optimal consumption and investment with transaction costs and multiple risky assets we consider the optimal intertemporal consumption and investment policy of a constant absolute risk aversion cara investor who faces fixed and proportional transaction costs when trading multiple risky assets we show that when asset returns are uncorrelated the optimal investment policy is to keep the dollar amount invested in each risky asset between two constant levels and upon reaching either of these thresholds to trade to the corresponding optimal targets an extensive analysis suggests that transaction cost is an important factor in affecting trading volume and that it can significantly diminish the importance of stock return predictability as reported in the literature this paper studies the optimal intertemporal consumption and investment policy of an investor with a constant absolute risk aversion cara preference and an infinite horizon the investor can trade in one risk free asset and n 1 risky assets in contrast to the standard setting the investor faces both fixed and proportional transaction costs in trading any of these risky assets in the absence of transaction costs and when risky asset prices follow geometric brownian motions the optimal investment policy is to keep a constant dollar amount in each risky asset as shown by merton 1971 this trading strategy requires continuous trading in all the risky assets in addition the optimal consumption is affine in the total wealth in the presence of transaction costs however trading continuously in a risky asset would incur infinite transaction costs therefore risky assets are traded only infrequently in this case the literature on optimal consumption and investment with multiple risky assets subject to transaction costs is limited leland 2000 examines a multiasset investment fund that is subject to transaction costs and capital gains taxes under the assumption that the fund has an exogenous target for each risky asset he develops a relatively simple numerical procedure to compute the no transaction region akian menaldi and sulem 1996 consider an optimal consumption and investment problem with proportional transaction costs for

evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

from paper to plastic understanding the impact of ewic on wic recipient behavior abstract evidence shows that the special supplemental nutrition program for women infants and children wic is underutilized wic enrolls 52 7 of eligible persons and participants claim a fraction of available benefits researchers suggest that people underutilize wic because of the time needed to enroll in and use wic and because participants may believe that if others notice them participating in wic community members will stigmatize them recently enacted policies may reduce both time costs and potential for stigma associated with wic congress mandated that by 2020 all states disburse wic benefits through an electronic benefits transfer ewic system given that ewic reduces the time required for each transaction and and makes it more difficult to identify beneficiaries we expect wic redemptions to increase in addition ewic might also increase the chance wic recipients choose non wic foods for redemption increasing non wic expenditures to measure the impact of ewic on wic redemptions and non wic food expenditures we analyze data on grocery expenditures of 11 887 wic participating households in one state over the period it implemented ewic we find that after beneficiaries began redeeming wic benefits through ewic spending on non wic eligible foods did not change but redemptions of wic benefits increased

evolution of the infant health production function michael grossman s seminal publication on the demand for health and health production grossman 1972 has spawned a substantial body of research focusing on the production of infant health this article provides a systematic review of the published literature to date on infant health production and how it has evolved over the past 3 4 decades as data have become more available computing has improved and econometric methods have become more sophisticated while empirical research in most fields has expanded in corresponding ways the infant health production research has become an important part of the broader and inherently multidisciplinary literature on intergenerational health the strongest and most robust findings are that policies matter for infant health particularly those affecting access to health care and that prenatal smoking and other chemical exposures substantially compromise infant health promising directions for future research include elucidating relevant pathways reconciling the largely inconsistent estimated effects of nutrition and education and exploring the roles of preconceptional and lifetime health care paternal factors social support housing complementarity and substitutability of inputs factors that modify effects of inputs and evolving medical technologies

smooth trading with overconfidence and market power we describe a symmetric continuous time model of trading among relatively overconfident oligopolistic informed traders with exponential utility traders agree to disagree about the precisions of their continuous flows of gaussian private information with enough disagreement an equilibrium exists in which prices reveal the average of all traders signals immediately but traders continue to trade gradually towards target inventories the price is a linear function of a trader s inventory the derivative of a trader s inventory and the average other traders valuations prices reflect a keynesian beauty contest faster than equilibrium trading generates flash crashes jel d8 d43 d47 g02 g14

