Department of Economics

unilogo

Philipp Wegmüller

Doctoral Student, University of Bern



Current Research

  • Wegmueller, P. and Thomet, J. (2015):The effects of technology shocks on hours worked: a cross-country analysis
  • Wegmueller, P. (2015): Fiscal policy and the labor market: Some evidence and theory

Publications

Recent empirical findings attribute a central role to the degree of economic openness for determining the size of the fiscal multiplier. However, traditional macroeconomic models have difficulties in accounting for this evidence. It is the purpose of this paper to provide a theoretical framework which is able to attest for the new empirical evidence. To this end, we introduce the formation of ‘deep habits’ into a New Keynesian small open economy model and give an active role to monetary policy. The presence of counter-cyclical firm markups is a crucial ingredient to generating a fiscal multiplier of empirically consistent size which is influenced by openness. We study three dimensions of economic openness: Exchange rate flexibility, trade openness and capital mobility. In line with the empirical findings, we report a negative relationship of above factors (i.e, economic openness measures) with the fiscal multiplier.


Working Papers

We provide international evidence on time-variation in trend productivity growth based on the quarterly dataset for output and overall hours worked constructed by Ohanian and Raffo (2012). Based on either Bai and Perron’s (1998, 2003) endogenous break tests, or Stock and Watson’s (1996, 1998) TVP-MUB methodology, we detect substantial evidence of time-variation in trend productivity growth for most countries. For either Japan, or countries belonging to the Eurozone, evidence points towards a significant decline in trend productivity growth over the last several decades. On the other hand, we report weaker evidence of time-variation for the United States, for which the 1990’s productivity acceleration is estimated to have been overall mild, and of a temporary nature.

This paper contributes to the resurging debate on the reform of the international monetary system by studying how the size of the public sector influences the choice of the exchange rate regime. In response to a meeting of the Bretton Woods Committee in 1993, Anna Schwartz (2000) argued that a large public sector impedes the viability of an exchange rate regime with a fixed rule for convertibility. Quantifying her line of reasoning from a welfare-based perspective leads to three main results: (1) Returning to a fixed exchange rate arrangement implies high welfare losses for countries with large public sectors; (2) The welfare loss is increasing in government size; (3) Increasing the share of public expenditures reduces output volatility, yet increasing the level of distortionary taxes enhances it.


This paper analyzes the dynamic effects of a fiscal policy shock and its transmission mechanism in a small open economy and compares the responses under different specifications of the utility function. The traditional Mundell-Flemming model tells that fiscal policy is more effective under a peg than under a float. This result is not confirmed for a baseline small open economy model with separable preferences. The present paper offers a survey of non-separable utility found in the literature on fiscal policy shocks and compares their implications for the transmission mechanism. The aim is to overturn the negative wealth effect of an increase in government spending, which causes a decrease in private consumption under the baseline separable utility function. Using a plausible calibration of the model, I find that if the complementarity between consumption and hours worked is large enough, then the response of private consumption is likely to be positive, although the assumptions have to be strong. This result holds for any specification of exchange rate regime.