the expected inflation channel of government spending in the postwar u s abstract there exist sticky price models in which the output response to a government spending change can be large if the central bank is nonresponsive to inflation according to this expected inflation channel government spending drives up expected inflation which in turn reduces the real interest rate and leads to an increase in private consumption this paper examines whether the channel was important in the post wwii u s with particular attention to the 2009 recovery act period first we show that a model calibrated to have a large output multiplier requires a large response of expected inflation to a government spending shock next we show that this large response is inconsistent with structural vector autoregression evidence from the federal reserve s passive policy period 1959 1979 then we study expected inflation measures during the recovery act period in conjunction with a panel of professional forecaster surveys a cross country comparison of bond yields and fiscal policy news announcements we show that the expected inflation response was too small to engender a large output multiplier

union effects on municipal employment and wages a longitudinal approach this article examines municipal union employment and wage effects in a sample of police fire sanitation streets and highways and finance and control departments from approximately 900 u s cities during 1977 80 cross section results for 1980 suggest positive union contract effects on fire fighter and sanitation employment and wages consistent with demand shifts due to union political influence in municipal bargaining i then model potential omitted variables as nonstationary fixed effects and apply longitudinal models to estimation of employment and wage changes between 1977 and 1980 the longitudinal results provide little support for the demand shift hypothesis

the 2009 recovery act stimulus at the extensive and intensive labor margins abstract this paper studies the effect of government stimulus spending on a novel aspect of the labor market the differential impact of spending on the total wage bill versus employment we analyze the 2009 recovery act via instrumental variables using a new instrument the spending done by federal agencies that were not instructed to target funds towards harder hit regions we find a moderate positive effect on jobs created saved i e the extensive margin and also a significant increase in wage payments to workers whose job status was safe without recovery act funds i e the intensive margin our point estimates imply that roughly one half of the wage payments resulting from the act were paid at the intensive margin to provide a theoretical underpinning for the estimates we build a micro founded dynamic model in which a firm meets new government demand with a combination of new hiring and increasing existing workers average hours faced with hiring costs and an overtime premium the firm responds by increasing hours along both margins our model analysis also provides insight into how government spending policy should be structured to lower the cost of generating new jobs finally we catalogue survey evidence from recovery act fund recipients that reinforces the importance of the intensive labor margin

inflation targeting in brazil constructing credibility under exchange rate volatility abstract this paper assesses the challenges faced by the inflation targeting regime in brazil the inflation targeting framework has played a critical role in macroeconomic stabilization we stress two important challenges construction of credibility and exchange rate volatility the estimations indicate the following results i the inflation targets have worked as an important coordinator of expectations ii the central bank has reacted strongly to inflation expectations iii there has been a reduction in the degree of inflation persistence and iv the exchange rate pass through for administered or monitored prices is two times higher than for market prices

the effects of collective bargaining rights on public employee compensation evidence from teachers firefighters and police widespread public sector unionism emerged only in the 1960s as individual states opened the door to collective bargaining for state and municipal workers in this study the author exploits differences in timing of legislative reforms across states to construct estimates of the causal effects of public sector collective bargaining rights on pay benefits and employment for teachers firefighters and police perhaps surprisingly estimates that allow for state fixed effects and state specific trends show little effect on teachers pay benefits or employment despite significantly increasing union presence among teachers for firefighters the results show a substantial positive effect on wages for police the wage effect was more modest but the workweek was significantly shortened

survey forecasts in brazil a prismatic assessment of epidemiology performance and determinants abstract this paper assesses the behavior of survey forecasts in brazil during the inflation targeting regime when managing expectations is one of the cornerstones of the conduct of monetary policy the distinctive database of the survey conducted by the central bank of brazil bcb among professional forecasters allows for a thorough investigation of the epidemiology determinants and performance of forecasts the main results are i top performing forecasters are influential to other forecasters ii survey forecasts perform better than vector autoregressive model based forecasts iii common forecast errors prevail over idiosyncratic components across respondents iv inflation targets play an important role in inflation expectations and v agents perceive the bcb as following a taylor rule consistent with inflation targeting the last two suggest high credibility of the monetary authority

how successful was the new deal the microeconomic impact of new deal spending and lending policies in the 1930s the new deal during the 1930s was arguably the largest peace time expansion in federal government activity in american history until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of new deal programs over the past decade scholars have developed new panel databases for counties cities and states and then used panel data methods on them to examine the impact of new deal spending and lending policies for the major new deal programs in most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy many of the studies also use instrumental variable methods to control for endogeneity the studies find that public works and relief spending had state income multipliers of around one increased consumption activity attracted internal migration reduced crime rates and lowered several types of mortality the farm programs typically aided large farm owners but eliminated opportunities for share croppers tenants and farm workers the home owners loan corporation s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers the reconstruction finance corporation s loans to banks and railroads appear to have had little positive impact although the banks were aided when the rfc took ownership stakes

