the inflation tax in a real business cycle model money is incorporated into a real business cycle model using a cash in advance constraint the model economy is used to analyze whether the business cycle is different in high inflation and low inflation economies and to analyze the impact of variability in the growth rate of money in addition the welfare cost of the inflation tax is measured and the steady state properties of high and low inflation economies are compared

commutes neighborhood effects and earnings an analysis of racial discrimination and compensating differentials abstract recent tester studies indicate that minority workers face restricted residential and employment opportunities because of racial discrimination in housing and labor markets these restrictions may create a spatial mismatch between where urban minorities reside and where metropolitan area jobs are located resulting in reduced proximity of minority workers to jobs prior studies of racial discrimination and urban spatial mismatch however have paid little attention to the possibility that differences in employment commutes may be partially offset by compensating variations in neighborhood amenities quality adjusted house prices and earnings such effects could help to mitigate the impact of discrimination on minority workers using a unique subset of the 1985 and 1989 american housing surveys we estimate a fixed effects commute time model that controls for quality adjusted house prices neighborhood amenities and earnings results indicate that although blacks have longer commutes than comparably skilled white and asian workers roughly one third of the estimated difference is offset by neighborhood amenity and housing price differentials however even after controlling for neighborhood fixed effects and earnings educated black workers have significantly longer commutes than comparably skilled asian and white workers additional findings indicate that regardless of race household mobility is an important mechanism through which the market attains a spatial equilibrium providing further support for arguments that restricted proximity to residential opportunities and jobs reduces the economic welfare of minority households

capital flow controls international asset pricing and investors welfare a multi country framework this paper investigates the impact of capital flow restrictions on the pricing of securities on the optimal portfolio composition for investors of different nationalities and on their welfare under capital flow controls the equilibrium price of a security is determined jointly by its international and national risk premiums and investors acquire nationality specific portfolios along with a market wide proxy for the world market portfolio removal of investment barriers generally leads to an increase in the aggregate market value of the affected securities and all investors favor a move toward market integration introduction of different types of index funds in the world market generally increases world market integration and investor welfare in recent years the international capital markets have undergone numerous important changes that have increased the international linkage of national markets these changes include the creation of national index funds e g mexico korea taiwan india france and scandinavia and selective liberalization e g brazil india korea sweden and japan despite their potential impact on the national economies and global finance it is not clear what consequences these integrating changes entail for example is welfare increased by allowing cross border investment that is restricted to purchasing the entire national portfolio of which the national index fund is a class unfortunately with the exception of subrahmanyam 1975a who studies the pricing and welfare effects of fully integrating heretofore completely segmented markets other international asset pricing models that incorporate capital flow restrictions for instance black 1974 stulz 1981b lessard et al 1983 errunza and losq 1985 cooper and kaplanis 1986 and eun and janakiramanan 1986 analyze the pricing but not the welfare effects of investment barriers to analyze systematically the welfare implications of various structural changes in the current market environment this paper follows the lead of subrahmanyam and recasts the analysis in two important respects

on universal currency hedges this paper identifies five universal currency hedge ratio uhr definitions these are hedge positions in foreign bonds stated as a fraction of national or global equity portfolios that are the same for all investors regardless of nationality the first three involve the total demand for foreign bonds and depend on equities not being held for hedging purposes the last two are associated with variance minimizing regression hedges these hold in general but are designed exclusively for hedging other traded asset positions jensen s inequality makes the choice of measurement currency irrelevant and makes the hrs universal without affecting their values

grim down south the determinants of unemployment increases in british cities in the 2008 2009 recession lee n grim down south the determinants of unemployment increases in british cities in the 2008 2009 recession regional studies this paper investigates the impact of the 2008 2009 recession on unemployment in the sixty largest cities in great britain the key determinant of changes in unemployment was the skills of the population with highly skilled cities experiencing smaller increases cities with employment in financial services or manufacturing sectors experienced larger increases in unemployment whether a city has a specialized or a diverse economy appears less important than the industries in which the city is specialized the results highlight a problem as the largest unemployment increases were in cities seen as having least potential for future growth

the monetary policy of the european central bank the first six years of ecb monetary policy are examined using a general framework that allows central bankers to weight differently positive and negative deviations of inflation output and the interest rate from their reference values the empirical analysis on synthetic euro area data suggests that the objective of price stability is symmetric whereas the objectives of real activity and interest rate stabilizations are not output contractions imply larger policy responses than output expansions of the same size while movements in the interest rate are larger when the level of the interest rate is relatively high the hypothesis of m3 growth rate targeting is rejected

job search and the effect of urban structure on unemployment and married female participation rates a model of urban job search is presented concentrating on the skill level of the seeker the implications for the effect of urban structure on intra urban unemployment and married female participation rate differentials are examined it is found using census data for greater london that urban structure represented by the intra urban distribution of jobs per worker as derived from the job search model has the predicted effects on unemployment and participation rates after allowing for other determinants of these rates the paper concludes with some implications for urban manpower policy

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

intraurban wage gradients evidence by race gender occupational class and sector abstract a general functional form is used to estimate intraurban wage gradients for various groups of workers with 1980 data from the philadelphia detroit and boston metropolitan areas as predicted by the standard monocentric model of urban land use the following results are obtained for most groups of white workers negative and statistically significant wage gradients steeper wage gradients for higher wage earners and an increase in the steepness of wage gradients as the cbd is approached positive wage gradients are not found for black workers despite the fact that suburban employers hire large numbers of these workers who reside within the central city this result is taken as support for the hypothesis that blacks have been disadvantaged by job suburbanization and continued housing market segregation

