does it matter how monetary policy is implemented abstract in the u s existing monetary base measures add an adjustment factor for changes in reserve requirement ratios to high powered money implicitly the monetary base assumes that the economic effects of changes in reserve requirements are identical to those due to changes in high powered money theory however does not generally support the prediction that the two policy tools will have the same economic effects structural vars are estimated to compare the short run paths of inflation and output growth under two different types of policy shocks in doing so this analysis gives one a measure of the costs associated with this implicit equivalence assumption the evidence is consistent with the hypothesis that the federal reserve at least partially offsets reserve requirement changes with open market operations and the hypothesis that dynamic explanations of macroeconomic variables are improved by separating reserve requirement changes from other monetary policy moves

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

vote buying supermajorities and flooded coalitions in a recent paper banks 2000 adopting the framework of our model groseclose and snyder 1996 derives several new and noteworthy results in addition he provides a counterexample to our proposition 4 here we explain the error in our proposition but note that we can correct it easily if we invoke an additional assumption in equilibrium the winning vote buyer constructs a nonflooded coalition that is she does not bribe every member of her coalition we conclude with a brief discussion of the substantive implications of banks s proposition 1 we note that it provides additional support for our general claim that minimal winning coalitions should be rare in a vote buying game

stock markets banks and growth panel evidence this paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976 98 and applying recent gmm techniques developed for dynamic panels on balance we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity omitted variables or unobserved country specific effects

bayesian analysis of structural credit risk models with microstructure noises in this paper a markov chain monte carlo mcmc technique is developed for the bayesian analysis of structural credit risk models with microstructure noises the technique is based on the general bayesian approach with posterior computations performed by gibbs sampling simulations from the markov chain whose stationary distribution converges to the posterior distribution enable exact finite sample inferences of model parameters the exact inferences can easily be extended to latent state variables and any nonlinear transformation of state variables and parameters facilitating practical credit risk applications in addition the comparison of alternative models can be based on deviance information criterion dic which is straightforwardly obtained from the mcmc output the method is implemented on the basic structural credit risk model with pure microstructure noises and some more general specifications using daily equity data from us and emerging markets we find empirical evidence that microstructure noises are positively correlated with the firm values in emerging markets

money output and real business cycles in a small open economy this paper examines some key propositions of real business cycle theory using a small open economy framework and a structural vector autoregressive methodology identification is achieved by long run restrictions the main results from the canadian economy are that domestic supply shocks are important in explaining short run fluctuations in output while real interest rate and terms of trade changes are not an important source of the money output correlation is output shocks affecting inside money in the short run and the presence of a causal influence of high powered money or demand deposits on output is not strongly supported by the data this paper examines some key propositions of real business cycle theory using a small open economy framework and a structural var methodology identification is achieved by long run restrictions the main results from the canadian economy are i domestic supply shocks are important in explaining short run fluctuations in output while real interest rate and terms of trade changes are not ii an important source of the money output correlation is output shocks affecting inside money in the short run and iii the presence of a causal influence of high powered money or demand deposits on output is not strongly supported by the data

does money matter the robustness of evidence from vector autoregressions traditionally empirical macroeconomic research begins with the use of theory to construct a highly restricted structural econometric model the determination of the nature of those restrictions is fraught with difficulty and thus many specification decisions turn out to be largely ad hoc and of dubious validity once these specification issues have been probably inadequately addressed and a structural model constructed it is then estimated using complicated econometric techniques requiring sophisticated computer programs recently an alternative approach to modeling macroeconomic time series has come into wide use this alternative introduced by sims 1980a 1980b suggests the use of vector autoregression var models to analyze time series relationships among macroeconomic variables the fact that the use of this approach has proliferated widely in a relatively brief period of time is due not only to the very persuasive criticisms of traditional methods made by sims see especially sims 1980a but perhaps even more to the perception that specification and estimation problems are greatly simplified the user of the var approach imposes few restrictions and can generally use ordinary least squares estimation procedures the var approach is thus believed to be largely free of the spurious specification assumptions and consequent specification errors necessitated by traditional macroeconometric procedures

lag length selection and tests of granger causality between money and income one of the most widely accepred relationships in macroeconomics is the positive relationship between the rate of growth of the money supply and the rate of growth of income a diversity of opinion arises however with the attempt to identify a causal relationship between these variables while friedman and schwartz 1963 initiated the empirical investigation of money income causality sims 1972 made the most significant contribution to this literature with a practical application of the criterion developed by granger 1969 for identifying a causal relationship since the appearance of sims s approach and an alternative one advanced by sargent 1976 many researchers have applied these techniques to the investigation of the causal relationship between money and income l with two exceptions hsiao 1981 and mcmillin and fackler 1984 these researchers have arbitrarily chosen the lengths of their distributed lags the purpose of this paper is to test for granger causality between money and income this paper differs from previous work in that considerably more attention is focused on the effect of the lag specification on the test results in particular we investigate the extent to which rules of thumb arbitrary lag specifications and

