changing inequality in markets for workplace amenities among u s industries where earnings rose relatively from 1979 1995 injury rates declined relatively obversely during the 1960s narrowing interindustry wage differentials were associated with an increase in the relative risk of injury in high wage industries evidence from the nlsy suggests similar results among full time workers between 1988 and 1996 between 1973 and 1991 the disamenity of evening night work was increasingly borne by low wage male workers changing earnings inequality has understated changing inequality in the returns to work assuming skill neutral changes in the cost of reducing these disamenities estimates of the implied income elasticities of demand for amenities are well above unity

alternative approaches to money and growth this paper reexamines the issue of money and growth in an economy with both endogenous labor supply and endogenous capital stock using three recently developed approaches the money in the utility function approach the cash in advance approach and the transactions costs approach by establishing a qualitative equivalence between alternative setups the authors find economically justifiable conditions such that all comparative statics results derived from the aforementioned approaches are identical copyright 1992 by ohio state university press

finite horizons and the non neutrality of money abstract this note re examines the issue of monetary super neutrality in an optimizing model with finite horizons mortality makes agents less patient and thus affects negatively the process of capital accumulation this distortion can be reduced by increases in monetary growth

labor market effects of hawaii s mandatory employer provided health insurance the author analyzes how mandatory employer provision of health insurance in hawaii which became law in 1974 affected workers wages employment and insurance coverage between 1970 and 1990 the

money capital and real liquidity effects with habit formation the money in utility model is reconsidered in the presence of endogenous labour and habits with standard assumptions about preferences and a policy rule that sets the nominal interest rate by adjusting the growth rate of money the model exhibits superneutrality in the steady state nevertheless habits give rise to real liquidity effects in the short run after an increase in the nominal interest rate employment falls resulting in a fall in capital accumulation and in the short and long term real interest rates the adjustment of the capital stock is non monotonic employment and the short and long term real interest rates may also adjust non monotonically jel classification e22 e52 e58 monnaie capital et effets reels de liquidite quand il y a formation d habitudes on re examine le role de la monnaie dans un modele d utilite quand travail et formation d habitudes sont endogenes dans le cadre des postulats usuels a propos des preferences et d une regle de politique qui definit le taux d interet en ajustant le rythme de croissance de la monnaie le modele fait preuve de super neutralite en regime permanent neanmoins les habitudes entrainent des effets reels de liquiditea court terme apres un accroissement dans le taux d interet nominal l emploi chute ce qui entraine un ralentissement dans l accumulation du capital et une chute des taux d interet reels a court et a long terme l ajustement dans le stock de capital n est pas monotone l emploi et les taux d interet reels a court et a long terme peuvent aussi ne pas s ajuster de facon monotone

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

the demand for money in developing countries assessing the role of financial innovation traditional specifications of money demand have commonly been plagued by persistent overprediction implausible parameter estimates and highly autocorrelated errors the authors argue that some of these problems stem from the failure to account for the impact of financial innovation they estimate money demand for ten developing countries using various proxies for financial innovations they also assess the relative importance of this variable finding financial innovation can be better modeled as a stochastic random walk trend rather than a deterministic time trend financial innovation plays an important role in determining fluctuations of the demand for money the importance of this role increases with the rate of inflation

fiscal policies in the world economy this paper uses a two country general equilibrium model of the world economy in order to analyze the effects of budget deficits and government spending on world rates of interest consumption and international indebtedness it demonstrates the difference between the effects of fiscal expenditures and tax cuts as well as between the effects of current policies and expected future policies it is shown that the qualitative effects of fiscal policies depend on whether the country introducing the policies runs a surplus or a deficit in its current account following the positive analysis of the short run and the steady state effects the paper concludes with a normative analysis of the welfare implications of budget deficits

consumption in developing countries tests for liquidity constraints and finite horizons adjustment programs in developing countries emphasize the importance of reducing fiscal deficits in order to improve aggregate saving and investment performance recent theoretical analyses associated with the ricardian equivalence proposition however suggest that changes in the level of public sector saving may be offset by a change in private saving the empirical relevance of this proposition depends among other things on the length of consumers horizons and on the extent to which households are liquidity constrained empirical tests of a consumption model for a sample of developing economies do not support the equivalence propositions owing to the prevalence of liquidity constraints copyright 1989 by mit press

government spending and capital accumulation with endogenous time preference this paper extends s djajic 1987 to allow for an endogenous rate of time preference and reexamines djajic s experiment how the optimal rates of private consumption and capital accumulation will respond to an unanticipated temporary expansion in government spending the key factors determining the adjustment patterns are the difference between the marginal utility of private consumption and that of public spending the timing of policy reversion and the relationship between private and public consumption in household utility if private and public consumption are edgeworth independent whether investment increases with the length of fiscal expansion depends on whether the marginal utility of private consumption exceeds that of public consumption

