monetary policy aggregate uncertainty and the stock market the authors develop and analyze a simple general equilibrium model of asset pricing in a monetary economy where the growth rate in money is partially determined by the policy of the monetary authority their model implies that the relationship between stock prices and consumption risk is systematically dependent on the monetary policy regime indicates that a rise in the noise associated with a given future monetary policy unambiguously increases current stock prices and formalizes the geske roll 1983 explanation for the observed negative correlation between stock returns and inflation copyright 1995 by ohio state university press

risk aversion and the term structure of real interest rates abstract the term structure of real interest rates is studied in the context of a consumption based general equilibrium model it is shown that the expectations hypothesis is approximately satisfied for low interest rate volatility otherwise the term premia are generally positive

the price elasticity of warm glow giving abstract we examine the charitable giving behavior of warm glow givers in response to the same donation incentive structure but with formally different schemes at this aim we implement a large online survey n 1655 using the amazon mechanical turk platform first we elicit and measure warm glow giving then we employ a between subjects design in which each warm glow donor n 881 is randomly assigned to one of two treatment groups that differ for the subsidy rebate or matching and is asked to make a series of allocation decisions between himself and a charity of his choice the results show that contributions are significantly more responsive to matching 1 15 than to rebate subsidies 0 17 moreover we provide evidence that under rebate price elasticity decreases as the warm glow magnitude increases for weak warm glow givers price elasticity is double that for strong warm glow donors

data revisions and the expenditure components of gdp the constant price components of the expenditure estimate of gdp for the united kingdom undergo an extensive process of revision as new information comes to light this study is concerned with three central themes the authors assess whether the preliminary vintages efficiently incorporate information available at the time of their compilation whether there is any evidence for the nonstationarity of data revisions and how to construct constant price time series when there are several changes of base copyright 1991 by royal economic society

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

the price elasticity of charitable giving new experimental evidence abstract we examine the charitable giving decisions of donors under two subsidy mechanisms rebate and matching and we calculate the price elasticity of giving we implement an online survey using the amazon mechanical turk platform participants are asked to make a series of allocation decisions between themselves and a charity of their choice we vary endowment and subsidy rates in line with the literature the results show that contributions under matching subsidies are significantly higher than contributions under rebate subsidies participants who usually make a donation are more likely to give and are less responsive to price changes moreover the probability of giving increases monotonically along with subsidy rates

subsidizing charitable giving with rebates or matching further laboratory evidence we examine two different ways to subsidize charitable giving by a rebate returning a portion of the donation to the giver or by a match adding additional donations to the giver s donation in previous experimental research we have shown that participants give more to charity under the match than under an equivalent rebate the previous within subject experimental design required participants to make a series of decisions under both types of subsidy each decision consisted of an allocation of an endowment between the subject and a charity chosen by the subject from a specified list this article examines whether that result is an artifact of the previous within subjects design subjects may have failed to fully distinguish the two types of subsidy in the current article we report results from a between subjects design where participants are required to make only one type of decision involving rebates or involving matching subsidies our results confirm previous findings

money and asset prices in a cash in advance economy an asset pricing model with money introduced via a cash in advance constraint is presented the monetary velocity is variable hence money demand does not obey the trivial quantity equation the effects of disturbances in output and money growth on real balances the price level and interest rates are examined monetary policy has effects on real asset prices the fisher relation and the premium on nominal bonds are discussed the precise role of the timing of information and transactions for properties of price levels and interest rates are clarified

monetary uncertainty in discrete time utility of money models abstract in a discrete time model higher variability of the future money supply affects current macroeconomic variables when beginning of period money is the argument of utility but not when end of period money is the effect is through the existence of a precautionary money demand

price smoothing policies a welfare analysis in post wwii experience u s monetary authorities have attempted to eliminate seasonal fluctuations in prices and nominal interest rates developments in financial markets and recently discovered empirical regularities regarding the seasonal cycle seem to make these activities questionable using a money in the utility function model this paper analyzes the welfare properties of price and interest rate smoothing policies and the sense in which the distinction between seasonal and cyclical fluctuations is relevant it is shown that smoothing policies are welfare improving but not optimal and that the origin of the shocks not the persistence of the fluctuations is relevant in formulating policies

the optimal quantity of money a reconciliation abstract despite the apparent disagreement of samuelson s 1958 overlapping generations model and townsend s 1980 turnpike model on the optimal quantity of money in both i those endowed at the start with goods prefer a constant money stock and ii those endowed at the start with fiat money prefer deflation

exchange rate volatility the role of real shocks and the velocity of money the effects of stochastic output shocks on the behavior of ex change rates and nominal price levels is studied within the context of a two country cash in advance model the analysis of this model in contrast to the existing cash in advance literature demonstrates that exchange rates can be more volatile than price levels even though agents elasticity of substitution between foreign and domestic goods is greater than one half this possibility arises when output shocks are autocorrelated and are due to revisions in expectations that affect the terms of trade and or the velocity of money

monetary growth innovations in a simple cash in advance asset pricing model abstract this paper contributes to the existing literature in the rational expectations cash in advance asset pricing general equilibrium model in two directions first we show that by allowing a variable velocity of circulation an increase in the conditional variance of the money growth process triggers an increase in the demand for money relative to stocks and bonds with a consequent reduction in stock and bond prices which is the opposite of the current result in the literature with constant unitary velocity second we explicitly show how the sequential markets and specific timing of information fits exactly into the notion of irreversibility in the sense that when faced with uncertainty agents might find optimal to delay decisions in order to wait for the arrival of new information

