Ph.D. Barrales-Ruiz, Jose

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.

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.

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.

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.

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.