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

large high technology firms and the spatial extension of metropolitan labour markets some evidence from israel the role of large high technology firms in fashioning the spatial extent of the labour markets that serve them is examined in this paper it is argued that the demand for highly skilled labour in these firms results in their active role in labour market extension through a strategy of employee transport this makes for employment mobility without a commensurate impact on residential mobility it can also result in the inclusion or exclusion of certain types of labour in this context the free rider phenomenon associated with worker transport is identified and described on the basis of an empirical study of some of the largest high technology firms in metropolitan areas in israel these processes are illustrated the labour markets serving these firms are delimited and characterised for employees of different skill levels in addition the determinants of the probability of the firm utilising spatially extensive labour markets is examined the role of firm size in explaining this behaviour is stre

seasonal solow residuals and christmas a case for labor hoarding and increasing returns in aggregate unadjusted data measured solow residuals exhibit large seasonal variations total factor productivity grows rapidly in the fourth quarter at an annual rate of 16 percent and regresses sharply in the first quarter at an annual rate of 24 percent how much of the total seasonal variation in the measured solow residual can be explained by christmas the answer to this question is surprising with increasing returns and time varying labor effort christmas is sufficient to explain the seasonal variation in the solow residual consumption average productivity and output in all four quarters our analysis of seasonally unadjusted data uncovers important roles for labor hoarding and increasing returns that are difficult to identify in adjusted data prescott 1986 has argued that the variability of solow s residual is a reasonable estimate of the variability of exogenous technology shocks when solow s residual is measured using seasonally unadjusted data for the postwar u s economy it exhibits large seasonal variations growing rapidly in the fourth quarter at an annual rate of 16 percent and falling sharply in the first quarter at an annual rate of 24 percent this paper starts from the premise that it is implausible to attribute seasonal variation of this magnitude to changes in the state of technology we present a model in which all seasonal fluctuations arise from a single demand shift christmas this demand shift together with misspecification of the traditional production function leads to large seasonal variation in the solow residual we consider two candidates for misspecification labor hoarding and external increasing returns to scale even when technological growth is aseasonal either candidate in isolation can induce spurious seasonality in the solow residual our general equilibrium analysis indicates that 1 the economy s seasonal patterns in all four quarters may be a response simply to a fourth quarter consumption demand shift and 2 a combination of labor hoarding and external increasing returns is important for replicating these patterns in aggregate quantity variables for the postwar u s economy since our analysis identifies important roles for labor hoarding and increasing returns these results have implications for nonseasonal macroeconomic models indeed our analysis im

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

predetermined prices and the persistent effects of money on output this note illustrates a model of predetermined pricing where firms set a fixed schedule of nominal prices at the time of price readjustment based on the work of fischer 1977 this contrasts with the model of fixed pricing the specification underlying most recent dynamic sticky price models it is well known that predetermined pricing cannot generate substantial persistence in the real effects of monetary shocks when prices are set via fixed duration contracts unless the contracts are of long duration however we show that with a probabilistic model of price adjustment a predetermined pricing specification can produce almost as much persistence as the more conventional model of fixed prices without the assumption of long average contract duration

the distribution of school leaver unemployment within scottish cities this paper examines the phenomenon of intra urban unemployment in the context of school leaver unemployment in scottish cities unlike much of the previous work in this area the paper avoids the ecological fallacy by utilising data on individual school leavers from the 1981 scottish school leavers survey in conjunction with detailed small area statistics from the 1981 decennial census probit analysis is employed to avoid certain statistical problems the results indicate that in terms of employment probabilities there is little evidence of any area effects within scottish cities in this sense there is one urban labour market in which personal characteristics matter but where area of residence is of little import these findings were found to hold in aberdeen dundee edinburgh and glasgow within each of these cities the effects of inter city variations in unemployment rates was found to fail disproportionately on the less qualified and less advantaged young job seekers

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

costly information planning complementarities and the phillips curve sticky information models capture the sluggish response of aggregate prices to monetary shocks but fail to match the magnitude and frequency of price changes at the microlevel this paper shows that accounting for the endogenous decision of when to acquire new information about different shocks can help overcome this shortcoming in the calibrated model prices change frequently and by large amounts in response to idiosyncratic shocks but sluggishly to monetary shocks the paper also highlights that many predictions of the sticky information and rational inattention models are the same and thus robust to different specifications of information processing costs

