output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

conditional asymmetries in real gnp a seminonparametric approach two critical assumptions are often made in empirical research regarding the relationship between economic variables and economic disturbances linearity and gaussianity together these two assumptions place strong restrictions on the time series behavior of a model most important these restrictions imply conditional symmetry using seminonparametric snp techniques this article presents evidence that real gross national product growth displays conditional asymmetry although these results confirm related results of brock and sayers sichel and hamilton the snp approach is novel in that it emphasizes the relationship between common modeling assumptions and the restrictions that these assumptions place on data

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effect of work experience on female wages and labour supply this paper develops and implements a semiparametric estimator for investigating with panel data the importance of human capital and time nonseparable preferences to females when aggregate shocks are present it provides a set of conditions for making statistical inferences about agents expectations of their correlated future choices from a short panel under the assumption that observed allocations are pareto optimal a dynamic model of female labour supply and participation is estimated in which experience on the job raises future wages and time spent off the job in the past directly affects current utility or indirectly through productivity in the nonmarket sector

remittances and the dutch disease abstract using data for el salvador and bayesian techniques we develop and estimate a two sector dynamic stochastic general equilibrium model to analyze the effects of remittances on emerging market economies we find that whether altruistically motivated or otherwise an increase in remittance flows leads to a decline in labor supply and an increase in consumption demand that is biased toward non tradables the higher non tradable prices serve as incentive for an expansion of that sector culminating in reallocation of labor away from the tradable sector a phenomenon known as the dutch disease quantitative results also indicate that remittances improve the welfare of households because they smooth income flows and increase consumption and leisure levels a bvar analysis provides results that are consistent with the dynamics of the model

time to build and aggregate fluctuations some new evidence this paper presents maximum likelihood estimates and tests of a model similar to one kydland and prescott 1982 suggested for this purpose it derives equilibrium laws of motion for a set of aggregate variables as functions of the model s parameters and the innovation to the technology shock the paper shows that a single unobservable index can explain the variability in the observed series but identifying the single index with the innovation to the technology shock implies that per capita hours is not well explained it also shows that time separable preferences with respect to leisure are consistent with the data copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

new evidence on labor supply employment versus hours elasticities by sex and marital status using the tri annual micro panel data of the survey of income and program participation we estimate fixed effects labor supply models separating the extensive and intensive margins the employment elasticity is 0 6 for single men versus 1 1 for married men the employment elasticity is 2 4 for single women versus 1 8 for married women the compensated hours worked elasticity is 0 4 for employed single and married men and 0 7 for employed single and married women the implied aggregate employment elasticity of 1 5 and hours per employee elasticity of 0 5 indicate employment fluctuations account for three fourths of wage induced variation in labor hours

a comparison of bribery and bidding in thin markets abstract this paper compares bribery to competitive bidding in a government purchasing context while competitive bidding is one method of procurement bribery is a common alternative in many third world countries although bribery is often considered to be the ethical antithesis of competitive bidding the analysis shows there is a fundamental isomorphism between bribery and competitive bidding on the supply side of the transaction

habit formation and the persistence of monetary shocks this paper studies the persistent e ects of monetary shocks on output previous empirical literature documents this persistence but standard general equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts this paper constructs and estimates a general equilibrium model with price rigidities habit formation and costly capital adjustment the model is estimated via maximum likelihood using u s data on output real money balances and the nominal interest rate econometric results suggest that habit formation and adjustment costs to capital play an important role in explaining the output e ects of monetary policy in particular impulse response analysis shows that the model generates persistent hump shaped output responses to monetary shocks

the dynamic eects of monetary policy a structural factor model approach we use the structural factor model proposed by forni giannone lippi and reichlin 2007 to study the eects of monetary policy the advantage with respect to the traditional vector autoregression model is that we can exploit information from a large data set made up of 112 us monthly macroeconomic series monetary policy shocks are identified using a standard recursive scheme in which the impact eects

what rate of return can you reasonably expect or what can the long run tell us about the short run conventional studies of long run returns on capital market assets because of changes in valuation between the starting date and the ending date obscure the basic return each asset earns consequently both absolute returns and measured risk premiums are distorted the basic return can be extracted by selecting widely separated dates with identical valuation levels over nearly 200 years the analysis for equities produced 63 episodes averaging 35 years with a mean nominal basic return of 9 6 percent and standard deviation of 1 6 percent 63 bond episodes averaging 43 years produced a mean nominal basic return of 4 9 percent and standard deviation of 2 3 percent equities revealed a tendency to regress to the mean over time but no such tendency was apparent in the bond data thus long run equity returns were more predictable than long run bond returns this conclusion applies with even greater force to real returns

the rbc models through statistical inference an application with french data the aim of this paper is to evaluate the capacity of rbc models to mimic the french business cycle we are thus led to investigate the three following assumptions on the labour market 1 the non time separability of leisure 2 the indivisibility of labour and 3 the imperfect information on labour market and time varying effort using the general method of moments we estimate the structural parameters and we test 1 the model s hypothesis using a set of overidentifying restrictions and 2 the model s implications i e its ability to reproduce the cyclical features of the french economy

