what accounts for the changes in u s fiscal policy transmission using vector autoregressions on u s time series for 1957 79 and 1983 2004 we find government spending shocks to have stronger effects on output consumption and wages in the earlier period we try to account for this observation within a dsge model featuring price rigidities and limited asset market participation specifically we estimate the structural parameters of the model for both periods by matching impulse responses model based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the volcker greenspan period

keep your friends close the effect of local social networks on child human capital outcomes abstract social networks can affect demand for human capital investments by relaxing household time or budget constraints or by defining and reinforcing human capital preferences however empirically identifying the effect of social networks on human capital investment is usually problematic because households self select their networks in ways that may be correlated with their abilities to make these investments in northern ugandan internally displaced persons camps networks were not entirely self selected rebel activity which forced households into camps in 2002 disrupted pre existing social networks in ways that were exogenous to household human capital preferences this paper uses the exogenous variation in network disruption to identify a positive impact of networks on children s long term nutritional outcomes

the random walk hypothesis of the exchange rate abstract we show that the exchange rate can follow a random walk without assuming risk neutrality we are thus able to derive a random walk hypothesis for the exchange rate which is associated with a risk premium that may differ from zero

stochastic saddlepoint systems stabilization policy and the stock market abstract we examine the effects of introducing stochastic shocks into a linear rational expectations model with saddlepoint dynamics generated by a forward looking asset price we derive the fundamental differential equation governing the path of the asset price as a function of the sluggish variable the equation does not admit closed form solutions in general but we provide a complete qualitative characterization of the solution paths which are symmetric about equilibrium these are the relevant solutions to consider in the presence of symmetric boundary conditions we present an application of the analysis to fiscal stabilization policy where public expenditures are only adjusted when gnp moves outside a threshold around a target level the impact of such a policy on the level of the stock market is considered and it is shown how the market will anticipate such state contingent policy changes whether the expectations are stabilizing or not is shown to depend on whether the stock market is positively or negatively correlated with gnp

short term and long term interest rates in a monetary model of a small open economy abstract this paper analyzes the effects of both anticipated and unanticipated monetary and fiscal disturbances on the dynamic behavior of a monetary model of a small open economy it focuses on the adjustment of the short term and long term interest rates and the divergence of their transitional paths particularly in anticipation of these disturbances the analysis demonstrates how anticipation of a future policy change can generate perverse short run behavior the essential reason for the divergence between the short and long rates is that the latter is dominated by long term expectations while the former is primarily determined by current influences

effects of anticipated central bank actions on tobin s q share prices and exchange rate in a small open economy abstract qualitative features of response patterns of domestic share price the exchange rate and tobin s q are analyzed to compare the effects of three types of anticipated central bank policies in a small open economy exchange of domestic money with domestic shares exchange of domestic money with foreign bonds and exchange of domestic shares with foreign bonds all of equal values in domestic currency tobin s q adjusts monotonically to a new equilibrium in response to all three anticipated actions aside from the initial discontinuous changes when anticipated actions are first announced under a set of plausible assumptions on the model parameters the exchange rate and the share price are shown to respond non monotonically to the announced exchange of domestic money with foreign bonds if the announcement is made sufficiently far in advance the paper also demonstrates that the exchange of domestic shares with foreign bonds is most effective in moving the terms of trade the paper establishes conditions for nonmonotone response patterns in terms of real rate of return to the domestic shares after distinguishing overshooting response pattern from another non monotone pattern called misadjusting in this paper where the initial response of a variable to a shock is a movement away from equilibrium these response patterns are characterized in terms of two parameters and their relative sizes with respect to the implementation lags of announced actions

foreign interest rate disturbance financial flows and physical capital accumulation in a small open economy this paper focuses on the interaction of financial capital movements and accumulation of physical capital in a small open economy faced with a foreign interest disturbance it is shown that endogenizing physical capital has important implications for the exchange rate dynamics not captured by models which assume a fixed capital stock an increase in the foreign interest rate leads to decumulation of physical capital reduces the full employment level of output increases foreign debt and depreciates the currency appropriate monetary and fiscal policies could counteract the effects on domestic wealth and the reduction in the stock of capital

