has india s economic growth become more pro poor in the wake of economic reforms the extent to which india s poor have benefited from the country s economic growth has long been debated a new series of consumption based poverty measures spanning 50 years including a 15 year period after economic reforms began in earnest in the early 1990s is used to examine that issue growth has tended to reduce poverty including in the post reform period there is no robust evidence of more or less poverty responsiveness to growth since the reforms began although there are signs of rising inequality the impact of growth is higher when using poverty measures that reflects distribution below the poverty line and when using growth rates calculated from household surveys rather than national accounts the urban rural pattern of growth matters for the pace of poverty reduction however in marked contrast to the period before the reforms urban economic growth in the period after the reforms has brought significant gains to the rural poor as well as the urban poor

the role of credit in the great moderation a multivariate garch approach abstract during the great moderation financial innovation in the us increased the size and scope of credit flows supporting the growth of wealth we hypothesize that spending out of wealth came to finance a wider range of gdp components such that it smoothed gdp both these trends combined would be consistent with a decrease in the volatility of output we suggest testable implications in terms of both growth of credit and output and volatility of growth in a multivariate garch framework we test this view for home mortgages and residential investment we observe unidirectional causality in variance from total output residential investment and non residential output to mortgage lending before but not during the great moderation these findings are consistent with a role for credit dynamics in explaining the great moderation

the response of the informal sector to trade liberalization this paper studies the relationship between trade liberalization and informality it is often claimed that increased foreign competition in developing countries leads to an expansion of the informal sector defined as the sector that does not comply with labor market legislation using data from two countries that experienced large trade barrier reductions in the 1980 s and 1990 s brazil and colombia we examine the response of the informal sector to liberalization in brazil we find no evidence of a relationship between trade policy and informality in colombia we do find evidence of such a relationship but only for the period preceding a major labor market reform that increased the flexibility of the colombian labor market these results point to the significance of labor market institutions in assessing the effects of trade policy on the labor market

what drives households to buy flood insurance new evidence from georgia abstract benefiting from access to detailed data on the federally run national flood insurance program for the entire state of georgia usa we analyze residential flood insurance purchasing behavior in that state over more than three decades 1978 2010 the demand for flood insurance on an extensive margin based on take up rates is found to be relatively price inelastic aligned with the behavioral economics literature recent flood events temporarily increase purchases but this effect fades after 3 years we also find that the proportion of developed area in floodplains has a significant positive impact on insurance take up rates contrary to what is often assumed we do not find evidence that insurance purchase and mitigation efforts are substitutes educated individuals individuals over the age of 45 and african americans are all else equal more likely to purchase flood insurance

to love or to pay savings and health care in older age this paper develops a dynamic structural lifecycle model to study how heterogeneous health and medical spending shocks affect the savings behavior of the elderly individuals are allowed to respond to health shocks in two ways they can directly pay for their health care expenses self insure or they can rely on health insurance contracts there are two possible insurance options one through formal contracts and another through informal care provided by family formal contracts may be affected by asymmetric information problems whereas informal insurance depends on social ties cohesion and on bequeathable wealth i estimate the model on share data using simulated method of moments for four levels of wealth in a sample of single retired europeans counterfactual experiments show that health medical spending and health insurance are indeed the main drivers of the slow wealth decumulation in old age i also find that social cohesion rises with age declines with wealth and is higher in mediterranean countries than in central european and scandinavian countries finally high social cohesion appears typically associated with increased life expectancy

a quantile estimation approach to identify income and age variation in the value of a statistical life abstract in theory heterogeneity in individual characteristics translates into variation in the marginal willingness to pay for a mortality risk reduction two dimensions of heterogeneity with respect to income and age have recently received attention due to their policy relevance we propose a quantile regression approach to simultaneously explore these two sources of heterogeneity and their interactions within the context of the hedonic wage model the most common revealed preference approach for obtaining value of statistical life estimates we illustrate the approach using data from the health and retirement study hrs we find that the impact of age on the wage risk tradeoff varies across the wage distribution this result indicates important interactions between age and income heterogeneity thus the conventional mean hedonic wage regression even when the mean effect is allowed to vary with age masks important heterogeneity