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

continuous time model of uncovered interest parity with regulated jump diffusion interest differential this study investigates to what extent can an exchange rate model built on uncovered interest parity uip match the empirical features of the exchange rate and the interest differential data this article presents a continuous time model of uip in which the interest differential evolves following regulated jump diffusion simulation experiments show that the model is capable of matching several important features of the data inclusion of jumps improves the model to capture persistent dynamics of interest differential and fat tails in exchange rate returns compared to simple diffusion processes

foreign exchange market efficiency and common stochastic trends abstract in a recent paper baillie and bollerslev 1989 using daily data from 1980 to 1985 identified six common stochastic trends in a vector of seven nominal exchange rates implying the existence of one cointegrating vector cointegration implies that granger causality must run in at least one direction that is at least one of the exchange rates is predictable using current available information this result has been interpreted as foreign exchange market inefficiency by many another interpretation is suggested if the stationary linear combination of spot rates proxies for a time varying risk premium in some way then these results could be explained in a rational and risk averse market this possibility is eliminated if the time series properties of the risk premium are incompatible with those of the error correction term specifically it is demonstrated that the forward risk premium is non stationary for the exchange rates that comprise the exchange rate cointegration relationship in this paper the existence of common stochastic trends in a vector of nominal exchange rates is tested over the period 1974 to 1991 the efficiency of foreign exchange markets is then tested by examining the implications of stochastic trends in the forward premium and what this means for the time series properties of a time varying forward risk premium jel f31 g14

dynamic portfolio choice with frictions abstract we show how portfolio choice can be modeled in continuous time with transitory and persistent transaction costs multiple assets multiple signals predicting returns and general signal dynamics the objective function is derived from the limit of discrete time models with endogenous transaction costs due to optimal dealer behavior we solve the model explicitly and the intuitive solution is also the limit of the solutions of the corresponding discrete time models we show how the optimal high frequency trading strategy depends on the nature of the trading costs which in turn depend on dealers inventory dynamics finally we provide equilibrium implications and illustrate the model s broader applicability to micro and macro economics monetary policy and political economy

does prenatal wic participation improve birth outcomes new evidence from florida we study the effects of prenatal receipt of nutritional and educational services provided by the supplemental nutrition program for women infants and children wic on birth outcomes our identification strategy consists of two elements 1 identifying families in a very tight income range surrounding the wic eligibility threshold and 2 exploiting a policy change that differentially influenced the wic takeup rates of the families on each side of the eligibility threshold we conduct this analysis by merging three large statewide administrative datasets from florida concerning all births during the period 1997 2001 we match the birth records of infants and the school records of their older siblings in order to relatively precisely identify marginally eligible and marginally ineligible families that are very similar in their observable characteristics we find that wic participation has no effect on mean birth weight and gestational age but substantially reduces the likelihood of adverse birth outcomes e g birth weights below 2500 g

paying for progress conditional grants and the desegregation of southern schools this paper examines how a large conditional grants program influenced school desegregation in the american south exploiting newly collected archival data and quasi experimental variation in potential per pupil federal grants we show that school districts with more at risk in 1966 were more likely to desegregate just enough to receive their funds although the program did not raise the exposure of blacks to whites like later court orders districts with larger grants at risk in 1966 were less likely to be under court order through 1970 suggesting that tying federal funds to nondiscrimination reduced the burden of desegregation on federal courts i introduction because the u s constitution reserves powers not explicitly delegated to the federal government to the states conditional grants are key levers for federal policymakers seeking to affect a broad range of state and local policies states must implement federally approved speed limits and drinking ages to receive highway funding universities must provide gender parity in athletic offerings to receive research funding and states can lose funding if they do not comply with the clean air act more recently states and school districts have risked losing federal grants for failure to comply with the accountability requirements of the no child left behind act in this paper we examine whether the threat