sticky goods prices flexible asset prices monopolistic competition and monetary policy a monetary general equilibrium asset pricing model with sticky goods prices is developed goods prices are set by monopolistically competitive firms that maximize stock market value equilibria with underutilization of resources excess capacity in some states result in contrast to previous monetary asset pricing models the degree of competition affects capacity utilization monetary policy can affect output and resource utilization in addition to real asset prices depending upon the amount of information available to the monetary authority

the effect of data revisions and additional observations on time series estimates 1987 the effect of data revisions and additional observations on time series estimates applied economics vol 19 no 3 pp 347 353

an experimental test of warm glow giving abstract this paper reports the results of an experimental test of the warm glow hypothesis a participant is presented with the opportunity to contribute from her own endowment to a charity of choice the experiment is designed so that a pure altruist has no incentive to donate the amount the designated charity will receive is preset any contribution by the participant crowds out dollar for dollar giving by the proctor we find that participants on average donated 20 of their endowments and that approximately 57 of the participants made a donation

the term structure of interest rates in a model with heterogeneous agents abstract this paper examines the term structure of interest rates in a stochastic overlapping generations model several discrete time discrete state models show that the term structure premium is generally positive this paper demonstrates that these results hinge upon the assumption of a single representative agent and if heterogeneous agents are introduced a negative term structure premium cannot be ruled out

general equilibrium properties of the term structure of interest rates abstract the paper examines the allocation of consumption and investment in a three date binomial model in order to determine the sign of the real term structure premium in general equilibrium when production functions are concave markets are complete and future production possibilities are the same irrespective of which state of the world occurs the term structure premium will be positive in incomplete markets constant or increasing absolute risk aversion is sufficient to guarantee a positive term structure premium although in the more likely case of decreasing absolute risk aversion a negative premium cannot be ruled out

the information content and gain of revisions to the components of gdp whilst it is well known that data comprising the components of gdp are revised several times before a final figure is published it is probably less well known that the process of revision and refinement of the initial data is lengthy one there can for example be six years between publication of the initial and final data this study develops and applies information measures due to theil to describe and analyse the revisions process our data set is a unique one made available to us by the cso comprising the constant price components of the expenditure measure of the gdp and the current price components of the income measure of gdp we report on the size of revisions over time and the extent to which information gains or losses characterize later vintages of the data we also consider the pattern of revisions to the growth rate of gdp and its components

a money demand function with output uncertainty monetary uncertainty and financial innovations in a general equilibrium framework incorporating the money in the utility function approach we show that output uncertainty and monetary uncertainty as well as output interest rates and financial innovations affect money demand the estimated long run relationships are consistent with our postulated relation but not with the conventional one our model delivers a high income elasticity consistent with cross sectional evidence and helps resolve m1 demand puzzles the model estimated in dynamic error correction form exhibits a good level of stability and forecastability providing little support for the recent de emphasis of monetary aggregates due to the instability of money demand

nominal prices and interest rates in general equilibrium endowment shocks the outstanding problem of neoclassical monetary theory has been to determine the effect of changes in the money stock on nominal prices and interest rates the classic result is that in the absence of money illusion contracts fixed in nominal terms and other such impedimenta money is neutral thus a doubling of the money stock results in a doubling of the nominal price level and in no change in nominal interest rates except at most for a temporary liquidity effect while the price level is rising to its new level during the adjustment period the nominal interest rate might temporarily drop this neutrality result has conventionally been proved in a static framework in intertemporal models it is necessary to distinguish between static neutrality and dynamic neutrality if a model displays dynamic neutrality fluctuations in the money stock immediately induce a proportional change in the nominal price level and no change in nominal interest rates or any real variable this property is different from and stronger than static neutrality which in dynamic models states only that if the money stock at all dates is doubled so will be the price level at all dates the effects of exogenous shocks in the monetary growth rate on nominal prices and interest rates are analyzed a representative individual rational expectations framework is adopted and a demand for money is generated by entering money in the utility function the effects of monetary shocks on inflation and interest rates are shown to depend on the autocorrelation of the monetary growth rate for example under serial independence the inflation rate equals the monetary growth rate and the nominal interest rate is nonrandom while under positive negative autocorrelation the nominal interest rate is affected positively negatively by positive growth rate shocks i am grateful to the staff of the federal reserve bank of philadelphia to the finance groups at the university of southem california and virginia polytechnic institute and to c j lacivita dan peled john seater and jon sonstelie for valuable comments on earlier drafts

data revisions and time series models of gdp and its components this paper examines how time series models of gross domestic product and its components in the uk change as a result of both new observations becoming available and the provisional data series being revised quarterly predictions from the time series models are compared with the series of first estimates of each quarterly change the series available one year after the forecasts are made and the most recent data available the time series models are found to be satisfactory in a number of cases and are better predictors of the final values of total final expenditure than the first estimates series surprisingly the first estimates series are closer to the most recent data available than the estimates obtained one year after the data period ended

on the term structure of interest rates abstract this paper tests the one good stochastic growth model with respect to its ability to explain the term structure of real interest rates we undertake both a qualitative and quantitative analysis first we assess the changing shape of the yield curve over the model economy s business cycle and compare our results with what is empirically observed second we employ the model to study various implications of informational and allocative efficiency properties which the artificial economy must possess it is found for example that long term rates are less volatile than short term rates and that holding premia can be highly correlated over time third we study the time varying risk premium implicit in the economy s forward rate structure a purely quantitative assessment of the model s explanatory power is also provided