how general are time preferences eliciting good specific discount rates abstract this paper tests the commonly used assumption that people apply a single discount rate to the utility from different sources of consumption using survey data from uganda with both hypothetical and incentivized choices over different goods we elicit time preferences from about 2400 subjects we reject the null of equal discount rates across goods the average person in our sample is more impatient about sugar meat and starchy plantains than about money and a list of other goods we review the assumptions to recover discount rates from experimental choices for the case of good specific discounting consistently with the theoretical framework we find convergence in discount rates across goods for two groups expected to engage in or think about arbitraging the rewards traders and individuals with large quantities of the good at home as an application we evaluate empirically the conditions under which good specific discounting could predict a low asset poverty trap

the economic consequences of extending the use of fair value accounting in regulatory capital calculations a discussion abstract when the federal reserve following basel iii proposed removing the accumulated other comprehensive income aoci filter that shields regulatory capital from unrealized gains and losses on available for sale afs debt securities it triggered fierce opposition the topic is at the heart of the debate about the role of fair value accounting for financial stability chircop and novotny farkas 2016 investigate banks stock price reaction and investment behavior around news events up to the announcement of the final decision i focus on the question of whether their evidence is sufficiently strong to convince either side in the debate

the economic consequences of extending the use of fair value accounting in regulatory capital calculations we investigate the economic consequences of the basel iii requirement to include unrealized fair value gains and losses on available for sale afs securities in regulatory capital using data for u s banks we find negative market reactions around news indicating an increased likelihood of this regulatory change being implemented consistent with increased regulatory costs we also find that banks affected by this regulation reduce their investment in risky afs securities relative to unaffected banks this result suggests that extending the use of fair values for regulatory purposes reduces ex ante risk taking

panacea pandora s box or placebo feedback in bank mortgage backed security holdings and fair value accounting we examine the relation between bank holdings of mortgage backed securities mbs and mbs prices theory suggests feedback between mbs holdings and underlying asset markets can be aggravated by mark to market accounting we measure feedback by the relation between asset returns and the changes in bank mbs holdings consistent with the existence of feedback effects related to mark to market we find that for banks with high mbs more nonperforming loans and lower total capital ratio changes in bank mbs positions are positively associated with changes in mbs prices and that this relation is reduced after the april 2009 mark to market rule clarification to assess the effect of feedback on shareholder value we test whether the stock price response of banks to the announcement of the mark to market accounting rule clarification is associated with the intensity of feedback behavior we find that the stock market reaction to the rule change is more positive for banks with more mbs higher nonperforming loans and higher pre rule change feedback we also find positive bond price reactions to the rule change overall our results suggest feedback related to mark to market accounting had a measurable effect on shareholder value 2011 published by elsevier b v

adjustment policies in developing countries a reassessment this paper analyzes policy responses to external shocks of the 1973 76 and 1979 81 periods in developing economies grouped according to the level of industrialization and the policies applied it is shown that outward oriented economies relied largely on export promotion and import substitution to offset the balance of payments effects of external shocks in both periods inward oriented economies failed to apply such output increasing policies of adjustment rather they financed the balance of payments effects of external shocks by foreign loans in the 1974 76 period and had to take deflationary measures in 1979 81 when their increased indebtedness limited the possibilities for further borrowing the policies applied led to rates of economic growth substantially higher in outward oriented than in inward oriented economies with growth rates in 1983 averaging 5 percent in the first case and practically nil in the second

the macro impacts of korea s heavy industry drive re evaluated the korean heavy industry hci drive has been criticised for the misallocation of capital and for negative spillover effects on growth inflation the current account and debt however such criticism places too much blame on hci for the late 1970s economic deterioration and gives hci insufficient credit for the subsequent economic rebound korean hci was a catch up exercise which attracted cheap foreign capital to accelerate structural change nevertheless the mid 1970s decision to pursue hci as a big push was flawed since it did result in project bunching that strained implementation capacity despite the safeguards which korea built into its hci strategy

