structural estimation of the affiliated private value auction model we consider the structural estimation of the affiliated private value apv model in first price sealed bid auctions the model allows for bidders individual efficiencies and opportunity costs while permitting dependence among bidders private values through affiliation we establish the nonparametric identification of the apv model characterize its theoretical restrictions and propose a computationally convenient and consistent two step nonparametric estimation procedure for estimating the joint private value distribution from observed bids using simulated bid data we provide a step by step guide on how to implement our procedure and show the good behavior of our estimator in small samples

nowcasting the real time informational content of macroeconomic data abstract a formal method is developed for evaluating the marginal impact that intra monthly data releases have on current quarter forecasts nowcasts of real gross domestic product gdp growth the method can track the real time flow of the type of information monitored by central banks because it can handle large data sets with staggered data release dates each time new data are released the nowcasts are updated on the basis of progressively larger data sets that reflecting the unsynchronized data release dates have a jagged edge across the most recent months

international spillovers of large scale asset purchases this paper evaluates the international spillover eects of large scale asset purchases lsaps using a two country dynamic stochastic general equilibrium model with nominal and real rigidities and portfolio balance eects portfolio balance eects arise from imperfect substitution between short and long term bond portfolios in each country as well as between domestic and foreign bonds within these portfolios we show that lsaps lower both domestic and foreign long term yields and stimulate economic activity in both countries international spillover eects

asset market responses to conventional and unconventional monetary policy shocks in the united states abstract we quantify the responses of a wide range of united states financial market variables to domestic monetary policy shocks over conventional and unconventional monetary policy environments our results show that responses to policy shocks are in the same direction but generally larger and more significant in the unconventional period the larger responses are mostly due to larger shocks in the unconventional period but some variables show evidence of a larger transmission of shocks we separately use our framework to test shadow short rate estimates as a proxy for short maturity interest rates across conventional and unconventional periods

unconventional monetary policy fiscal side effects and euro area im balances we study the macroeconomic effects of unconventional monetary policy in the euro area using structural vector autoregressions identified with external instruments the instruments are based on the common unexpected variation in euro area sovereign yields for different maturities on policy announcement days we first show that expansionary monetary surprises are effective at lowering public and private interest rates and increasing economic activity consumer prices and inflation expectations we then document that the shocks lead to a rise in primary public expenditures and a widening of internal trade balances

the response of multinationals foreign exchange rate exposure to macroeconomic news abstract we use intraday data to estimate the daily foreign exchange exposure of u s multinationals and show that macroeconomic news affects these firms foreign exchange exposure news creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component for example a positive domestic demand surprise as reflected in higher than expected nonfarm payroll increases the value of the low exposure domestic activities and results in a persistent decrease in foreign exchange exposure

a unified measure of fed monetary policy shocks abstract we develop a u s monetary policy shock series that stably bridges periods of conventional and unconventional policymaking is largely unpredictable and contains no significant central bank information effect we attribute differences between our measure and often used alternatives to our econometric procedure a partial least squares approach and our using the full maturity spectrum of interest rates in estimating the shock we find that shocks to our monetary policy series have particularly large effects on maturities in the middle of the term structure and produce conventionally signed impulse responses of output and inflation

super experienced bidders in first price common value auctions rules of thumb nash equilibrium bidding and the winner s curse super experienced bidders have learned to overcome the winner s curse but still earn less than 50 of nash equilibrium profits subjects deviate from the complicated nash strategy employing piecew

nonlinear contracts zero profits and moral hazard contracts that base payments on an ex post variable are examined it is shown that a quadratic contract form may elicit truthful responses from auction participants and offer zero expected profits to the winning bidder but not eliminate adverse incentives ex post a general impossibility theorem is proven this theorem establishes that regardless of functional form no contract can offer zero expected profits and resolve the ex post moral hazard problem copyright 1987 by the review of economic studies limited

entry and subcontracting in public procurement auctions we empirically study how the interplay between entry and subcontracting choices is affected by the use of different auction formats in public procurement the difference in differences strategy used exploits a data set of auctions for public works run alternately under first price and average bid auctions we find that the use of first price auctions causes a marked decline in both entry and subcontracting we also find that the type of firms entering first price auctions changes with firms becoming more likely to bid jointly with other firms in ad hoc joint ventures data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 2071 this paper was accepted by teck hua ho behavioral economics

bidding for incomplete contracts an empirical analysis of adaptation costs abstract procurement contracts are often renegotiated because of changes that are required after their execution using highway paving contracts we show that renegotiation imposes significant adaptation costs reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs are an important determinant of their bids a structural empirical model compares adaptation costs to bidder markups and shows that adaptation costs account for 7 5 14 percent of the winning bid markups from private information and market power the focus of much of the auctions literature are much smaller by comparison implications for government procurement are discussed jel d44 d82 d86 h57 l13 l74 r42

u s monetary policy surprises identification with shifts and rotations in the term structure we develop a model to extract measures of monetary policy surprises from the maturity structure of the yield curve the model endogenously allows for the fact that the yield curve may either shift or rotate in response to monetary policy shocks a latent factor model approach with identification through heteroskedasticity harnesses the term structure to extract monetary policy shocks the approach offers informational advantages over event studies results from the u s term structure from 1994 strongly support the hypothesis that differing term structure responses are reactions to different types of monetary policy shock rather than differing reactions to the same policy shock

