the case for divisia monetary statistics a bayesian time varying approach abstract the zero lower bound and quantitative easing policies have rekindled interest in the link between monetary aggregates and the business cycle this paper argues on the basis of bayesian time varying coefficient var models that use divisia indexes that money is more closely linked to the business cycle as well as forecasting economic activity more accurately than existing literature claims moreover the relationship between money and economic activity is considerably more pronounced during periods of economic distress such as in the great recession

earnings inequality among males in the united states trends and the effect of labor force growth we analyze the variance of log earnings within labor force cohorts of u s males with particular attention to the influence of labor force growth rates estimates with data from the 1968 79 current population surveys reveal increases in earnings inequality within labor force cohorts even after we control for the level of education experience and unemployment a model of human capital investment is used to analyze differences among cohorts in the life cycle profile of the variance of log earnings it is shown that a pattern of sharply increasing and then declining labor force growth rates will tend to raise the return on human capital investment and thereby increase the variance of postschooling investment and log earnings early in the life cycle this positive effect on relative earnings inequality should decline with experience and possibly become negative because of the post world war ii baby boom and baby bust recent labor force entrants have faced just such a pattern of actual and projected labor

poverty in eastern europe in the years of crisis 1978 to 1987 poland hungary and yugoslavia eastern europe experienced an economic crisis between 1978 and 1987 declining income led to substantial increases in poverty rates in poland and yugoslavia while poverty in hungary remained at about the same level as before the crisis in all three countries urban poverty increased as the economic condition of state sector workers deteriorated to a much greater extent than that of agricultural and mixed households the increased poverty was entirely explained by declining income because the overall income distribution did not change or in some cases improved

are emissions permits regressive grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders consequently they can be highly regressive even if the poor do not have large budget shares for polluting goods using an analytical model this paper estimates the burden of emissions permits borne by different income groups under control of power plant emissions of carbon so2 and nox we also compare the burden borne by poor households under permits with that under emissions taxes performance standards technology mandates and input taxes and we show how the social costs of policies differ from efficiency costs when society has aversion to inequality

further evidence on the marginal gains in accuracy of alternative levels of specificity of the producer price indexes in the process of evaluating the reliability of the current cost data required to be disclosed by its statement no 33 fasb 1979 the financial accounting standards board fasb is soliciting empirical evidence on the accuracy of price indexes for estimating the current cost of machinery and equipment see fasb 1983 sunder and waymire 1983 presented some preliminary evidence that the marginal gains in accuracy from increasing the specificity of price indexes utilized as measurement techniques for three approximations of the u s economy were not substantial their hypothetical economies consisted of portfolios of 15 68 and 199 commodities represented by selected price indexes from the two digit three digit and four digit producer price indexes ppi respectively most of the indexes they selected represent inventorytype commodities in the absence of actual price data the sunder and waymire 1983 methodology provides a means to assess only the relative efficiency of various aggregations of the ppi to estimate the current costs of assets

soft skills hard skills and the black white wage gap this study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between blacks and whites in the united states it posits that the black white pay gap may vary across occupations that require the use of different types of skills we classify occupations into hard skill intensive versus soft skill intensive jobs using the skill content measures of different occupations from the occupational information network o net we then use data from the national longitudinal survey of youth nlsy and current population survey cps to investigate the impact of job skill type on the wage gap consistent with our theoretical predictions we show that this wage gap in white collar jobs is smaller for hard skills jobs than it is for soft skills jobs moreover we demonstrate that in response to variations in the wage gap across different occupations blacks are more likely to self select themselves into hard skills jobs ceteris paribus this shows not only that discrimination against blacks varies across occupations but also that such discrimination induces the self selection of blacks into certain occupations moreover this finding highlights the role played by co worker customer discrimination in explaining the racial wage gap in the u s labor market jel j15 j31

indexing government programs for changes in the cost of living this article presents social cost of living indexes constructed from an econometric model of aggregate consumer behavior the econometric price index has the same average inflation rate as a tornqvist price index over the period 1947 1995 but rises less rapidly after 1973 group cost of living indexes are presented for white and nonwhite male and female headed and elderly and nonelderly households elderly households have experienced a slightly higher rate of inflation than the nonelderly since 1980 we recommend indexing government programs such as social security by social and group cost of living indexes rather that the consumer price index

down and out in north america recent trends in poverty rates in the united states and canada this paper examines why canadian poverty rates fell relative to u s poverty rates during the periods 1970 1979 and 1979 1986 during the 1970s the principal reason for declining canadian poverty rates is higher economic growth during the 1980s however differences in government transfer policy are the main cause of relative poverty change in the two countries virtually all of the 3 3 point fall in relative canadian u s poverty rates from 1979 to 1986 can be attributed to expansions in the canadian transfer system and simultaneous contractions in u s transfers