stock market conditions and monetary policy in a dsge model for the u s abstract this paper investigates the interactions between stock market fluctuations and monetary policy within a dsge model for the u s economy first we design a framework in which fluctuations in households financial wealth are allowed but not necessarily required to exert an impact on current consumption this is due to the interaction in the financial markets of long time traders holding wealth accumulated over time with newcomers holding no wealth at all importantly we introduce nominal wage stickiness to induce pro cyclicality in real dividends additional nominal and real frictions are modeled to capture the pervasive macroeconomic persistence of the observables employed to estimate our model we fit our model to post wwii u s data and report three main results first the data strongly support a significant role of stock prices in affecting real activity and the business cycle second our estimates also identify a significant and counteractive response of the fed to stock price fluctuations third we derive from our model a microfounded measure of financial slack the stock price gap which we then contrast to alternative ones currently used in empirical studies to assess the properties of the latter to capture the dynamic and cyclical implications of our dsge model the behavior of our stock price gap is consistent with the episodes of stock market booms and busts occurred in the post wwii as reported by independent analyses and closely correlates with the current financial meltdown typically employed proxies of financial slack such as detrended log indexes or growth rates show limited capabilities of capturing the implications of our model consistent index of financial stress cyclical properties of the model as well as counterfactuals regarding shocks to our measure of financial slackness and monetary policy shocks are also proposed

monetary and fiscal policy interactions in the post war u s abstract a new keynesian model allowing for an active monetary and passive fiscal policy ampf regime and a passive monetary and active fiscal policy pmaf regime is estimated to fit various u s samples from 1955 to 2007 the results show that data in the pre volcker periods strongly prefer an ampf regime even with a prior centered in the pmaf region the estimation however is not very informative about whether the federal reserve s reaction to inflation is greater than one in the pre volcker period because much lower values can still preserve determinacy under passive fiscal policy in addition whether a pmaf regime can generate consumption growth following a government spending increase depends on the degree of price stickiness an income tax cut can yield an unusual negative labor response if monetary policy aggressively stabilizes output growth

identity and the economics of organizations on plebes first day at west point called r day they strip down to their underwear their hair is cut off they are put in uniform they then must address an older cadet with the proper salute and with the statement sir new cadet doe reports to the cadet in the red sash for the first time as ordered plebes must stand and salute and repeat and stand and salute and repeat until they get it exactly right all the while being reprimanded for every tiny mistake in the summary of david lipsky 2003 pp 145 154 who spent four years tracking a company of cadets at west point on r day you surrender your old self in stages but r day is just the beginning of the training and personal re engineering that is to come so that west point graduates emerge four years later as loyal officers in the u s army lipsky shows that despite some failure this tough program is remarkably successful in creating officers with the will to lead in battle economists current picture of organizations and work incentives has no place for the west point program and the motivations it seeks to inculcate in recruits in a standard economic model an individual s preferences are fixed and utility depends only on pecuniary variables the army s aim at west point is to change cadets preferences they wish to inculcate non economic motives in the cadets so that they have the same goals as the u s army alternatively stated the goal of west point is to change the identity of the cadets so they will think of themselves above all else as officers in the u s army they will feel bad about themselves they will lose utility if they fall short of the ideals of such an officer this change in identity

household consumption smoothing through ethnic ties evidence from cote d ivoire abstract this paper investigates the hypothesis that households in cote d ivoire take part in spatially diversified risk sharing arrangements with members of their own ethnic group empirical tests are presented using several estimation methods to deal with heteroscedasticity measurement error and extreme value problems to examine whether results are robust across estimation procedures the hypothesis of complete risk sharing within ethnic groups is rejected however there appears to be some partial insurance performed by individual households with other members of the same ethnic group particularly for the households residing in the regions least likely to have access to formal financial arrangements

rdp 8708 risk effects versus monetary effects in the determination of short term interest rates economic theory offers two distinct approaches to the modeling of interest rates at the microeconomic level interest rates are modeled as an outcome of intertemporal optimization by investors so that real interest rates are determined entirely by the real variables that characterize risk at the macroeconomic level short term behavior of interest rates is usually thought of as being governed by the money demand function this paper tests a model that encompasses both views using data for four countries the results suggest that risk factors are empirically insignificant in explaining interest rate behavior copyright 1989 by the london school of economics and political science

surviving andersonville the benefits of social networks in pow camps twenty seven percent of the union army prisoners captured july 1863 or later died in captivity at andersonville the death rate may have been as high as 40 percent how did men survive such horrific conditions using two independent datasets we find that friends had a statistically significant positive effect on survival probabilities and that the closer the ties between friends as measured by such identifiers as ethnicity kinship and the same hometown the bigger was the impact of friends on survival probabilities jel n41 z13