monetary policy indeterminacy and identification failures in the u s results from a robust test we propose a novel identi cation robust test for the null hypothesis that an estimated new keynesian model has a reduced form consistent with the unique stable solution against the alternative of sunspot driven multiple equilibria our strategy is designed to handle identi cation failures as well as the misspeci cation of the relevant propagation mechanisms we invert a likelihood ratio test for the cross equation restrictions cer that the newkeynesian system places on its reduced form solution under determinacy if the cer are not rejected sunspot driven expectations can be ruled out from the model equilibrium and we accept the structural model otherwise we move to a second step and invert an anderson and rubin type test for the orthogonality restrictions or implied by the system of euler equations the hypothesis of indeterminacy is accepted if the or are not rejected we investigate the nite sample performance of the suggested two steps testing strategy by some monte carlo experiments we apply our robust test to a new keynesian ad as model estimated with actual u s post wwii data in spite of some evidence of weak identi cation

on the low frequency relationship between public deficits and inflation summary we estimate the low frequency relationship between fiscal deficits and inflation and pay special attention to its potential time variation by estimating a time varying vector autoregression model for us data from 1900 to 2011 we find the strongest relationship neither in times of crisis nor in times of high public deficits but from the mid 1960s up to 1980 employing a structural decomposition of the low frequency relationship and further narrative evidence we interpret our results such that the low frequency relationship between fiscal deficits and inflation is strongly related to the conduct of monetary policy and its interaction with fiscal policy after world war ii copyright 2015 john wiley sons ltd

pro poor trade policy in sub saharan africa abstract this paper examines the presence of a pro poor bias in the existing structure of protection of six sub saharan african ssa countries burkina faso cameroon cote d ivoire ethiopia gambia and madagascar we build on a simple agricultural household production model and we propose an extension to include adjustments in labor income our approach which can be implemented without repeated cross sections of household level data suits well the data constraints in ssa it also allows us to capture the heterogeneity in trade protection at the tariff line level the pro poor bias indicators suggest that ssa s trade policies tend to be biased in favor of poor households as these policies redistribute income from rich to poor households this is because protection increases the agricultural prices of goods that are sold by african households and this effect dominates both the impacts of higher consumption prices and the strong stolper samuelson effects that benefit skilled over unskilled workers

are women more risk averse we find that single women exhibit relatively more risk aversion in financial decision making than single men using u s sample data we examine household holdings of risky assets to determine whether there are gender differences in financial risk taking as wealth increases the proportion of wealth held as risky assets is estimated to increase by a smaller amount for single women than for single men gender differences in financial risk taking are also influenced by age race and number of children greater financial risk aversion may provide an explanation for women s lower levels of wealth compared with men s jel j16 d81 g11

gender based risk aversion and retirement asset allocation this research examines whether women have higher risk aversion than men as demonstrated by their retirement asset allocation the analysis is extended to investigate how retirement asset investment decisions are made in married households initial results suggest controlling for demographic income and wealth differences lead to no significant difference in the proportion of retirement assets held in stocks between women and male faculty for married households with joint investment decision making results indicate that gender differences are a significant factor in explaining individual retirement asset allocation our estimates imply that women faculty are more risk averse than their male spouse jel j16 g11 d10

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

trade reform and poverty the case of mexico we use a two step computationally simple procedure to analyse the effects of mexico s s potential unilateral tariff liberalisation on real incomes first we use the cge model provided by the global trade analysis project gtap as the new price generator second we apply the price changes to mexican household data in order to assess the effects of the policy simulation on poverty and income distribution although mexico widely liberalised most of its imports by the mid 90s one salient feature is its membership in the north american free trade agreement nafta with canada and united states by choosing gtap as the price generator we are able to model the differential tariff structure even starting with a low level of tariff protection simulation results show that the impact of tariff reform on welfare will be positive in general for all expenditure deciles we find that when we assume non homothetic individual preferences trade liberalisation benefits people in the poorer deciles more than those in the richer ones

distributional implications of climate change in rural india a general equilibrium approach we develop a general equilibrium framework based on a specific factors trade model to quantify the medium term household welfare impacts of global warming in rural india using an hedonic approach grounded in the theory combined with detailed microdata we estimate that three decades of warming will reduce agricultural productivity in the range of 7 13 with the arid northwest of india especially hard hit our analysis shows that the proportional welfare cost of climate change is likely to be both modest and evenly distributed across percentiles of the per capita income distribution but this latter conclusion emerges only when the flexibility of rural wages is taken into account

non equivalent pass through of anti dumping duties countervailing duties and import tariffs we directly compare the short run pass through of tariffs anti dumping ad duties and countervailing cv duties into us import prices consistent with the theoretical predictions we find clear pattern of non equivalence in import price reaction to the three duty types with the most notable difference detected between ad duties and tariffs according to our estimates a tariff rate would have to be approximately two times higher than an ad duty rate in order to have the same effect on the delivered import price

