expensive (1.82% of GDP). Our results have important implications for the severity of the COVID-19 recession, the design of policies, and the speed of the recovery.

Labor --- Macroeconomics --- Economic Theory --- Diseases: Contagious --- Health Behavior --- Labor Economics: General --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Demand and Supply of Labor: General --- Wages, Compensation, and Labor Costs: General --- Infectious & contagious diseases --- Labour --- income economics --- Economic theory & philosophy --- COVID-19 --- Supply shocks --- Labor supply --- Wages --- Health --- Economic theory --- Communicable diseases --- Labor economics --- Supply and demand --- Labor market --- Czech Republic