money and the natural rate of interest structural estimates for the united states and the euro area abstract we examine the role of money in three environments the new keynesian model with separable utility and static money demand a nonseparable utility variant with habit formation and a version with adjustment costs for holding real balances the last two variants imply forward looking behavior of real money balances with forecasts of future interest rates entering current portfolio decisions we conduct a structural econometric analysis of the u s and euro area economies fiml estimates confirm the forward looking character of money demand a consequence is that real money balances are valuable in anticipating future variations in the natural interest rate

theoretical analysis regarding a zero lower bound on nominal interest rates this paper explores several issues concerning a possible zero lower bound zlb including its theoretical rationale the magnitude of effects of low sustained inflation on real interest rates the validity of analyzing monetary policy in models with no monetary variables and the dynamic stabilizing properties of taylor rules in a zlb context the most important argument however is that if the short nominal rate is immobilized at zero there nevertheless exists a route for monetary stabilization policy to be effective via the foreign exchange market its quantitative importance is examined in a calibrated optimizing open economy model

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

an analysis of the relationship between various redistributive programs and poverty this paper utilizes multivariate exogeneity causality tests to analyze the relationship between various income policy programs and the poverty rate the framework we develop allows us to make a distinction between intended poverty reduction objectives and automatic stabilizing behavior since we find that the poverty in a given year affects the funding of social programs in later years we conclude that these programs are primarily acting as automatic stabilizers i e the poverty reduction instruments do not appear to have been implemented with a relentless intent to reduce poverty a result consistent with tullock s 1983 1986 theorem

does money matter in shaping domestic business cycles an international investigation we study the contribution of money to business cycle uctuations in the us the uk japan and the euro area using a small scale structural monetary business cycle model constrained likelihood based estimates of the parameters are provided and time instabilities analyzed real balances are statistically important for output and in ation uctuations their contribution changes over time models giving money no role provide a distorted representation of the sources of cyclical uctuations of the transmission of shocks and of the events of the last 40 years

aggregate consumer behaviour and the measurement of inequality this paper presents an approach to inequality measurement based on an econometric model of aggregate consumer behaviour the novel feature of this model is that systems of individual demand functions can be recovered uniquely from the system of aggregate demand functions we present methods for evaluating social welfare based on an explicit social welfare function this social welfare function incorporates measures of individual welfare based on indirect utility functions for all consumer units we develop indexes of inequality based on actual and potential levels of social welfare

slipping into and out of poverty the dynamics of spells this paper examines the dynamics of poverty previous analyses have examined either fluctuations in the male heads earnings or the frequency of poverty periods over a fixed time frame our approach depends on a definition of spells of poverty using this methodology we find that the majority of poor persons at any time are in the midst of a rather long spell of poverty the methodology also allows us to estimate that less than 40 percent of poverty spells begin because of a drop in the heads earnings while 60 percent of the spells end when the heads earnings increase thus researchers must focus on household formation decisions and on the behavior of secondary family members there has been a dramatic resurgence recently of discussion of the underclass the discussion is reminiscent of debates about poverty during the 1960s when the notions of a culture of poverty particularly as popularized by michael harrington s other america 1962 dominated both intellectual and policy thinking the idea of an underclass seems inconsistent however with much of the research on the dynamics of poverty during the 1970s that research using new longitudinal data seemed to show that the bulk of the poor were poor for only a few years the research also showed that the poor were a very heterogeneous group including a small minority of persistently poor the persistence of poverty is of interest both for understanding the phenomenon and for developing policy claims about dependency and separate life styles among the poor rest on assumptions about the long term nature of poverty questions

a utility based analysis of the wage subsidy program abstract because the poverty line is usually defined in terms of income two families may be classified as having poverty level incomes even though their hours of work and therefore their utilities may be very different this paper compares a government income support program that defines the poverty line in terms of utility with several other support programs that define the poverty line in terms of income through the use of the wage solution of the indirect utility function we find the amount of wage subsidy required to raise a subpoverty line family to the poverty line as defined by the utility function this subsidy is compared with wage subsidies based on directly observable quantities such as income

consumer expenditures and inequality an analysis based on decomposition inequality in u s consumption expenditures is examined using the lerman and yitzhaki covariance method for decomposing the gini coefficient by factors from the decomposition nonparametric estimates of elasticities with respect to total expenditures are derived using data from the 1987 u s consumer expenditure interview survey the overall gini based on total annual consumption expenditures is 0 33 consistent with parametric expenditure elasticities the gini expenditure elasticities for household operations apparel and services and entertainment are relatively high an implication of this result is that taxing such goods and services will increase the progressivity or reduce the regressivity of the tax system copyright 1993 by mit press