endogenous federal grants and crowd out of state government spending theory and evidence from the federal highway aid program contrary to simple theoretical predictions existing evidence suggests that federal grants do not crowd out state government spending a legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods this correlation has likely biased existing work against measuring crowd out to correct for such endogeneity the model motivates instruments based on the political power of state congressional delegations exploiting this exogenous variation in grants the instrumental variables estimator reports crowd out that is statistically and economically significant this endogeneity may explain the flypaper effect a nonequivalence between grant receipts and private income jel d70 h40 h77

cyclical effects of government s employment and goods purchases distinguishing between the goods purchase and employee compensation components of government spending is important shocks to government goods purchases and shocks to government employment have the opposite effects on private output private employment and private investment moreover with this distinction in place quantitative analysis reveals that government spending is no longer a significant driving source of the u s business cycle on the contrary the components of government spending are procyclical in the u s data primarily because of their positive responses to the output fluctuations generated by technology shocks copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

how teachers unions affect education production this study helps to explain why measured school inputs appear to have little effect on student outcomes particularly for cohorts educated since 1960 teachers unionization can explain how public schools simultaneously can have more generous inputs and worse student performance using panel data on united states school districts i identify the effect of teachers unionization through differences in the timing of collective bargaining especially timing determined by the passage of state laws that facilitate teachers unionization i find that teachers unions increase school inputs but reduce productivity sufficiently to have a negative overall effect on student performance union effects are magnified where schools have market power

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

the flypaper effect what happens to a state s spending when it receives an unconditional grant from the federal government the standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes or roughly 5 10 percent for most states in contrast numerous empirical analyses have found that spending increases by much more with some estimates near 100 percent this result is known as the flypaper effect since the money appears to stick where it hits the authors review this evidence as well as other studies that find similar behavior in firms

market efficiency of brazilian exchange rate evidence from variance ratio statistics and technical trading rules abstract this study utilizes the variance ratio test to examine the behavior of brazilian exchange rate we show that adjustments for multiple tests and a bootstrap methodology must be employed in order to avoid size distortions we propose a block bootstrap scheme and show that it has much nicer properties than the traditional chow denning chow k v denning k c 1993 a simple multiple variance ratio test journal of econometrics 58 3 385 401 multiple variance ratio tests overall the method proposed in the paper provides evidence refuting the random walk behavior for the brazilian exchange rate for long investment horizon but consistent with the random walk hypothesis for short run horizon additionally we also test for the predictive power of variable moving average vma and trading range break trb technical rules and find evidence of forecasting ability for these rules nonetheless the excess return that can be obtained from such rules is not significant suggesting that such predictability is not economically significant

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

anchoring inflation expectations in the face of oil shocks in the proximity of zlb a tale of two targeters this paper applies a n ardl framework to two longstanding inflation targeting policy regimes in order to assess the relation between oil prices dynamics and inflation expectations and the further consequences created by a proximal zlb situation the application is based on data from january 1994 to june 2018 for new zealand and the uk we focus on oil price shocks as a variable of interest and this was found to have an asymmetric effect on inflation expectations one further key finding is that the real effective exchange rate has significant impacts on inflation expectations and this is indicative of an exchange rate pass through to inflation via an inflation expectations channel in general we find that inflation exchange rate money supply output growth unemployment and fiscal deficit surplus have significant implications for inflation expectations inflation expectations are also influenced by their past behaviour indicating adaptive inflation expectations this study contributes to the debate on the inflation targeting at zlb

balance of payments crises under inflation targeting abstract this paper analyzes a small open economy model under inflation targeting it shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously the speed at which the regime collapses and the extent of reserve losses are increasing in the central bank s explicit or implicit commitment to intervene in the foreign exchange market attacks are therefore ranked from most to least severe as follows exchange rate targeting cpi inflation targeting domestic nontradables inflation targeting and money targeting under inflation targeting the size of the attack is increasing in the tradables consumption share

pay reference points and police performance several theories suggest that pay raises below a reference point will reduce job performance final offer arbitration for police unions provides a unique opportunity to examine these theories as the police officers either receive their requested wage or receive a lower one in the months after new jersey police officers lose in arbitration arrest rates and average sentence length decline and crime reports rise relative to when they win these declines in performance are larger when the awarded wage is further from the police union s demand the findings support the idea that considerations of fairness disappointment and more generally reference points affect workplace behavior

