estimation of a taiwan monetary reaction function with time varying parameters this paper employs a nonlinear kalman filter to examine the time varying responses of taiwan s monetary policy in the presence of a limited dependent variable the kalman filtered parameters reveal that the responses are not constant but change over time furthermore a counter cyclical reaction function is identified and a stronger than usual discretionary policy during the recessions is found

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

dynamic forecasts of qualitative variables a qual var model of u s recessions this article presents a new qual var model for incorporating information from qualitative and or discrete variables in vector autoregressions with a qual var it is possible to create dynamic forecasts of the qualitative variable using standard var projections previous forecasting methods for qualitative variables in contrast produce only static forecasts i apply the qual var to forecasting the 2001 business recession out of sample and to analyzing the romer and romer narrative measure of monetary policy contractions as an endogenous variable in a var out of sample the model predicts the timing of the 2001 recession quite well relative to the recession probabilities put forth at the time by professional forecasters qual vars which include information about the qualitative variable can also enhance the quality of density forecasts of the other variables in the system

domestic violence a nonrandom affair in this paper we develop and estimate a model of domestic violence we extend a noncooperative model of the family to include violence as a source of gratification and an instrument for controlling behavior we estimate the model by robust methods since the violence process appears to have a heavy tailed nonnormal error distribution we find that the properties of the equilibria depend on family income for low middle income families our results indicate an equilibrium in which one person s reservation utility constraint is binding whereas for higher income families both individuals may gain from the relationship

the operations of the bank of england 1890 1908 a dynamic probit approach this paper analyzes the workings of the pre world war i gold standard using weekly data and a dynamic probit econometric technique the authors evidence sheds light on three potentially conflicting motivations underlying bank rate changes profitability convertibility and concern for home trade the conflict among these goals manifests itself in the bank s asymmetric responses to inflows and outflows of gold and in the bank s asymmetric responses to changes in market interest rates the authors results are consistent with the view that central bank cooperation played an important role in the workings of the gold standard copyright 1995 by ohio state university press

time varying response of monetary policy to macroeconomic conditions we reject the hypothesis that the federal reserve s response to the macroeconomy over the period of 1953 1994 can be accurately represented with a fixed parameter discrete choice model thus we model the fed s time varying response with a nonlinear kalman filter the estimated time paths of the reaction function coefficients suggest that the fed has responded countercyclically to movements in the price level except for the middle 1970s when it accommodated inflation the fed has generally responded countercyclically to unemployment and output during recessions however it has not maintained a countercyclical policy during nonrecessionary times until the 1980s a reaction function empirically relates a monetary policy indicator often the federal funds rate or a monetary aggregate to the macroeconomic objectives of monetary policy usually national output inflation and unemployment assuming that the underlying macroeconomy is stable estimated coefficients from a reaction function reveal information about the monetary authority s response to macroeconomic conditions chappell havrilesky and mcgregor 1993 beyond the assumption described above most reaction function studies further assume that the federal reserve s response function is linear in the sense that it contains fixed coefficients see the survey by barth sickles and weist 1982 and more recently chappell havrilesky and mcgregor 1993 that is most studies implicitly assume that the fed responds to a change in inflation for example with the same vigor regardless of whether the level of inflation is unusually high or low and regardless of the timing of the response with respect to the business cycle elections and so on although it is generally recognized that a fixed coefficient estimate of the fed s reaction function overly homogenizes the fed s actual response to macroeconomic conditions solutions to the problem have been ad hoc studies that seek to expose a political business cycle impose structural break points on the fed s reaction function based on pre and postelections periods and then estimate a fixed coefficient reaction function within each subperiod hakes 1988a chappell havrilesky and mcgregor 1993 gamber and hakes 1997 other studies impose structural break points based on political or policy regimes and then estimate a fixed coefficient

in defense of base drift the federal reserve has been criticized for allowing the base from which it calculates its target growth paths for the monetary aggregatesto drift from year to year in response to past deviations from target drift in the base implies that target misses permanently affect the levels of the monetary aggregates using a simple theoretical model this paper shows that the optimal degree of base drift consistent withprice stability depends on the importance of permanent versus transitory income and velocity disturbances neither zero base drift nor complete base drift are likely to be compatible with price stability copyright 1986 by american economic association

terror as a bargaining instrument a case study of dowry violence in rural india this ethnographic study examined the sociocultural context of domestic violence and dowry in india and describes a theoretical model and econometric methodology the model was tested with survey data collected from a sub caste of 149 potter families from 3 villages in karnataka state in south india interviews were conducted among 139 adult married women and 130 married men the case studies demonstrate that violence can be used as a way to redistribute resources bargaining over dowry amounts occurs twice once before the marriage and renegotiations after the wife had moved to the husbands family domestic violence may be a weapon in order to obtain higher transfers at the renegotiation stage the model assumes that the level of dowry and the occurrence of violence are determined simultaneously hypotheses tested whether increases in husbands family wealth in the dowry paid and husbands cost of violent behavior reduces the incidence of violence tests determined whether increases in wifes familys wealth and increases in wifes human capital husbands human capital or wifes cost of violence increase violence 23 reported wife beating at some time a 10000 rupee increase in the wifes parents income increased the risk of violence by 4 a 10000 rupee increase in the husbands parents income reduced the risk of violence by 10 a 10000 rupee increase in dowry reduced the risk by 5 an additional male child reduced the risk by 11 female sterilization increased the risk by 16 findings suggest that husbands beat wives when the wifes family is rich and when dowries are small

