the differential regional effects of monetary policy this paper examines whether monetary policy has similar effects across regions in the united states impulse response functions from an estimated structural vector autoregression reveal a core of regions new england mideast plains southeast and the far west that respond to monetary policy changes in ways that closely approximate the u s average response of the three noncore regions one great lakes is noticeably more sensitive to monetary policy changes and two southwest and rocky mountains are found to be much less sensitive a state level version of the model is estimated and used to provide evidence on the channels for monetary policy

sentiments and aggregate demand fluctuations we formalize the keynesian insight that aggregate demand driven by sentiments can generate output fluctuations under rational expectations when production decisions must be made under imperfect information about demand optimal decisions based on sentiments can generate stochastic self fulfilling rational expectations equilibria in standard economies without persistent informational frictions externalities nonconvexities or strategic complementarities in production the models we consider are deliberately simple but could serve as benchmarks for more complicated equilibrium models with additional features

renewable resource management with environmental prediction variations in environmental conditions affect renewable resource growth the ability to predict such variations is improving providing scope for improved management we generalize a common stochastic stock recruitment model to explore how optimal management changes with environmental prediction we obtain three main results first while it might seem that a prediction of adverse future conditions should lead to more conservative management the opposite may be true second optimal management requires only a one period ahead forecast suggesting forecast accuracy is more important than forecast lead time finally we derive conditions on environmental fluctuations guaranteeing positive optimal harvest in every period gestion d une ressource renouvelable quand on predit les conditions futures de l environnement les variations dans les conditions de l environnement affectent la croissance de la ressource renouvelable la capacitea prevoir ces variations s ameliore et ouvre la possibilite d ameliorer la gestion de la ressource les auteurs utilisent un modele de ressource renouvelable avec croissance stochastique et obtiennent trois resultats d abord alors qu il peut sembler que des previsions pessimistes de conditions difficiles dans l avenir peuvent conduire a une gestion plus conservatrice le contraire peut etre vrai ensuite la gestion optimale requiert seulement une prediction pour la prochaine periode voila qui suggere qu il est plus important d avoir une prevision exacte que d avoir des previsions a plus long terme enfin on developpe les conditions pour les fluctuations de l environnement qui garantissent une recolte positive optimale a chaque periode

are policy platforms capitalized into equity prices evidence from the bush gore 2000 presidential election abstract this paper tests for the capitalization of policy platforms into equity prices using a sample of 70 firms favored under bush or gore platforms during the 2000 u s presidential election two sources of daily data during the six months leading up to the election are incorporated firm specific equity returns and the probability of a bush victory as implied by prices from the iowa electronic market for this group of politically sensitive firms the daily baseline estimates demonstrate that platforms are capitalized into equity prices under a bush administration relative to a counterfactual gore administration bush favored firms are worth 3 more and gore favored firms are worth 6 less implying a statistically significant differential return of 9 estimates based on weekly returns are even stronger suggesting a differential return of 16 the most sensitive sectors include tobacco worth 13 more under a favorable bush administration microsoft competitors worth 15 less under an unfavorable bush administration and alternative energy companies worth 16 less under an unfavorable bush administration a corresponding analysis of campaign contributions which allows for heterogeneity in the importance of policy platforms to the firms supports the baseline estimates

does consumer sentiment forecast household spending if so why in the three months following the iraqi invasion of kuwait the university of michigan s index of consumer sentiment ics fell an unprecedented 24 3 index points to its lowest level since the 1981 1982 recession this collapse in household confidence became the focus of a great deal of economic commentary and indeed frequently was cited as an important if not the leading cause of the economic slowdown that ensued concern was fueled by the well known contemporaneous correlation between the ics and the growth of household spending figure 1 shows quarterly averages of the index 1978 1993 together with the quarterly growth in real personal consumption expenditures as measured in the national income accounts bureau of economic analysis the correlation is impressive of course it is not surprising that sentiment and the growth of spending are positively correlated this correlation may simply reflect that when economic prospects are poor households curtail their spending and also give gloomy responses to interviewers thus the contemporaneous correlation between sentiment and spending does not refute traditional life cycle or permanentincome models of consumption nor does it necessarily make the job of forecasting changes in consumption any easier from the point of view of an economic forecaster the questions of interest are first whether an index of consumer sentiment has any predictive power on its own for future changes in consumption spending and second whether it contains information about future changes in consumer spending aside from the information contained in other available indicators in section i we present evidence that the answer to the first question is a clear yes we find that lagged values of the ics taken on their own explain about 14 percent of the variation in the growth of total real personal consumption expenditures over the post1954 period further investigation shows that the answer to the second question is probably yes as well though here the margin is narrower and the evidence more murky the ics contributes about 3 percent to the r2 of a simple reduced form equation for total personal consumption expenditures in the longer of the two sample periods we examine but nothing in the shorter sample period though the latter result is heavily influenced by the observation for 1980 2 for the major subcategories of spending the contribution generally ranges between 1 percent and 8 percent overall we read the evidence as pointing toward at least some significant incremental explanatory power therefore we take as given for the remainder of the paper that sentiment forecasts spending and we turn to the issue of how that statistical relationship should be interpreted one possible interpretation is that sentiment is an independent driving factor in the economy and that changes in carroll division of research and statistics stop 80 federal reserve board washington dc 20551 fuhrer research department federal reserve bank of boston boston ma 02106 wilcox division of monetary affairs stop 71 federal reserve board washington dc 20551 we have benefited from the research assistance of stephen helwig and christopher geczy and the comments of an anonymous referee the views expressed in this paper are those of the authors and not of the federal reserve board the federal reserve bank of boston or the other members of the staff of either institution ithe conference board s consumer confidence index also plunged at the same time

