inconsistent voting behaviour in the fomc this article uses transcript data to examine determinants of inconsistent voting behaviour in the federal open market committee fomc in the period 1989 2008 inconsistent voting behaviour occurs

bargaining and the timing of investment the joint determination of the timing of investment and wage bargaining is modelled two cases are considered a there is an alternating offer bargaining game over binding wage contracts and production is possible only when agreement is reached b there are no binding contracts so revenue is divided in period by period bargaining post investment investment can occur earlier in case b than in case a and the equilibrium in case b can pareto dominate the equilibrium with binding contracts these conclusions depend on players discount factors

regional house price dynamics and voting behavior in the fomc i introduction interest rate decisions by the federal open market committee fomc are not always made unanimously different individual views about the appropriate monetary policy stance may lead to the result that members cast dissenting interest rate votes in fomc meetings that is they opt for a higher or lower interest rate than proposed by the chairman of the fomc several studies find that fomc members have different views about the appropriate monetary policy when casting interest rate votes belden 1989 chappell and mcgregor 2000 chappell mcgregor and vermilyea 2005 2008 2012 gildea 1990 1992 havrilesky and gildea 1991 1995 havrilesky and schweitzer 1990 meade and sheets 2005 meade 2010 tootell 1991 1996 an important source of such dissenting votes may be the regional bias of the fomc member which is constituted by its regional affiliation several studies have examined the impact of the regional unemployment rate on the interest rate votes of fomc members while gildea 1992 meade and sheets 2005 and chappell mcgregor and vermilyea 2008 find that a higher regional unemployment rate relative to the national rate increases decreases fomc members preference for monetary easing tightening tootell 1991 finds no significant evidence 1 in this article we analyze whether fomc members align their interest rate voting behavior with house price developments of the federal reserve district they represent in addition to the regional unemployment rate studied so far in this way we can test whether regional house prices and or regional unemployment rates have a significant impact on the voting behavior of fomc members and we examine whether there are systematic differences between regional bank presidents and board members various studies have examined the link between monetary policy and asset price developments according to gilchrist and leahy 2002 there are some good reasons why central banks should align their monetary policies with asset prices first the consumer price index cpi or gross domestic product gdp deflator are incomplete measures since they only signal information on the prices of goods consumed today whereas a more complete measure would also signal future cost of living such as the information contained in asset prices alchian and klein 1973 second asset prices may be useful in forecasting inflation goodhart and hofmann 2000 third asset prices may directly affect real economic activity and inflation since for example wealthier consumers spend more which may affect price developments carroll otsuka and slacalek 2011 whether central banks should react to asset prices is however debated in the literature the traditional view is that central banks should only react to asset prices to the extent that they feed back into the conventional monetary policy goals inflation and output bernanke and gertler 1999 2001 on the contrary cecchetti et al 2000 conclude that it may be reasonable for central banks to react to asset prices in particular house prices in order to avoid the buildup of asset price bubbles as the burst of asset price bubbles may lead to financial crises reinhart and rogoff 2009 leaning against the buildup of extreme asset price changes may therefore be a reasonable choice for central banks as a part of their mission to manage systemic risk allen and carletti 2009 bordo and jeanne 2002 another rationale that central banks should take asset prices particularly house prices into account is that house prices have been shown to be suitable early warning indicators for the outbreak of the recent financial crisis kemme and roy 2012 several empirical papers analyze the impact of asset prices on interest rate setting rigobon and sack 2003 and dupor and conley 2004 find evidence that fomc interest rate decisions are influenced by equity prices on the contrary fuhrer and tootell 2008 find that fomc interest rate decisions are not a direct response to equity price movements and are an indirect response only to the extent that equity prices helped forecast the conventional monetary policy goals