inside money and real output abstract an example shows that anticipated non neutral monetary policy disturbances can result in correlation between real output and lagged inside money that is observationally equivalent to the real business cycle interpretation

incentives to cultivate favored minorities under alternative electoral systems a simple model is used to compare under different electoral systems the incentives for candidates to create inequalities among otherwise homogeneous voters by making campaign promises that favor small groups rather than appealing equally to all voters in this game model each candidate generates offers for voters independently out of a distribution that is chosen by the candidate subject only to the constraints that offers must be nonnegative and have mean 1 symmetric equilibria with sincere voting are analyzed for two candidate elections and for multicandidate elections under rank scoring rules approval voting and single transferable vote voting rules that can guarantee representation for minorities in multiseat elections generate in this model the most severely unequal campaign promises

risk sharing market imperfections asset prices evidence from china s stock market liberalization abstract we examine the roles of risk sharing and other factors in stock price revaluation during a recent liberalization episode in china consistent with the theoretical prediction that liberalizations reduce systematic risk we find that risk sharing explains approximately one fourth of the price revaluation of investible stocks during the eight month window between reform announcement and implementation the firm specific information generated by the reform is more efficiently priced into stocks that have a higher degree of market liquidity information transparency and informed trading

atheoretical macroeconometrics a critique abstract the spurious nature of the restrictions used to identify many macroeconometric models has led some researchers to advocate a style of econometric inquiry that is less dependent on prior theoretical restrictions of the sort that were central to the approach of the cowles commission this development which we call atheoretical macroeconometrics is summarized and evaluated in the current paper it is contrasted with an updated version of the cowles commission approach we conclude that while some of the exercises of atheoretical macroeconometrics are valid those that have attracted the most attention and appear the most innovative exogeneity testing impulse response analysis and policy analysis using estimated vector autoregressions are based on incorrect analysis

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

explaining share price disparity with parameter uncertainty evidence from chinese a and h shares abstract the price disparity between the a and h share markets for dual listed firms in china is one of the most intriguing puzzles in the mainland and hong kong financial markets in this paper we revisit this price disparity puzzle using the channel of parameter uncertainty in the presence of information asymmetry and market segmentation investors have different views on a firm s asset volatility and hence different valuations of the same reference firm we estimate a structural model for equity pricing using a bayesian approach in which the uncertainty of investor model parameters is represented by the posterior standard deviation of the firm s asset volatility our regression analysis shows that in addition to other market based and macro factors parameter uncertainty explains variations in price disparity

violence bribery and fraud the political economy of elections in sub saharan africa post soviet african democratization has introduced elections into contexts that often lack restraints upon the behavior of candidates resulting in the emergence of voter intimidation vote buying and ballot fraud we propose a model of electoral competition where although some voters oppose violence it is effective in intimidating swing voters we show that in equilibrium a weak challenger will use violence which corresponds to a terrorism strategy similarly a nationally weak incumbent will use repression however a stronger incumbent facing local competition will prefer to use bribery or ballot fraud we discuss the applicability of the model to several african elections

the dynamic impacts of monetary policy an exercise in tentative identification it is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate these assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses this paper tentatively identifies supply and demand shocks in the markets for reserves and m2 for the 1980s and contrasts them with results for the 1970s in the later period identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses

competitive lobbying and supermajorities in a majority rule institution this paper presents a complete information model of competitive lobbying in a majority rule institution where lobbying consists of providing politically valuable resources to legislators legislators have three roles first they act as allies or opponents in deciding whether to consider a lobbyist s offer second they act as agenda setters in deciding whether to bring a policy alternative to a vote third they vote on the agenda the stationary equilibria include minimal majorities and supermajorities and involve unilateral counteractive and preemptive lobbying supermajorities are recruited either to influence agenda formation or to preempt the opposing lobbyist

can a corrupt ruling party win a re election through vote buying abstractin many developing countries it is common for electoral candidates to use embezzled money to buy votes we develop a dynamic model to analyse the trade off between economic performance and free handouts resulting from corruption on an incumbent party s chances of being re elected the results show because voters anticipate handouts from the politicians politicians engage in corrupt behaviour early in the election cycle while minimizing unemployment and maximizing vote buying at the end of the election cycle