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

local underemployment and the discouraged worker effect summary the effect of poor local labour market opportunities on occupational achievement is an important aspect of the spatial mismatch hypothesis much of the research has concentrated on the direct link between geographical access to jobs and employment outcomes in contrast little attention has been given to the discouraging effect of poor chances on job search activities the discouraged worker effect is dee ned as the decision to refrain from job search as a result of poor chances on the labour market discouragement effects can arise from a lack of individual qualie cations from discrimination in the labour market or from a high local level of underemployment the empirical e ndings of this paper based on the netherlands labour force surveys 1994 97 show that discouragement can enter the job search process both at the stage of deciding to enter the labour force and at the stage of deciding to engage actively in a job search gender differentials in discouragement are revealed in the process of self selection into the labour force poor labour market chances lead to less activity in both off the job and on the job search indicating a role of discouragement in the spatial mismatch individual qualie cations and ascribed characteristics turn out to be more decisive than the local level of underemployment

can fiscal spending stimulate private consumption abstract empirically government expenditure shocks seem to crowd in private consumption while neoclassical and new keynesian models predict crowding out we derive conditions under which a government in utility specification in a sticky price model helps to reconcile theory and evidence

unemployment and urban labour markets two quite distinct views on how metropolitan labour markets work have co existed for over three decades both claim empirical support and after a brief period of confrontation they continue to co exist today giving quite conflicting signals to policy makers according to the first model the urban labour market consists of a number of spatially defined sub markets so that local unemployment exists primarily because of deficiencies in highly localised demand for labour by this argument unemployment rates remain high in the absence of a renewed supply of appropriate jobs within short commuting distances of the jobless the solution according to this model is to attract private and public sector production into such areas in contrast a second model views the city as a single market in which transactions between labour and capital take place regardless of the location of residence and employment sites according to this perspective the spatial incidence of unemployment simply reflects the residential

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

on the effects of barriers to international investment a simple model is presented in which it is costly for domestic investors to hold foreign assets the implications of the model for the composition of optimal portfolios at home and abroad are derived it is shown that all foreign assets with a beta larger than some beta plot on either one of two security market lines some foreign assets with a beta smaller than are not held by domestic investors even if their expected return is increased slightly while it is obviously not true that asset markets are completely segmented between countries there is evidence of barriers to international investment although reality seems to lie in that grey area between complete segmentation and no segmentation at all most international asset pricing models are concerned with the extreme case of no barriers to international investment no effort seems to have been made to study the effect on portfolio choice of such barriers which make it costly to hold foreign securities as opposed to domestic securities but which do not in general render international diversification so onerous that investors avoid foreign securities completely casual empiricism suggests that models without barriers to international investment should be suspect those models cannot explain why it appears that in every country investors on average hold more domestic securities than would be required if they held the world market portfolio 2 this paper constructs a model of international asset pricing in which there is a cost associated with holding either long or short risky foreign securities for the sake of simplicity in most of the paper we assume that while domestic investors face barriers to international investment foreign investors face no such barriers it turns out that nothing significant is lost with such an assumption the main conclusions of this paper for the case in which foreign investors face no barriers to international investment are 1 in the presence of barriers to international investment some risky foreign

commutes quits and moves abstract this paper analyzes the effects of commuting distance on quit and move propensities in metropolitan areas with conventional wage and housing price gradients most workers ordinarily move in order to lengthen commutes and quit in order to shorten them however quits and moves by workers whose residential choices are constrained by segregation should be relatively insensitive to commutes descriptive statistics and simultaneous probit estimates of move and quit propensities for white and black employees of a single firm confirm these predictions they demonstrate that long commutes encourage white quits and discourage white moves commute increases of one standard deviation would increase white quit propensities and reduce white move propensities by approximately 10 in contrast commutes by black employees have no significant effects on their quit and move propensities

substantive issues in the definition of localities evidence from sub group local labour market areas in the west midlands coombes m g green a e and owen d w 1988 substantive issues in the definition of localities evidence from sub group local labour market areas in the west midlands reg studies 22 303 318 local labour market areas llmas are now widely accepted as the most appropriate areal units for analyses of spatial patterns of employment and unemployment the most commonly used set of llmas in britain are the travel to work areas ttwas of the department of employment these areas are increasingly being used for locality studies that encompass not only labour and demand trends but also their social and political implications however ttwas are defined on the basis of aggregate commuting patterns which generalize substantial differences in the journey to work behaviour of different sections of the workforce this paper compares the ttwas as revised in 1984 with llmas defined using the same methodology for four sub groups of the labour force with differing skill levels in the west midlands the numb

urban labour markets the causes and consequence of change the labour market plays a key role in mediating the relationship between economic competitiveness and social cohesion within nations cities and regions it transmits external shocks and internal restructuring of the economy to the employment prospects incomes and quality of life of individuals and communities key issues concern the pace and nature of economic change the ability of the labour market to adjust whether some groups bear a disproportionate burden and what policies can help to mitigate these effects the labour force should also be viewed as more than a passive recipient of economic change in the language of urban competitiveness labour can be regarded as an urban asset with an in uence on economic performance through its productivity creativity and availability the issues surrounding labour market adjustment exibility and employability go to the heart of many contemporary economic and social theories and policies this paper provides an overview of contemporary labour market developments in britain s cities it also updates research from over a decade ago to establish the long term trends incorporates a selective review of recent literature and discusses the implications for government policy this approach is felt to be justi ed on the grounds that there has been less synoptic research on urban labour markets in britain during the past decade than there was in the 1970s and 1980s research has tended to become more specialised and focused on particular features of the labour market such as the growth of non employment and social exclusion particular localities or city types such as global and polycentric cities or particular adjustment processes such as migration commuting or wage exibility meanwhile there is a growing body of literature asserting that there has been a turn around and recovery in the performance of cities but with limited supporting evidence coincidentally there have been important developments in labour market policy including increasing emphasis placed on supply side perspectives individual behaviour skills and choice while the differential demand for labour in different places has been downplayed the rst section analyses the long term changes in labour demand looking particularly at the scale and composition of employment trends in the 1980s and 1990s compared with earlier decades despite major restructuring of the british economy and