policy uncertainty lender of last resort and the real economy abstract a reduction in lender of last resort lolr policy uncertainty positively affects bank lending and propagates to investment and employment we exploit a unique policy that reduced uncertainty regarding the availability of future lolr funding for banks as a quasi natural experiment using micro level data on banks firms and loans in portugal we generate cross sectional variation in banks exposure to uncertainty and find that the size of the haircut subsidy the gap between private market and central bank security valuations plays a key role in the propagation of the shock to lending and the real economy

the effects of conventional and unconventional monetary policy on forecasting the yield curve abstract we investigate how conventional and unconventional monetary policies affect the dynamics of the yield curve by assessing the performance of individual yield curve models and their mixtures out of sample forecasts for u s bond yields show that the arbitrage free nelson siegel model and its mixtures with other models perform well in the period of conventional monetary policy whereas the random walk model outperforms all the other models in the period of unconventional monetary policy the diminished role of the no arbitrage restriction in forecasting the yield curve since 2009 can be attributed to unconventional monetary policy which resulted in low correlations between short and long term bond yields and little variation in the short term rates during the period of the maturity extension program in 2011 2012 the superiority of the random walk forecasts is more pronounced reinforcing our finding that the monetary policy framework affects yield curve forecast accuracy

high frequency identification of monetary non neutrality the information effect we present estimates of monetary non neutrality based on evidence from high frequency responses of real interest rates expected inflation and expected output growth our identifying assumption is that unexpected changes in interest rates in a 30 minute window surrounding scheduled federal reserve announcements arise from news about monetary policy in response to an interest rate hike nominal and real interest rates increase roughly one for one several years out into the term structure while the response of expected inflation is small at the same time forecasts about output growth also increase the opposite of what standard models imply about a monetary tightening to explain these facts we build a model in which fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output

the impact of monetary policy on corporate bonds under regime shifts abstract we study the effects of a conventional monetary expansion quantitative easing and the maturity extension program on corporate bond yields using impulse response functions obtained from flexible models with regimes using a three state markov switching model with time homogeneous vector autoregressive var coefficients that emerges from a systematic model specification search we find that unconventional policies may have been generally expected to decrease both corporate yields and spreads however even though the sign of the responses is the one desired by policymakers the size of the estimated effects depends on the assumptions regarding the decline in long term treasury yields caused by unconventional policies on which considerable uncertainty remains further tests based on yield spreads and a variable that measures inflation expectations show that in the crisis regime unconventional monetary policies do not produce any perverse effects on expected inflation these results prove robust to adopting a framework that allows var coefficients to break to imposing coefficient restrictions that increase parsimony and to a range of different ordering schemes that identify shocks in alternative ways

the credit channel at the zero lower bound through the lens of equity prices this study examines the impact of unconventional monetary policies on the stock market when the short term nominal interest rate is stuck at the zero lower bound zlb unconventional monetary policies appear to have significant effects on stock prices and the effects differ across stocks in agreement with existing credit channel theories i find that firms subject to financial constraints react more strongly to unconventional monetary policy shocks especially large scale asset purchases lsaps than do less constrained firms these results imply that the credit channel is as important as the interest rate channel in the transmission of unconventional monetary policies at the zlb

monetary policy bond returns and debt dynamics abstract using the government s intertemporal budget constraint we quantify the contribution of returns paid on the u s government s debt portfolio to the evolution of the debt to gdp ratio we show that announcements of unconventional monetary policy measures by the federal reserve between 2008 iv and 2012 as a part of macroeconomic stabilization were associated with a sizable increase in returns and debt to gdp ratios and contributed to fiscal imbalances we use the federal reserve s portfolio composition as a proxy for unconventional monetary policy measures and show that it is significantly related to future bond returns and fiscal balances

decomposing the effects of monetary policy using an external instruments svar we study the effects of monetary policy on economic activity separately identifying the effects of a conventional change in the fed funds rate from the policy of forward guidance we use a structural var identified using external instruments from futures market data the response of output to a fed funds rate shock is found to be consistent with typical monetary var analyses however the effect of a forward guidance shock that increases long term interest rates has an expansionary effect on output this counterintuitive response is shown to be tied to the asymmetric information between the federal reserve and the public

are financial markets less responsive to monetary policy shocks at the zero lower bound abstract this paper investigates the time varying effect of monetary policy shocks on financial markets we show that the corporate bond market is highly responsive to monetary policy shocks throughout 2000 2012 implying a high pass through of policy induced movements in treasury yields to private yields even during the zero lower bound period while the long term treasury bond market is highly sensitive to monetary policy shocks throughout almost the entire sample the short term treasury bond market is severely constrained by the zero lower bound the stock market is less responsive from 2008 to 2010 but the responsiveness bounces back rapidly in 2011

cultural conflict and merger failure an experimental approach we use laboratory experiments to explore merger failure due to conflicting organizational cultures we introduce a laboratory paradigm for studying organizational culture that captures several key elements of the phenomenon in our experiments we allow subjects in firms to develop a culture and then merge two firms as expected performance decreases following the merging of two laboratory firms in addition subjects overestimate the performance of the merged firm and attribute the decrease in performance to members of the other firm rather than to situational difficulties created by conflicting culture

