central bank design abstract starting with a blank slate how could one design the institutions of a central bank for the united states this paper explores the question of how to design a central bank drawing on the relevant economic literature and historical experiences while staying free from concerns about how the fed got to be what it is today or the short term political constraints it has faced at various times the goal is to provide an opinionated overview that puts forward the trade offs associated with different choices and identifies areas where there are clear messages about optimal central bank design

natural resource prices will they ever turn up abstract natural resource theory predicts that natural resource rents should increase over time however technical progress in resource extraction environmental constraints or great natural abundance could result in stagnant or declining product prices thus there is no theoretical reason to believe that product prices will rise in the near future the prediction of product prices by time series methods is shown to depend critically upon whether the series are modeled as difference or trend stationary dickey fuller and lagrange multiplier tests are used to show that the series are difference stationary long and short sample series are tested trend stationary modeling strongly predicts rising resource prices the result from difference stationary modeling is that there is only a weak supposition that natural resource prices will rise

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

valuing mineral reserves when capacity constrains production abstract we add a capacity constraint and heterogeneous reserves to the hotelling valuation principle this produces a more general version of the principle that is more consistent with empirical valuations while retaining the underlying relationship between net price and reserve value

trust no more the impact of the crisis on citizens trust in central banks abstract citizens trust in economic institutions has generally declined since the onset of the crisis in particular eurobarometer surveys show that trust in the european central bank ecb has fallen significantly during the crisis this paper studies the determinants of public trust in the ecb over the lifetime of the euro net trust in the ecb has decreased significantly in those countries which have experienced increasing sovereign bond yields and financial market turbulence the finding that country specific variables affect citizens trust in the ecb may seem counterintuitive however it is consistent with strong evidence in the political science literature showing that domestic considerations play a significant role when citizens get an opportunity to express their opinion on eu matters

discretionary monetary policy and the zero lower bound on nominal interest rates abstract ignoring the existence of the zero lower bound on nominal interest rates one considerably understates the value of monetary commitment in new keynesian models a stochastic forward looking model with an occasionally binding lower bound calibrated to the u s economy suggests that low values for the natural rate of interest lead to sizeable output losses and deflation under discretionary monetary policy the fall in output and deflation are much larger than in the case with policy commitment and do not show up at all if the model abstracts from the existence of the lower bound the welfare losses of discretionary policy increase even further when inflation is partly determined by lagged inflation in the phillips curve these results emerge because private sector expectations and the discretionary policy response to these expectations reinforce each other and cause the lower bound to be reached much earlier than under commitment

do budget maximizing public officials increase the probability of property reassessment county governments in pennsylvania face non binding limits on their property tax rates these are considered non binding because they do not place a limit on tax levies or expenditures assuming local public officials have monopoly power tax rate limits can be circumvented by reassessing the property tax base a two stage process was hypothesized in which the probability of reaching tax rate limits first was determined and the probability of reassessment then was determined the effect of budget maximizing government officials at each stage was tested for 66 pennsylvania counties over the 1970 1995 period the empirical results showed that variables associated with budget maximizing behaviour influenced the choice in each stage public expenditure growth increased the probability of reaching the tax rate limit in the first stage while reaching the tax rate limit increased the probability of reassessment in the second stage the estimates also showed that economic fiscal and taste variables were signific

on the optimal order of natural resource use when the capacity of the inexhaustible substitute is limited consider a general equilibrium framework where the marginal cost of extraction from several deposits of an exhaustible resource is constant in terms of an inexhaustible perfect substitute and differs between deposits the instantaneous rate of production form the inexhaustible resource is subject to a capacity constraint

new hampshire s tax base limits an example of the leviathan model this study views the lack of an income tax on wages and salaries and a general sales tax in new hampshire as tax base limits i use the leviathan model to analyze the differences between the fiscal system in new hampshire and the fiscal systems in vermont maine and massachusetts vermont maine and massachusetts do not have the tax base limits that new hampshire has from 1957 to 1989 new hampshire had lower state and local government tax and expenditure levels than the other three states more rapid population growth lower welfare expenditures but comparable levels of expenditures for several of the major public services and a more competitive structure of state and local government

price expectations ore quality selection and the supply of a nonrenewable resource abstract economic models of depletion imply that the present value price of a resource and the quality of extracted ore should be directly related the empirical evidence is that in the short run the average quality of extracted ore and in some cases metal output decline in response to a price increase this paper examines a model of extraction with heterogeneous ore quality within a deposit and revised price expectations in which this seemingly paradoxical supply response is rationalized as the outcome of ore quality selection which maximizes the present value of the mine

exploration and scarcity noting that a suggested measure of natural resource scarcity resource rent is unobservable we show that rent is linked to observable marginal exploration cost a two period model of extraction and exploration reveals that rent is equal to this cost when discovery is certain under risky exploration cost data can be used to bound rent the model also indicates how exploration uncertainty affects the competitive firm s extraction and exploration decisions finally the behavior of u s oil and gas exploration costs suggests that these costs were rising in the postwar era which has different implications for scarcity than indicated by other measures of scarcity

pitfalls im a received idea ricardian decreasing returns at the extensive margin of a natural resource the ricardi theo of constantly decreasing returs on addition units of a self renewable resource states that best resources are used firs except for location and technical change using modem economic theory we show this result to be an unfounded prejudice our moel of the origin ricardian ild problem easily splays initial increasing retumsr thus soling a 150 year old empirical puzzle carey s paradox of switches in hstorical land use pattems the ricadi result may be empirically correct in specific cases but cannot claim general theoretica validity le embuches dune ide re ue le rendements d raissants icardens a ia marge extensive duine ressource naturelle la theonre ncardienne des rendements constamment

political competition and state government size do tighter elections produce looser budgets we test implications of politicalcompetition theory concerning government size usingdata from u s states we find that greaterpolitical competition in the race for governor actsas a check against bigger government evidence onthe effectiveness of legal limits on expendituresand or revenues growth is mixed the democraticparty is associated with bigger government but onlywhen party representation in both the governor shouse and the legislature is strong the flypapereffect of grants is found to be strong our resultshave implications for models of fiscal illusion

on the nonexistence of market equilibria in exhaustible resource markets with decreasing costs this paper examines the existence of competitive equilibria in markets for exhaustible resources where there are initial economies of scale in either the extraction of the resource or the utilization of the resource as an input in production in such instances which are fairly common we find that the classic hotelling rule for competitive extraction does not apply since competitive price equilibria generally do not exist this is in marked contrast to static markets where the usual textbook example of firms with u shaped average cost curves is not inconsistent with the existence of competitive equilibria furthermore oligopolistic market equilibria in which resource firms act as nash producers may also fail to exist when there are returns to scale in production

reserve characteristics and mining costs an empirical study of the phosphate industry this paper deals with an estimation of phosphate mining cost function here it is argued that other characteristics of reserves besides their size could be quite important in the cost function the result of a cross sectional analysis of phosphate mining in the world shows that reserve size and average total cost have a positive and modest statistically significant relationship in one of the two models among many qualitative characteristics and location factors tested in this paper overburden grade ore product ratio water availability and the price of capital are significant with expected signs finally the results confirm the existence of economies of scale in phosphate mining which seem to be more related to mining technology than to reserve size

resource characteristics extraction costs and optimal exploitation of mineral resources this paper modifies the traditional theories ofnon renewable resource exploitation where reserve sizeis assumed to be the major determinant of extractioncosts in a competitive model of resourceexploitation characteristics of aggregate reservesare considered as a determinant of extraction cost then dynamic solutions for the price and exploratoryefforts are developed various price paths arefeasible under different assumptions with regard tothe changes in the reserve characteristics over time past empirical research shows that there is noconsistent price path for all materials in fact itis the quality of newly discovered reserves as well astheir size that has affected material prices todemonstrate the complexity of a firm s decision torecover mineral from new deposits potentials forsubstantial high quality marine mineral resources areevaluated as a substitute for land based resources however several factors including the decreasingtrend in marine mining r d expenditures and thepotential impact of large scale marine mining on priceof minerals indicate that mining of mostnon hydrocarbon marine minerals will not take place inthe near future

grade selection under uncertainty least cost last and other anomalies abstract grade selection rules for heterogeneous resource deposits with increasing marginal extraction costs are derived it is shown that contrary to the conventional wisdom it can be optimal to extract the least cost deposits last there are a number of rules that are compatible with dynamic profit maximization under certainty nevertheless none explains empirical regularities in actual extraction patterns when uncertainty about future price is introduced however the theoretical model conforms closely not only to observed grade selection patterns but also to observed mineral industry price paths

exploration and exhaustible resources the microfoundations of aggregate models the appropriate specifications for aggregate extraction and exploration cost functions are derived from a disaggregate model of the search for low cost deposits of an exhaustible resource the common practice of combining the no discovery extraction cost function with exploration is shown to result in a misspecified model for which the total cost of extracting the resource is not well defined the widely accepted prediction that the anticipated discovery of low cost deposits results in a u shaped price path appears to be an artifact of this misspecification for the authors properly specified cost functions the predicted resource price always rises copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

sectoral supply of minerals of varying quality in this sectoral model of mineral production investment in capacity and variation in orebody grade and volume help explain some stylized facts more than one grade of ore may be exploited simultaneously mine exhaustion but not necessarily entry occurs in declining order of grade the price may rise or fall but is likely to fall initially young industry and must eventually rise at less than the interest rate unless demand expands rapidly these trends exhibit fluctuations due to entry and exhaustion of deposits resource price cyclicality is reinforced because mines keep producing at capacity when the price is falling

the effects of party competition on budget outcomes empirical evidence from local governments in spain this paper investigates the link between local budget outcomes and the intensity of party competition measured as the margin of victory obtained by the incumbent in the previous local election i e the difference between the vote share and 50 two competing hypotheses are tested in the paper on the one hand the leviathan government hypothesis suggests that the lower the intensity of party competition is the greater is the increase in the size of the local public sector irrespective of the ideology of the party in power on the other hand the partisan government hypothesis suggests that the incumbent will find it easier to advance its platform when intensity of competition is low i e parties on the left right will increase decrease the size of the local public sector when the intensity of the challenge from the opposition is low these hypotheses are tested with information on spending own revenues and deficit for more than 500 spanish local governments over 8 years 1992 1999 and information on the results of two local electoral contests 1991 and 1995 the evidence favors the partisan hypothesis over the leviathan one we found that for left wing governments spending taxes and deficits increased as the electoral margin increases whereas for right wing governments a greater margin of victory led to reductions in all these variables

property tax revaluation and tax levy growth abstract jurisdiction wide property revaluation like many administrative reforms may have unintended consequences this paper examines one such potential consequence by pooling 18 year time series for each of 39 massachusetts cities 17 of which revalued and 270 massachusetts towns 202 of which revalued we examine the hypothesis that politicians take advantage of the confusion generated by revaluation and raise property taxes by more than they otherwise would have we observe such a response in cities but not in towns and attribute this difference to differences in their governmental structures

extraction costs and the economics of nonrenewable resources the study questions the fundamental assumption of the standard aggregate exploration extraction model of nonrenewable resources that extraction costs and the level of reserves are inversely related it also raises questions about the model s conclusions regarding exploration incentives and the valuation of reserves an empirically tested disaggregate model is presented that suggests that exploration activity occurs from firms attempting to balance marginal extraction plus user costs at the intensive and extensive margins exploration is carried out until the marginal discovery cost of a deposit equals its present asset value and a u shaped price path is indicated

optimal monetary policy at the zero interest rate bound what should a central bank do when faced with a weak aggregate demand even after reducing the short term nominal interest rate to zero to address this question we solve a central bank s intertemporal loss minimization problem in which the non negativity constraint on nominal interest rates is explicitly considered we find that the optimal path is characterized by policy inertia in the sense that a zero interest rate policy should be continued for a while even after the natural rate of interest returns to a positive level by making such a commitment the central bank is able to achieve higher expected inflation lower long term nominal interest rates and a weaker domestic currency in the adverse periods when the natural rate of interest significantly deviates from a steady state level

infrequent assessments distort property taxes theory and evidence abstract economists have long recognized that lags in property reassessment benefit infrequent movers because it reduces their property taxes but in addition reassessment lags can influence the level of property taxes selected under majority rule i show that short delays in community wide reassessment increase property tax collections because it reduces the tax price for a majority of voters however longer delays reduce property tax collections because the aggregate assessed base and thus the tax yield declines so much i formally characterize the cutoff between these regimes and show tax collections are generally above their socially optimal level this theory can help explain why many people believe property taxes are excessive and it also suggests that the american system of taxing capital gains at realization rather than on accrual might result in excessive rates i test this theory on a sample of pennsylvania municipalities in the philadelphia suburbs this is a suitable crucible for such an evaluation because community wide reassessments are infrequently performed in pennsylvania it is not possible to reject the theory s basic predictions and numerical estimates suggest that a 5 year delay in community wide reassessment increases government revenues by 6 however reassessment delays do not impose statistically significant social losses because they benefit infrequent movers

trends in natural resource commodity prices an analysis of the time domain abstract this paper attempts to reconcile the theoretical predictions of increasing real prices for nonrenewable natural resource commodities obtained from hotelling style models with the empirical findings of falling prices for these commodities a theoretical model for relative price movements is derived for the case of exogenous technical change and endogenous change in the grade of ores mined the model suggests a u shaped time path for relative prices the implied price movements are tested for all the major metals and fuels and the model parameters are found to be statistically significant for 11 out of the 12 commodities tested

supportive housing and neighborhood property value externalities we analyzed impacts on single fam institutional settings as part of the nationily home prices of eleven small scale supportive wide deinstitutionalization movement housing facilities announced in denver during beginning in the 1970s chronically men 1989 1995 using a difference in differences econo tally ill developmentally and physically dis metric specification we found that these facilities abled non violent produced a positive impact on house prices within offenders recovering 1 001 to 2 000 feet we attributed this effect to coun substance abusers and frail elderly inditervailing externalities building rehabilitation vs viduals have increasingly been domiciled resident behaviors that vary in their spatial extent in small scale facilities located in residen supportive housing facilities were systematically tial neighborhoods this normalization sited in neighborhoods with declining relative of residential environment coupled with prices compared to elsewhere in the census tract on site and on call specialized care is seen this location bias led a conventional econometric as therapeutic bymany policy makers new specification to erroneously estimate a negative property value impact from supportive housing

resource taxation with heterogeneous quality and endogenous reserves abstract this paper analyzes the impact of mining taxation on the intertemporal extraction profile for a heterogeneous ore body the extraction profile specifies both quantities and qualities extracted in each period total extraction is thus endogenously determined the taxes explicitly considered are severance taxes ad valorem or per unit on metal or on ore property taxes and profits taxes with depletion allowance the intertemporal framework integrates economic and geological factors generating new results on extraction distortions and providing qualification or reconciliation of previous diverse results in this area

links between trust in the ecb and its interest rate policy we analyse determinants of trust in the european central bank ecb our main finding is that when households have pessimistic expectations aggressive cuts in interest rates have an adverse effect on their trust in central bank this result is in accordance with the lack of confidence shock hypothesis developed by schmitt grohe and uribe 2012 and in contrast with the fundamental shock hypothesis which implies positive effects of aggressive cuts for trust in the ecb the result is robust to various changes in the modelling approach