empirical implications of equilibrium bidding in first price symmetric common value auctions this paper studies federal auctions for wildcat leases on the outer continental shelf from 1954 to 1970 these are leases where bidders privately acquire at some cost noisy but equally informative signals about the amount of oil and gas that may be present we develop tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values we also use data on tract location and exposr values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition we find that bidders are aware of the winner s curse and their bidding is largely consistent with equilibrium

real rigidity nominal rigidity and the social value of information does welfare improve when firms are better informed about the state of the economy and can thus better coordinate their production and pricing decisions we address this question in an elementary business cycle model that highlights how the dispersion of information can impede both kinds of decisions and in this sense be the source of both real and nominal rigidity within this context we develop a taxonomy for how the social value of information depends on the two rigidities on the sources of the business cycle and on the conduct of monetary policy jel d21 d82 d83 e32 e52

speculative attacks and the information role of the interest rate this paper models currency attacks as carried out by speculators who condition their actions on private signals about the state and on the market clearing interest rate besides affecting speculators payoffs this interest rate also provides an endogenous public signal for a plausible type of investment strategies the dual role of the interest rate allows the model to explain abrupt and intense speculative attacks solely via economic fundamentals without resorting to sunspot variables this result underlies a novel policy implication an official intervention in the foreign exchange market may reinforce a currency peg by influencing the precision of public information jel d82 d84 f31

testing for affiliation in first price auctions using entry behavior in this article we show that affiliation among potential bidders private information either private signals or entry costs leads to affiliation among their entry decisions we propose a test for affiliation among potential bidders private information based on the implication of affiliation on the entry behavior which is general and widely applicable to various scenarios the test is implemented using the simulation based method we then apply our method to timber sales in the oregon department of forestry and find a small but strongly significant level of affiliation among all timber companies

structural estimation of the affiliated private value auction model we consider the structural estimation of the affiliated private value apv model in first price sealed bid auctions the model allows for bidders individual efficiencies and opportunity costs while permitting dependence among bidders private values through affiliation we establish the nonparametric identification of the apv model characterize its theoretical restrictions and propose a computationally convenient and consistent two step nonparametric estimation procedure for estimating the joint private value distribution from observed bids using simulated bid data we provide a step by step guide on how to implement our procedure and show the good behavior of our estimator in small samples

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

transparency of information and coordination in economies with investment complementarities how do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities and what is the optimal transparency in the information conveyed for example by economic statistics policy announcements or news in the media we first consider an environment where the complementarities are weak so that the equilibrium is unique no matter the structure of information an increase in the precision of public information may have the perverse effect of increasing aggregate volatility nevertheless as long as there is no value to lotteries welfare unambiguously increases with an increase in either the relative or the absolute precision of public information hence full transparency is optimal this is because more transparency facilitates more effective coordination which is valuable from a social perspective on the other hand when complementarities are strong enough that multiple equilibria are possible more transparency permits the market to coordinate more effectively on either the bad or the good equilibrium in this case constructive ambiguity becomes optimal if there is a high risk that more transparency will lead to coordination failures this abstract was borrowed from another version of this item

growth forecasts belief manipulation and capital markets abstract we analyze how a benevolent privately informed government agency would optimally release information about the economy s growth rate when the agents hold heterogeneous beliefs we model two types of agent conforming and dissenting the former has a prior that is identical to that of the government agency whereas the latter has a prior that differs from that of the government agency we identify both informative and uninformative equilibria informative equilibria are equilibria in which the government agency s equilibrium signal leads to a revision of beliefs we demonstrate that the uninformative equilibria can in fact dominate the informative ones in terms of ex post social welfare

asymmetric information and rational expectations when is it right to be wrong abstract in this paper we examine the effects of private agents being less than fully rational in their expectations we examine this in the context of monetary policy where the central bank may have uncertain preferences either by choice or by necessity the new feature is that we allow the public to react in two different ways they either form rational expectations and internalize the uncertainty about the central bank s preferences in full or alternatively and if this process of internalization is costly it forms a best guess regarding those preferences this implies a certainty equivalence strategy applied to the preference parameters as those parameters enter the decisions non linearly a systematic error emerges we examine the magnitude of the resulting error in inflation and output following the assumption of certainty equivalence under all reasonable levels of uncertainty this error turns out to be small but involves trading a deflation bias against the cost of gathering the information needed for the full information rational expectations solution