poverty alleviation as an economic problem economists distinguish between technological problems in which variable means confront a given end and economic problems in which given means are allocated across competing ends james buchanan and f a hayek each offer constructive criticisms of the standard definition of an economic problem arguing that economists too easily slide into mechanistic and teleological thinking building on these accounts we argue that there are three key dimensions to the economic problem exchange coordination and governance we then make a case that poverty alleviation is more like an economic problem than a technological one an economic problem with a small e we survey empirical evidence from economics anthropology and sociology indicating that poverty is not a simple lack of objectively identifiable resources but rather a multidimensional and socially embedded phenomenon understanding what poverty alleviation would even look like requires thinking through problems of exchange coordination and governance

work and welfare as determinants of female poverty and household headship this paper formulates and estimates a model of the determinants of female household headship headship responds to variations in the levels of well being a woman can expect if she marries or if she heads her own household the authors measure the opportunity cost of female headship and the effects of welfare benefits and womens work in the market on female headship and poverty they find that if welfare benefits were reduced there would be small reductions in the proportion of women heading households for whites and nonwhites but a substantial increase in poverty for nonwhites they also find that wives work in the market reduces poverty and female headship for nonwhites and reduces poverty but increases headship for whites the study is based on 1975 u s data excerpt

direct effects of base money on aggregate demand theory and evidence abstract meltzer the transmission process working paper carnegie mellon university 1999a shows that real monetary base growth is a significant determinant of consumption growth in the us controlling for the short term real interest rate in this paper i show that the same property of base money holds for total output relative to trend or potential in both the us and the uk the standard optimizing is lm model cannot account for this result but i show that it can once the long term nominal interest rate is included in the money demand function because the long term real rate matters for aggregate demand the presence of the long term nominal rate in the money demand function increases the effect of nominal money stock changes on real aggregate demand when prices are sticky

the social cost of living index abstract household cost of living indexes reflect household preferences analogous indexes for groups of households require a corresponding concept of group preferences in this paper i investigate the social cost of living index a group index based on the bergson samuelson social welfare function i first define the index and examine its properties under the assumption that the investigator constructing it expresses his distributional judgments in an explicit bergson samuelson social welfare function i then examine the maximizing society and the independent society two cases in which the index can be constructed from the information contained in the market demand functions in these two cases a laspeyres index i e the fixed weight index based on the reference consumption pattern is an upper bound on the exact social cost of living index in general however the assumptions required to place bounds on the social cost of living index are much more likely to be satisfied than those required to place analogous bounds on a household s cost of living index

habit formation in consumption and its implications for monetary policy models this paper explores a monetary policy model with habit formation for consumers in which consumers utility depends in part on current consumption relative to past consumption the empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous condence largely because the habit formation model captures the gradual hump shaped response of real spending to various shocks the paper then embeds the habit consumption specication in a monetary policy model and nds that the responses of both spending and inflation to monetary policy actions are signicantly improved by this modication jel d12 e52 e43

the un importance of forward looking behavior in price specifications the seminal work of edmund s phelps 1978 john b taylor 1980 and guillermo a calvo 1983 developed forward looking models of price determination that imparted inertia to the price level these models incorporate expectations of future prices and excess demand by imposing constraints typically lag lead symmetry constraints that force future variables to enter the specification in this paper the author tests the empirical significance of future prices in specifications like those of taylor he finds that expectations of future prices are empirically unimportant in explaining price and inflation behavior however the dynamics of a model that includes a purely backward looking inflation specification differ substantially and not altogether pleasingly from those with a forward looking specification copyright 1997 by ohio state university press

below the line poverty in latin america abstract despite gains in basic welfare indicators poverty remains prevalent in latin america this paper surveys existing data on poverty in the region and discusses the relationship between growth inequality and poverty given the inequality of income distribution in latin america and the slow growth of output policies to overcome poverty must involve more efficient allocation of government resources redistribution and foreign aid

consumption needs and inequality most empirical studies demonstrating a u turn in inequality in the united states are based on the distribution of income however utility is derived from the consumption of goods and services and there are many reasons to expect the distribution of expenditure to be different from the distribution of income the author demonstrates that consumption based inequality indexes actually decrease over the postwar era this conclusion differs from the stylized facts because of differences in the income and expenditure distributions differences also arise from the inclusion of equivalence scales to account for the different needs of heterogeneous households copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

should a monetary policymaker look at money abstract this paper examines whether monetary indicators are useful in implementing optimal discretionary monetary policy when the policymaker has incomplete information about the environment we find that money does not contain useful information for the policymaker if we calibrate the model to the u s economy if money demand were to be appreciably less variable observations on money could be useful in response to productivity shocks but would be harmful in response to money demand shocks we provide an incomplete information example where equilibrium welfare declines when the money demand volatility decreases