did the 2008 tax rebates stimulate spending in an effort to bolster economic performance in light of a looming downturn in economic activity on february 13 2008 president george w bush signed the economic stimulus act of 2008 more than two thirds of the 152 billion bill consisted of economic stimulus payments to be sent beginning in may to approximately 130 million households to qualify recipients had to have a valid social security number an income tax liability or at least 3 000 of qualifying income that included earned income and some benefits from social security veterans affairs or railroad retirement and have filed a 2007 federal tax return for the most part those who filed as single individuals received between 300 and 600 while those who filed jointly received between 600 and 1 200 additionally parents with children under 17 who were eligible for a child tax credit and had a social security number received an extra 300 per child the tax rebate phased out at higher levels of income as the payment was reduced by 5 percent of the amount of adjusted gross income over 75 000 for singles or over 150 000 for married couples the treasury remitted payments either by direct deposit mainly in the first half of may or by mail mainly from mid may through mid july the effect of these stimulus payments depends on how much was spent this paper reports new survey evidence on the propensity of consumers to spend the 2008 rebate it also relates the survey evidence to aggregate data and to evidence about spending from the 2001 tax rebate

who pays for public employee health costs abstract we analyze the incidence of public employee health benefits because these benefits are negotiated through the political process relevant labor market institutions deviate significantly from the competitive private sector benchmark empirically we find that roughly 15 percent of the cost of recent benefit growth was passed onto school district employees through reductions in wages and salaries strong teachers unions were associated with relatively strong linkages between benefit growth and growth in total compensation our analysis is consistent with the view that the costs of public workers benefits are difficult to monitor contributing to benefit oriented and often under funded compensation schemes

stimulating the macro economy through state and local governments the economic stimulus program of early 1977 featured a strong dose of what might be termed indirect countercyclical policy rather than altering federal expenditures and taxes directly the stimulus program consisted mainly of three different grant programs for state and local governments a countercyclical revenue sharing crs b public service employment pse c local public works lpw in the parlance of the public finance literature the first of these grants was an unconditional block grant the second was a close ended categorical grant with no local matching for the purpose of stimulating local government employment and the third was a close ended categorical grant with no local matching for the purpose of stimulating local government construction stimulating or attempting to stimulate aggregate spending through state and local governments in this way is fiscal federalism with a vengeance the federal government is not abdicating its stabilization responsibilities and leaving it up to states and localities to do the job but it is placing its own stabilization policy at the mercy of the behavior of state and local governments there are no restrictions at all on the use of the crs grantsthey can be spent used for tax reduction or used to rebuild financial net worth asset stocks less outstanding debt with only the first two uses having any stimulative effect at all there are restrictions on what can be done with the other two grants but the well known displacement phenomenon implies that with these grants it also may be possible for states and localities to frustrate the restrictions and use the grants as they would any other source of revenue sharing what happens to all three grants then is an empirical issue and the timing and magnitude of any stabilization impact depends on how the numbers come out in this paper i briefly describe a model for estimating this stabilization impact and show what it suggests for the three grants only the pse grant will be seen to have any positive short run impact on aggregate spending at all and that impact will prove to be both diluted and short lived indicating that the general idea of stimulating the economy through state and local governments is probably not a very good one plain old permanent federal income tax cuts retain their superiority as a fiscal stabilization device but even though as stimulation devices the three grant programs leave much to be desired as policies they may still be valuable and the paper also suggests how one might do a more complete evaluation of each of the grant programs

flexible inflation targets forex interventions and exchange rate volatility in emerging countries abstract emerging economies with inflation targets it face a dilemma between fulfilling the theoretical conditions of strict it which imply a fully flexible exchange rate or applying a flexible it which entails a de facto managed floating exchange rate with foreign exchange forex interventions to moderate exchange rate volatility using a panel data model for 37 countries we find that although it lead to higher exchange rate instability than alternative regimes forex interventions in some it countries have been more effective to lower volatility than in non it countries which may justify the use of flexible it by policymakers

monetary policy and inflation expectations in latin america long run effects and volatility spillovers this paper uses multiple cointegration analysis to estimate simultaneously a monetary reaction function and the determinants of expected inflation for brazil chile colombia and mexico in addition m garch modeling is used to test for the presence of volatility spillovers between the monetary stance and inflation expectations the analysis shows that there are long term relationships between the interest rate expected inflation and the inflation target and that greater volatility in the monetary stance increases the volatility of expected inflation in brazil colombia and mexico

public sector unions and public spending this study examines the influence of public sector unions on the expansion of the public sector based on public goods theory our paper models how unions influence the supply of and demand for public sector activities on the demand side public sector unions are special interests which advocate public sector expansion to policy makers on the supply side they exert pressure to maintain and expand monopoly powers empirical evidence supports the hypothesis that a positive relationship exists between public sector unionism and public spending