fiscal spillovers in the euro area this paper analyses the dynamic effects of fiscal imbalances in a given emu member state on the borrowing costs of other countries in the euro area the estimation of a multivariate multi country time series model specifically a global var or gvar using quarterly data for the emu period suggests that euro denominated government yields are strongly linked with each other however financial markets seem to be able to discriminate among different issuers consequently fiscal imbalances in italy and in other peripheral countries should be closely monitored by their emu partners and the european institutions

timber sale auctions with random reserve prices this paper analyzes first price sealed bid auctions of standing timber organized by the french forest service office national des forets onf a feature of these auctions is that they are held wi

identification in auctions with selective entry this paper considers nonparametric identification of a two stage entry and bidding game we call the affiliated signal as model this model assumes that potential bidders have private values observe signals of their values prior to entry and then choose whether to undertake a costly entry process but imposes only minimal structure on the relationship between signals and values it thereby nests a wide range of entry processes including in particular the samuelson 1985 and levin and smith 1994 models as special cases working within the as model we map variation in factors affecting entry behavior potential competition or entry costs into identified bounds on model fundamentals these bounds are constructive collapse to point identification when available entry variation is continuous and can readily be refined to produce the pointwise sharp identified set we then extend our core results to accommodate nonseparable unobserved auction level heterogeneity and potential endogeneity of entry shifters thereby establishing a formal identification framework for structural analysis of auctions with selective entry

optimal degree of public information dissemination financial markets and macroeconomic environments are often characterised by positive external ities in these environments transparency may reduce expected welfare public announcements serve as focal points for higher order beliefs and affect agentsbehaviour more than justified by their informational contents some scholars conclude that reducing public signalsprecision or entirely withholding information may improve welfare this article shows that public information should always be provided with maximum precision but under certain conditions not to all agents restricting the degree of publicity is a better suited instrument for preventing the negative welfare effects of public announcements than restrictions on their precision are there is a general presumption that higher central bank transparency in terms of information disclosure to a wider audience improves the effectiveness of monetary policy and is beneficial to markets as it reduces information asymmetries helps to assess risk better and arrive at more informed decisions thus enhancing market efficiency while practitioners in central banks and international institutions agree on the desirability of informative announcements and promote higher transparency on the ground that any information is valuable to markets recent academic literature distin guishes private and public information and argues that public announcements may destabilise markets and reduce efficiency by their effects on higher order beliefs if markets are characterised by positive externalities morris and shin 2002 henceforth m s have shown that noisy public announcements may be detrimental to welfare from an ex ante point of view they conclude that a commitment to withholding relevant information or deliberately reducing its precision may be welfare enhancing in this article we challenge this conclusion by distinguishing two components of transparency precision ofinformationanddegreeofpublicity the degreeof publicity is the proportion of agents who receive a signal using a stylised coordination game introduced by m s we show that information should always be provided to the market

exchange rate regimes and asset prices abstract we study the implications of alternative exchange rate regimes for asset prices in a portfolio balance model motivated by the recent us china experience we establish that asset price responses to various shocks differ across a flexible regime and a unilateral peg but the differences for most shocks tend to be rather small moreover while both monetary and public debt expansions have inflationary effects on equity prices the latter s impact is stronger under a flexible exchange rate regime these two findings suggest that a flexible usd rimni rate would not have limited the recent asset price inflation in the us

the social value of public information with convex costs of information acquisition in a beauty contest framework welfare can decrease with public information if the precision of private information is exogenous whereas welfare necessarily increases with public information if the precision is endogenous with linear costs of information acquisition the purpose of this paper is to reconcile these results by considering nonlinear costs of information acquisition the main result of this paper is a necessary and sufficient condition for welfare to increase with public information using it we show that costs of information acquisition are linear if and only if welfare necessarily increases with public information thus welfare can decrease with public information for any strictly convex costs this is because convex costs mitigate the so called crowding out effect of public information on private information thereby making the social value of public information with endogenous precision closer to that with exogenous precision

