AUT School of Economics
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The AUT School of Economics has an established record and an on-going commitment to excellent research, high-quality supervision, and community and professional engagement. Members of the School sit on editorial boards and serve as referees for professional journals. The school has particular research strength in; Micro and macroeconomics, Econometrics, Industrial organisation, International trade and finance, Natural resource and environmental economics, Labour economics, Economic development, Health economics, and Public policy.
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- ItemMonetary Policy, Investment and Firm Heterogeneity(Elsevier, 2022-09-01) Vermeulen, P; Durante, E; Ferrando, AThis paper provides new evidence on the channels of monetary policy transmission combining 9 million observations on firm level investment and high-frequency identified monetary policy shocks. We show that the reaction of firms’ investment to a monetary policy shock is heterogeneous along dimensions that correspond to the two main channels of monetary policy transmission. First, we show that young firms are more sensitive to monetary policy shocks and that high leverage amplifies the effects, supporting the existence of a credit channel of monetary policy. Second, we document large cross-sectional heterogeneity related to the industry the firm operates in. We find that firms producing durable goods react more than others, which is consistent with traditional interest rate channel effects of monetary policy. Furthermore, this sectoral effect is longer lived. In line with the demand effects of the interest rate channel, we also provide evidence that sales growth of durables producing firms reacts stronger to a monetary policy shock.
- ItemDo You Know That I Know That You Know…? Higher-Order Beliefs in Survey Data(Oxford University Press (OUP), 2021-01-30) Kumar, S; Coibion, O; Gorodnichenko, Y; Ryngaert, JWe implement a new survey of firms, focusing on their higher-order macroeconomic expectations. The survey provides a novel set of stylized facts regarding the relationship between first-order and higher-order expectations of economic agents, including how they adjust their beliefs in response to a variety of information treatments. We show how these facts can be used to calibrate key parameters of noisy-information models with infinite regress as well as to test predictions made by this class of models. We also consider a range of extensions to the basic noisy-information model that can potentially better reconcile theory and empirics. Although some extensions like level-k thinking are unsuccessful, incorporating heterogeneous long-run priors can address the empirical shortcomings of the basic noisy-information model.
- ItemHappiness Lost: Was the Decision to Implement Lockdown the Correct One?(University of Pretoria, 2021-04-28)Background: Amid the rapid global spread of the coronavirus disease 2019 (COVID-19), many governments enforced country-wide lockdowns, likely with severe well-being consequences. The actions by governments triggered a debate on whether the costs of a lockdown, economically and in well-being, surpass the benefits perceived from a lower infection rate. Aim: To use the Gross National Happiness index (GNH), derived from Big Data, to investigate the determinants of happiness before and during the first few months of a lockdown in a country as an extreme case, South Africa (a country with low levels of well-being and stringent lockdown regulations). Next, to estimate (1) the probability of being happy during a pandemic year, before and after the implemented lockdown, relative to the mean happiness levels of the previous year, and (2) to utilise simulations to estimate the probability of being happy if there were no lockdown. Setting: This study considers the effect of government-mandated lockdown on happiness in South Africa. Methods: We use Big Data in the forms of Twitter and Google Trends to derive variables and ordinary least squares and ordered probit estimation methods. Results: What contributes to happiness under lockdown, except for COVID-19 cases, are the factors linked to the implemented regulations themselves. If we compare scenarios pre- and post-lockdown, we report a happiness cost of 9%. The simulations indicate that assuming there were no lockdown in 2020, the relative well-being gain is 3%. Conclusion: If policymakers want to increase happiness levels and the probability of achieving the same happiness levels as in 2019, they should consider factors related to the regulations that can increase happiness levels.
- ItemA Method to Analyze the Sectoral Impact of Fiscal Support for COVID-19 Affected Economies: The Case of Oceania(Elsevier, 2021-03-15) Badri Narayanan, G; Sen, R; Srivastava, S; Mathur, SIn this paper, we apply the method of computable general equilibrium (CGE) modeling in economics to ascertain how fiscal support measures such as wage subsidies, small business loans, and finance guarantee schemes have impacted at an economy-wide and sectoral level for 8 COVID-19 affected economies in Oceania. We model our scenarios based on IMF World economic outlook projections, combined with the fiscal stimulus packages offered to counter this global health pandemic's recessionary effect. Our study confirms that the adverse impact of COVID-19 on output is cushioned through a large fiscal stimulus package wherever offered. This package would still be inadequate to avoid unemployment and job losses in tourism and education services in Oceania, with continued support essential for their survival in 2021. • The approach entails steps (1) to (3), as outlined in the paper. • Future researchers will find this method useful in evaluating the adverse impact of not only COVID-19 but any other external shocks to the economy, either directly or indirectly, that involves fiscal support mechanisms.
- ItemImpacts of China's Emissions Trading Scheme on the National and Hong Kong Economies: A Dynamic Computable General Equilibrium Analysis(Frontiers Media SA, ) Wang, Y; Winchester, N; Webster, CJ; Nam, K-MIn this study, we estimate the economic impacts of China's official carbon-mitigation targets, in connection with Hong Kong's potential participation in a proposed national emissions trading scheme. We find that moderate intensity-reduction targets emulating China's pledged Paris Agreement commitment would incur much larger policy-compliance costs in Hong Kong (0.1–2.5% of baseline gross domestic product) than in Mainland China (0.1–0.7%) in each of the modeled years 2021 to 2030 when each economy operates its own independent carbon market. By comparison, an integrated carbon market enables Hong Kong to achieve the same reduction goal at up to 78% lower costs compared to an independent market, and this is achieved without significantly affecting the Mainland's economy. These savings in compliance costs for Hong Kong are greater when pre-integration local carbon prices in both economies are subject to a larger gap. Effectively, the cheaper pre-integration carbon prices in the Mainland indirectly subsidize the Hong Kong economy in the initial years of the integration scenario, buffering the policy shock. In sum, an integrated carbon market in China would improve overall efficiency at the national level, but the benefits are biased toward Hong Kong. This finding suggests that it is in the city's interest to play a more active role in cross-border collaboration on climate mitigation and emissions trading.