optimal nonparametric estimation of first price auctions this paper proposes a general approach and a computationally convenient estimation procedure for the structural analysis of auctioni data considering first price sealed bid auction models within the independent private value paradigm we show that the underlying distribution of bidders private values is identified from observed bids and the number of actual bidders without any parametric assumptions using the theoiy of minimax we establish the best rate of uniform convergence at which the latent density of private values can be estimated nonparametrically from available data we then propose a two step kernel based estimator that converges at the optimal rate

central bank announcements of asset purchases and the impact on global financial and commodity markets abstract we present evidence on the effects of large scale asset purchases by the federal reserve and the bank of england since 2008 we show that announcements about these purchases led to lower long term interest rates and depreciations of the u s dollar and the british pound on announcement days while commodity prices generally declined despite this more stimulative financial environment we suggest that lsap announcements likely involved signaling effects about future growth that led investors to downgrade their u s growth forecasts lowering long term us yields depreciating the value of the u s dollar and triggering a decline in commodity prices moreover our analysis illustrates the importance of controlling for market expectations when assessing these effects we find that positive u s monetary surprises led to declines in commodity prices even as long term interest rates fell and the u s dollar depreciated in contrast on days of negative u s monetary surprises i e when markets evidently believed that monetary policy was less stimulatory than expected long term yields the value of the dollar and commodity prices all tended to increase

estimating monetary policy rules when nominal interest rates are stuck at zero did the federal reserve s response to economic fundamentals change with the onset of the global financial crisis estimation of a monetary policy rule to answer this question faces a censoring problem since the interest rate target has been set at the zero lower bound since late 2008 surveys by forecasters allow us to sidestep the problem and to use conventional regressions and break tests we find that in the opinion of forecasters the fed s inflation response has decreased and the unemployment response has increased which suggests that the federal reserve s commitment to stable inflation has become weaker in the eyes of the professional forecasters

us monetary policy and international bond markets this paper analyzes how u s monetary policy affects the pricing of dollar denominated sovereign debt we document that yields on dollar denominated sovereign bonds are highly responsive to u s monetary policy surprises during both the conventional and unconventional policy regimes and that the passthrough of unconventional policy to foreign bond yields is on balance comparable to that of conventional policy in addition a conventional u s monetary easing tightening leads to a significant narrowing widening of credit spreads on sovereign bonds issued by countries with a speculative grade credit rating but has no effect on the corresponding weighted average of bilateral exchange rates for a basket of currencies from the same set of risky countries this indicates that an unanticipated tightening of u s monetary policy widens credit spreads on risky sovereign debt directly through the financial channel as opposed to indirectly through the exchange rate channel during the unconventional policy regime yields on both investment and speculative grade sovereign bonds move one to one with policy induced fluctuations in yields on comparable u s treasuries we also examine whether the response of sovereign credit spreads to us monetary policy differs between policy easings and tightenings and find no evidence of such asymmetry

unravelling financial market linkages during crises an empirical model of multiple asset classes across countries is formulated in a latent factor framework a special feature of the model is that financial market linkages during periods of financial crises including spillover and contagion effects are formally specified the model also captures a range of common factors including global shocks country and market shocks and idiosyncratic shocks the framework is applied to modelling linkages between currency and equity markets during the east asian financial crisis of 1997 98 the results provide strong evidence that cross market links are important spillovers have a relatively larger effect on volatility than contagion but both are statistically significant

measuring the effects of federal reserve forward guidance and asset purchases on financial markets i extend the methods of gurkaynak sack and swanson 2005 to separately identify the effects of federal reserve forward guidance and large scale asset purchases lsaps during the 2009 15 u s zero lower bound zlb period i find that both forward guidance and lsaps had substantial and highly statistically significant effects on medium term treasury yields stock prices and exchange rates comparable in magnitude to the effects of the federal funds rate before the zlb forward guidance was more effective than lsaps at moving short term treasury yields while lsaps were more effective than forward guidance and the federal funds rate at moving longer term treasury yields corporate bond yields and interest rate uncertainty however the effects of forward guidance were not very persistent with a half life of 1 4 months the effects of lsaps seem to be more persistent i conclude that overall in terms of these criteria lsaps were a more effective policy tool than forward guidance during the zlb period

expectation and duration at the effective lower bound abstract with risk averse arbitrageurs and an effective lower bound elb on nominal rates nonlinear interactions among short rate expectations bond supply and term premia emerge in equilibrium these interactions which are absent from affine models help explain the observed behavior of the yield curve near the elb including evidence about unconventional monetary policy the impact of both short rate expectations and bond supply are attenuated at the elb however in simulations of the post crisis experience in the u s shocks to investors duration risk exposures have much smaller effects than shocks to the anticipated path of short rates the latter shocks matter in part because of the reduction in interest rate volatility associated with a longer expected stay at the elb a novel channel of unconventional policy

quantitative easing in the united kingdom evidence from financial markets on qe1 and qe2 during the recent financial crisis the bank of england like many other central banks loosened monetary policy using both conventional and unconventional measures the main unconventional measure used by the bank was the policy of asset purchases mainly of government bonds financed by the creation of central bank money so called quantitative easing qe during march 2009 to january 2010 and october 2011 to may 2012 the bank completed asset purchases of 200 billion qe1 and 125 billion qe2 respectively the decision to resume purchases in july 2012 will mean that by november 2012 the bank will have bought a total of 375 billion of assets equivalent to around 25 per cent of annual gdp this article reviews the transmission channels through which asset purchases operate and assesses the impact of qe1 and qe2 on financial markets copyright 2012 oxford university press