optimal policy intervention and the social value of public information svensson 2006 argues that morris and shin s 2002 analysis is contrary to what is claimed actually pro transparency this paper re examines the issue but with an important modification to the original morris and shin framework recognizing that central banks impact on the economy not only indirectly via their public announcements but also directly through their policy actions we consider the social value of public information in the presence of active policy intervention our results strengthen morris and shin s conclusions considerably in particular we find that public disclosure of the central bank s information is always undesirable

disclosure standards and market efficiency evidence from analysts forecasts abstract this paper studies whether recent international transparency initiatives affect information accuracy and dispersion i show that the impact of these initiatives is limited because public disclosure crowds out private investments in information i first develop a theoretical model of the incentive to invest in information and the impact of public disclosure i then analyze stock market analysts forecasts for thirty developing economies for the period 1990 2004 i find that disclosure standards enhance forecast accuracy directly but at the same time reduce the number of analysts per stock proxy for private information investments the net effect of disclosure standards thus ranges from weak to nonexistent

recessions growth and banking crises abstract we examine the relationship of banking crises with economic growth and recessions our data cover 21 economies from around the world most from 1870 to 2009 with the rest starting in 1901 or earlier the data include capital investment and human capital formation we have two major findings first there is very large heterogeneity in growth of gross domestic product gdp and capital investment after banking crises most strikingly twenty five percent of counties experience no decrease in real gdp per capita in the year of the crisis or the following two years some countries see an increase in long run growth after a crisis while others see a fall with no clear overall pattern second we find clear evidence consistent with zarnowitz s law if there is a contraction in economic activity after a banking crisis larger decreases in real gdp per capita are followed by faster subsequent growth

ex ante efficient mechanism with private entry costs this paper studies ex ante efficient resource allocation mechanism in an environment where agents endowed with their private values must incur private entry costs to participate due to the nature of this bidimensional screening problem and the difficulty in fully characterizing all implementable endogenous entries the domain of the related social planner s problem that is essential for establishing the existence of efficient mechanism needs to be carefully designed we find that a second price auction among the entrants with a reserve price equal to the seller s valuation is ex ante efficient and any ex ante efficient mechanism must be ex post efficient jel d44 d61 d82

learning and complementarities in speculative attacks we study a model where the aggregate trading of currency speculators reveals new information to the central bank and affects its policy decision we show that the learning process gives rise to coordination motives among speculators leading to large currency attacks and introducing non fundamental volatility into exchange rates and policy decisions we show that the central bank can improve the ex ante effectiveness of its policy by committing to put a lower weight ex post on the information from the market and that transparency may either increase or decrease the effectiveness of learning from the market depending on how it is implemented

does publication of interest rate paths provide guidance abstract does the central bank practice of publishing interest rate projections irps improve how market participants map new information into future interest rates using high frequency data on forward rate agreements fras we compute market forecast errors differences between expected future interest rates and ex post realizations we assess their change in narrow windows around monetary policy announcements and macroeconomic releases in norway and sweden overall communication of future policy plans does not improve markets response to information irrespective of whether or not irps are in place a decomposition of market reactions into responses to the current monetary policy action target and responses to signals about the future path reveals that only policy actions lead to improvements in market forecasts

heterogeneous private sector information central bank disclosure and stabilization policy conventional wisdom has it that a central bank that uses an informational advantage to undertake active policy intervention can do as well at least so far as real outcomes are concerned by making its information publicly available and abstaining from stabilization this notion is examined using a framework incorporating heterogeneous private sector information concerning aggregate demand shocks an activist regime in which the central bank exploits its own information to engage in stabilization is found to be unambiguously superior to a noninterventionist regime where the central bank maintains a constant setting of policy but publicly discloses its own information

