multipliers of unexpected increases in defense spending an empirical investigation abstract we show that unexpected increases in defense spending increase total factor productivity tfp and output and decrease investment in us quarterly data yet the output multiplier is zero when the tfp response is shut down we examine various explanations for this phenomenon and find that the rise in tfp is due to the presence of measurement error in quarterly data using artificial data generated from an rbc model with measurement error we demonstrate the suitability of our identification approach for recovering the true output multiplier in the presence of measurement error

the zero lower bound the dual mandate and unconventional dynamics abstract this paper examines monetary policy when it is constrained by the zero lower bound zlb on the nominal interest rate our analysis uses a nonlinear new keynesian model with technology and discount factor shocks specifically we investigate why technology shocks may have unconventional effects at the zlb what factors affect the likelihood of hitting the zlb and the implications of alternative monetary policy rules we initially focus on a new keynesian model without capital model 1 and then study that model with capital model 2 the advantage of including capital is that it introduces another mechanism for intertemporal substitution that strengthens the expectational effects of the zlb four main findings emerge 1 in model 1 the choice of output target in the taylor rule may reverse the effects of technology shocks when the zlb binds 2 when the central bank targets steady state output in model 2 a positive technology shock at the zlb leads to more pronounced unconventional dynamics than in model 1 3 the presence of capital changes the qualitative effects of demand shocks and alters the impact of a monetary policy rule that emphasizes output stability and 4 in model 1 the constrained linear solution is a decent approximation of the nonlinear solution but meaningful differences exist between the solutions in model 2

demand for sport this article reviews international literature on the demand for professional sport the first part presents a conceptual framework for understanding the sources and determinants of the demand for professional sporting contests the second part reviews empirical evidence on key determinants of attendance at sporting events and on other sources of demand such as broadcasting sponsorship and merchandising the review concludes that there is still much to be learned about demand for professional sport and that there are no simple lessons to be drawn from existing literature but important messages do emerge from studies of demand for attendance with regard to effects of uncertainty of outcome quality of contest and quality of viewing copyright 2003 oxford university press

a flexible finite horizon alternative to long run restrictions with an application to technology shocks abstract recent studies using long run restrictions question the validity of the technology driven real business cycle hypothesis we propose an alternative identification that maximizes the contribution of technology shocks to the forecast error variance of labor productivity at a long but finite horizon in small sample monte carlo experiments our identification outperforms standard long run restrictions by significantly reducing the bias in the short run impulse responses and raising their estimation precision unlike its long run restriction counterpart when our max share identification technique is applied to u s data it delivers the robust result that hours worked responds negatively to positive technology shocks

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

the power of forward guidance revisited in recent years central banks have increasingly turned to forward guidance as a central tool of monetary policy especially as interest rates around the world have hit the zero lower bound standard monetary models imply that far future forward guidance is extremely powerful promises about far future interest rates have huge effects on current economic outcomes and these effects grow with the horizon of the forward guidance we show that the power of forward guidance is highly sensitive to the assumption of complete markets if agents face uninsurable income risk and borrowing constraints a precautionary savings effect tempers their responses to changes in future interest rates as a consequence forward guidance has substantially less power to stimulate the economy in addition we show that the business cycle dynamics of our incomplete markets model differ substantially from its complete market counterpart this contrasts with the well known results of krusell and smith 1998 we present approximate representations that can easily be incorporated into standard business cycle models

monetary news shocks we pursue an empirical strategy to identify a monetary news shock in the u s economy we use a monetary policy residual along with other variables in a vector autoregression var and identify a monetary news shock as the linear combination of reduced form innovations that is orthogonal to the current residual and that maximizes the sum of contributions to its forecast error variance over a finite horizon real gdp declines in a persistent manner after a positive monetary news shock this contraction in economic activity is accompanied by a fall in inflation and a rapid increase in the nominal interest rate

investment specific news shocks and u s business cycles we provide robust evidence that news shocks about future investment specific technology ist constitute a significant force behind u s business cycles positive ist news shocks induce comovement that is raise output consumption investment and hours these shocks account for 70 of the business cycle variation in output hours and consumption and 60 of the variation in investment and have played an important role in 9 of the last 10 u s recessions our findings provide strong support for shifting focus to ist news shocks when investigating the role of news in driving u s business cycles