peers at work we study peer effects in the workplace specifically we investigate whether how and why the productivity of a worker depends on the productivity of coworkers in the same team using high frequency data on worker productivity from a large supermarket chain we find strong evidence of positive productiv ity spillovers from the introduction of highly productive personnel into a shift worker effort is positively related to the productivity of workers who see him but not workers who do not see him additionally workers respond more to the presence of coworkers with whom they frequently interact we conclude that social pressure can partially internalize free riding externalities that are built into many workplaces jel j24 l81 m54

clearing up the fiscal multiplier morass bayesian prior predictive analysis of five nested dsge models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers multipliers are decomposed into wealth and substitution effects yielding uniform comparisons across models by constraining the multiplier to tight ranges model and prior selections bias results revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data when monetary policy actively targets inflation output multipliers can exceed one but investment multipliers are likely to be negative passive monetary policy produces consistently strong multipliers for output consumption and investment

productivity and growth verdoorn s law revisited abstract this paper presents causality tests on manufacturing output and labour productivity to examine the so called verdoorn law the conclusion is that a modified granger test supports verdoorn s law

money demand and the effects of fiscal policies this paper reexamines the choice of the scale variable in the money demand function a variety of evidence suggests that consumer spending is a better scale variable than gnp changing the money demand specification along these lines can profoundly affect the standard keynesian analysis of a tax cut copyright 1986 by ohio state university press

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

the effects of government expenditure on the term structure of interest rates most formal macroeconomic models treat all assets as being of common maturity typically this is assumed to be either extremely infinitesimally short a short term bill or infinitely long a perpetuity in reality of course there is a whole spectrum of assets in existence having varying times to maturity moreover different agents in the markets are concerned with rates of return extending over different time horizons participants in asset markets can typically adjust their portfolios virtually instantaneously so that some short run rate of return is appropriate as an argument of the relevant asset demand functions on the other hand investors in physical equipment are typically locked into some longterm financial arrangement in which case it is some long term rate that is the appropriate argument of the investment function provided that the financial markets operate efficiently arbitrage by participants in the asset markets will bring the instantaneous rates of return on assets of varying maturities into equality l in this paper we introduce both a short rate and a long rate into a simple dynamic macroeconomic model the framework we employ is the familiar blinder solow 1973 model it is shown how through arbitrage the current long rate at any point

monetary policy in a cash in advance economy employment capital accumulation and the term structure of interest rates in this paper we study the effects of monetary policies on employment capital accumulation consumption and the term structure of interest rates in a cash in advance economy where money is required for consumption expenditures monetary policy involves targeting the inflation rate the detailed dynamics of the model are fully worked out as no numerical analysis is involved we are able to identify very clearly the different channels through which monetary policy will impinge on the important macroeconomic variables the model is also used to discuss the great canadian

the stock market and investment another look at the micro foundations of q theory this paper introduces a novel distinction between real q and financial q the paper examines three versions of financial q developed by brainard and tobin minsky and hayashi respectively these theories differ regarding the nature of stock market price determination and their use of marginal productivity theory it is shown that non profit maximising behaviour by managers does not invalidate q theory it is also shown that if managers and shareholders have different profit expectations this leads to an equilibrium value of q that differs from unity lastly the implicit claims in q theory regarding the efficient role of stock markets as regulators of capital accumula tion are shown to depend on assumptions about stockholder behaviour

sterling and oil discoveries the mystery of nonappreciation abstract this paper analyzes the impact of north sea oil discoveries on the value of sterling by looking at market reactions to announcements of oil discoveries it shows there is no evidence for the common view that oil discoveries led to an appreciation of sterling it also explores alternative explanations for the nonappreciation of sterling

consumption insurance an evaluation of risk bearing systems in low income economies the hypothesis of full risk sharing can be taken to data from low income countries and evaluate formal and informal financial systems in many contexts idiosyncratic risks are high so credit insurance arrangements could be beneficial statistical tests reveal that households in southern india take advantage of these possibilities villages in cote d ivoire and countries in thailand do not do as well the paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems the full information and mechanism design frameworks provide benchmarks for policy analysis

