Liquidity, Value and Wealth Reconceiving Marx for an Era Of
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Demographics, Wealth, and Global Imbalances in the Twenty-First Century
Demographics, Wealth, and Global Imbalances in the Twenty-First Century § Adrien Auclert∗ Hannes Malmbergy Frédéric Martenetz Matthew Rognlie August 2021 Abstract We use a sufficient statistic approach to quantify the general equilibrium effects of population aging on wealth accumulation, expected asset returns, and global im- balances. Combining population forecasts with household survey data from 25 coun- tries, we measure the compositional effect of aging: how a changing age distribution affects wealth-to-GDP, holding the age profiles of assets and labor income fixed. In a baseline overlapping generations model this statistic, in conjunction with cross- sectional information and two standard macro parameters, pins down general equi- librium outcomes. Since the compositional effect is positive, large, and heterogeneous across countries, our model predicts that population aging will increase wealth-to- GDP ratios, lower asset returns, and widen global imbalances through the twenty-first century. These conclusions extend to a richer model in which bequests, individual savings, and the tax-and-transfer system all respond to demographic change. ∗Stanford University, NBER and CEPR. Email: [email protected]. yUniversity of Minnesota. Email: [email protected]. zStanford University. Email: [email protected]. §Northwestern University and NBER. Email: [email protected]. For helpful comments, we thank Rishabh Aggarwal, Mark Aguiar, Anmol Bhandari, Olivier Blanchard, Maricristina De Nardi, Charles Goodhart, Nezih Guner, Fatih Guvenen, Daniel Harenberg, Martin Holm, Gregor Jarosch, Patrick Kehoe, Patrick Kiernan, Pete Klenow, Dirk Krueger, Kieran Larkin, Ellen McGrat- tan, Kurt Mitman, Ben Moll, Serdar Ozkan, Christina Patterson, Alessandra Peter, Jim Poterba, Jacob Rob- bins, Richard Rogerson, Ananth Seshadri, Isaac Sorkin, Kjetil Storesletten, Ludwig Straub, Amir Sufi, Chris Tonetti, David Weil, Arlene Wong, Owen Zidar and Nathan Zorzi. -
Global Wealth Inequality
EC11CH05_Zucman ARjats.cls August 7, 2019 12:27 Annual Review of Economics Global Wealth Inequality Gabriel Zucman1,2 1Department of Economics, University of California, Berkeley, California 94720, USA; email: [email protected] 2National Bureau of Economic Research, Cambridge, MA 02138, USA Annu. Rev. Econ. 2019. 11:109–38 Keywords First published as a Review in Advance on inequality, wealth, tax havens May 13, 2019 The Annual Review of Economics is online at Abstract economics.annualreviews.org This article reviews the recent literature on the dynamics of global wealth https://doi.org/10.1146/annurev-economics- Annu. Rev. Econ. 2019.11:109-138. Downloaded from www.annualreviews.org inequality. I first reconcile available estimates of wealth inequality inthe 080218-025852 United States. Both surveys and tax data show that wealth inequality has in- Access provided by University of California - Berkeley on 08/26/19. For personal use only. Copyright © 2019 by Annual Reviews. creased dramatically since the 1980s, with a top 1% wealth share of approx- All rights reserved imately 40% in 2016 versus 25–30% in the 1980s. Second, I discuss the fast- JEL codes: D31, E21, H26 growing literature on wealth inequality across the world. Evidence points toward a rise in global wealth concentration: For China, Europe, and the United States combined, the top 1% wealth share has increased from 28% in 1980 to 33% today, while the bottom 75% share hovered around 10%. Recent studies, however, may underestimate the level and rise of inequal- ity, as financial globalization makes it increasingly hard to measure wealth at the top. -
A WILPF Guide to Feminist Political Economy
A WILPF GUIDE TO FEMINIST POLITICAL ECONOMY Brief for WILPF members Table of Contents Advancing WILPF’s approach to peace . 2 Political economy as a tool . 4 A feminist twist to understanding political economy . 4 Feminist political economy in the context of neoliberal policies . 5 Gendered economy of investments . 7 Feminist political economy analysis - How does WILPF do it? . 9 What questions do we need to ask? . 10 Case study . 