bequests gifts and social security this paper analyses the very long run or stationary state impact of an unfunded social security system we use an overlapping generations model framework a key feature is that while parents care about their children and can leave non negative bequests to them children also care about their parents and can make non negative gifts to them we show that the possibility of negative net bequests may make social security less harmful to private wealth accumulation than would otherwise be the case a subsidiary finding is that risk loving behaviour may emerge for some households due to the nature of intergenerational transfers within family lines

information rigidities inflation perceptions and the media lessons from the euro cash changeover the objective of theoretical models of information rigidities is to capture the fact that people are constrained in their ability to acquire and process all available information given that most people obtain their information about the economy from the media press coverage of the economy may exert an influence on peoples attitudes this paper tests for this influence by examining consumers inflation perceptions in the aftermath of the euro cash changeover which serves as a natural experiment using a new data set that quantifies the intensity and tone of media reports we document that media reporting has had a statistically significant and economically meaningful impact on inflation perceptions and contributed to their sharp rise in the aftermath of the euro cash changeover and to the divergence between inflation perceptions and actual inflation rates jel e53 d83

social security public education and the growth inequality relationship abstract we study how the relationship between economic growth and inequality depends upon the levels of funding of two of the largest government programs public education and social security we do this in the context of an overlapping generations economy with heterogeneous agents where the government collects a tax on labor income to finance these programs we show that in our model an increase in government spending on social security reduces income inequality and can have a non monotonic effect on growth when the initial level of social security funding is low as is the case in most poor economies then its increase will enhance growth when its funding level is high as is typical for developed countries we show that its further increase can slow down growth while reducing income inequality these results obtain regardless of whether the increase in social security funding is financed by a tax increase or by cutting the public education budget we also find that the effects of increasing the level of public education expenditures or the overall size of the government budget holding the budget composition fixed are characterized by similar non monotonic growth inequality relationships

long run effects of unfunded social security with earnings dependent benefits this paper examines the effects of unfunded social security with bequests fertility and human capital by considering a mix of earnings dependent and universal social security benefits we show that social security is more likely to promote growth by reducing fertility and increasing human capital investment if its benefits are more dependent on individuals own earnings through simulations we find that the differences in the effects of social security resulting from variations in the benefit formula can be too substantial to be ignored we also investigate the welfare effect in calibrated economies c 2003 elsevier b v all rights reserved

distributional effects of public education in an economy with public pensions we study how the allocation of government expenditures between two major outlays education and pay as you go social security affects human capital distribution in an economy with heterogeneous agents we consider an overlapping generations economy where the government maintains both programs and allocates tax revenues to finance them in our model human capital is one of the factors of production it is itself produced as a combined result of public inputs and private inputs parents decisions to invest time and material resources in education of their children are motivated by altruism heterogeneous in its strength across the population which leads to heterogeneity of incomes we investigate the effect of an increase in public funding for education on the human capital distribution we show that in this framework contrary to some earlier results increased spending on public education may lead to higher inequality our results depend crucially on the interaction of education funding with the social security budget and on the elasticity of substitution in the learning technology

natural resources and economic development new panel evidence the question as to whether natural resources are a curse on economic growth and development is subject to considerable debates and remains controversial using heterogeneous panel cointegration techniques this paper provides a fresh re examination of the resource curse while allowing for cross section heterogeneity and commonalities in the nexus between natural resource abundance and economic development it finds in a sample of developing countries that economies endowed with abundant natural resources tend to develop more slowly than countries with scarce resources natural resources are on average a curse however there is considerable heterogeneity in the effects of resource abundance on economic development across countries perhaps because of differences in the extent of government intervention access to sound money legal structures and the security of property rights the degree of globalization and or corruption

child policy solutions for the unemployment problem abstract using a simple overlapping generations model with endogenous fertility minimum wages and involuntary unemployment it is shown that the child tax can be used as an instrument to promote population growth and restore full employment