entry and competition effects in first price auctions theory and evidence from procurement auctions motivated by several interesting features of the highway mowing auction data from the texas department of transportation tdot we study three competing procurement auction models with endogenous entry our entry and bidding models provide several interesting implications for the first time we show that even within an independent private value paradigm as the number of potential bidders increases bidders equilibrium bidding behaviour can become less aggressive and the expected procurement cost may rise because the entry effect is always positive and may dominate the negative competition effect we then develop structural models of entry and bidding corresponding to the three models under consideration controlling for unobserved auction heterogeneity and use the recently developed semi parametric bayesian estimation method to analyse the data we select the model that best fits the data and use the corresponding structural estimates to quantify the entry effect and the competition effect with regard to the individual bids and the procurement cost copyright 2009 wiley blackwell

macroeconomic adjustment and the history of crises in open economies abstract this paper investigates the impact of the history of crises on macroeconomic performance we first study the impact of past banking crises on the probability of a future banking crisis we do not detect a learning process from past banking crises countries that have already experienced one banking crisis generally have a higher likelihood of experiencing another crisis and the depth of the crisis does not appear to be affected by the previous historical experience with crisis events evidence also suggests that in middle income countries higher de jure capital account openness is associated with lower likelihood of a banking crisis a lower ratio of non performing loans during the crisis and higher levels of forgone output in the crisis aftermath in contrast we find that past crisis experience has a significant impact on savings when facing considerable political risk the past does seem to matter countries with more people who were exposed over their lifetime to larger disasters will tend to save more this association however does not hold for countries with more stable political systems

the role of central bank transparency for guiding private sector forecasts central banks have become remarkably more transparent over the last few decades in this paper we study the effects of this evolution focusing on whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables we use a large set of proxies for central bank transparency in 12 advanced economies we find evidence for a sizeable effect e g by announcing a quantified inflation objective or by publishing inflation and output forecasts however there are decreasing marginal effects to increases in transparency and the disagreement among the expectations of the general public is not affected this suggests that there are possible limits to transparency

a primer on global games applied to macroeconomics and finance this paper shows how to solve global games applied to macroeconomics and finance we ascertain the roles of public and private information for the determination of a unique equilibrium and discuss the informative role of market prices we examine the impact of public information on social welfare comparing models with and without complementarities at the aggregate level

an informational rationale for action over disclosure abstract the past two decades have seen a considerable increase in the amount of public information provided by policymakers are such disclosures desirable or is it instead preferable to use such information to condition a policy instrument such a tax or an interest rate this paper studies the relative merits of each means to use a policymaker s information in a flexible class of economies that feature dispersed information and payoff and learning externalities i provide conditions for when the exclusive use of a policy instrument or disclosure is optimal i then relate these to differences in the equilibrium and socially optimal use of information i conclude with a series of applications that show how my results apply to common beauty contest models competitive economies and a broad class of macroeconomic models among others

the affiliation effect in first price auctions we study the monotonicity of the equilibrium bid with respect to the number of bidders n in affiliated private value models of first price sealed bid auctions and prove the existence of a large class of such models in which the equilibrium bid function is not increasing in n we moreover decompose the effect of a change in n on the bid level into a competition effect and an affiliation effect the latter suggests to the winner of the auction that competition is less intense than she had thought before the auction since the affiliation effect can occur in both private and common value models a negative relationship between the bid level and n does not allow one to distinguish between the two models and is also not necessarily only due to bidders taking account of the winner s curse

communication by central bank committee members different strategies same effectiveness the paper assesses the communication strategies of the federal reserve the bank of england and the european central bank and their effectiveness we find that the effectiveness of communication is not independent from the decision making process the paper shows that the federal reserve has been pursuing a highly individualistic communication strategy amid a collegial approach to decision making while the bank of england is using a collegial communication strategy and highly individualistic decision making the european central bank ecb has chosen a collegial approach both in its communication and in its decision making assessing these strategies we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the federal reserve and the ecb this suggests that there may not be a single best approach to designing a central bank communication strategy

central bank communication and monetary policy a survey of theory and evidence over the last two decades communication has become an increasingly important aspect of monetary policy these real world developments have spawned a huge new scholarly literature on central bank communication mostly empirical and almost all of it written in this decade we survey this ever growing literature the evidence suggests that communication can be an important and powerful part of the central bank s toolkit since it has the ability to move financial markets to enhance the predictability of monetary policy decisions and potentially to help achieve central banks macroeconomic objectives however the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