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

international money supply and real estate risk premium the case of the london office market abstract the main purpose of this study is to deeply investigate the determinants of the risk premium for the central london market between q2 2002 and q3 2015 using a vector autoregression var model we shed new light on the role of central banks in the historical level of the commercial real estate risk premium indeed since the global financial crisis gfc central banks have used unconventional monetary policies increasing the quantity of money available in the economy and creating structural changes therefore we have described the link between monetary policies and real estate using a theoretical is lm mundell fleming framework for a small open economy with a flexible exchange rate to empirically explore this phenomenon we have constructed a monetary index adapted to the office market we find that throughout the whole period 2002 2015 the vacancy rate the employment in services the ftse 100 the new monetary index and the autoregressive parameter are the main determinants of the historical risk premium however this result hides the complex realities of different sub periods finally we study the structural changes introduced by the monetary policy using a structural var model and impulse response function

monetary policy and market interest rates this thesis contains four chapters each of which examines different aspects of the uncertainty facing monetary policymakers monetary policy and market interest rates investigates how interest rates set on financial markets respond to policy actions taken by the monetary authorities the reaction of market rates is shown to depend crucially on market participants interpretation of the factors underlying the policy move these theoretical predictions find support in an empirical analysis of the u s financial markets predicting monetary policy using federal funds futures prices examines how prices of federal funds futures contracts can be used to predict policy moves by the federal reserve although the futures prices exhibit systematic variation across trading days and calendar months they are shown to be fairly successful in predicting the federal funds rate target that will prevailafter the next meeting of the federal open market committee from 1994 to 1998 monetary policy with uncertain parameters examines the effects of parameter uncertainty on the optimal monetary policy strategy under certain parameter configurations increasing uncertainty is shown to lead to more aggressive policy in contrast to the accepted wisdom should central banks be more aggressive examines why a certain class of monetary policy models leads to more aggressive policy prescriptions than what is observed in reality these counterfactual results are shown to be due to model restrictions rather than central banks being too cautious in their policy behavior an unrestricted model taking the dynamics of the economy and multiplicative parameter uncertainty into account leads to optimal policy prescriptions which are very close to observed federal reserve behavior

shocking language understanding the macroeconomic effects of central bank communication we explore how the multi dimensional aspects of information released by the fomc has effects on both market and real economic variables using tools from computational linguistics we measure the information released by the fomc on the state of economic conditions as well as the guidance the fomc provides about future monetary policy decisions employing these measures within a favar framework we find that shocks to forward guidance are more important than the fomc communication of current economic conditions in terms of their effects on market and real variables nonetheless neither communication has particularly strong effects on real economic variables

identifying vars based on high frequency futures data abstract using the prices of federal funds futures contracts we measure the impact of the surprise component of federal reserve policy decisions on the expected future trajectory of interest rates we show how this information can be used to identify the effects of a monetary policy shock in a standard var this alternative approach to identification is quite different and we argue more plausible than the conventional identifying restrictions we find that a usual recursive identification of the model is rejected as is any identification that insists on a monetary policy shock having an exactly zero effect on prices contemporaneously we nevertheless agree with the conclusion of much of the var literature that only a small fraction of the variance of output can be attributed to monetary policy shocks

increasing competition and the winner s curse evidence from procurement we assess empirically the effects of the winner s curse which in common value auctions counsels more conservative bidding as the number of competitors increases first we construct an econometric model of an auction in which bidders preferences have both common and private value components and propose a new monotone quantile approach which facilitates estimation of this model second we estimate the model using bids from procurement auctions held by the state of new jersey for a large subset of these auctions we find that median procurement costs rise as competition intensifies in this setting then asymmetric information overturns the common economic wisdom that more competition is always desirable

volume volatility and public news announcements we provide new empirical evidence for the way in which financial markets process information our results rely critically on high frequency intraday price and volume data for the s p 500 equity portfolio and u s treasury bonds along with new econometric techniques for making inference on the relationship between trading intensity and spot volatility around public news announcements consistent with the predictions derived from a theoretical model in which investors agree to disagree our estimates for the intraday volume volatility elasticity around important news announcements are systematically below unity our elasticity estimates also decrease significantly with measures of disagreements in beliefs economic uncertainty and textual based sentiment further highlighting the key role played by differences of opinion

cross border spillover effects of unconventional monetary policies on swiss asset prices abstract unconventional monetary policies umps announced by the federal reserve the european central bank the bank of england and the bank of japan exert important spillover effects on asset prices in switzerland using a broad ump event set and a long term bond futures based measure of market anticipation we show that surprisingly expansionary umps lower swiss government and corporate bond yields induce the swiss franc to appreciate and dampen swiss equity prices four extensions provide further insights first the estimated effects are strongest for announcements by the ecb second the impact on government bonds is largest for bonds with residual maturities of 7 10 years third the impact of foreign ump shocks on exchange rates and swiss bond yields is less pronounced after the introduction of the minimum rate of 1 20 swiss franc per euro by the swiss national bank on september 6 2011 indicating that domestic monetary policy action partially affects the impact of external monetary shocks on domestic financial markets fourth the sign of spillover effects differs for positive and negative ump surprises but their strength does not

what does monetary policy do to long term interest rates at the zero lower bound this article uses a structural var with daily data to identify the effects of monetary policy shocks on various longer term interest rates since the federal funds rate has been stuck at the zero lower bound the var is identified using the assumption that monetary policy shocks are heteroskedastic monetary policy shocks have especially high variance on days of fomc meetings and certain speeches while there is otherwise nothing unusual about these days a complementary high frequency event study approach is also used i find that stimulative monetary policy shocks lower treasury and corporate bond yields but the effects die off fairly fast