the curse of natural resources in fractionalized countries abstract this paper develops a model that can explain why natural resources are a blessing for some countries but a curse for others in this model natural resources cause fighting activities between rivalling groups fighting reduces productive activities and weakens property rights making productive activities even less attractive the aggregate production decrease exceeds the natural resources direct positive income effect if and only if the number of rivalling groups is sufficiently large the model thus predicts that natural resources lower incomes in fractionalized countries but increase incomes in homogenous countries empirical evidence supporting this prediction is provided

destructive competition factionalism and rent seeking in iran summary the literature on the resource curse suggests that the quality of institutions determines a country s ability to transform resource wealth into economic development this article explores the link between resource rents institutions and economic performance by focusing on the case of iran a key feature of iran s institutional environment is its factionalized political system we give an introduction to the main actors vying for control over the country s resources and analyze the effect of their destructive competition using a theoretical model we study how oil revenues and the relative strength of interest groups affect private investment and economic efficiency

the influence of fomc member characteristics on the monetary policy decision making process abstract this paper provides new empirical evidence on a monetary policy committee with heterogeneous members whose decisions affect the efficacy of monetary policy it thereby provides a link between the literature on monetary policy committees and central bank monetary policy implementation through monetary rules using a novel dataset of the idiosyncratic characteristics of fomc members over the period from august 1979 to february 2014 the empirical findings show that characteristics such as education age and to a lesser extent work experience are not important in understanding the fomc decision making process instead the results point to the importance of time spent within the federal reserve system tenure on the fomc itself and the influence of the chair in shaping the decision making process the results are expected to have implications for the capacity of economic agents as well as various markets in the economy to more readily interpret public monetary policy information that reaches them this makes the monetary policy decision process less noisy and thus enhances the capability of agents and markets to attach the correct weight to this information

do natural resource revenues hinder financial development the role of political institutions we hypothesize that natural resource revenues may deteriorate contract enforcement if political institutions are weak as poor contract enforcement leads to low financial development resource revenues may hinder financial development in countries with poor political institutions but not in countries with comparatively better political institutions we provide empirical support for this hypothesis based on within country variation in our sample covering the period 1970 2005 and 133 countries our results are robust to the use of additional control variables different samples and alternative measures of financial development and political institutions

rent seeking and resource booms abstract this paper develops a model of rent seeking in which the opportunity cost of rent seeking is foregone entrepreneurship it provides conditions under which resource booms tend to lead to an increase in rent seeking activity and those in which they induce entrepreneurship we identify an important difference between the two activities which leads resource booms to bias gains in favour of rent seeking over entrepreneurship but we also show that this bias depends on the nature of the initial equilibrium

social capital barriers to production and capital shares implications for the importance of parameter heterogeneity from a nonstationary panel approach recent advances in the growth literature have proposed that difficult to quantify concepts such as social capital may play an important role in explaining the degree of persistent income disparity that is observed among countries other recently explored possibilities include institutional mechanisms which generate barriers to aggregate production an important limitation for empirical work in this area stems from the fact that it is difficult to distinguish sources of heterogeneity when direct observations are not available in this study we show how developments in the analysis of nonstationary panels can aid in this endeavor in contrast to traditional dynamic panel data analysis this approach focuses explicitly on low frequency behavior under relatively mild assumptions the approach can be used to infer properties of aggregate production which are robust to the presence of large classes of unobserved features in this framework we are able to estimate and test the distribution of production function parameters that would be required in order to generate conditional forecast convergence of per capita incomes even when some of the key factors required to explain growth are unobserved the results indicate that in order to fully explain the observed persistence in the disparity of per capita incomes the manner in which unobserved mechanisms influence production must go beyond merely accounting for differences in the trending behavior of aggregate productivity specifically if such mechanisms are to be successful empirically they must also be able to account for cross country heterogeneity in steady state capital shares this adds to a growing literature that provides support for models with multiple production regimes copyright 2007 john wiley sons ltd