food prices wages and welfare in rural india this paper considers the welfare and distributional consequences of higher relative food prices in rural india through the lens of a specific factors general equilibrium trade model applied at the district level the evidence shows that nominal wages for manual labor both within and outside agriculture respond elastically to increases in producer prices that is wages rose faster in rural districts growing more of those crops with large price run ups over 2004 09 accounting for such wage gains the analysis finds that rural households across the income spectrum benefit from higher agricultural commodity prices indeed rural wage adjustment appears to play a much greater role in protecting the welfare of the poor than the public distribution system india s giant food rationing scheme moreover policies like agricultural export bans which insulate producers as well as consumers from international price increases are particularly harmful to the poor of rural india conventional welfare analyses that assume fixed wages and focus on households net sales position lead to radically different conclusions

var analysis and the great moderation post world war ii us macroeconomic history is usually divided into two distinct subperiods the former period which extends up to the end of the volcker disinflation is characterized by a significant extent of macroeconomic turbulence with highly volatile inflation and output growth the latter period from the end of the volcker disinflation up to the present day is marked in contrast by significantly smaller volatilities for both inflation and output growth these dramatic changes in the reduced form properties of the us economy over the last several decades char acterize a phenomenon known as the great moderation see in particular chang jin kim and charles nelson 1999 margaret mcconnell and gabriel perez quiros 2000 a vast empirical literature has investigated the source s of the great moderation in an attempt to disentangle the relative contributions of two main explanations good policy and good luck based on time varying or markov switching structural var methods the good luck hypoth esis has been advocated by a number of authors including james h stock and mark w watson 2003 giorgio e primiceri 2005 christopher sims and tao zha 2006 and luca gambetti evi pappa and fabio canova 2008

evolving post world war ii u k economic performance in this paper we use tests for multiple structural breaks at unknown points in the sample and band pass filtering techniques to investigate changes in u k economic performance since the end of world war ii empirical evidence suggests that the most recent decade associated with the introduction of an inflation targeting regime has been significantly more stable than the previous post wwii era both for real gdp growth and for three measures of inflation we identify break dates around the time of the introduction of inflation targeting in october 1992 for all four series the estimated innovation variance over the most recent sub period is the lowest of the post wwii era the volatility of the band pass filtered macroeconomic indicators we consider is after 1992 almost always lower than either during the bretton woods regime or over the 1971 92 period often like in the case of inflation and real gdp markedly so the phillips correlation appears to have undergone significant changes over the last 50 years from being unstable in the 1970s to slowly stabilising from the beginning of the 1980s onwards after 1992 the correlation exhibits by far the greatest extent of stability of the post wwii era

the dynamics of inflation a study of a large number of countries over the last twenty years the statistical properties of inflation persistence has been the subject of intense investigation and debate without reaching a unanimous conclusion yet in this article we attempt to shed further light to this debate using a battery of econometric techniques in order to provide robust evidence on the degree of inflation persistence and whether this has changed during the period in which several countries have followed inflation targeting regimes or new monetary regimes we consider the inflation rates of thirty developed and emerging economies using quarterly data for the period 1958 to 2007 which include alternative monetary policy regimes the coefficient of the inflation parameter is estimated by ordinary least squares ols autoregressive moving average arma and autoregressive fractionally integrated moving average arfima models furthermore the grid bootstrap median unbiased mub estimator approach developed by hansen 1999 is used to estimate the finite sample ols

unintended consequence of trade on regional dietary patterns in rural india abstract this paper investigates how trade liberalisation has contributed to a dietary shift from one dominated by traditional staples to one high in animal products a trend that is associated with both improved intake in micronutrients and higher rates of obesity and other diet related diseases in developing countries in the context of india s trade liberalisation in 1991 we examine whether the difference in consumption of cereals and animal products across rural regions before and after the reforms can be attributed to their differential degree of exposure to tariff reductions the estimates reveal that trade reforms have a negative impact on cereal consumption through reducing edible oil prices and a positive effect on the consumption of animal products through enhancing consumer tastes towards these foods these findings provide evidence for the role of trade in supporting dietary diversity and highlight the need for complementary policies to enhance the coherence between trade policy and nutrition actions