announcements of ecb unconventional programs implications for the sovereign spreads of stressed euro area countries abstract this paper studies the effects of ecb communications about unconventional monetary policy operations on the sovereign spreads of greece ireland italy portugal and spain relative to germany between 2008 and 2012 more than fifty events concerning non standard operations are identified and classified with respect to the specific ecb program the empirical results suggest that the ecb announcements about unconventional monetary policies substantially reduced long term government bond yield spreads relative to german counterparts in all countries except greece particularly among the different types of measures news about the securities markets programme strongly affected the perceived sovereign risk of the five stressed euro area countries while the announcements of the outright monetary transactions seem to have a significant impact only in italy and spain

the impact of the federal reserve s large scale asset purchase programs on corporate credit risk estimating the effect of federal reserve s announcements of large scale asset purchase lsap programs on corporate credit risk is complicated by the simultaneity of policy decisions and movements in prices of risky financial assets as well as by the fact that both interest rates of assets targeted by the programs and indicators of credit risk reacted to other common shocks during the recent financial crisis this paper employs a heteroskedasticity based approach to estimate the structural coefficient measuring the sensitivity of market based indicators of corporate credit risk to declines in the benchmark market interest rates prompted by the lsap announcements the results indicate that the lsap announcements led to a significant reduction in the cost of insuring against default risk as measured by the cdx indexes for both investment and speculative grade corporate credits while the unconventional policy measures employed by the federal reserve to stimulate the economy have substantially lowered the overall level of credit risk in the economy the lsap announcements appear to have had no measurable effect on credit risk in the financial intermediary sector

some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

the winner s curse experiments with buyers and with sellers this paper explores the winner s curse phenomena as it was studied experimentally by kagel and levin experiments with the winner s curse are complicated by the fact that subjects can lose money and the experimenter has only a limited means of collecting it from them thus subjects enjoy only limited liability which has theoretical implications for behavior in the kagel and levin experiments subjects were removed from the bidders competition after losses reached a predetermined value this experimental procedure has unknown implications for the results so ambiguity exists about whether the winner s curse was actually observed in this study their results were replicated in an environment in which subjects were not removed the case in which competitors are sellers is also studied bankruptcy cannot be a problem in sellers competition in both cases the winner s curse is observed thus the limited liability cannot be an explanation for the phenomenon reported by kagel and levin in addition the paper examines the bidding behavior of all individuals and shows that this behavior does not fit any of the tested theories either on the aggregate or individual level the winner s curse did not disappear over time during the conduct of the research

the fed and the stock market an identification based on intraday futures data this article develops a new identification procedure to estimate the contemporaneous relation between monetary policy and the stock market within a vector autoregression var framework the approach combines high frequency data from the futures market with the var methodology to circumvent exclusion restrictions and achieve identification our analysis casts doubt on var models imposing a recursive structure between innovations in policy rates and stock returns we find that a tightening in policy rates has a negative impact on stock prices and that the federal reserve fed has responded significantly to movements in the stock market estimates are robust to various model specifications

ecb monetary policy surprises identification through cojumps in interest rates this paper proposes a new econometric approach to disentangle two distinct response patterns of the yield curve to monetary policy announcements based on cojumps in intraday tick data of a short and long term interest rate we develop a day wise test that detects the occurrence of a significant policy surprise and identifies the market perceived source of the surprise the new test is applied to 133 policy announcements of the european central bank ecb in the period from 2001 2012 our main findings indicate a good predictability of ecb policy decisions and remarkably stable perceptions about the ecb s policy preferences

life after takeover economic consequences of takeovers are investigated by analyzing profitability of enterprises acquired a s a direct or indirect white knight consequence of tender offer s target companies pre tender profitability averaged 0 97 percentag e points below peer industry norms nine years after takeover acquir ed lines of business had operating income assets percentages 3 10 poi nts below those of non tender lines with similar industry bases mark et shares and merger accounting methods most of the targets postta keover profit decline stemmed from asset value writeups there is no indication that on average the acquirers raised their targets operat ing profitability net of merger related accounting adjustments copyright 1987 by blackwell publishing ltd

credit auctions and bid caps abstract in this paper we offer two contributions to the field of credit auctions first we compare first and second price credit auctions and provide solvency dependent conditions such that one mechanism dominates the other in terms of expected payoffs of all the parties involved in addition we present a new possibility of using bid caps in credit auctions we study the equilibria in the capped mechanisms and show that bid caps can increase the seller s expected payoff and in some cases the expected payoffs of all sides a win win situation

measuring euro area monetary policy abstract we map ecb policy communication into yield curve changes and study the information flow on policy dates a byproduct is the publicly available euro area monetary policy event study database ea mpd containing intraday asset price changes we find that policy target forward guidance and quantitative easing factors capture about all the variation in the yield curve with different factors appearing in the windows covering the policy decision announcement and the press conference and having time varying variance shares we study sovereign yields exchange rates stock prices persistence of effects and response asymmetry our methodology can be implemented for any policy related event