inflation and growth impatience and a qualitative equivalence this paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money in utility function miuf and transactions costs tc models we establish a qualitative equivalence between the two models in a setup without a labor leisure tradeoff when the time preference is decreasing or increasing in consumption and real balances both the miuf and tc models are qualitatively equivalent in terms of predicting a negative or positive relationship between inflation and growth in a steady state both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature while a decreasing time preference in real balances corroborates with empirical evidence there is no evidence in support of an increasing time preference in real balances

deficits and intergenerational welfare in open economies this paper deals with public debt in open economies extending diamond s overlapping generations model to a small open economy as well as an international equilibrium of two large economies it focuses on the intergenerational welfare redistributions caused by an increase in public debt triggered by a temporary government budget deficit and shows how these redistributions differ in open and closed economies the interplay between the deficits in the government budget and the current account is also analyzed it is shown how a single period with a government deficit can be followed by a sequence of periods with a deficit in the current account

forecasting reit volatility with high frequency data a comparison of alternative methods abstractvolatility is a crucial input for many financial applications including asset allocation risk management and option pricing over the last two decades the use of high frequency data has greatly advanced the research on volatility modelling this article makes the first attempt in the real estate literature to employ intraday data for volatility forecasting we examine a wide range of commonly used methods and apply them to several major global reit markets our findings suggest that the group of reduced form methods deliver the most accurate one step ahead forecast for daily reit volatility they outperform their garch model based counterparts and two methods using low frequency data we also show that exploiting intraday information through garch does not necessarily yield incremental precision for forecasting reit volatility our results are relatively robust to the choice of realized measure of volatility and the length of evaluation period

nondiscrimination rules and the distribution of fringe benefits this article considers the impact of nondiscrimination nd rules in the federal tax code nondiscrimination rules limit within firm inequality in the provision on nonwage benefits but they place no corresponding limit on within firm inequality in wages firms can skirt nd rules by moving workers with unusual benefits into part time and seasonal positions because workers in such positions are excluded from some nd compliance calculations we examine these issues empirically and find relationships consistent with the hypothesis that nd rules provide a binding constrain on within firms benefits inequality

monetary and fiscal policy in an optimising model with capital accumulation and finite lives this paper considers the effects of monetary and fiscal policies in an optimizing model with capital accumulation and a pos itive birth rate an increase in monetary growth leads to a reduction in the real interest rate and a boost of capital and total consumpti on however the superneutrality result still prevails when open mark et operations are used to increase monetary growth and preferences ar e separable a tax financed fiscal expansion reduces capital and crow ds out consumption by more than 100 percent a bond financed fiscal e xpansion increases capital by less and crowds out consumption by more than a money financed fiscal expansion copyright 1988 by royal economic society

the labor market effects of rising health insurance premiums we estimate the effect of rising health insurance premiums on wages employment and the distribution of part time and full time work using variation in medical malpractice payments driven by the recent medical malpractice crisis we estimate that a 10 increase in health insurance premiums reduces the aggregate probability of being employed by 1 2 percentage points reduces hours worked by 2 4 and increases the likelihood that a worker is employed only part time by 1 9 percentage points for workers covered by employer provided health insurance this increase in premiums results in an offsetting decrease in wages of 2 3

real money balances as a productive input abstract using a translog production function and data from the united states private sector over the period 1929 1972 this paper clarifies the theoretical debate which has occured on whether real money balances are an original factor input or a catalyst with a role similar to technological innovation real money balances are found to be an important factor input that cannot be treated as separable from the primary factor inputs capital and labor furthermore the results indicate that real money balances are substitutes for capital but complements with labor while capital and labor are in a relative sense complements

estimating workers marginal valuation of employer health benefits would insured workers prefer more health insurance or higher wages abstract in recent years the cost of health insurance has been increasing much faster than wages in the face of these rising costs many employers will have to make difficult decisions about whether to cut back health benefits or to compensate workers with lower wages or lower wage growth in this paper we ask the question which do workers value more one additional dollar s worth of health benefits or one more dollar in their pockets using a new approach to obtaining estimates of insured workers marginal valuation of health benefits this paper estimates how much on average employees value the marginal dollar paid by employers for their workers health insurance we find that insured workers value the marginal health premium dollar at significantly less than the marginal wage dollar however workers value insurance generosity very highly the marginal dollar spent on health insurance that adds an additional dollar s worth of observable dimensions of plan generosity such as lower deductibles or coverage of additional services is valued at significantly more than one dollar