salience and consumer choice we present a theory of context dependent choice in which a consumer s attention is drawn to salient attributes of goods such as quality or price an attribute is salient for a good when it stands out among the good s attributes relative to that attribute s average level in the choice set or more broadly the choice context consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality price ratios the model accounts for a variety of disparate evidence including decoy effects and context dependent willingness to pay it also suggests a novel theory of misleading sales

is historical cost accounting a panacea market stress incentive distortions and gains trading we provide new empirical evidence concerning the contentious debate over the use of historical cost versus fair value accounting in regulating financial institutions these accounting rules through their interactions with capital regulation alter financial institutions optimal portfolio choice and trading behavior the insurance industry provides a natural laboratory in which to explore these interactions first there exist significant differences in regulatory accounting rules life insurers have greater flexibility to hold speculative grade instruments at historical cost than property and casualty insurers second within an insurer s investment portfolio detailed data are available on transactions positions and most importantly the regulatory accounting treatment for each security when faced with severe downgrades among their holdings in asset backed securities abs life insurers largely continue to hold the downgraded securities at historical cost and instead selectively sell their corporate bond holdings with the highest unrealized gains inducing significant price declines this is particularly true for life insurers facing regulatory capital constraints and with high abs exposures this behavior is largely absent among property and casualty insurers they instead disproportionately sell their re marked abs holdings historical cost accounting creates an altered incentive environment in which constrained financial institutions sell assets to realize gains insofar as this behavior transmits shocks across potentially unrelated markets historical cost accounting is not a panacea

bikinis instigate generalized impatience in intertemporal choice neuroscientific studies demonstrate that erotic stimuli activate the reward circuitry processing monetary and drug rewards theoretically a general reward system may give rise to nonspecific effects exposure to hot stimuli from one domain may thus affect decisions in a different domain we show that exposure to sexy cues leads to more impatience in intertemporal choice between monetary rewards highlighting the role of a general reward circuitry we demonstrate that individuals with a sensitive reward system are more susceptible to the effect of sex cues that the effect generalizes to nonmonetary rewards and that satiation attenuates the effect

four score and seven years from now the date delay effect in temporal discounting we describe a new anomaly in intertemporal choice the date delay effect discount rates that are imputed when time is described using calendar dates e g on october 17 are markedly lower than those revealed when future outcomes are described in terms of the corresponding delay e g in six months date descriptions not only reduce discount rates but also affect the implied shape of the discount function when inferred from intertemporal choices between options referenced by calendar dates the discount function appears markedly less hyperbolic we discuss potential psychological bases of the date delay effect its implications and other modes of temporal reference

korea s macroeconomic prospects and policy issues for the next decade the purpose of this paper is to evaluate korea s macroeconomic prospects and major policy issues for the next decade after reviewing the intial conditions the report examines growth strategies and prospects for growth then it discusses external borrowing options and the role of monetary and fiscal policy in the next decade from the review of korea s macroeconomic prospects for the next decade the report concludes that although the external environment will not be as favorable as in the 1983 86 period still the korean economy will be resilient enough to achieve a 6 7 percent annual growth rate for the next decade areas where new policy actions will be required are in the management of monetary policy and the provision of social welfare although there is an indication of some increase in the protectionist threat against korea s exports the report maintains that the pressures for higher consumption and investment and the less favorable external environment will result in smaller trade surpluses in the years ahead

time discounting for primary and monetary rewards this paper reports a positive and statistically significant relation between short term discount rates elicited with a monetary and a primary reward chocolate the relation is most evident among people who like chocolate and are hungry this finding suggests that high short term discount rates are related to an underling individual trait consistent with models of presentbiased preferences