retirement savings a tale of decisions and defaults we examine the behavior of members of an industry wide pension fund to assess both the prevalence of defaults and their impact on retirement savings our empirical investigations show that preferences demographic characteristics and labor mobility matter greatly when it comes to the extent of active plan choice or high defaulting and overall level of pension benefits using a structural dynamic life cycle model we then evaluate the ability of these empirically motivated factors to explain retirement savings patterns in our model individuals decide how much to save in a setting that combines irreversible automatic enrolment with an active decision regime after automatic enrolment there is an initial choice between two pension plans defined benefit vs defined contribution and then members decide possibly by default their voluntary contributions and type of investment allocation we estimate the model using the simulated method of moments on administrative data from a large australian pension fund our results show that default settings strongly influence wealth accumulation such settings are also highly persistent both over time and across decisions overall our findings suggest that if defaults particularly the irreversible ones are not carefully designed retirement savings can be severely affected this article is protected by copyright all rights reserved

the persistence of inflation in the united states abstract has the persistence of inflation in the united states changed since 1965 we estimate the persistence of inflation over time using different measures and estimation procedures and we produce confidence intervals for our estimates as well as formal tests of unchanged persistence we find that inflation persistence has been high and approximately unchanged in the u s over our sample period we reconcile our results with other studies that reached different conclusions

what explains the great moderation in the u s a structural analysis this paper investigates what has caused output and inflation volatility to fall in the u s using a small scale structural model using bayesian techniques and rolling samples there are instabilities in the posterior of the parameters describing the private sector the policy rule and the variance of the shocks results are robust to the specification of the policy rule changes in the parameters describing the private sector are the largest but those of the policy rule and the covariance matrix of the shocks explain the changes most jel e52 e47 c53

realized and optimal monetary policy rules in an estimated markov switching dsge model of the united kingdom this paper investigates underlying changes in the u k economy over the past thirty five years using a small open economy dsge model using bayesian analysis we find uk monetary policy nominal price rigidity and exogenous shocks are all subject to regime shifting a model incorporating these cha nges is used to estimate the realised monetary policy and derive the optimal mon etary policy for the uk this allows us to assess the effectiveness of the realis ed policy in terms of stabilising economic fluctuations and in turn provide an ind ication of whether there is room for monetary authorities to further improve their polic ies

a prism into the ppp puzzles the micro foundations of big mac real exchange rates we match big mac prices with prices of its ingredients as a unique prism to study real exchange rates rers this approach has several advantages first the levels of the big mac rer can be measured meaningfully second as the exact composition of a big mac is known the contributions of its tradable and non tradable components can be estimated relatively precisely third the dynamics of the rer can be studied in a setting free of several biases inherent in cpi based rers finally a large cross country dimension allows us to overturn the engel result on what drives rers in most economies the exchange rate is the single most important relative price one that potentially feeds back into a large range of transactions obstfeld and rogoff 2000

asset allocation and individual risk aversion 1992 asset allocation and individual risk aversion financial analysts journal vol 48 no 6 pp 32 37

do finance professors invest like everyone else comparing the results of the fed s survey of consumer finances with those of a survey of finance professors at u s universities the authors found that finance professors are significantly more likely than others to invest in equities they also found that finance professors are less prone to behavioral biases because their decision not to invest in equities is based on neither the outcome of their past investments nor their short term expectations of the market see comments and response on this article

protection in government procurement auctions abstract discrimination against foreign bidders in procurement auctions has typically been achieved by price preferences we demonstrate that in the bidding game each level of protection via a price preference can be achieved by an equivalent tariff when government welfare depends only on net expenditures this equivalence carries over to the government s decision as such this equivalence provides a justification that agreements to eliminate price preferences to be taken in tandem with agreements to lower tariffs e g the government procurement agreement gpa in the broader context of the wto