can targeted transfers improve birth outcomes evidence from the introduction of the wic program abstract the goal of federal food and nutrition programs in the united states is to improve the nutritional well being and health of low income families a large body of literature evaluates the extent to which the supplemental program for women infants and children wic has accomplished this goal but most studies have been based on research designs that compare program participants to non participants if selection into these programs is non random then such comparisons will lead to biased estimates of the program s true effects in this study we use the rollout of the wic program across counties to estimate the impact of the program on infant health we find that the implementation of wic led to an increase in average birth weight and a decrease in the fraction of births that are classified as low birth weight we find no evidence that these estimates are driven by changes in fertility or selection into live births our preferred estimates suggest that wic initiation raised average birth weight by 2 g or by 7 g among infants born to mothers with low education levels these translate into estimated birth weight increases among participating mothers of approximately 18 to 29 g estimated treatments on the treated impacts among infants born to participating mothers with low education are of similar magnitude

foreign exchange market efficiency and cointegration in this note we examine an implication of the cointegration literature for the efficiency of foreign exchange markets in particular if foreign exchange markets are efficient then two spot exchange rates cannot be cointegrated this proposition is tested for 10 dollar bilateral exchange rates over the period january 1973 december 1985

the costs of low birth weight birth weight has emerged as the leading indicator of infant health and welfare and the central focus of infant health policy this is because low birth weight lbw infants experience severe health and developmental difficulties that can impose enormous costs on society but would the prevention of lbw generate equally sizable cost savings and health improvements estimates of the return to lbwprevention from cross sectional associations may be biased by omitted variables that cannot be influenced by policy such as genetic factors to address this we compare the hospital costs health at birth and infant mortality rates between heavier and lighter infants from all twin pairs born in the united states we also examine the effect of maternal smoking during pregnancy the leading risk factor for lbw in the united states on health among singleton births after controlling for detailed background characteristics both analyses imply substantially smaller effects of lbw than previously thought suggesting two possibilities 1 existing estimates overstate the true costs and consequences of lbw by at least a factor of four and by as much as a factor of 20 or 2 different lbw preventing interventions have different health and cost consequences implying that policy efforts that presume a single return to reducing lbw will necessarily be suboptimal

cointegration and market efficiency abstract recently many economists have asserted that asset prices determined in efficient asset markets cannot be cointegrated we show that there is no general equivalence between the existence of arbitrage opportunities and cointegration or for that matter a lack of cointegration whether asset prices are cointegrated is a function of the relevant model we first show a convenient way to calculate the cointegrating vector based on necessary and sufficient conditions for cointegration we then examine particular cases including exchange rates interest rates and spot and forward exchange rates and asset prices with incoem flows reinvested and not reinvested jel f31

from the cradle to the labor market the effect of birth weight on adult outcomes lower birth weight babies have worse outcomes both short run in terms of one year mortality rates and longer run in terms of educational attainment and earnings however recent research has called into question whether birth weight itself is important or whether it simply reflects other hard to measure characteristics by applying within twin techniques using an unusually rich dataset from norway we examine the effects of birth weight on both short run and long run outcomes for the same cohorts we find that birth weight does matter despite short run twin fixed effects estimates that are much smaller than ols estimates the effects on longer run outcomes such as adult height iq earnings and education are significant and similar in magnitude to ols estimates

asset prices and liquidity in an exchange economy i develop an asset pricing model in which financial assets are valued for their liquidity the extent to which they are useful in facilitating exchange as well as for being claims to streams of consumption goods the implications for average asset returns the equity premium puzzle and the risk free rate puzzle are explored in a version of the model that nests the work of mehra and prescott 1985

early life health interventions and academic achievement this paper studies the effect of improved early life health care on mortality and long run academic achievement in school we use the idea that medical treatments often follow rules of thumb for assigning care to patients such as the classification of very low birth weight vlbw which assigns infants special care at a specific birth weight cutoff using detailed administrative data on schooling and birth records from chile and norway we establish that children who receive extra medical care at birth have lower mortality rates and higher test scores and grades in school these gains are in the order of 0 15 0 22 standard deviations

a note on cointegration and international capital market efficiency abstract in a recent paper in the jimf crowder 1994 claims that evidence that spot exchange rates are cointegrated and forward premiums are non stationary implies international capital markets are not efficient this note argues that the cointegration properties of spot exchange rates are independent of the efficiency or inefficiency of financial markets

