Browsing by Person "Schmid, Kai Daniel"

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Capital income shares and income inequality in the European Union
(2013) Schmid, Kai Daniel; Schlenker, Eva
In this paper, we measure the effect of changing capital income shares upon inequality of gross household income. Using EU-SILC data covering 17 EU countries from 2005 to 2011 we find that capital income shares are positively associated with the concentration of gross household income. Moreover, we show that the transmission of a shift in capital income shares into the personal distribution of income depends on the concentration of capital income in an economy. Using fixed effect models we find that changing capital income shares play an important role in the development of household income inequality. Hence, in many industrialized countries income inequality has by no means evolved independently from the observed structural shift in factor income towards a higher capital income share over the last decades.
Interest rate policy and supply-side adjustment dynamics
(2010) Schmid, Kai Daniel; Kienzler, Daniel
In contrast to the present consensus view of stabilization policy, theoretical and empirical research strongly support the consideration of supply-side adjustment to pronounced variations of factor-utilization in order to trace a more realistic pattern of macroeconomic adjustment dynamics within simulation studies. Against this background, our paper seeks to illuminate the relevance of endogenous supply-side adjustment for monetary policy research. We modify a basic New Keynesian model by explicitly considering demand-side stimulus on the evolution of productive capacity and analyze stability, impulse response, and welfare issues if the central bank follows a simple monetary policy rule. Thereby, we control for the robustness of our policy implications by various states of output gap mismeasurement the central bank might be confronted with. We find that, in contrast to a basic New Keynesian Model, output gap stabilization plays a more prominent role when potential output is endogenous.
Langfristige Neutralität der Geldpolitik?
(2010) Schmid, Kai Daniel; Spahn, Peter
Macroeconomic theory often strictly separates cyclical analysis from trend analysis. Whereas the former is identified as the short-run phenomenon of a varying capacity utilization, the latter is understood as the long-run problem of economic growth that predominantly focuses on the evolution of basic growth factors, such as the supply of labour and technical progress, and disregards problems of macroeconomic stability. In particular, the consequences of monetary policy actions are modeled nonneutral in the short run but neutral in the long run. Policy implications of the present consensus view of stabilization policy depend on specific assumptions with regard to the equilibrium level of production. Thereby, the interpretation of equilibrium output rests on a separation of supply-side and demand-side adjustment to macroeconomic shocks promoting a dichotomy of short-term and long-term macrodynamics. For the present consensus model of macroeconomic stabilization policy this dichotomy represents one of the basic conceptual features. As non-neutrality is limited to the short run - interest rate policy affects aggregate demand and enables the central bank to target inflation - the system does not face a trade-off between real and nominal variables in the long run. The possibility that monetary policy actions may induce real effects that exceed short-term dynamics has been rarely discussed in mainstream economic literature and consequently has gained little attention in the discussion of monetary policy?s stabilization strategies. However, such a strict separation between short-term (generally associated with demand-side) and long-term (supply-side) macrodynamics not only provokes concern from the stance of basic insights of the theories of economic growth. Rather one has to argue that significant changes of capacity utilization that last over several periods may induce procyclical supply-side adjustments. For this reason, several economists raise severe concerns with regard to the corresponding model-setups described above. In fact, the (over-)simplification of an extensively exogenous evolution of productive capacity on the one hand and the mechanisms of procyclical adjustment of production factors on the other hand reveal a strong macrotheoretical tension. There are several channels that promote procyclical stimulus of aggregate demand and a changing factor utilization to the accumulation and efficiency of an economy?s productive capacity. Changing investment dynamics not only lead to quantitative adjustments of the capital stock, but also stimulate multifactor productivity through technical progress. Moreover, unemployment may forward the emergence of long-term unemployment and reduce the effective supply of labor by mechanisms of labor market hysteresis. This clearly weakens the conventional agreement of a trend-cycle-dichotomy which still plays a central role within the context of models that are used for stabilization analysis. Moreover, the theoretical considerations are supported by empirical findings that provide strong clues for procyclical evolution of productive capacity. Against the background of asymmetric factor utilization due to nominal divergence and the resulting differences in real interest rates EMU-members reflect clear differences with regard to the utilization and accumulation of production factors. As alternating stimuli of aggregate demand and supply support the view that the long-term development of an economy cannot be understood without its short-term outcomes, stabilization policy that is supposed to be nonneutral in the short run will exhibit long-term effects with regard to output and employment. The impact of a changing factor utilization on the accumulation and efficiency of production factors motivates path dependency and the existence of multiple equilibria. As cyclical movements of aggregate demand play a decisive role for the evolution of an economy?s productive capacity stability and uniqueness of long-term equlibria as a system?s point of return become uncertain. In particular, output gaps close not only via the shift of aggregate demand but also due to the procyclical adjustment of potential output. Although there seem to be strong arguments in favor of procyclical adjustment of potential capacity to variations in aggregate demand, monetary policy may not frivolously exploit supply?s elasticity for expansionary stimulus. This is not only due to the fact that supply-side adjustment limits itself to certain ranges but also the evolution of inflation expectations may reduce the reflationary scope. On the other hand, the long-term costs of pronounced underutilization highlight the asymmetric quality of stabilization impulses that seem to be disregarded within ordinary loss functions.
Medium-run macrodynamics and the consensus view of stabilization policy
(2010) Schmid, Kai Daniel
Policy implications of the present consensus view of stabilization policy depend on specific assumptions with regard to the equilibrium level of production. Thereby, the interpretation of equilibrium output rests on a separation of supply-side and demandside adjustment to macroeconomic shocks promoting a dichotomy of short-term and long-term macrodynamics. In contrast to this, there are several channels that promote procyclical stimulus of aggregate demand and a changing factor utilization to the accumulation and efficiency of an economy?s productive capacity. Medium-run macrodynamics call for a rather endogenous explanation of production capacity and challenge the uniqueness of long-term equilibria.
The camp view of inflation forecasts
(2009) Schmid, Kai Daniel; Sauter, Oliver; Geiger, Felix
Analyzing sample moments of survey forecasts, we derive disagreement and un- certainty measures for the short- and medium term inflation outlook. The latter provide insights into the development of inflation forecast uncertainty in the context of a changing macroeconomic environment since the beginning of 2008. Motivated by the debate on the role of monetary aggregates and cyclical variables describing a Phillips-curve logic, we develop a macroeconomic indicator spread which is assumed to drive forecasters? judgments. Empirical evidence suggests procyclical dynamics between disagreement among forecasters, individual forecast uncertainty and the macro-spread. We call this approach the camp view of inflation forecasts and show that camps form up whenever the spread widens.