the price stability oriented monetary policy of the ecb an assessment the definition of price stability adopted by the ecb has recently been criticized in the literature particularly for being unable to fully anchor inflation expectations and creating a deflation risk in the paper empirical evidence is provided against these claims despite the unfavourable macroeconomic conditions for the euro area since 2001 monetary policy management has lead to the setting of the policy rate at levels compatible with trend inflation the long run inflation forecast in the range 1 3 and therefore without affecting negatively the inflation outlook

fiscal stimulus with learning by doing using a bayesian svar analysis we document that an increase in government purchases raises private consumption the real wage and total factor productivity tfp while reducing inflation each of these facts is hard to reconcile with both neoclassical and new keynesian models we extend a standard new keynesian model to allow for skill accumulation through past work experience following chang gomes and schorfheide 2002 an increase in government spending increases hours and induces skill accumulation and higher measured tfp and real wages in subsequent periods future marginal costs fall lowering future expected inflation and through the monetary policy rule the real interest rate consumption increases as a result

government investment and fiscal stimulus effects of government investment are studied in an estimated neoclassical growth model the analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus implementation delays for building public capital and expected fiscal adjustments to deficit financed spending implementation delays can produce small or even negative labor and output responses to increases in government investment in the short run anticipated fiscal adjustments matter both quantitatively and qualitatively for long run growth effects when public capital is insufficiently productive distorting financing can make government investment contractionary at longer horizons

economic integration and political disintegration in a world of trade restrictions large countries enjoy economic benefits because political boundaries determine the size of the market under free trade and global markets even relatively small cultural linguistic or ethnic groups can benefit from forming small homogeneous political jurisdictions this paper provides a formal model of the relationship between openness and the equilibrium number and size of countries and successfully tests two implications of the model firstly the economic benefits of country size are mediated by the degree of openness to trade secondly the history of nation state creations and secessions is influenced by the trade regime

the response of asset prices to monetary policy shocks stronger than thought standard macroeconomic theory predicts rapid responses of asset prices to monetary policy shocks small scale vector autoregressions vars however often find sluggish and insignificant impact effects using the same high frequency instrument to identify monetary policy shocks we show that a large scale dynamic factor model finds overall stronger and quicker asset price reactions compared to a benchmark var both on euro area and us data our results suggest that incorporating a sufficiently large information set is crucial to estimate monetary policy effects

dynamic games and the time inconsistency of optimal policy in open economies it has been argued that the bretton woods system of pegged but adjustable exchange rates set up after world war ii was designed specifically to prevent the manipulation of exchange rates in pursuit of national macroeconomic objectives see r cooper so it is perhaps no coincidence that the ending of pegged rates has led to the re emergence of theories and policies involving such manipulation before the war when inflation was low and unemployment high in the major industrialised nations this involved competitive depreciation as countries tried to gain employment in the late 1970 s and early 1980 s however countries like the uk and the us have embarked on policies of competitive appreciation in order to cut inflation regarded as the first priority sharp movements in exchange rates however constitute a threat to orderly trade and stimulate protectionism as bergsten 1981 argues this abstract was borrowed from another version of this item

network effects and welfare cultures we empirically examine the role of social networks in welfare participation using data on language spoken at home to better infer networks within an area our empirical strategy asks whether being surrounded by others who speak the same language increases welfare use more for those from high welfare using language groups this methodology allows us to include local area and language group fixed effects and to control for the direct effect of being surrounded by one s language group these controls eliminate many of the problems in previous studies the results strongly confirm the importance of networks in welfare participation

hierarchies and the survival of prisoners of war during world war ii using a comprehensive database of american prisoners of war during world war ii we find that survival from captivity generally declines as the hierarchy of a prisoner s group becomes steeper or more closely matches the military s established hierarchy there is no evidence that survival is enhanced by being held in more hierarchical groups one interpretation of these findings that is consistent with survivors accounts is that the military s hierarchy was too inflexible to adapt from the battlefield to captivity and this inflexibility impeded trading among the prisoners this paper was accepted by brad barber finance

current and anticipated deficits interest rates and economic activity abstract there is a widespread feeling that current deficits in europe and the u s may hurt rather than help the recovery this paper examines some of the issues involved through a sequence of three models the first model focuses on sustainability and characterizes its determinants it suggests that the issue of sustainability may indeed be relevant in some countries the second model focuses on the effects of fiscal policy on real interest rates and in particular on the relative importance of the level of deficits and the level of debt in determining interest rates the third model focuses on the effects of fiscal policy on the speed of the recovery it shows how a sharply increasing fiscal expansion might be initially contractionary rather than expansionary

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

financial variables and real activity in canada in this paper we utilize canadian and u s data to investigate the relationship between financial market variables canadian and u s and canadian output growth using a non parametric technique the financial variables examined are those that are often associated with future output growth namely stock prices interest rates interest rate spreads and monetary aggregates our results show that as the number of autocovariances that are assigned a non zero weight increases the feedback from selected canadian or u s financial variables to future canadian output growth increases in particular we find that stock prices as well as yield spreads and monetary aggregates are useful predictors of output growth this is in line with earlier parametric studies in the literature that find these variables to be good predictors of economic activity variables financieres et niveau d activite reelle au canada ce memoire utilise des donnees canadiennes et americaines pour analyser la relation entre les variables des marches financiers au canada et aux e u et la croissance du produit canadien a l aide d une technique non parametrique les variables financieres analysees sont celles qui sont generalement associees a la croissance du produit national dans l avenir i e le prix des actions les taux d interet les ecarts entre taux d interets et les agregats monetaires les resultats montrent que a proportion que le nombre des auto covariances auquel on assigne une valence zero s accroit les effets d echos variables financieres sur la croissance future du produit canadien s accroissent en particulier il appert que les prix des actions les ecarts entre taux d interets et les agregats monetaires sont des predicteurs utiles de la croissance du produit voila qui confirme les resultats d etudes parametriques

do contractionary monetary policy shocks expand shadow banking summary using var models for the usa we find that a contractionary monetary policy shock has a persistent negative impact on the level of commercial bank assets but increases the assets of shadow banks and securitization activity to explain this waterbed effect we propose a standard new keynesian model featuring both commercial and shadow banks and we show that the model comes close to explaining the empirical results our findings cast doubt on the idea that monetary policy can usefully get in all the cracks of the financial sector in a uniform way

output the stock market and interest rates this paper develops a simple model of the determination of output the stock market and the term structure of interest rates the model is an extension of the is lm model and borrows from it the assumption that output is determined by aggregate demand and that the price level can only adjust over time to its equilibrium value however whereas the is lm emphasizes the interaction between the interest rate and output this model emphasizes the interaction between asset values and output asset values rather than the interest rate are the main determinants of aggregate demand and output current and anticipated output and income are in turn the main determinants of asset values it is this interaction that the model intends to capture its goal is to characterize the joint response of asset values and output to changes in the environment such as changes or announcement of changes in monetary and fiscal policy as the above brief description makes clear anticipations are central to the story the assumption made in this paper will be one of rational expectations the paper is organized as follows section i describes the model and sections ii iv characterize the behavior of the economy under the extreme but convenient assumption that prices are fixed forever sections v and vi extend the analysis to the case where prices adjust over time to their equilibrium value

what are the effects of fiscal policy shocks we propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions specifically we use sign restrictions to identify a government revenue shock as well as a government spending shock while controlling for a generic business cycle shock and a monetary policy shock we explicitly allow for the possibility of announcement effects i e that a current fiscal policy shock changes fiscal policy variables in the future but not at present we construct the impulse responses to three linear combinations of these fiscal shocks corresponding to the three scenarios of deficit spending deficit financed tax cuts and a balanced budget spending expansion we apply the method to us quarterly data from 1955 to 2000 we find that deficit financed tax cuts work best among these three scenarios to improve gdp with a maximal present value multiplier of five dollars of total additional gdp per each dollar of the total cut in government revenue 5 years after the shock copyright 2009 john wiley sons ltd

manufacturing output and labor productivity further evidence for the united states abstract formulating the so called verdoorn s law in terms of cointegration and granger causality between manufacturing output and labor productivity quaterly u s data for 1950 1988 are used to test the pattern implied by the law evidence is lacking to support the predicted pattern

macroeconomic and stock market interactions with endogenous aggregate sentiment dynamics abstract this paper studies the implications of heterogeneous capital gain expectations on output and asset prices we consider a disequilibrium macroeconomic model where agents expectations on future capital gains affect aggregate demand agents beliefs take two forms fundamentalist and chartist and the relative weight of the two types of agents is endogenously determined we show that there are two sources of instability arising from the interaction of the financial with the real part of the economy and from the heterogeneous opinion dynamics two main conclusions are derived on the one hand perhaps surprisingly the non linearity embedded in the opinion dynamics far from the steady state can play a stabilizing role by preventing the economy from moving towards an explosive path on the other hand however real financial interactions and sentiment dynamics do amplify exogenous shocks and tend to generate persistent fluctuations and the associated welfare losses we consider alternative policies to mitigate these effects