optimal fishery management with regime shifts an assessment of harvesting strategies this paper compares outcomes from informed and uninformed harvesting strategies for a fish stock with switching dynamics where the probability of switching is influenced by climate using data on sea surface temperature anomalies the impacts of climate on the conservation and the welfare that can be extracted from the stock are investigated results indicate that an informed management policy leads to stock biomass and resource rents that are up to 2 7 and 2 times higher respectively than under an uninformed policy also the fishery is open 54 longer under the informed policy the magnitude of these effects depends on the choice of the discount rate indicating that when the future is highly discounted gains from the informed policy dissipate

did steve forbes scare the us municipal bond market abstract this paper investigates the relationship of the daily spread between taxable and municipal securities to a daily indicator of the likelihood of a tax reform that would eliminate the preference now accorded to municipal securities the flat tax the probability of tax reform is proxied by the market price of the shares of steve forbes a champion of the flat tax in the iowa electronic market we find evidence that the indicator of tax reform s prospects was correlated with a decline in the spread on five and ten year maturity bonds although not for 30 year maturity bonds the correlations do not however survive in first difference form suggesting either that forbes prospects did not immediately affect expectations of future tax policy that the correlations are coincidental rather than causal or that the decreased signal to noise ratio obscures a real but small causal relationship

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

tfp news and sentiments the international transmission of business cycles we propose a novel identification scheme for a non technology business cycle shock that we label sentiment this is a shock orthogonal to identified surprise and news tfp shocks that maximizes the short run forecast error variance of an expectational variable alternatively a gdp forecast or a consumer confidence index we then estimate the international transmission of three identified shocks surprise tfp news of future tfp and sentiment from the us to canada the us sentiment shock produces a business cycle in the us with output hours and consumption rising following a positive shock and accounts for the bulk of short run business cycle fluctuations in the us the sentiment shock also has a significant impact on canadian macro aggregates in the short run it is more important than either the surprise or the news tfp shocks in generating business cycle comovement between the us and canada accounting for up to 50 of the forecast error variance of canadian gdp and about one third of canadian hours imports and exports the news shock is responsible for some comovement at 5 10 years and surprise tfp innovations do not generate synchronization

resilience in the dynamics of economy environment systems the ecological concept of resilience has begun to inform analysis of change in economy environment systems the linkages between resilience and the stability of dynamical systems are discussed along with its role in understanding of the evolution of such systems particular linkages discussed include those between resilience biodiversity and the sustainability of alternative states recent developments in modelling the resilience of joint economy environment systems suggest the advantages of analysing change in the system as a markov process the transition probabilities between states offering a natural measure of the resilience of the system in such states it is argued that this emergent property of the collaboration between ecology and economics has far reaching implications for the way we think about model and manage the environmental sustainability of economic development

consistent economic indexes for the 50 states in the late 1980s james stock and mark watson developed for the u s economy an alternative coincident index to the one now published by the conference board they used the kalman filter to estimate a latent dynamic factor for the national economy and designated the common factor as the coincident index this paper uses the stock watson methodology to estimate a consistent set of coincident indexes for the 50 states these indexes provide researchers with a comprehensive monthly measure of economic activity that can be used to examine a number of state and regional issues