forecast dispersion dissenting votes and monetary policy preferences of fomc members the role of individual career characteristics and political aspects using data from 1992 to 2001 we study the impact of members economic forecasts on the probability of casting dissenting votes in the federal open market committee fomc employing standard ordered probit techniques we find that higher individual inflation and real gdp growth forecasts relative to the committee s median significantly increase the probability of dissenting in favor of tighter monetary policy whereas higher individual unemployment rate forecasts significantly decrease it using interaction models we find that fomc members with longer careers in government industry academia non governmental organizations ngos or on the staff of the board of governors are more focused on output stabilization while fomc members with longer careers in the financial sector or on the staffs of regional federal reserve banks are more focused on inflation stabilization we also find evidence that politics matters with republican appointees being much more focused on inflation stabilization than democratic appointees moreover during the entire clinton administration natural monetary policy preferences of bank presidents and board members for inflation and output stabilization were more pronounced than under periods covering the administrations of both george h w bush and george w bush respectively

structural analysis of cointegrating vars this survey uses a number of recent developments in the analysis of cointegrating vector autoregressions vars to examine their links to the older structural modelling traditions using autoregressive distributed lag ardl and simultaneous equations models sems in particular it emphasizes the importance of using judgement and economic theory to supplement the statistical information after a brief historical review it sets out the statistical framework discusses the identification of impulse responses using the generalized impulse response functions reviews the analysis of cointegrating vars and highlights the large number of choices applied workers have to make in determining a specification in particular it considers the problem of specification of intercepts and trends and the size of the var in more detail and examines the advantages of the use of exogenous variables in cointegration analysis the issues are illustrated with a small u s macroeconomic model

new light on the impressionistic view of the balancing item in australia s balance of payments accounts recently fausten and brooks offered what they refer to as an impressionistic view of the temporal evolution of australia s balancing item which is a measure of the accuracy of the balance of payments accounts they claim that the balancing item has been increasing in magnitude and volatility violating with increasing frequency internationally agreed acceptability criteria for smallness in the present paper it is shown that fausten and brooks results derive from data that incorporates excessively a dynamically asymmetric concentration of revisions and is therefore unsuitable for statistical analysis this paper develops and empirically evaluates a model of the process of revisions of balance of payments data this model illustrates that dynamically inconsistent time series of the balancing item such as that employed by fausten and brooks are bound to generate an artificial impression that it follows an explosive time trend subsequently it is illustrated that when alternative dynamically c

first impressions matter signalling as a source of policy dynamics we provide the first direct empirical support for the importance of signalling in monetary policy by testing two key predictions from a novel structural model first all policymaker types should become less tough on inflation over time and secondly types that weigh output more should have a more pronounced shift voting data from the bank of england s monetary policy committee strongly support both predictions counterfactual results indicate signalling has a substantial impact on interest rates over the business cycle and improves the committee designer s welfare implications for committee design include allowing regular member turnover and transparency regarding publishing individual votes

anti herding and strategic consultation in this paper i analyze how careerist decision makers aggregate and use information provided by others i find that decision makers who are motivated by reputation concerns tend to anti herding i e they excessively contradict public information such as the prior or others recommendations i also find that some decision makers may deliberately act unilaterally and not consult advisers although advice is costless moreover advisers to the decision maker may not report their information truthfully even if the advisers care only about the outcome they bias their recommendation since they anticipate inefficient anti herding behavior by the decision maker

the dissent voting behaviour of central bankers what do we really know we examine the determinants of the dissent in central bank boards voting records about monetary policy rates in the czech republic hungary sweden the uk and the us in contrast to previous studies we consider 25 different macroeconomic financial institutional psychological or preference related factors jointly and use bayesian model averaging bma to formally assess the attendant model uncertainty we find that the rate of dissent is between 5 and 20 for the examined central banks our results suggest that most of the examined regressors including factors that capture the effects of inflation and output are not robust determinants of voting dissent this result suggests that unobserved characteristics of central bankers and different communication strategies drive the dissent rather than the level of macroeconomic uncertainty

monetary mystique secrecy and central banking abstract the paper contains a discussion of the role of secrecy in the implementation of monetary policy it documents the federal reserve s defense of secrecy as argued in a recent freedom of information act suit the federal reserve s arguments are evaluated on the basis of economic theory theoretical papers related to the secrecy issue are reviewed the discussion highlights a number of potential benefits and costs of central bank secrecy and identifies some conditions under which secrecy could be socially beneficial

