January 2016 calls for papers

January 27, 2016

It is time to submit to the Summer conferences!

Third African Search and Matching Workshop, Marrakech, 26-27 May 2016.

Tsinghua Workshop in Macroeconomics, Beijing, 17-19 June 2016.

Shanghai Macroeconomics Workshop, Shanghai, 25-27 June 2016.

Society for Computational Economics Meeting, Bordeaux, 26-28 June 2016.

Society for Economic Dynamics Meeting, Toulouse, 30 June-2 July 2016.

Carnegie-Rochester-NYU Conference on Public Policy on “The Macroeconomics of Liquidity in Capital Markets and the Corporate Sector”, Pittsburgh, 11-12 November 2016.


Financing Constraints, Radical versus Incremental Innovation, and Aggregate Productivity

January 26, 2016

By Andrea Caggese


I provide new empirical evidence on a negative relation between financial frictions and productivity growth over firms’ life cycle. I show that a model of firm dynamics with incremental innovation cannot explain such evidence. However also including radical innovation, which is very risky but potentially very productive, allows for joint replication of several stylized facts about the dynamics of young and old firms and of the differences in productivity growth in industries with different degrees of financing frictions. These frictions matter because they act as a barrier to entry that reduces competition and the risk taking of young firms.

After the last recessions, many people have called for adding frictions in the financial sector and for reducing risk-taking. This paper seems to be advocating the exact opposite if we want to raise the productivity growth rate, which has indeed been lagging recently. Should the pendulum swing back now?

Declining Trends in the Real Interest Rate and Inflation: Role of aging

January 13, 2016

By Shigeru Fujita and Ippei Fujiwara


This paper explores a causal link between the aging of the labor force and declining trends in the real interest rate and inflation in Japan. We develop a new Keynesian search/matching model that features heterogeneities in age and firm-specific skill levels. Using the model, we examine the long-run implications of the sharp drop in labor force entry in the 1970s. We show that the changes in the demographic structure driven by the drop induce significant low-frequency movements in per-capita consumption growth and the real interest rate. They also lead to similar movements in the inflation rate when the monetary policy rule follows the standard Taylor rule, failing to recognize the time-varying nature of the natural rate of interest. The model suggests that the aging of the labor force accounts for roughly 40% of the decline in the real interest rate observed between the 1980s and 2000s in Japan.

Are interest rates, currently at record low levels in many countries, ever going to go back to “normal” levels? This depends not only on central bank policy but also on the level of the natural real interest rate. And there is no reason to believe that the latter should be constant. This paper shows that population aging can have a substantial impact on the natural real interest rate. Japan is used as an example because it is the first population to age substantially, and other industrialized economies have started to go through that process as well. There are thus likely to see a decrease in the natural real interest rate.