a method for taking models to the data abstract this paper develops a method for combining the power of a dynamic stochastic general equilibrium model with the flexibility of a vector autoregressive time series model to obtain a hybrid that can be taken directly to the data it estimates this hybrid model via maximum likelihood and uses the results to address a number of issues concerning the ability of a prototypical real business cycle model to explain movements in aggregate output and employment in the postwar us economy the stability of the real business cycle model s structural parameters and the performance of the hybrid model s out of sample forecasts

corruption and corruptibility summary the expressed norms and values of both citizens and street level officials explicitly condemn the giving or taking of bribes however citizens respond to extortion by officials and officials respond to temptation by clients this paper is based on over 6 000 interviews with the public and over 1 300 with street level officials in four postcommunist countries the czech republic slovakia bulgaria and ukraine who were questioned about i their values ii their hypothetical conditional behavior if exposed to extortion or temptation iii their personal experience of extortion or temptation and iv their actual behavior with respect to bribes

the conventional treatment of seasonality in business cycle analysis does it create distortions abstract no so says one model that is broadly consistent with postwar u s seasonal and business cycle data

imperfect information and the house price in a general equilibrium model abstract house prices have inertia which may be because housing market participants need time to recognize long booms and recessions within a dynamic stochastic general equilibrium model with an endogenous market for housing i consider the case of rational expectations subject to imperfect information about the persistence of exogenous shocks i evaluate the performance of the model against the last 40 years of key u s macroeconomic data bayesian comparison strongly favors the model over the baseline case with perfect information under imperfect information agents rely on learning to form expectations which improves the ability of the model to generate realistic low frequency house price dynamics however as long as the agents form expectations rationally the improvement is limited furthermore to confine price inertia within the housing market is a challenge for the general equilibrium approach

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

bridging dsge models and the raw data abstract a method to estimate dsge models using the raw data is proposed the approach links the observables to the model counterparts via a flexible specification which does not require the model based component to be located solely at business cycle frequencies allows the non model based component to take various time series patterns and permits certain types of model misspecification applying standard data transformations induces biases in structural estimates and distortions in the policy conclusions the proposed approach recovers important model based features in selected experimental designs two widely discussed issues are used to illustrate its practical use

the effect of democracy on corruption income is key summary this paper provides an explanation for the ambiguous relationship between democracy and corruption using rich panel data with annual observations from 1998 to 2012 allows us to control not only for country and time invariant factors but also for potential reverse causality between corruption and income levels in a 3sls framework democracy reduces corruption but only in economies that have already crossed a gdp capita level of approximately us 2 000 in 2005 us for poorer nations democratization is suggested to increase corruption other institutional characteristics are unlikely to drive this result and findings are robust to a variety of robustness checks and quantile regressions

testing between competing models of real business cycles this paper tests a real business cycle model with efficient long term labor contracts the efficient long term contract model against a standard real business cycle model the intertemporal substitution model in the former model employment and real wages are determined by bilateral dynamic bargaining between firms and workers in the latter model employment and real wages are determined instead by the dynamic optimization of households within the competitive market framework we estimate each model using aggregate japanese data our results show that the data are consistent with the efficient long term contract model but are inconsistent with the intertemporal substitution model a business cycle phenomenon is typically found in time series data on employment and real wages according to the data of almost all developed countries employment fluctuations are considerably greater than wage fluctuations many recent economic studies have attempted to explain this phenomenon most of these studies fall into the equilibrium business cycle theory in which business cycles are the result of individual agents optimizing in a competitive environment among the most famous early examples of such a theory are the rational expectations general equilibrium models of lucas 1972 and barro 1976 which stress the role of nominal shocks in the presence of imperfect information more recently the predominant equilibrium business cycle theory has been the real business cycle model of kydland and prescott 1982 long and plosser 1983 and king and plosser 1984 which emphasizes the importance of real shocks to production technology real business cycle theory considers a model economy populated by a single infinitely lived individual with given initial resources production possibilities and tastes the representative individual chooses a preferred consumption production plan and the resulting allocation is pareto optimal the implications of real business cycle theory are thus derived from the pareto optimal equilibrium allocation as calculated from the planning problem of a social planner or representative agent a policy implication of this theory is that monetary policy has no significant effect

the changing nature of stock and bond volatility this article examines the changing nature of u s stock and bond risk from 1871 through 2000 and the implications for asset allocation using geometric means and standard deviations we examine nominal and inflation adjusted monthly returns over nonoverlapping 5 year periods as well as annual returns over periods of approximately 25 years and we document how stock and bond volatility changed over the period our analysis suggests that the relative change in the volatility of stocks and volatility of bonds over the past 50 years has increased the importance of stocks in asset allocation the change is even more pronounced when inflation is considered

labor and investment frictions in a real business cycle model abstract this paper develops a prototype real business cycle model in which labor and investment frictions may compete directly with technology shocks in accounting for fluctuations in the postwar us economy using ireland s 2004a a method for taking models to the data journal of economic dynamics and control 28 1205 1226 methodology we establish that both types of friction are quantitatively important technology shocks still explain a substantial fraction of the fluctuations in aggregate output as the baseline real business cycle model predicts formal hypothesis tests suggest that changes in the recurrence of shocks frictions and structural parameters all play a role in accounting for the shift in the time series properties of the data between the periods before and after 1980