rational bias in macroeconomic forecasts do professional forecasters provide their true unbiased estimates or do they behave strategically in our model forecasters have common information confer actively and thus know the true pdf of future outcomes intensive users of economic forecasts monitor forecasters performance closely occasional users are drawn to the forecaster who fared best in the previous period in the resulting nash equilibrium even though economists have identical expectations they make a range of projections that mimics the true probability distribution of the forecast variable those whose wages depend most on publicity produce forecasts that differ most from the consensus empirical evidence supports the model

disagreement and biases in inflation expectations empirical work documents substantial disagreement in inflation expectations obtained from survey data furthermore the extent of such disagreement varies systematically over time in a way that reflects the level and variance of current inflation this paper oers a simple explanation for these facts based on asymmetries in the forecasters costs of over and under predicting inflation our model implies biased forecasts with positive serial correlation in forecast errors and a cross sectional dispersion that rises with the level and the variance of the inflation rate it also implies that forecast errors at dierent horizons can be predicted through the spread between the short and long term variance of inflation we find empirically that these patterns are present in inflation forecasts from the survey of professional forecasters a constant bias component not explained by asymmetric loss and rational expectations is required to explain the shift in the sign of the bias observed for a substantial portion of forecasters around 1982

oil rents corruption and state stability evidence from panel data regressions abstract we examine the effects of oil rents on corruption and state stability exploiting the exogenous within country variation of a new measure of oil rents for a panel of 30 oil exporting countries during the period 1992 2005 we find that an increase in oil rents significantly increases corruption significantly deteriorates political rights while at the same time leading to a significant improvement in civil liberties we argue that these findings can be explained by the political elite having an incentive to extend civil liberties but reduce political rights in the presence of oil windfalls to evade redistribution and conflict we support our argument documenting that there is a significant effect of oil rents on corruption in countries with a high share of state participation in oil production while no such link exists in countries where state participation in oil production is low

fertility intra generational redistribution and social security sustainability incorporating heterogeneity in preference to having children into an overlapping generations model of a small open economy we examine the effects of changes in the size of pay as you go payg social security on fertility choices of individuals and population growth of the economy it is shown that payg social security will raise population growth by increasing the number of individuals who have children and the number of children parents have if the system involves redistribution between retirees with different contributions whereas if it has no redistribution payg social security does not affect the fertility decisions of individuals fecondite redistribution intra generationnelle et durabilite de la securite sociale incorporant l heterogeneite des preferences pour avoir des enfants dans un modele d une petite economie ouverte avec des generations qui se chevauchent on examine les effets de changements dans l importance de la securite sociale par repartition sur les choix de fecondite des individus et sur la croissance de la population dans l economie on montre que cette forme de securite sociale augmente la croissance de la population en accroissant a la fois le nombre de personnes qui ont des enfants et le nombre d enfants que les parents choisissent d avoir si le systeme implique une redistribution entre les gens a la retraite qui ont fait des contributions differentes alors que si le regime n implique aucune redistribution le regime de securite sociale par repartition n affecte pas les decisions de fecondite des individus

an intergenerational model of population growth the problem of population growth has been only partially formulated in an intertemporal context therefore a link between population theory and economic growth theory is still missing this paper attempts to provide such a link by analyzing an intergenerational model of optimum population growth the model accommodates the idea that decisions on increases in population should consider the new population s quality of life this concept is elaborated upon in a static framework by gary becker and gregg lewis dennis de tray and robert willis other literature on population growth such as harold votey disregards this consideration altogether 2 more explicitly this paper assumes that the utility of each generation is a function of the level of its consumption and the number and utility of the newly born people we are thus led to consider the utility of an infinite number of generations this model differs from paul samuelson s intergenerational model of pure consumption in which the utility of each generation depends only on that generation s own consumption recently philip neher 1971 analyzed a model of fertility in primitive economies it is based on the assumption that parents use children as investments to insure future consumption needs neher s analysis focuses entirely on the pension motive for having children 3 our model assumes that fertility is determined so as to balance the parents welfare derived from additional children against that derived from the children s quality of life we first outline a general model of optimum population growth in order to discuss explicitly various economic aspects of population we use a simple case in the analysis section i sets up the basic model