product market competition and the industry price cost markup fluctuations abstract we examine the role played by imperfect competition in the response of markups to energy price and monetary changes we find i for concentrated industries markups increase with monetary expansion and decrease when energy prices increase the elasticity with respect to energy prices is greater than monetary changes ii for low concentration industries markups are virtually unaffected by monetary changes and the energy price elasticities are statistically insignificant iii markups are procyclical over the industry specific cycle and iv increased import competition lowers markups only in the concentrated industries the energy price increases decreases during the 1970s 1980s may have been a key factor contributing to the narrowing widening of the markup gap between high and low concentration industries we provide evidence that procyclical markups in concentrated industries are not being driven by differences in the degree of labor hoarding between low and high concentration industries

daily monetary policy shocks and new home sales abstract the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified the primary news for market participants is not what the fed just did but is instead new information about the fed s future intentions revisions in these anticipations show up instantaneously in long term mortgage rates home sales do not respond until much later this paper attributes this delay and hence much of the hump shaped response of economic activity to monetary policy to cross sectional heterogeneity in search times this framework allows one in principle to measure policy impacts at the daily frequency

are monetary policy reaction functions asymmetric the role of nonlinearity in the phillips curve abstract this paper investigates the implications of a nonlinear phillips curve for the derivation of optimal monetary policy rules combined with a quadratic loss function the optimal policy is also nonlinear with the policy maker increasing interest rates by a larger amount when inflation or output are above target than the amount it will reduce them when they are below target specifically the main prediction of our model is that such a source of nonlinearity leads to the inclusion of the interaction between expected inflation and the output gap in an otherwise linear taylor rule we find empirical support for this type of asymmetries in the interest rate setting behaviour of four european central banks but none for the us fed

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

using romer and romer s new measure of monetary policy shocks to identify the ad and as shocks this article re examines the series of exogenous federal funds rate ffr shocks created by romer and romer 2004 for the period 1969 01 1996 12 we hypothesize that if romer and romer have constructed a reasonable set of monetary policy shocks then including them in a small vector autoregression var should help to identify other structural shocks that affected the united states economy during their sample period using a sample period of 1971 01 1996 12 we are easily able to identify both an aggregate demand ad shock and an aggregate supply as shock without imposing any sign or long run restrictions we present historical decompositions that allow us to compare the relative importance of these shocks with that of the exogenous monetary policy shocks in explaining output fluctuations during the 1973 1975 1980 1984 and 1990 1991 business cycle episodes

the time varying parameter model for modeling changing conditional variance the case of the lucas hypothesis the main econometric issue in testing the lucas 1973 hypothesis in a time series context is estimation of the forecast error variance conditional on past information the conditional variance may vary through time as monetary policy evolves and agents are obliged to infer its present state under the assumption that a monetary policy regime is continuously changing a time varying parameter model is proposed for the monetary growth function based on kalman filtering estimation of recursive forecast errors and their conditional variances the lucas hypothesis is tested for the u s economy 1964 1 1985 4 using monetary growth as aggregate demand variable the lucas hypothesis is rejected in favor of friedman s 1977 hypothesis the conditional variance of monetary growth affects real output directly not through the coefficients on the forecast error term in the lucas type output equation

the vanishing liquidity effect of money on interest analysis and implications for policy this paper seeks to re examine the effects of money on interest rates the earlier literature on this topic determined fairly well the pattern of response of interest rates to changes in money growth the notable studies of cagan 1972 cagan and gandolfi 1969 and gibson 1970 served to establish the professions stylized pattern as presented in section i section ii presents new evidence on the subject and finds that the old empirical generalizations no longer hold specifically the results suggest that the initial liquidity effect of faster money growth is likely to be offset within the month following the monetary policy change sections iii and iv investigate the reasons for the changing pattern of monetary effects on interest rates and discuss the policy implications of the new pattern

the equilibrium fed funds rate and the indicator properties of term structure spreads i introduction interest rate spreads figure prominently in the economics literature as monetary policy indicators for instance while some writers have focused on the predictive power of the spread between the six month commercial paper rate and the six month treasury bill rate others have emphasized spreads between short and long term interest rates 1 this paper follows the latter tradition my analysis is motivated by the work of bernanke and blinder 1992 who compare the difference between the federal funds rate and the ten year government bond rate with other interest rate spreads and find it to be a particularly useful predictor of future economic activity the rationale for using term structure spreads as monetary policy indicators is relatively straightforward 2 when assessing the stance of monetary policy it is not just the level of the federal funds rate that matters but how it relates to some implicit notion of equilibrium interest rates this insight is not new and can be found in the seminal work of wicksell 1898 xxv who wrote that it is not a high or low rate of interest in the absolute sense which must be regarded as influencing demand the causative factor is the current rate on loans as compared with what i shall be calling the natural rate of interest the direct empirical implementation of the wicksellian insight is however obviously hampered by the fact that the natural rate of interest is not an observable variable as suggested by laurent 1988 and bernanke and blinder 1992 the slope of the term structure is often used as a proxy for the spread between a short term interest rate and its unobservable equilibrium level thus the yield curve steepens as short term interest rates are perceived to be below their equilibrium levels i follow a more direct approach to measuring the stance of monetary policy instead of using the slope of the term structure as a proxy for the gap between observed and equilibrium federal funds rates i introduce a model based method to constructing a measure of the level of the equilibrium funds rate as described below this equilibrium rate is calculated for the real sectors of the economy conditional on the observed rate of inflation thus the equilibrium rate is constructed to be independent of the inflation objectives of monetary policy and the implied difference between actual and equilibrium rates the funds rate spread constitutes my monetary policy indicator this paper provides an overview of the proposed methodology and compares the funds rate spread with traditional indicators of the monetary policy stance ii a model based measure of the spread i rely on the estimated structure of a macroeconometric model to measure the equilibrium federal funds rate the theoretical framework is the mit penn ssrc mps model which is housed at the federal reserve board this is a large scale quarterly model of the u s economy it consists of more than 100 behavioral equations about 200 identities and over 100 exogenous variables in its theoretical foundations the long run properties of the model are akin to a neoclassical growth model whereas the dynamic structure is essentially keynesian 3 the approach used in this paper is a departure from the traditional literature in at least two dimensions first i use an explicit theoretic framework to compute the equilibrium measure as opposed to the empirically based approach of using long term interest rates second by focusing on the equilibrium level of the federal funds rate i have a more direct way to gauge the stance of monetary policy the equilibria analyzed here correspond to intermediate run dynamics a time frame that seems most relevant for the conduct of monetary policy conceptually the equilibrium notion i explore is a simple one for a given position of the mps model s is block the equilibrium federal funds rate is defined as the one consistent with unemployment at its natural rate after all lags in the model have fully worked through