sticky inflation and the real effects of exchange rate based stabilization abstract this paper tests the empirical validity of the forward looking pricing hypothesis using data from four exchange rate based stabilization erbs episodes it finds that backward looking components of inflation play an important role in inflation dynamics in some cases exceeding the importance of forward looking components the paper then shows that the presence of empirically relevant degrees of inflation stickiness increases the size of the real exchange rate appreciation predicted by an imperfect credibility model of erbs the 12 real appreciation predicted by the sticky inflation model is a 70 improvement over the predictions of the fully forward looking pricing setup but as in other erbs models still falls short of matching the real appreciations observed in practice

the time variation of risk and return in the foreign exchange and stock markets this paper attempts to determine whether the fluctuations of conditional first and second moments which are observed for many assets are consistent with the sharpelintner mossin capital asset pricing model we test the mean variance model under several different assumptions about the time variation of conditional second moments of returns using weekly data from july 1974 to december 1986 that include returns on a portfolio composed of dollar deutsche mark sterling and swiss franc assets together with the u s stock market the results indicate that estimated conditional variances cannot explain the observed time variation of risk premia rates of return on international financial assets are characterized by statistical properties that are quite common to all financial markets they are highly volatile and largely unpredictable these properties make it very difficult to extract statistically reliable estimates of systematic exchange rate and assetprice movements and are at the root of the generally poor empirical performance of international asset pricing models nevertheless two important results have been uncovered by empirical researchers and can be considered a fair characterization of the data a expected returns on foreign assets vary over time cumby and obstfeld 1981 and the numerous articles that followed recently surveyed by frankel and meese 1987 b the volatility of returns of foreign assets also changes over time cumby and obstfeld 1984 hodrick and srivastava 1984 and hsieh 1988 among others as giovannini and jorion 1987 suggest the

work location residence location and the intraurban wage gradient abstract the monocentric city model implies that work and residence locations are likely to be positively correlated and that wages decline with distance from the city center the first implication has not been explicitly tested before we provide strong support for it in census data for cleveland columbus dayton detroit indianapolis philadelphia and pittsburgh previous wage gradient estimates were hindered by lack of individual data on employment location and worker characteristics we solve this problem by estimating probit models that predict optimal work location and using the results to explain wages we find evidence of significant wage gradients

comparing dsge var forecasting models how big are the differences abstract i generate priors for a vector autoregression var from a standard real business cycle rbc model an rbc model with capital adjustment costs and habit formation and a sticky price model with an unaccommodating monetary authority the response of hours worked to a tfp shock differs sharply across these models i compare the accuracy of forecasts made from each of the resulting dynamic stochastic general equilibrium vector autoregression dsge var models despite having different structural characteristics the dsge vars are comparable in terms of forecasting performance as in previous work dsge vars compare favorably with atheoretical vars

the influence of uncertain job location on urban form and the journey to work abstract standard urban models assume residents never think about their next job more likely the individual value of a given home and the choice of commute length are based not only on the current job site but also on the expectation of where future jobs will be and the likelihood of both job separations and residential moves the first factor lessens the value of access to the present job while the second determines the opportunity cost of moving both sets of factors lead to flatter rent gradients and more sprawl than predicted by standard theories the analysis further suggests that relatively stable jobs are likely associated with relatively shorter commutes past studies of the regional balance of jobs and housing of wasteful commuting of differences in the length of commute by gender and of spatial tests for discrimination in housing and local labor markets have neglected these considerations and may yield biased results as a consequence

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

real and nominal propagation of nominal shocks the role of real and nominal propagation mechanisms in generating persistent real effects of nominal shocks is analysed analytically in a fully specified intertemporal general equilibrium model while neither a real propagation mechanism capital acccumulation with one period nominal contracts nor nominal propagation staggered nominal contracts in the absence of any real propagation can generate plausible impulse responses with strong persistence it is shown that the two mechanisms interact so as to strengthen persistence possibly unit roots and generate more plausible impulse responses

spatial mobility intentions the labour market and incapacity benefit claimants evidence from northern ireland the paper analyses the work related spatial mobility intentions of incapacity benefit ib claimants in northern ireland using a new survey dataset greater understanding of the prospective mobility of benefit claimants contributes to debates about employability inclusion in the labour market and arguments about spatial mismatch the analysis finds that ib claimants are not markedly less mobile than other population groups that mobility is shaped by age level of qualification illness type ability to drive and motivation and that geography is important in several ways the paper concludes by arguing that limited spatial mobility is a good indicator of disadvantage and that spatial mobility should be placed nearer the centre of the design and delivery of labour market policy

inefficiencies in the geographical operation of labour markets curry l 1985 inefficiencies in the geographical operation of labour markets reg studies 19 203 215 after postulating an efficient overall competitive spatial price equilibrium in labour markets the real world map of wages and labour flows is introduced as an inefficient form of this configuration because of opportunities not being exploited and wages not being correct due to ignorance since these markets operate via local information and income flows the employment status of an individual affects that of his neighbours depending on the intensity of labour demand and the coupling strength between contiguous pairs on a regular lattice the economy can break up into polarized patches of different economic climates singularities now develop and previously monotonic functions develop flat parts

