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In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector. Numerical simulations are performed using stylized Chinese data, and banks failures are generated through increases in the growth rate of the labor force, a revaluation of the exchange rate or an increase in debt issue to finance the government deficit, as compared to a benchmark scenario in which banks remain solvent. Thus bank failures can result from what might seem to be either beneficial economic trends, or correct monetary and fiscal policies. We introduce fiscal policies that modify relative factor prices by lowering the capital tax rate and increasing the tax rate on labor. Such policies can prevent banking failures by raising the return to capital. It is shown that such fiscal policies are, in the short run, welfare reducing.

Bank failures. --- Electronic books. -- local. --- Fiscal policy. --- Finance --- Business & Economics --- Banking --- Tax policy --- Taxation --- Failure of banks --- Government policy --- Economic policy --- Finance, Public --- Business failures --- Banks and Banking --- Budgeting --- Exports and Imports --- Public Finance --- Industries: Financial Services --- International Investment --- Long-term Capital Movements --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- National Budget --- Budget Systems --- Debt --- Debt Management --- Sovereign Debt --- Financial Institutions and Services: General --- Budgeting & financial management --- Public finance & taxation --- Foreign direct investment --- Budget planning and preparation --- Government debt management --- Distressed institutions --- Investments, Foreign --- Banks and banking --- Budget --- Debts, Public --- Financial services industry --- China, People's Republic of

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Zonder onderwerpscode: economie

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The U.S. Personal Saving Rate.

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This paper estimates the change in policy multipliers in the U.S. relative to their pre-2008 financial crisis levels using an augmented Blanchard-Perotti model to allow for the dynamic effects of shocks to the central bank balance sheet, real interest rates and debt levels on economic activity. Given the elevated debt level and significantly larger central bank balance sheet in the U.S. after 2008, the paper estimates the likely impact of new stimulus packages. We find that expenditure multipliers have fallen post-2008 crisis because of higher government debt, implying that the effectiveness of fiscal policy has declined. The analysis also investigates the impact of quantitative easing. The results suggest that it is beneficial, but requires sizable balance sheet interventions to lead to noticeable effects on real GDP. The results are used to assess the impact of the policy packages to address COVID-19. Because of rising debt stocks, dealing with a crisis is becoming more and more costly despite the current low interest rate environment.

Business and Economics --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Currency crises --- Economic & financial crises & disasters --- Economic sectors --- Economics of specific sectors --- Economics --- Economics: General --- Financial crises --- Fiscal Policy --- Informal sector --- International Economics --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Macroeconomics --- Model Construction and Estimation --- Stabilization --- Treasury Policy

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This paper tests whether Japan's key macro policy multipliers have declined since 2013, the year that Japan introduced Qualitative and Quantitative Easing. We use the augmented Blanchard-Perotti structural VAR model introduced in Ouliaris and Rochon (2021) to study the dynamic effects of shocks in the central bank’s asset holdings, interest rates, and debt levels relative to GDP on economic activity in Japan. We find that both the expenditure and tax multipliers of Japan have fallen, implying that the effectiveness of fiscal policy in Japan declined following the change in monetary policy. Moreover, we find that the efficacy of quantitative easing is small, implying the need for huge interventions to have a significant effect on real GDP, and that the effectiveness of quantitative easing has declined since 2013. We argue that the reduction in policy multipliers can be attributed to the upward trend in the government debt level relative to GDP which, despite historically low interest rates, has increased Japan’s structural deficit, and the likelihood of reduced expenditures and higher taxes going forward.

Banking --- Banks and Banking --- Budget --- Budgeting & financial management --- Budgeting --- Central bank balance sheet --- Central Banks and Their Policies --- Central banks --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Currency crises --- Debt Management --- Debt --- Debts, Public --- Econometrics --- Economic & financial crises & disasters --- Economics of specific sectors --- Economics --- Economics: General --- Expenditure --- Expenditures, Public --- Finance --- Financial services --- Fiscal Policy --- Informal sector --- Interest rates --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Macroeconomics --- Model Construction and Estimation --- Monetary economics --- Money and Monetary Policy --- National Government Expenditures and Related Policies: General --- Public debt --- Public finance & taxation --- Public Finance --- Public financial management (PFM) --- Real interest rates --- Sovereign Debt --- Stabilization --- Tax expenditures --- Taxation, Subsidies, and Revenues: Other Sources of Revenue --- Treasury Policy