on the dynamic effects of oil price shocks a study using industry level data abstract this paper analyzes the effects of oil price shocks on demand and supply in various industries the impulse responses of identified var models indicate that for industries that have a large cost share of oil such as petroleum refinery and industrial chemicals oil price shocks mainly reduce supply in contrast for many other industries with the automobile industry being a particularly important example oil price shocks mainly reduce demand the paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects possibly by delaying purchasing decisions of durable goods

why don t oil shocks cause inflation evidence from disaggregate inflation data this paper uses disaggregate u s inflation data to evaluate explanations for the breakdown of the relationship between oil price shocks and consumer price inflation a data set with measures of inflation energy intensity labor intensity and sensitivity to monetary policy is constructed for 97 sectors that make up core cpi inflation a comparison of the 1973 85 and 1986 2006 time periods reveals that substitution away from energy use in production and monetary policy were both important with approximately two thirds of the change in response of inflation to oil shocks being due to reduced energy usage and one third to monetary policy we find no evidence that other factors such as changes in wage rigidities or changes in the persistence of oil shocks played a role

news noise and fluctuations an empirical exploration a common view of the business cycle gives a central role to anticipations consumers and firms continuously receive information about the future which is sometimes news and sometimes just noise based on this information consumers and firms choose spending and because of nominal rigidities spending affects output in the short run if ex post the information turns out to be news the economy adjusts gradually to a new level of activity if it turns out to be just noise the economy returns to its initial state therefore the dynamics of news and noise generate both short run and long run changes in aggregate activity this view appears to capture many of the aspects often ascribed to fluctuations the role of animal spirits in affecting demand spirits coming here from a rational reaction to information about the future the role of demand in affecting output in the short run together with the notion that in the long run output follows a natural path determined by fundamentals in this paper we examine whether this view is consistent with the data we reach three main conclusions the first two methodological the third substantive structural vars typically cannot recover news and noise shocks the reason is straightforward if agents face a signal extraction problem and are unable to separate news from noise then the econometrician faced with either the same data as the agents or a subset of these data cannot do it either while structural estimation methods cannot recover the actual time series for news and noise shocks either they can recover underlying structural parameters and thus the relative role and dynamic effects of news and noise shocks estimation of both a simple model and then of a more elaborate dsge model suggest that agents indeed solve such a signal extraction problem and that noise shocks play an important role in determining short run dynamics recent efforts to estimate business cycle models in which expectations about the future play an important role include christiano et al 2010 and schmitt grohe and uribe 2012 those papers follow the approach of jaimovich and rebelo 2009 and model news as perfectly anticipated productivity changes that will occur at

the intertemporal substitution model of labour market fluctuations an empirical analysis the paper uses two approaches to study whether aggregate fluctuations in employment and unemployment may be explained within a market clearing framework as intertemporal substitution in labour supply first log linear equations for labour supply and unemployment are estimated using a forecasting model to measure wage and price expectations second a utility function is used to derive and estimate an equation for labour supply as a function of the current real wage and consumption the influence of expected future real wages and interest rates is captured by the consumption variable the empirical results do not support the intertemporal substitution model

labour force transitions among low wage married couples a simultaneous probability model interdependence in the labour force transitions of low income married couples is studied it utilizes a simultaneous probability model in which each person s job exit depends in part on the job transitions of their spouse estimates are based on data from the seattle denver income maintenance experiments the evidence appears to indicate that wives emulate the nonwork status of their husbands wives of exit prone husbands are themsleves more exit prone and less likely to enter employment evidence in favour of reverse dependence of husbands status on wives exits appears to be weak and imprecise

a new coincident index of business cycles based on monthly and quarterly series maximum likelihood factor analysis of time series is possible even when some series are quarterly and others are monthly treating quarterly series as monthly series with missing observations and replacing them with artificial observations independent of the model parameters one can apply the kalman filter to a state space representation of a factor model and evaluate the likelihood function an application to quarterly real gdp and monthly coincident business cycle indicators gives a new coincident index of business cycles the new index is essentially the smoothed estimate of latent monthly real gdp and should improve upon the stock watson index

