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Working Papers and Publications

Speed of Propagation in Production Networks

(Earlier versions available at SSRN: https://ssrn.com/abstract=4392276 or http://dx.doi.org/10.2139/ssrn.4392276 )

The Dot-com bubble, the Global Financial Crisis, and the post-COVID inflation were heavily influenced if not entirely triggered by localized sector-specific shocks, such as a financial market collapse, or the supply disruptions of important commodities. These aggregate events eventually unfolded as the triggering shocks' effects propagated through production networks. This paper aims to quantify the propagation speed by developing a novel econometric method. Estimations are carried out on an annual sample of 66 US industries between 1998 and 2020. The speed of propagation is identified from the propagation of industry TFP shocks within the production network into industry output and prices. Results show that the propagation time – the time shocks need to get transmitted between industries – was between 7 to 8 months on average and it accelerated after the GFC. These results provide evidence for dynamic shock propagation, which production network models have mostly overlooked.

Economic Costs of Distancing Policy Interventions

Latest version is available at: https://tinyurl.com/bdhte7rx

Distancing policy interventions (DPIs) were aimed at containing the COVID-19 pandemic, but they also likely affected economic activity. This paper estimates the effects of DPIs on selected indicators of monthly economic activity, such as industrial and manufacturing production, construction output, retail trade, inflation, and unemployment. The main contribution of this paper is the isolation of the causal effects of distancing interventions from the effects of voluntary distancing. I use mobility data as a measure of distancing to identify DPI effects on mobility in a regression discontinuity design, specifically as immediate changes in distancing right after the intervention. This strategy identifies the unobserved voluntary component of distancing as well, which is a key control variable in the identification of the economic effects of DPIs. I find significant output losses due to DPIs, but no evidence for inflationary or unemployment effects. Results also show that although voluntary distancing caused significant output losses, their effect was an order of magnitude smaller than that of DPIs.

The Effect of Distancing Policies on the Reproduction Number of Covid-19 

Corvinus Economics Working Papers, 2023/01 [BibTeX]

Distancing policies became the primary preventive interventions during the covid-19 pandemic. This paper estimates the effect of such interventions on the effective reproduction number (R) of this virus on a daily panel of 109 countries. The main contribution of this paper is the separation of policy compliant and voluntary distancing effects. I identify the policy compliant component of distancing behavior as rapid changes in social activity immediately after an intervention. This allows me to isolate the voluntary component as residual changes in activity. I use this voluntary component as a control in the main estimation of distancing policy effects on R. I distinguish (i) place restrictions: restricting destinations, and (ii) mobility restrictions: regulations on inland movements. I find strong and permanent effects for both types of restrictions. Place restrictions reduce R by 29 percent, mobility restrictions by 61 percent on average. Place and mobility restrictions, and voluntary distancing contributed 21, 44 and 14 percentage points to the global decline in R in the first wave.

Income Taxation, Transfers and Labour Supply at the Extensive Margin.

Joint with Péter Benczúr, Gábor Kátay and Áron Kiss. 

Banque de France Working paper series 487; 2014. p. 1-27. JRC89930 [BibTeX]

This paper estimates the effect of income taxation and transfers on labour supply at the extensive margin, i.e., the labour force participation. We extend existing structural form methodologies by considering the effect of both taxes and transfers. Non-labour income contains the (hypothetical) transfer amount someone gets when out of work, while the wage is replaced by the difference between net wages and the amount of lost transfers due to taking up a job (gains to work). To incorporate these components of the budget set, we employ a detailed tax-benefit model. Using data from the Hungarian Household Budget Survey (HKF), we find that participation probabilities are strongly influenced by transfers and the gains to work, particularly for low-skill groups and the elderly. Moreover, the same change in the net wage leads to a much larger change in the gains to work for low earners, making them even more responsive to wages and taxation. Overall, we find that a single equation can capture a large heterogeneity of individual responsiveness to taxes and transfers. Our parametric estimates can be readily utilized in welfare evaluations, or microsimulation analyses of tax and transfer reforms.

Using confidence indicators for the assessment of the cyclical position of the economy

MNB Bulletin (discontinued), 7(2), June , 41-46. [BibTeX]

In an inflation targeting regime, the best possible knowledge of demand-side inflationary pressure is of priority importance for monetary policy. In applied macroeconomic models, this is traditionally represented by the actual position of the cyclical component of GDP (the output gap). This study aims at defining a new output gap indicator, which, as opposed to the traditionally employed methods, also relies on direct information concerning the actual utilisation of economic resources. Exploiting such information substantially improves the real-time stability of the output gap estimate. The output gap indicator generated by my method (resource utilisation gap) has convincing predictive power and therefore gives a valid indication of the demand-side inflationary pressure in the real economy. Taking the above into account, the method described below will become a useful additional tool to support decision-making in monetary policy in Hungary. 

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Work in progress

Dynamics of firm-level input-output networks

Joint with András Borsos and Lajos Szabó

This paper aims to document stylized facts about the formation and discontinuation of input-output linkages on a firm-level supplier network data. We also want to test the predictions of the best-known models of input-output network formation.