panel discussion price stability how should long term monetary policy be determined these comments address the question of monetary strategy as distinct from monetary tactics they are not directed at the question of what monetary policy is appropriate at the present time or of how monetary policy should be determined at any specific point as a function of prevailing conditions instead the issue i take is one that has been of increasing interest to economists in recent years what should be the long terrn objectives of the monetary authority increased interest in this issue as opposed to the issue of fine tuning the economy reflects the general intellectual consensus that has emerged on two points first what the monetary authority surely can control in the long run is the growth rate of nominal income second issues of dynamic consistency and commitment are crucial to the design of appropriate monetary policies beyond its recognition of these points my view is that most of what the academic economics community has had to say on the issue of long run monetary strategy has been tangential at best and i fear that many of the papers at this conference have not done much to improve the situation i wish to advance four propositions about monetary policy and to discuss their implications first an optimal tax theory has little or nothing to do with sensible inflation policy second positive rates of inflation are almost certainly desirable third to an important extent institutions do the work of rules and monetary rules should be avoided instead institutions should be drafted to solve time inconsistency problems fourth h j res 409 the proposed zero inflation amendment is a good idea if it is not taken too seriously or too literally but is instead viewed as a device for strengthening the independence of the federal reserve system my first proposition is that the connection between optimal tax theory and infla

roughing it up including jump components in the measurement modeling and forecasting of return volatility a rapidly growing literature has documented important improvements in financial return volatility measurement and forecasting via use of realized variation measures constructed from high frequency returns coupled with simple modeling procedures building on recent theoretical results in barndorff nielsen and shephard 2004a 2005 for related bi power variation measures the present paper provides a practical and robust framework for non parametrically measuring the jump component in asset return volatility in an application to the dm exchange rate the s p500 market index and the 30 year u s treasury bond yield we find that jumps are both highly prevalent and distinctly less persistent than the continuous sample path variation process moreover many jumps appear directly associated with specific macroeconomic news announcements separating jump from non jump movements in a simple but sophisticated volatility forecasting model we find that almost all of the predictability in daily weekly and monthly return volatilities comes from the non jump component our results thus set the stage for a number of interesting future econometric developments and important financial applications by separately modeling forecasting and pricing the continuous and jump components of the total return variation process

money and endogenous growth the ramsey romer model of endogenous growth is extended to allow for holdings of real money balances and government debt as well as capital and for non interconnected generations of households tax financed increases in government consumption and debt depress growth prospects and boost inflation as long as a positive birth rate ensures that future taxes are shouldered by future yet unborn generations debt financed increases in government consumption depress growth and boost inflation even more money financed increases in government consumption depress growth less but increase inflation by more giving subsidies through an increase in monetary growth is non neutral since this increases real growth and thus inflation increases by a lesser amount than monetary growth bond financed increases in monetary growth lead to a larger increase in real growth and a smaller increase in inflation if there are cost adjustment for investment cuts in monetary growth and increases in government debt and government consumption induce an increase in the real interest rate copyright 1994 by ohio state university press

the optimal inflation tax when money reduces transactions costs abstract it has been argued that if money acts as an intermediate good the optimal inflation tax is zero this paper reexamines such a claim in the context of a model in which money reduces transactions costs it is shown that modeling money as an intermediate good does not necessarily imply that the optimal inflation tax is zero the optimality of a zero inflation tax depends on the properties of the transactions costs technology in particular if the transactions costs technology does not exhibit constant returns to scale it is optimal to resort to the inflation tax

the elusive wage benefit trade off the case of employer provided health insurance this study shows that standard regressions estimated to measure a trade off between wages and health insurance are misspecified by insufficiently accounting for establishment and firm size an interactive size corrected specification is more likely to reveal a trade off furthermore because insurance decisions are typically made by firms and wages set by establishments the insurance constraint on establishments in multi establishment firms weakens the trade off we use model generated data to show that both factors contribute to the failure in previous research to identify a trade off and data from a cross section of northern californian establishments to test for a trade off in multi establishment and single establishment firms

money supply and capital accumulation on the transition path revisited fischer 1979 and asako 1983 analyze the sign of the correlation between the growth rate of money and the rate of capital accumulation on the transition path both plug a constant relative risk aversion utility based on a cobb douglas and a leontief function respectively into sidrauski s model yet return contrasting results the present analysis by using a more general ces utility presents both of those settings and conclusions as limiting cases and generates economic figures more consistent with reality e g the interest rate elasticity of the money demands derived from those previous works is necessarily 1 and 0 respectively