risk preferences and expected utility evidence from labor supply data i introduction why do some people enjoy bungee jumping while others do not why do some individuals hold extensive insurance portfolios it is intuitive to attribute these differences between people to their individual preferences for risk a concept that is appealing but hard to quantify arrow 1965 and pratt s 1964 coefficient of relative risk aversion rra has been the standard risk measure since the mid 1960s it relies on expected utility theory eut and the fact that the utility function is concave over wealth although eut is still widely used in economics theorists are increasingly unsatisfied with its performance this is true when applied specifically to risk aversion as well for example rabin 2000 provides a calibration argument that shows that if an expected utility maximizer is not essentially risk neutral over a modest stakes gamble he will be unrealistically risk averse over a large risk gamble he concludes that aversion to modest stakes risk has nothing to do with the diminishing marginal utility of wealth 1282 a frequent argument for continuing to use eut despite failures of its axioms is that it adequately explains behavior an empirical measure of risk aversion that explains behavior is very desirable as risk preference plays an important role in many decisions of interest to economists using a labor supply regression and information on each individual s income and hours of work i compute a measure of risk aversion gamma sub ls that is the curvature of utility over wealth and compare this measure of risk aversion to one based on the individual s willingness to accept gambles over lifetime income go both should measure an individual s preferences for large scale risk while it has been well established that an individual s risk preferences with respect to both large and small scale risk cannot be adequately explained by eut comparing gamma sub g and gamma sub ls affords an opportunity to see how eut performs over gambles of the same scale if eut is a good predictive model for behavior under uncertainty individuals who have a very concave utility function as measured by gamma sub ls should be less willing to gamble with lifetime income than those with smaller values of gamma sub ls i find no correlation between the two measures implying that eut does not explain the variation in risk preferences as measured by a hypothetical gambling frame many economists have questioned whether hypothetical choices are a good proxy for actual decisions in the context of risk and perhaps the discrepancy in the two measures stems from this from a preliminary look at how these measures vary with actual risky choices it appears that the measure of the curvature of utility over wealth does a better job of explaining actual risky choices such as smoking and binge drinking and the hypothetical gambling frame does a better job explaining people s responses to other hypothetical risky situations this is of interest for theorists who are trying to find the new direction for choices under uncertainty but also for empiricists who wish to use risk preferences to explain decision making and behavior ii measuring risk aversion with labor supply data aside from concerns as to the validity of eut risk aversion can be difficult to measure as it requires specific information on an individual s utility function chetty 2006 uses the fact that rra is directly related to the ratio of the income and compensated wage elasticities of labor supply and presents a formula that allows for the estimation of the coefficient of rra using labor supply data recall that rra is proportional to u sub cc u sub c where u sub c is the first partial derivative of the utility function with respect to consumption and u sub cc is the second derivative an agent s compensated wage elasticity is directly related to u sub c the larger the marginal utility of consumption the more benefit the agent gets from an additional dollar of income so the more willing he is to work when his wage increases

tariff pass through and the distributional effects of trade liberalization abstract this paper estimates the distribution of welfare gains due to the trade reforms in india by simultaneously considering the effect on prices of tradable goods and wages the cost of consumption for each household is affected by the domestic price changes while wage incomes adjust to these price changes in equilibrium three rounds of the indian employment and consumption surveys are used for the analysis the price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices in order to assess the distributional effects a series of nonparametric local linear regressions are estimated the findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization while the average effect was generally pro poor and varied significantly across the per capita expenditure spectrum

using survey data to assess the distributional effects of trade policy the author develops and applies a methodology to empirically explore the effects of trade policies on the distribution of income and poverty in developing countries he uses a methodology based on two links one connecting trade policies to prices and another connecting prices to household welfare the author applies the methodology to the study of the distributional effects of mercosur on argentine families the main finding is that mercosur benefits the average argentine household across the entire income distribution there is evidence of a pro poor bias of the regional trade agreement on average poor households gain more from the reform than middle income households whereas the effects on rich families are positive but not statistically significant prior to the reform argentine trade policy protected the rich over the poor and after the reform granted some protection to the poor as relative pre mercosur tariffs are higher on relatively skill intensive goods the tariff removals tend to benefit the poor over the rich these findings indicate that trade reforms may actually help improve the distribution of income and reduce poverty in the country

household impacts of tariffs data and results from agricultural trade protection how do trade reforms impact households in different parts of the income distribution this paper presents a new database the household impacts of tariffs data set which contains harmonized household survey and tariff data for 54 low and lower middle income countries the data cover highly disaggregated information on household budget and income shares for 53 agricultural products wage labor income nonfarm enterprise sales and transfers as well as spending on manufacturing and services using a stylized model of the first order impacts of import tariffs on household real income this paper quantifies the welfare implications of agricultural trade protection on average unilateral elimination of agricultural tariffs would increase household incomes by 2 50 percentage points import tariffs have highly heterogeneous effects across countries and within countries across households consumers and income earners the average standard deviation of the gains from trade within a country is 1 01 percentage points

the time varying volatility of macroeconomic fluctuations we investigate the sources of the important shifts in the volatility of us mac roeconomic variables in the postwar period to this end we propose the esti mation of dsge models allowing for time variation in the volatility of the structural innovations we apply our estimation strategy to a large scale model of the business cycle and find that shocks specific to the equilibrium condition of investment account for most of the sharp decline in volatility of the last two decades jel c51 e32

