the hyperinflation model of money demand revisited in this paper we propose a test of the hyperinflation model of money demand which is valid under any assumption concerning agents expectations subject only to the restriction that forecasting errors are stationary it is also demonstrated that highly efficient parameter estimates can be obtained and restrictions on them tested under the same weak assumption finally it is shown how these first stage estimates can be utilized to test the stronger assumption of rational expectations the arguments are illustrated by analysis of the classic data on european hyperinflations previously analyzed by cagan 1956 barro 1970 and abel dornbusch huizinga and marcus 1979 copyright 1991 by ohio state university press

detecting periodically collapsing bubbles a markov switching unit root test this paper addresses the problem of testing for the presence of a stochastic bubble in a time series in the case that the bubble is periodically collapsing so that the asset price keeps returning to the level implied by the market fundamentals as this is essentially a problem of identifying the collapsing periods from the expanding ones we propose using a generalization of the dickey fuller test procedure which makes use of the class of markov regime switching models the potential of the new methodology is illustrated via simulation and an empirical example is given copyright 1999 john wiley sons ltd

subcontracting and the survival of plants in the road construction industry a panel quantile regression analysis this paper investigates how subcontracting parts of contracted work shapes entrants success and survival we find that newly developed quantile regression approaches can be adapted to study survival of firms competing for government contracts in road construction the method is applied on a data set that includes patterns of firm entry exit and auction related information we find an apparent increase in the business life of firms who subcontract out part of their projects in texas these subcontracting effects appear to be more pronounced for firms with few or no options outside the industry and among firms who contract out part of their work to disadvantaged business enterprises

comments rational bubbles during poland s hyperinflation implications and empirical evidence by m funke s hall and m sola a number of papers have tested for rational bubbles in the post world war i hyperinflation in germany the present paper henceforth fhs does so in poland around the time of the big bang it finds some evidence that the main determination of the hyperinflation was a rational bubble but cautiously notes that conventional structural models might also explain the hyperinflation i salute their technically sophisticated investigation of this interesting question but in the end find their evidence distinctly less suggestive of bubbles than do they this evidence comes from a nice extension of techniques suggested by diba and grossman 1984 and hamilton and whiteman 1985 and applied to the german hyperinflation by hamilton and whiteman 1985 using the cagan model that paper noted that in the absence of bubbles prices will have the same order of integration as does money if money is say z 2 so that what is stationary is changes in the growth rate of money but not the growth rates themselves then prices should be z 2 as well but bubbles cause explosive growth so no level of differencing will induce stationarity in a variable driven wholly or even in part by a bubble hamilton and whiteman 1985 found that prices and money appeared to be z 2 in the german hyperinflation and concluded that bubbles probably were not present evans 1991 in turn pointed out that if a bubbles periodically grow and collapse and b there are not a whole lot of observations during which the bubble was growing the hamilton and whiteman 1985 test will likely fail to find bubbles and tests are likely to find that prices and money are

a permanent effect of temporary immigration on economic growth immigration can help to lessen the burden of ageing for the welfare states of most western economies to show this we develop a decomposition framework for gross domestic product gdp per capita which deals with the impact of both ageing and immigration on economic growth using a vector error correction model vecm for the netherlands during 1973 to 2009 we demonstrate the empirical relevance of some crucial interactions between elements of that decomposition the conclusion is that even temporary immigration may help to alleviate the ageing problem through a positive long term contribution to employment wages and gdp per capita as long as the immigrants are able to participate in the labour force in tandem with the native population unfavourable short term effects should be avoided through a gradual phasing in of immigration policies

the monetary dynamics of sustained high inflation taiwan 1945 1949 taiwan experienced a sustained period of very high price inflation in the period 1945 1949 which led to an eventual rise in prices even greater than that experienced during some of the classic european hyperinflations analyzed by cagan 3 and others makinen and woodward 22 90 note that on the list of recognized hyperinflations one will not find taiwan but nevertheless argue that this episode should be classed as such although the average rate of taiwanese inflation during this period was not as high as in the episodes examined by cagan the very length of the period during which inflation remained high singles the taiwanese experience out as an extremely interesting period for analysis by monetary economists in this paper a primary aim is to examine whether the salient features of the demand for money during this period can be adequately characterized by an application of cagan s model of money demand under conditions of hyperinflation in particular we apply a test of cagan s model which is not contingent on any particular assumption concerning expectations formation except that agents errors in forecasting inflation are stationary using these first stage estimates we then examine subject only to the same weak assumption of stationary forecasting errors the hypothesis that the monetary authorities expanded the money supply in such a way as to maximize the inflation tax revenue ensuing from money creation finally we test the rational expectations version of the hyperinflation model of money demand the remainder of the paper is set out as follows in section ii we discuss the background to the taiwanese hyperinflation of 1945 1949