futures markets and commodity options hedging and optimality in incomplete markets abstract this paper examines the allocational roles of futures markets and commodity options in multi good and multi period economies in a continuous time model with time additive utilities and homogeneous beliefs trading in unconditional futures contracts the market portfolio and a riskless asset gives any pareto optimal allocation individuals optimal holdings of futures contracts in the continuous time model are related to their consumption bundles and to their risk tolerances it is shown that both hedging and reverse hedging behavior are possible in the general model with discrete trading options on portfolios of commodity options are shown to permit any unconstrained pareto optimal allocation

young people job search and local labour markets the example of belfast in debates about employability the role of area perceptions in shaping the labour market behaviour of individuals has been neglected this paper sets out to gain an understanding of what relatively disadvantaged young people in belfast know about the geography of labour market opportunities in the city and the locations where they are prepared to work using secondary data analysis and primary research methods it is shown that most young people have a highly localised outlook factors of limited mobility lack of confidence and religion intertwine in complex ways to limit perceived opportunities it is concluded that geography does play a role in shaping access to employment and training opportunities

dynamic monopsony and structural change examines at the microeconomic level the assumption that the rate of change of the labor supply to a firm depends on the wage paid by the firm concept of dynamic monopsony response in terms of the optimal wage path to different product prices properties of the optimal path from ebsco

the intra urban unemployment gradient the influence of location on unemployment this paper explores the influence of location on unemployment differentials within australia s largest city sydney it is suggested that spatial frictions impede the search processes of unemployed residents the most important friction is related to physical accessibility to work despite suburbanisation in sydney the concentration of job opportunities is still far greater in the centre than elsewhere the second friction concerns information flows the formal information network about job vacancies seems to service the inner area better than the fringe suburbs as the analysis used data of 1976 and 1981 the possibility of involuntary unemployment must be considered this creates a third spatial factor firms preferences for residents of areas close to their vacancies with involuntary unemployment firms often have many similar candidates for single vacancies and may be particular in their standards of recruitment together these three spatial factors imply a positive intra urban unemployment gradien

sticky price models and the natural rate hypothesis abstract a major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state in this paper we estimate a dynamic optimizing business cycle model whose price setting behavior satisfies the natural rate hypothesis the price adjustment specifications we consider are the sticky information specification of mankiw and reis sticky information versus sticky prices a proposal to replace the new keynesian phillips curve quarterly journal of economics 117 1295 1328 and the indexed contracts of christiano et al nominal rigidities and the dynamic effects of a shock to monetary policy journal of political economy 113 1 45 our empirical estimates of the real side of the economy are similar whichever price adjustment specification is chosen consequently the alternative model specifications deliver similar estimates of the u s output gap series but the empirical behavior of the gap series differs substantially from standard gap estimates

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

an empirical investigation of intraurban wage gradients abstract intraurban wage gradients have received little attention in the urban literature but have been shown theoretically to be important indicators of the spatial characteristics of urban economic activity this study examines the spatial distribution of wages of five groups of municipal public employees in the chicago smsa negative wage gradients significant at the 0 05 level are found for four of the five labor groups results show that monthly wages decrease on average as much as 24 per additional mile from the city center

geographical labour mobility migration or commuting eliasson k lindgren u and westerlund o 2003 geographical labour mobility migration or commuting reg studies 37 827 837 in this paper we examine how individual labour market status and spatial variations in employment opportunities influence interregional job search behaviour and mobility decisions in sweden the econometric analysis is based on 290 000 individual observations and refers to the years 1994 95 the empirical results show that the probability of interregional labour mobility unexpectedly decreases with the accessibility to employment opportunities in neighbouring regions as expected the findings reveal that accessibility to job openings in surrounding regions significantly increases the likelihood of choosing commuting as the mobility mode moreover the empirical findings indicate that individual unemployment experience increases the likelihood of mobility as well as migration eliasson k lindgren u et westerlund o 2003 la mobilite geographique du travail la migration

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

sticky goods prices flexible asset prices monopolistic competition and monetary policy a monetary general equilibrium asset pricing model with sticky goods prices is developed goods prices are set by monopolistically competitive firms that maximize stock market value equilibria with underutilization of resources excess capacity in some states result in contrast to previous monetary asset pricing models the degree of competition affects capacity utilization monetary policy can affect output and resource utilization in addition to real asset prices depending upon the amount of information available to the monetary authority

currency hedging for international portfolios this paper examines the benefits from currency hedging both for speculative and risk minimization motives in international bond and equity portfolios the riskreturn performances of globally diversified portfolios are compared with and without forward contracts over the period 1974 to 1990 inclusion of forward contracts results in statistically significant improvements in the performance of unconditional portfolios containing bonds conditional strategies are also implemented both in sample and out of sample and are shown to both significantly improve the risk return tradeoff of global portfolios and to outperform unconditional hedging strategies whether international portfolios should be hedged against currency risks is the subject of an active debate the theoretical side of the debate has been closely associated with two strands in the academic literature international asset pricing and optimal hedging in the futures markets in the international asset pricing model iapm of solnik 1974 optimal portfolios contain positions in forward contracts or equivalently foreign currency denominated bills these positions which can differ from the positions in foreign stocks have since been termed hedges black 1990 shows that under additional assumptions the hedge ratios should be identical for all investors regardless of their nationality universality and that investors should never fully hedge their foreign currency exposures similarly theoretical models from the futures literature produce demands for hedging instruments that contain both speculative and hedging components the empirical issue unanswered so far is whether adding forward contracts to international portfolios significantly improves the risk return profile of global investments empirical research has barely begun to respond to the challenges of theoretical models there exists little empirical evidence on either the relevance of black s universal hedge ratios or the optimality of hedge ratios less than one instead researchers have concentrated on the benefits of fully hedging exchange risk for example eun and resnick 1988 indicate that stock portfolios perform better when fully hedged but offer no statistical tests

imperfect credibility and inflation persistence in this paper we formulate a dynamic general equilibrium model with staggered nominal contracts in which households and rms use optimal ltering to disentangle persistent and transitory shifts in the monetary policy rule the calibrated model accounts quite well for the dynamics of output and insation during the volcker disinsation and implies a sacri ce ratio very close to the estimated value our approach indicates that insation persistence and substantial costs of disinsation can be generated in an optimizing agent framework without relaxing the assumption of rational expectations or relying on arbitrary modi cations to the aggregate supply relation jel classi cation e31 e32 e52

women in the labour markets of the london region a model of dependence and constraint this paper uses a simultaneous equations model of labour and housing market relationships in the london metropolitan region in order to illuminate some of the specific characteristics of female labour markets in an explicitly spatial context in addition to restricted female commuting fields two significant sets of spatial constraint were identified firstly the residential location of married women tended to depend on access to male not female employment opportunities and secondly limited access to owner occupation tended to restrict the residential mobility of non married women nevertheless responsiveness to local demand conditions of married women s participation rates on the one hand and non married women s migration on the other rendered local female unemployment comparatively less sensitive to employment change

money and interest in a cash in advance economy the authors analyze an aggregative general equilibrium model in which the use of money is motivated by a cash in advance constraint applied to purchases of a subset of consumption goods the system is subject to both real and monetary shocks which are economy wide and observed by all they develop methods for verifying the existence of characterizing and explicitly calculating equilibria copyright 1987 by the econometric society

unemployment durations and local labour market conditions abstractunemployment durations vary across local authority districts in the uk we explore the extent to which this variation is explained by differences in local labour demand as opposed to compos

the spatial variation in unemployment and labour force participation rates of male and female workers lillydahl j h and singell l d 1985 the spatial variation in unemployment and labour force participation rates of male and female workers reg studies 19 459 469 this paper investigates the spatial patterns of male and female unemployment and labour force participation rates the theoretical underpinnings for differences in work and residential choices for males and females are reviewed census tract data from five metropolitan areas in the united states are examined we find that no significant pattern exists for overall labour market activity however when male and female unemployment and participation rates are analysed separately significant and dissimilar spatial patterns exist for each hence returns from relocating industry improving transportation investing in human capital or providing job information need to be evaluated in sex specific terms

endogenous time dependent rules and inflation inertia in this paper we endogenize fixed price time dependent rules to examine the output effects of monetary disinflation we derive the optimal rules in and out of inflationary steady states and develop a methodology to aggregate individual pricing rules which vary through time because of strategic complementarities we have to solve both problems simultaneously this allows us to reassess the output costs of monetary disinflations including aspects such as the roles of the initial level of inflation and of the degree of strategic complementarity in price finally we relax the strict assumption of pure time dependent rules by allowing price setters to re evaluate their rules at the time disinflation is announced

monetary policy and asset prices a markov switching dsge approach summary this paper estimates a markov switching dynamic stochastic general equilibrium model by incorporating stock prices in monetary policy rules in order to identify the federal reserve s stance toward them based on the data from 1984 q1 to 2009 q2 i find that historical evidence of the policy reaction toward stock prices is weak except for the stock market bubble of the 1990s a counterfactual exercise shows that the rapid growth in stock prices during that period would have been significantly higher if monetary policy had been independent of the stock market however unconditional macroeconomic volatility increases with the degree of policy responsiveness toward stock prices copyright 2017 john wiley sons ltd

the importance of locational choice in an empirical labour supply model an estimation of labour supply is modelled using the theory of urban household behaviour the major purpose is to test the implicit assumption in previous labour supply studies that work travel and housing consumption are weakly separable from the hours of work the results which are obtained using swedish data imply that the hypothesis of weak separability is clearly rejected we also find that the choice of location affects policy relevant conclusions about the labour supply behaviour

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

adjustment to job loss in britain s major cities bailey n and turok i 2000 adjustment to job loss in britain s major cities reg studies 34 631 653 this paper examines the labour market consequences of severe employment decline in britain s major cities between 1981 and 1991 using labour market accounts significant adjustment to employment change occurred through out migration and commuting but unemployment in cities also rose although much of it was recorded as inactivity on average women were less able to adjust through out migration or commuting than men while women in lower skilled jobs showed much less adjustment than those in professional or managerial occupations this suggests that the creation of employment opportunities for less skilled occupations brings far greater direct benefits to the resident population of major cities than the creation of professional or managerial employment bailey n et turok i 2000 ajuster ala suppression d emplois dans les grandes villes de grande bretagne reg studies 34 631 653 a partir des ch

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

unemployment as excess supply of labor implications for wage and price inflation abstract the introduction of both market clearing wages and nominal rigidities on wage setting can be used to rationalize unemployment as excess supply of labor in the new keynesian model as a result wage inflation dynamics are forward looking and depend negatively on the rate of unemployment moreover both price inflation and wage inflation evolve as indicated by equations equivalent to those obtained in erceg et al 2000 though with different slope coefficients in an equal volatility comparison the model with unemployment conveys less price stickiness and more wage stickiness

information variables for monetary policy in an estimated structural model of the euro area a small scale new keynesian model for the euro area is estimated with maximum likelihood under the assumptions of imperfect information and discretionary monetary policy the estimated parametrization of this widely used dynamic stochastic model unveils the monetary authorities objectives and the information content of two indicator variables monetary aggregates and real unit labour costs the results highlight a significant policy concern about interest rate smoothing and inflation almost no concern for output gap stabilization emerges regarding indicator variables unit labour costs provide information on potential output that is helpful for stabilization policy no useful information role emerges for monetary aggregates

fiscal policy in the new neoclassical synthesis we analytically derive the cyclical effects of fiscal policy shocks in a new neoclassical synthesis model price stickiness has the consequence that a rise in government demand affects labor demand while at the same time the usual wealth effect boosts labor supply the strength of the demand effect depends on the response of the real interest rate governed by the monetary policy regime when the central bank controls money growth fiscal expansions are deflationary and might even be contractionary whereas output wages and inflation can increase when the rise in the real interest rate is dampened by an interest rate rule however price stickiness alone is not sufficient to explain a rise in consumption as predicted by keynesian theory

inner city and suburban labour markets in a major english conurbation processes and policy implications unemployment is one of the key characteristics of britain s inner cities this paper examines labour market processes and their policy implications within an inner city and a suburban area of an economically depressed city in england sheffield five major themes are examined markedly contrasting unemployment rates within the two areas and their policy implications job barriers aspirations and opportunities skills attainment and training issues differential unemployment rates affecting specific socio economic groups in each locality and questions surrounding poverty

commuting in search of jobs and residences abstract this paper introduces a model which includes residential job moving and commuting behavior when labor and housing markets are characterized by market imperfections imperfect information and moving costs we examine the consequences of these market imperfections on commuting behavior an empirical analysis of commuting behavior indicates that workers commute less if they receive more job offers

job proximity and the urban employment problem do suitable nearby jobs improve neighbourhood employment rates due to a scarcity of small area jobs data much of the spatial mismatch literature has not directly addressed the impact of nearby jobs on neighbourhood employment rates such analysis is particula

is there a fiscal free lunch in a liquidity trap this paper uses a dsge model to examine the eects of an expansion in government spending in a liquidity trap the spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent and scal stimulus can be rapidly implemented moreover the budgetary costs may be minimal as the large response of output boosts tax revenues allowing for something close to a scal free lunch however we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending and or if the liquidity trap lasts less than two years in addition because the marginal impact of scal expansion decreases in the scale of the outlay it is crucial to distinguish between average and marginal multipliers

describing inequalities in access to employment and the associated geography of wellbeing this paper addresses three questions how unequal is access to urban employment and the wellbeing associated with it what is the monetary value consumers place on access how does the inequality of access correspond to the geographical pattern of unemployment a novel approach is developed using the osland and pryce house price model to estimate the monetary value of access welfare mvaw the wellbeing associated with living a given distance from employment taking into account the negative externalities associated with centres of employment and the complexities that arise from the existence of multiple employment centres of varying size it is found that mvaw is considerably more unequal than house prices or income mvaw contributes around 13 per cent of the average value of a house and the spatial pattern of unemployment rates is highly inelastic with respect to both mvaw and employment suggesting no evidence of a spatial mismatch

monopsony in the labor market this paper surveys recent theoretical and empirical research on monopsony in labor markets broadly defined as upward sloping labor supply to an employer we compare older monopsony models based on small numbers of employers with newer models based on labor market frictions such as moving costs and search we also compare older econometric approaches that focus on static wage concentration relationships with newer approaches that focus on dynamics our review of empirical estimates suggests that monopsony power based on small numbers of employers is probably rare but occasionally large while monopsony power based on frictions is probably widespread but small on average

equilibrium exchange rate hedging we assume a world like the one that gives the capital asset pricing model but with many goods and many countries we assume that investors in a given country have homothetic utility functions with the same weights and a currency that has a sure endof period value using a price index with those weights siegel s paradox derived from jensen s inequality makes investors want a positive amount of exchange risk when average risk tolerance is the same across countries every investor will hold the same mix of market risk through the world market portfolio of all assets and exchange risk in a diversified basket of foreign currencies in fact the ratio of exchange risk to market risk is equal to the average investor s risk tolerance we can write the ratio of exchange risk to market risk and the fraction of the market s exchange risk that investors hedge as depending on an average of world market risk premia an average of world market volatilities and an average of exchange rate volatilities the weights in these averages are the same as the weights of the different countries in the currency basket given these averages the ratio and the fraction hedged will not depend directly on exchange rate means or covariances in equilibrium we can use the ratio of exchange risk to market risk to measure average risk tolerance in this model risk tolerance is observable

what determines aggregate returns to scale abstract this paper develops a unified framework that incorporates four features important in existing models with increasing returns fixed costs decreasing marginal costs product variety and market power when fixed costs are not allowed to vary and profits are imposed to be zero in every period only the degree of returns to variety determines the degree of aggregate increasing returns to scale when fixed costs respond to changes in aggregate activity or the zero profit condition does not hold in the short run aggregate returns depend not only on product variety but also on diminishing marginal costs or market power the degree of market power however does not affect input prices which are critical to determine the uniqueness of equilibrium

opportunity preference and constraint an approach to the analysis of metropolitan migration the paper aims to consider how the fragmentation in the literature on migration may be overcome and to develop an integrated model of migration which can be applied to all types of population flow in the london metropolitan region the need for such an approach follows from the complexity of flows observed at the 112 zone level of disaggregation as well as the unresolved problems of the literature despite this catholicity of aim the theoretical basis of the model is essentially economic drawing on aspects of human capital and search and spatial choice theories with an emphasis on the interaction between three concepts opportunities preference and constraints in determining observed levels of migration

universal hedging optimizing currency risk and reward in international equity portfolios investors can increase their returns by holding foreign stocks in addition to domestic ones they can also gain by taking the appropriate amount of exchange risk but what amount is appropriate assume that investors see the world in light of their own consumption goods and count both risk and expected return when figuring their optimum hedges assume that they share common views on stocks and currencies and that markets are liquid and there are no barriers to international investing in this perfect world it is possible to derive a formula for the optimal hedge ratio this formula requires three basic inputs the average across countries of the expected returns on the world market portfolio the average across countries of the volatility of the world market portfolio and the average across all pairs of countries of exchange rate volatility these values can be estimated from historical data the formula in turn gives the circumstances for three rules 1 hedge foreign equity 2 hedge less than 100

optimal monetary policy under low trend inflation abstract in the monetary policy literature it is common to assume that trend inflation is zero despite overwhelming evidence that zero inflation is neither empirically relevant nor a practical objective for central bank policy we therefore extend the standard new keynesian model to allow for positive trend inflation showing that even low trend inflation has strong effects on optimal monetary policy and the dynamics of inflation output and interest rates under discretion the efficient policy deteriorates and there is no guarantee of determinacy even with commitment targeting non zero trend inflation leads to substantial welfare losses our results serve as a warning against indiscriminate use of models assuming zero trend inflation

state dependent pricing and the general equilibrium dynamics of money and output economists have long suggested that nominal product prices are changed infrequently because of fixed costs in such a setting optimal price adjustment should depend on the state of the economy yet while widely discussed statedependent pricing has proved difficult to incorporate into macroeconomic models this paper develops a new tractable theoretical state dependent pricing framework we use it to study how optimal pricing depends on the persistence of monetary shocks the elasticities of labor supply and goods demand and the interest sensitivity of money demand

identifying the influences of nominal and real rigidities in aggregate price setting behavior we formulate a generalized price setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs real rigidities we estimate this framework using macroeconomic data for germany 1975 1998 and for the u s 1983 2003 in each case we find that the data are well characterized by nominal contracts with an average duration of about two to three quarters we also find that new contracts exhibit very low sensitivity to marginal cost corresponding to a relatively high degree of real rigidity finally our results indicate that backward looking price setting behavior such as indexation to lagged inflation is not needed in explaining the aggregate data at least in an environment with a stable monetary policy regime and a transparent and credible inflation objective

migrant inertia accessibility and local unemployment a labour markets model is constructed in which migration may exhibit distance deterrence and cumulative inertia migration probabilities fall with distance and length of residence respectively the combination of these two processes yields higher equilibrium unemployment rates in remote areas fewer out migration opportunities in remote areas generate longer residence durations which become self perpetuating via cumulative inertia such areas accu mulate net in migrants until the local unemployment rate rises sufficiently to balance inflows and outflows in equilibrium local unemployment rates compensate for endogenous varia tions in residence duration some evidence is presented for britain which supports the pre diction of higher unemployment in remote areas inertia or negative duration dependence and distance deterrence in migration behaviour generates higher equilibrium unemployment rates in remote areas all other things being equal cumulative inertia reflects a process whereby individuals form attachments to area friends job etc which grow over time distance deterrence arises because of increasing movement costs over longer distances and friction in information flows about relevant opportunities both processes are intuitively plausible and have been tested empirically clearly both issues are likely to affect adjustment patterns in the face of shocks to labour markets the argument advanced in this paper however and one that is perhaps not quite so obvious is that the combination of the two processes can also affect the underlying equilibrium itself the existence of persistent spatial differentials in unemployment is charac teristic of most countries and would appear to motivate areas of government policy various explanations for such differentials have been proposed the analysis presented here is intended primarily to deepen our understanding of the causes of these sustained differentials and hence to inform policy traditional explanations for sustained local unemployment differentials may be divided into three types one argument is in terms simply of labour immobility the perceived costs of moving outweigh the benefits and hence labour market imbalances persist alternatively one may combine mobile lab our with spatial wage rigidities such that equilibrium local unemployment patterns compensate for local variation in wages and other exogenous factors climate environment etc in people s preference functions finally there is the issue of labour heterogeneity e g by occupation a compensating varia tions equilibrium may exist for each homogeneous class of labour such that a region s aggregate unemployment rate reflects the local composition of