the permanent income hypothesis estimation and testing by instrumental variables the permanent income hypothesis with rational expectation is restated estimated and tested by an instrumental variables technique on the postwar u s aggregate time series data the hypothesis is accepted on a consumption series which includes service flows from consumer durables if the consumption series is the one in the national income and product accounts the hypothesis is decisively rejected an explanation is suggested to reconcile the conflicting test results

admiration is a source of indeterminacy abstract are consumption externalities sources of indeterminacy the answer is negative in conventional wisdom this paper shows consumption externalities establish local indeterminacy if the degree of decreasing impatience is sufficiently large dynamic models with indeterminacy are valuable as they tend to explain economic fluctuations without relying on exogenous shocks and question interpretation of simple estimation obtained by pooling data among others

forecasting the volatility of australian stock returns do common factors help this article develops multivariate factor models for forecasting volatility in australian stocks we suggest estimation procedures for approximate factor models that are robust to jumps when the cross sectional dimension is not very large and also work with volatility measures that have been constructed so that they contain no jump components out of sample forecast analysis shows that multivariate factor models of volatility outperform univariate models but there is little difference between simple and sophisticated factor models

multiple bgps in a growth model with habit persistence this paper establishes multiple balanced growth paths in an otherwise standard competitive growth model without externality or distortions and with households preference dependent upon how his her consumption compares to a habit stock formed by his her own past consumption the key feature in our model is that consumption forms habits in combination with existing habits this model establishes multiple equilibria because habit persistence induces an internal intertemporal complementarity effect among consumption flows with current consumption reinforcing future consumption as a result there exist two balanced growth paths with one path exhibiting low consumption and habits and high economic growth and the other path exhibiting high consumption and habits and low growth that is not necessarily a development trap both steady states are saddles but global indeterminacy arises where a high balanced growth path co exists with a low balanced growth path where the two equilibrium paths cannot be pareto ranked and history need not matter for the selection of the equilibrium path

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

worker sorting compensating differentials and health insurance evidence from displaced workers this article introduces an empirical strategy to the compensating differentials literature that i allows both individual observed and unobserved characteristics to be rewarded differently in firms based on health insurance provision and ii selection to jobs that provide benefits to operate on both sides of the labor market estimates of this model are used to directly test empirical assumptions that are made with popular econometric strategies in the health economics literature our estimates reject the assumptions underlying numerous cross sectional and longitudinal estimators we find that the provision of health insurance has influenced wage inequality finally our results suggest there have been substantial changes in how displaced workers sort to firms that offer health insurance benefits over the past two decades we discuss the implications of our findings for the compensating differentials literature

a simple dynamic general equilibrium model abstract we analyse a single sector economy with h 1 infinitely lived agents that operate in a continuous time framework utility functions are recursive but not additive both efficient and perfect foresight competitive equilibrium allocations are considered the existence and stability of such allocations are investigated locally i e in a neighbourhood of steady state allocations the model is shown to be useful for explaining the distribution of wealth and consumption across agents and for analysing the way in which wealth redistribution can affect the dynamics of aggregate economic variables

time patience and specialization patterns in the presence of asset trade specialization patterns in an open economy two sector growth model with endogenous capital accumulation are examined in the presence of free international lending and borrowing without free international lending and borrowing it is known that whereas the less time patient country decumulates real capital the more patient country accumulates real capital and eventually specializes in a capital intensive industry however free trade of international financial assets causes a dramatic change in long run specialization patterns in this case the less patient country may well specialize in the capital intensive industry and the more patient country in the labor intensive industry

a theoretical comparison between integrated and realized volatility in this paper we provide both qualitative and quantitative measures of the precision of measuring integrated volatility by realized volatility for a fixed frequency of observation we start by characterizing for a general diffusion the difference between realized and integrated volatility for a given frequency of observation then we compute the mean and variance of this noise and the correlation between the noise and the integrated volatility in the eigenfunction stochastic volatility model of meddahi 2001a this model has as special cases log normal affine and garch diffusion models using previous empirical results we show that the noise is substantial compared with the unconditional mean and variance of integrated volatility even if one employs five minute returns we also propose a simple approach to capture the information about integrated volatility contained in the returns through the leverage effect we show that in practice the leverage effect does not matter copyright 2002 john wiley sons ltd