inequality and poverty economists tend to be quite egalitarian in their evaluation of social issues according to one survey 71 percent of american economists believe the distribution of income in the united states should be more equal and 81 percent feel that redistribution of income is a legitimate role for government support for these positions is even stronger among economists with academic affiliations and stronger still among economists with elite academic affiliations of course as economists we also have a healthy regard for economic efficiency we are concerned with the size of the economic pie as well as with its distribution borrowing from the title of alan blinder s recent book 1 economists can be characterized as having hard heads and soft hearts hardheaded in our emphasis on efficiency and soft hearted in our concern with equality the hard headed soft hearted approach is familiar to economists who argue that it is reasonable to sacrifice a bit of efficiency in return for greater equality in principle this position seems unobjectionable but i intend to argue that we may have gone too far in attempting to promote economic equality through government policies in taking this position i run the risk of being labeled hard hearted and perhaps soft headed as well an important part of my argument however is based on distinguishing between economic inequality within the large nonpoor part of the population and the poverty that afflicts a small portiop of our population i fav9r a role for government in helping the truly needy but i will attempt to show that extending that role to permit redistribution among the general population is often counterproductive

constructing and estimating a realistic optimizing model of monetary policy abstract a dynamic stochastic general equilibrium dsge model with real and nominal both price and wage rigidities succeeds in capturing some key nominal features of u s business cycles additive technology shocks as well as multiplicative shocks are introduced and shown to be crucial monetary policy is specified as an interest rate targeting rule following developments in the structural vector autoregression var literature the interaction between real and nominal rigidities is essential to reproduce the liquidity effect of monetary policy the model is estimated by maximum likelihood on u s data and its fit is comparable to that of an unrestricted first order var besides producing reasonable impulse responses and second moments this model replicates a feature of u s business cycles never captured by previous research with dsge models that an increase in interest rates predicts a decrease in output two to six quarters in the future

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

multivariate exogeneity tests and poverty abstract many recent studies presume direction of the relationship between poverty and other economic factors is one way that is they assume that the various economic phenomena cause or affect poverty and that there is no feedback however if feedback is present it is possible that the level of poverty or the perception of poverty may not only impact public policy decisions aimed at eradicating poverty but may have indirect effects on other economic variables as well we test that hypothesis in this paper using multivariate exogeneity tests

measuring the natural rate of interest international trends and determinants abstract u s estimates of the natural rate of interest the real short term interest rate that would prevail absent transitory disturbances have declined dramatically since the start of the global financial crisis for example estimates using the laubach williams 2003 model indicate the natural rate in the united states fell to close to zero during the crisis and has remained there into 2016 explanations for this decline include shifts in demographics a slowdown in trend productivity growth and global factors affecting real interest rates this paper applies the laubach williams methodology to the united states and three other advanced economies canada the euro area and the united kingdom we find that large declines in trend gdp growth and natural rates of interest have occurred over the past 25 years in all four economies these country by country estimates are found to display a substantial amount of comovement over time suggesting an important role for global factors in shaping trend growth and natural rates of interest

does participation in the conservation reserve program impact the economic well being of farm households this study uses u s farm household survey data to examine how participation in the conservation reserve program crp affects farm household economic well being further the study also examines the effects of crp participation on farm household consumption income and imputed savings in contrast to previous studies that assume the relationships are homogenous across the population quantile regression is used to investigate the association between crp participation across the entire distribution of farm household consumption and income empirical findings suggest that the effect of crp participation on household economic well being differs across the income and consumption distribution for households in the lower percentiles of the distribution the crp participation is associated with an increase in household consumption but a decrease in farm household income and savings in contrast farm households at the median and higher income and consumption quantiles participation in crp is associated with lower levels of household consumption and income but with higher levels of savings

consumption technology and the intrafamily distribution of resources adult equivalence scales reexamined adult equivalence scales are supposed to measure differences in the needs of households of different demographic composition formally they purport to measure the change in the cost of attaining a certain welfare level when the family composition varies this paper shows that the definition and the measurement of these scales depend crucially on the concept of welfare used when welfare is the utility parents derive from their own consumption one has to assume separability of parents and children s consumption this assumption implies that the only way of imputing the intrafamily allocation of resources is by observing the consumption patterns of adult goods regardless of the definition used one cannot separate the factors reflecting home technology i e needs from those determining the intrafamily distribution rule i e wants out of consumption data

changes in the federal reserve s inflation target causes and consequences this paper estimates a new keynesian model to draw inferences about the behavior of the federal reserve s unobserved inflation target the results indicate that the target rose from 1 1 4 percent in 1959 to over 8 percent in the mid to late 1970s before falling back below 2 1 2 percent in 2004 the results also provide some support for the hypothesis that over the entire postwar period federal reserve policy has systematically translated short run price pressures set off by supply side shocks into more persistent movements in inflation itself although considerable uncertainty remains about the true source of shifts in the inflation target jel e31 e32 e52