the great moderation in the united kingdom we use a bayesian time varying parameters structural var with stochastic volatility for gdp deflator inflation real gdp growth a 3 month nominal rate and the rate of growth of m4 to investigate the underlying causes of the great moderation in the united kingdom our evidence points toward a dominant role played by good luck in fostering the more stable macroeconomic environment of the last two decades results from counterfactual simulations in particular show that i bringing the monetary policy committee back in time would only have had a limited impact on the great inflation episode at the cost of lower output growth ii imposing the 1970s monetary rule over the entire sample period would have made almost no difference in terms of inflation and output growth outcomes and iii the great inflation was due to a dominant extent to large demand non policy shocks and to a lesser extent especially in 1973 and 1979 to supply shocks

would the bundesbank have prevented the great inflation in the united states abstract policy counterfactuals based on estimated structural vars routinely suggest that bringing alan greenspan back in the 1970s united states would not have prevented the great inflation we show that a standard policy counterfactual suggests that the bundesbank which is near universally credited for sparing west germany the great inflation would also not have been able to prevent the great inflation in the united states the implausibility of this result sounds a cautionary note on taking the outcome of svar based policy counterfactuals at face value and raises questions on the reliability of such exercises

the transmission of international shocks to the uk estimates based on a time varying factor augmented var the aim of this paper is to gauge the importance of foreign demand supply and interest rate shocks on the uk economy and assess how their role has changed over time to that end we devise a time varying factor augmented var model that captures the relationship between 17 industrialised countries and the uk and accounts for any temporal evolution in this relationship the response of uk macroeconomic variables to a foreign interest rate shock is estimated to have changed significantly since the early 1990s international demand shocks play an important role in driving world and uk real activity especially during the recent recession

the structural dynamics of u s output and inflation what explains the changes we examine the dynamics of u s output and inflation using a structural time varying coefficients vector autoregression there are changes in the volatility of both variables and in the persistence of inflation but variations are statistically insignificant technology shocks explain changes in output volatility real demand disturbances variations in the persistence and volatility of inflation we detect important time variations in the transmission of technology shocks to output and demand shocks to inflation and significant changes in the variance of technology and of monetary policy shocks

oil price shocks in a data rich environment abstract this paper examines the impact of different types of oil price shocks on the u s economy using a factor augmented var favar approach the results indicate that when examining the effects of oil price shocks it is important to account for the interaction between the oil market and the macroeconomy i find that oil demand shocks are more important than oil supply shocks in driving several macroeconomic variables and that the origin of demand shocks matters specifically the u s economy and monetary policy respond differently to global demand shocks that have the effect of raising the price of oil and to oil specific demand shocks

are risk averse agents more optimistic a bayesian estimation approach our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance this quantity is of particular importance since it characterizes the consensus belief in risk taking situations with heterogeneous beliefs its estimation leads to a nontrivial statistical problem we start from a large lottery survey 1 536 individuals we assume that individuals have true unobservable characteristics and that their answers in the survey are noisy realizations of these characteristics we adopt a bayesian approach for the statistical analysis of this problem and use an hybrid mcmc approximation method to numerically estimate the distributions of the unobservable characteristics we obtain that individuals are on average pessimistic and that pessimism and risk tolerance are positively correlated as a consequence we conclude that the consensus belief is biased towards pessimism

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

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

rice prices and income distribution in thailand a non parametric analysis rice is a staple crop in thailand significantly entering both household production and consumption this paper examines the effect of rice prices on the distribution of real income across households taking into account household characteristics and geographical location the data set is a large scale survey of 11 893 households simple nonparametric techniques for regression and density estimation are used these methods depend on few assumptions and generate flexible graphical results that are directly informative about the problem at hand the main results are that higher rice prices should benefit all rural households but the largest benefits accrue to rural households in the middle of the income distribution copyright 1989 by royal economic society

monetary accommodation imperfect central bank transparency and optimal delegation optimal delegation restores the beneficial effects of non accommodating monetary policy when the central bank is allowed to be not fully transparent about its response to wages

gender differences in risk aversion and expected retirement benefits women are generally considered more risk averse than men controlling for age income and education this study examined the impact of gender on the superannuation retirement fund risk preferences of staff in the australian university sector the findings suggest that women choose more conservative investment strategies than men and that lower income which affects the amount members contribute to their superannuation funds is the primary contributor to the lower projected retirement benefits of women providing members with a choice among risk levels in their retirement investments should significantly benefit male and female retirees

evolving u s monetary policy and the decline of inflation predictability based on a structural var with time varying parameters and stochastic volatility for the post wwii u s we document a negative correlation between the evolution of the long run coefficient on inflation in the structural monetary rule and the evolution of the persistence and predictability of inflation relative to a trend component using an estimated sticky price model we show that a more aggressive policy stance towards inflation causes a decline in inflation predictability jel e37 e52 e58