the effects of conventional and unconventional monetary policy on exchange rates abstract what are the effects of monetary policy on exchange rates and have unconventional monetary policies changed the way monetary policy is transmitted to international financial markets according to conventional wisdom expansionary monetary policy shocks in a country lead to that country s currency depreciation we revisit the conventional wisdom during both conventional and unconventional monetary policy periods in the us by using a novel identification procedure that defines monetary policy shocks as changes in the whole yield curve due to unanticipated monetary policy moves and allows monetary policy shocks to differ depending on how they affect agents expectations about the future path of interest rates as well as their perceived effects on the riskiness uncertainty in the economy our empirical results show that i a monetary policy easing leads to a depreciation of the country s spot nominal exchange rate in both conventional and unconventional periods ii however there is substantial heterogeneity in monetary policy shocks over time and their effects depend on the way they affect agents expectations iii we find favorable evidence to dornbusch s 1976 overshooting hypothesis iv changes in expected real interest rates play an important role in the transmission of monetary policy shocks

quantitative easing auctions of treasury bonds abstract the federal reserve uses reverse auctions to implement its purchases of treasury bonds in quantitative easing qe to evaluate dealers offers across multiple bonds the fed relies on its internal yield curve model fitted to secondary market bond prices from november 2010 to september 2011 a one standard deviation increase in the cheapness of a treasury bond how much the market price of the bond is below a model implied value increases the fed s purchase quantity of that bond by 276 million and increases the auction costs on that bond by 2 6 cents per 100 par value controlling for standard covariates our results suggest that the fed harvests gains from trades by purchasing undervalued bonds but strategic dealers extract some profits because the fed s relative values can be partly inferred from price data

the cms auction experimental studies of a median bid procurement auction with nonbinding bids we report on the experimental results of simple auctions with i a median bid pricing rule and ii non binding bids winning bids can be withdrawn the two central pillars of the competitive bidding program designed by the centers for medicare medicaid services cms comparisons between the performance of the cms auction and the performance of the excluded bid auction reveal the problematic nature of the cms auction the cms auction fails to generate competitive prices of goods and fails to satisfy demand in all proposed efficiency measures we find the excluded bid auction significantly outperforms the cms auction

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

international monetary policy surprise spillovers abstract this is the first paper to examine international monetary surprise spillovers and to estimate the response of security prices to monetary and nonmonetary surprises monetary surprises have a slope effect on the domestic yield curve short maturity yields adjust much more than longer maturity yields these results are similar to other studies the following results are new us monetary surprises spill over and affect australian yields and equity returns australian monetary surprises do not spill over to the us nonmonetary surprises are much more important than monetary policy surprises in explaining longer maturity yield changes and equity returns

measuring the reaction of monetary policy to the stock market movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy however little is known about the magnitude of the federal reserve s reaction to the stock market in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate this paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market we find a significant policy response with a 5 percent rise fall in the s p 500 index increasing the likelihood of a 25 basis point tightening easing by about a half

macro finance linkages in this survey i review the academic and policy oriented literature on the linkages between financial markets and the rest of the economy first i summarize the leading economic theories for why the financial sector can influence the macroeconomy second i consider empirical research on spillovers from the financial sector to the rest of the economy as well as across financial markets in different countries third i discuss key monetary policy debates regarding the appropriate response of central banks to financial conditions finally i conclude with an overview of the major gaps in the existing literature

the effectiveness of non standard monetary policy measures evidence from survey data we assess the perception of professional forecasters regarding the effectiveness of unconventionalmonetary policy measures undertaken by the u s federal reserve after the collapse of lehmanbrothers using individual survey data we analyse the changes in forecasting of bond yields aroundthe announcement and implementation dates of non standard monetary policies the resultsindicate that bond yields are expected to drop significantly for at least one year after theannouncement and the implementation of accommodative policies

code creation in endogenous merger experiments we study the conflict that can occur in a merger due to firms use of specialized language or code and whether participants accurately forecast this difficulty after creating a shared code to describe different pictures accurately subjects bid for extra payments to join a merged group the two lowest bidders are placed in the merged group values inferred from two different bidding procedures indicate fairly accurate general appraisals of the cost of the merger but the values of those subjects who bid the least and choose to join the merged group are too optimistic reflecting an organizational winner s curse

monetary policy announcements and market interest rates response evidence from china abstract this paper examines the daily responses of market interest rates to three monetary policy announcements in china using the event study approach i find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve by contrast market interest rates barely respond to the qualitative mpc announcements about the monetary policy stance these findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption these findings suggest that the pbc should formulate its policy communication in a quantitative way

monetary policy uncertainty and economic fluctuations uncertainty associated with the monetary policy transmission mechanism is a key driving force of business cycles to investigate this link we propose a new term structure model that allows the volatility of the yield curve to interact with macroeconomic indicators the data favors a model with two volatility factors that capture shortterm and long term monetary policy uncertainty increases in either of them lead higher unemployment rates but they interact with ination in opposite directions

on the international spillovers of us quantitative easing this article analyses the effects of the federal reserve s quantitative easing qe on global portfolio flows differentiating across recipient region of the flows type of flow and qe rounds furthermore the analysis differentiates between the impact of qe expansionary announcements and the actual market operations the analysis shows that qe1 resulted in slight rebalancing towards the us while qe2 and qe3 resulted in rebalancing towards non us assets this suggests that qe increased the pro cyclicality of flows outside the us in particular into emerging market equities the results also suggest a link between us macro financial conditions and the transmission of qe to portfolio flows

