Open Access
Did US business dynamism recover in the 2010s?
(2021) Aguilera Bravo, Asier; Casares Polo, Miguel; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
We provide evidence that both firm and establishment entry rates in the US have been increasing over the past decade, seemingly ending the secular decline observed over previous decades. However, the job-size of new businesses relative to incumbents has decreased substantially. Controlling for these opposite trends reveals that the size-adjusted entry rate continues to decline.
Open Access
COVID-19 pandemic and economic scenarios for Ontario
(2020) Casares Polo, Miguel; Gomme, Paul; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
To study the efficacy of the public policy response to the COVID-19 pandemic, we develop a model of the rich interactions between epidemiology and socioeconomic choices. Preferences feature a 'fear of death' that lead individuals to reduce their social activity and work time in the face of the pandemic. The aggregate effect of these reductions is to slow the spread of the coronavirus. We calibrate the model, including public policies, to developments in Ontario in spring 2020. The model fits the epidemiological data quite well, including the second wave starting in late 2020. We find that socioeconomic interventions work well in the short term, resulting in a rapid drop off in new cases. The long run, however, is governed chiefly by health developments. Welfare cost calculations point to synergies between the health and socioeconomic measures.
Open Access
A dynamic model of COVID-19: contagion and implications of isolation enforcement
(2020) Casares Polo, Miguel; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
We present a dynamic model that produces day-to-day changes in key variables due to the COVID-19 contagion: the number of ever infected people, currently infected, deaths, healed, and infected people who require hospitalization. The model is carefully calibrated to Spanish data and we conduct simulation exercises to study the role of isolation measures to contain the virus spread. We find that virus containment from isolation exhibits increasing returns. Our model simulations show that the State of Alarm intervention of the Spanish government on March 14th, 2020 reduces deaths by almost 85%, and lowers the maximum number of infected people who need daily hospitalization by a factor of 1/12. The simulations also indicate that both the timing and the intensity of the isolation enforcement are key for the evolution of the virus spread and the smoothing of the hospitalization needs.
Open Access
The post-covid inflation episode
(2023) Casares Polo, Miguel; Aguirre Osa, Idoia; Economía; Ekonomia
The recent inflation episode has been examined in an estimated NK-DSGE model with sticky wages and unemployement. The rise of US price inflation resulted from a combination of a sudden rise in 2020, the expansionary monetary policy in 2021 and price-push shocks in the quarters of a global rising on the cost of energy. The projections of the disinflation path indicate that if either prices or wages are further indexed to lagged inflation, wage inflation will be higher and the price disinflation will slow down. Also, a severe tightening of Fed's monetary policy will barely reduce inflation at the cost of higher unemployment.
Open Access
The timing and intensity of social distancing to flatten the COVID-19 curve: the case of Spain
(MDPI, 2020) Casares Polo, Miguel; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
The continued spread of COVID-19 suggests a significant possibility of reimposing the lockdowns and stricter social distancing similar to the early phase of pandemic control. We present a dynamic model to quantify the impact of isolation for the contagion curves. The model is calibrated to the COVID-19 outbreak in Spain to study the effects of the isolation enforcement following the declaration of the state of alarm (14 March 2020). The simulations indicate that both the timing and the intensity of the isolation enforcement are crucial for the COVID-19 spread. For example, a 4-day earlier intervention for social distancing would have reduced the number of COVID-19 infected people by 67%. The model also informs us that the isolation enforcement does not delay the peak day of the epidemic but slows down its end. When relaxing social distancing, a reduction of the contagion probability (with the generalization of preventive actions, such as face mask wearing and hands sanitizing) is needed to overcome the effect of a rise in the number of interpersonal encounters. We report a threshold level for the contagion pace to avoid a second COVID-19 outbreak in Spain.
Open Access
The post-COVID inflation episode
(Elsevier, 2024-07-22) Aguirre Osa, Idoia; Casares Polo, Miguel; Institute for Advanced Research in Business and Economics - INARBE; Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa
This study examined the recent inflation episode in the US using an estimated NK-DSGE model with endogenous unemployment fluctuations. We find that the US price inflation accelerated due to a sudden wage increase during the COVID-19 lockdown, the 2021 expansionary monetary policy, and price-push shocks in the quarters of a global surge in energy costs. The disinflation path predicts that further indexing prices or wages to lagged inflation will lead to higher wage inflation and slower price disinflation. Moreover, severely tightening the Fed's monetary policy will only slightly reduce inflation but increase unemployment.
Open Access
The extensive margin and US aggregate fluctuations: a quantitative assessment
(Elsevier, 2020) Casares Polo, Miguel; Khan, Hashmat; Poutineau, Jean-Christophe; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
We report empirical evidence indicating that US net business formation has recently turned more volatile, procyclical and persistent. To study these stylized facts, we estimate a DSGE model with endogenous entry and exit. Business units feature heterogeneous productivity and they shut down if the present value of expected future dividends falls below the current liquidation value. The model provides a better fit than a constant exit rate model with the fluctuations of US business formation. The introduction of the extensive margin amplifies the effects of technology and risk-premium shocks, and reduces the procyclicality of firm-level production. The main sources of variability of the US aggregate fluctuations during the Great Recession are countercyclical technology shocks, persistent adverse risk-premium shocks, and expansionary monetary policy shocks.
Open Access
Did US business dynamism recover in the 2010s?
(Elsevier, 2022) Aguilera Bravo, Asier; Casares Polo, Miguel; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
We provide evidence that both firm and establishment entry rates in the US have been increasing over the past decade, seemingly ending the decline observed over previous decades. However, neither the job creation and destruction rates nor the reallocation rates show signs of recovery. These conflicting features are reconciled after we control for the changes in job size of business units. As a result, we conclude that business dynamism flattened at historically low levels during the 2010s.
Open Access
On financial frictions and firm's market power
(Wiley, 2023) Casares Polo, Miguel; Deidda, Luca; Galdón Sánchez, José Enrique; Economía; Ekonomia
There are two opposing welfare effects of market power in a model with monopolistic competition, loan defaults and moral hazard. The loss of output produced if firms set a higher mark-up over marginal costs confronts with some gain due to higher expected profits and the reduction of defaults. Such tradeoff results in an optimal level of market power that decreases with the efficiency of liquidation following default on a loan. If moral hazard is pervasive, credit rationing cuts down the default rates and mitigates the welfare cost of financial frictions.