the effects of inflation on economic growth lessons from latin america this paper investigates the relationship between inflation and long run growth it presents an endogenous growth model that illustrates the channels through which inflation affects growth the model highlights the effects of inflation on the productivity of capital and the rate of capital accumulation the reduction in growth is caused by a diversion of resources away from activities that lead to faster rates of growth toward activities associated with reducing the costs of inflation the negative association between inflation and growth is assessed empirically for a sample group of latin american countries this abstract was borrowed from another version of this item

government spending and the real exchange rate i study the effect of government spending on the real exchange rate in an open economy version of the sidrauski model with a time varying rate of time preference that introduces complementarity between consumption at different points in time i show that a balanced budget fiscal expansion causes a real depreciation and a current account surplus if the expansion falls on traded goods if the increase falls instead on nontraded goods both the stylized results of a real appreciation and a current account deficit and the perverse result of an appreciation and a surplus can occur

economic growth financial evolution and the long run behavior of velocity a general equilibrium model is presented in which buyers and sellers find it increasingly difficult to make private credit arrangements as economic activity spreads into new markets hence the demand for money increases as the structure of production and trade becomes more complex at the same time however financial innovations allow agents to economize on their cash balances together these effects of technological progress account for two empirical regularities the u shaped pattern in velocity and the ever increasing share of productive resources devoted to the private financial sector that are associated with the process of real economic growth

the global stability of efficient intertemporal allocations this paper describes a continuous time model of an economy with finitely many infinitely lived consumers and a finite number of capital goods two objectives are achieved first recursive nonadditive utility functionals are formulated and analyzed second these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy two classes of global turnpike propositions are proven which provide the basis for a model of the long run distribution of wealth these propositions also provide new perspective regarding existing stability literature based on additive utilities copyright 1987 by the econometric society

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

the complete complementarity of consumption and real balances and the strong superneutrality of money abstract in the representative agent model with money in the utility function if consumption and real balances are perfect complements steady state capital intensity and real balance holdings are both invariant to monetary growth regardless of the nature of time preferences

elastic capital supply and the effects of fiscal policy i introduction perfectly elastic or perfectly inelastic supply or demand curves have much to recommend them equilibrium analysis which would otherwise be fraught with ambiguity yields forth sharp predictions when one assumes either demand or supply are either perfectly elastic or inelastic nonetheless this is not the way we typically teach equilibrium analysis nor in most circumstances perform it neoclassical macroeconomics is an exception to this rule specifically capital accumulation models in which a representative agent maximizes the standard additively separable fixed discount factor utility function to which class most equilibrium business cycle models based on the neoclassical growth model belong imply a long run supply curve for capital which is perfectly elastic at the agent s fixed rate of time preference this property of what we will refer to as the standard model is and has been well known and well criticized even by users of the standard model 1 but the question of exactly where and when this assumption ceases to be innocuous i e for what sorts of experiments it is or isn t a harmless simplification has been given surprisingly short shrift 2 in this paper we explore the implications for the equilibrium analysis of the effects of changes in government purchases of relaxing this assumption in particular we explore the implications of replacing the fixed discount factor beta in the standard utility specification summation of beta sup t u c sub t l sub t where t 0 to infinity where c sub t and l sub t denote consumption and leisure at date t with an endogenous discount factor beta c sub t l sub t in this way discounting of future utility is allowed to depend on the agent s enjoyment of current consumption and leisure the lifetime utility function that results from this modification is of the sort first formulated by uzawa 1968 and epstein and hynes 1983 the latter of these in particular demonstrated through a series of examples the extent to which models with endogenous discount factors can differ substantially from their fixed discount factor counterparts while these earlier papers were primarily concerned with developing theoretical results our analysis will be primarily quantitative the possibility that the rate of time preference varies across individuals and over time or equivalently that the rate at which the future is discounted responds to the current and previous decisions of individuals is more than a theoretical curiosum to start with there is a substantial body of evidence that rates of time preference differ across individuals people are not equally patient much of this evidence is summarized in table 1 of becker and mulligan 1997 at the aggregate level they point to the fact that rich countries have grown slightly faster than poor countries over the past 30 years as suggesting that the residents of rich countries may have lower rates of time preference than residents of poor countries differences between the united states and japan in the age consumption profile are also consistent with differences in the rate of time preference between the united states and japan and the fact that income is associated with consumption growth suggests that the rich may be more patient than the poor detailed micro evidence on differences in rates of time preference across households is also presented by lawrance 1991 she finds that the rates of time preference of poor consumers are three to five percentage points higher than those of rich consumers using panel data for the united states from the psid ogaki and atkeson 1997 estimate a model in which time preference is allowed to vary across rich and poor households using household level panel data from india furthermore there is evidence that rates of time preference vary not just across individuals at a point in time but also over time