communication and monetary policy recent trends toward greater central bank independence and the adoption of formal inflation targeting by several countries have served to emphasize the importance of communication policy in this paper we explore some of the economic effects of public information that arise whenever public information serves the dual role of conveying fundamental information as well as serving as a focal point for better coordination more precise public information is a double edged tool while it is very effective in influencing actions through coordination sometimes it can be too effective and coordinate actions away from fundamentals copyright 2002 oxford university press

information acquisition and welfare we study information acquisition in a flexible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the efficient acquisition of information first we relate the in efficiency in the acquisition of information to the in efficiency in the use of information and explain why efficiency in the use is no guarantee of efficiency in the acquisition next we show how the acquisition of private information affects the social value of public information i e the comparative statics of equilibrium welfare with respect to the quality of public information finally we illustrate the implications of the results in a monetary economy with price rigidities and dispersed information about productivity shocks

optimal reservation prices in auctions the risk neutral independent private values ipv auction model produces curious results regarding the use of reservation prices no matter how many bidders the seller should announce a fixed reservation price above his true value this is notable since the seller gains by adopting an inefficient institution and puzzling because it conflicts with common practice the authors relax the ipv assumption characterize optimal reservation prices in a richer class of auctions and show that when information is correlated the seller s optimal reservation price converges to his true value often monotonically and rapidly as the number of bidders grows copyright 1996 by royal economic society

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

market distortions and government transparency in this paper we investigate how government transparency depends on economic distortions we first consider an abstract class of economies in which a benevolent policy maker is privately informed about the exogenous state of the economy and contemplates whether to release this information our key result is that distortions limit communication even if transparency is ex ante pareto superior to opaqueness it cannot constitute an equilibrium when distortions are sufficiently high we next confirm this broad insight in two applied contexts in which monopoly power and income taxes are the specific sources of distortions jel d82 e61

optimal policy intervention constrained obfuscation and the social value of public information we study the welfare implications of public information precision in a beauty contest framework allowing for optimal stabilization policies and information obfuscation when policy makers ability to obfuscate information is constrained increasing public information precision can be welfare improving

inflation targeting with imperfect information in a global games setup with imperfect commitment technology we show that low targets the ones close to the optimal inflation under perfect commitment are unattainable leading to a trade off between low and credible targets moreover since noisy public information helps to coordinate expectations around the announced target our article supports unconventional policy prescriptions first weaker countries need to impose higher targets second less transparency helps to make the announced target credible and then reduces the optimally announced target results are based on a general central bank loss function encompassing models traditionally used to discuss central bank decisions

optimal central bank transparency should central banks increase their degree of transparency any further we show that there is likely to be an optimal intermediate degree of central bank transparency up to this optimum more transparency is desirable it improves the quality of private sector inflation forecasts but beyond the optimum people might 1 start to attach too much weight to the conditionality of their forecasts and or 2 get confused by the large and increasing amount of information they receive this deteriorates the perceived quality of private sector inflation forecasts as a result inflation is set in a more backward looking manner resulting in higher inflation persistence by using a large scale panel data set on the transparency of central banks we find empirical support for an optimal intermediate degree of transparency at which inflation persistence is minimized our results indicate that while several central banks would benefit from further transparency increases some already have reached the optimal level

the effect of fomc votes on financial markets this paper shows that since votes of members of the federal open market committee have been included in press statements stock prices increase after the announcement when votes are unanimous but f

auctions with selective entry and risk averse bidders theory and evidence we study auctions with selective entry and risk averse bidders our model accounts for risk averse bidders endogenous participation decision and thus encompasses the existing entry models we establish entry and bidding equilibrium in first price auction and ascending auction mechanisms and show that bidders entry behavior differs between these two mechanisms with different forms of risk aversion our approach provides testable implications of risk aversion in terms of entry behavior we analyze a timber auction data set and propose a simple test for the form of bidders risk aversion based on our model implications

policy announcements and welfare in the presence of idiosyncratic risk the public revelation of information about uncertain aggregate outcomes such as policy choices can be detrimental to social welfare by announcing informative signals on non insurable aggregate risk the policy maker distorts agents insurance incentives and increases the riskiness of the optimal allocation that is feasible in self enforceable arrangements as an application we consider a monetary authority that may reveal changes in the inflation target and document that the negative effect of distorted insurance incentives can very well dominate conventional effects in favor for the release of better information

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices

semiparametric estimation of the optimal reserve price in first price auctions the optimal reserve price in the independent private value paradigm is generally expressed as a functional of the latent distribution of private signals which is by nature unobserved this feature has limited the implementation of the optimal reserve price in practice in this article we consider first price auctions within the general affiliated private values paradigm we show that the seller s expected profit can be written as a functional of the observed bid distribution we propose a semiparametric extremum estimator for estimating consistently the optimal reserve price from observed bids as an illustration we consider the outer continental shelf ocs wildcat auctions

buybacks with costly participation abstract posted price offers and first price auctions along with the multi unit discriminatory auction extension are two widely used mechanisms for allocating conservation contracts the choice between the two typically hinges on the trade off between the posted price s simplicity and the potential revenue gains of the auction in this paper we introduce a novel mechanism that attempts to bridge the gap between the performance of posted price offers and auctions a two price and lottery schedule combines the simplicity of the former with some of the flexibility of the latter using a model that incorporates agents cognitive and information costs of bidding we analyze how the ranking of allocative efficiency and cost effectiveness between the mechanisms varies as the wedge of participation costs increases when the number of bidders is endogenously determined by participation costs bid shading associated with a lack of competition in the auction compromises its cost effectiveness vis a vis the posted price and the lottery schedule we use data from three recent buybacks for fishing licenses conducted in maryland to calibrate our model and identify conditions under which the two price schedule outperforms the other mechanisms

interrelations between the united states and the united kingdom 1873 1975 abstract this article is an excerpt from a monograph monetary trends in the united states and the united kingdom their relation to income prices and interest rates 1867 1975 that the university of chicago press has scheduled for publication in july 1982 earlier in the monograph we estimate a single demand curve for money for the united states and the united kingdom and also show that velocity in the two countries had parallel movements and that the rates of change of velocity were nearly identical in the two countries for most of the century we cover similar behavior of velocity in the two countries requires in addition to a largely common demand curve similar behavior of the variables affecting the demand for money chapter 7 from which this excerpt is taken begins by examining the interrelations between velocity in the two countries the excerpt though self contained is clearly incomplete note that the basic data are geometric averages of annual data for cycle phases expansions or contractions which average 2 0 years in length for the united states 2 8 years for the united kingdom rates of change g with a subscript for the variable for a phase are the slopes of straight lines fitted to the logarithms of three successive phase averages the phase in question the prior phase and the following phase money refers to currency plus adjusted demand and time deposits of commercial banks held by the public income refers to net national product nominal money m or income y is income in dollars or pounds at current prices prices p refer to the implicit price index obtained by dividing national product in current prices by national product in constant 1929 prices velocity v is the ratio of nominal income to nominal money short term interest rates refer to the us commercial paper rate and the uk rate on 3 month bank bills demand shift and postwar readjustment effects refer to the values of dummy variables in the demand curves for each country these effects allow for an upward shift in the demand for money during selected phases of economic uncertainty and for readjustments in the demand for money following world wars i and ii

sources of disagreement in inflation forecasts an international empirical investigation abstract central to the conduct of monetary policy are inflation forecasts inflation forecasts are not unique central banks and professional organizations generate inflation forecasts while households are surveyed about their inflation outlook this paper estimates inflation forecast disagreement for nine economies over the 1999 2009 period five of which target inflation i find that central bank transparency tends to increase forecast disagreement to the extent this reflects the attention paid to inflation performance the implication is that transparency is beneficial moreover this finding does not appear to be a feature that applies only to central banks that must adhere to an inflation target

auctions with resale markets an application to u s forest service timber sales when bidders anticipate an opportunity for resale trade the value of winning an auction is determined in part by the option values of buying and selling in the secondary market one implication is that a bidder s willingness to pay at an auction increases with the expected level of competition between resale buyers empirical evidence from auctions of timber contracts supports this prediction and rejects standard models that ignore resale the estimated effect is smaller after policy changes expected to diminish the prevalence of resale additional evidence supports the predicted presence of a common value element introduced by the resale opportunity