do delays in expected loss recognition affect banks willingness to lend abstract banks can decrease their future capital inadequacy concerns by reducing lending the capital crunch theory predicts that lending is particularly sensitive to regulatory capital constraints during recessions when regulatory capital declines and external financing frictions increase regulators and policy makers argue that the current loan loss provisioning rules magnify this pro cyclicality exploiting variation in the delay in expected loss recognition under the current incurred loss model we find that reductions in lending during recessionary relative to expansionary periods are lower for banks that delay less we also find that smaller delays reduce the recessionary capital crunch effect these results hold across management quality partitions

evidence of variable discount rates and non standard discounting in mortality risk valuation time discounting is central to the valuation of future health and mortality risks in public sector allocative decision making particularly for environmental policies with delayed health impacts using a risk risk trade off survey we elicit discount rates for fatality risks and establish discounting functional forms on both a sample and an individual level we find wide variation in implicit discount rates for fatality risk between individuals as well as between individual heterogeneity in discounting functional forms in aggregate the sample is best characterised by subadditive discounting our work has implications for the academic investigation of intertemporal choice involving mortality risks and potentially for the evaluation of policy options with delayed mortality risk outcomes a thought experiment cautions against the standard practice of assuming that exponential discounting characterises society s time preferences

a model of focusing in economic choice we present a generally applicable theory of focusing based on the hypothesis that a person focuses more on and hence overweights attributes in which her options dier more our model predicts that the decisionmaker is too prone to choose options with concentrated advantages relative to alternatives but maximizes utility when the advantages and disadvantages of alternatives are equally concentrated in intertemporal choice because the relative concentrations of an option s costs and benets can be dierent from the perspective of a single period and the perspective of the entire choice problem the decisionmaker often exhibits a form of time inconsistency she is present biased when the costs of current misbehavior are distributed over many future dates such as in harmful consumption but future biased when the benet of many

can we sterilize theory and evidence under managed floating as under the bretton woods system central banks have intervened heavily in the foreign exchange market as before they have often attempted to divorce their intervention activities from their money supplies through offsetting operations in domestic financial markets an official purchase of foreign exchange can be sterilized through a corresponding openmarket sale of domestic securities the transaction which is equivalent to an official forward sale of domestic currency leaves relative money supplies unchanged but alters the relative supplies of foreign and domestic currency bonds available to the public regardless of the exchange rate regime sterilized intervention may be viewed as an attempt to attain independent exchange rate and money stock targets in the short run for this to be possible bonds denominated in different currencies must be imperfect substitutes in private portfolios if feasible sterilization may or may not be useful in attaining the long run objectives of the central bank

time matters less when outcomes differ unimodal vs cross modal comparisons in intertemporal choice unimodal intertemporal decisions involve comparing options of the same type e g apples now versus apples later and cross modal decisions involve comparing options of different types e g a car now versus a vacation later as we show existing models of intertemporal choice do not allow time preference to depend on whether the comparisons to be made are unimodal or cross modal we test this restriction in an experiment using the delayed compensation method a new extension of the standard method of eliciting intertemporal preferences that allows for assessment of time preference for nonmonetary and discrete outcomes as well as for both cross modal and unimodal comparisons participants were much more averse to delay for unimodal than cross modal decisions we provide two potential explanations for this effect one drawing on multiattribute choice the other drawing on construal level theory data are available at https doi org 10 1287 mnsc 2016 2613 this paper was accepted by yuval rottenstreic

an empirical analysis of the economic implications of fair value accounting for investment securities abstract this paper analyzes security returns of bank holding companies and insurance companies during periods surrounding the adoption of sfas 115 we find bank share prices were negatively affected by the examined events but find little share price reaction for insurance companies our evidence suggests banks were adversely affected by the standard because of problems with the standard s market value accounting approach cross sectional analysis of event period returns shows that banks that more frequently traded their investments with longer maturing investments and that are more fully hedged against interest rate changes were the most negatively impacted by the standard