cross currency cross maturity forward exchange premiums as predictors of spot rate changes theory and evidence abstract this paper shows that in predicting the spot rate of a currency the term structures of forward premiums of other currencies have incremental information content in addition to the term structure of the currency s own forward premiums the theoretical model motivating the analysis hinges on the abundant evidence on the co movements of excess returns from investing in different currencies the empirical results are obtained through fiml estimation of a vector error correction model for weekly data on three bilateral us dollar exchange rates

foreign exchange market efficiency revisited abstract the cointegration of spot rates is neither a necessary nor a sufficient condition to account for the lack of foreign exchange market efficiency instead crowder crowder w 1994 1996 j int money finance 13 551 564 15 661 664 and engel engel c 1996 j int money finance 15 557 560 claimed that the stationarity of the forward premium is crucial to the hypothesis of market efficiency in this paper we employ the panel unit root test of im et al to examine the stationarity of forward premia and interest differentials among nine oecd countries we reject the unit root null for both the time series of the forward premium and interest differential which in turn supports the hypothesis of foreign exchange market efficiency

take up and targeting experimental evidence from snap this paper develops a framework for evaluating the welfare impact of various interventions designed to increase take up of social safety net programs in the presence of potential behavioral biases we calibrate the key parameters using a randomized field experiment in which 30 000 elderly individuals not enrolled in but likely eligible for the supplemental nutrition assistance program snap are either provided with information that they are likely eligible provided with this information and also offered assistance in applying or are in a status quo control group only 6 percent of the control group enrolls in snap over the next 9 months compared to 11 percent of the information only group and 18 percent of the information plus assistance group the individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group the results are consistent with the existence of optimization frictions that are greater for needier individuals suggesting that the poor targeting properties of the interventions reduce their welfare gains

market efficiency and cointegration an application to the sterling and deutschemark exchange markets abstract the assumption that the foreign exchange market is efficient that is that agents are risk neutral and use all available information rationally so that the forward exchange rate is an unbiased predictor of the future spot rate is a property often imposed in theoretical international macroeconomic models although a vast empirical literature has evolved to test market efficiency we use recent developments in the theory of cointegration to provide new methods of testing several aspects of foreign exchange market efficiency we ffind evidence inconsistent with market efficiency for both germany and the united kingdom

bridging the gap for roma the effects of an ethnically targeted program on prenatal care and child health abstract this study uses quasi experimental variation from a public health program implemented in romania that targeted roma europe s largest and most disadvantaged ethnic minority the program employed health mediators to increase the provision of information about already existing free of charge health services available for children and pregnant women we find that in rural areas the program led to large increases in prenatal care take up rates but no improvements in children s health at birth however we find significant reductions in infant mortality caused by perinatal complications

portfolio choice and pricing in illiquid markets abstract this paper studies portfolio choice and pricing in markets in which immediate trading may be impossible it departs from the literature by removing restrictions on asset holdings and finds that optimal positions depend significantly and naturally on liquidity when expected future liquidity is high agents take more extreme positions given that they do not have to hold those positions for long when they become undesirable consequently larger trades should be observed in markets with more frequent trading liquidity need not affect the price significantly however because liquidity has offsetting impacts on different agents demands this result highlights the importance of unrestricted portfolio choice the paper draws parallels with the transaction cost literature and clarifies the relationship between the price level and the realized trading frequency in this literature

episodic liquidity crises cooperative and predatory trading we describe how episodic illiquidity arises from a breakdown in cooperation between market participants we first solve a one period trading game in continuous time using an asset pricing equation that accounts for the price impact of trading then in a multi period framework we describe an equilibrium in which traders cooperate most of the time through repeated interaction providing apparent liquidity to one another cooperation breaks down when the stakes are high leading to predatory trading and episodic illiquidity equilibrium strategies that involve cooperation across markets lead to less frequent episodic illiquidity but cause contagion when cooperation breaks down why is illiquidity rare and episodic pastor stambaugh 2003 detect only 14 aggregate low liquidity months over the time period 1962 to 1999 despite being of significant magnitude most of the episodes were short lived and were followed by long periods of liquidity 1 the origin of this empirical observation still remains a puzzle in this paper we attempt to shed light on this puzzle by developing a theoretical model in which a breakdown in cooperation between traders in the market manifests itself in predatory trading this mechanism leads to sudden and short lived illiquidity we develop a dynamic model of trading based on liquidity needs during each period a liquidity event may occur in which a trader is required to liquidate a large block of an asset in a relatively short time period this need for liquidity is observed by a tight oligopoly whose members may choose to predate or cooperate predation involves racing and fading the distressed trader to the market