the effects of monetary policy news and surprises there is substantial agreement in the monetary policy literature over the effects of exogenous monetary policy shocks the shocks that are investigated however almost exclusively represent unanticipated changes in policy which surprise the private sector and which are typically found to have a delayed and sluggish effect on output in this paper we estimate a new keynesian model that incorporates news about future policies to try to disentangle the anticipated and unanticipated components of policy shocks the paper shows that the conventional estimates confound two distinct effects on output an effect due to unanticipated or surprise shocks which is smaller and more short lived than the response usually obtained in the literature and a large delayed and persistent effect due to anticipated policy shocks or news news shocks play a larger role in influencing the business cycle than unanticipated policy shocks although the overall fraction of economic fluctuations that can be attributed to monetary policy remains limited

estimating the effects of forward guidance in rational expectations models abstract simulations of forward guidance in rational expectations models should be assessed using the modest policy interventions framework introduced by eric leeper and tao zha that is the estimated effects of a policy intervention should be considered reliable only if that intervention is unlikely to trigger a revision in private sector beliefs about the way that monetary policy will be conducted i show how to constrain simulations of forward guidance to ensure that they are regarded as modest policy interventions and illustrate the technique using a medium scale dsge model estimated on us data i find that many experiments that generate the large responses of macroeconomic variables deemed implausible by many economists the so called forward guidance puzzle are not modest policy interventions those experiments should therefore be treated with caution since they may prompt agents to believe that there has been a change in the monetary policy regime that is not accounted for within the model more reliable results can be obtained by constraining the experiment to be a modest policy intervention in the cases i study the quantitative effects on macroeconomic variables are more plausible when this constraint is imposed

do constraints improve portfolio performance the discrete time dynamic investment model using only historical data in various asset allocation settings often produces significant abnormal returns however the model does not choose the diversified portfolios that theory suggests it should therefore in this paper we compare the investment policies and returns of the model with and without constraints on the mix of risky assets the constraints lead to appreciably more diversification and less realized risk but only at the cost of less realized return visual comparisons of compound return standard deviation plots and statistical comparisons of jensen s alpha suggest that the reduction in return is not worth the reduction in risk for more risk averse investors ex post utility and certainty equivalent returns suggest that it is the results however illustrate the problems associated with using ex post utility to measure performance 2000 elsevier science b v all rights reserved

inequality among equals embedding market and authority in league sports in league sports the regulatory authority of leagues is thought to counter market pressures that would otherwise concentrate player talent in smsas with the largest market potential the presumed opposition between authority and markets is not supported by league histories in the four major team sports these histories show that contrary to expectations market potential has the greatest influence on winning when league authority is formally strongest market potential has no influence on performance when league authority is opposed by antitrust law player unions rival leagues or league members to explain this anomaly authority and market relations must both be seen as embedded within the multiplex relations among team owners these relations changed dramatically with the rise of national audiences in the past three decades inequality among equals replaced inequality among unequals as the support of a rootless national audience replaced rooted and unequal local audiences altering the opportunity

credit booms and lending standards evidence from the subprime mortgage market this paper links the u s subprime mortgage crisis to demand side factors that contributed to the rapid expansion of the u s mortgage market we show that denial rates were relatively lower in areas that experienced faster credit demand growth and that lenders in these high growth areas attached less weight to applicants loan to income ratios the results are robust to controlling for supply side factors including house price appreciation mortgage securitization and other economic fundamentals and to several robustness tests controlling for endogeneity the results are consistent with the notion that a relaxation of lending standards triggered by an increased demand for loans contributed to the boom and the ensuing crisis together with other supply side explanations these findings shed new light on the relationship between credit booms and financial instability

team roster turnover and attendance in major league baseball empirical support is shown for the propositionthat sports fans prefer the composition of their home team to remain the same from season to season controlling for price income population team quality league year the stadium effects the regression results indicate that for each percentage point increase in the turnover of the composition of the team attendance will fall by about 0 7 the implications of this heretofore ignored tendency are briefly discussed