inflation and currency reform expectations of currency reform are explicitly incorporated into a rational expectations version of the cagan model of money market equilibrium where expectations about the timing of reform are lerived from a simple government rule for choosing when to reform the currency the model is estimated for three of the episodes of hyperinflation that cagan investigated and the results support the hypothesis that expectations of reform were responsible for the apparent instability of the demand for money during the final months of these hyperinflations

money demand the cagan model and the inflation tax some latin american evidence this paper examines the demand for money under conditions of very high inflation in argentina bolivia brazil chi le and peru during the 1970s and 1980s the authors test whether the monetary and inflationary experiences of these countries can be adequately characterized by the cagan 1956 model using an econometric procedure that is not reliant on any particular assumpti on concerning expectations formation except that forecasting errors are stationary the authors also examine the importance of foreign asset substitution in domestic portfolios and the hypothesis that monetary policy was tantamount to maximization of the inflation tax revenue before testing the rational expectations hypothesis copyright 1993 by mit press

measures of fit for rational expectations models this survey provides a detailed description of some of the recent theoretical and empirical literature on rational expectations econometrics the survey pays special attention to non stationarity of the data and to the various methods for evaluating rational expectations models that have been developed as alternatives to the classical statistical approach of testing overidentifying restrictions these methods have become very popular and widely used in empirical research we provide an illustration using danish stock market data and we summarize the many results obtained recently using these measures in areas as diverse as stock prices the term structure of interest rates exchange rates consumption and saving the balance of payments tax smoothing hyperinflation and linear quadratic adjustment cost models for inventories labour demand and money demand

testing for rational bubbles with exogenous or endogenous fundamentals the german hyperinflation once more abstract the presence of rational price bubbles during the german hyperinflation is tested under two different structural assumptions on the money process if the money supply is constrained to be exogenous to the current inflation rate the hypothesis of no bubble can be rejected however this is no longer found to be true when a feedback rule from inflation to money creation is allowed the analysis contradicts previous results presented in the literature

comparative study of one bid versus two bid auctions abstract the paper focuses on a comparative investigation of the standard one bid first price auction and a corresponding two bid auction where each buyer may place two bids a high bid and a low one and the winner pays his low bid if this was higher than all other bids we characterize the equilibria of the two mechanisms and prove some results on the ranking of revenues for the symmetric case we show that subjects in an experiment prefer the two bid over the one bid auction when given the possibility of choosing between the two and compare the observed behavior to the theoretical predictions

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

regional labor markets and the determinants of wage inequality from 1972 to 1990 the united states experienced the largest increase in wage inequality of any developed country the spread in log wages between the 90th and 10th percentiles of the male wage distribution increased by about 60 points and inequality increased within virtually every demographic or skill category of the labor force see chinhui juhn et al 1993 various explanations have been offered including changes in the relative demand for skill intensive goods international trade immigration of less skilled workers and increased labor force participation of women yet attempts to quantify the relative importance of these factors have not met with much success this leaves skill biased technical change as the residual claimant that rationalizes the data this paper uses regional differences in the evolution of wage inequality to provide new evidence on the determinants of relative wages using a model of factor demand in geographic markets i isolate contributions of i changing skill ratios in the labor force ii increased participation of women iii technical change and iv changes in the industrial composition of labor demand the data indicate that changing skill ratios and women s labor supply have affected the wages of low skilled men in the west the data indicate that increased immigration of less skilled hispanic and asian workers has adversely affected the wages of natives causing a greater increase in inequality there than in any other region of the country i modeling wage inequality in regional markets