labour force participation timing and persistence this paper examines the relative importance of timing and persistence elements in explaining cyclical fluctuations in labour supply data from the natural experiment provided by world war ii and cross sectional data on american local labour markets as well as aggregate time series data are used in the empirical work we find little evidence that timing effects play an important role in labour market dynamics the evidence suggests that views emphasizing persistence are more accurate and that previous employment tends to raise the probability of subsequent employment much of the development of applied economic theory within the past 25 years has emphasized the importance of viewing economic decisions in a life cycle context consumption decisions are today frequently viewed as being determined by wealth or permanent income the human capital revolution has brought life cycle considerations to the forefront of modern labour economics while the life cycle dynamics of labour force participation decisions have important implications for macroeconomic theory and policy they have received relatively little empirical attention with the notable exceptions of lucas and rapping 1969 and hall 1980 none of the large body of work on cyclical fluctuations in employment has explicitly relied on a dynamic model of labour supply this paper uses several types of data to examine two elements of participation dynamics the first is the aspect of timing which is implicit in the work of lucas and rapping and in mincer s 1966 early discussion of hidden unemployment the timing argument which is presented most explicitly in ghez and becker 1975 holds that leisure is easily substitutable across periods hence relatively small transitory movements in the perceived real wage or real rate of return can have large effects on the path of labour supply as individuals time their participation to coincide with periods of high transitory wages on the other hand permanent changes because they do not affect the timing decision are expected to have a much smaller effect on participation it is this view of labour supply which underlies new classical macroeconomic models the dependence is made explicit in lucas 1975 who claims that what we do know indicates that leisure in one period is an excellent substitute for leisure in other nearby periods the ability of classical macroeconomic models to explain fluctuations in employment depends on the presence of strong intertemporal substitution effects unless

housing assets and consumer spending a regional analysis carruth a and henley a 1993 housing assets and consumer spending a regional analysis reg studies 27 611 621 this paper is concerned with the relationship between the housing market and consumer spending for the eleven standard regions of the uk pooled regional cross sectional and annual time series data are used to appraise the effect of housing assets on regional consumer spending in the 1980s a fixed effects estimator imposing common slope coefficients across the regions is employed and this assumption is tested using the sure estimator estimates of a dhsy specification of the consumption function and a model augmented with housing assets are compared the fixed effects models perform quite well indicating that the growth in regional housing equity has had a positive impact on regional consumer spending the sure results indicate that the assumption of common regional responses of consumer spending to the explanatory variables is not valid and that the housing wealth effect is strongest in

do shocks to animal spirits cause output fluctuations we evaluate whether shocks to animal spirits affect real outcomes at business cycle frequencies using data on consumer confidence and region and state level coincident activity indexes in a vector autoregression var with long run restrictions we assume that animal spirits shocks do not affect the long run level of activity innovations in fundamentals explain most variation in the level of activity but animal spirits have economically significant effects at business cycle frequencies a positive innovation in animal spirits causes real activity to rise by between 0 2 and 0 6 in the medium term and animal spirits may explain up to about half of real fluctuations in the medium run

dynamic resource management under the risk of regime shifts abstract this paper provides a framework through which a dynamic resource management problem with potential regime shifts can be analyzed both in a strategic environment and from a social planner s perspective based on a fairly general model a condition for a precautionary policy is discussed by applying the framework to a common property resource problem with a linear production technology we illustrate how the qualitative as well as quantitative nature of equilibrium is altered due to the possibility of regime shifts in particular when the risk is endogenously affected by the players behavior potential regime shifts can facilitate the precautionary management of resources as long as the resource stock is in good shape as the stock of resource becomes scarce however the precautionary effect vanishes and more aggressive resource exploitation emerges the impacts of irreversibility on the equilibrium behavior are highlighted it is also shown that there can exist a resource depletion trap in which a regime shift once it happens triggers a continuous decline of resource stock no matter which regime materializes in the subsequent periods

labour market conditions and labour force participation the case of the netherlands we develop a model to explain the relationship between unemployment and labour force participation by males and females in the netherlands following recent advances in the literature a distinction is made between temporary and permanent unemployment our findings indicate that male labour force participation is significantly influenced by the temporary unemployment variable while permanent unemployment does not seem to play a significant part for females we find the opposite

the optimal management of renewable resources under the risk of potential regime shift abstract complex dynamic systems can undergo changes in feedbacks between system components causing a rapid and persistent shift in system behavior regime shifts and potentially reduce welfare from declining provision of important ecosystem services in this paper we provide an analytical condition that determinfilefs whether the threat of a potential regime shift causes management to be more aggressive or more precautionary in numerical simulations we find that aggressive management can occur for reasonable parameter values which is counter prior results that the potential for harmful regime shift always leads to precautionary management