realized garch a joint model for returns and realized measures of volatility summary we introduce a new framework realized garch for the joint modeling of returns and realized measures of volatility a key feature is a measurement equation that relates the realized measure to the conditional variance of returns the measurement equation facilitates a simple modeling of the dependence between returns and future volatility realized garch models with a linear or log linear specification have many attractive features they are parsimonious simple to estimate and imply an arma structure for the conditional variance and the realized measure an empirical application with dow jones industrial average stocks and an exchange traded index fund shows that a simple realized garch structure leads to substantial improvements in the empirical fit over standard garch models that only use daily returns copyright 2011 john wiley sons ltd

dynamic behavior of capital accumulation in a cash in advance model abstract this paper analyzes the dynamic behavior of capital accumulation in stockman s cash in advance model if the cash in advance constraint applies only to consumption then money is superneutral along the transition path as well as in the long run alternatively if the cash in advance constraint applies to gross investment as well as consumption then a permanent increase in the rate of monetary growth reduces the steady state capital stock the effect on the speed of adjustment depends on the sign of a certain simple function of the parameters of preferences and technology

on the integrability of money demand functions by the sidrauski and the shopping time models abstract this paper investigates which properties money demand functions must satisfy so that they are consistent with lucas s lucas jr r e 2000 inflation and welfare econometrica 68 247 274 versions of the sidrauski and the shopping time models we conclude that shopping time integrable money demand functions are necessarily also sidrauski integrable but that the converse is not necessarily true unless a boundedness assumption on the nominal interest rate is made both the log log with an interest rate elasticity greater than or equal to one and the semi log money demands may serve as counterexamples all the models and results are also extended to the case in which there are several assets in the economy performing monetary functions

dynamics in a transactions based monetary growth model abstract this paper characterizes the dynamics of a monetary endogenous growth model in which money is introduced into the system via a transactions cost technology a monetary equilibrium that either satisfies the friedman rule of the optimum quantity of money or accommodates the zero inflation rate policy is dynamically unstable with cagan like hyperinflation the monetary equilibrium may either be unstable or exhibit dynamic indeterminacy in which a variety of equilibrium outcomes emerge in transition the rate of monetary expansion the relative magnitudes of the intertemporal elasticity of substitution and the production technological parameter are crucial for determining the stability property of the model

the value of time and the transactions demand for money this paper reexamines the hypothesis of dean s dutton and william p gramm and edi karni that the wage rate influences the demand for money as a proxy for the value of transactions time it develops value of time transactions models which yield demand for money equations that have a real wage rate argument and compares it to a non value of time alternative that does not the author finds that the value of time models perform well and that the value of time effect is empirically significant copyright 1990 by ohio state university press

rate of time preference intertemporal elasticity of substitution and level of wealth the rate of time preference rtp and the intertemporal elasticity of substitution ies are two important factors shaping intertemporal consumption decisions models in which the rtp and or the ies differ systematically between rich and poor households have different empirical and policy implications for economic development growth and the distribution of income and consumption from those of standard models in which these parameters are constant across households in this chapter we estimate a model in which both rtp and ies are allowed to differ across rich and poor households using household level panel data from india our empirical results are consistent with the view that the rtp is constant across poor and rich households but the ies is larger for the rich than it is for the poor

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

capital accumulation and the current account in a two country model abstract this paper examines the joint determination of international debt and capital accumulation in a two country model national rates of time preference are endogenous adjusting along an optimal path to come into equality with one another in the steady state the characteristics of short run current account dynamics are crucially linked to world capital accumulation and to a country s long run net external asset position steady state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries this gives rise to possible non monotonic adjustment in the current account and consumption

intertemporal dependence impatience and dynamics abstract this paper develops simple geometric methods for analyzing consumer behavior under recursive but intertemporally dependent tastes since the preferences studied need not be time additive they allow the marginal utility of consumption on a given date to vary with consumption on other dates intertemporal dependence is induced by the presence of a variable individual rate of time preference the optimal consumption responses to transitory and anticipated changes in incomes and interest rates are easily derived and are similar in many respects to the responses implied by the standard constant time preference model intuitive explanations of the first order conditions describing optimal paths are provided