the pricing of forward exchange rates abstract this paper tests the hypotheses that 1 risk premia fully account for the observed systematic discrepancies between forward and future spot exchange rates and 2 efficient markets versions of ppp holds a simple theoretical framework is used to derive testable restrictions on the parameters of a multivariate regression model the data reject the restrictions and each hypothesis in contract to past investigations the empirical analysis strongly suggest that forward exchange rates incorporate anticipated real exchange rate movements

wic in your neighborhood new evidence on the impacts of geographic access to clinics a large body of evidence indicates that conditions in utero and health at birth matter for individuals long run outcomes suggesting potential value in programs aimed at pregnant women and young children this paper uses a novel identification strategy and data from birth and administrative records over 2005 2009 to provide causal estimates of the effects of geographic access to the special supplemental nutrition program for women infants and children wic my empirical approach uses within zip code variation in wic clinic presence together with maternal fixed effects and accounts for the potential endogeneity of mobility gestational age bias and measurement error in gestation i find that access to wic increases food benefit take up pregnancy weight gain birth weight and the probability of breastfeeding initiation at the time of hospital discharge the estimated effects are strongest for mothers with a high school education or less who are most likely eligible for wic services

testing the hypothesis of market efficiency in the taiwan us forward exchange market since 1990 this article examines the applicability of the hypothesis of market efficiency in taiwan s foreign exchange market using daily data instead of linear regression based models we consider the possibility that the true data generating process may come from two different distributions and we employ the markov switching approach to analyse this from the results of the two state markov switching model we define state 1 as the efficient state and state 2 as the inefficient one only the 30 day forward rate is able to differentiate between the two states based on the unconditional probabilities from the markov switching model we also find that the 30 day forward rate has a 70 probability in the efficient state which indicates that 70 of all speculators fully extract information when predicting future spot rates while 30 of all investors do not

transaction costs and asset prices a dynamic equilibrium model in this article we study the effects of transaction costs on asset prices we assume an overlapping generations economy with a riskless liquid bond and many risky stocks carrying proportional transaction costs we obtain stock prices and turnover in closed form surprisingly a stock s price may increase in transaction costs and a more frequently traded stock may be less adversely affected by an increase in transaction costs calculations based on the marginal investor overestimate the effects of transaction costs for realistic parameter values transaction costs have very small effects on stock prices but large effects on turnover

what did medicare do the initial impact of medicare on mortality and out of pocket medical spending abstract we study the impact of the introduction of one of the major pillars of the social insurance system in the united states the introduction of medicare in 1965 our results suggest that in its first 10 years the establishment of universal health insurance for the elderly had no discernible impact on elderly mortality however we find a substantial reduction in the elderly s exposure to out of pocket medical expenditure risk specifically we estimate that the introduction of medicare was associated with a 40 decline in out of pocket spending for the top quartile of the out of pocket spending distribution a stylized expected utility framework suggests that the welfare gains from such reductions in risk exposure alone may be sufficient to cover almost two fifths of the costs of medicare these findings underscore the importance of considering the direct insurance benefits from public health insurance programs in addition to any indirect benefits from an effect on health