the bidder s curse traditional explanations for the popularity of auctions are efficiency and revenue maximization we argue that another reason is the potential for overbidding i e buyers bidding above their willingness to pay outside the auction the auction mechanism ensures that even if only few buyers overbid they affect prices and allocations we employ a novel approach to identify overbidding in the field comparing auction prices to simultaneous fixed prices for identical items on the same ebay webpage we argue that fixed prices provide an upper bound for auction bids in a detailed data set of board game auctions we find that the final price exceeds the simultaneous fixed price in 42 percent of the auctions the result is not explained by differences in item quality shipping costs or seller reputation prior auction experience does not eliminate overbidding the finding replicates in a second broad data set of a cross section of auctions 48 percent overbidding the substantial fraction of overbid auctions is induced by a small number of bidders only 17 percent ever bid above the fixed price using a simple model of second price auctions with alternative fixed prices we show that transaction costs of switching between auctions and fixed prices cannot explain the results given that even the expected auction price is higher than the fixed price consistent with limited attention the closer the fixed price is listed relative to an auction the less likely are overbids this effect is strongest for bidders first bids when they are likely to examine the auction and fixed price listings more closely

learning to bid an experimental study of bid function adjustments in auctions and fair division games we examine learning behaviour in auction and fair division experiments with independent private values under two different price rules first and second price participants play all four games repeatedly and submit complete bid functions rather than single bids this allows us to study how institutional changes are anticipated and whether learning is influenced by the structural differences between games we find that learning does not drive bidding towards the benchmark solution bid functions are adjusted globally rather than locally directional learning theory offers a partial explanation for bid changes the data support a cognitive approach to learning

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

an alternate method of estimating the cagan money demand function in hyperinflation under rational expectations abstract an alternate method of estimating the cagan money demand function under rational expectations is presented the technique utilizes the side assumptions that 1 accurate contemporaneous information on the price level and money stock is available to individuals and 2 unobservable noise in the portfolio balance schedule is neglible the procedure has three main virtues first it is implemented without imposing restrictions on the money supply process second the procedure is extremely simple and economical third it admits a simple test of a restriction implied by the cagan money demand function results are related to issues in recent hyperinflation studies

misspecification versus bubbles in hyperinflation data monte carlo and interwar european evidence abstract this paper analyzes some new tests of the cagan hyperinflation money demand model which have several advantages relative to those in the literature they do not confound specification error with rational bubbles can be implemented with a linear procedure and are frequently able to detect periodically collapsing bubbles which have challenged existing tests after a monte carlo analysis the tests are applied to data from hyperinflations in austria germany hungary and poland evidence of misspecification is found for austria germany and hungary while the model without a rational bubble component appears to fit the data for poland

entry decisions and bidding behavior in sequential first price procurement auctions an experimental study abstract though many real life auctions are run independently of each other from the bidders point of view they often form sequences of auctions we investigate how behavior responds to the additional incentives that are present in such auction sequences comparing subjects decisions in single first price procurement auctions with their decisions in a game consisting of two subsequent first price procurement auctions we find that in line with the theoretical prediction entry and bidding behavior is crucially affected by the opportunity cost of early bid submission though entry decisions and average bids in the auction sequence systematically deviate from the perfect bayesian equilibrium prediction while the nature of the opponent human being or computer has no significant effect on these findings giving subjects additional feedback on winners and prices seems to reduce the deviations from the equilibrium prediction

rational bubbles during poland s hyperinflation implications and empirical evidence abstract it has been argued that the polish hyperinflation at the end of the eighties was too excessive to be attributed to market fundamentals only in this paper a range of indirect non structural and structural tests for rational exploding deterministic and stochastic bubbles are carried out we adopt a new strategy based on the work of hall and sola 1993a which allows for the possibility of switching regimes in the time series properties of the data to allow for both indirect tests and structural tests for the presence of stochastic bubbles

asymmetric auction experiments with out commonly known beliefs abstract are commonly known beliefs essential for bidding behavior in asymmetric auctions our experimental results suggest that not informing participants how values are randomly generated does not change behavior much and may even make it appear more rational

information and conspiracy in sealed bid auctions abstract this paper examines the allocative properties of the sealed bid institution when different aspects of the available information to bidders are considered specifically we examine a the effect on price determination in repeated sealed bid auctions of post auction revelation of losing bids and b the effect on price determination when conspiratorial discussions are allowed

out of equilibrium bids in first price auctions wrong expectations or wrong bids deviations from risk neutral equilibrium bids in auctions can be related to inconsistent expectations with correct best replies or correct expectations but deviant best replies e g because of risk aversion regret quantal response mistakes to distinguish between these two explanations we use a novel experimental procedure and study expectations together with best replies in symmetric and asymmetric auctions we extensively test the internal validity of this setup we find that deviations from equilibrium bids do not seem to be because of to wrong expectations but because of deviations from a risk neutral best reply