optimal management with reversible regime shifts abstract in this paper we examine the management of a natural resource a fishery subject to regime shifting dynamics a regime shift is defined as an episode in which the dynamics of the resource can switch between two alternative regimes at random times specifically we study the impact of reversible regime switching both observed and unobserved on optimal harvesting policy the case in which the regime is not directly observed i e observational uncertainty is addressed by using the extended pomdp approach developed in fackler and pacifici 2014 we illustrate the performance of the model under different assumptions on the underlying stochastic growth variability the biological structure of the stock in different regimes and the resilience of the regimes when the regime is known optimal policies depend on the population level and which regime is currently active when the regime is unobserved on the other hand the optimal policy depends on the population level and a belief distribution about the current regime in general when the probability of regime change is fixed and hence is not affected by harvesting policy the optimal policy is of the constant escapement variety when the probability of switching regime is endogenous the optimal policy is no longer of the constant escapement type optimal policies when the regime is uncertain are approximately equal to a weighted average of the policies when the regime is certain with the weights equal to the beliefs in the associated regimes but there are differences

regional output growth in the united kingdom more timely and higher frequency estimates from 1970 output growth estimates for the regions of the uk are currently published at the annual frequency only and are released with a long delay regional economists and policymakers would benefit from having higher frequency and more timely estimates in this paper we develop a mixed frequency vector autoregressive mf var model and use it to produce estimates of quarterly regional output growth temporal and cross sectional restrictions are imposed in the model to ensure that our quarterly regional estimates are consistent with the annual regional observations and the observed quarterly uk totals we use a machine learning method based on the hierarchical dirichlet laplace prior to ensure optimal shrinkage and parsimony in our over parameterised mf var thus this paper presents a new regional quarterly database of nominal and real gross value added dating back to 1970 we describe how we update and evaluate these estimates on an ongoing quarterly basis to publish online at www escoe ac uk regionalnowcasting more timely estimates of regional economic growth we illustrate how the new quarterly data can be used to contribute to our historical understanding of business cycle dynamics and connectedness between regions

on uncertain renewable resource stocks optimal harvest policies and the value of stock surveys abstract annual harvest quotas are commonly employed in the management of renewable resource stocks commercial fisheries being a prime example such resource stocks often undergo quite significant natural fluctuations to which quotas must be adapted a further complication arises from the fact that estimates of stock abundance are often highly uncertain in this paper a bayesian approach is used to model optimal quota decisions for an uncertain fluctuating renewable resource stock

news or noise the missing link the literature on belief driven business cycles treats news and noise as distinct representations of agents beliefs we prove they are empirically the same our result lets us isolate the importance of purely belief driven fluctuations using three prominent estimated models we show that existing research understates the importance of pure beliefs we also explain how differences in both economic environment and information structure affect the estimated importance of pure beliefs

fishery management under multiple uncertainty abstract among others who point to environmental variability and managerial uncertainty as causes of fishery collapse roughgarden and smith proc natl acad sci 93 1996 5078 argue that three sources of uncertainty are important for fisheries management variability in fish dynamics inaccurate stock size estimates and inaccurate implementation of harvest quotas we develop a bioeconomic model with these three sources of uncertainty and solve for optimal escapement based on measurements of fish stock in a discrete time model among other results we find 1 when uncertainties are high we generally reject the constant escapement rule advocated in much of the existing literature 2 inaccurate stock estimation affects policy in a fundamentally different way than the other sources of uncertainty and 3 the optimal policy leads to significantly higher commercial profits and lower extinction risk than the optimal constant escapement policy by 42 and 56 respectively

fisheries management under cyclical population dynamics cycles in environmental conditions e g sea surface temperature directly impact fish growth this paper extends the classical gordon schaefer fishery model by replacing the constant growth rate with a cyclical growth rate the optimal harvest rate is shown to fluctuate but the cycle of the harvest rate lags the cycle of the biological growth function with the highest harvest rate occurring after biological conditions start to decline simulations contrast various fishing policies and illustrate the proclivity to crash a fishery if it is wrongfully managed as if there is a constant growth rate with i i d environmental shocks finally we show that small cyclical fluctuations in one species can result in large fluctuations in the optimal harvest rate of another species if the fish species are interlinked through predator prey relationships

