Juha Tervala

University of Helsinki

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Giovanni Ganelli

International Monetary Fund

Philipp Engler

International Monetary Fund

Timothy Watson

Australian National University

Simon Voigts

International Monetary Fund

Sandra Pasch

University of Helsinki

Sandra Pasch

Juha Parantainen

Ministry of Transport and Communications

S Kosonen

Tristram Sainsbury

Australian National University

Timothy Watson

Pfizer (United States)

Cooperative Institutions

International Monetary Fund

University of Helsinki

German Institute for Economic Research

Australian National University

Ministry of Transport and Communications

Lowy Institute for International Policy

Pfizer (United States)

University of Hull

Department of the Prime Minister and Cabinet

Institute of Materials Finishing

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Hysteresis and fiscal policy

Journal of Economic Dynamics and Control (2018)

Philipp Engler Juha Tervala

Hysteresis

Crowding out

Liberian dollar

Potential output

10.1016/j.jedc.2018.02.002

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Citations (27)

The Fiscal Multiplier

Juha Tervala

Fiscal multiplier

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Työttömyys uuskeynesiläisissä DSGE-malleissa: kommentti Lehdolle

Juha Tervala

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The JobKeeper Payment: How Good Are Wage Subsidies?

SSRN Electronic Journal (2022)

Timothy Watson Juha Tervala Tristram Sainsbury

We estimate the effect of the Australian JobKeeper Payment COVID-19 wage subsidy on payroll jobs and wages at the employer-level using novel administrative datasets. We find a cost per job-year saved of around $112,819 ($US80,959) over the program period, implying around 812,000 jobs were saved over this time. Weekly payroll wages were almost $1.1 billion ($US761 million) higher on average during the program period, implying wage benefits equivalent to around 60 per cent of program spending. Program effects are persistent, suggesting cumulative benefits will be larger over time. A medium-scale business cycle model featuring heterogeneous households and learning-by-doing in the production technology is derived to map estimates of costs per job-year saved to approximate output multipliers. The model generates plausible output multipliers centred around 1.3, and identifies the extent to which wage subsidies support liquidity constrained workers as a key determinant of program effectiveness.

10.2139/ssrn.4103865

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Keeping up with the Joneses and the welfare effects of monetary policy

Journal of Economic Psychology (2011)

Juha Tervala

10.1016/j.joep.2011.08.014

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Citations (1)

Learning by devaluating: A supply-side effect of competitive devaluation

International Review of Economics & Finance (2012)

Juha Tervala

10.1016/j.iref.2012.10.007

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Citations (8)

Hysteresis and the Welfare Costs of Business Cycles

MPRA Paper (2020)

Juha Tervala

Lucas (1987, 2003) finds that the welfare costs of business cycles are trivial, 0.008-0.05% of consumption in each period. I analyze the implications of hysteresis for the welfare costs of business cycles by extending the basic New Keynesian model with hysteresis. Hysteresis is defined as the negative effect of the negative, one-percentage point output gap on potential output. The net present value of the welfare cost of a recession in which the deviation of output from the trend is 3% is 0.6% of consumption without hysteresis. If the degree of hysteresis is 0.4, an empirical estimate for OECD countries, the welfare cost increases – by a factor of 121 – to 70%. The study of stabilization policy using New Keynesian models without hysteresis is pointless; the potential benefits of stabilization policy are notable only in the presence of hysteresis.

Hysteresis

Consumption

New Keynesian economics

Output gap

Value (mathematics)

Potential output

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Learning by Devaluating: A Supply-Side Effect of Competitive Devaluation

RePEc: Research Papers in Economics (2011)

Juha Tervala

This study shows that the learning by doing (LBD) effect has substantial, both quantitative and qualitative, consequences for the international transmission of monetary policy. LDB implies that a country can increase its productivity-increasing skill level, at the expense of the neighbour, by competitive devaluation engineered through low interest rates. If measured by the cumulative change in output after 12 quarters, LBD increases the harmful effect of competitive devaluation on foreign output by 85Ð125%, when compared to the case without it. If LBD is sufficiently strong and the cross-country substitutability is high (low), it reverses the effect of monetary policy on foreign (domestic) welfare into negative (positive). Moreover, a combination of a high crosscountry substitutability and a sufficiently strong LDB effect implies that competitive devaluation increases both domestic output and welfare, at the expense of foreign output and welfare.

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Keeping Up with the Joneses and the Welfare Effects of Monetary Policy

Juha Tervala

This paper examines the implications of keeping up with the Joneses preferences (jealousy) for the welfare effects of monetary policy. I develop a New Keynesian model, where households are jealous and the central bank follows the Taylor rule. I show that the welfare effects of monetary policy over time depend significantly on the relative strength of the consumption externality caused by jealousy and the monopolistic distortion. If jealousy (the monopolistic distortion) dominates, then a decrease in the interest rate reduces (increases) welfare in the short run, but increases (reduces) welfare in the medium run.

Monopolistic competition

Distortion (music)

Consumption

Externality

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The fiscal multiplier: positive or negative?

RePEc: Research Papers in Economics (2009)

Juha Tervala

This study examines whether the fiscal multiplier can be negative for certain types of government spending. The key result is that the fiscal multiplier can be negative if there is a high degree of substitutability between private and government consumption and government consumption is complementary to leisure.

Fiscal multiplier

Private consumption

Consumption

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Citations (1)