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

laboratory testbeds and non market valuation the case of bidding behavior in a second price auction with an outside option researchers now use the lab to examine the behavioral underpinnings of valuation before the field application which some argue has less experimental control but lab valuation work raises its own set of concerns when it uses private goods to explore non market valuation behavior because private goods have substitutes often unaccounted for in the lab therefore the lab as a tool to testbed field valuation work may be limited herein we design an induced valuation experiment to explore bidding behavior in a second price auction with an outside option that is a perfect substitute for the auction commodity theory predicts that rational bidders will consider the prices of outside options when formulating bidding strategies and will reduce their bids whenever their resale value exceeds the price of the outside option our results suggest that bidders account for outside options when formulating bids with behavior following comparative static predictions in addition we provide evidence concerning hypothetical versus actual behavior with induced values the data suggesting a hypothetical bias in the level of bids but not in bid shaving

a gravity model of immigration this paper develops a gravity model of immigration tests of the model using panel data for 16 oecd countries for 1991 2000 confirm the model s high explanatory power and examples illustrate its usefulness for testing other hypothesized determinants of immigration

does immigration boost per capita income using a cross section of countries we adapt frankel and romer s 1999 iv strategy to international labor mobility controlling for institutional quality trade and financial openness we establish a robust and non negative causal effect of immigration on real percapita income

auctions and the price of art the value of most important works of art is established by public auction either directly by an actual sale or indirectly by reference to other sales how the auction system works is thus a critical determinant of how the public s preferences are translated into the evaluation of artistic work the auction system is central in the determination of the incentives for artistic work and the efficiency of the auction system is a key determinant of the cost of creating and distributing works of art this paper contains a review of the burgeoning new research of the last decade that has been designed to shed light on how the art auction system actually works what it indicates about price formation and how well it performs we begin our discussion in section 2 with a short description of the mechanics of the auction system and then organize the remainder of our discussion around two major topics the first topic concerns how auction prices can be used to determine and compare overall price movements within the art market and other markets and the second topic concerns how the auction mechanism influences prices we

an experimental analysis of auctions with interdependent valuations abstract we study experiments in an auction setting with interdependent valuation groups of three players receive private signals and then bid for a single indivisible item valuations for the item differ within groups and depend asymmetrically on a bidder s own and other bidders signals theoretically the english auction yields efficient allocations while other standard auction formats fail to do so consistent with equilibrium predictions we find that an english auction yields significantly more efficiency than a second price sealed bid auction we also study the seller s expected revenue and the bidders expected profits and find that the experimental results are close to the theoretical predictions

nonlinear behavior in sealed bid first price auctions the extent to which the behavior of people is consistent with game theoretic principles is investigated in a first price sealed bid auction environment three linear rules of thumb with increasing complexity are used as benchmarks to gauge the accuracy of the constant relative risk aversion model crram in addition the crram is tested against the relaxation of the rational expectation hypothesis existing competitive bidding experiments cannot clearly distinguish between game theoretic models and linear markdown rules on an individual level within the parametric environments studied and reported in the experimental literature game theoretic solutions are linear over the range of private values in which bid functions are estimated in this study agents drew values from non uniform distributions as a result the game theoretic bidding behavior is nonlinear due to the nonlinearity special econometric and numerical techniques are applied to solve the model and obtain the estimates the crram exhibits good fit of the data the pseudo r2 is greater than 0 8 in 90 percent of the subjects the crram is more accurate than the markdown model mm and the simple ad hoc model simam but not as accurate as the sophisticated ad hoc model sop am the data also supports the relaxation of the rational expectation hypothesis and suggests that substantial increases in the predictive power of game theoretic models can be gained from improvements in the theory of belief formation