time preference in dynamic trade models an empirical critique in this article i present an empirical critique of one of the results of certain two sector dynamic trade models that under free trade a country may save less than under autarky or limited trade this result implies that in the long run the attainable level of consumption per capita would be lower under free trade than under protectionism 2 in the short run of course consumption would be increased because of the reduced rate of savings associated with free trade dynamic trade models such as those formulated by stiglitz deardorff samuelson and findlay conclude that in general the opening up to trade increases the differences among countries in savings rates and in some other economic variables 3 in particular they conclude that a developing country with a low savings rate will reduce its rate of savings after increasing its trade with advanced countries that have relatively high savings rates this hypothesis is tested and rejected in this article i contend that what the existing dynamic trade models show us is not the likely path that each country will follow after opening to trade instead i demonstrate the limited usefulness of models based on the postulation of constant rates of time preference or preference structures the objection to the existing dynamic trade models is essentially that they take the time preference structures as given rather than as molded by international contact in this article it is suggested that trade is likely to shift the time preference structure of a developing country inducing the developing country to save more as its citizens strive to catch up with the higher living standards of the advanced country i contend that the most important result of opening to trade is the possible change in the time preference structure of each country itself which may lead to a reduction in disparities in steady state savings propensity as well as in capital labor ratio

how much and how often a model of repeated consumption with endogenous consumption frequency abstract we study the consumption pattern for a repeated good in which individuals choose both consumption frequency and intensity in response to income price and setup cost results include that increased setup costs reduce frequency and increase intensity and that the effects of a setup cost increase are qualitatively different from those of a price increase or an income reduction

forecasting daily exchange rate volatility using intraday returns abstract this study investigates whether intraday returns contain important information for forecasting daily volatility whereas in the existing literature volatility models for daily returns are improved by including intraday information such as the daily high and low volume the number of trades and intraday returns here the volatility of intraday returns is explicitly modelled daily volatility forecasts are constructed from multiple volatility forecasts for intraday intervals it is shown for the dem usd and the yen usd exchange rates that this results in superior forecasts for daily volatility

impatience and equilibrium indeterminacy abstract this paper extends the neoclassical one sector optimal growth model by postulating that individual agents time preference impatience depends on the economy wide average consumption and average income which are social factors taken as external by individual agents the paper shows that with the socially determined individual time preference local equilibrium indeterminacy can arise moreover local indeterminacy can also be associated with global indeterminacy in many cases the results hold in models with bounded and unbounded growth

does monetary policy have asymmetric effects on stock returns this paper investigates whether monetary policy has asymmetric effects on stock returns using markov switching models different measures of a monetary policy stance are adopted empirical evidence from monthly returns on the standard poor s 500 price index suggests that monetary policy has larger effects on stock returns in bear markets furthermore it is shown that a contractionary monetary policy leads to a higher probability of switching to the bear market regime

monetary policy and economic fluctuations in a sticky price model abstract this paper examines a simple monetary optimizing model with sticky prices two types of monetary policy rules are considered constant money growth rules and interest rate feedback taylor type rules in the case of constant money growth rules we show the existence of limit cycles through the hopf bifurcation theorem on the other hand in the case of the interest rate feedback rules we show that active monetary policy leads to the determinacy of equilibrium path while passive monetary policy induces economic fluctuations

a liquidity in advance model of the demand for money under price uncertainty abstract we develop a model of money demand in which the asset and goods markets open sequentially money balances are subject to price level and consumption risk empirical evidence from a bivariate arch framework suggests both sources of risk reduced money demand in the 1970s inflation risk depresses money demand throughout our sample 1962 1987 the econometric analysis resolves conflicting empirical estimates reported in the literature

money and the bias of technical progress in the literature on the behaviour of a monetary economy it has been suggested that in addition to its role as a medium of exchange the role of money in production should be recognized explicityliy however on this latter point there is some disagreement as to the mechanism by which it affects production for example mundell 1971 bailey and friedman 1969 attribute direct productivity to money and consequently sugest that is should be treated as a separate facto of production on the other hand brunner and meltzer 1971 perlman 1971 stein 1971 gabor and pearce 1958 saving 1972 and moroney 1970 emphasize the role of money as an innovational factor while the reasoning varies the basic idea is that the use of money enhances efficiencies of capital and labour in other words money acts as an input augmenting factor in a recent paper subrahmanyam and cosimano 1979 using data on the indian economy for 1950 51 1969 70 and the ces production function framework have tried to test t

inflation and growth pecuniary transactions costs and qualitative equivalence this paper develops a pecuniary transactions costs tc approach to reexamine the principal relationships and results concerning inflation and growth in a model with a general tc function and an endogenous labor leisure choice we consider four special cases by distinguishing among money as 1 a consumption good 2 a production good 3 an investment good and 4 a consumption good as well as an investment good under some weaker conditions as in related studies a reversed tobin effect obtains for all cases a high monetary growth rate leads to lower steady state capital labor consumption and real money balances these findings suggest that a pecuniary tc model is qualitatively equivalent to alternative models in the literature