12 © 2018 Women’s International League for Peace and Freedom August 2018 A User Guide to Feminist Political Economy 2nd Edition 13 pp. Authors: Nela Porobic Isakovic Editors: Nela Porobic Isakovic, Nina Maria Hansen, Cover photo Madeleine Rees, Gorana Mlinarevic Brick wall painting of faces by Design: Nadia Joubert Oliver Cole (@oliver_photographer) www.wilpf.org on Unsplash.com 1 Advancing WILPF’s approach to peace HOW CAN FEMINIST UNDERSTANDING OF POLITICAL ECONOMY IN CONFLICT OR POST-CONFLICT CONTEXT HELP ADVANCE WILPF’S APPROACH TO PEACE? Political economy makes explicit linkages between political, economic and social factors. It is concerned with how politics can influence the economy. It looks at the access to, and distribution of wealth and power in order to understand why, by whom, and for whom certain decisions are taken, and how they affect societies – politically, economically and socially. It combines different sets of academic disciplines, most notably political science, economy and sociology, but also law, history and other disciplines. By using feminist political economy, WILPF seeks to understand the broader context of war and post-conflict recovery, and to deconstruct seemingly fixed and unchangeable economic, social, and political parameters. -
High-Frequency Trading and the Flash Crash: Structural Weaknesses in the Securities Markets and Proposed Regulatory Responses Ian Poirier
Hastings Business Law Journal Volume 8 Article 5 Number 2 Summer 2012 Summer 1-1-2012 High-Frequency Trading and the Flash Crash: Structural Weaknesses in the Securities Markets and Proposed Regulatory Responses Ian Poirier Follow this and additional works at: https://repository.uchastings.edu/ hastings_business_law_journal Part of the Business Organizations Law Commons Recommended Citation Ian Poirier, High-Frequency Trading and the Flash Crash: Structural Weaknesses in the Securities Markets and Proposed Regulatory Responses, 8 Hastings Bus. L.J. 445 (2012). Available at: https://repository.uchastings.edu/hastings_business_law_journal/vol8/iss2/5 This Note is brought to you for free and open access by the Law Journals at UC Hastings Scholarship Repository. It has been accepted for inclusion in Hastings Business Law Journal by an authorized editor of UC Hastings Scholarship Repository. For more information, please contact [email protected]. High-Frequency Trading and the Flash Crash: Structural Weaknesses in the Securities Markets and Proposed Regulatory Responses Ian Poirier* I. INTRODUCTION On May 6th, 2010, a single trader in Kansas City was either lazy or sloppy in executing a large trade on the E-Mini futures market.1 Twenty minutes later, the broad U.S. securities markets were down almost a trillion dollars, losing at their lowest point more than nine percent of their value.2 Certain stocks lost nearly all of their value from just minutes before.3 Faced with the blistering pace of the decline, many market participants opted to cease trading entirely, including both human traders and High Frequency Trading (“HFT”) programs.4 This withdrawal of liquidity5 accelerated the crash, as fewer buyers were able to absorb the rapid-fire selling pressure of the HFT programs.6 Within two hours, prices were back * J.D. -
Financial Integration and International Business Cycle Co-Movement: Wealth Effects Vs
Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Working Paper No. 89 http://www.dallasfed.org/assets/documents/institute/wpapers/2011/0089.pdf Financial Integration and International Business Cycle Co-movement: Wealth Effects vs. Balance Sheet Effects* J. Scott Davis Federal Reserve Bank of Dallas September 2011 Revised: August 2012 Abstract Different types of international financial integration have different effects on cross-country business cycle co-movement. International business cycle transmission through financial integration occurs through the wealth and balance sheet effects. The balance sheet effect leads to business cycle convergence, but the wealth effect leads to divergence. Using a cross- sectional regression, this paper shows that cross-border credit market integration (debt) has a positive effect on co-movement, implying that the balance sheet effect is the main conduit for international transmission through credit markets. However, cross-border capital market integration (equity) has a negative effect, implying that the wealth effect is the main channel for international transmission through capital markets. By distinguishing between wealth and balance sheet effects, this paper resolves many discrepancies between some key empirical and theoretical findings in the open economy macro literature, between different studies in the theoretical literature, and between empirical studies that use a cross-sectional regression and those employing panel data. JEL codes: E30, E44, F40, G15 * Scott Davis, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, 2200 N. Pearl Street, Dallas, TX 75201. 214-922-5124. [email protected]. This paper previously circulated under the title “Financial Integration and International Business Cycle Co-movement: The Role of Balance Sheets.” I would like to thank Jean Imbs and participants at the Banque de France, CEPR conference on “The Financial Crisis: Lessons for International Macroeconomics” for many helpful comments and suggestions. -