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

optimal management with potential regime shifts we analyze how the threat of a potential future regime shift affects optimal management we use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics and exogenous versus endogenous probabilities of regime shift prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock we show that all other cases yield unambiguous results in particular with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels

fear of obama an empirical study of the demand for guns and the u s 2008 presidential election using monthly data constructed from futures markets on presidential election outcomes and a novel proxy for firearm purchases this paper analyzes the response of the demand for guns to the likelihood of barack obama being elected in 2008 point estimate suggests the existence of a large obama effect on the demand for guns this political effect is larger than the effect associated with the worsening economic conditions this paper presents robust empirical evidence supporting the hypothesis that the unprecedented increase in the demand for guns was partially driven by fears of a future obama gun control policy conversely the evidence for a racial prejudice motivation is less conclusive furthermore this paper argues that the obama effect did not represent a short lived intertemporal substitution effect and that it permanently affected the stock of guns in circulation finally states that had the largest increases in the demand for guns during the 2008 election race experienced significant changes in certain categories of crime relative to other states following obama s election in particular those states were 20 more likely to experience a shooting event where at least three people were killed c 2015 elsevier b v all rights reserved language en

using regional economic indexes to forecast tax bases evidence from new york this paper evaluates the use of measures of regional economic activity to forecast tax revenues for new york state and new york city at 3 6 and 12 month horizons we construct sales and withholding tax base series and then apply the methodology of stock and watson 1989 1991 to estimate regional indexes of coincident economic indicators employing an out of sample forecasting framework we find that the use of the coincident indexes leads to statistically and economically significant improvements in tax base forecasts compared to those generated from univariate autoregressions in addition the coincident indexes produce forecasts that are generally more accurate than forecasts that rely on the use of the coincident indicators separately though our analysis focuses on forecasting movements in tax revenue at the state or local level it is also intended to draw attention to the value the indexes may provide in other applications

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

why has regional income convergence in the u s declined the past thirty years have seen a dramatic decrease in the rate of income convergence across states and in population flows to wealthy places these changes coincide with 1 an increase in housing prices in productive areas 2 a divergence in the skill specific real returns to living in productive places 3 a redirection of low skilled migration and 4 diminished human capital convergence due to migration we develop a model where falling housing supply elasticity and endogenous labor mobility generates these patterns using a new panel measure of housing supply regulations we demonstrate the importance of this channel income convergence continues in less regulated places while it has stopped in more regulated places

energy price shocks and economic activity which energy price series should we be using there is not one primary energy market and the price of oil is not a good proxy for many alternative energy prices therefore this paper explores the effects of alternative energy price shocks on economic activity and examines the relative performance of these alternative measures in predicting state level economic activity using the davidson and mackinnon j test the alternative energy price series considered are as follows gasoline diesel natural gas heating oil and electricity alternative measures of energy price shocks produce different patterns of impulse responses than oil price shocks additionally overwhelming evidence indicates that alternative energy price models excluding models containing the price of gasoline outperform the baseline model containing the price of oil for many states particularly at short to mid forecast horizons using alternative energy prices should lead to a more accurate modeling of the energy price macroeconomy relationship

a density projection approach for non trivial information dynamics adaptive management of stochastic natural resources abstract we demonstrate a density projection approximation method for solving resource management problems with imperfect state information the method expands the set of partially observed markov decision process pomdp problems that can be solved with standard dynamic programming tools by addressing dimensionality problems in the decision maker s belief state density projection is suitable for uncertainty over both physical states e g resource stock and process structure e g biophysical parameters we apply the method to an adaptive management problem under structural uncertainty in which a fishery manager s harvest policy affects both the stock of fish and the belief state about the process governing reproduction we solve for the optimal endogenous learning policy the active adaptive management approach and compare it to passive learning and non learning strategies we demonstrate how learning improves efficiency but typically follows a period of costly short run investment

metro business cycles abstract we construct monthly economic activity indices for the 50 largest u s metropolitan statistical areas msas beginning in 1990 each index is derived from a dynamic factor model based on twelve underlying variables capturing various aspects of metro area economic activity to accommodate mixed frequency data and differences in data publication lags we estimate the dynamic factor model using a maximum likelihood approach that allows for arbitrary patterns of missing data our indices highlight important similarities and differences in business cycles across msas while a number of msas experience sizable recessions during the national recessions of the early 1990s and early 2000s other msas escape recessions altogether during one or both of these periods nearly all msas suffer relatively deep recessions near the recent great recession but we still find significant differences in the depth of recent metro recessions we relate the severity of metro recessions to a variety of msa characteristics and find that msas with less educated populations and less elastic housing supplies experience significantly more severe recessions after controlling for national economic activity we also find significant evidence of dynamic spillover effects in economic activity across msas