u s monetary policy since the 1950s and the changing content of fomc minutes content analysis is used to analyze 60 years of federal open market committee fomc minutes since there is no unique algorithm to quantify content two different algorithms are applied wordscores compares content relative to a chosen benchmark while diction is an alternative algorithm that is specifically designed to capture various elements that capture the sentiment or tone conveyed in a text the resulting indicators are then incorporated into a var the content of fomc minutes is found to be significantly related to the state of the economy notably real gdp growth and changes in the fed funds rate however the relationship between content and macroeconomic conditions changes after 1993 when minutes are made public with a lag both content indicators also suggest substantive changes in the content of fomc minutes since the 1950s in terms of the fomc s dovishness or hawkishness

a welfare analysis of employment contracts with and without asymmetric information this paper provides a complete characterization of the welfare economics of employment contracts when workers are immobile in the ex post period necessary and sufficient conditions for constrained pareto optimality are derived for economies with incomplete risk markets two consumption goods and random production technologies in which a workers can cannot observe realizations of their employers revenue function symmetric vs asymmetric information and in which b employment contracts allow preclude contingent wages and or employment levels flexible vs rigid contracts this taxonomic approach serves to identify the welfare implications of exogenous and endogenous contractual rigidities and to isolate a class of externalities that is unique to economies with asymmetric information the latter market failure is also present with indexed contracts when workers alone can observe realizations of their consumption goods prices another form of asymmetric information

the economics of career concerns part i comparing information structures many incentives in organizations arise not through explicit formal incentive contracts but rather implicitly through career concerns this paper models career concerns through agents trying to manipulate the market assessment of their future productivity the information flow from current actions to market assessment is therefore crucial in determining the nature of these incentives improved information may either increase or reduce incentives the impact of information provides a major distinction between the explicit and implicit incentives model the paper derives general results on comparisons of information structures which serve as counterparts to the standard results on information structures in the principal agent model sufficient statistic impact of a blackwell garbling comparison of inclusive information structures 1999 the review of economic studies limited

decision making in committees transparency reputation and voting rules in this paper i analyze the effect of the transparency of the decision making process in committees on the decisions that are eventually taken i focus on committees whose members are motivated by career concerns so that each member tries to enhance his own reputation when the decision making process is secretive the individual votes of the committee members are not exposed to the public but only the final decision thus individuals are evaluated according to the group s decision i find that in such a case group members are induced to comply with preexisting biases for example if the voting rule demands a supermajority to accept a reform individuals vote more often against reforms and exacerbate the conservatism of the voting rule when the decision making process becomes transparent and individual votes are observed this effect disappears and such committees are then more likely to accept reforms i also find that coupled with the right voting rule a secretive procedure may induce better decisions than a transparent one

publicity of debate and the incentive to dissent evidence from the us federal reserve transparency in committee decision making may have clear benefits by making members more accountable to outside observers we consider one potential cost the possibility that publishing records of deliberations will make members more reluctant to offer dissenting opinions we construct a model that compares incentives for members with career concerns to voice dissent when deliberations occur in public or in private we test the model using an original dataset based on deliberations of the federal reserve s federal open market committee asking whether the fomc s 1993 decision to begin releasing transcripts of its meetings has altered incentives for dissent we find evidence that this is indeed the case there has been much recent discussion of the advantages of transparency in agency relationships both in and outside of government while research has attempted to model this issue theoretically there has been less progress with empirical tests a problem due no doubt in large part to the fact that it is difficult to make before and after comparisons of a shift in transparency often no data are available on an agent s actions prior to the establishment of transparency in this article we focus on one specific type of transparency publishing verbatim transcripts of committee meetings and one specific reason why this type of transparency might not be desirable the possibility that the quality of deliberation on a committee will suffer if the deliberations take place in public we develop a theoretical model that helps to identify the potential costs of this type of transparency and we then test the model empirically using an original dataset on deliberations of the federal reserve s federal open market committee fomc our dataset is unique in that it records views expressed by policymakers at fomc meetings and not just their official votes our empirical tests focus in particular on the observed effect of the institutional change that occurred in 1993 when the fomc decided to begin releasing transcripts of its meetings after a delay of five years transparency is a particularly relevant issue in monetary policy because it is commonly argued that when central banks take actions such as publishing macroeconomic forecasts revealing individual votes on monetary policy committees or releasing minutes of meetings this will lead to improved economic outcomes while simultaneously facilitating democratic accountability 1