The Effectiveness of Short-Selling Bans
An Academic View: The Effectiveness of Short-Selling Bans Travis Whitmore Securities Finance Research, State Street Associates Introduction As the COVID-19 virus continues At the same time, regulators have reacted to tighten its grip on the by stiffening regulations to try and protect markets from further price declines. One such world – causing wide spread response, which is common during periods lockdowns and large-scale of financial turmoil, has been to impose disruptions to global supply chains short-selling bans. At the time of writing this, short-selling bans have been implemented in – governments, central banks, and seven countries with potentially more following regulators have been left with little suit. South Korea banned short selling in three choice but to intervene in financial markets, including its benchmark Kospi Index, markets. Central banks have for six months. As stock markets plunged across Europe in late March, Italy, Spain, already pulled out all the stops. France, Greece, and Belgium temporarily halted short selling on hundreds The US Federal Reserve slashed interest of stocks.2 rates to near zero and injected vast amounts of liquidity into the financial system with In this editorial, we discuss the impact “a $300 billion credit program for employers” of short-selling bans on markets and if it and “an open-ended commitment” of will be effective in stemming asset price quantitative easing, meaning unlimited declines resulting from the economic fallout buy back of treasuries and investment from COVID-19. To form an objective view, grade corporate debt. Governments have we review empirical findings from past started to pull on the fiscal policy lever academic studies and look to historical as well, approving expansive stimulus event studies of short-selling bans. -
Income Inequality and the Business Cycle: a Threshold Cointegration Approach ♣
INCOME INEQUALITY AND THE BUSINESS CYCLE: A THRESHOLD COINTEGRATION APPROACH ♣ Gary A. Hoover University of Alabama Daniel C. Giedeman Grand Valley State University Sel Dibooglu♦ University of Missouri St Louis March 2009 Abstract: This paper investigates the impact of various socio-economic variables on various cohorts of the income distribution. We use asymmetric cointegration tests to show that unemployment and immigration shocks have real impacts on income inequality. In addition, using threshold test results we are able to show that positive and negative shocks to the economy do not have symmetric effects nor do the impacts of these shocks impact income quintiles uniformly. Keywords: Income inequality, Granger Causality, Asymmetric Cointegration JEL: I32, I39 ♣ The authors wish to thank Junsoo Lee and an anonymous referee for helpful comments. The usual caveats regarding remaining errors apply. ♦ Corresponding author: University of Missouri St Louis, Department of Economics, One University Blvd., St Louis, MO 63121, Email: [email protected], Phone: 314 516 5530; Fax: 314 516 5352 1. INTRODUCTION Beginning with the seminal work of Kuznets (1955) many researchers have endeavored to investigate the nature of the relationship between economic growth and income inequality. The Kuznets hypothesis posited that the functional relationship between inequality and economic development had an inverted “U” shape. Kuznets speculated that inequality would initially be positively correlated with economic development but that the relationship between economic growth and inequality would become negative at higher levels of development. Results supporting this hypothesis typically come from the use of cross-sectional country-specific data. Some recent researchers dispute the Kuznets hypothesis such as Bruno et al. -
Sudden Stops and Currency Crises: the Periphery in the Classical Gold Standard
Sudden Stops and Currency Crises: The Periphery in the Classical Gold Standard Luis Catão* Research Department International Monetary Fund First Draft: November 2004 Abstract While the pre-1914 gold standard is typically viewed as a successful system of fixed exchange rates, several countries in the system’s periphery experienced dramatic exchange rate adjustments. This paper relates the phenomenon to a combination of sudden stops in international capital flows with domestic financial imperfections that heightened the pro-cyclicality of the monetary transmission mechanism. It is shown that while all net capital importers during the period occasionally faced such “sudden stops”, the higher elasticity of monetary expansion to capital inflows and disincentives to reserve accumulation in a subset of these countries made them more prone to currency crashes. JEL Classification: E44, F31, F34 Keywords: Gold Standard, Exchange Rates, International Capital Flows, Currency Crises. ___________________ * Author’s address: Research Department, International Monetary Fund, 700 19th street, Washington DC 20431. Email: [email protected]. I thank George Kostelenos, Pedro Lains, Agustín Llona, Leandro Prados, Irving Stone, Gail Triner, and Jeffrey Williamson for kindly sharing with me their unpublished data. The views expressed here are the author’s alone and do not necessarily represent those of the IMF. - 2 - I. Introduction The pre-1914 gold standard is often depicted as a singularly successful international system in that it managed to reconcile parity stability among main international currencies with both rapid and differential growth across nations and unprecedented capital market integration. Nevertheless, several countries in the periphery of the system experienced dramatic bouts of currency instability. -
The Flash Crash: the Impact of High Frequency Trading on an Electronic Market∗
The Flash Crash: The Impact of High Frequency Trading on an Electronic Market∗ Andrei Kirilenko|MIT Sloan School of Management Albert S. Kyle|University of Maryland Mehrdad Samadi|University of North Carolina Tugkan Tuzun|Board of Governors of the Federal Reserve System Original Version: October 1, 2010 This version: May 5, 2014 ABSTRACT This study offers an empirical analysis of the events of May 6, 2010, that became known as the Flash Crash. We show that High Frequency Traders (HFTs) did not cause the Flash Crash, but contributed to it by demanding immediacy ahead of other market participants. Immediacy absorption activity of HFTs results in price adjustments that are costly to all slower traders, including the traditional market makers. Even a small cost of maintaining continuous market presence makes market makers adjust their inventory holdings to levels that can be too low to offset temporary liquidity imbalances. A large enough sell order can lead to a liquidity-based crash accompanied by high trading volume and large price volatility { which is what occurred in the E-mini S&P 500 stock index futures contract on May 6, 2010, and then quickly spread to other markets. Based on our results, appropriate regulatory actions should aim to encourage HFTs to provide immediacy, while discouraging them from demanding it, especially at times of significant, but temporary liquidity imbalances. In fast automated markets, this can be accomplished by a more diligent use of short-lived trading pauses that temporarily halt the demand for immediacy, especially if significant order flow imbalances are detected. These short pauses followed by coordinated re-opening procedures would force market participants to coordinate their liquidity supply responses in a pre-determined manner instead of seeking to demand immediacy ahead of others. -
Department of Economics
DEPARTMENT OF ECONOMICS Working Paper Problematizing the Global Economy: Financialization and the “Feudalization” of Capital Rajesh Bhattacharya Ian Seda-Irizarry Paper No. 01, Spring 2014, revised 1 Problematizing the Global Economy: Financialization and the “Feudalization” of Capital Rajesh Bhattacharya1 and Ian J. Seda-Irizarry2 Abstract In this essay we note that contemporary debates on financialization revolve around a purported “separation” between finance and production, implying that financial profits expand at the cost of production of real value. Within the literature on financialization, we primarily focus on those contributions that connect financialization to global value-chains, production of knowledge- capital and the significance of rent (ground rent, in Marx’s language) in driving financial strategies of firms, processes that are part of what we call, following others, the feudalization of capital. Building on the contributions of Stephen A. Resnick and Richard D. Wolff, we problematize the categories of capital and capitalism to uncover the capitalocentric premises of these contributions. In our understanding, any discussion of the global economy must recognize a) the simultaneous expansion of capitalist economic space and a non-capitalist “outside” of capital and b) the processes of exclusion (dispossession without proletarianization) in sustaining the capital/non-capital complex. In doing so, one must recognize the significance of both traditional forms of primitive accumulation as well as instances of “new enclosures” in securing rent for dominant financialized firms. Investment in knowledge-capital appears as an increasingly dominant instrument of extraction of rent from both capitalist and non-capitalist producers within a transformed economic geography. In our understanding, such a Marxian analysis renders the separation problem an untenable proposition. -