anticipation of future consumption a monetary perspective we adapt the monetary model sidrauski 1967 to study the hypothesis of anticipation of future consumption we assume that anticipation of future consumption affects an agent s instantaneous utility and that all effects of future consumption on current well being are captured by the stock of future consumption monetary policy effectiveness is thereby reduced and a zero nominal lower interest rate and thus the friedman rule is destabilizing given this we can derive a just stable equilibrium nominal interest rate with matching definitions for inflation and monetary growth we demonstrate that these implied lower bounds match their historical analogues well

economic development and time preference schedule the case of japan and east asian nics the constancy of the time preference rate has been a traditional assumption of the literature on intertemporal choice of consumers this chapter examines empirically the validity of the constancy hypothesis of the time preference schedule three alternative hypotheses concerning the time preference rate are investigated the first hypothesis posits that the time preference rate decreases as the economy develops fisher hypothesis the second hypothesis posits that the time preference rate increases as the economy develops uzawa hypothesis the third hypothesis which is a combination of the second and third hypotheses posits that as a nation develops the time preference rate decreases up to a certain point and thereafter the time preference rate increases fukao hamada hypothesis post war annual time series data from taiwan japan and korea are employed to examine these hypotheses i find that the fukao hamada hypothesis is supported for taiwan and japan while the time preference rate is constant for korea

do workers accept lower wages in exchange for health benefits compensating wage theory predicts that workers receiving more generous fringe benefits are paid a lower wage than comparable workers who prefer fewer fringe benefits this study tests this prediction for employer provided health insurance by modeling the wages of married women employed full time in the labor market husband s union status husband s firm size and husband s health coverage through his job are used as instruments for his wife s own employer health insurance benefits the estimates suggest wives with own employer health insurance accept a wage about 20 lower than what they would have received working in a job without benefits

on the existence of balanced growth equilibrium the authors characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth balanced and asymptotically balanced they show that under a constant returns to scale technology asymptotically constant discount rate and asymptotically constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a n asymptotically balanced growth equilibrium path the authors provide examples of recursive utility models that accept a n asymptotically balanced growth equilibrium and discuss their implications on cross country differences in growth rates as well as on savings behavior and wealth distribution copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the speed of convergence and alternative government financing abstract in this paper we are concerned with the speed of convergence in the sidrauski monetary optimizing model sidrauski am econ rev 57 1967 534 in which the steady state capital stock is not influenced by a change in public spending the paper studies how different the speed of convergence to the steady state is affected by a change in government spending under the various ways of financing in exploring the transitional adjustment to the public policy shock it will be convenient to focus upon the degree of relative risk averse

the role of monetary policy in eliminating nonconvergent dynamic paths this paper investigates the effects of money growth on nonconvergent dynamic paths in a money in utility model when relative risk aversion is decreasing in money period two cycle and sunspot equilibria are always associated with a high rate of money supply growth however when relative risk aversion is increasing in money it is ambiguous whether they are associated with either high or low rate of money supply growth the paper also investigates the same problem in a transaction cost model the author shows that the results essentially depend on the form of the transaction cost function copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

substitution between wage and nonwage benefits you gotta be kidding ollie you re just robbing yourself schuylkill mutual offers a terrific deal on keogh and we could plug you in in fact we advise plugging you in on the corporate end so not a nickel comes out of your personal pocket it comes out of the corporate pocket and there s that much less for uncle to tax these poor saps carrying their own premiums with no company input are living in the dark ages there s nothing shady about rigging it this way we re just using the laws the government has put there they want people to take advantage it all works to up the gross national product you know what i mean by keogh don t you you re looking kind of blank john updike p 296

on the equivalence of private and public money abstract when does a swap between private and public money leave the equilibrium allocation and price system unchanged to answer this question the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles we derive sufficient conditions for equivalence and apply them in the context of the chicago plan cryptocurrencies the indian de monetization experiment and central bank digital currency cbdc our results imply that cbdc coupled with central bank pass through funding need not imply a credit crunch nor undermine financial stability

tough love and intergenerational altruism this chapter develops and studies a tough love model of intergenerational altruism we model tough love by modifying the barro becker standard altruism model in two ways first the child s discount factor is endogenously determined so lower childhood consumption leads to a higher discount factor later in life second the parent evaluates the child s lifetime utility with a constant high discount factor our model predicts that parental transfers will fall when the child s discount factor falls this is in contrast with the standard altruism model which predicts that parental transfers are independent of exogenous changes in the child s discount factor