the evolution of a free banking system the institutional features of models of unregulated monetary systems have often been arbitrarily and implausibly assumed this paper instead provides realistic grounding for important features by constructing a logical evolutionary account of free banking sophisticated and orderly arrangements are shown to emerge from competition and the pursuit of less costly methods of payment the emergence of standardized commodity money is followed by the development in turn of basic money transfer banking easily transferable bank liubilities and clearinghouses the features of an evolved free banking system differ from those assumed in recent models of competitive payments systems

housing choices and uncertainty the impact of stochastic events abstract in our model a household recognizes that family size is stochastic when making its tenure and housing consumption decisions it also recognizes that initial choices constrain later behavior because they affect the amount of savings simulations of the model show that housing consumption and the duration of stay in a residence are sensitive to whether the realization of the stochastic event is the expected value based on this observation we suggest that empirical housing studies should include both the expected and realized values of stochastic explanatory variables we find few behavioral responses to changes in the variance of an uncertain event even though increased uncertainty is passed through to after tax income and the user cost of owning a notable exception is that if a household knows that a change in an influential variable will occur but it does not know the direction of change it is more likely to rent initially

sample selection and biases in local house value indices abstract analysis of cross sectional or intertemporal variations in house values among localities requires reliable house value indices however prior studies applying the hedonic method to transaction data have reported price series that may be biased our paper investigates a possible cause of bias and uses a censored regression technique extended to an intertemporal model to derive an unbiased index we apply our method to 1971 1991 data from the miami florida msa and find evidence in time varying amounts of bias our results suggest that prior studies using the hedonic method and samples consisting only of sold houses have understated the intertemporal variability of house prices

money as meta rule buchanan s constitutional economics as a foundation for monetary stability this paper explores james buchanan s contributions to monetary economics and argues these contributions form the foundation of a robust monetary economics paradigm while often not recognized for his contributions to monetary economics buchanan s scholarship offers important insights for current debates especially the renewed interest in narrow banking in the wake of the financial crisis we argue that the post 2007 crisis milieu creates a unique opportunity to recognize as buchanan did the vital role that money plays in the market as the grammar of commerce that recognition makes the need for more fundamental reform of our monetary regimes at the constitutional level more apparent making buchanan s work on monetary constitutions more relevant than ever before we then discuss how adopting buchanan s monetary framework can improve both monetary scholarship and institutions

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

comparing tax and transfer systems poverty inequality and target efficiency this paper is concerned with comparisons between alternative tax and transfer systems using target efficiency measures where the objective is the alleviation of poverty means testing is preferred however the desire to reduce inequality usually leads to a preference for universal transfer systems such as the linear income tax the present paper provides comparisons of social welfare using an abbreviate welfare function for schemes which imply the same degree of poverty using several poverty measures it was found that means testing dominates if the headcount poverty measure is used otherwise the linear tax dominates copyright 1996 by the london school of economics and political science

alternative value estimates of owner occupied housing evidence on sample selection bias and systematic errors abstract numerous econometric models have used various estimates of housing value as dependent variables the three most common measures in order of descending popularity have been homeowner estimates sales price and assessed value each of these measures has limitations the use of sales price can cause sample selection bias while owner and tax assessor estimates are subject to measurement error this study investigates the magnitude of the selection bias associated with sales price samples and whether the errors in owner and assessor estimates are systematically related to independent variables typically included in estimated equations our most important conclusion is that the use of owner estimates may cause bias in the estimated coefficients on many independent variables

housing demand and disequilibrium abstract researchers have recently begun relying heavily on samples of recent movers to estimate housing demand parameters estimates from mover equilibrium and disequilibrium samples are compared to determine whether significant differences exist the results suggest that income elasticities are not affected by the sample distinctions but demographic effects vary across the different subsamples

a structural model of the demand for owner occupied housing abstract the goal of the analysis in this paper is to estimate a structural model of the demand for owner occupied housing in our framework the buyer selects the value of the house the size of the mortgage and the length of stay in the house we estimate a housing demand equation which includes both the length of stay and the loan to value ratio as endogenous variables one empirical result of interest is that the income elasticity of demand for housing found in the structural housing demand equation is much larger than the value estimated in the reduced form we also point out some occasions when it is important to distinguish between a reduced form and a structural model of housing choices

the central banking role of clearinghouse associations most of this clearinghouse currency was illegal but no one thought of prosecuting or interfering with its issuers as practically all of it bore the words payable only through the clearing house its holders could not demand payment for it in cash in plain language it was an inconvertible paper money issued without the sanction of law yet necessitated by conditions for which our banking laws did not provide when banks were being run upon and legal money had disappeared in hoards in default of any legal means of relief it worked effectively and doubtlessly prevented multitudes of bankruptcies which otherwise would have occurred andrew 1908b p 516