the economic effects of energy price shocks large fluctuations in energy prices have been a distinguishing characteristic of the u s economy since the 1970s turmoil in the middle east rising energy prices in the u s and evidence of global warming recently have reignited interest in the link between energy prices and economic performance this paper addresses a number of the key issues in this debate what are energy price shocks and where do they come from how responsive is energy demand to changes in energy prices how do consumers expenditure patterns evolve in response to energy price shocks how do energy price shocks affect u s real output inflation and stock prices why do energy price increases seem to cause recessions but energy price decreases do not seem to cause expansions why has there been a surge in the price of oil in recent years why has this new energy price shock not caused a recession so far have the effects of energy price shocks waned since the 1980s and if so why as the paper demonstrates it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets when answering these questions

do technology shocks lead to a fall in total hours worked this paper contributes to the debate initiated by gali in 1999 i provide a theory with capital income taxation labor hoarding as well as long run shifts in the social attitudes to the workplace modelled as leisure at the workplace to argue that there are other shocks that may influence labor productivity in the long run i introduce medium run identification and show it to be superior to long run identification or standard short run identification when applied to artificial data with u s data and medium run identification i find the robust result that technology shocks lead to a hump shaped response of total hours worked which is mildly positive following a near zero initial response jel e32 e24 c32 c15 copyright c 2004 the european economic association

regional effects of federal tax shocks this article studies the effects of federal tax changes on u s state level income utilizing an exogenous tax shock series recently proposed in the literature we find considerable variation in how federal tax changes affect regional income estimated state income multipliers range between 0 2 in utah and 3 7 in hawaii analyzing the determinants of differences in regional tax multipliers suggests that size and composition of the state tax base help explain the observed heterogeneity in the transmission of federal tax policy

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

partisan impacts on the economy evidence from prediction markets and close elections analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections we sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day analyzing high frequency financial fluctuations following the release of flawed exit poll data on election day 2004 and then during the vote count we find that markets anticipated higher equity prices interest rates and oil prices and a stronger dollar under a george w bush presidency than under john kerry a similar republican democrat differential was also observed for the 2000 bush gore contest prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts suggesting that electing a republican president raises equity valuations by 2 3 percent and that since ronald reagan republican presidents have tended to raise bond yields

macroeconomic releases and the interest rate term structure abstract we extract two systematic economic factors from a wide array of noisy and sparsely observed macroeconomic releases and link the dynamics and market prices of the two factors to the interest rate term structure the two factors predict 77 9 82 1 of the daily variation in libor and swap rates from one month to 10 years shocks on inflation related releases have large positive impacts on interest rates of all maturities leading to parallel shifts of the yield curve but shocks on output related releases have larger impacts on the short rate than on the long rate thus generating a slope effect

information animal spirits and the meaning of innovations in consumer confidence we show that unexplained innovations in several variables representing survey responses to forwardlooking questions on the michigan survey of consumers have powerful prognostic implications for the future paths of macroeconomic variables we attempt to distinguish the hypothesis that these impulse responses indicate a causal channel from autonomous movements in sentiment to economic outcomes the animal spirits view from the alternative interpretation that the surprise confidence movements summarize information about future economic prospects the information view in natural rate models animal spirits shocks are associated with overshooting of among other variables consumption that attenuates when agents come to grips with their overreaction while information shocks about the long future are followed by gradual movements in macroeconomic variables that are not subsequently reversed in a baseline vector autoregression involving consumption income and confidence the data come down sharply in favor of the information view the impulse responses of consumption and gdp show no tendency to attenuate even after a number of years further confidence innovations have strong implications for labor productivity many quarters into the future in somewhat larger vars with an information block that includes inflation and or stock prices the impulse responses to confidence innovations continue to have the permanent shape that defines information shocks but they are smaller in magnitude we demonstrate that this is due to the fact that both inflation and stock price innovations have prognostic implications for future productivity that are very similar to the implications of innovations in confidence addition of unemployment to the system induces a transitory component that changes the shape of the impulse responses and somewhat weakens the previously airtight case against animal spirits but it does not provide constructive evidence of such effects

how black candidates affect voter turnout both black and white voter turnout increases 2 3 percentage points with each black democrat on the ballot given the groups representations in the population the white response is numerically greater whites of both parties are less likely to vote for their parties candidate when s he is black the turnout findings are not explained away by voter election or politician characteristics however the fact that there is no turnout response to black republicans suggests that a perception of blacks ideology may be a factor