horatio alger meets the mobility tables the question of how entrepreneurship relates to income mobility is cogent given the current public debate about the sources of income inequality and mobility in united states society we examine how experience with entrepreneurship has affected an individual s place in the earnings distribution our basic tack is to follow individuals positions in the income distribution over time and to see how their mobility or lack thereof was affected by involvement with entrepreneurship our main finding is that for low income individuals there is some merit to the notion that the self employed moved ahead in the earnings distribution relative to those who remained wage earners on the other hand for those at the upper end of the earnings distribution those who became self employed often advanced less in the earnings distribution than their salaried counterparts

robust monetary policy structural breaks and nonlinearities in the reaction function of the central bank of brazil abstract in this work we seek to investigate the existence of nonlinearities in the reaction function of the central bank of brazil arising from this policymaker s uncertainties about the effects of the output gap on inflation theoretically we follow tillmann 2011 to obtain a nonlinear optimal monetary policy rule that is robust to uncertainty about the output inflation trade off of the phillips curve in addition we perform structural break tests to assess possible changes in the conduct of the brazilian monetary policy during the inflation targeting regime the results indicate that i the uncertainties about the slope in the phillips curve implied nonlinearities in the central bank of brazil s reaction function ii we cannot reject the hypothesis of a structural break in the monetary rule parameters occurring in the third quarter of 2003 iii there was an increase in the response of the selic rate to output gap and a weaker response to the current inflation gap in meirelles tombini s administration and iv the central bank of brazil has also reacted to the exchange rate in meirelles tombini s administration

what drives inflation expectations in brazil an empirical analysis this study examines the macro economic determinants of survey inflation expectations in brazil since the adoption of inflation targeting in 1999 the results suggest that the inflation targeting framework has helped anchor expectations with the dispersion of inflation expectations declining considerably particularly during periods of high uncertainty we also find that apart from the inflation target the stance of fiscal policy as proxied by the ratio of the consolidated primary surplus to gdp has been instrumental in shaping expectations the importance of past inflation in determining expectations appears to be relatively low and the overall empirical evidence does not suggest the presence of substantial inertia in the inflation process

special interest groups and the allocation of public funds i propose a fully rational model of government contracting that explains differences in local government spending from grants and other income in this model violations of fungibility arise from dynamic interactions between politicians and interest groups with the ability to raise funds for the local government the predictions of the model are tested by exploiting unique features of windfalls received by states under a settlement with the tobacco industry although windfalls are legally unrestricted the median state increased spending on tobacco control programs from zero to 2 30 per capita upon receipt of funds the marginal propensity to spend on such programs is 0 20 from settlement revenue and zero from overall income states which were not involved in the settlement lawsuits spend less these results cannot be explained by existing models in the literature

self employment and labor force participation of older males this longitudinal analysis of the labor market behavior of older urban white males in 1969 1971 and 1973 focuses on changes from wage and salary to self employment and changes from working to nonworking status in each two year transition approximately 4 percent of wage and salary workers switched to self employment controlling for a large number of economic and demographic variables the self employed were significantly more likely to continue to work partly by reducing their workweek to under 35 hours other significant predictors of continuing to work are good health years of schooling white collar occupation no expectation of a private pension and a workweek longer than 50 hours age is also important especially at the eligibility ages set by social security

activist fiscal policy during and after the great recession that began in december 2007 the u s federal government enacted several rounds of activist fiscal policy in this paper we review the recent evolution of thinking and evidence regarding the effectiveness of activist fiscal policy although fiscal interventions aimed at stimulating and stabilizing the economy have returned to common use their efficacy remains controversial we review the debate about the traditional types of fiscal policy interventions such as broad based tax cuts and spending increases as well as more targeted policies while there have been improvements in estimates of the effects of broad based policies much of what has been learned recently concerns how such multipliers might vary with respect to economic conditions such as the credit market disruptions and very low interest rates that were central features of the great recession the eclectic and innovative interventions by the federal reserve and other central banks during this period highlight the imprecise divisions between monetary and fiscal policy and the many channels through which fiscal policies can be implemented