a reconsideration of sims evidence concerning monetarism abstract in var systems such as those of sims 1980 monetary policy surprises may be more accurately represented by interest rate than money stock innovations especially if the monetary authority uses an interest rate instrument

inside money output and causality the authors present an explicit general equilibrium model consistent with these observations 1 innovations in the nominal money stock are positively correlated with and precede granger cause innovations in output 2 these innovations in the nominal money stock represent innovations in inside not outside money and 3 when interest rates are included in vector autoregressions their innovations not money s are seen to precede output changes in the money stock represent an endogenous reaction to some third factor and do not cause subsequent changes in output therefore a change in the current fiat money stock will not lead to any change in output copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

vote buying general elections we examine the consequences of vote buying assuming this practice were allowed and free of stigma two parties compete in a binary election and may purchase votes in a sequential bidding game via up front binding payments and or campaign promises platforms that are contingent on the outcome of the election we analyze the role of the parties and voters preferences in determining the winner and the payments to voters

the relation between narrative and money market indicators of monetary policy this paper studies the relation between narrative based indicators of monetary policy and widely used money market indicators of monetary policy three principal findings emerge first changes in monetary policy as measured by the narrative based policy indices are associated with persistent changes in the levels of m2 and the monetary base in contrast changes in the narrative policy indicators lead to transitory changes in short term interest rates nonborrowed reserves and the spread between the six month commercial paper rate and the three month treasury bill rate third these findings are generally robust across different narrative based policy indices

equilibrium and efficiency in an organized vote market we study an organized market for votes in which trade is directed by a market specialist this market mechanism always produces an equilibrium outcome and whenever vote buying occurs the alternative chosen is pareto superior to the alternative that would be chosen without trade we then characterize the equilibrium outcomes in a one dimensional policy space and show that if the distribution of ideal points is skewed enough then the equilibrium with vote buying differs from the equilibrium without vote buying the median ideal point this difference reflects the ability of an intense minority to obtain a policy it prefers in exchange for side payments

asset pricing in partially segmented markets evidence from the finnish market this paper analyzes asset pricing in a partially segmented market where citizens of a small country are allowed to hold only their domestic securities whereas the rest of the investors foreigners are essentially allowed to hold all securities in this market setting it may occur that the citizens of the small country are willing to pay less for their domestic securities than are the foreign investors the paper derives equilibrium required rates of return for different investors in this market setting which perfectly occurred in finland and tests this equilibrium model using data from the finnish stock market empirical results are consistent with the hypotheses derived from the model several studies see e g solnik 1974a and grauer and hakansson 1987 have shown that investors should diversify internationally as by so doing they can reduce the risk of their portfolio without lowering the expected return this implies that if the citizens of a certain country are by legal restrictions prohibited from holding foreign securities they may require a higher rate of return on the domestic securities than the foreign investors do this may happen because the domestic investors cannot diversify away the specific country risk in the same way that the foreign investors can thus if we could observe the prices which the foreign and domestic investors are willing to pay for these domestic securities we would expect them to differ because of this diversification effect the finnish law prohibited finnish investors from investing in foreign securities until 1986 while simultaneously allowing foreign investors to own up to 20 of the shares of any finnish company moreover since 1984 the helsinki stock exchange hse has separately quoted the prices for the unrestricted shares which can be owned both by foreign and domestic investors and for the restricted shares owned solely by domestic investors thus the market setting depicted in the previous paragraph occurred perfectly in finland during the years 1984 and 1985 in this paper our objective is to develop and test an asset pricing model which takes into account the legal restrictions in the finnish stock market in section i we specify the market structure in the finnish stock market in more detail by explaining the relevant legal restrictions affecting the market we also present some descriptive statistics on the prices of the restricted and the unrestricted on

real business cycle theory and monetary policy the multiplier approach according to real business cycle theory the money multiplier explains money output correlations because nominal policy is impotent this paper re examines the key assumptions of the multiplier approach and presents empirical evidence for five countries the main conclusions are as follows first base money does granger cause economic activity second actual operating procedures of monetary authorities prevent orthogonalization of base money and multiplier changes the distinction between real and nominal aspects of monetary policy is therefore not very helpful

productivity shocks and real business cycles abstract productivity shocks play a central role in real business cycles as an exogenous impulse to macroeconomic activity however measured solow prescott residuals do not behave as an exogenous impulse rather econometric evidence provided in this paper indicates that 1 money interest rates and government spending granger cause these impulses and 2 a substantial component of the variance of these impulses between one quarter and one half is attributable to variations in aggregate demand these results are robust to a number of econometric issues including measurement errors specification of the production function and certain forms of omitted real variables

capital account liberalization and dynamic price discovery evidence from chinese cross listed stocks abstractwe analyse the effects of a recent financial reform shanghai hong kong stock connect that enables cross market investment between hong kong and shanghai stock exchanges using a vecm we find that the reform announcement considerably narrows the equilibrium level of price disparity and strengthens the price comovement of shares that are cross listed in both markets the estimated equilibrium relationship is in support of the relative law of one price we find that both markets adjust in response to a disequilibrium in price disparity leading to a sizeable error correction activity the shanghai market contributes to approximately two thirds of the price discovery process competition and informativeness of trading affect the relative role of price discovery in each market finally the reform implementation reinforces the long run cointegration relationship and strengthens the short run price comovements of cross listed stocks despite the widening price disparity during the period

distributive politics and electoral competition abstract within the framework of pure redistribution dividing one unit of a homo geneous good among identical individuals the paper analyses the redistribution that arises from downsian two party electoral competition it appears that the strategic behavior of vote maximizing parties leads them to propose divisions which are not far from the egalitarian one journal of economic literature classification numbers c72 d63 d72

term structures of credit spreads with incomplete accounting information we study the implications of imperfect information for term structures of credit spreads on corporate bonds we suppose that bond investors cannot observe the issuer s assets directly and receive instead only periodic and imperfect accounting reports for a setting in which the assets of the firm are a geometric brownian motion until informed equityholders optimally liquidate we derive the conditional distribution of the assets given accounting data and survivorship contrary to the perfect information case there exists a default arrival intensity process that intensity is calculated in terms of the conditional distribution of assets credit yield spreads are characterized in terms of accounting information generalizations are provided

the stability of long run money demand in five industrial countries abstract this study provides strong evidence for the stability of long run demand functions for narrowly defined money m1 in five industrial countries u s japan canada u k and west germany using post war quarterly data evidence of stability is examined using two different estimation techniques and through a formal test of parameter constancy designed specifically for cointegrating vectors in the majority of these countries the key to stability is the imposition of a unitary long run income elasticity that is rarely rejected by the data

how money affects real output this paper decomposes the money stock into constituent parts to examine the relationship between monetary variables and real economic activity using vector autoregression for 1954 to 1979 the first decomposition reveals that innovations in money multiplier growth rates are approximately three times more influential in determining real output growth than are monetary base growth innovations the second decomposition includes components of the money multiplier to identify the importance of actions of the public the banking community and the monetary authority the results suggest that the public and the fed had a significant impact on influencing real output growth copyright 1989 by ohio state university press

beyond chopsticks symmetric equilibria in majority auction games majority auction games are simultaneous sealed bid auctions of identical objects among identical bidders who each want to win a specified fraction more than a half of the objects each bidder receives no benefit from winning less than the specified fraction and no additional benefit from winning more than it symmetric equilibria having simple intuitive forms are shown to exist in first price second price and all pay versions of such games when the number of bidders is sufficiently large this contrasts with earlier results for the two bidder pure chopstick majority auction games where the only known equilibria are more complicated

the political value of land political reform and land prices in chile in this article we argue that when patron client relations are grounded in economic relationships such as between landlord and worker we should expect clientelism to influence not just how public policy the state and the political system work but also how the economy works we develop a simple model of the economic consequences of electoral clientelism when voting behavior can be observed landlords patrons provide economic rents to workers and in exchange workers vote for parties favored by landlords as votes are used by the landlords to accumulate political rents vote control increases the demand for labor and for land the model implies that the introduction of the australian ballot which destroys this form of clientelism should lead to a fall in the price of land in those areas where patron client relationships are strongest we test the predictions of the model by examining in detail the evolution of land prices in chile around may 31 1958 for which we collected original data a characteristic of rural chile at this time were patron client relations based on the inquilinaje system by which a worker the inquilino entered into a long term often hereditary employment relationship with a landlord and lived on his landlord s estate we show that the introduction of the australian ballot in 1958 led to a fall of about 26 in land prices in the areas where these patron client relationships were predominant

clientelism and vote buying lessons from field experiments in african elections electoral clientelism and vote buying are widely perceived as major obstacles to economic development this is because they may limit the provision of public goods in this paper we review the literature on clientelism and vote buying and propose the use of field experiments to evaluate empirically the consequences of these phenomena we provide an overview discuss implementation and interpret the main results of recent field experiments conducted by the authors in west african countries clientelism and vote buying seem to be effective and to enjoy widespread electoral support the results suggest that increased access to information and political participation by women may limit clientelism in addition voter education campaigns may undermine the effects of vote buying on voting behaviour we argue that our findings may inform the design of development aid interventions as a way effectively to increase public good political accountability we also discuss directions for fruitful future research copyright 2009 oxford university press