Fabrice Dabiré
PhD Student in Economics
PhD Student in Economics
Work in progress
The distributive Effects of monetary policy in a Two-agents new-Keynesian model
Working paper
This paper uses zero and signs restrictions to study the effect of the U.S. forward guidance and unanticipated monetary policy on four U.S. bilateral nominal exchange rates and net exports. I find that although the U.S. forward guidance easing depreciates the exchange rate, the policy does not transmit to the real activity via an “expenditure-switching effect” on the net exports. The use of narrative sign restrictions improves the identification method. The complementary results are as follows: a VAR model augmented with interest rate forecasts contains at least enough information to identify the forward guidance and unanticipated monetary shocks; the nominal bilateral exchange rates depreciate by two to four percent after a 25 basis point forward guidance easing in a hump-shaped pattern without any deviation from the Uncovered Interest rate Parity condition; both shocks explain between 7.3 percent to 27.9 percent of the exchange rates variance, and the forward guidance shock contributes to at least half of this variance decomposition; finally, forecasters perceive the forward guidance shock as future deviation from the Taylor rule.
“G-multipliers in Canada: How large? And why?”, with Khan H., Richard P., Rouillard J.-F.
We estimate the effects of government spending on GDP in Canada using the sign restrictions approach with quarterly data that spans from 1961 to 2019. The variables that enter our vector autoregressive model are carefully chosen to reflect the distinct characteristics of the economy, in particular, its linkages with US business cycles. We find large multipliers that are above 1 on impact and in the long-run. They are not specific to the state of the economy. Moreover, neither net exports nor real exchange rates nor terms-of-trade respond significantly to the government spending shock. Hence, we explore two channels that involve specific closed-economy characteristics of Canada to explain the size of the multipliers. First, the production of public goods in Canada features a much larger labour share than the production of private goods. Second, we argue that the level of public capital relative to its GDP is suboptimal. Based on a general equilibrium model, we show and explain how these two characteristics matter for the multipliers.
“Fiscal policy in the context of post-Covid-19 economic recovery: Applied study to Quebec’s case.” (French, Post Covid policy recommandation paper submitted to Quebec Ministry of Finance) with Fortin M., Khan H., Richard P., Rouillard J.-F.
Nous examinons les effets de la politique budgétaire sur le territoire québécois à l’aide de données qui s’échelonnent entre T1-1981 et T1-2020. Pour ce faire, nous estimons des modèles VAR et extrayons des chocs de dépenses gouvernementales selon la méthode de restrictions de signes proposée par Uhlig (2005). Les réponses impulsionnelles du PIB réel, de la consommation des ménages, de l’investissement privé non-résidentiel et de l’indice de confiance des ménages à un choc temporaire et positif de dépenses gouvernementales sont toutes significativement positives à court terme. Nous trouvons des multiplicateurs élevés pour des chocs de dépenses gouvernementales totales—ils sont à plus de 2 à court terme, tandis que les dépenses gouvernementales en investissement sont au-dessus de 3,5 et affichent une plus grande peristance. Les conséquences possibles de la pandémie et des mesures de relance sur la trajectoire d’endettement du Québec complètent l’analyse. Enfin, les dépenses gouvernementales en investissement sont celles qui devraient être privilégiées pour stimuler l’activité économique et même réduire le ratio d’endettement en conformité avec les cibles prévues en 2026.
This paper extends a New Keynesian model to examine how unequal access to investment and housing influences the transmission of monetary policy. The model categorizes households into ”Savers” and ”Hand-to-Mouth.” Simulation results reveal that combining real estate and physical capital investment intensifies the impact of monetary policy on aggregate consumption. The model, considering income inequality and household mobility, generates a higher multiplier effect of an interest rate cut on consumption. The paper emphasizes the fiscal authority’s role in redistributing income types and affecting both aggregate consumption and inequality. When the central bank targets a composite consumer price index, including housing rent, the model suggests a moderate impact of an interest rate cut on macroeconomic aggregates. Overall, the paper contributes valuable insights into the complex dynamics of real estate, monetary policy, and household behavior.