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

nonlinear monetary policy reaction functions in large emerging economies the case of brazil and china this article estimates monetary policy rules for two key emerging market economies brazil and china it analyses whether the monetary authority reacts to changes in economic activity financial markets monetary conditions the foreign exchange market and the commodity price we assess the importance of nonlinearity using a smooth transition regression str model using quarterly data over the time period 1990 1 to 2008 4 we find that considerations about the output gap and the real effective exchange rate in the case of brazil and the inflation rate for china explain the nonlinear adjustment of the central bank rate moreover the results suggest that central banks pursue a target range for the threshold variable rather than a specific point target in the case of china the mccallum rule shows that the gdp growth the interest rate and the commodity price drive the response of the growth rate of the relevant monetary aggregate

a cup runneth over fiscal policy spillovers from the 2009 recovery act this article studies the effects of interregional spillovers from the american recovery and reinvestment act of 2009 the recovery act using cross county commuting data we cluster us counties into local labour markets each of which we further partition into two subregions we then compare differential labour market outcomes and recovery act spending at the regional and subregional levels among pairs of subregions we find evidence of fiscal policy spillovers according to our benchmark specification 1 of recovery act spending in a subregion increases its own wage bill by 0 64 and increases the wage bill in its neighbouring subregion by 0 50 during the first two years following the act s passage the spillover effect occurs in the service sector whereas the direct effect occurs in both the services and goods producing sector

public sector unions and municipal employment using 1980 data for a large sample of u s cities the author reexamines recent empirical findings of a positive association between public sector unionization and municipal employment several researchers have interpreted this correlation as evidence that public employee unions successfully exert political pressure to raise the demand for municipal services structural estimates of labor demand and the determinants of police and fire unionization reveal however that economies of scale in union formation are at least partly responsible for any positive association between public sector unionization and municipal employment the author concludes that previous studies overstate the amount of political clout wielded by municipal labor unions

general revenue sharing and public sector unions abstract in this paper i find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986 cities increased expenditures one for one with federal grants which is suggestive of a large flypaper effect furthermore i find that cities in states with pro union collective bargaining laws spent more than half of the transfers on increased wages while cities in states without such laws spent a greater fraction on increased government services these latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants

the effects of fiscal shocks on employment and the real wage we study the transmission of fiscal shocks in the labor market we employ a structural var and base identification on the restrictions that shocks to government consumption investment and employment must raise output and deficits these restrictions hold in both prototype real business cycle rbc and new keynesian models shocks to government consumption and investment increase real wages and employment contemporaneously both at state level and in the aggregate the dynamics in response to employment shocks are mixed increases in government employment raise the real wage and total employment in the aggregate however in one third of the states they reduce total employment

the american recovery and reinvestment act solely a government jobs program abstract this paper estimates the private and government sector employment effects of american recovery and reinvestment act arra spending via an instrumental variables strategy we argue that this aid was effectively fungible and states used it to offset declines in revenue this enables us to use exogenous variation in states budget positions to identify the act s employment effects we also exploit exogenous variation across states in arra highway funding according to our benchmark estimates average state and local government employment during the 24 months following the program s inception was between 156 000 and 563 000 persons greater as a result of arra spending 90 confidence interval the corresponding estimate for the private sector ranges from a loss of 182 000 to a gain of 1 1 million jobs our point estimate for the implied cost of creating a job lasting one year is 202 000 which is substantially larger than the corresponding estimate from the president s council of economic advisors

the aggregate effects of sectoral reallocations abstract can a one time permanent change in the fundamentals behind the sectoral composition of the economy prompt an aggregate downturn can this downturn be non negligible even if one uses us data to determine the relative size of gross vs net job flows and the importance of job creation costs can one consider the military build down of the 1990s as a plausible cause for the 1990 1991 recession do sectoral reallocations generate responses that are qualitatively similar to productivity shocks we use a variant of the mortensen pissarides 1994 review of economic studies 61 397 415 job creation destruction model calibrate it to us labor market data and run experiments that suggest one can answer yes to all these questions

monetary policy and macroeconomic stability in latin america the cases of brazil chile colombia and mexico abstract in 1999 new monetary policy regimes were adopted in brazil chile colombia and mexico combining inflation targeting with floating exchange rates these regime changes have been accompanied by lower volatility in the monetary stance in brazil colombia and mexico despite higher inflation volatility in brazil and colombia this paper estimates a conventional new keynesian model for these four countries and shows that i the post 1999 regime has been associated with greater responsiveness by the monetary authority to changes in expected inflation in brazil and chile while in colombia and mexico monetary policy has become less counter cyclical ii lower interest rate volatility in the post 1999 period owes more to a benign economic environment than to a change in the policy setting and iii the change in the monetary regime has not yet resulted in a reduction in output volatility in these countries

interpreting panel data on job tenure tenure responses in the panel study of income dynamics psid and the national longitudinal surveys are often inconsistent with calendar time these inconsistencies pose special problems in the psid because job changes cannot be identified directly so researchers must infer them from error ridden tenure data we use alternative rules for partitioning psid data into jobs and then estimate several wage and mobility models to assess the sensitivity of parameter estimates to the partitioning method we also assess the importance of replacing raw tenure data with imputed measures that are internally consistent