new evidence on inflation persistence and price stickiness in the euro area implications for macro modeling this paper evaluates new evidence on price setting practices and inflation persistence in the euro area with respect to its implications for macro modeling it argues that several of the most commonly used assumptions in micro founded macro models are seriously challenged by the new findings jel e31 e52

do real balance effects invalidate the taylor principle in closed and open economies this paper examines the determinacy implications of forecast based monetary policy rules that set the interest rate in response to expected future inflation in a neo wicksellian model that incorporates real balance effects we show that the presence of such effects in closed economies restricts the ability of the taylor principle to prevent indeterminacy of the rational expectations equilibrium the problem is exacerbated in open economies particularly if the policy rule reacts to consumer price rather than domestic price inflation however determinacy can be restored in both closed and open economies with the addition of monetary policy inertia

the impact of the changing us family structure on child poverty and income inequality this paper analyses links between rising income inequality child poverty and one parent families in the united states from 1971 to 1989 one test reallocated weights so that 1989 proportions of children by mothers marital status resembled the 1971 distribution a second method used 1 simulated marriages among unmarried men and unmarried mothers in 1989 to reproduce 1971 marital patterns and 2 earnings responses induced by the simulated marriages the results indicate that the trend away from marriage accounted for almost half the increase in child income inequality and more than the entire rise in child poverty rates excerpt

has children s poverty become more persistent iffood stamp benefits are counted as income there is little change in estimates ofpersistent povertyfor children between the late 1960s and early 1980s however the absence of change in persistent poverty masks a number of important changes in the demographic and statistical structure ofpersistent poverty these changes include increasing inequality in the distribution of permanent socioeconomic position greater dependence on social assistance and the more familiar demographic changes such as increased numbers of single parent families higher educational attainments of parents and decline in family size

household equivalence scales and welfare comparisons abstract the ratio of cost functions of different households facing the same prices and attaining the same utility level is a true cost of demographic characteristics index this index is independent of a base level of income or utility ib if and only if it equals a ratio of household equivalence scales that are themselves ib applied cost index and equivalence scales specifications are usually ib this paper describes the general restrictions on cost functions and social welfare functions required for ib scales and for their use in welfare analysis

the retirement consumption conundrum evidence from a consumption survey abstract recent studies have shown that food consumption declines at retirement we use broader definitions of consumption from the consumer expenditure survey and find that the so called retirement consumption puzzle is solved by using comprehensive consumption data

afdc benefits and the inter urban variation in poverty among female headed households the percentage of families headed by females in poverty varies widely across metropolitan areas for example 8 37 of all families in albany georgia were female headed and in poverty in 1980 while in sheboygan wisconsin the figure was 1 1 though not as dramatic as this interregional difference intra regional variation can also be significant in detroit michigan 4 90 of families were femaled headed and in poverty and in the closest interstate metropolitan area toledo ohio the figure was 3 77 recent research into the behavior of low income femaleheaded families suggests that state benefit differentials in aid to families with dependent children afdc may in part be responsible in this paper we construct a model that explains an important and overlooked implication of non uniform benefit standards among states the inter urban variation in the size of the potential and actual afdc recipient population particular attention is given to 1 the impact of interurban differences in real afdc payments 2 the potential of afdc to alter the number of female headed families in poverty and 3 the relative importance of other urban characteristics in explaining the size of the potential and actual afdc recipient population the model uses 1980 census data and is estimated for all standard metropolitan statistical areas for which we were able to obtain data

trickling down the rising tide new estimates of the link between poverty and the macroeconomy this paper uses pooled time series regressions of regional data to reexamine the link between poverty and the macroeconomy the use of disaggregated data provides additional degrees of freedom and permits the inclusion of controls for demographic changes and increased income inequality the results indicate a stronger relationship between poverty rates and the macroeconomy in the 1980s than that found in prior research and confirm that the dramatic reduction in unemployment during the late 1990s was instrumental in reducing poverty rates the estimated results for the 1990s imply a 0 4 0 9 increase in the poverty rate for each 1 increase in the unemployment rate

consumption inequality between farm and nonfarm households in taiwan a decomposition analysis of differences in distribution consumption has been recognized as a more reliable indicator of household well being than income although a considerable body of literature has examined income inequality between farm and nonfarm households little is known about inequality in consumption this research aims to fill this knowledge gap by investigating consumption disparity between farm and nonfarm households using a nationally representative household survey from taiwan we apply an unconditional quantile regression based decomposition method to decompose the differences in the distribution of household expenditure between these farm and nonfarm households the results indicate that differences in the observed characteristics between these two types of households explain most of the consumption inequality moreover the difference in the education level of the farm operator household income and the degree of urbanization are particularly important jel classifications q10 q12