the future price of houses mortgage market conditions and the returns to homeownership the purpose of this paper is to provide a simple framework in which to analyze the impact of a perfectly anticipated increase in the future selling price of houses on current house purchase decisions in the presence of capital market imperfections since implicitly it is the after tax selling price of houses that is considered this analysis is equivalent to one of a decrease in the capital gains tax on houses at retirement in this paper assumptions about homeownership mortgage markets and liquidity constraints are added to a life cycle model of asset accumulation taking the date of house purchase as exogenous it is shown that the impact of an exogenous increase in the expected future price of houses depends on current mortgage market conditions the future price of houses relative to the current price and the ratio of liquid assets to future labor income as well as preferences also a simple model of a market for houses is presented to analyze the impact of an increase in the expected future price of houses on the current market clearing price the mortgage market and the redistribution of the housing stock to consumers according to their wealth and liquidity characteristics in the life cycle model as exposited by franco modigliani and robert brumberg an increase in consumption in one period requires a decrease in consumption in another period when owner occupied housing is added to the model the tradeoff between consumption in different periods becomes more complex purchasing a larger house entails an increase in the consumption of housing services and an increase in assets held in the form of a house but a decrease in either nonhousing consumption or the holdings of an alternative asset or both the response of the consumer to price or income changes is also limited by financial market constraints capital market imperfections have been introduced into the life cycle model by a number of authors see for example lester thurow thayer watkins thomas russell clark wiseman and christopher pissarides and several authors have explicitly considered the impact of capital market imperfections on the house purchase decision see william dolde and james tobin william poole donald lessard and modigliani and dolde most similar to this study although developed independently roland artle and p varaiya s paper includes the theoretical incorporation of the house purchase decision into a life cycle model they consider the problem of choosing the date of house purchase while treating the level of consumption of housing services as exogenous in the life cycle model in this paper the consumer chooses the size of house to purchase at an exogenous date to use the life cycle model in the framework of a market of houses it is assumed that the stock of houses and the prices of all other goods including the rate of return on the alternative asset are fixed all consumers are identical except perhaps for initial wealth as noted by irving fisher p 325 in a world of perfect foresight and perfect markets the rates of return on all assets are equated in equilibrium if markets are perfect with the stock of houses and other prices fixed the present price of houses will rise by an amount equal to the present value of an exogenous increase in a future price of houses when mortgage market imperfections are introduced this relationship no longer holds and a future price increase may result in a redistribution of the current stock assistant professor of economics university of michigan this paper is an extension of a chapter of my doctoral thesis at the university of wisconsin madison the helpful comments of donald d hester charles a wilson hal varian and george borts are gratefully acknowledged

the impact of milton friedman on modern monetary economics setting the record straight on paul krugman s who was milton friedman abstract paul krugman s essay who was milton friedman seriously mischaracterizes friedman s economics and his legacy in this paper we provide a rejoinder to krugman on these issues in the course of setting the record straight we provide a self contained guide to milton friedman s impact on modern monetary economics and on today s central banks we also refute the conclusions that krugman draws about monetary policy from the experiences of the united states in the 1930s and of japan in the 1990s

the worldwide change in the behavior of interest rates and prices in 1914 abstract this paper evaluates the role of the destruction of the gold standard and the founding of the federal reserve both of which occured in 1914 in contributing to observed changes in the behavior of interest rates and prices after 1914 the paper presents a model of policy coordination in which the introduction of the fed stabilizes interest rates even it the gold standard remains intact and it offers empirical evidence that the dismantling of the gold standard did not play a crucial role in precipitating the changes in interest rate behavior

housing consumption and permanent income in developing countries estimates from panel data in el salvador the estimation of the parameters of housing demand equations occupies a prominent place in the urban economics literature of developed countries see de leeuw 4 and mayo 20 for thorough reviews of the state of the empirical art most research has focused on income and price elasticities of housing demand using both aggregated and micro level data the main conclusions of those studies which do not suffer from aggregation or other biases seem to be that a on average for a large segment of the population including both renters and owners permanent income elasticities are well below one b permanent income elasticities for owners ranging mostly from 0 5 to 0 7 in mayo s review are slightly higher than estimates for renters which ranged mostly from 0 3 to 0 5 c as predicted by the theory the permanent income demand elasticity generally exceeds that of current

bank regulation and monetary policy the depository institutions deregulation and monetary control act 1980 and the garn st germain depository institutions act 1982 are the two most significant pieces of bank legislation since the 193os their significance stems from the fact that they have sought to roll back a number of the regulations and restrictions imposed on bank activity and competition in the 1933 80 period among the important provisions of these acts are a gradual elimination of regulation q ceilings on time and savings deposits by march 1986 the amelioration of state imposed usury ceilings on loans the nationwide provision of interest bearing transaction type accounts negotiable order of withdrawal now and super now accounts permission for thritts to expand into bank like products such as commercial and industrial loans consumer loans and credit cards and the development of new types of savings accounts such as mmdas l in addition to legislative deregulation we have also witnessed homemade deregulation as banks have sought to exploit often with great success loopholes in the bank holding

home ownership and unemployment in the us in this paper we scrutinise oswald s evidence that home ownership and unemployment are correlated across the us states in order to abstract from state fixed effects in levels we analyse the cross sectional variation in changes in home ownership and unemployment rates between 1970 and 1990 after duplicating nearly oswald s result we illustrate the importance of weighting the state observations by the fraction of total us households in 1970 that resided in the respective states and of abstracting from the ageing of the population between 1970 and 1990 this causes oswald s correlation to to disappear secondly we estimate the relationship for six different age classes and for household heads and total population we find that the relationship is non existent for both young households and old households but exists for middle aged households young households have accumulated little wealth and have had less time to become attached to the geographical area than middle aged households and thus are more

the role of the federal reserve as lender of last resort and the seasonal fluctuation of interest rates the federal reserve s role as a lender of last resort may explain why the seasonal fluctuation of interest rates appeared to decline around 1914 the creation of the fed reduced the seasonal fluctuation of both the probability of a bank receiving an emergency loan and the probability of a financial panic the seasonality of real interest rates could therefore have declined regardless of whether the fed conducted seasonal open market operations the evidence is consistent with the lender of last resort model copyright 1991 by ohio state university press

free banking and information asymmetry a traditional argument against free banking is that it will collapse because of information externalities it is impossible for depositors to tell whether a high deposit rate offered by a bank is due to its high efficiency or risky lending strategy this paper shows that in a separating equilibrium a higher quality bank offers a lower deposit rate and holds a smaller proportion of risky loans than a lower quality bank to signal its underlying quality hence free banking is not inherently unstable the empirical results for the hong kong banking system during 1964 65 are consistent with the hypothesis of a separating equilibrium