evolution of bank efficiency in brazil a dea approach abstract this paper investigates cost technical and allocative efficiencies for brazilian banks in the recent period 2000 2007 we use data envelopment analysis dea to compute efficiency scores brazilian banks were found to have low levels of economic cost efficiency compared to banks in europe and in the us for the period with high macroeconomic volatility 2000 2002 the economic inefficiency in brazilian banks can be attributed mainly to technical inefficiency rather than allocative inefficiency state owned banks are significantly more cost efficient than foreign private domestic and private with foreign participation there is no evidence of differences in economic efficiency due to type of activity and bank size these results may provide some useful guidance for financial regulators and bank managers

an evaluation of private forecasts of interest rate targets in brazil abstract this study shows that the private sector accurately predicts short term interest rate targets set by the brazilian monetary authorities with increased transparency under inflation targeting such evidence suggests that the public perceives the central bank as credible

asymmetric information and agenda control the bases of monopoly power in public spending abstract a pervasive empirical finding widely known as the flypaper effect is that lump sum intergovernmental grants generate considerably greater public spending by the recipient jurisdiction than would be predicted by equivalent shifts in personal income in that jurisdiction moreover such observations are inconsistent with standard median voter models of the political process we posit a model in which it is in the interest of suppliers of a collectively provided good not to generate full information to voters about outside aid the empirical results are consistent with flypaper and suggest that voters are very poorly informed about outside grants

can government purchases stimulate the economy this essay briefly reviews the state of knowledge about the government spending multiplier drawing on theoretical work aggregate empirical estimates from the united states as well as cross locality estimates i assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate a temporary deficit financed increase in government purchases i conclude that the multiplier for this type of spending is probably between 0 8 and 1 5 jel e23 e62 h50

is job stability in the us falling reconciling trends in the current population survey and panel study of income dynamics this article considers whether two commonly used sources of information on employer tenure the panel study of income dynamics and the current population survey yield systematically different trends in employer tenure little evidence of a discrepancy between the data sets in the 1980s or 1990s is found when comparable samples variable definitions and time frames are used neither data set shows a significant trend in the share of workers with 1 year or less of tenure while both data sets show an increase in the fraction of men with less than 10 years of tenure starting in the late 1980s

new macroeconomic consensus and inflation targeting monetary policy committee directors turnover in brazil abstract the main objective of this paper is to estimate a central bank reaction function that accounts for the effects of directors rotation of the brazilian copom monetary policy committee the reaction function proposed is assumed to be the mechanism for inflation targeting policy it accounts for the copom rotation to examine copom s policy credibility the empirical analysis use monthly data from 2001 to 2008 to estimate a structural vector auto regression svar in order to learn about the long run effects the svar results suggest that the turnover of the copom board of directors affects inflation expectation and interest rate of the brazilian economy in the long run this means that the turnover causes economic agents to increase their expectations about inflation resulting in increases of the rate of change of the interest rate level this break in credibility leads to an additional cost to society through higher future interest rates to be paid by government bonds

the economic effects of public financing evidence from municipal bond ratings recalibration we show that the supply of local public financing can have important effects on local economies we identify these effects by exploiting exogenous variation on municipal bond ratings due to moody s recalibration of its scale in 2010 we find that local governments increase expenditures and employment due to an expansion of their debt capacity following an upgrade these increases in local government spending lead to multiplier effects on non tradable employment and income our findings suggest that debt financed increases in government spending can improve economic conditions during recessions

the impact of unions on municipal elections and urban fiscal policies abstract the efficient decentralized provision of public goods requires that special interest groups such as municipal unions do not exercise undue influence on the outcome of municipal elections and local fiscal policies we develop a new political economy model in which a union can endorse one of the candidates in a local election a politician that prefers an inefficiently large public sector can therefore win an election if the union can provide sufficiently strong support during the campaign we have assembled a unique data set that is based on union endorsements that are published in leading local newspapers our empirical analysis focuses on municipal elections in the 150 largest cities in the u s between 1990 and 2012 we find that challengers strongly benefit from endorsements in competitive elections challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies

the voting behavior of bureaucrats some empirical evidence this paper has examined the voting behavior of bureaucrats and the consequences for elections the economic theory of the rational voter predicts that bureaucrats would have more to gain by voting than the general public the cost of voting is lower for public employees than for those who work in the private sector as a consequence theory predicts that bureaucrats would participate in elections at a greater rate than other individuals as a test of the validity of the economic theory of voting an empirical analysis of national elections from 1964 to 1978 was presented the evidence is drawn from household survey data published by the u s bureau of the census the data permit a direct observation of voting participation rates of public and private employees the empirical results indicate that bureaucrats consistently participate in elections at significantly greater rates than non bureaucrats as the public sector expands and voter participation rates remain low bureaucrats will exert disproportionate influence on election outcomes