a decade of dissent explaining the dissent voting behavior of bank of england mpc members we examine the dissent voting record of the bank of england monetary policy committee contrary to findings in the fomc literature for example havrilesky and schweitzer in the political economy of american monetary policy pp 197 210 1990 chappell et al in q j econ 108 1 185 218 1993 the effects of members career backgrounds and the political channel of appointment on voting behavior are negligible reflecting the distinct institutional constraints and incentives associated with uk monetary policy our findings also suggest that literature which characterizes voting behavior as being predominantly determined by members internal or external status is overly simplistic this view is supported by econometric results appertaining to the introduction of member specific fixed effects which account for possible unobserved heterogeneity

the balancing item in australia s balance of payments accounts an impressionistic view the balancing item in the australian balance of payments has been increasing in magnitude and volatility violating with increasing frequency internationally agreed acceptability criteria of smallness this investigation examines the temporal evolution of the balancing item identifying structural breaks that are plausible a priori it also explores alternative data driven and structural approaches to the diagnosis of the errors and omissions in the statistical record

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

managerial incentive problems a dynamic perspective the paper studies how a person s concern for a future career may influence his or her incentives to put in effort or make decisions on the job in the model the person s productive abilities are revealed over time through observations of performance there are no explicit output contingent contracts but since the wage in each period is based on expected output and expected output depends on assessed ability an implicit contract links today s performance to future wages an incentive problem arises from the person s ability and desire to influence the learning process and therefore the wage process by taking unobserved actions that affect today s performance the fundamental incongruity in preferences is between the individual s concern for human capital returns and the firm s concern for financial returns the two need be only weakly related it is shown that career motives can be beneficial as well as detrimental depending on how well the two kinds of capital returns are aligned it is well understood by now that informational externalities may place special demands on the organization of economic exchange simple price mediated markets will frequently fail in the presence of asymmetric information in that case more elaborate contractual arrangements have to be used as substitutes for the price system lately considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system the analysis of moral hazard has played a prominent role in this development moral hazard problems arise when for some reason or another transacting parties cannot contract contingent on the delivery of the good for instance in buying labour services it may be that the amount of labour supplied is not directly observable precluding a simple exchange of wage for labour as a partial remedy to this problem an imperfect mutually observed signal about the supply of labour can be used as a proxy in the contract frequently output is taken as such a proxy the drawback is that output is often influenced by other factors than labour input which induce undesirable risk into the contract one is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour gaining insight into this tradeoff is important not only for understanding contracting in the small e g managerial incentive schemes but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole while our understanding of moral hazard has advanced a lot in past years it is clear that much work remains an important question that has received little attention until

a survey of recent developments in the literature of finance and growth this paper provides a survey of the recent progress in the literature of financial development and economic growth the survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables although the positive role of finance on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies several key issues unresolved in the literature are highlighted the paper also points to several directions for future research