news shocks and business cycles abstract this paper proposes and implements a novel structural var approach to the identification of news shocks about future technology the news shock is identified as the shock orthogonal to the innovation in current utilization adjusted tfp that best explains variation in future tfp a favorable news shock leads to an increase in consumption and decreases in output hours and investment on impact more suggestive of standard dsge models than of recent extensions designed to generate news driven business cycles though news shocks account for a significant fraction of output fluctuations at medium frequencies they contribute little to our understanding of recessions

changes in the federal reserve communication strategy a structural investigation this paper structurally investigates the changes in the fed s communication strategy since the mid 1990s through the lens of anticipated and unanticipated disturbances to a taylor rule the anticipated disturbances are identified using treasury bond yield data in estimating a dynamic stochastic general equilibrium dsge model with a term structure of interest rates our estimation results show that the fed s decisions were unanticipated for market participants until 1999 but thereafter a larger portion of its future policy actions tended to be communicated in advance we also find that the relative contribution of the anticipated monetary policy disturbances to macroeconomic fluctuations became larger after 1999 the bond yield data is indispensable to these results since it contains crucial information on an expected future path of the federal funds rate

monetary policy shocks we got news abstract we assess the role of monetary policy news shocks in the context of a medium scale dsge model estimated on us data we estimate several versions of the model and find decisive evidence in favour of the inclusion of monetary policy news shocks over a two quarter horizon according to our results monetary policy news shocks account for a non negligible fraction of the variance of real variables especially at shorter forecast horizons further we document that the importance of monetary policy news shocks goes beyond what was observed in recent years the historical importance of monetary policy news shocks dates back to the 1999 2006 period when the official fomc statements provided information about both the current policy setting and the expected future policy path we also show that adding monetary policy news shocks to the model does not lead to identification problems

coaching team production coaching team production the actual function of managers is the subject of much debate using data on more than 3000 male college basketball players their coaches and their skill levels we find a positive and significant relation between our ability to replicate an individual coach s allocation of playing time across players and his winning percentage although this result does not answer the central question of just what it is that managers contribute the results do support the property rights paradigm managers are the employees of workers and more generally sports data can be used to help understand related economic processes where quantifiable measures of inputs and outputs are more costly to obtain what is meant by performance input energy initiative work attitude perspiration rate of exhaustion or output sometimes by inspecting a team member s input activity we can better judge his output effect it is not always the case that watching input activity is the only or best means of detecting measuring or monitoring output effects of each team member but in some cases it is a useful way i introduction a major tenet of the alchian demsetz 1972 representation of the firm is that managers are hired by workers to prevent shirking and malfeasance in their own ranks absent overseers individual workers bear only a fraction of the cost of shirking and hence everyone undersupplies labor relative to its opportunity cost in this world the managerial function is to monitor inputs and meter rewards thereby reducing the incentive to shirk and raising each worker s marginal productivity the more dependence there is in the marginal products of laborers the more important the role of management this view of supervision is simultaneously intuitively pleasing and difficult to quantify this paper investigates the role of management in a setting where indisputably there is team production intercollegiate basketball 1 data on 3012 college basketball players across ten years and sixty five teams are used to replicate one aspect of coaching the allocation of playing time next we attempt to link coaching decisions to winning the goal is to determine if coaches who manage well by our standards are successful section ii motivates the paper in section iii the empirical methodology is detailed the monitoring function is estimated and related to coaching success section iv contains a summary and conclusion ii coaching decisions the essence of team production is interdependence and the inherent immeasurability of marginal productivity across workers however this does not mean that proxies for marginal productivity cannot be developed managers monitor worker inputs and deduce marginal products accordingly of course some inputs are more cheaply quantified than others attitude is hard to measure but heart rate is easy sweat is observed cheaply but workers can feign exhaustion in the famous chinese boatpullers fable the coxswain uses his whip to insure that coolies pull efficiently to persuade each worker to give the appropriate effort 2 mcmanus 1975 341 relates a story told by cheung boats are pulled upstream by a team of coolies prodded by an overseer with a whip an american lady horrified at the sight of the overseer whipping the men as they strained at their harness demanded that something be done about the brutality she was quickly informed those men own the rights to draw boats over this stretch of water and they have hired the overseer and given him his duties here the monitor uses his vision intuition and experience to determine shirking counseling the loafers with his whip but employing subjective observation is just one way to monitor