money and information in a new neoclassical synthesis framework we consider an otherwise standard new neoclassical synthesis theoretical framework that allows a role for money money in our model has an informational role which facilitates the estimation of the unobserved shocks that drive potential output and thus the state of the economy for this purpose we estimate a small scale sticky price model using bayesian techniques our findings support the view that money has information value this is reflected in higher precision in terms of unobserved model concepts such as the natural rate of output moreover our results highlight how modelling money demand can provide insights about structural features of the economy that may be important for the design of interest rate rules focusing on money also allows for a step towards resolving the price puzzle money demand shocks can confound monetary policy shocks to generate a perverse price response in vector autoregressions var

money s role in the monetary business cycle a small structural model of the monetary business cycle implies that real money balances enter into a correctly specified forward looking is curve if and only if they enter into a correctly specified forward looking phillips curve the model also implies that empirical measures of real balances must be adjusted for shifts in money demand to accurately isolate and quantify the dynamic effects of money on output and inflation maximum likelihood estimates of the modelos parameters take both these considerations into account but still suggest that money plays a minimal role in the monetary business cycle

economic inequality new methods for new trends two positions dominate the debate over the recent increases in economic inequality in the united states the job skill mismatch thesis attributes rising inequality to growth in the number of high skill high wage jobs that leaves less skilled workers behind the polarization thesis in contrast argues that the service shift generates growth in the number of both high wage and low wage jobs and declines in the middle standard summary measures of distributional inequality cannot discriminate between these depictions of where job growth is occurring we propose new methods for measurement that provide both summary and detailed information about the distributional shifts in earnings and aframework for statistical inference using data from the curent population survey cps on yearly earnings from 1967 to 1987 we show that the trends in distributional inequality vary considerably by race gender and time while the evidence provides more support for the polarization argument this thesis needs refinement if it is to account for the variations in changing inequality observed here

european inflation dynamics abstract we provide evidence on the fit of the new phillips curve npc for the euro area over the period 1970 1998 and use it as a tool to compare the characteristics of european inflation dynamics with those observed in the u s we also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs as well as that of its two main components namely labor productivity and real wages some of the findings can be summarized as follows a the npc fits euro area data very well possibly better than u s data b the degree of price stickiness implied by the estimates is substantial but in line with survey evidence and u s estimates c inflation dynamics in the euro area appear to have a stronger forward looking component i e less inertia than in the u s d labor market frictions as manifested in the behavior of the wage markup appear to have played a key role in shaping the behavior of marginal costs and consequently inflation in europe

a budget based definition of poverty an approach to defining poverty through a basic needs budget bnb is presented which takes account of families differing needs for child care and transportation and of regional differences in housing costs taxes and noncash benefits from governmental and private sources are also accounted for the bnb poverty rate for single parents for 1989 is 47 percent compared to 39 percent under the official method almost a quarter of single parents holding full time jobs are counted as poor under the bnb method radical reduction in both the welfare rolls and the poverty rate would require government assurance of child care and medical care to single parents

endogenous money or sticky prices abstract what explains the correlations between nominal and real variables in the postwar us data are these correlations indicative of significant nominal rigidity or do they simply reflect the particular way that monetary policymakers react to developments in the real economy to answer these questions this paper uses maximum likelihood to estimate a model of endogenous money this model allows but does not require nominal prices to be sticky the results show that nominal price rigidity over and above endogenous money plays a role in accounting for key features of the data

measurement of inequality by components of farm household consumption expenditures inequality in consumption levels of families both nationally and internationally has been studied by theil however empirical studies that measure inequality in farm household consumption to our knowledge have not been performed this study measures inequality in farm household consumption in addition the study also measures inequality in consumption based on farm typology and farming region results from this analysis show consumption inequality among farm households is lower than consumption inequality among all other households results indicate that other expenditures component has the highest inequality and food and household supplies component has the lowest inequality further farm typology has information about difference in consumption expenditures the typology is informative when it comes to the components of consumption while the regional decomposition is not

children and household economic behavior this paper looks at some of the methodological issues that arise in modeling the effects of children on household behavior and presents some estimates for selected areas for our purposes household behavior will be taken to refer to household decisions on labor supply the allocation of expenditure to different periods and the decision as to what to do with the difference between income and expenditure i shall be concerned mainly with the effects of dependent children and i restrict attention largely to western societies excerpt

measuring the natural yield curve we generalize the concept of the natural rate of interest laubach and williams 2003 woodford 2003 by defining and estimating the natural yield curve nyc the term structure of natural interest rates our motivation stems i a from the observation that at times when central banks attempt to directly affect long term interest rates e g via quantitative easing the gap between the short term real and natural rate is no more a good indicator of the monetary policy stance we estimate the nyc on us data document its main properties and show i a that in the period 2008 to 2011 the nyc allows to better capture the us monetary policy stance than the short term natural rate