the effects of monetary policy a dsge model analysis of taiwan this article attempts to use empirical data to analyse the impact of monetary policy in a dynamic stochastic general equilibrium model according to the monetary policy decisions of the central bank of china taiwan maintaining price financial stability and fostering economic growth are the ultimate goals of monetary policy during the empirical period first this article uses the cointegration tests to determine the operating targets the intermediate targets and the ultimate goals of monetary policy then a forward looking aggregate demand aggregate supply model for a small open economy is specified and policy discretion is included in this model finally the model is estimated by a linear state space model and is used to analyse the short run effects of a systematic monetary change

welfare egalitarianism in non rival environments we study equity in economies where a set of agents commonly own a technology producing a non rival good from their private contributions a social ordering function associates to each economy a complete ranking of the allocations we build social ordering functions satisfying the property that individual welfare levels exceeding a legitimate upper bound should be reduced combining that property with efficiency and robustness properties with respect to changes in the set of agents we obtain a kind of welfare egalitarianism based on a constructed numerical representation of individual preferences

time varying discrete monetary policy reaction functions a novel dynamic ordered probit model with time varying parameters is proposed to estimate a monetary policy reaction function with narrative based monetary indicators the estimation and inference are carried out using the bayesian simulation based approach empirically these are the following findings first there is strong evidence in support that the central bank in taiwan responds counter cyclically to inflation but weaker if any evidence to economic growth secondly the persistence and consistence in policy making of the monetary authority is confirmed by the significance of the positive autoregressive coefficient although not all the estimates of the tvp dop model provide at least partial support of time varying parameters finally the results indicate that studies of the discrete monetary policy reaction functions without explicitly considering the possible dynamics inherent in the time series data and time variations in model parameters may be inappropriate if not incorrect

love hate and murder commitment devices in violent relationships many violent relationships are characterized by a high degree of cyclicality women who are the victims of domestic violence often leave and return multiple times to explain this we develop a model of time inconsistent preferences in the context of domestic violence this time inconsistency generates a demand for commitment we present supporting evidence that women in violent relationships display time inconsistent preferences by examining their demand for commitment devices we find that no drop policies which compel the prosecutor to continue with prosecution even if the victim expresses a desire to drop the charges result in an increase in reporting no drop policies also result in a decrease in the number of men murdered by intimates suggesting that some women in violent relationships move away from an extreme type of commitment device when a less costly one is offered

backward looking interest rate rules interest rate smoothing and macroeconomic instability the existing literature on the stabilizing properties of interest rate feedback rules has stressed the perils of linking interest rates to forecasts of future inflation such rules have been found to give rise to aggregate fluctuations due to self fulfilling expectations in response to this concern a growing literature has focused on the stabilizing properties of interest rate rules whereby the central bank responds to a measure of past inflation the consensus view that has emerged is that backward looking rules contribute to protecting the economy from embarking on expectations driven fluctuations a common characteristic of the existing studies that arrive at this conclusion is their focus on local analysis the contribution of this paper is to conduct a more global analysis we find that backward looking interest rate feedback rules do not guarantee uniqueness of equilibrium we present examples in which for plausible parameterizations attracting equilibrium cycles exist the paper also contributes to the quest for policy rules that guarantee macroeconomic stability globally our analysis indicates that policy rules whereby the interest rate is set as a function of the past interest rate and current inflation are likely to ensure global stability provided that the coecient on lagged interest rates is greater than unity

the objectives and priorities of monetary policy under different federal reserve chairmen this paper utilizes a monetary policy reaction function that relates policy intentions to forecasts of policy objectives estimates of this reaction function over the post accord period suggest that the burns period was unique while the martin and volcker periods were extremely similar the burns period was structurally distinct from both the martin and volcker periods further model specifications that allow for an independent influence on monetary policy from different presidential administrations also imply that there are significant differences in monetary policy under different fed chairmen copyright 1990 by ohio state university press

an application of the shapley value to fair division with money the author considers fair division when monetary compensations are feasible and utilities are quasi linear four axioms are discussed individual rationality resource monotonicity population solidarity and the stand alone test the latter views the utility from consuming all the goods as an upper bound on every coalition s actual joint utility under efficiency the four axioms show little compatibility however when the goods have enough substitutability in everyone s preferences the shapley value of the surplus sharing game satisfies all four axioms an example is the optimal assignment of indivisible goods when every agent consumes only one good copyright 1992 by the econometric society

how the ecb and the us fed set interest rates monetary policies of the european central bank ecb and us fed can be characterized by taylor rules that is both central banks seem to be setting rates by taking into account the output gap and inflation we also set up and tested taylor rules which incorporate money growth and the euro dollar exchange rate thereby improving the fit between actual and taylor rule based rates in general taylor rules appear to be a much better way of describing fed policy than ecb policy simulations suggest that the ecb s short term interest rates have been at a much lower level in the last 2 years compared with what a taylor rule would suggest

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

the federal reserve s response to aggregate demand and aggregate supply shocks evidence of a partisan political cycle the orthodox approach to modeling the fed s response to economic conditions is to employ a monetary policy reaction function most reaction functions are estimated by regressing a policy indicator possibly the federal funds rate or a monetary aggregate on variables that describe the state of the economy such as unemployment inflation and growth in output under certain conditions which we discuss below estimated coefficients from a reaction function provide information about the fed s monetary policy priorities moreover extending the model to include election and partisan dummy variables may provide information about the fed s response to political pressures there are two problems with interpreting the coefficients in a standard reaction function as the weights that the fed attaches to its policy objectives first the monetary policy decision may not be represented accurately by an aggregate reaction function one that models the fed as a whole because there are twelve voting members on the fomc chappell havrilesky and mcgregor 10 have recently addressed this issue by employing a disaggregated set of reaction functions the second problem with interpreting reaction function coefficients as the weights the fed places on its policy objectives is that this interpretation implicitly assumes structural stability of the underlying macroeconomy abrams froyen and waud 1 31 acknowledge this shortcoming when they state coefficients from estimated reaction functions do not provide direct information on policymaker utility functions rather than being the solution to an unconstrained optimization dependent only on policymaker preferences reaction functions are the output of a constrained maximization where the constraints are the reduced form equations that characterize

words are not all created equal a new measure of ecb communication we develop a field specific dictionary to measure the stance of the european central bank ecb monetary policy dovish neutral hawkish and the state of the eurozone economy positive neutral negative through the content of ecb press conferences in contrast with traditional textual analysis we propose a novel approach using term weighting and contiguous sequence of words n grams to better capture the subtlety of central bank communication we find that quantifying ecb communication using our field specific weighted lexicon helps to explain future ecb monetary decisions when considering an augmented taylor rule regarding european stock market volatility we find that markets are more less volatile on the day following a conference with a negative positive tone about the euro area economic outlook our indicators significantly outperform a textual classification based on the loughran mcdonald or apel blix grimaldi dictionaries and a media based measure of economic policy uncertainty

monetary policy and long term interest rates in germany abstract in this paper we provide new empirical evidence on the relationship between short and long run interest rates for germany we find a positive correlation after a supply and demand shock and a negative correlation after a monetary policy shock this finding is consistent with the theory of ellingsen and soderstrom american economic review 2001 91 5 1594 1607

monetary policy and long term interest rates an efficient markets approach abstract this paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long term interest rates this approach has the advantage over calier research on this subject in that it imposes a theoretical structure on this relationship that flows easier interpretation of the empirical results as well as more powerful statistical tests on the interest of ascertaining the robustness of the results many different empirical tests are carried out in this paper and they uniformly do not support the preposition that increases in the money supply are correlated with declines in long rates

budget deficits inflation risk and asset prices abstract kitchen examines how us budget deficit news affects asset prices and concludes that news of lower deficits reduces the inflation risk premium this paper constructs narrative histories of several deficit reduction laws to identify when markets learned that deficits would fall it then estimates a multi factor model that allows the inflation risk premium to vary following news of deficit reductions the results indicate that there is a large and statistically significant drop in the factor price associated with inflation following news that budget deficits would decline

employment and the risk of domestic violence does the breadwinner s gender matter abstractthis article studies the effect on the risk of female victimization of the employment status of the woman and her partner we use individual level data from the violence against women surveys for spain which also provide information on income and a rich set of sociodemographic characteristics to address the potential endogeneity of the binary employment indicators we exploit exogenous geographical information on the employment and unemployment rates by gender and age within a multivariate probit framework our estimation results show that male partner employment plays a major role in the risk of physical violence while female employment only lowers it when her partner is employed too the lowest risk appears for more egalitarian couples in which both partners are employed

international migration and the role of institutions we study the determinants of international migration with special attention to the role of institutional factors other than economic and demographic fundamentals we evaluate the impact of political institutions and of those institutions specifically targeted at attracting migrants for a dataset on 19th century migration we find that economic and demographic differentials play a major role but that the quality of institutions also matter we produce evidence that both political and migration institutions represent significant factors of attraction even after controlling for their potential endogeneity through a set of instruments exploiting colonial history and the institutions inherited from the past

foreign direct investment and endogenous growth in vietnam foregin direct investment s fdi s contribution to growth has been a controversial topic in economic literature and appears to be country specific in this article we use time varying coefficients in an augmented production function and let fdi indirectly affect gross domestic product growth through labour productivity this approach creates built in heteroskedasticity so the feasible generalized least square estimation is employed the results show that fdi has significant and positive effect on labour productivity and economic growth in vietnam but the effect is not equally distributed among economic sectors

narrative and var approaches to monetary policy common identification problems abstract romer and romer romer c d romer d h 1989 does monetary policy matter a new test in the spirit of friedman and schwartz in blanchard o j fischer s eds nber macroeconomics annual 1989 mit press cambridge ma pp 121 170 romer c d romer d h 1994 monetary policy matters journal of monetary economics 34 75 88 adopted a narrative approach to address the identification problems in time series models of monetary policy based on federal reserve documents the romers created a dummy variable equal to one in periods when the federal reserve contracted in response to perceived inflationary pressures this paper shows 1 the dummy variable is predictable from past macroeconomic variables reflecting the endogenous response of policy to the economy 2 unpredictable changes in the dummy do not generate dynamic responses that look like the effects of monetary policy the identification problems that plague time series models also afflict the narrative approach

characterizations of the pivotal mechanism the pivotal mechanism is strategyproof demand revealing in public decision problems where preferences are quasi linear moreover no agent has an incentive to free ride by withdrawing from the committee and consuming whatever decision is taken by the remaining agents strategyproofness plus no free ride characterize the pivotal mechanism this mechanism is anonymous and neutral yet together strategyproofness anonymity and neutrality do not characterize it they will however if reasonable lower or upper bounds on final utilities are imposed our last characterization of the pivotal mechanism uses the no free ride axiom and two mild monotonicity properties but not strategyproofness

central bank communication and monetary policy a survey of theory and evidence over the last two decades communication has become an increasingly important aspect of monetary policy these real world developments have spawned a huge new scholarly literature on central bank communication mostly empirical and almost all of it written in this decade we survey this ever growing literature the evidence suggests that communication can be an important and powerful part of the central bank s toolkit since it has the ability to move financial markets to enhance the predictability of monetary policy decisions and potentially to help achieve central banks macroeconomic objectives however the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

inference using qualitative and quantitative information with an application to monetary policy i introduction there has been a revival of interest in the use of qualitative information in macroeconomic analysis recently an impetus for this revival is the apparent inability of modern statistical analyses that use only quantitative information to resolve significant macroeconomic controversies for example the direction of causality between money and output continues to be the subject of considerable debate the use of qualitative information in macroeconomic analysis has a long tradition mitchell 1927 and burns and mitchell 1946 use the descriptions in thorp s 1926 annals and several statistical series to identify the unobserved phase of the business cycle 1 in their chapters on the federal reserve friedman and schwartz 1963 use diaries policy records and monetary aggregates to identify the stance of monetary policy the essence of this traditional method is that it is prudent to use both qualitative and quantitative information in the process of inference because of the potential gain in confidence associated with cross verification both types of information are needed to identify the asymmetries and nonlinearities that are characteristic of business cycles policy initiatives and other economic phenomena questions concerning the interpretation of results using qualitative information however have been raised 2 a source of unease is the difficulty of assessing a researcher s distillation of the information in descriptive materials no obvious metric for evaluating the coding of a qualitative variable exists i present an alternative framework for combining qualitative and quantitative information in order to draw inferences of an unobservable variable quantitative information is an observable time series variable qualitative information is an indicator variable coded by a researcher that reflects the distillation of literary materials motivated by the traditional method i consider the case where both types of observable information are imperfect representations of an unobserved state variable an iterative algorithm that uses quantitative and qualitative information to draw inferences of the unobservable variable is constructed the algorithm produces an inference of the unobservable state variable for each sample period using the two types of information it also produces a probabilistic assessment of whether the qualitative indicator is a reliable indicator of the true unobserved state as discussed in more detail below this algorithm is closely related to those of cosslett and lee 1985 and hamilton 1989 the algorithm is applied to the problem of determining the stance of monetary policy a goal is to confront a problem that economic agents may actually face because of the secrecy surrounding the monetary policy process a description of that problem is how can observable information qualitative and quantitative be combined to infer the stance of monetary policy also can the reliability of the qualitative information or a distillation of it be measured i implement the algorithm using two prominent indicators of monetary policy the paper is organized as follows the alternative framework for using qualitative and quantitative information to draw inferences of an unobservable variable is presented in the next section the application to the problem of inferring the stance of monetary policy is presented in section iii in this section indicators of policy are introduced the model is estimated and the relationship between the dynamic conditional monetary policy inferences and an important forecaster of macroeconomic activity is explored section iv concludes ii an alternative framework for inference stochastic structure my alternative framework is based on a particular conception of the statistical model underlying the traditional method let y sub t denote a quantitative variable and i sub t denote a 0 1 qualitative variable

discrete response state space models with conditional heteroscedasticity an application to forecasting the federal funds rate target we propose a state space mixed model with stochastic volatility for ordinal response time series data for parameter estimation we design an efficient markov chain monte carlo algorithm we illustrate our method with an empirical study on the federal funds rate target the proposed model provides better forecasts than alternative specifications