deliberation and learning in monetary policy committees i introduction recent theoretical and experimental work on the monetary policy decision process supports the argument that committees may make better policy decisions than individuals e g blinder 2007 blinder and morgan 2005 gerlach kristen 2006 lombardelli proudman and talbot 2005 blinder 2004 38 39 offers four reasons why monetary policy committees mpcs might make better choices than individuals first when members have different preferences diversification avoids extreme outcomes second even if members have similar preferences they might use different models to reach their conclusions third members might use different forecasts or forecasting techniques finally individuals might use different modes of reasoning or heuristics to approach problems the last three reasons in blinder s list suggest that members bring distinct perspectives or information to a committee meeting deliberation in the committee meeting requires members to confront their differences and could result in both learning and better policy decisions former bank of england mpc member richard lambert 2005 and former federal reserve bank of boston president cathy minehan 2006 have pointed to the importance of deliberation in mpc meetings particularly revealing are minehan s 2006 comments about her experience on the federal open market committee fomc one highly important element in dealing with uncertainty is the strength of the committee itself in that regard it is perhaps fashionable to deride committee decision making in general as bureaucratic and cumbersome my view is that in situations where there are many possible philosophical approaches and a lot at stake a committee helps its members to both see all aspects of the issue and weigh the risks and costs of a particular decision as with other vital institutions like the supreme court there is value to a committee decision on policy versus one taken by a single executive the importance of deliberation in various decision making contexts has also been addressed in political science austen smith and feddersen 2006 contribute to the literature on jury deliberation by offering a theoretical analysis of how different voting rules shape voters incentives to share information prior to a vote being taken barabas 2004 finds evidence that deliberation is an effective way to disseminate information and shape opinions about public policy issues u s supreme court justice stephen breyer has explained how deliberation matters in supreme court conferences cited in brafman and brafman 2009 kindle location 1764 if someone is going to write a dissent they have a point they have some kind of point they re trying to make quite often the opinion of the majority is changed somewhat in response to comments and opinions of the dissenters occasionally maybe once or twice a year the whole court shifts even when dissenters do not have enough votes to change the court s opinion they still affect the process it makes the other person take account of the point they have to answer it or they have to take it into account breyer said in the case of the fomc bailey and schonhardt bailey 2008 use a full text content analysis of the 1979 and 1980 fomc transcripts to study the importance of deliberation in the decision to shift to anti inflationary policy under chairman paul volcker they conclude that deliberation in the fomc did indeed matter both in 1979 and 1980 p 404 as volcker led his colleagues to adopt a new operating procedure and maintain a more restrictive monetary policy stance bailey and schonhardt bailey 2009 extend their analysis to the 1979 1999 period and find that the role of deliberation declined from the volcker era to the greenspan era woolley and gardner 2009 concur with this result even in light of previous theoretical and empirical work on deliberation though bailey and schonhardt bailey 2009 22 nevertheless argue that too little attention has been given to understanding the process of deliberation in policymaking and how this yields outcomes decisions and the quality of those outcomes

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

are two heads better than one monetary policy by committee two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals one of these experiments imitates real life monetary policy decisions in both cases the hypothesis is found wanting groups are not slower than individuals in both experiments we also find that group decisions are on average better than individual decisions this holds regardless of whether the groups make decisions by unanimity or majority rule simple mechanical theories of group decisionmaking that the group follows its average player median player or best player do not explain the results group interactions seem to matter

is the mpc s voting record informative about future uk monetary policy it is shown that the voting record of the monetary policy committee of the bank of england helps predict future policy rate changes this result is robust to the inclusion of market participants expectations as measured by the slope of the term structure of money market rates and interest rate futures moreover expectations seem to adjust to the information contained in the voting record which suggests that publishing the minutes of mpc meetings increases the transparency of monetary policy

exploding net errors and omissions as a capital flight phenomenon the case of slovakia this article empirically explores determinants of net errors and omissions neo of slovakia during the 1997 2014 period with emphasis on the 2008 2014 sub period when a distinct downturn in the n

