Research

WORKING PAPERS

Li, Q and Sabaj, E, (2024). The effects of oil prices on the US housing market. 

We investigate the impact of oil price shocks on the US housing market. Utilizing a Structural Vector Autoregression (SVAR) approach, we provide empirical evidence for the US economy. We further employ a Dynamic Stochastic General Equilibrium (DSGE) model incorporating financial frictions, introducing oil price shocks as an intermediate input in the production function. Our analysis highlights the role of the banking sector, particularly how its deteriorating financial position due to balance sheet changes influences the housing market. Results from both the empirical SVAR and the DSGE model consistently indicate a negative impact of oil price shocks on US house prices.

This paper was presented  at:

Sabaj, E, (2024). Sectoral shocks, labor mobility and heterogeneity in price/wage stickiness.

In this paper, I show that not only the existence of differences in the distribution of within-sector prices has important consequences for the transmission of shocks, but also the dispersion of wages between sectors especially when focusing on the degree of labor mobility in the economy. The findings indicate an equivalence in the impact of wage and price heterogeneity across sectors, especially in their effect on total inflation. Using a New-Keynesian medium-scale DSGE model for the US economy, I show that a single-sector model is unable to capture these features. The multi-sector version of the model estimated with sectoral data explains more of the variability in output from sectoral price shocks compared to the one-sector version of the model. 

This paper was presented  at:


Sabaj, E, (2024). How do sectoral elasticities affect the transmission of shocks?  (R & R, Journal of Economic Studies)  Old version. 

This paper studies output dynamics in a closed economy New Keynesian model that allows for heterogeneity in price stickiness across sectors. Whilst it has been shown that heterogeneity in price stickiness is the central force for the real effects of nominal shocks, I present theoretical results that demonstrate the importance of labor mobility across sectors and the intratemporal elasticity of substitution across sectors. Typically, labor is assumed to be reallocated immediately across sectors when shocks occur, and my results show how the reallocation of labor across sectors plays an important role in generating well-known results. The main insight provided by the analytical results is that there is an equivalence between changes in labor mobility and the intratemporal elasticity of substitution across sectors when they are taken into account for the response of sectoral output. These results are driven by the differences in price stickiness across sectors. I then go on to calibrate the model for the US economy based on manufacturing and services and broadens the set of shocks driving the business cycle, verifying the analytical results.

This paper was presented  at:


Sabaj, E, (2024). The effects of government spending under trend inflation: theory and empirics.  (Reject & Resubmit EER) Old version.

This paper presents empirical evidence that long-run inflation is important in explaining cross-country differences in the response of private consumption to a government spending shock. Contributing to the debate on the size of fiscal multipliers, I motivate my analysis by documenting, in a quarterly dataset of OECD countries, that countries with high long-run inflation display a relatively higher response of private consumption to an increase in government spending. It is on this basis that I develop a small-scale DSGE model with positive trend inflation and show that the higher the trend inflation in an economy is, the higher the response of private consumption to a government spending shock. If we interpret positive trend inflation as the long-run inflation target, I show, convincingly, that the monetary stance of the central banks has important implications for the effectiveness of short-run fiscal policy interventions. Finally, I calculate consumption multipliers. I find that the consumption multipliers in countries with low trend inflation are below one, while under high trend inflation are higher than 2. These multipliers are consistent with the empirical evidence, which I provide in the paper.

This paper was presented  at:

Publications

Troug, H and Sabaj, E, (2024). Monetary Policy in a Small Open Economy with Non-Separable Government Spending.  Journal of Economic Studies, doi: https://doi.org/10.1108/JES-10-2022-0513  


Sabaj, E, Troug, H and Sbia, R, (2023). Does it matter where and how governments spend? Economics Letters, doi:

https://doi.org/10.1016/j.econlet.2023.111158 

[SUERF Policy Brief,  Jun 2023, No 606]



PRE-PHD RESEARCH WORK

Kahveci, Mustafa and Sabaj, Ernil (2017). Determinant of Housing Rents in Urban Albania: An Empirical Hedonic Price Application with NSA Survey Data. Eurasian Journal of Economics and Finance, Vol. 5(2), p. 51-65, 2017. 

 Available at: https://eurasianpublications.com/wp-content/uploads/2021/02/EJEF-5.2.4.pdf 


Sabaj, Ernil (2017): Cyclical Behaviour of Fiscal Policy in the Western Balkans.  

Available at: https://mpra.ub.uni-muenchen.de/84279/


Sabaj, Ernil and Kahveci, Mustafa (2016): Forecasting tax revenues in an emerging economy: The case of Albania. 

Available at: https://mpra.ub.uni-muenchen.de/84404/