a fresh look at fiscal multipliers one size fits it all evidence from the mediterranean area following the adoption of important fiscal stimuli to fight the recent crisis a large literature estimated fiscal multipliers focusing on an area particularly appealing given its diversity and the diversity of the response of countries that compose it to the current crisis namely the mediterranean area we unveil major disparities regarding the significance sign and size of fiscal multipliers depending mainly on the economic characteristics the type of multiplier the time span and the type of fiscal stimulus evidence of such important heterogeneities highlights the need for better cooperation among countries particularly regarding the design of fiscal policy failing to do so might divert public resources to ineffective fiscal policies in some countries or on the contrary deprive other countries of potentially high benefits of appropriate fiscal policies including a reliable tool for exiting the current crisis

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

tobin s q investment and the endogenous adjustment of financial structure abstract should q theory be modified to take account of financial structure this paper analyzes a general equilibrium q model where financial structure affects firm value agency costs and taxes combine to yield an interior solution for the endogenous debt equity ratio although q is still a sufficient statistic for investment the endogenous adjustment of financial structure alters the relation between the interest rate and investment in this model an increase in the corporate tax rate could either raise or lower the steady state capital stock furthermore both q and investment could jump in opposite directions to that of their steady state values

globalisation and the market for team mates the globalisation of firms is explored at theoretical and empirical levels the idea is that a global firm is a multi cultural team the existence of a global firm is somewhat puzzling combining workers who have different cultures legal systems and languages imposes costs on the firm that would not be present were all workers to conform to one standard in order to offset the costs of cross cultural dealing there must be complementarities between the workers that are sufficiently important to overcome the costs the search for the best practice is analysed and empirical support from an examination of trading patterns is provided

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

a re examination of the impacts of macroeconomic and financial shocks on real exchange rate fluctuation evidence from g7 and asian countries this paper aims to investigate the sources of real exchange rate fluctuation by utilizing sign restrictions in structural vector autoregressive svar method under an agnostic identification schem

economic growth kaldor s laws and the static dynamic verdoorn law paradox 1982 economic growth kaldor s laws and the static dynamic verdoorn law paradox applied economics vol 14 no 3 pp 279 294

fiscal policy shocks and stock prices in the united states this paper uses a range of structural vars to show that the response of us stock prices to fiscal shocks changed in 1980 over the period 1955 1980 an expansionary spending or revenue shock was associated with modestly higher stock prices after 1980 along with a decline in the fiscal multiplier the response of stock prices to the same shock became negative and larger in magnitude we use an estimated dsge model to show that this change is consistent with a switch from an economy characterised by active fiscal policy and passive monetary policy to one where fiscal policy was passive and the central bank acted aggressively in response to inflationary shocks

an empirical structural model of aggregate demand abstract this paper estimates a structural model of aggregate demand it attempts to avoid two of the shortcomings of most existing macroeconometric models the structure of the model is specified so as to be approximately policy invariant to eliminate the pretesting from which most published estimated models suffer all regression run are reported as the model contains consumption investment and money demand functions close in specification to existing ones it should help the reader judge the reliability of existing estimated functions the estimated model shows a relatively small direct dependence of aggregate demand on the past a much larger dependence on the anticipated future

the international transmission of policy announcement effects abstract this paper extends recent work on the effects of fiscal and monetary policy in two country models by considering an additional channel through which the effects of policy announcements may be transmitted the term structure of interest rates previous work suggests that policy announcements have no impact on worldwide aggregates and merely cause a redistribution of demand and output between the domestic and important impact effects on worlwide aggregates which necessarily introduces ambiguities concerning the effects of policy announcements on foreign output and employment

real time forecasting with a mixed frequency var this article develops a vector autoregression var for time series which are observed at mixed frequencies quarterly and monthly the model is cast in state space form and estimated with bayesian methods under a minnesota style prior we show how to evaluate the marginal data density to implement a data driven hyperparameter selection using a real time dataset we evaluate forecasts from the mixed frequency var and compare them to standard quarterly frequency var and to forecasts from midas regressions we document the extent to which information that becomes available within the quarter improves the forecasts in real time this article has online supplementary materials

networks or neighborhoods correlations in the use of publicly funded maternity care in california abstract this study focuses on network effects in the utilization of publicly funded prenatal care using vital statistics data from california for 1989 2000 networks are defined using 5 digit zip codes and a woman s racial or ethnic group like others we find evidence that the use of public programs is highly correlated within groups defined using race ethnicity and neighborhoods these correlations persist even when we control for many unobserved characteristics by including zip code year fixed effects and when we focus on the interaction between own group behavior and measures of the potential for contacts with other members of the group contact availability however the richness of our data allows us to go further and to conduct several tests of one important hypothesis about networks that the estimated effects represent information sharing within groups the results cast doubt on the idea that the observed correlations can be interpreted as evidence of information sharing in particular we find estimated effects to be as large or larger among women who have previously used the program as among first time users

monetary policy uncertainty and the market reaction to macroeconomic news abstract we examine whether monetary policy uncertainty influences the reaction of the equity treasury security foreign exchange and crude oil markets as well as medium term interest rates to u s macroeconomic announcements using intraday futures data we show that in the presence of higher policy uncertainty the response to macroeconomic news weakens in the stock and crude oil markets and strengthens in the treasury interest rate and foreign exchange markets in times of elevated monetary policy uncertainty macroeconomic announcements impact the financial and crude oil markets to a large extent through expectations of future monetary policy

fiscal policy and the great recession in the euro area how much did fiscal policy contribute to euro area real gdp growth during the great recession we estimate that discretionary fiscal measures have increased annualized quarterly real gdp growth during the crisis by up to 1 6 percentage points we obtain our result by using an extended version of the european central bank s new area wide model with a rich specification of the fiscal sector a detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result

the dynamic adjustment path for perfectly foreseen changes in monetary policy abstract this paper investigates the real effects of announced or perfectly foreseen changes in monetary policy produced by the mundell tobin effect a particularly good place to study these non neutralities appears to be the period between announcement and implementation of new policies at announcement the economy jumps to a new equilibrium path moving continuously even after implementation all transition paths between announcement and implementation are established to be scalar multiples of each other the path depends upon the structure of the economy and the discounted present value of the change in policy both algebraic and diagrammatical analyses are presented

networks in the modern economy mexican migrants in the u s labor market this paper attempts to identify job networks among mexican migrants in the u s labor market the empirical analysis uses data on migration patterns and labor market outcomes based on a sample of individuals belonging to multiple origin communities in mexico over a long period of time each community s network is measured by the proportion of the sampled individuals who are located at the destination the united states in any year we verify that the same individual is more likely to be employed and to hold a higher paying nonagricultural job when his network is exogenously larger by including individual fixed effects in the employment and occupation regressions and by using rainfall in the origin community as an instrument for the size of the network at the destination

output consumption and the stock market implications for european convergence this paper investigates the nature of the relationship between output and stock prices and consumption and stock prices with respect to the different financial structures that exist primarily in the european union eu evidence is found of a long run relationship for both relationships with the exception of germany and to an extent france which is argued is due to their bank dominated financial systems kalman filter estimates reveal that both relationships have increased in strength although little evidence is found of any convergence in the strength of the relationship across the eu

sufficient information in structural vars abstract necessary and sufficient conditions under which a var contains sufficient information to estimate the structural shocks are derived on the basis of this theoretical result we propose two simple tests to detect informational deficiency and a procedure to amend a deficient var a simulation based on a dsge model with fiscal foresight suggests that our method correctly identifies and fixes the informational problem in an empirical application we show that a bivariate var including unemployment and labor productivity is informationally deficient once the relevant information is included into the model technology shocks appear to be contractionary

backward and forward solutions for economies with rational expectations in models where anticipations of future endogenous variables influence current behavior there exists an infinity of solutions under the assumption of rational expectations this problem has been dealt with in the study of macro economic models by the implicit or explicit use of one of three additional requirements optimality consistency with alleged economic behavior or conformity of the endogenous variables to an imposed stationarity condition these requirements have coincided in existing models leading to the choice of a unique solution a forward solution the purpose of this paper is to review the problem characterize the solutions and examine whether these requirements are acceptable section i presents a simple model and derives the set of solutions the model makes no claim to generality but has the major advantage that the issues are easily understood in this simple case section ii discusses the requirement of consistency with economic behavior section iii discusses the requirement of stationarity and section iv provides some conclusions