estimating the evolution of money s role in the u s monetary business cycle we assess money s role in the post wwii u s business cycle by employing both fixed coefficient and rolling window bayesian estimations of a structural model of the business cycle with money our empirical evidence favors a specification with drifting parameters for money consumption nonseparability and the federal reserve s reaction to nominal money growth the role of money is estimated to have been important during the 1970s and declined afterward the omission of money produces severely distorted impulse response functions relative to the model with money money is found to be important in replicating the u s output volatility during the great inflation

on the relative weil being of the nonmetropolitan poor an examination of alternate definitions of poverty during the 1990s using foster greer thorbecke poverty indices this paper shows that although the incidence of poverty was higher in nonmetropolitan than metropolitan areas throughout the 1990s the poverty gap index was only statistically significantly higher in nonmetropolitan areas in six of the 10 years and the squared poverty gap index was worse in only three years this paper also provides design corrected standard errors for the indices which result in more than doubling the uncorrected estimates an examination of the ratio of the poverty gap to the head count index establishes that the average shortfall of the poor as a fraction of the poverty line was worse in the metropolitan areas during all 10 years of the 1990s similarly the distribution of income divided by the poverty line indicates that disproportionately more of the nonmetropolitan poor subsisted on incomes near the poverty line whereas the metropolitan poor were relatively more likely to be living in extreme poverty

measuring the intensity of poverty among subpopulations applications to the united states this paper proposes an approach to measuring the intensity of poverty within a group relative to that of the population to which the group belongs a poverty intensity index is presented which is easy to interpret and satisfies a number of desirable properties the intensity of poverty among racial and residential groups in various geographical locations is measured using 1980 united states census data

when does the cost channel pose a challenge to inflation targeting central banks abstract in a sticky price model where firms finance their production inputs there is both a lower and an upper bound on the central bank s inflation response necessary to rule out the possibility of self fulfilling inflation expectations this paper shows that real wage rigidities decrease this upper bound but coefficients in the range of those on the taylor rule place the economy well within the determinacy region however when there is time variation in the share of firms who finance their inputs i e markov switching then inflation targeting interest rate rules frequently result in indeterminacy even if the central bank also targets output adding a nominal growth target to the policy rule can often alleviate this indeterminacy and therefore anchor inflation expectations

optimal monetary policy optimal monetary policy maximizes the welfare of a representative agent given frictions in the economic environment constructing a model with two sets of frictions costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods we find optimal monetary policy is governed by two familiar principles first the average level of the nominal interest rate should be sufficiently low as suggested by milton friedman that there should be deflation on average yet the keynesian frictions imply that the optimal nominal interest rate is positive second as various shocks occur to the real and monetary sectors the price level should be largely stabilized as suggested by irving fisher albeit around a deflationary trend path since expected inflation is roughly constant through time the nominal interest rate must therefore vary with the fisherian determinants of the real interest rate although the monetary authority has substantial leverage over real activity in our model economy it chooses real allocations that closely resemble those which would occur if prices were flexible in our benchmark model there is some tendency for the monetary authority to smooth nominal and real interest rates

money in the production function a new keynesian dsge perspective this article checks whether money is an omitted variable in the production process by proposing a microfounded new keynesian dynamic stochastic general equilibrium model in this framework real money balances enter the production function and money demanded by households is differentiated from that demanded by firms using a bayesian analysis our model weakens the hypothesis that money is a factor of production however the demand of money by firms appears to have a significant impact on the economy even if this demand has a low weight in the production process

money in an estimated business cycle model of the euro area this article examines the role of money in a small scale dynamic general equilibrium model of the euro zone estimated by maximum likelihood the model allows for both intertemporal and intratemporal non separability in preferences we find first that real balances do not affect the marginal utility of consumption second money demand shocks mainly help to forecast real balances while real shocks explain the bulk of price output and interest rates fluctuations third the calculation of the natural rate of interest reveals that the evolution of the interest rate is mostly accounted for by the real sources of fluctuations

aggregate poverty measures the way poverty is measured is important for an understanding of what has happened to poverty as well as for anti poverty policy evaluation sen s 1976 pathfinding work has motivated many researchers to focus on the way poverty should be measured a poverty measure argued by sen should satisfy certain properties or axioms and the desirability of a poverty measure should be evaluated by these axioms during the last two decades many researchers have adopted the axiomatic approach pioneered by sen to propose additional axioms and develop alternative poverty measures the objective of this survey is to provide a clarification on the extensive literature of aggregate poverty measures in this survey we first examine the desirability of each axiom the properties of each poverty measure and the interrelationships among axioms the desirability of an axiom cannot be evaluated in isolation and some combination of axioms may make it impossible to devise a satisfactory poverty measure some axioms can be implied by other axioms combined and so are not independent some others are ad hoc and are disqualified as axioms for poverty measurement based on the interactions among axioms we identify the core axioms which together have a strong implication on the functional form of a poverty measure we then review poverty measures that have appeared in the literature evaluating the interrelationships among different measures and examining the properties of each measure the axioms each measure satisfies violates are also summarized in a tabular form several good poverty measures which have not been documented by previous surveys are also included