the peculiar externalities of professional team sports the economics literature has long been divided regarding whether competing sports teams can achieve the same efficient allocation of playing skills that a revenue maximizing league monopolist would choose despite the external effects the teams impose on each other in their pursuit of athletic talent in this article an explicit consideration of the arbitrage incentives that underlie the marketing and pricing of playing skills indicates that decentralized franchises generally fail to allocate talent efficiently for fans concerned about the championship prospects of their preferred team the popular complaint has merit big city teams win too much jel l83 i introduction twenty years before the end of major league baseball s comprehensive reserve clause which assigned to team owners the exclusive right to market player contracts simon rottenberg 1956 p 255 observed that a market in which freedom is limited by the reserve rule such as that which governs the baseball labor market distributes players among teams about as a free market would the subsequent economics literature has been divided regarding whether the distribution of players under the reserve clause and free agency is not just identical but also efficient my analysis suggests that it is not the typical popular view is that competitive balance is achieved when teams at least over time perform equally well as measured by winning percentage or championship frequency economic analysis suggests instead that if team revenues uniformly reflect fan satisfaction then competitive balance is optimal when talent is allocated so as to maximize revenues for the league as a whole the two notions of competitive balance match only when team markets are of equal size either by coincidence or because of freedom of entry and relocation of team franchises under the prevailing circumstances in which market sizes differ superior on field performance by large market teams does not in itself indicate to economists that the existing level of competitive balance is suboptimal the question of interest is whether the dominance of large market teams is excessive thereby reducing total league revenues the next section reviews the debate about the efficiency consequences that result from the external effects that teams impose on each other through their competition for athletic talent the following sections then establish three key points section iii shows that teams generally fail to achieve the league revenue maximizing allocation of talent when the teams acquire players from an external market with a perfectly elastic supply of playing skills section iv turns to the internal marketing of athletic talent for which quirk and el hodiri 1974 have demonstrated that decentralized franchises reach the same allocation of playing skills as a league revenue maximizing monopolist as long as internally marketed skills sell for a uniform price however the analysis of section iv indicates that the arbitrage process that drives the internal marketing of talent does not lead to a uniform price for playing skills but only to an equilibrium set of bilateral transaction prices between each pair of teams as a result decentralized franchises do not end up with an equal marginal revenue product of playing skills across teams and therefore do not achieve the allocation of talent that a league revenue maximizing monopolist would choose section v examines the nature of the discrepancy between the optimal allocation of talent and the allocation achieved by noncooperative franchises linking fan interest to the championship prospects of the fan s preferred team generates an outcome in which unrestricted competition for playing skills by decentralized franchises results in excessive domination by large market teams whose incremental acquisitions of playing skills impose negative externalities on third party rivals appropriate per unit taxes and or subsidies on playing skills can be structured as a first best policy to address this inefficiency

chronicle of a war foretold the macroeconomic effects of anticipated defence spending shocks we identify us defense news shocks as shocks that best explain future movements in defense spending over a ve year horizon and are orthogonal to current defense spending our identied shocks are strongly correlated with the ramey 2011 news shocks but explain a larger share of macroeconomic uctuations and have signicant demand eects fiscal news induces signicant and persistent increases in output consumption investment hours and the interest rate standard dsge models fail to produce such a pattern we propose a sticky price model with distortionary taxation variable capital utilization capital adjustment costs and rule of thumb consumers that replicates the empirical ndings

sport as business there is both a popular and academic literature suggesting that owners of sports teams do not profit maximize the alternative formulation entails either win or utility maximization usually subject to a breakeven constraint another line of economic analysis holds that team owners do fundamentally profit maximize or that profit maximization provides a useful benchmark against which to assess actual performance there has been some empirical work attempting to decipher the true objective function of team owners these results are inconclusive objective functions however remain important because they affect both owner behaviour and league performance in practice owners objectives vary by team league and country and are strongly affected by how the team relates to an owner s other assets the next task for modelling the behaviour and performance of sports leagues is to take fuller account of the diversity of ownership objectives within a given league copyright 2003 oxford university press