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Yiqiao Sun
Economics
- Division
Forecasting and Policy Modelling
- Current Position
-
Economist
- Fields of interest
-
Macroeconomics and Monetary Economics,International Economics,Economic Growth
- Other current responsibilities
- 2018-
Working Group of Forecasting
- Education
- 2019
PhD in Economics, WHU-Otto Beisheim School, Germany
- 2011
M.Sc. in Economics and Finance, University of Tübingen, Germany
- 2009
Licence Economie et gestion, Université IX de Paris-Dauphine, France
- Professional experience
- 2024-
DG Economics, Forecasting and Policy Modelling
- 2021-2024
DG Economics, Business Cycle Analysis Division
- 15 December 2023
- OCCASIONAL PAPER SERIES - No. 336Details
- Abstract
- In this paper we analyse the sensitivity of the macroeconomic outcomes under the Network for Greening the Financial System’s (NGFS’s) Phase III net-zero and delayed transition scenarios to different monetary and fiscal policy settings. In doing so, we provide a rare application of the NGFS climate scenarios to economic assessment through the lens of the macroeconomic modelling frameworks underlying the scenario construction (e.g. NiGEM). Using the model to disentangle the main drivers of the scenarios, we show that gross domestic product (GDP) growth is shaped by physical and transition shocks jointly, whereas transition shocks account for most of the inflationary pressure. As regards alternative policy settings within the model, it turns out that Fiscal recycling options become more discriminant in terms of GDP impact in the medium term. Full recycling through government investment yields the strongest output multiplier, whereas recycling through household transfers or reduced income taxes yields the lowest multiplier. During the transition, euro area macroeconomic variables respond very similarly if two-pillar or price level-targeting monetary policy rules are followed. The Taylor- rule, reacting to inflation and output gap, yields higher and more persistent inflation as well as stronger short-term interest rate increases. These findings are certainly model-specific but do reflect the policy sensitivity embedded of the NGFS scenarios, within the confines of the very model used to build them up.
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
D6 : Microeconomics→Welfare Economics
- 15 February 2023
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2023Details
- Abstract
- In line with the ECB’s comprehensive action plan to incorporate climate change considerations into its policy framework, technical assumptions on carbon pricing have been introduced in the Eurosystem/ECB staff macroeconomic projections, along with a regular evaluation of the impact of climate-related fiscal policies on the projections baseline. This box evaluates the impact of green fiscal measures on GDP growth and inflation and discusses potential effects and risks to the outlook posed by the EU Emissions Trading System (ETS) and non-fiscal climate-related measures. The overall impact of green measures on euro area real GDP growth is expected to be very small until 2025, and their impact on inflation is limited but increases slightly over time. Over the period 2022-25, fiscal measures that are detrimental to the green transition outweigh green measures. Changes to the EU ETS under the “Fit for 55” package, and the sustained shift towards renewable energy sources implied by regulation, could pose both upside and downside risks to the inflation outlook, especially from 2025 onwards.
- JEL Code
- Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
O44 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Environment and Growth
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 23 September 2022
- WORKING PAPER SERIES - No. 2730Details
- Abstract
- We propose a new and time-varying optimum currency area (OCA) index for the euro area in assessing the evolution of the OCA properties of the monetary union from an international business cycle perspective. It is derived from the relative importance of symmetric vs. asymmetric shocks that result from a sign and zero restricted open-economy structural vector autoregression (VAR) model. We argue that the euro area is more appropriate through the lens of empirical OCA properties when the relative importance of common symmetric shocks is high, but, at the same time, is not overly dispersed across euro area member countries. We find that symmetric shocks have been the dominant drivers of business cycles across euro area countries. Our OCA index, nevertheless, shows that cyclical convergence among euro area members is not a steady process as it tends to be disrupted by crises, especially those not primarily triggered by common external shocks. In the aftermath of a crisis the OCA index embarks on a recovery trajectory catching up with its pre-crisis level. Our OCA index is slow-moving and a good reflection of changing underlying economic structures across the euro area and, therefore, informative about the ability of monetary policy to stabilise the euro area economy in the medium run.
- JEL Code
- F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
- 22 August 2022
- WORKING PAPER SERIES - No. 2716Details
- Abstract
- We estimate the euro area output gap by applying the Beveridge-Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the COVID-19 pandemic. The estimated output gap lines up well with the CEPR chronology of the business cycle for the euro area and we find that hours worked, more than the unemployment rate, provides the key source of information about labor utilization in the economy, especially in pinning down the depth of the output gap during the COVID-19 recession when the unemployment rate rose only moderately. Our findings suggest that labor market adjustments to the business cycle in the euro area occur more through the intensive, rather than extensive, margin.