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

dissent in monetary policy decisions voting records indicate that dissents in monetary policy committees are frequent and predictability regressions show that they help forecast future policy decisions in order to study whether the latter relation is causal we construct a model of committee decision making and dissent where members decisions are not a function of past dissents the model is estimated using voting data from the bank of england and the riksbank stochastic simulations show that the decision making frictions in our

collective versus individual decision making a case study of the bank of israel law abstract the new bank of israel law of 2010 changed monetary policy decision making at the bank of israel from a setup where decisions are taken by the governor to one where decisions are taken by a committee of voting members we use this institutional change as a natural experiment to compare individual versus collective decision making empirical results show different dynamics for interest rate decisions across the two regimes and support the view that the status quo bias is larger when decisions are taken by a committee than when they are taken by a single individual

a theory of yes men this paper illustrates an incentive for workers to conform to the opinion of their supervisors when firms use subjective performance evaluation this desire to conform arises endogenously from the firm s need to induce the worker to exert effort the author shows that firms may optimally eschew the use of incentive contracts to retain workers incentives for honesty the author illustrates that the incentive to conform implies inefficiencies even when workers are risk neutral and is likely to lead to more centralized decision making than in the absence of the desire to conform copyright 1993 by american economic association

information aggregation in debate who should speak first abstract privately informed individuals speak openly in front of other members of a committee about the desirability of a public decision each individual wishes to appear well informed for any given order of speech committee members may herd by suppressing their true information with individuals of heterogeneous expertise optimizing over the order of speech can improve the extraction of information but not perfectly so it is not always optimal to use the common anti seniority rule whereby experts speak in order of increasing expertise a committee with more able experts may be afflicted by greater herding problems yielding a worse outcome

dynamic labor market competition and wage seniority abstract we design an overlapping generations model of the labor market experienced workers bear costs of switching employers whereas the segment for junior workers is horizontally differentiated the literature typically explains wage seniority premia with reference to productivity gains generated by the accumulation of worker experience or mechanisms associated with incomplete information in contrast this paper characterizes how the wage seniority premium depends on the relative intensities of competition in the markets for junior and senior workers in particular we show that a wage seniority premium may prevail even under circumstances where senior workers are less productive than junior workers

monetary policy preferences of individual fomc members a content analysis of the memoranda of discussion the memoranda of discussion provide detailed records of federal open market committee fomc meeting deliberations procedures are developed for coding the textual data in the memoranda and assessing the reliability of those codings the codings are then used in the estimation of parameters of individual fomc members reaction functions data from the 1970 to 1976 period are employed in the estimation in the future similar methods could be used to analyze newly released transcripts of fomc meetings held after 1976

on committees of experts a committee makes a decision on a project on behalf of the public members of the committee agree on the a priori value of the project and hold additional private information about its consequences they are experts who care about the value of the project and about being considered well informed before voting on the project members can exchange their private information simultaneously we show that reputational concerns make the a priori unconventional decision more attractive and lead committees to show a united front these results hold irrespective of whether information can be manipulated or not also reputational concerns induce members to manipulate information and vote strategically if their preferences differ considerably from those of the member casting the decisive vote our last result is that the optimal voting rule balances the quality of information exchange and the alignment of interests of the decisive voter with those of the public

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

the effect of fomc votes on financial markets this paper shows that since votes of members of the federal open market committee have been included in press statements stock prices increase after the announcement when votes are unanimous but f

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

career concerns of mutual fund managers we examine the labor market for mutual fund managers using data from 1992 1994 we find that termination is more performance sensitive for younger managers we identify possible implicit incentives created by the termination performance relationship the shape of the termination performance relationship may give younger managers an incentive to avoid unsystematic risk direct effects of portfolio composition may also give younger managers an incentive to herd into popular sectors consistent with these incentives we find that younger managers hold less unsystematic risk and have more conventional portfolios promotion incentives and market responses to managerial turnover are also studied

the importance of lifetime jobs in the u s economy though the u s labor market is justly notorious for high turnover and consequent high unemployment it also provides stable near lifetime employment to an important fraction of the labor force this paper investigates patterns of job duration by age race and sex with the following major conclusions 1 the typical worker today is holding a job which has lasted or will last about eight years over a quarter of all workers are holding jobs which will last twenty years or more sixty percent hold jobs which will last five years or more 2 the jobs held by middle aged workers with more than ten years of tenure are extremely stable over the span of a decade only twenty to thirty percent come to an end 3 among workers aged thirty and above about forty percent are currently working in jobs which eventually will last twenty years or more three quarters are in jobs which will last five years or more 4 the duration of employment among blacks is just as long as among whites even though the jobs held by blacks are worse in almost every other dimension they are no more unstable than those held by whites 5 women s jobs are substantially shorter than men s on the average only about a quarter of all women over the age of thirty are employed in jobs which will last over twenty years whereas over half of men over thirty are holding these near lifetime jobs this abstract was borrowed from another version of this item