the heterogeneity of immigrants host countries income and productivity a channel accounting approach this article exploits changes in the distribution of immigrants across 20 organization for economic co operation and development countries from 1960 to 2005 in order to assess their contribution to income of destination countries the non random sorting of immigrants across countries is addressed by using an instrumental variable strategy the instrument is built by estimating a bilateral migration model incorporating exogenous origin country determinants of migration aggregate results reveal that immigrants have a positive effect on income that works primarily through total factor productivity tfp we further construct a novel dataset from censuses and labor force surveys to explore the information on the age of immigrants contrasting income effects are found across age groups a higher share of immigrants among the youth has a negative impact on aggregate income while a higher share of immigrants among prime aged workers has a positive effect we interpret this disparity as short term versus medium term effects adjustments over time involve changes in tfp but also in the human capital of the native born jel f22 j24 j31 o31

bottom fishing and declining prices in sequential auctions abstract we study standard sequential auctions in which the seller chooses the order of sale and right to choose auctions in which the winner chooses her preferred item from the remaining items empirically prices in sequential auctions tend to decline and sellers often hold right to choose auctions in our setting the right to choose format guarantees declining prices and efficiency in the standard auction a buyer may submit a low bid for the first item bottom fishing despite its being her less preferred item an example shows that the standard auction has declining prices is inefficient and gives lower expected revenue than the right to choose journal of economic literature classification numbers d44 d82

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

bidding behavior and experience in internet auctions abstract we study the role of experience in internet art auctions by analyzing repeated bidding by the same bidder in a unique longitudinal field dataset our results show that experience significantly lowers the level of bids suggesting that bidders change their bidding behavior throughout time participating in more than ten auctions brings down average bids by up to 26 we further test several possible explanations for the observed learning behavior and show that the change in bidding strategy is a result of a change in within auction behavior that is generated with experience our results are robust to concerns of endogenous participation as well as bidder fixed effects

pitfalls in testing for explosive bubbles in asset prices a number of studies e g robert j shiller 1981 olivier j blanchard and mark watson 1982 kenneth d west 1988 have argued that dividend and stock price data are not consistent with the market fundamentals hypothesis in which prices are given by the present discounted values of expected dividends these results have often been construed as evidence for the existence of bubbles or fads related arguments have been made with respect to gold bonds and foreign exchange a major problem with such arguments e g james hamilton and charles whiteman 1985 is that apparent evidence for bubbles can be reinterpreted in terms of market fundamentals that are unobserved by the researcher behzad t diba and herschel i grossman 1984 1988b and hamilton and whiteman 1985 have recommended the alternative strategy of testing for rational bubbles by investigating the stationarity properties of asset prices and observable fundamentals 1 in essence the argument for equities is that if stock prices are not more explosive than dividends then it can be concluded that rational bubbles are not present since they would generate an explosive component to stock prices 2 using unit root tests autocorrelation patterns and cointegration tests to implement this procedure diba and grossman 1988b p 529 state that the analysis supports the conclusion that stock prices do not contain explosive rational bubbles this paper shows that the above battery of tests is in fact unable to detect an important class of rational bubbles the point is demonstrated by constructing rational bubbles that appear to be stationary when unitroot tests are applied even though they are explosive in the relevant sense simulations show that when such bubbles are present stock prices will not appear to be more explosive than dividends on the basis of these tests even though the bubbles are substantial in magnitude and volatility the presence of rational bubbles in actual stock prices thus remains an open question

impulse balance equilibrium and feedback in first price auctions abstract experimental sealed bid first price auctions with private values in which feedback on the losing bids is provided yield lower revenues than auctions where this feedback is not given the concept of weighted impulse balance equilibrium which is based on a principle of ex post rationality and incorporates a concern for social comparison captures the data

bidding behavior in asymmetric auctions an experimental study abstract we review an asymmetric auction experiment based on plum int j game theory 20 1992 393 private valuations of the two bidders are independently drawn from distinct but commonly known distributions one of which first order stochastically dominates the other we test the qualitative properties of that model of asymmetric auctions in particular whether the weak bidder behaves more aggressively than the strong and then test bidders preference for first vs second price auctions

natural disasters and the effect of trade on income a new panel iv approach natural disasters affect bilateral trade we use this fact to generalize the instrumental variables strategy of frankel and romer 1999 to a panel setup this allows revisiting an old question does openness cause per capita gdp we work with a modified gravity framework in which we interact foreign natural disasters with geography predicting the exogenous component of bilateral trade flows and aggregating over trade partners we obtain a time varying instrument for multilateral openness of a country controlling for constant determinants of income history geography by means of fixed effects we find a robust positive effect of trade on income averaging 0 74 the estimated elasticity is substantially smaller than the one obtained in the cross section poor or non oecd countries feature a larger elasticity

collusion and information revelation in auctions abstract the theoretical literature on collusion in auctions suggests that the first price mechanism can deter the formation of bidding rings however such analyses neglect to consider the effects of failed collusion attempts wherein information revealed in the negotiation process may affect bidding behaviour we experimentally test a setup in which theory predicts no collusion and no information revelation in first price auctions the results reveal a hitherto overlooked failing of the first price mechanism failed collusion attempts distort bidding behaviour resulting in a loss of seller revenue and efficiency moreover the first price mechanism does not result in less collusion than the second price mechanism we conclude that while the features of the first price mechanism may have the potential to deter bidder collusion the role of beliefs in guiding bidding behaviour make it highly susceptible to distortions arising from the informational properties of collusive negotiation auction designers should take this phenomenon into account when choosing the auction mechanism

testing for cointegration abstract monte carlo experiments indicate that temporal disaggregation often yields significant power increases in augmented dickey fuller cointegration tests this result is contrary to the properties of adf unit root tests and is robust to several lag specifications and test misspecifications

cagan s model of hyperinflation under rational expectations this paper studies p cagan s model of the german hyperinflation under the hypothesis that adaptive expectations are rational it shows that inference about the key money demand elasticity parameter a is very senstitive to the specification of the dynamic interaction of the unobserved money demand shock with prices and money in particular if t j sargent s 1977 specification is modified then his basic conclusions are overturned identification of a does not require prior knowledge about the covariance of unobserved shock terms and d ata on the german hyperinflation imply a sharp not loose estimate of a which is of plausible magnitude finally informal tests indicate that modifying sargent s specification gives rise to improved model fit copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

misspecification versus bubbles in hyperinflation data comment abstract in this article i critically review some of the claims and analyses made by hooker j int money financ 19 2000 583 in his study of the cagan hyperinflation model i argue that i contrary to what hooker claims cointegration tests can be used to discriminate between bubbles and no bubbles ii contrary to hooker s claim his empirical results for the interwar european hyperinflations do not in general imply that the cagan model is misspecified iii although hooker s analyses build directly on the durlauf and hall bounds on the variances of specification errors in models with expectations nber working paper 2936 massachusetts cambridge 1989 methodology he neglects an important part of that methodology namely the measurement of the magnitude of noise i present such measures and together with reported cointegration tests the noise measures help reinterpreting hooker s empirical results

bubble weak and strong hyperinflation theory and empirical evidence the monthly continuous inflation rate that maximizes the inflation tax revenue varies widely from 18 3 to 143 according to semi elasticity estimates for the german hyperinflation made by several authors cagan 1956 barro 1970 frenkel 1977 sargent 1977 goodfriend 1982 burmeister and wall 1987 christiano 1987 casella 1989 taylor 1991 engsted 1993 imrohoroglu 1993 michael et al 1994 those estimates lead one to conclude that during hyperinflation the german government could have obtained more tax revenue with lower inflation rates

misspecification and bubbles in hyperinflation data reply to engsted engsted 2003 takes issue with several aspects of hooker 2000 mainly he objects to the statement that cointegration tests cannot be implemented when bubbles exist draws different conclusions than i did from my bubble test evidence and faults the paper s failure to include measures of the magnitude of model noise in this reply i focus mostly on interpreting the evidence where we have substantive disagreement that i believe is largely a result of differing priors regarding cointegration tests in the presence of bubbles in practice researchers may of course infer that a differenced bubble is stationary even though it will not be and apply cointegration tests my statement was simply intended to draw attention to this issue and highlight concerns about test properties what is particularly helpful in assessing the usefulness of a test under such conditions is a monte carlo analysis like the one included in my paper which gives readers a way to judge for themselves the efficacy of the test under different scenarios on the last point i agree with engsted on the merits of model noise measures and i find those he reports a useful contri

outside options another reason to choose the first price auction abstract in this paper we study equilibrium and experimental bidding behaviour in first price and second price auctions with outside options we find that bidders do respond to outside options and to variations of common knowledge about competitors outside options however overbidding in first price auctions is significantly higher with outside options than without first price auctions yield more revenue than second price auctions this revenue premium is significantly higher with outside options in second price auctions the introduction of outside options has only a small effect