dispersed communication by central bank committees and the predictability of monetary policy decisions the paper asks whether members of central bank decision making committees should communicate with the public in a collegial manner by conveying the consensus or majority view of the committee or in an individualistic way by providing the diversity of views among the committee members it finds that more active as well as more consistent communication by committee members improves the predictability of monetary policy decisions significantly this effect is sizeable as communication dispersion across committee members accounts on average for one third to one half of the market s prediction errors of fomc policy decisions moreover more active and more consistent communication are found to also reduce the degree of uncertainty about the future path of interest rates these findings suggest that a collegial communication which stresses the consensus view on policy inclinations can enhance the effectiveness of central bank communication

heterogeneous information quality strategic complementarities and optimal policy design abstract the beauty contest framework of morris and shin 2002 is extended to allow sub groups within the population of agents to differ in the quality i e precision of their private information we discuss the inefficiency of the resulting model s equilibrium and assess the relative effectiveness in remedying this inefficiency of i a pigouvian tax scheme ii direct policy intervention by means of an instrument which can modify the state of the world the disclosure policy implications of each of these two policy approaches are also analyzed

imperfect common knowledge staggered price setting and the effects of monetary policy this paper studies the consequences of a lack of common knowledge in the transmission of monetary policy by integrating the woodford 2003a imperfect common knowledge model with taylor calvo staggered price setting models the average price set by monopolistically competitive firms depends on their higher order expectations about not only the current state of the economy but also about the states in the future periods in which prices are to be fixed this integrated model provides a plausible explanation for the observed effects of monetary policy it shows analytically how price adjustments are delayed and how the response of output to monetary disturbances is amplified

optimal bank transparency increasing transparency is recurrently offered as a centerpiece of bank regulation we study a competitive banking sector whose illiquid assets are funded by short term debt that must be refinanced we show that welfare is a nonmonotonic function of the level of transparency increasing transparency fosters efficient liquidation but has an adverse effect on rollover risk given the level of risk banks may compensate this adverse effect by taking more risk these offsetting effects render an intermediate level of transparency optimal moreover the existence of negative social externalities of bank failures calls for making banks more opaque rather than more transparent

managing beliefs about monetary policy under discretion in models of monetary policy discretionary policymaking is typically constrained in its ability to manage public beliefs however when a policymaker possesses private information policy actions serve as signals to the public about unobserved economic conditions and belief management becomes an integral part of optimal discretion policies this article derives the optimal time consistent policy for a general linear quadratic setting the optimal policy is illustrated in a simple new keynesian model where analytical solutions can be derived as well in this model imperfect information about the policymaker s output target leads to lower policy losses

spread the word international spillovers from central bank communication abstract we construct a novel text dataset to measure the sentiment component of communications for 23 central banks over the 2002 2017 period our analysis yields three results first comovement in sentiment across central banks is not reducible to trade or financial flow exposures second sentiment shocks generate cross country spillovers in sentiment policy rates and macroeconomic variables and the fed appears to be a uniquely influential generator of such spillovers even among prominent central banks and third geographic distance is a robust and economically significant determinant of comovement in central bank sentiment while shared language and colonial ties have weaker predictive power

to bid or not to bid the role of participation rates in conservation auction outcomes in this article i jointly analyze stated willingness to accept values with revealed auction bids from fishing license buybacks in the chesapeake bay blue crab fishery in order to better understand the link between participation decisions and conservation outcomes in contrast with theoretical expectations i find individuals with the lowest willingness to accept participated in these reverse auctions at lower rates than other eligible individuals all else being equal this suggests that who bids in an auction plays an important role in the success of conservation outcomes these results indicate that market design should expand to consider how and whether the economic incentives underlying auction participation align with desired conservation outcomes both within fisheries and in natural resource management more broadly

purdah on the rationale for central bank silence around policy meetings many central banks share the practice of purdah a guideline of abstaining from communication around policy meetings although seemingly contradicting the virtue of transparency by withholding information precisely when it is sought after intensely it has been justified on grounds that such communication may create excessive market volatility this paper assesses the purdah for the federal reserve and confirms that financial markets are substantially more sensitive to central bank communication around policy meetings short term interest rates react three to four times more strongly in the purdah before federal open market committee meetings than otherwise and volatility increases compared to a reduction otherwise