the credit channel of monetary policy transmission evidence from stock returns christophre georges this paper offers a novel test of the credit view of the monetary policy transmission mechanism using stock market returns we identify fed policy shocks using newspaper accounts and track daily stock prices immediately following the shocks if the credit channel is important then firms that are dependent on bank credit and internal funds should receive a relatively greater benefit loss from a fed easing tightening than firms with access to nonbank credit at favorable terms we identify ten policy shocks during the expansion of 1993 94 and the credit crunch period of the 1990 91 recession and find little evidence supportive of an operative credit channel jel e5 i introduction recently there has been renewed interest in the mechanism by which monetary policy innovations are transmitted into changes in aggregate output according to the traditional money view monetary policy influences market interest rates inducing changes in interest sensitive spending and consequently changes in output by assumption there is no distinction between financial assets and thus bank loans and internal funds are of no special interest in contrast the credit view e g bernanke and blinder 1988 assumes that bank loans are special due to information asymmetries some businesses are dependent on banks for loanable funds a withdrawal of reserves by the fed causes the supply of bank loans to fall and bank dependent businesses consequently reduce their spending a broader version of this view e g gertler and gilchrist 1993 bernanke and gertler 1995 claims that credit market imperfections contribute to the propagation of monetary policy shocks without working exclusively through the su pply of bank loans tight monetary policy may for example cause a deterioration of borrowers net worth thereby increasing external finance premia in either case this transmission mechanism operates through firms that are credit constrained in the sense that nonbank credit is an imperfect substitute for internal funds and bank loans empirical evidence on the transmission mechanism has been mixed see bernanke and blinder 1992 ramey 1993 kashyap et al 1993 gertler and gilchrist 1993 1994 christiano et al 1996 oliner and rudebusch 1995 1996 kashyap and stein 2000 two fundamental problems make direct tests of the credit view difficult the difficulty of identifying exogenous monetary policy shocks and the difficulty of identifying the relationship between these shocks and subsequent real activity this article offers a novel empirical test of the credit view using stock market returns if the credit channel is important then firms that are credit constrained should receive a relatively greater benefit loss from a fed easing tightening than firms with access to nonbank credit at favorable terms this relative benefit loss should be reflected in the behavior of stock prices immediately following news of the fed policy change we therefore identify changes in market expectations of fed policy calculate abnormal returns the deviations of the actual returns from the returns predicted by an asset pricing model for individual securities immediately following these innovations and test for systematic relationships between these abnormal returns and indicators of credit constraints at the firm level this approach is more indirect than others in the literature but has the advantage of mitigating the two identification problems noted above first the policy shocks that we use are changes in stock market expectations of fed policy we can identify these closely using daily accounts in the business press 1 second because the stock market reacts quickly to changes in expectations of future profitability we observe near contemporaneous responses of stock prices to policy shocks regardless of when in the future profits are expected to be altered

the relation between narrative and money market indicators of monetary policy this paper studies the relation between narrative based indicators of monetary policy and widely used money market indicators of monetary policy three principal findings emerge first changes in monetary policy as measured by the narrative based policy indices are associated with persistent changes in the levels of m2 and the monetary base in contrast changes in the narrative policy indicators lead to transitory changes in short term interest rates nonborrowed reserves and the spread between the six month commercial paper rate and the three month treasury bill rate third these findings are generally robust across different narrative based policy indices

turkish monetary policy and components of aggregate demand a var analysis with sign restrictions model this article estimates the effects of monetary policy on components of aggregate demand using quarterly data on turkish economy from 1987 2008 by means of structural vector autoregression var methodology this study adopts uhlig s 2005 sign restrictions on the impulse responses of main macroeconomic variables to identify monetary shock this study finds that expansionary monetary policy stimulates output through consumption and investment in the short run however expansionary monetary policy is ineffective in the long run

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

rhetoric and action what are central banks doing before elections central bank rhetoric need not always be followed bycorresponding measures in a number of regressions coveringgermany japan and the u s we examine differences in rhetoricand actual behavior before elections using a standard pbcmodel our results indicate that these three central bankshave not been influenced by electoral consideration in thepolicies they implement but the case of the german bundesbankindicates that it may be helpful to distinguish betweenrhetoric and action

the enfranchisement of women and the welfare state abstract we offer a rationale for the decision to extend the franchise to women within a politico economic model where men are richer than women women display a higher preference for public goods and women s disenfranchisement carries a societal cost men and women are matched within households which are the center of the decision process we derive the optimal tax rate under two alternative regimes a males only enfranchisement regime and a universal enfranchisement regime the latter is associated with a higher tax rate but as industrialization raises the reward to intellectual labor relative to physical labor women s relative wage increases thus decreasing the difference between the tax rates when the cost of disenfranchisement becomes higher than the cost of the higher tax rate which applies under universal enfranchisement the male median voter is better off extending the franchise to women a consequent expansion of the size of government is only to be expected in societies with a relatively high cost of disenfranchisement we empirically test the implications of the model over the 1870 1930 period we proxy the gender wage gap with the level of per capita income and the cost of disenfranchisement with the presence of catholicism which is associated with a more traditional view of women s role and thus a lower cost the gender gap in the preferences for public goods is proxied by the availability of divorce which implies marital instability and a more vulnerable economic position for women consistently with the model s predictions women s suffrage is correlated positively with per capita income and negatively with the presence of catholicism and the availability of divorce while women s suffrage increases the size of government only in non catholic countries

what do the vars mean measuring the output effects of monetary policy abstract vars describe the history of output and other variables following monetary shocks to measure the effects of monetary shocks one must add economic identifying assumptions i specify the relative effects of anticipated and unanticipated money and i calculate how var based measures of the effect of money on output change as one varies this assumption the anticipated unanticipated assumption influences measured output effects as much or more than the variable selection and shock orthogonalization assumptions on which the var literature focuses assuming that anticipated monetary policy can have some effect on output results in much shorter smaller and perhaps more believable estimates of the output response to monetary shocks

the return of the liquidity effect a study of the short run relation between money growth and interest rates in this article i use band pass filters to investigate the short run relationship between money growth and interest rates i find a negative correlation between short run movements in money growth and interest rates which i interpret as evidence that the liquidity effect dominates the anticipated inflation effect