- JEL Code
- C18 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Methodological Issues: General
E17 : Macroeconomics and Monetary Economics→General Aggregative Models→Forecasting and Simulation: Models and Applications
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 4 August 2022
- WORKING PAPER SERIES - No. 2696Details
- Abstract
- We investigate the factors driving current account and monetary policy developments in the euro area. We estimate an open-economy structural vector autoregression (VAR) model with zero and sign restrictions derived from a multi-country dynamic stochastic general equilibrium (DSGE) model to identify relevant shocks and analyse their impact on the current account and interest rate. Examining the VAR impulse responses for Germany, Italy and Spain we find that investment shocks and preference shocks drive the current account and interest rates in the opposite directions. By contrast, external demand shocks and productivity shocks cause both the current account balance and interest rate to move in the same direction. We also provide evidence for spillovers to the euro area from US preference shocks and US interest rate policy shocks.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 3 August 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2022Details
- Abstract
- This article takes stock of the impact of the coronavirus (COVID-19) crisis on business investment dynamics in the euro area and presents evidence on the main drivers of investment, as well as the opportunities, challenges and risks for its recovery, also in investment with respect to digitalisation and greening needs. Euro area business investment fell sharply in the first half of 2020. The considerable rebound and subsequent investment dynamics have been heterogenous across countries and types of investment, and the rebound has been overall somewhat weaker in the euro area than in the United States. While the recovery has been helped by substantial support from monetary and fiscal policy, headwinds such as increased uncertainty, commodity price rises and lingering supply bottlenecks risk delaying investment decisions and leading companies to further increase savings. Meanwhile, spending on further digitalising and “greening” the economy, as reflected in available investment data, has accelerated throughout the pandemic. Investment opportunities in these areas are considerable, and so are the challenges, which are mainly related to financing, regulation and incentives.
- JEL Code
- D25 : Microeconomics→Production and Organizations
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
Q55 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Technological Innovation
- 22 June 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2022Details
- Abstract
- This box summarises the findings of a survey of leading firms on the impact of climate change and related measures to green the economy on business, and thus on activity and prices. The survey responses indicate that during the transition to a net-zero economy large companies anticipate significantly higher investment, input costs and price pressures, as well as changes to production and market structures. However, only a small share of respondents expect a significant impact on investment, input cost and prices after the transition. As regards the challenges involved, firms emphasise issues related to the availability of new clean technologies and inputs, followed by concerns about costs and regulation. Firms expect physical risks to have an impact in particular on the agricultural, construction and transport sectors, and on firms in the manufacturing sector with vulnerable supply chains.
- JEL Code
- C83 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Survey Methods, Sampling Methods
M21 : Business Administration and Business Economics, Marketing, Accounting→Business Economics→Business Economics
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
Q5 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics
- 22 December 2021
- WORKING PAPER SERIES - No. 2634Details
- Abstract
- We study exchange rate pass-through (ERPT), i.e., the impact of exchange rate movements on inflation, focusing on euro area import prices at a sectorally disaggregated level. Our estimation strategy is based on VAR-X models, thus incorporating both endogenous and exogenous explanatory variables. The impulse response functions not only allow to study the extent but also the dynamics of ERPT. We find that ERPT is heterogeneous in terms of magnitude across sectors. We further investigate what industry-specific characteristics affect the heterogeneity of ERPT. Across various model specifications including import penetration, market integration, competition and value chain integration, we find that higher market concentration and higher backward integration in global value chains decrease pass-through, in line with previous findings in the literature.
- JEL Code
- C50 : Mathematical and Quantitative Methods→Econometric Modeling→General
F30 : International Economics→International Finance→General
F40 : International Economics→Macroeconomic Aspects of International Trade and Finance→General
- 5 August 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 5, 2021Details
- Abstract
- This box reports evidence on the heterogeneous impact of the pandemic on euro area countries. It shows that the different impact on activity was largely due to different containment measures, heterogenous sectoral compositions and institutions. Economies with a larger share of high-contact services sectors were hit the hardest, even when lockdown measures eased over time. All euro area governments implemented fiscal support measures, albeit different in size, to alleviate the health and economic consequences of the pandemic. This led to divergence in public finances in 2020 compared with the pre-crisis period. Looking ahead, the Next Generation EU programme is expected to help reduce the economic divergence observed in the euro area in 2020 and foster a more inclusive recovery.
- JEL Code
- E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 7 January 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2020Details
- Abstract
- The coronavirus (COVID-19) pandemic and the lockdown measures to contain its spread caused large cumulated losses in euro area domestic demand in the first half of 2020, with a rebound in the third quarter of the year, according to the standard expenditure-based breakdown of GDP. However, an adjustment for import intensities derived from input-output data shows that external factors have also contributed significantly to growth dynamics in 2020. While an extended analysis based on ratios of sectoral imports to value added as a proxy suggests that import intensities may have, in aggregate, risen somewhat in the current crisis, this does not have a significant impact on the alternative, import-adjusted GDP breakdown for 2020.
- JEL Code
- E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 25 January 2017
- WORKING PAPER SERIES - No. 2006Details
- Abstract
- Most euro area countries have entered an unprecedented ageing process: life expectancy continues to rise and fertility rates have declined, while retirement age in the last twenty to thirty years hardly increased. This implies an ever smaller fraction of the working age population in total population, leading to changes in consumption and saving behaviours and having an important impact on the macroeconomy. In this paper we focus on the relationship between demographic change and inflation. We find that based on a cointegrated VAR model there is a positive long-run relationship between inflation and the growth rate of working-age population as a share in total population in the euro area countries as a whole, but also in the US and Germany. We also find that this relation is mitigated by the effect of monetary policy, which we account for by including the short-term interest rate in our analysis. One caveat of the analysis could be that the empirical relationship as found does not sufficiently take into account changes in policy settings following the high inflation experiences in the 1970s. Our findings support the view that demographic trends are among the forces that shape the economic environment in which monetary policy operates. This is particularly relevant for countries, like many in Europe, that face an ageing process.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes - Network
- Task force on low inflation (LIFT)
- 2024
- SUERF Policy Brief, No. 833
- 2023
- European Economic Review
- 2023
- SUERF Policy Brief, No. 520*
- 2022
- SUERF Policy Brief, No. 492
- 2022
- SUERF Policy Brief, No. 347