the effects of the ecb s expanded asset purchase programme abstract this paper provides empirical evidence on the financial and macroeconomic impact of the news associated to the announcement launching the ecb s expanded asset purchase programme app we proxy the app announcement shock with an announcement variable derived from the institutional features of the app and survey based evidence the variable is used in a time varying coefficient var model with stochastic volatility to estimate the effects of the announcement shock the evidence suggests that this shock had a significant upward effect on both real economic activity and hicp inflation in the euro area the response of long term interest rates gave rise to a flattening of the yield curve in the short term followed by a steepening in the medium term several channels of transmission appear to have been activated including the portfolio rebalancing channel the exchange rate channel and the credit channel

what is the effect of unconventional monetary policy on bank performance this paper examines the relationship between unconventional monetary policy and the us banking performance unconventional monetary policy is captured through the central bank s assets and excess reserves results show that unconventional monetary policy has a negative relationship with bank performance further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding we also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions finally we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value

quantitative easing in the 1930s during the 1934 39 recovery from the u s great depression overnight interest rates were usually at a lower bound meanwhile american monetary authorities followed policies related to today s debates on quantitative easing they tried to stabilize yields on treasury bonds with open market operations they created rapid growth in high powered money and they allowed transitory factors to affect high powered money effects of these policies on bond yields reveal a portfolio effect of short duration asset supply on term premiums this portfolio effect helps explain why high powered money growth was associated with recovery of real activity over 1934 39

stock market reaction to fed funds rate surprises state dependence and the financial crisis this paper examines the response of us stock returns to federal funds rate ffr surprises between 1989 and 2012 focusing on the impact of the recent financial crisis we find that outside the crisis period stock prices increased as a response to unexpected ffr cuts state dependence is identified with stocks exhibiting larger increases when interest rate easing coincided with recessions bear markets and tightening credit conditions however an important structural shift occurred during the crisis changing the stocks response to ffr shocks and the nature of state dependence throughout the crisis period stocks did not react positively to unexpected ffr cuts which were interpreted as signals of worsening future economic conditions this triggered a rebalancing of investment portfolios away from falling equities and towards safe haven assets our results highlight the severity of the crisis and the ineffectiveness of conventional monetary policy close to the zero lower bound

analyzing federal reserve asset purchases from whom does the fed buy abstract asset purchases have become an important monetary policy tool of the federal reserve in recent years to date most studies of the federal reserve s asset purchases have tried to measure the interest rate effects of the purchases and several provide evidence that these purchases do have important effects on longer term market interest rates the theory of how asset purchases work however is less well developed some of the empirical studies point to preferred habitat models in which investors do not have the same objectives and therefore prefer to hold different types and maturities of securities to study this more closely we exploit flow of funds data to assess the types of investors that are selling to the federal reserve and their portfolio adjustment after these sales which could provide a view to the plausibility of preferred habitat models and the transmission of unconventional monetary policy across asset markets we find that the federal reserve is ultimately buying from only a handful of investor types primarily households which includes hedge funds with a different reaction to changes in federal reserve holdings of longer term versus shorter term assets although not evident for all investors the key participants are shown to rebalance their portfolios toward more risky assets during this period these results can be interpreted as supporting at least in part the preferred habit theory and the view that the monetary policy transmission is working across asset markets

monetary policy expectations at the zero lower bound we show that conventional dynamic term structure models dtsms estimated on recent u s data severely violate the zero lower bound zlb on nominal interest rates and deliver poor forecasts of future short rates in contrast shadow rate dtsms account for the zlb by construction capture the resulting distributional asymmetry of future short rates and achieve good forecast performance these models provide more accurate estimates of the most likely path for future monetary policy including the timing of policy liftoff from the zlb and the pace of subsequent policy tightening we also demonstrate the benefits of including macroeconomic factors in a shadow rate dtsm when yields are constrained near the zlb

publicity requirements in public procurement evidence from a regression discontinuity design abstract we document whether and how publicizing a public procurement auction causally affects entry and the costs of procurement we run a regression discontinuity design analysis on a large database of italian procurement auctions auctions with a value above the threshold must be publicized in the regional official gazette and two provincial newspapers we find that the increased publicity requirement induces more entry and higher winning rebates which reduces the costs of procurement and rationalizes public spending the evidence suggests that the number of bidders is the channel through which publicity affects rebates increased publicity also selects different winners it increases the likelihood that the winner hails from outside the region of the public administration and that the winner is a large company such companies tend to win repeated auctions gaining market share publicity seems to have no adverse effect on the ex post renegotiations of the works as measured by the percent of works delivered with delay or that are subcontracted estimates are robust to alternative measures of publicity alternative model specifications different sample selections to a falsification analysis at simulated thresholds and to the possibility that firms learn about auctions from a web based for profit information provider

when did the fomc begin targeting the federal funds rate what the verbatim transcripts tell us in october 1982 the fomc deemphasized m1 and moved to what is commonly referred to as a borrowed reserves operating procedure sometime thereafter the fomc switched to a funds rate targeting procedure but never formally announced the change given the close correspondence between a borrowed reserves operating procedure and a funds rate targeting procedure thornton 1988 suggested that the fomc went immediately to a funds rate targeting procedure others date the switch to the funds rate procedure later meulendyke 1998 suggests the switch came in late 1987 while others suggest the change occurred later this paper reviews the verbatim transcripts of the fomc meetings to establish the timing of the switch the verbatim transcripts suggest that the fomc effectively switched to a funds rate targeting procedure in 1982 the documentary evidence is supported by an analysis of the spread between the funds rate and the funds rate target which suggests that the differences in the behavior of the spread before october 1979 and after october 1982 are relatively small and economically unimportant