the lucas critique and the stability of empirical models this paper re considers the empirical relevance of the lucas critique using a dsge sticky price model in which a weak central bank response to inflation generates equilibrium indeterminacy the model is calibrated on the magnitude of the historical shift in the federal reserve s policy rule and is capable of generating the decline in the volatility of inflation and real activity observed in u s data using monte carlo simulations and a backward looking model of aggregate supply and demand we show that shifts in the policy rule induce breaks in both the reduced form coefficients and the reduced form error variances the statistics of popular parameter stability tests are shown to have low power if such heteroskedasticity is neglected in contrast when the instability of the reduced form error variances is accounted for the lucas critique is found to be empirically relevant for both artificial and actual data

were there regime switches in u s monetary policy working paper 2004 14 june 2004 abstract a multivariate model identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances is confronted with u s data since 1959 the best fit is with a model that allows time variation in structural disturbance variances only among models that also allow for changes in equation coefficients the best fit is for a model that allows coefficients to change only in the monetary policy rule that model allows switching among three main regimes and one rarely and briefly occurring regime the three main regimes correspond roughly to periods when most observers believe that monetary policy actually differed and the differences in policy behavior are substantively interesting though statistically ill determined the estimates imply monetary targeting was central in the early 80s but was also important sporadically in the 70s the changes in regime were essential neither to the rise in inflation in the 70s nor to its decline in the 80s jel classification e52 e47 c53 key words counterfactuals lucas critique policy rule monetary targeting simultaneity volatility model comparison i the debate over monetary policy change in an influential paper clarida gali and gertler 2000 cgg presented evidence that us monetary policy changed between the 1970 s and the 1980 s indeed that in the 70 s it was drastically worse they found that the policy rule apparently followed in the 70 s was one that when embedded in most stochastic general equilibrium models would imply non uniqueness of the equilibrium and hence vulnerability of the economy to sunspot fluctuations of arbitrarily large size their estimated policy rule for the later period on the other hand eliminated this indeterminacy these results are a possible explanation of the volatile and rising inflation of the 70 s and of its subsequent decline the cgg analysis has two important weaknesses one is that it fails to account for stochastic volatility us macroeconomic variables and particularly the federal funds rate have gone through periods of tranquility and of agitation with forecast error variances varying greatly from period to period ignoring such variation does not lead to inconsistent estimates of model parameters when the forecasting equations themselves are constant but it strongly biases toward a finding of changed parameters tests of the stability of the forecasting equations the other weakness is that the cgg analysis rests on powerful and implausible identifying assumptions they require that we accept that the response of the monetary authority to expected future inflation and output does not depend on the recent history of inflation money growth or output it is hard to understand why this should be so especially in the 70 s when monetarism was a prominent theme in policy debates congress was requiring reports from the fed of projected time paths of monetary aggregates and financial markets were reacting sensitively to weekly money supply numbers the requirement for existence and uniqueness of equilibrium in dynamic models is that the monetary policy rule show a more than unit response of interest rates to the sum of the logs of all nominal variables that appear on the right hand side of the reaction function if we force a particular measure of expected future inflation to proxy for all the nominal variables that actually appear independently in the reaction function we are bound to get distorted conclusions on the one hand because expected future inflation will be a noisy measure of the full set of nominal influences on policy we might get downward bias in our estimates from the usual errorsin variables effect on the other hand to the extent that expected future inflation like most expected future values shows less variation than current nominal variables we could find a mistaken scaling up of coefficients

the price effect of tariff liberalization measuring the impact on household welfare abstract trade policy literature has for many years emphasized open policies positive impact on economic growth and development while these results generally hold when measured on averages empirical evidence suggests that trade liberalization is unlikely to produce beneficial results across all households this study adds to the literature by providing an analysis of the distributive effects of tariff liberalization in mexico the paper examines the effect of tariff liberalization from the perspective of households both as consumers and factor owners allowing for imperfect domestic price transmission the results indicate the overall positive effect of tariff liberalization masks significant differences in the distribution of gains both across income levels and across geographic regions richer households are found to have gained relatively more urban areas as well as mexican states closest to the united states border are also found to be larger beneficiaries while southernmost states have been largely bypassed by the effects of tariff liberalization those results can be explained not only in relation to the different endowments of the households but also by the diverse effects on local prices that has resulted from mexican trade liberalization

structural changes in the us economy is there a role for monetary policy this paper investigates the contribution of monetary policy to the changes in output growth and inflation dynamics in the us we identify a policy shock and a policy rule in at ime varying coefficients var using robust sign restrictions the transmission of policy shocks has been relatively stable the variance of the policy shock has decreased over time but policy shocks account for a small fraction of the level and of the variations in inflation and output growth volatility and persistence we find little evidence of a significant increase in the long run response of the interest rate to inflation a more aggressive inflation policy in the 1970s would have produced large output growth costs