explaining disagreement on interest rates in a taylor rule setting most studies on disagreement focus on one specific variable thereby neglecting the fact that disagreement can be co moving with disagreement on other variables in this paper we explore to what extent disagreement regarding the interest rate is driven by disagreement on inflation and unemployment this relationship can be motivated by the theoretical concept of the taylor rule using survey microdata for both professional forecasters and consumers we provide evidence that disagreement on the interest rate is mainly driven by disagreement on inflation we further show that disagreement is significantly influenced by central bank transparency as well as news on money and credit conditions

public pensions choices for the future abstract the purpose of this paper is to analyze to what extent pay as you go government mandated pensions can provide adequate retirement income to future generations this question is particularly relevant at times when the financial viability of public pensions is threatened by demographic aging and possibly declining productivity and when more importantly there is little consensus as to why those programs exist as they are that is mandatory public and unfunded the gist of our argument is that an aging population particularly if combined with declining productivity would jeopardize the financial and political viability of public pensions if individuals behavior doesn t adjust to this new reality and public authorities don t adopt the appropriate reforms as to mandatory retirement age payroll taxes and benefits structure among key individual decisions we focus on saving labor participation retirement education migration and fertility we consider how sensitive each of these is to changes in the environment and to changes in policy parameters then we turn to a number of issues unsolved either because of analytical complexity or because they arise from new realities

resource intensity institutions and development summary we examine the relationship between resource abundance and several indicators of human welfare consistent with the existing literature on the relationship between resource abundance and economic growth we find that given an initial income level resource intensive countries tend to suffer lower levels of human development while we find only weak support for a direct link between resources and welfare there is an indirect link that operates through institutional quality there are also significant differences in the effects that resources have on different measures of institutional quality these results imply that the resource curse is a more encompassing phenomenon than previously considered and that key differences exist between the effects of different resource types on various aspects of governance and human welfare 2005 elsevier ltd all rights reserved

why do forecasters disagree lessons from the term structure of cross sectional dispersion abstract key sources of disagreement among economic forecasters are identified by using data on cross sectional dispersion in forecasters long and short run predictions of macroeconomic variables dispersion among forecasters is highest at long horizons where private information is of limited value and lower at short forecast horizons moreover differences in views persist through time such differences in opinion cannot be explained by differences in information sets our results indicate they stem from heterogeneity in priors or models differences in opinion move countercyclically with heterogeneity being strongest during recessions where forecasters appear to place greater weight on their prior beliefs

expectations heterogeneous forecast errors and consumption micro evidence from the michigan consumer sentiment surveys the household data underlying the michigan index of consumer sentiment are used to test the rationality of consumer expectations and their usefulness in forecasting expenditure the results can be interpreted as characterizing the shocks that hit different types of households over time expectations are found to be biased and inefficient at least ex post people underestimated the disinflation of the early 1980s and the severity of recent business cycles people s forecast errors are also systematically correlated with their demographic characteristics in part because of time varying group level shocks further sentiment helps forecast consumption growth some of this rejection of the permanent income hypothesis is due to the systematic demographic components in forecast errors

fomc forecasts as a focal point for private expectations we explore empirically the theoretical prediction that public information acts as a focal point in the context of the u s monetary policy we aim at establishing whether the publication of federal open market committee fomc inflation forecasts affects the cross sectional dispersion of private inflation expectations our main finding is that publishing fomc inflation forecasts has a negative effect on the cross sectional dispersion of private current year inflation forecasts this effect is found to be robust to another survey data set and to various macroeconomic controls moreover we find that the dispersion of private inflation forecasts is not affected by the dispersion of views among fomc members

disagreement in inflation expectations empirical evidence for colombia the literature on expectation disagreements in emerging economies is scarce this paper examines the disagreements in inflation expectations for the colombian economy during the 2010 2017 period w

inflation expectations as a policy tool abstract we assess the prospects for central banks using inflation expectations as a policy tool for stabilization purposes we review recent work on how expectations of agents are formed and how they affect their economic decisions empirical evidence suggests that inflation expectations of households and firms affect their actions but the underlying mechanisms remain unclear especially for firms two additional limitations prevent policy makers from being able to actively manage inflation expectations first available surveys of firms expectations are systematically deficient which can only be addressed through the creation of large nationally representative surveys of firms second neither households nor firms expectations respond much to monetary policy announcements in low inflation environments we provide suggestions for how monetary policy makers could pierce this veil of inattention through new communication strategies as well as the potential pitfalls to trying to do so

baby boomer retirement security the roles of planning financial literacy and housing wealth abstract we compare wealth holdings across two cohorts of the health and retirement study the early baby boomers in 2004 and individuals in the same age group in 1992 levels and patterns of total net worth have changed relatively little over time though boomers rely more on housing equity than their predecessors most important planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non planners instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth

differential interpretation of information in inflation forecasts we test the hypothesis associated with a standard assumption in the theoretical literature on learning that economic agents interpret information identically we use a data set based on a survey o

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

inflation and relative price variability reinstating parks results this paper revisits parks seminal work on the time series relationship between inflation and relative price variability the results reported show that a significant positive association is obtained allowing for an asymmetrical response of relative prices to episodes of positive and negative inflation this finding is maintained after excluding oil shock years extending park s original sample to 1996 using an alternative data set and allowing for a higher degree of disaggregation

prospects for commodity exporters those low income countries that export non agricultural commodities are in the midst of a resource transfer it is undoubtedly the biggest opportunity for transformative development that these societies have experienced dwarfing both aid and previous commodity booms to get it in proportion in 2004 commodity exports from sub saharan africa accounted for 146 billion us dollars or 28 percent of the region s gdp while aid amounted to 5 percent of gdp compared with the boom of the 1970s many more countries are beneficiaries the push to diversify sources of supply has resulted in exploitable discoveries in places that were previously political no go areas further whereas the boom of the 1970s was conjured up by the opec cartel this one is grounded in asian growth and so is intrinsically less precarious in this paper the authors draw on a range of new research that provides a prognosis of prospects a diagnostic of likely problems and prescribes an agenda for international action the paper is organized around these three objectives

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

demographic transition in resource rich countries a blessing or a curse summary this study argues that resource wealth is a key factor for understanding income effects of demographic transition we develop a simple model highlighting how the income effect of increased labor supply may depend on resource rents and provide empirical evidence that support the theoretical predictions using panel data covering the period from 1982 to 2006 for more than 120 countries we find a negative interaction effect between resource wealth and demographic transition on national income moreover the negative interaction effect does not depend on institutional quality and is found also across different samples

health spending savings and fertility in a lifecycle dynastic model with longevity externalities we investigate health spending savings fertility and policy implications in a lifecycle dynastic model with longevity externalities in annuity returns we show that such externalities engender not only excessive health spending but also under saving and excessive fertility social security and health subsidization increase health spending and savings but reduce fertility from laissez faire levels a publicly funded universal health system under labour income taxation raises fertility taxing health spending or using social security and public health together can obtain socially optimal health spending savings longevity and fertility numerical results based on us observations suggest substantial variations among these cases especially in old age health spending

the role of media for consumers inflation expectation formation the full information rational expectations model is clearly rejected by the data the expectation formation process has therefore important implications for macroeconomic outcomes we examine how consumers react to information provided by the media by taking into account that this information is imperfect we show that information rigidities play a role empirically intensive news reporting improves the accuracy of consumers inflation expectations because they receive more information however this effect depends on the tone of the news if news are badly toned the effect reverts

the role of media for inflation forecast disagreement of households and professional forecasters this paper investigates the effects of media coverage about consumer price inflation on inflation forecast disagreement of german households and professional forecasters we adopt a bayesian learning model in which media coverage of inflation affects forecast disagreement by influencing information sets as well as predictor choice our empirical results show that disagreement of households depends on the heterogeneity of story content and on the reporting intensity especially of news on rising inflation disagreement of professional forecasters does not depend on media coverage with respect to the influence of macroeconomic variables we provide evidence that disagreement of professional forecasters primarily depends on the inflation rate and on inflation volatility the response of households to inflation is much less pronounced

learning by doing and the dutch disease this paper develops a model of learning by doing and the dutch disease that extends the earlier literature in two ways first it is assumed that both the traded and the non traded sector can contribute to learning second it is assumed that there are learning spillovers between the sectors it is shown that within such a model a foreign exchange gift results in a real exchange rate depreciation in the long run due to a shift in the steady state relative productivity between the traded and the non traded sector in contrast to standard models of the dutch disease production and productivity in both sectors may go up or down the conditions for the different cases are worked out

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

the old age security hypothesis revisited abstract children s altruism toward parents is allowed in a two overlapping generations model with endogenous fertility parents raise children because when retired they expect gifts from their children who are essentially a capital good individuals behavior between generations is examined by analyzing a nash equilibrium which is then compared with a social planner s optimal allocation the pay as you go public pension program is viewed as the optimal gifts from the optimal allocation when the latter is implemented the effect on fertility of the introduction of a capital market is also analyzed the validity of the old age security hypothesis is shown to depend on the parameters of utility and cost functions

disagreement a la taylor evidence from survey microdata there is a growing interest in studying the disagreement of economic agents most studies however focus on the disagreement regarding one specific variable hereby neglecting that disagreement may be comoving with disagreement on other variables in this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment this relationship can be motivated by the existence of the taylor rule using micro survey data for both professional forecasters and consumers we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation exploring further determinants we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement

social security and endogenous growth abstract this paper examines the effects of social security on the steady state growth of per capita income in an endogenous growth model in which agents care about their own consumption the number of children and the welfare of each child it shows that an unfunded program may simulate growth by reducing fertility and increasing the ratio of human capital investment per child to per family income when bequests are positive also it may cause faster growth than funded programs especially when receipts from funded programs are independent of contributions when voluntary saving is positive funded social security is neutral if receipts are linked to contributions and most likely depresses growth if receipts are independent of contributions

natural resources institutional quality and economic growth in china the resource curse has been mainly studied using cross country samples in this paper we analyze a cross province sample from one country china we focus on the interplay between resource abundance institutional quality and economic growth using two different measures of resource abundance a stock resource reserves and a flow resource revenues and employing various econometric approaches including varying coefficient models we find that resource abundance has a positive effect on economic growth at the provincial level in china between 1990 and 2008 an effect that depends nonlinearly on institutional quality 1995 confidence in courts the west china development drive policy initiated in 2000 caused substantial changes which we investigate through a comparative panel data analysis

pay as you go public pensions with endogenous fertility abstract veall s 1986 model of public pensions is generalized to allow for endogenous fertility we show that gifts to the old which can be viewed as social security contributions are always positive in the steady state an optimal stationary allocation is sustainable if savings are zero and fertility is exogenous however the optimal allocation is in general not sustainable in particular if a government enforces a social security plan setting the pension level at the optimal gifts and individuals optimize under the pension constraint the resulting sustainable outcome is in general different from either the optimal or nash outcome

the implications of central bank transparency for uncertainty and disagreement abstract using survey data from 25 economies we provide evidence that greater transparency surrounding monetary policy reduces uncertainty of interest rates and inflation primarily by reducing uncertainty that is common to agents rather than disagreement between agents this suggests that studies that focus on disagreement as a proxy for uncertainty understate the benefits of monetary policy transparency the adoption of inflation targets and forward guidance are both associated with lower uncertainty although inflation targets have a stronger impact on reducing uncertainty than forward guidance moreover there are diminishing benefits from ever higher levels of transparency taken as a whole our results support the contention that clarity of communication is as important as the magnitude of transparency

asset bubbles and endogenous growth abstract we study the interaction between productive and nonproductive savings in economies with endogenous long run growth as in the neoclassical growth setting with overlapping generations asset bubbles can exist in an economy with endogenous growth provided that they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate here the existence conditions for bubbles reflect parameters of tastes and technology we find that bubbles when they exist retard the growth of the economy perhaps even in the long run and reduce the welfare of all generations born after the bubble appears

pay as you go or funded social security a general equilibrium comparison abstract this paper demonstrates that the analysis of fiscal sustainability of social security must include the education funding dimension of public policy which affects the productivity of future workers this fact is true under both social security regimes pay as you go payg and fully funded ff we consider an olg economy where the government in addition to running social security also funds education via a dedicated tax the education tax rates are chosen in each period by a majoritarian rule we demonstrate contrary to conjectures in the literature that the ff social security system produces political support for a relatively higher compared to payg education funding and hence generates higher rates of human capital accumulation physical capital accumulation and economic growth furthermore it also results in a comparatively lower degree of income inequality

sticky information and model uncertainty in survey data on inflation expectations abstract this paper compares three reduced form models of heterogeneity in survey inflation expectations on the one hand we specify two models of forecasting inflation based on limited information flows of the type developed in mankiw and reis 2002 sticky information versus sticky prices a proposal to replace the new keynesian phillips curve quarterly journal of economics 117 4 1295 1328 we present maximum likelihood results that suggests a sticky information model with a time varying distribution structure is consistent with the michigan survey of inflation expectations we also compare these sticky information models to the endogenous model uncertainty approach in branch 2004 the theory of rationally heterogeneous expectations evidence from survey data on inflation expectations economic journal 114 497 non parametric evidence suggests that models which allow the degree of heterogeneity to change over time provide a better fit of the data

intergenerational transfers and demographic transition abstract this paper presents an analysis of demographic transition based on the endogenous evolution of intergenerational transfers along an economy s endogenous path of development two period lived agents belonging to overlapping generations choose optimally their desired levels of consumption and fertility together with their desired sizes of transfers to both parents and children parents are more efficient than children in producing output but some parental time must be devoted to child rearing at low levels of development fertility is high and the flow of net intergenerational transfers is from the young to the old at high levels of development fertility is low and the flow of net transfers is from the old to the young these results accord strongly with empirical observations and the analysis may be seen as formalising for the first time a long standing and well respected hypothesis in the demographic transition literature

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

social security and endogenous fertility pensions and child allowances as siamese twins abstract this paper analyses public pensions and child support in a model with endogenous fertility we show that the individual fertility choice may not coincide with the social optimum due to the existence of external effects of children on society as a whole the market outcome without government intervention is efficient however as the externalities exactly cancel out in that case if the government wants to redistribute towards the old it cannot replicate the command optimum by merely applying lump sum transfers but rather needs a child allowance scheme to effectively alter the number of offspring finally we analyse whether a pareto improving social security reform is possible it is shown that merely reducing the payg scheme cannot be pareto improving but the introduction of a child allowance scheme can be

social security intergenerational transfers and endogenous growth in this paper the effects of social security in a simple model of endogenous growth with alternative motives of having children are analyzed it shows how the effects of social security depend on the size of the social security tax the motive to have children and the pattern of intergenerational transfers the pattern of intergenerational transfers itself however is shown to change with the social security tax rate when the social security tax is not too high social security increases per capita income growth and tends to enhance welfare