an investigation of the average bid mechanism for procurement auctions in a procurement context it can be quite costly for a buyer when the winning seller underestimates the cost of a project and then defaults on the project midway through completion the average bid auction is one mechanism intended to help address this problem this format involves awarding the contract to the bidder who has bid closest to the average of the bids submitted we compare the performance of this mechanism with the standard low price mechanism to determine how successful the average bid format is in preventing bidder losses as well as its impact on the price paid by the buyer we find the average bid mechanism to be more successful than expected because surprisingly bidding behavior remains similar between the average bid and low price auctions we provide an explanation for the bidding behavior in the average bid auction that is based on subjects having problems processing signals near the extremes of the distribution this paper was accepted by teck hua ho behavioral economics

assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives this study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the united states using two structural vector autoregressive var models and a counterfactual scenario analysis the results show that monetary policy shocks as identified by changes in treasury yields following changes in the central bank s target interest rates lead to a substantial increase in pension funds allocation to equity assets notably the shift from bonds to equity securities is greater during the period where the us federal reserve launched unconventional monetary policy measures additional findings show a positive correlation between pension fund risk taking low interest rates and the decline in treasury yields across both well funded and underfunded public pension plans which is thus consistent with a structural risk shifting incentive

unconventional monetary policy and bank risk taking abstract we analyze the presence of bank risk taking associated with unconventional monetary policy in the united states between 2008 and 2015 using corporate syndicated loan data at the bank firm level we measure monetary policy using the identification through heteroskedasticity approach with a var model to identify the risk taking channel we control for time varying heterogeneity in credit demand and supply our results indicate that accommodating monetary conditions are associated with overall lower loan spreads however the spread reduction is lower for riskier firms suggesting that there is no risk taking behavior in the syndicated loan market during the ump period

reactions of real yields and inflation expectations to forward guidance in the united states we study the impact of forward policy rate guidance by the federal reserve s federal open market committee fomc used as an unconventional monetary policy tool at the zero lower bound of the policy rate on real and breakeven us treasury yield curves we find that explicit fomc policy rate guidance announcements led to a significant reduction in real yields at horizons of 2 to 5 years ahead by contrast long term breakeven inflation rates were little affected suggesting that inflation expectations have remained well anchored and that explicit fomc policy rate guidance has not adversely affected central bank credibility

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields

the economics of options implied inflation probability density functions recently a market in options based on cpi in ation in ation caps and oors has emerged in the us this paper uses quotes on these derivatives to construct probability densities for in ation we study how these pdfs respond to news announcements and nd that the implied odds of de ation are sensitive to certain macroeconomic news releases we compare the option implied probability densities with those obtained by time series methods and use this information to construct empirical pricing kernels the options implied densities assign considerably more mass to extreme in ation outcomes either de ation or high in ation than do their time series counterparts this yields a u shaped empirical pricing kernel with investors having high marginal utility in states of the world characterized by either de ation or high in ation

auctions versus negotiations which is the more profitable way to sell a company an auction with no reserve price or an optimally structured negotiation with one less bidder we show under reasonable assumptions that the auction is always preferable when bidders signals are independent for affiliated signals the result holds under certain restrictions on the seller s choice of negotiating mechanism the result suggests that the value of negotiating skill is small relative to the value of additional competition the paper also shows how the analogies between monopoly theory and auction theory can help derive new results in auction theory jel d44 g34 there are close analogies between standard price theory and the theory of auctions in an absolute english auction in which the price rises continuously until only one bidder remains and the seller is required to accept the final bid the sale price equals the lowest competitive price at which supply equals demand in the theory of optimal auctions the seller is treated as a monopolist who can choose any

the effectiveness of the fed s quantitative easing policy new evidence based on international interest rate differentials abstract this paper explores the effects of non standard monetary policies on international yield relationships we first document that long term rates followed a common global downward trend that had already manifested itself prior to the financial crisis the bond buying operations commonly dubbed quantitative easing qe of the us federal reserve did not disturb this global co movement i e the global downward trend in interest rates we model the relationship between usd and euro riskless long term interest rates using a cointegrated vector autoregressive model cvar employing recursive estimation methods we find no evidence that qe1 or the qe episodes destabilized the transatlantic interest rate relationship nor the relationship between interest rates and the us dollar exchange rate a robustness test using a vector autoregressive model var with interest rates inflation rates and output differentials for 11 countries relative to us yielded the same result there is thus little evidence that central bank bond buying in the us had an independent distinct impact on us interest rates

high bids and broke winners abstract this paper analyzes auctions where budget constrained bidders have options to declare bankruptcy it predicts a bidding equilibrium that changes discontinuously in a borrowing rate available to bidders when the borrowing rate is above a threshold high budget bidders win and the likelihood of bankruptcy is low when the borrowing rate is below the threshold the winner is the most budget constrained bidder and is most likely to declare bankruptcy this result explains the high bids and broke winners anomaly in the c block fcc spectrum auction based on its equilibrium analysis the paper proves that a seller can profit from offering to finance the highest bidder at a below market interest rate even with default risk journal of economic literature classification numbers d44 d45 d82 g33 l96

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation