Research Outputs

Now showing 1 - 9 of 9
  • Publication
    The distributive cycle: Evidence and current debates
    (Wiley, 2022) ;
    Mendieta‐Muñoz, Ivan
    ;
    Rada, Codrina
    ;
    Tavani, Daniele
    ;
    von Arnim, Rudiger
    This paper surveys current debates on the distributive cycle. The literature builds on Goodwin's seminal 1967 chapter titled “A growth cycle.” We review theoretical motivations for the distributive cycle, which, despite significant differences, all imply that macroeconomic activity leads the labor share in a counterclockwise cycle in the activity‐labor share plane. Subsequently, we summarize and update evidence on the existence of a distributive cycle, with a focus on the post‐war U.S. macroeconomy. We analyze activity and labor share series and their interaction in the frequency domain, and also employ standard vector autoregressions. Results confirm the distributive cycle for the U.S. post‐war period. We contextualize results vis‐à‐vis current debates: (1) we consider a financial cycle, to rebut the theoretical possibility of “pseudo‐Goodwin” cycles, (2) demonstrate that a suppressed labor share and stagnation are compatible with short‐run Goodwin cycles, and argue that this link presents the way forward for research on secular stagnation.
  • Publication
    On the effect of short-run and long-run US economic expectations on oil and gold volatilities
    (Elsevier, 2024) ;
    Pino, Gabriel
    This paper investigates the effect of US Economic expectations on oil and gold volatilities, examining their formation across different time horizons. To this end, we compute expectations using a MS-VAR model from one (short run) to sixteen quarters ahead (long run). Then, we estimate the impact of an expectation shock on oil and gold volatility measures through an impulse response function estimating a VAR model from 1987Q1 to 2022Q1. Our results show that oil volatility is significantly affected by expectations in the short run, while gold volatility is affected by expectations in the long run. In particular, gold and oil volatilities exhibit a decrease following a positive expectation shock.
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    Publication
    The oil price (Ir)relevance for global CO2 emissions
    (Elsevier, 2024) ;
    Neudörfer, Pablo
    This study investigates the relationship between oil prices and global CO2 emissions under an instrumental variable research design. In the first stage, we take advantage of the global oil market model developed by Baumeister and Hamilton (2019) to produce exogenous shocks to the oil supply and global economic activity. In the second stage, we use these shocks to compute impulse responses to observed oil prices and CO2 emissions. Finally, based on the latter computations, we obtain the dynamic multiplier that measures the shock-specific effect driving a 1% increase in the oil price on the cumulative CO2 emissions. Our results reveal a nuanced relationship: not all increases in oil prices uniformly lead to a reduction in CO2 emissions. Reductions in CO2 emissions are predominantly observed when increases in oil prices are supply-driven, revealing a substitution effect from fossil fuel to renewable energies in the energy market. However, CO2 emissions increase when oil prices are higher during times with positive shocks to global economic activity.
  • Publication
    Financial regimes and oil prices
    (Elsevier, 2021) ;
    Mohammed, Mikidadu
    Financialization of oil price and its effects on the economy has been a topic of major interest over the last decade. In this paper, we use a threshold VAR model to investigate how oil price reacts to financial shock in periods of low and high financial stress. We find that the sensitivity of oil price to financial shock imply a six times larger impact and much longer time to recover during periods of high financial stress compared with low stress. Further, oil price shock during different financial regimes has dissimilar effects over inflation and industrial production. Taken together, the findings have several important implications for designing effective policy interventions.
  • Publication
    Endogenous fluctuations in demand and distribution: An empirical investigation
    (Elsevier, 2021) ;
    von Arnim, Rudiger
    This paper empirically investigates the possibility of self-sustained oscillations at business cycle frequency. The theoretical model considers aggregate economic activity and the functional income distribution in the spirit of Goodwin (1967). In the empirical investigation, we utilize four measures each of economic activity and the labor share for the US post-war macroeconomy. Using Schuster’s periodogram, we first show that these time series have an important frequency peak at about forty quarters. We therefore detrend them with wavelet methods. To allow for nonlinear dynamic interaction, we introduce a feedforward neural network (FNN). This method is first shown to correctly identify stability or a limit cycle in simulations of the theoretical model with reasonable noise and sample size. Estimation results provide some support for a limit cycle in the post-war US, but this evidence is not independent of detrending methods used.
  • Publication
    Demand-driven Goodwin cycles with Kaldorian and Kaleckian features
    (Edward Elgar Publishing, 2015) ;
    von Arnim, Rudiger
    Goodwin's original endogenous growth cycle describes a supply-driven counter-clockwise movement in employment rate and labor share (Goodwin 1967). Such cycles are observed in (US) data. Similarly, counter-clockwise cycles exist between utilization rate and labor share, and utilization rate and employment rate. This paper presents a critical discussion of two demand-driven frameworks to explain these cycles, namely a Goodwin–Kaldor model and a Goodwin–Kalecki model. The two models share important features. The main difference lies in the approach to the determination of the distribution of income. We argue that the Goodwin–Kalecki model's ‘profit squeeze’ is the preferable approach.
  • Publication
    Income distribution and economic activity: A frequency domain causal exploration
    (Metroeconomica, wiley, 2023) ;
    Rudiger von Arnim
    ;
    Mikidadu Mohammed
    This paper contributes to the empirical literature on the Goodwin pattern. Building on the frequency domain representation of SVAR models, we calculate the extended partial directed coherence. This measure captures the contemporaneous effect from labor share onto economic activity. We illustrate the method with simulated data. Results for two-dimensional models with quarterly US data (1947Q1–2020Q1) between activity proxies (employment rate and output gap) and labor share indicate causal bi-directional relationships for short and medium run. We estimate an extended model in employment rate, output gap, and labor share, and sub-samples describing golden age and great moderation separately. Results indicate that the mechanisms underlying the Goodwin pattern have weakened in recent decades.
  • Publication
    Growth cycles: A response to Peter Skott
    (Edward Elgar Publishing, 2015) ;
    von Arnim, Rudiger
  • Publication
    Longer-run distributive cycles: Wavelet decompositions for the US, 1948–2011
    (Edward Elgar Publishing, 2017) ;
    von Arnim, Rudiger
    This paper presents an analysis of the comovement of the income–capital ratio, output gap, and employment rate vis-à-vis the functional distribution of income. We decompose time series into wavelets of varying periodicity. Cycles at all periodicities in all three variables vis-à-vis wage share show a counter-clockwise (‘Goodwin’) pattern. The well-known regular cycles appear at business cycle frequency. Furthermore, a roughly 30-year cycle exists before 1980. Post-1980, no clear medium-run cyclical picture emerges. This finding is complemented by wavelet covariance analysis, which suggests that covariance of longer period cycles is negative before 1980, but positive thereafter. Crucially, trajectories of trends across the entire postwar period raise the possibility of one ‘long’ 60-year Goodwin cycle in all three variables vis-à-vis the wage share, which would suggest that sustained growth after c.2000 required much broader real wage increases relative to labor productivity. We conduct non-parametric Granger tests, which indicate that systematic interaction at all periodicities exist. We discuss our findings in relation to the debate on wage-led and profit-led demand regimes.