incentive compatible long term contracts and job rationing this article presents a model in which markets for long term contractual employment coexist with spot markets for labor assuming the absence of third party enforcement wage contracts are required to be incentive compatible as a consequence contract wages yield higher expected utility to the worker than spot market wages so that in equilibrium contractual long term jobs are rationed

preferences or private assessments on a monetary policy committee using bank of england voting data we show empirically that members votes are driven by heterogeneous individual assessments of the economy as well as their individual policy preferences estimates indicate that internal committee members form more precise assessments than externals and are also more hawkish the estimates allow the first quantification of the gain due to information aggregation on monetary policy committees the marginal gain from additional committee members tapers quickly after five members there is no evidence of gains through externals moderating internals preferences a relatively small committee of highly informed internal members emerges as a desirable committee structure

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

a note on overemployment underemployment in labor contracts under asymmetric information abstract models of labor contracts under asymmetric information may predict either overemployment or underemployment this paper shows that this result depends crucially on whether or not leisure is a normal good if firms are risk neutral

monetary policy in the media just like private companies depend crucially on their ability to reach customers policymakers must communicate with private agents to be successful and much of this communication is channeled through the media this is especially true for central banks which need to build credibility among the general public this paper analyses how favorably the print media report about the european central bank s ecb monetary policy decisions favorableness is inter alia influenced by the amount of information communicated by the ecb there are however also indications of a critical monitoring role of the media which reports more negatively when inflation exceeds the inflation target

transparency and deliberation within the fomc a computational linguistics approach how does transparency a key feature of central bank design aect the deliberation of monetary policymakers we exploit a natural experiment in the federal open market committee in 1993 together with computational linguistic models particularly latent dirichlet allocation to measure the eect of increased transparency on debate commentators have hypothesized both a benecial discipline eect

security analysts career concerns and herding of earnings forecasts several theories of reputation and herding see e g scharfstein and stein 1990 suggest that herding among agents should vary with career concerns our goal in this paper is to document whether such a link exists in the labor market for security analysts specifically we look at the relationship between an analyst s job tenure a proxy for career concerns and various measures of stock earnings forecast performance we establish the following key results 1 older analysts are more likely to produce earnings forecasts of firms before younger ones 2 their forecasts also deviate more from the consensus forecast than their younger counterparts we argue that these results are consistent with some reputational models of herding we also establish a number of auxiliary findings regarding the relationship between forecast accuracy and frequency of forecast revisions with job tenure

the wrong kind of transparency in a model of career concerns for experts when is a principal hurt from observing more information about her agent this paper introduces a distinction between information on the consequence of the agent s action and information directly on the agent s action when the latter kind of information is available the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori this conformist behavior hurts the principal in two ways the decision made by the agent is less likely to be the right one discipline and ex post it is more difficult to evaluate the agent s ability sorting the paper identifies a necessary and sufficient condition on the agent signal structure under which the principal bene ts from committing not to observe the agent s action the paper also shows the existence of strategic complementarities between information on action and information on consequence the results on the distinction between action and consequence are then used to interpret existing disclosure policies in delegated portfolio management in particular they are consistent with hitherto puzzling evidence that mutual funds systematically overperform pension funds

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

an informational theory of privacy we develop a theory that explains how and when privacy can increase welfare without privacy some individuals misrepresent their preferences because they will otherwise be statistically discriminated against this chilling effect hurts them individually and impairs information aggregation the information gain from infringing privacy e g by electronic surveillance can be much smaller than expected ceteris paribus overall privacy is essential for any mechanism of information aggregation such as markets or a democratic society it is also redistributive like free speech privacy benefits some and hurts others

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment