In Acemoglu, Johnson, and Robinson, henceforth AJR, (2001), we advanced the hypothesis that the mortality rates faced by Europeans in different parts of the world after 1500 affected their willingness to establish settlements and choice of colonization strategy. Places that were relatively healthy (for Europeans) were—when they fell under European control—more likely to receive better economic and political institutions. In contrast, places where European settlers were less likely to go were more likely to have “extractive” institutions imposed. We also posited that this early pattern of institutions has persisted over time and influences the extent and nature of institutions in the modern world. On this basis, we proposed using estimates of potential European settler mortality as an instrument for institutional variation in former European colonies today. Data on settlers themselves are unfortunately patchy—particularly because not many went to places they believed, with good reason, to be most unhealthy. We therefore followed the lead of Curtin (1989 and 1998) who compiled data on the death rates faced by European soldiers in various overseas postings. 1 Curtin’s data were based on pathbreaking data collection and statistical work initiated by the British military in the mid-nineteenth century. These data became part of the foundation of both contemporary thinking about public health (for soldiers and for civilians) and the life insurance industry (as actuaries and executives considered the

/pdf/the-colonial-origins-of-comparative-development-an-empirical-4a7vtfps9i.pdf

The Colonial Origins of Comparative Development: An Empirical Investigation

We estimate a dynamic stochastic general equilibrium (DSGE) model for the US economy. The model incorporates many types of real and nominal frictions: sticky nominal price and wage setting, habit formation in consumption, investment adjustment costs, variable capital utilisation and fixed costs in production. It also contains many types of shocks including productivity, labour supply, investment, preference, cost-push and monetary policy shocks. Using Bayesian estimation techniques, the relative importance of the various frictions and shocks in explaining the US business cycle are empirically investigated. We also show that this model is able to outperform standard VAR and BVAR models in out-of-sample prediction.

/pdf/shocks-and-frictions-in-us-business-cycles-a-bayesian-dsge-2gcs6kvruw.pdf

Shocks and frictions in US business cycles: A Bayesian DSGE approach

Automatic forecasts of large numbers of univariate time series are often needed in business and other contexts. We describe two automatic forecasting algorithms that have been implemented in the forecast package for R. The first is based on innovations state space models that underly exponential smoothing methods. The second is a step-wise algorithm for forecasting with ARIMA models. The algorithms are applicable to both seasonal and non-seasonal data, and are compared and illustrated using four real time series. We also briefly describe some of the other functionality available in the forecast package.

/pdf/automatic-time-series-forecasting-the-forecast-package-for-r-5aiye6l7ao.pdf

Automatic Time Series Forecasting: The forecast Package for R

A country's suitability for entry into a currency union depends on a number of economic conditions. These include, inter alia, the intensity of trade with other potential members of the currency union, and the extent to which domestic business cycles are correlated with those of the other countries. But international trade patterns and international business cycle correlations are endogenous. This paper develops and investigates the relationship between the two phenomena. Using thirty years of data for twenty industrialized countries, we uncover a strong and striking empirical finding: countries with closer trade links tend to have more tightly correlated business cycles. It follows that countries are more likely to satisfy the criteria for entry into a currency union after taking steps toward economic integration than before.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w5700.pdf?abstractid=4283&mirid=5

The Endogeneity of the Optimum Currency Area Criteria

What are the effects of monetary policy on output? Results from an agnostic identification procedure

http://apps.eui.eu/Personal/Canova/Articles/debucy.pdf

Detrending and business cycle facts

is published by Princeton University Press and copyrighted, © 2007, by Princeton University Press. All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher, except for reading and browsing via the World Wide Web. Users are not permitted to mount this file on any network servers.

Methods for Applied Macroeconomic Research

Europe's regions Income disparities and regional policies

In this paper we take a critical look at current European regional policies. First, we document the motivation for such policies, that is, the large income disparities across the regions of the EU15. Large disparities are certainly present. Second, we illustrate the various instruments adopted and discuss their underpinnings in established economic theories. Next, we look at available data, searching for three kinds of evidence: (1) if disparities are either growing or decreasing, we conclude they are neither; (2) which are the major factors explaining such disparities and, in particular, if they are the factors predicted by the economic models adopted by the Commission to justify current policies, we conclude this is most certainly not the case; (3) if there are clear signs that EU policies, as opposed to other social and economic factors, are actually reducing such disparities, we cannot find any clear sign of such desired impact. Our conclusion is that regional and structural policies serve mostly a redistributional purpose, motivated by the nature of the political equilibria upon which the European Union is built. They have little relationship with fostering economic growth. This casts a serious doubt on their social value and, furthermore, strongly questions extending such policies to future members of the European Union. A successful EU enlargement, in our view, calls for an immediate and drastic revision of regional economic policies.

— Michele Boldrin and Fabio Canova

Inequality and convergence in Europe’s regions: reconsidering European regional policies

https://www.federalreserve.gov/pubs/ifdp/2000/660/ifdp660.pdf

Monetary disturbances matter for business fluctuations in the G-7

I study whether and how US shocks are transmitted to eight Latin American countries. US shocks are identified using sign restrictions and treated as exogenous with respect to Latin American economies. Posterior estimates for individual and average effects are constructed. US monetary shocks produce significant fluctuations in Latin America, but real demand and supply shocks do not. Floaters and currency boarders display similar output but different inflation and interest rate responses. The financial channel plays a crucial role in the transmission. US disturbances explain important portions of the variability of Latin American macrovariables, producing continental cyclical fluctuations and, in two episodes, destabilizing nominal exchange rate effects. Policy implications are discussed. Copyright © 2005 John Wiley & Sons, Ltd.

/pdf/the-transmission-of-us-shocks-to-latin-america-1wm93jozum.pdf

Fabio Canova

Papers

Detrending and business cycle facts

Methods for Applied Macroeconomic Research

Inequality and convergence in Europe’s regions: reconsidering European regional policies

Monetary disturbances matter for business fluctuations in the G-7

The transmission of US shocks to Latin America