the risk preferences of u s executives in this paper i elicit risk attitudes of u s executives by calibrating a subjective option valuation model for option exercising data 1996 to 2008 yielding approximately 65 000 values of relative risk aversion rra for almost 7 000 executives the observed behavior is generally consistent with moderate risk aversion and a median mean rra close to one three values are validated for chief executive officers ceos by testing theory based predictions on the influence of individual characteristics on risk preferences such as gender marital status religiosity and intelligence senior managers such as ceos presidents and chairpersons of the boards of directors are significantly less risk averse than non senior executives rra heterogeneity is strongly correlated with sector membership and firm level variables such as size performance and capital structure alternative factors influencing option exercises are tested for their influence on rra values this paper was accepted by brad barber finance

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

gender differences in risk behavior an analysis of asset allocation decisions in ghana abstract within a developing country context little is known about gender differences in risk preferences as reflected in asset allocation decisions much of the empirical literature within development studies on risk and investment in assets centers on risk coping and risk management strategies of households with some exceptions this literature primarily focuses on household and household level outcomes previous experimental studies have explored gender differences in risk preferences in developing countries with inconclusive results using unique national representative sex disaggregated data with self reported asset ownership and wealth information of individuals within households in ghana from a multi country project the gender asset gap project this paper explores men and women s risk preferences as reflected in asset allocation decisions through a decomposition method typically used to explore gender differences in wage employment the study finds that although women hold significantly fewer risky assets than men in absolute terms and as a proportion of their wealth in the sample men and women do not have systematically different risk preferences the results in this paper differ from the results in many empirical studies in developed countries where women are often found to be more risk averse than men as the first study to look at gender differences in risk aversion in terms of asset allocation with in the developing country context the results from this study provide evidence that gender differences in risk attitudes may vary by cultural context as the growing experimental literature in developing countries suggests

trade wages and the political economy of trade protection evidence from the colombian trade reforms abstract worker industry affiliation plays a crucial role in how trade policy affects wages in many trade models yet most research has focused on how trade policy affects wages by altering the economy wide returns to a specific worker characteristic i e skill or education rather than through worker industry affiliation this paper exploits drastic trade liberalizations in colombia in the 1980s and 1990s to investigate the relationship between protection and industry wage premiums we relate wage premiums to trade policy in an empirical framework that accounts for the political economy of trade protection accounting for time invariant political economy factors is critical when we do not control for unobserved time invariant industry characteristics we find that workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors allowing for industry fixed effects reverses the result trade protection increases relative wages this positive relationship persists when we instrument for tariff changes our results are in line with short and medium run models of trade where labor is immobile across sectors or alternatively with the existence of industry rents that are reduced by trade liberalization in the context of the current debate on the rising income inequality in developing countries our findings point to a source of disparity beyond the well documented rise in the economy wide skill premium because tariff reductions were proportionately larger in sectors employing a high fraction of less skilled workers the decrease in the wage premiums in these sectors affected such workers disproportionately

financial fragility in the great moderation abstract a nascent literature explores the measurement of financial fragility this paper considers evidence for rising financial fragility during the 1984 2007 great moderation in the u s the literature suggests that macroeconomic stability combined with strong growth of credit to asset markets in asset prices and in credit relative to output are all indicators of rising financial fragility we show each of these trends in the great moderation we derive the testable implication that in the great moderation credit growth is driven more by past credit growth and less by output growth allen and gale 2000 relative to pre great moderation years results from a var model estimated on quarterly data for 1955 2007 are consistent with the hypothesis this invites a reinterpretation of the great moderation our methodology may help understand when a credit boom turns into a credit bubble and contributes to the development of methods of measuring financial fragility

the development trinity how regional integration impacts growth inequality and poverty developing countries today have become more active participants in regional trade agreements this raises questions about how the benefits of integration are distributed and the extent to which lower income countries are able to capture development gains historically such impacts have been difficult to identify with precision this paper seeks to address this gap by empirically analysing the impact of regional integration on development particularly the effects on growth and welfare using both bilateral and regional integration measures we show that the ability to capture gains from integration varies across developing country regional groups with developing asia benefiting on par with developed countries the findings in the paper indicate that trade and trade policy play an important role in reducing inequality and poverty in developing countries it also shows that regionalism can function as a channel to make multilateralism a more adept way of addressing national challenges