microeconomic adjustment hazards and aggregate dynamics the basic premise of this paper is that understanding aggregate dynamics requires considering that agents are heterogeneous and that they do not adjust continuously to the shocks they perceive we provide a general characterization of lumpy behavior at the microeconomic level in terms of an adjustment hazard function which relates the probability that a unit adjusts to the deviation of its state variable from its moving target we characterize rich cross sectionally dependent aggregate dynamics generated by nonconstant hazards we present an example based on u s manufacturing employment and job flows and find that increasinghazard models outperform constant hazard partial adjustment models in describing aggregate employment dynamics

low wage employment subsidies versus the welfare state this paper is a brief for the introduction of a subsidy to any qualified firm for its use of low wage employees as a means to reduce the unemployment and raise the pay of disadvantaged workers there would be a case for such a wage subsidy in all the advanced market economies and certainly the american one regardless of recent trends the case has grown stronger however with the worsening of the relative wages and especially the unemployment rates of low age workers the globalization of investment and the bias of technical progress are the causes most often suggested i would add the growth of the welfare system the public entitlements to hospitalization to retirement and disability insurance and to the benefits labeled welfare in the narrow sense since this factor tends to be overlooked i devote section i to it section ii proceeds to the case for a low wage employment subsidy it will be clear that the beneficial effects of the subsidy on disadvantaged workers are the mirror opposite of the harmful side effects of the welfare system side effects that the subsidy would counteract i side effects of the welfare system

forecasting food inflation in developing countries with inflation targeting regimes developing countries that employ inflation targeting monetary policy regimes require accurate short run food inflation forecasts we develop a systematic approach to improve food inflation forecasts apply it to colombian monthly data from december 1989 to april 2006 and show its relevance for inflation targeting regimes forecast accuracy can be improved by disaggregating food products into away from home processed and fresh foods employing econometric methods to combine forecasts from individual models and using flexible least squares methods in the presence of structural changes we also show the importance of accurate food inflation forecasts in models simulating monetary policy transmission ams subject classification copyright 2012 oxford university press

does inflation targeting make a difference in developing countries we evaluate the treatment effect of inflation targeting in thirteen developing countries that have adopted this policy by the end of 2004 using a variety of propensity score matching methods we show that on average inflation targeting has large and significant effects on lowering both inflation and inflation variability in these thirteen countries however the effectiveness of inflation targeting on lowering inflation is found to be quite heterogeneous the performance of a given inflation targeting regime can be affected by country characteristics such as government s fiscal position central bank s desire to limit the movements of exchange rate its willingness to meet the preconditions of policy adoption and the time length since the policy adoption

inflation targeting in brazil chile and mexico performance credibility and the exchange rate inflation targeting it has been adopted by a growing number of countries and latin america has been part of this world trend this paper reviews the recent it experiences of brazil chile and mexico applying a common empirical framework to the three country cases inflation performance under it and its associated output costs are reported and compared favorably to a control group of other countries the paper analyzes ways by which it has contributed to strengthen credibility the effect of targets on inflation expectations and on actual inflation the low influence of inflation shocks on core inflation and the decline in inflation forecast errors do the three inflation targeters exhibit fear of floating no considering their relatively large exchange rate volatility and moderate international reserve holdings no considering strongly declining inflation to devaluation passthrough coefficients and little evidence for monetary policy reaction to exchange rate shocks yes considering the frequency and intensity of sterilized exchange interventions in comparison to other inflation targeters that float more cleanly

aggregate employment dynamics building from microeconomic evidence this paper studies quarterly employment flows of approximately 10 000 u s manufacturing establishments the authors use establishments hours week to construct measures of the deviation between desired and actual employment and use these as the establishments main state variables the main findings are 1 microeconomic adjustment functions are nonlinear with plants adjusting disproportionately to large shortages 2 adjustments are often either large or nil suggesting the presence of nonconvexities in the adjustment cost technologies 3 the bulk of average employment fluctuations is accounted for by aggregate rather than reallocation shocks and 4 microeconomic nonlinearities amplify the impact of large aggregate shocks copyright 1997 by american economic association

obstacles to disinflation what is the role of fiscal expectations persistently high expected inflation often makes it difficult for policy makers to recover from inflationary episodes without substantial output losses using survey data from eleven disinflation episodes we can assess whether the more or less sluggish decline of inflation rates towards lower target levels is related to backward looking pricing behavior or to imperfect credibility of the stabilization efforts we find that expectations of future inflation play a much more important role than past inflation in shaping the inflation process second we find that an improvement in various measures of fiscal balances significantly reduces inflation expectations this evidence suggests that when attempting to stabilize inflation priority should be given to building fiscal credibility oya celasun r gaston gelos and alessandro prati

