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This paper uses a structural vector autoregression representation of the Mundell-Flemming model to analyze the determinants of movements in Sweden’s real exchange rate. It finds that, while (supply and demand) shocks account for over 60 percent of the forecast error variance, comparable to several Economic and Monetary Union (EMU) countries, demand shocks account for a higher fraction of these real shocks in Sweden than in those core countries. If real demand shocks result from controllable macroeconomic policies, the cost of relinquishing the exchange rate is no higher, and may be lower, for Sweden than for most core EMU countries.

Foreign Exchange --- Macroeconomics --- Economic Theory --- International Finance: General --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Macroeconomics: Consumption --- Saving --- Wealth --- Currency --- Foreign exchange --- Economic theory & philosophy --- Real exchange rates --- Supply shocks --- Exchange rates --- Government consumption --- Real effective exchange rates --- Economic theory --- National accounts --- Supply and demand --- Consumption --- Economics --- Sweden

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This paper studies the effects of demand and supply shocks in the global crude oil market on several measures of countries' external balance, including the oil and non-oil trade balances, the current account, and changes in net foreign assets (NFA) during 1975-2004. We explicitly take a global perspective. In addition to the U.S., the Euro area and Japan, we consider a number of country groups including oil exporters and middle-income oil-importing economies. We find that the effect of oil shocks on the merchandise trade balance and the current account, which depending on the source of the shock can be large, depends critically on the response of the nonoil trade balance, and differs systematically between the U.S. and other oil importing countries. Using the Lane-Milesi-Ferretti NFA data set, we document the presence of large and systematic (if not always statistically significant) valuation effects in response to oil shocks, not only for the U.S., but also for other oil-importing economies and for oil exporters. Our estimates suggest that increased international financial integration will tend to cushion the effect of oil shocks on NFA positions for major oil exporters and the U.S., but may amplify it for other oil importers.

Investments: Energy --- Exports and Imports --- Macroeconomics --- Economic Theory --- Energy: General --- Energy: Demand and Supply --- Prices --- Empirical Studies of Trade --- Agriculture: Aggregate Supply and Demand Analysis --- Fiscal Policy --- Investment & securities --- International economics --- Economic theory & philosophy --- Oil --- Oil prices --- Trade balance --- Supply shocks --- Fiscal stance --- Petroleum industry and trade --- Balance of trade --- Supply and demand --- Fiscal policy --- United States

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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

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Building on recent work on the role of speculation and inventories in oil markets, we embed a competitive oil storage model within a DSGE model of the U.S. economy. This enables us to formally analyze the impact of a (speculative) storage demand shock and to assess how the effects of various demand and supply shocks change in the presence of oil storage facility. We find that business-cycle driven oil demand shocks are the most important drivers of U.S. oil price fluctuations during 1982-2007. Disregarding the storage facility in the model causes a considerable upward bias in the estimated role of oil supply shocks in driving oil price fluctuations. Our results also confirm that a change in the composition of shocks helps explain the resilience of the macroeconomic environment to the oil price surge after 2003. Finally, speculative storage is shown to have a mitigating or amplifying role depending on the nature of the shock.

Business & Economics --- Industries --- Petroleum products --- Prices --- Econometric models. --- Storage. --- Mazut --- Petroleum --- Hydraulic fluids --- Refining --- Prices&delete& --- Econometric models --- Storage --- E-books --- Investments: Energy --- Inflation --- Macroeconomics --- Economic Theory --- General Aggregative Models: Keynes --- Keynesian --- Post-Keynesian --- Energy and the Macroeconomy --- Energy: Demand and Supply --- Energy: General --- Commodity Markets --- Price Level --- Deflation --- Agriculture: Aggregate Supply and Demand Analysis --- Investment & securities --- Economic theory & philosophy --- Oil prices --- Oil --- Commodity price fluctuations --- Supply shocks --- Commodities --- Economic theory --- Petroleum industry and trade --- Supply and demand --- United States