distance to hospital and children s use of preventive care is being closer better and for whom i introduction this article examines the effect of distance to hospital on the utilization of preventive care among children many poor children lacking alternative providers rely on hospitals and clinics for preventive care moreover in many poor neighborhoods the majority of private doctors offices are located in buildings adjacent to a hospital thus hospitals indirectly serve to attract physician services that would otherwise be lacking in the neighborhood this pattern of service provision raises several concerns first it is inefficient for children to be receiving preventive care directly from hospitals because preventive care can be delivered more cheaply in doctors offices and doctors offices also provide greater continuity of care an index of quality second even when children are receiving care in a doctor s office adjacent to a hospital continuation of that service may be jeopardized if the hospital were to close in this study we use distance to hospital as a proxy for access to medical services to examine the effect of distance to hospital on the use of preventive care services if the use of these services falls with distance other things being equal then we interpret this as evidence of lack of access to alternative providers most previous studies of the effects of distance have concentrated on specific geographical areas and or hospitalizations for specific procedures we are therefore unaware of any previous studies that have focused on the effects of distance on the utilization of preventive care among children 1 we use a national sample of children created by matching records from the national longitudinal survey of youth s child mother nlscm file with the american hospital association s 1990 hospital survey we allow the effects of distance to vary with race ethnicity insurance status and degree of urbanicity we control for other factors that might affect utilization of preventive care by including a rich set of control variables and by estimating models that include either city dummy variables or mother fixed effects in particular city dummies control for unobserved differences across cities in public transportation services and population density mother fixed effects control for unobserved differences in preferences for preventive health care robust estimates across models allow us to rule out these alternative explanations for why distance to hospital might affect different groups differentially these innovations address the important question of whether children who rely on hospitals for preventive ca re do so because they lack access to other providers we find that distance to hospital has significant effects on access to preventive care only among central city black children for these children each additional mile from the hospital is associated with a 3 decline in the probability of having had a checkup from a mean baseline of 74 this effect is comparable to the 3 increase in the probability of having a checkup which is associated with having private health insurance coverage rather than being uninsured a striking result is that among these children the size of the distance effect is similar for both the privately insured and those with medicaid suggesting that even black urban children with private health insurance have difficulty obtaining access to preventive care outside the area around hospitals thus for this group questions of access to providers may be as important as insurance coverage in predicting use of preventive care ii children who rely on hospitals for primary care prior research suggests that children who are members of minorities uninsured covered by medicaid or residing in rural areas are all more likely to rely on hospitals for preventive care this section discusses each of these groups in turn bloom 1990 demonstrates that nationally black children are twice as likely as white children to receive care in an institutional setting such as a clinic or emergency room and that they are more likely to be attended by residents than by staff physicians

inside the war on poverty the impact of food stamps on birth outcomes this paper evaluates the health impacts of a signature initiative of the war on poverty the introduction of the modern food stamp pro gram fsp using variation in the month fsp began operating in each u s county we find that pregnancies exposed to fsp three months prior to birth yielded deliveries with increased birth weight with the largest gains at the lowest birth weights we also find small but statistically insig nificant improvements in neonatal mortality we conclude that the sizable increase in income from fsp improved birth outcomes for both whites and african americans with larger impacts for african american mothers n this paper we evaluate the health consequences of a sizable improvement in the resources available to ameri ca s poorest in particular we examine the impact of the food stamp program fsp which in 2007 provided 34 billion in payments to about 13 million households on infant health our paper makes two distinct contributions first although the goal of the fsp is to increase the nutri tion of the poor few papers have examined its impact on health outcomes second building on work by hoynes and schanzenbach 2009 we argue that the fsp treatment represents an exogenous increase in income for the poor our analysis therefore represents a causal estimate of the impact of income on health an important topic with little convincing evidence due to concerns about endogeneity and reverse causality currie 2009 we use the natural experiment afforded by the nation wide rollout of the modern fsp during the 1960s and early 1970s our identification strategy uses the sharp timing of the county by county rollout of the fsp which was initially constrained by congressional funding authorizations and ultimately became available in all counties by 1975 speci fically we use information on the month the fsp began operating in each of the roughly 3 100 u s counties and examine the impact of the fsp rollout on mean birth weight low birth weight gestation and neonatal mortality throughout the history of the fsp the program para meters have been set by the u s department of agriculture usda and are uniform across states in the absence of the state level variation often leveraged by economists to eval uate transfer programs previous fsp research has typically resorted to strong assumptions as to the comparability of fsp participants and eligible nonparticipants currie 2003 not surprisingly the literature is far from settled as to what casual impact if any the fsp has on nutrition and health hoynes and schanzenbach 2009 use this county rollout to examine the impact of the fsp on food consumption using the psid they found that the introduction of the fsp increased total food spending and decreased out of pocket food spending importantly consistent with the predictions of canonical microeconomic theory the magnitude of the increase in food expenditures was similar to an equivalent sized income transfer implying that most recipient house holds were inframarginal that is they would spend more on the subsidized good than the face value of the in kind transfer as one of the largest antipoverty programs in the united states comparable in cost to the earned income tax credit eitc and substantially larger than temporary assistance to needy families tanf understanding fsp effects is valuable both in its own right and for what it reveals about the relationship between income and health 1

the long memory of the forward premium abstract the estimation of arfima models by approximate maximum likelihood estimation methods reveals the forward premia for the currencies of canada germany and the uk vis a vis the us dollar to be well described by a fractionally integrated process these models imply that all the forward premia are mean reverting although their autocorrelations are quite persistent this degree of persistence has led other studies to erroneously conclude that the forward premia contains a unit root jel c22 e31

pricing options in an extended black scholes economy with illiquidity theory and empirical evidence this article studies the pricing of options in an extended black scholes economy in which the underlying asset is not perfectly liquid the resulting liquidity risk is modeled as a stochastic supply curve with the transaction price being a function of the trade size consistent with the market microstructure literature the supply curve is upward sloping with purchases executed at higher prices and sales at lower prices optimal discrete time hedging strategies are then derived empirical evidence reveals a significant liquidity cost intrinsic to every option copyright 2006 oxford university press

does head start improve children s life chances evidence from a regression discontinuity design this paper exploits a new source of variation in head start funding to identify the program s effects on health and schooling in 1965 the office of economic opportunity oeo provided technical assistance to the 300 poorest counties to develop head start proposals the result was a large and lasting discontinuity in head start funding rates at the oeo cutoff for grant writing assistance we find evidence of a large drop at the oeo cutoff in mortality rates for children from causes that could be affected by head start as well as suggestive evidence for a positive effect on educational attainment i introduction head start was established in 1965 as part of the war on poverty to provide preschool health and other social services to poor children age three to five and their families and currently serves over 900 000 children each year at a cost of around 7 billion hhs 2006 this paper provides new evidence on the effects of the head start program on schooling and health by drawing on a new source of variation in program funding spe

money transfer and birth weight evidence from the alaska permanent fund dividend the positive relationship between income and health is well established however the direction of causality remains unclear do economic resources influence health or vice versa exploiting a new source of exogenous income variation this study examines the impact of the alaska permanent fund dividend apfd on newborns health outcomes the results show that income has a significantly positive but modest effect on birth weight we find that an additional 1 000 2 331 in 2011 dollars increases birth weight by 17 7 g and substantially decreases the likelihood of a low birth weight a decrease of around 14 of the sample mean furthermore the income effect is higher for less educated mothers based on a gestation weight profile in the sample increased gestation owing to the apfd could explain a maximum of 34 57 of the measured weight increase although we are unable to examine all the potential mechanisms jel i10 i18 i12

on cointegration and exchange rate dynamics baillie and bollerslev 1989 have recently argued that nominal dollar spot exchange rates are cointegrated here we examine an immediate implication of their finding namely that cointegration implies an error correction representation yielding forecasts superior to those from a martingale benchmark in light of a large earlier literature highlighting the predictive superiority of the martingale in an out of sample forecasting exercise we find the martingale model to be superior we then perform a battery of improved cointegration tests and find that the evidence for cointegration is much less strong than previously thought a result consistent with the outcome of the forecasting exercise

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14

balanced budget rules and fiscal outcomes evidence from historical constitutions this paper studies the long run fiscal consequences of balanced budget rules bbr that are enshrined in a country s constitution using historical data dating back to the 19th century and applying a difference in difference approach we find that the introduction of a constitutional bbr reduces government debt to gdp and expenditure to gdp ratios on average by around 11 and 3 percentage points respectively we do not find evidence that bbrs affect tax revenues our analysis indicates that such rules reduce the probability of experiencing a debt crisis and that the effective enforcement of bbrs can be conditional on the quality of democratic institutions in addition we implement an instrumental variable approach by instrumenting the probability of having budget rules on de jure constraints on changing the constitution this and other tests suggest that the relations we find are largely causal going from bbrs to fiscal outcomes