cost of business cycles with indivisibilities and liquidity constraints it is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk in this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles two versions of incomplete insurance markets are considered and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy

local and aggregate fiscal policy multipliers abstract using a newly constructed panel of state level defense contracts this paper studies the effect of defense spending on the u s macroeconomy summing observations across states we estimate aggregate income and employment multipliers comparing these to local multipliers estimated with the panel provides evidence that local multiplier estimates may be reliable indicators of fiscal policy s aggregate effects furthermore evidence of small positive spillovers is found across several specifications we estimate income and employment multipliers between zero and 0 5 this result is reconciled with the greater than one multipliers found in nakamura and steinsson 2014 by analyzing the korean war years impact on the estimation

the cost of business cycles and the stabilization value of unemployment insurance this paper o ers a new perspective on why labor market policies aimed at reducing the cost of business cycles may be warranted and how such policies can be designed in order to improve welfare to this end we develop a quantitative dynamic equilibrium model to illustrate how the contractual structure of the labor market may hide signi cant undiversi ed wage risk induced by aggregate uctuations the environment analyzed is such that the only imperfectly diversi ed risk workers bear is the risk of losing their job when the market for new contracts is depressed when we t the model to replicate the amount of wage variation estimated from micro data we obtain estimates of the potential value of stabilization policies that are substantially larger than those found in the literature we use this framework to examine several policy issues and in particular to show why state contingent unemployment insurance may dominate non contingent unemployment insurance schemes 2001 elsevier science b v all rights reserved jel classixcation e32 j41

does clarity of central bank communication affect credibility evidences considering governor specific effects central banks have made great efforts to increase transparency and accountability to the public since then studies seek empirical evidences about the effects of monetary policy communication over

idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics we examine a model of lumpy investment wherein establishments face persistent shocks to common and plant specific productivity and nonconvex adjustment costs lead them to pursue generalized s s investment rules we allow persistent heterogeneity in both capital and total factor productivity alongside low level investments exempt from adjustment costs to develop the first model consistent with available evidence on establishment level investment rates reassessing the implications of lumpy investment for aggregate dynamics in this setting we find that they remain substantial when factor supply considerations are ignored but are quantitatively irrelevant in general equilibrium the substantial implications of general equilibrium extend beyond the dynamics of aggregate series while the presence of idiosyncratic shocks makes the time averaged distribution of plant level investment rates largely invariant to market clearing movements in real wages and interest rates we show that the dynamics of plants investments differ sharply in their presence thus model based estimations of capital adjustment costs involving panel data may be quite sensitive to the assumption about equilibrium our analysis also offers new insights about how nonconvex adjustment costs influence investment at the plant when establishments face large and weakly persistent idiosyncratic productivity shocks consistent with existing estimates we find that nonconvex costs do not cause lumpy investments but act to eliminate them

more cops less crime abstract i exploit a natural experiment to estimate the causal effect of police on crime the american recovery and reinvestment act increased funding for the community oriented policing services cops hiring grant program from less than 20 million over 2005 2008 to 1 billion in 2009 hiring grants distributed in 2009 were allocated according to an application score cutoff rule and i leverage quasi random variation in grant receipt by comparing the change over time in police and crimes for cities above and below the threshold in a difference in differences framework relative to low scoring cities those above the cutoff experience increases in police of about 3 2 and declines in victimization cost weighted crime of about 3 5 following the distribution of hiring grants the effects are driven by large and statistically significant effects of police on robbery larceny and auto theft with suggestive evidence that police reduce murders as well crime reductions associated with additional police were more pronounced in areas most affected by the great recession the results highlight that fiscal support to local governments for crime prevention may offer large returns especially during bad macroeconomic times

testing asymmetries in central bank preferences in a small open economy a study for brazil abstract in this paper we extend surico s 2007a model to an open economy and test if the brazilian central bank s loss function is asymmetric with regard to positive and negative deviations of the output gap and of the inflation rate from its target furthermore we use tests for structural breaks to investigate changes in the conduct of policy and monetary authority s preferences the results revealed that the central bank reacted more strongly to deviations of inflation from the target and the output gap after 2003 with regard to the monetary authority s preferences estimates indicate only an asymmetric preference over an above target inflation rate until mid 2003 after this period the evidence obtained by estimating the reaction function with inflation expectations showed that the central bank has been more averse to positive deviations of inflation from its target