bank rate policy under the interwar gold standard a dynamic probit model the classical gold standard occupies an almost mystical position in the literature of international finance in popular accounts the gold standard is portrayed as a remarkably durable and efficient mechanism for achieving price and exchange rate stability and for relieving balance of payments pressures the system s resilience is attributed to the willingness of nationa monetary authorities to refrain from impeding the international adjustment process when central banks intervened in financial markets it is said they did so mechanically obeying rules of the game which dictated that they reinforce the impact on domestic money and credit of changing balance of payments conditions succeeding generations of economists and historians have sought to qualify this popular view the recent contributions of bordo i98i and cooper i982 make a critical assessment of extravagant claims concerning price and exchange rate stability under the classical gold standard other authors have extended the research of bloomfield i 959 ford i962 and triffin i964 who emphasised the special conditions that permitted the classical gold standard s smooth operation and cast doubt on the tendency of national monetary authorities to adhere faithfully to rules of the game all too often scant mention is made of the interwar gold standard for it is not evident how interwar experience fits into either view certain facts are clear it is clear that the interwar standard was far from durable britain s resumption of gold payments in i925 usually is taken to mark the gold standard s resurrection just as her devaluation a mere 6 years later is taken as its demise in the interim many of the major participants suffered serious balance of payments pressures that threatened to render their exchange rates indefensible the system was anything but conducive to stability it precluded neither price nor income fluctuations as the great depression dramatically illustrated numerous explanations have been advanced for the interwar gold standard s

the separability axiom and equal sharing methods a quasi linear social choice problem is defined as selecting one among finitely many indivisible public decision and a vector of monetary transfers among agents to cover the cost of this decision this decision is based upon individual preferences which are assumed to be additively separable and linear in money the separability axiom is a consistency property for choice methods on societies with variable size the decision is not affected if we remove an arbitrary agent under the condition that he be guaranteed his original utility level and the cost to the remaining agents is modified accordingly thus the utility level assigned by the social choice function to agent i is the price at which the other agents are unanimously willing to buy agent is share of the decision power a general characterization of choice methods satisfying this axiom is provided three subclasses of particular interest are characterized by additional milder axioms those are i equal sharing of the surplus left over some reference utility e g the utility at a status quo decision ii utilitarian methods that merely select the efficient public decision and perform no monetary transfers and iii equal allocation of nonseparable costs which divides equally the surplus left over from the utility derived from the pivotal mechanism also known as the vickrey clarke groves mechanism

modelling inflation shifts and persistence in tunisia perspectives from an evolutionary spectral approach this article examines the dynamic characteristics of the inflation rate in tunisia over the last two decades and particularly following the onset of the arab spring in 2010 which causes distortions in this country s monetary policy we focus on the two specific dimensions of the tunisian inflation rate inflation regimes and persistence we tackle this issue by adopting an evolutionary spectral approach initially proposed by priestley and tong 1973 our main findings indicate a stable inflation regime in the last 10 years with an average inflation rate of around 5 5 it is also found that the tunisian inflation experienced a high degree of inertia which reflects its gradual responses to shocks we also discuss the policy implications of these results which typically require policy makers to implement sound institutional reforms to reduce inflation

all sorry to disagree a general principle for the provision of non rival goods a group of agents with identical rights but different preferences share the cost of a public good in a situation where each agent is held responsible for his own preferences the principle says that nobody can benefit from the difference between his and other agents preferences all are sorry to disagree this axiom is incompatible with the pay according to benefits approach and in particular with lindahl pricing methods however it is compatible with foley s stand alone core constraints the author s axiom unlike the stand alone properties applies to any number of public goods or bads and to arbitrary public decisions copyright 1992 by the editors of the scandinavian journal of economics

egalitarian equivalent cost sharing of a public good in an economy with one public and one private good egalitarian equivalent cost sharing consists of finding the highest public good level x such that consuming x for free yields a feasible utility distribution the corresponding feasible allocation typically unique called egalitarian equivalent is in the core of the economy conversely any cost sharing method satisfying pareto optimality cost monotonicity nobody suffers a utility loss if the production technology improves upon ceteris paribus and individual rationality no single agent coalition objects or no private transfers no agent receives a positive amount of private good must select an egalitarian equivalent allocation in every economy copyright 1987 by the econometric society

the timing of welfare payments and intimate partner violence i examine transfer schedules for the temporary assistance for needy families tanf program and find a causal relationship between the time directly after welfare payments and intimate partner violence against women this study supports the hypothesis that the husband uses threats of violence as an instrument to gain control over the allocation of household resources and suggests that the increased incidence in physical violence after welfare payments is associated with alcohol use additionally i find that states that pay tanf recipients twice a month do not have this effect on threats of violence this suggests that smaller more frequent payments may reduce the husband s incentive to use verbal violence as a bargaining tool jel i38 j18 j12

a new look at pass through abstract this paper examines the relationship between exchange rates and prices rather than assuming exchange rate changes are exogenous shocks that affect prices i use a long run restrictions var to identify shocks and explore the way domestic prices import prices and exchange rates react to a variety of shocks consumer price pass through is nearly complete in response to some shocks but low in response to others alternatively import prices and exchange rates typically respond in the same direction and pass through seems quick this supports the idea that import prices are set in the producer s currency and that lower cpi pass through is a result of changes in quantities or margins further down the supply chain

do measures of monetary policy in a var make sense a reply to christopher a sims using the estimated var system one can trace out how monetary policy innovations affect the economy as john cochrane 1996 p 1 notes this literature has at last produced impulse response functions that capture common views about monetary policy for example in finding that a positive innovation to monetary policy is followed by increases in output prices and money and by a decline in the short term nominal interest rate in addition despite ongoing debates about precisely how the policy innovation should be identified the estimated responses of key macroeconomic variables to a policy shock are reasonably similar across a variety of studies and suggest that monetary policy shocks can have significant and persistent real effects

monetary policy and asymmetric response in default risk abstract in this empirical study monetary tightening is found to significantly raise the default risk on baa bonds absolutely and relative to the default risk on aaa bonds monetary easing however does not have a statistically significant effect on either of these variables

regional income fluctuations common trends and common cycles this paper investigates trend and cycle dynamics in per capita income for the major u s regions during the 1956 1995 period cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components we find considerable differences in the volatility of regional cycles controlling for differences in volatility we find a great deal of comovement in the cyclical response for all regions but the far west possible sources underlying differences in regional cycles are explored such as the share of a region s income accounted for by manufacturing defense spending as a proportion of a region s income oil price shocks and the stance of monetary policy somewhat surprisingly we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles but manufacturing share differentially affects trend growth for four of the seven regions studied

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

welfare bounds in the cooperative production problem a general model of lower bound individual rationality and upper bound axioms for fair allocation is proposed the unanimity welfare function associates to each individual utility function the highest equal utility feasibile when all agents share this utility if this function is a feasible lower bound resp upper bound then it is the highest lower bound of all resp the lower upper bound applying this to cooperative production of private goods we characterize when the unanimity welfare is a lower upper bound function and when the stand alone welfare is an upper or lower bound our approach unifies several familiar fairness properties

inflation differentials in the euro area did the ecb care compared to inflation differentials among regions in the united states european monetary union emu inflation differentials are larger and more persistent based on augmented monetary policy reactions functions this article addresses the question whether the presence of pronounced inflation differentials in combination with low average inflation rates has influenced monetary policy decisions of the ecb the article finds statistical evidence that the ecb took inflation differentials into account which may reflect the fear of deflation in low inflation countries like germany

private sector influences on monetary policy in the united states i examine the extent to which the federal reserve s monetary policy actions are correlated with the expressed wishes of private sector lobbying groups i update and extend work by havrilesky 1990 1993 regarding the effect of signals from the banking industry through the federal advisory council fac i also construct a new database containing statements from non financial interest groups i find that monetary policy actions are correlated with signals from non financial groups before 1979 but not after and are correlated with signals from the fac after 1979 but not before i also find that the fed s policy stance more closely matches the preferred stance of the banking industry after 1979

a proposal to unify some concepts in the theory of fairness so far the theory of distributive justice has tried to single out a unique criterion of justice in our opinion we live in a world in which different people hold conflicting ideas about justice we propose a procedure for representing these individual opinions by means of what we call aspiration functions and we present in this paper three different ways of aggregating such opposing opinions into a socially acceptable judgement furthermore we show that many well known concepts are special cases of our approach we study under a restriction on the form of the aspiration functions the conditions that are necessary and sufficient for a social choice correspondence to be generated from any of our concepts

monetary policy announcements and market interest rates response evidence from china abstract this paper examines the daily responses of market interest rates to three monetary policy announcements in china using the event study approach i find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve by contrast market interest rates barely respond to the qualitative mpc announcements about the monetary policy stance these findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption these findings suggest that the pbc should formulate its policy communication in a quantitative way

coherence causality and effectiveness of the eu environmental policy system results of complementary statistical and econometric analyses this paper presents the first empirical test of coherence i e consistency of policies within a framework causality i e logical priority of objectives over policies and effectiveness i e ability of policies to tackle challenges as defined by objectives of the overall eu environmental policy system to do so i applied complementary statistical cross sectional and time series and econometric dynamic tri probit analyses to an original panel dataset based on addressed issues i e pollution vs resource trans boundary vs domestic flow vs stock rather than on implemented policies i e eu legislation aiming at optimal pollution production optimal resource use and market competition it would be impossible to perform similar analyses by referring to realized policies rather than tackled issues due to the unbalanced sample characterizing the former with respect to the latter as well as due to overlapping objectives interrelated policies and non univocal relationships between objectives and policies in contrast with previous studies of single eu environmental policies characteristics of the eu environmental policy or eu environmental objectives i found that the overall eu environmental policy system is internally coherent dynamically causal and ex ante effective moreover the evidence suggests that many issues are correlated trans boundary issues became more relevant in 2012 pollution production was more significant than resource use and flow issues were more important than stock issues from 1995 to 2010 finally i show that few objectives overlapped a safe environment objective 1987 1997 was preferred to a greenhouse gas ghg reduction objective 2003 2012 but pursued with a 2 year lag although the latter has recently become preferred to the former in addition a ghg reduction objective was preferred to a sustainable development objective 1998 2002

the pure compensation problem egalitarianism versus laissez fairism a binary choice problem with side payments and quasi linear utilities is considered we study two compensation rules called social choice functions the egalitarian rule divides equally the surplus above the average utility level the laissez faire rule chooses an efficient decision but performs no transfer egalitarianism is characterized by a monotonicity axiom called agreement no two agents ever disagree in comparing two distinct preferences of a third one laissez fairism is characterized by the no subsidy axiom a coalition would not be worse off if the other agents were not present

term structure views of monetary policy under alternative models of agent expectations abstract term structure models and many descriptions of the transmission of monetary policy rest on the empirical relevance of the expectations hypothesis small differences in the perceived policy reaction function in var models of agent expectations strongly influence the relevance in the transmission mechanism of the expected short rate component of bond yields mean reverting or difference stationary characterizations of interest rates require large and volatile term premiums to match the observable term structure however short rate descriptions that capture shifting perceptions of long horizon inflation evident in survey data support a more substantial term structure role for short rate expectations

estimating the discount rate policy reaction function of the monetary authority this paper estimates a policy rule that explains the sign and the magnitude of the federal reserve s fed s discount rate changes it sets out a two sided type ii tobit model and develops a procedure for its estimation considering the discrete and censored nature of the changes the results suggest that the fed has conducted discount rate policy counter cyclically to influence output and to curb inflation and that the fed s response to policy indicators varies over monetary regimes furthermore consistency is found between the model prediction of the discount rate change and a classification based on whether the change is technical or non technical copyright 1999 john wiley sons ltd