similarity judgments and anomalies in intertemporal choice i introduction evidence accumulated over many years reveals the inadequacies of the expected utility hypothesis as a descriptive model of choice under uncertainty over a much shorter period of time evidence has accumulated revealing systematic violations of the standard model of choice over time the discounted utility model in rubinstein 1988 azipurua et al 1993 and leland 1994 1998 choice anomalies under uncertainty occur because agents base their decisions on judgments regarding the similarity or dissimilarity of prizes and probabilities across alternatives 1 this article specifies conditions under which such a procedure implies analogous violations of the discounted utility model in intertemporal settings ii choice anomalies under uncertainty and over time axioms assumed in models of choice place restrictions on what agents can choose across different pairs of alternatives the independence axiom for example requires that for risky or riskless options l sub 1 l sub 2 and l sub 3 if l sub 1 is weakly preferred to l sub 2 then the lottery l sub 1 p l sub 3 1 p must be weakly preferred to the lottery l sub 2 p l sub 3 1 p for any p one consequence of this requirement is that preferences between simple lotteries x sub 1 p sub 1 0 1 p sub 1 and x sub 2 p sub 2 0 1 p sub 2 must be invariant to changes in the values of p sub 1 and p sub 2 which leave their ratio undisturbed in choices between s and r and between s and r for example independence requires either the choice of s and s or the choice of r and r s 3000 0 90 0 0 10 r 6000 0 45 0 0 55 s 3000 0 02 0 0 98 r 6000 0 01 0 0 99 the stationarity assumption of the discounted utility model of intertemporal choice places restrictions on how agents can choose between pairs of intertemporal prospects consider simple intertemporal prospects t sub j and t sub k shown below where t sub j offers an increment to consumption x sub j in time period t sub j and t sub k offers an increment to consumption x sub k in time period t sub k t sub j x sub j t sub j t sub k x sub k t sub k assuming for simplicity a common baseline level of consumption per period c agents deciding between these options according to the discounted utility model will choose as follows where u is a concave ratio scaled utility function delta is the one period discount factor and and denote strict preference and indifference respectively 2 1 formula not reproducible in ascii dividing through by delta sub j and rearranging terms yields the following expression 2 formula not reproducible in ascii expression 2 reveals that the only way discounting enters into the decision is through the absolute difference in the time periods as such agents given choices between t sub 1 and t sub 2 and between t sub 11 and t sub 12 shown below must either select t sub 1 and t sub 11 or t sub 2 and t sub 12 since the absolute time interval in both choices is identically 1 period t sub 1 20 1 month t sub 2 25 2 months t sub 11 20 11 months t sub 12 25 12 months neither the restrictions implied by the independence axiom nor those following from stationarity hold empirically instead regarding the independence axiom kahneman and tversky 1979 among others find that individuals choosing the safer option s over r nevertheless choose the riskier option r over s as the difference between probabilities declines their ratio held constant this phenomenon is referred to as the common ratio effect they also find that for lotteries involving losses the opposite pattern rs obtains this phenomenon is referred to as the reflection effect

estimating time preferences from convex budgets experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision making such high rates are often attributed to present biased discounting a well known bias of standard measurements is the assumption of linear consumption utility attempting to correct this bias using measures of risk aversion to identify concavity researchers find reasonable discounting but at the cost of exceptionally high utility function curvature we present a new methodology for identifying time preferences both discounting and curvature from simple allocation decisions we find reasonable levels of both discounting and curvature and surprisingly dynamically consistent time preferences jel c91 d12 d81 understanding and estimating time preferences is obviously of great importance to economists marketers and policy makers consumers decide how much to invest in savings education real estate and life insurance how much to diet exercise and smoke whether to marry when to have children and what to leave in their wills while there has been substantial research estimating time preferences using aggregate consumption data 1 the bulk of the effort has occurred in laboratory environments 2 among the many laboratory techniques employed recent studies have favored multiple price lists mpl with monetary payments 3 with mpls individuals are asked multiple times to choose between smaller payment amounts closer to the present and larger amounts further into the future the interest rate increases monotonically in a price list such that the point where an individual switches from preferring sooner payments to later payments carries interval