THE NEOLIBERAL THEORY of SOCIETY Simon Clarke
THE NEOLIBERAL THEORY OF SOCIETY Simon Clarke The ideological foundations of neo-liberalism Neoliberalism presents itself as a doctrine based on the inexorable truths of modern economics. However, despite its scientific trappings, modern economics is not a scientific discipline but the rigorous elaboration of a very specific social theory, which has become so deeply embedded in western thought as to have established itself as no more than common sense, despite the fact that its fundamental assumptions are patently absurd. The foundations of modern economics, and of the ideology of neoliberalism, go back to Adam Smith and his great work, The Wealth of Nations. Over the past two centuries Smith’s arguments have been formalised and developed with greater analytical rigour, but the fundamental assumptions underpinning neoliberalism remain those proposed by Adam Smith. Adam Smith wrote The Wealth of Nations as a critique of the corrupt and self-aggrandising mercantilist state, which drew its revenues from taxing trade and licensing monopolies, which it sought to protect by maintaining an expensive military apparatus and waging costly wars. The theories which supported the state conceived of exchange as a ‘zero-sum game’, in which one party’s gain was the other party’s loss, so the maximum benefit from exchange was to be extracted by force and fraud. The fundamental idea of Smith’s critique was that the ‘wealth of the nation’ derived not from the accumulation of wealth by the state, at the expense of its citizens and foreign powers, but from the development of the division of labour. The division of labour developed as a result of the initiative and enterprise of private individuals and would develop the more rapidly the more such individuals were free to apply their enterprise and initiative and to reap the corresponding rewards. -
The Federal Reserve's Response to the 1987 Market Crash
PRELIMINARY YPFS DISCUSSION DRAFT | MARCH 2020 The Federal Reserve’s Response to the 1987 Market Crash Kaleb B Nygaard1 March 20, 2020 Abstract The S&P500 lost 10% the week ending Friday, October 16, 1987 and lost an additional 20% the following Monday, October 19, 1987. The date would be remembered as Black Monday. The Federal Reserve responded to the crash in four distinct ways: (1) issuing a public statement promising to provide liquidity as needed, “to support the economic and financial system,” (2) providing support to the Treasury Securities market by injecting in-high- demand maturities into the market via reverse repurchase agreements, (3) allowing the Federal Funds Rate to fall from 7.5% to 7.0%, and (4) intervening directly to allow the rescue of the largest options clearing firm in Chicago. Keywords: Federal Reserve, stock market crash, 1987, Black Monday, market liquidity 1 Research Associate, New Bagehot Project. Yale Program on Financial Stability. [email protected]. PRELIMINARY YPFS DISCUSSION DRAFT | MARCH 2020 The Federal Reserve’s Response to the 1987 Market Crash At a Glance Summary of Key Terms The S&P500 lost 10% the week ending Friday, Purpose: The measure had the “aim of ensuring October 16, 1987 and lost an additional 20% the stability in financial markets as well as facilitating following Monday, October 19, 1987. The date would corporate financing by conducting appropriate be remembered as Black Monday. money market operations.” Introduction Date October 19, 1987 The Federal Reserve responded to the crash in four Operational Date Tuesday, October 20, 1987 distinct ways: (1) issuing a public statement promising to provide liquidity as needed, “to support the economic and financial system,” (2) providing support to the Treasury Securities market by injecting in-high-demand maturities into the market via reverse repurchase agreements, (3) allowing the Federal Funds Rate to fall from 7.5% to 7.0%, and (4) intervening directly to allow the rescue of the largest options clearing firm in Chicago.