the social value of public information with costly information acquisition abstract in a beauty contest framework public authorities decide the accuracy of public information evaluating how it affects individual actions and private information acquisition more precise public information increases welfare whenever its marginal cost does not exceed that of private information

mergers cartels set asides and bidding preferences in asymmetric oral auctions from bidding data we estimate the underlying value distribution for forest service timber we find that bidder values decrease 2 mbf thousand board feet with each mile from the tract and that small firms fewer than 500 employees have values that are 72 mbf lower than large firms the empirical value distribution is used to simulate various hypothetical scenarios designed to inform public policy the most anticompetitive mergers raise price by less than 3 and a 4 decline in marginal costs through greater merger efficiencies is enough to offset a 1 anticompetitive price increase eliminating the sba set aside program would raise timber revenues by 15 a policy of granting bidding preferences to small and more distant bidders would raise revenue by approximately one tenth of one percent

a nonparametric test for comparing valuation distributions in first price auctions this article proposes a nonparametric test for comparing valuation distributions in first price auctions our test is motivated by the fact that two valuation distributions are the same if and only if their integrated quantile functions are the same our method avoids estimating unobserved valuations and does not require smooth estimation of bid density we show that our test is consistent against all fixed alternatives and has nontrivial power against root n local alternatives monte carlo experiments show that our test performs well in finite samples we implement our method on data from u s forest service timber auctions

social value of public information comment morris and shin 2002 is actually pro transparency not con the main result of morris and shin 2002 restated in papers by amato morris and shin 2002 and amato and shin 2003 and commented upon by the economist 2004 has been presented and interpreted as an anti transparency result more public information can be bad however some scrutiny of the result shows that it is actually pro transparency except in very special circumstances more public information is good furthermore for a conservative benchmark of equal precision in public and privateinformation social welfare is higher than in as ituation without public information

attention misallocation social welfare and policy implications we examine how agents allocate attention between private and public signals to reduce the uncertainty about observation noises when coordination is an important concern in this setting the attention allocation may not be monotone in endowed attention capacity agents may decrease their attention on or even ignore the more accurate signal when capacity increases as a result social welfare may decrease when they have more attention to process information and it can be even higher when agents possess a finite amount of capacity than when they have an infinite amount of capacity we derive sufficient and necessary conditions under which multiple equilibria emerge and study the implications of equilibrium multiplicity for macroeconomic policies

characterizing social value of information abstract this paper characterizes the social value of information in bayesian games with symmetric quadratic payoff functions and normally distributed public and private signals the main result provides a necessary and sufficient condition for welfare to increase with public or private information in so doing we represent welfare as a linear combination of the variance of a common term in an equilibrium strategy and that of an idiosyncratic term which are referred to as the common variance and the idiosyncratic variance of actions respectively the ratio of their coefficients is a key parameter in our condition if the coefficient of the common variance is relatively large welfare necessarily increases but if it is relatively small welfare can decrease using our condition we find eight types of games with different welfare effects of information

i discovered the peso problem irving fisher and the uip puzzle abstract irving fisher was the first economist to posit what has come to be known as uncovered interest parity relation he was also the first to offer a peso problem type explanation for important episodes in which it was violated after reviewing his theoretical and empirical work on this subject we go on to reexamine both his data and several other bodies two consisting of multi country panel data and a third consisting of a two century long time series for the united states and the united kingdom we find evidence in these data of the important role played by episodic phenomena in disturbing the uip relation like fisher we find that the influence of such phenomena dissipates over time over the long term these errors prove to be less important and uip receives empirical support

what matters when the impact of ecb communication on financial market expectations this article analyses financial markets reaction to european central bank s ecb communication we apply a novel indicator that quantifies the contents of the ecb s introductory statements and allows disentangling ecb statements on prices the real and the monetary sector we provide evidence that it matters what issue the ecb is speaking about especially the ecb s statements on price developments represent important news to financial markets it also matters when the ecb affects markets communication drives maturities above 4 months