testing whether unemployment represents intertemporal labour supply behaviour in the lucas rapping 1969 model of the labour market fluctuations in unemployment represent individuals optimally adjusting their labour supply behaviour in response to fluctuations in wage rates over the business cycle in this paper i propose and implement a misspecification test of the lucas rapping treatment of unemployment as labour supply behaviour using panel data this test extends previous such work with micro data by simultaneously allowing for intertemporal substitution uncertainty and endogenous unemployment using the standard specification of intertemporal labour supply behaviour i find strong evidence against this interpretation of unemployment there are two possible interpretations of the test results the first is that it is necessary to turn to alternative models of the labour market in which unemployed workers are off a supply function the second is that the test results indicate the necessity of moving to more complex models of intertemporal substitution however given current econometric techniques and data sets these alternative models of intertemporal substitution will be extremely difficult to test

regime shifts and uncertainty in pollution control we develop a simple model of managing a system subject to pollution damage such as climate change under the risk of an abrupt and random jump in the damage function the model allows the full dynamic characterization of the optimal emission policies under uncertainty the results imply precautionary behavior in contrast with the ambiguous outcomes reported in the literature for models of catastrophic occurrences the framework is used to analyze the adaptation vs mitigation dilemma and provides a simple criterion to determine when adaptation activities should be undertaken

sentiments and economic activity evidence from u s states we examine whether sentiment influences aggregate demand by studying the relationship between the michigan survey expectations concerning national output growth and future economic activity at the state level we instrument for local sentiments with political outcomes positing that agents in states with a higher share of congressmen from the political party of the sitting president will be more optimistic this instrument is strong in the first stage and our results confirm a positive relationship between sentiments and future state economic activity that is robust to a battery of sensitivity tests

real time forecasting of inflation and output growth with autoregressive models in the presence of data revisions we examine how the accuracy of real time forecasts from models that include autoregressive terms can be improved by estimating the models on lightly revised data instead of using data from the latest available vintage the benefits of estimating autoregressive models on lightly revised data are related to the nature of the data revision process and the underlying process for the true values empirically we find improvements in root mean square forecasting error of 2 4 when forecasting output growth and inflation with univariate models and of 8 with multivariate models we show that multiple vintage models which explicitly model data revisions require large estimation samples to deliver competitive forecasts copyright 2012 john wiley sons ltd

racial bias in the 2008 presidential election we survey the evidence on whether racial attitudes negatively affected barack obama s vote share in the 2008 presidential election there is some evidence pointing toward this possibility first the increase in the democratic vote share in the presidential election between 2004 and 2008 was relatively smaller in appalachia and some southern states second there was a significantly smaller 2004 2008 growth in votes for the democratic presidential candidate than democratic house of representatives candidates while these patterns are consistent with the possibility that racial attitudes lowered the number of votes for obama a more complete examination of available data casts doubt on this interpretation we examine whether barack obama underperformed in parts of the country where voters are more racially biased on average specifically we test whether the loss of votes experienced by obama compared to john kerry relative to the votes that one may have predicted based on the general increase in the number of democratic votes in house elections between 2004 and 2008 was larger in states where the white population is more racially biased on average we measure racial attitudes using data from the general social survey on the fraction of white voters who support anti interracial marriage laws we find little evidence that obama underperformed relative to congressional democrats in states that have a white electorate with stronger racial bias we also find little evidence that turnout was higher among segments of the

an indicator of monthly gdp and an early estimate of quarterly gdp growth a range of monthly series are currently available giving indications of short term movements in output in the uk the main aim of this paper is to suggest a formal and coherent procedure for grossing these monthly data up to represent the whole of gdp although the resultant estimates of gdp would be worse than those obtained by direct measurement they should be more satisfactory than simply making an informal inference from whatever monthly data are available our examination of the efficacy of the method for estimation of the state of economic activity indicates a rather satisfactory outcome macroeconomic policy making in real time faces the perennial problem of uncovering what is actually happening to the economy movements of seasonally adjusted real gdp referred to subsequently simply as gdp and related estimates of the output gap are widely regarded as important predictors of future inflation and thus are relevant to the problem of inflation targeting estimates of gdp are typically produced quarterly with the first estimates in the uk available about 25 days after the end of the quarter to which they relate 1 in many countries

sufficient information in structural vars abstract necessary and sufficient conditions under which a var contains sufficient information to estimate the structural shocks are derived on the basis of this theoretical result we propose two simple tests to detect informational deficiency and a procedure to amend a deficient var a simulation based on a dsge model with fiscal foresight suggests that our method correctly identifies and fixes the informational problem in an empirical application we show that a bivariate var including unemployment and labor productivity is informationally deficient once the relevant information is included into the model technology shocks appear to be contractionary