gaining ground poverty in the postwar united states official measures of poverty in the united states are compiled by the bureau of the census by comparing a household s income level to a prespecified threshold from a theoretical perspective it is more appropriate to evaluate the level of poverty using a consumption based measure of household welfare in this paper i evaluate the level of poverty using expenditure data from the consumer expenditure survey i find that consumption based poverty rates are much lower than those based on income the trend in the poverty rate in the united states is sensitive to the price index and equivalence scales used to adjust the poverty thresholds

habit formation in consumption a meta analysis abstract we examine 597 estimates of habit formation reported in 81 published studies the mean reported strength of habit formation equals 0 4 but the estimates vary widely both within and across studies we use bayesian and frequentist model averaging to assign a pattern to this variance while taking into account model uncertainty studies employing macro data report consistently larger estimates than micro studies 0 6 vs 0 1 on average the difference remains 0 5 when we control for 30 factors that reflect the context in which researchers obtain their estimates such as data frequency geographical coverage variable definition estimation approach and publication characteristics we also find that evidence for habits strengthens when researchers use lower data frequencies employ log linear approximation of the euler equation and utilize open economy dsge models moreover estimates of habits differ systematically across countries

accuracy of linear valuation rules in industry segmented environments industry vs economy weighted indexes abstract the comparative ability of valuation rules using economy weighted versus industry weighted price indexes to estimate the unobserved economic value of a basket of assets in modelled industry weighted indexes do not necessarily provide valuations of higher accuracy than economy weighted indexes dominance depends on 1 the relative magnitude of the mean and variability of price changes and 2 the magnitude of errors of measurement in the current price data larger measurement errors favor economy weighted indexes larger mean and variability of prices changes favor industry weighted indexes

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

consumption and poverty how effective are in kind transfers the ability of in kind transfers to alleviate poverty depends on accurate targeting as well as recipients valuations of the benefits using data from the consumer expenditure surveys the efficiency of in kind transfers is examined in a microsimulation framework in which recipients are identified as those who have the lowest consumption in this framework in kind transfers of food capital services which includes housing and consumer services are an effective means of providing support to the poor even at high levels of subsidization the multiple good transfers that are considered are essentially equivalent to cash grants copyright 1996 by royal economic society

did we lose the war on poverty was the war on poverty a failure or a success official u s poverty statistics based on household income imply that the war on poverty ended in failure according to the bureau of the census the proportion of the u s population below the poverty level of income reached a minimum of 11 1 percent in 1973 this ratio rebounded to 15 2 percent in 1983 and has fluctuated within a narrow range since then giving rise to the widespread impression that the elimination of poverty is difficult or even impossible 1 however poverty estimates based on household consumption imply that the war on poverty was a success jorgenson and slesnick 1989 showed that the proportion of the u s population below the poverty level of consumption fell to 10 9 percent in 1973 only slightly below the poverty incidence as measured by income in that year the poverty ratio for consumption declined further reaching 6 8 percent in 1983 slesnick 1993 presents estimates of poverty ratios incorporating consumption data from the consumer expenditure survey conducted by the bureau of labor statistics the poverty rate for consumption fell to 9 7 percent in 1973 and reached a low of 8 7 percent in 1978 before rising to 12 0 percent in 1980 the consumptionbased poverty rate then declined to a new low of 8 3 percent in 1986 ending at 8 4 percent in 1989 calibrating consumption to levels reported in the u s national income and product accounts slesnick obtained a poverty rate of 4 1 percent in 1978 and a postwar low in 1989 of only 2 2 percent 2 1 the persistence of poverty as reflected in the official statistics is discussed by sawhill 1988 2 slesnick 1993 presented a detailed decomposition of the differences between estimates of poverty rates based on consumption and the official estimates based on income neither measures of consumption from the consumer expenditure survey nor measures of income used by the bureau of the census include in kind transfers slesnick 1996 discussed the effects of these transfers on measures of poverty

putting the new open economy macroeconomics to a test abstract this paper explores one way to extend the new open economy macroeconomics in an empirical direction adapting maximum likelihood procedures it estimates and tests an intertemporal small open economy model with monetary shocks and nominal rigidities results offer mixed support for a benchmark model where prices are assumed to be sticky in the currency of the buyer price stickiness seems to be an important element as overall results are poorer for versions of the model in which prices either are flexible or are sticky in the currency of the producer the benchmark model does a better job explaining some variables than others in particular it does a poor job explaining exchange rate movements