a method for estimating the timing interval in a linear econometric model with an application to taylor s model of staggered contracts abstract this paper describes and implements a procedure for estimating the timing interval in any linear econometric model the procedure is applied to taylor s model of staggered contracts using annual averaged price and output data the fit of the version of taylor s model with serially uncorrelated disturbances improves as the timing interval of the model is reduced

structural dynamic factor analysis using prior information from macroeconomic theory dynamic factor models are becoming increasingly popular in empirical macroeconomics due to their ability to cope with large datasets dynamic stochastic general equilibrium dsge models on the other hand are suitable for the analysis of policy interventions from a methodical point of view in this article we provide a bayesian method to combine the statistically rich specification of the former with the conceptual advantages of the latter by using information from a dsge model to form a prior belief about parameters in the dynamic factor model because the method establishes a connection between observed data and economic theory and at the same time incorporates information from a large dataset our setting is useful to study the effects of policy interventions on a large number of observed variables an application of the method to u s data shows that a moderate weight of the dsge prior is optimal and that the model performs well in terms of forecasting we then analyze the impact of monetary shocks

investment and time to plan and build a comparison of structures vs equipment in a panel of italian firms time to build models of investment expenditures play an important role in many traditional and modern theories of the business cycle especially for explaining the dynamic propagation of shocks we estimate the structural parameters of a time to build model using annual firm level investment data on equipment and structures for expenditures on equipment we find no evidence of time to build effects beyond one year for expenditures on structures by contrast there is clear evidence of such effects in the range of two to three years the contrast between equipment and structures is intuitively reasonable and consistent with previous results the estimates for structures also indicate that initial period expenditures are low and increase as projects near completion these results provide empirical support for including time to plan effects for investment in structures more generally these results suggest a potential source of specification error for q models of investment and production based asset pricing models that ignore the time required to plan build and install new capital jel d24 g31 c33 c34

business cycles and monetary regimes in emerging economies a role for a monopolistic banking sector abstract this study shows that the presence of imperfect competition in the banking system propagates external shocks and amplifies the business cycle strategic limit pricing aimed at protecting retail niches from potential competitors generates countercyclical bank markups markup increments during recessions directly increase borrowing costs for firms and indirectly damage the financial position of firms balance sheets increasing the risk perception of lenders i use bayesian techniques and data from argentina to show that the inclusion of monopolistic banking improves the fit of the new keynesian small open economy model

competition and corruption in an agency relationship abstract the paper reconsiders the relationship between competition and corruption in a model where corruption has solid informational foundations and where the regulatory response to the possibility of corruption is taken into account it is shown that the effect of greater competition on corruption depends on the complementarity or substitutability of the two instruments available to decrease information rents namely low powered incentives and greater competition the paper concludes with a brief empirical exploration of the relationship between competitiveness and corruption on african data

time to build and aggregate fluctuations abstract this paper studies the contribution of time to build to the explanation of business cycle phenomena using a simple version of the neoclassical model the analysis shows that it is not evident that multiperiod construction is crucial to the theory of fluctuations

are economic rents good for development evidence from the manufacturing sector abstract are rents or excess profits good for development rents could induce firms to lobby or bribe governments to preserve the status quo on the other hand rents may promote growth by giving firms the needed funds to make investments in fixed capital or research and development to test this question empirically we use a panel of manufacturing data at the industry country year level and measure rents by the mark up ratio we find that the relationship between rents and growth is strongly negative with the results being primarily driven by the poorer countries or those with worse institutions in the sample this result holds when we instrument for mark up using the average mark up in other industries in the country even in industries with high external financing needs and countries with less developed financial sectors precisely the places where excess profits could be used to drive growth we find that rents are especially harmful consistent with the rent seeking mechanism we highlight we find that high rents are associated with a slower reduction in tariffs we also test for the most likely alternative mechanism that higher rents cause slower growth through the channel of allowing managerial slack we find that controlling for management has little impact on our estimate of the impact of mark up on productivity growth

global business cycles convergence or decoupling we analyze the evolution of the degree of global cyclical interdependence over the period 1960 2008 using a dynamic factor model we decompose macroeconomic fluctuations in output consumption and investment into a global factor factors specific to country groups and country specific factors we find that during 1985 2008 there is some convergence of business cycle fluctuations among industrial economies and among emerging market economies surprisingly there is a concomitant decline in the relative importance of the global factor we conclude that there is evidence of business cycle convergence within each of these two groups of countries but divergence or decoupling between them

investment gestation lags the difference between time to build and delivery lags the timing of investment and capital stock accumulation can differ as a result of time to build and or delivery lags in this paper simple calibration methods are used to illustrate the differences in these sources of gestation lags

an analytical approach to new keynesian models under the fiscal theory abstract this article illustrates a widely applicable frequency domain methodology to solving multivariate linear rational expectations models as an example we solve a prototypical new keynesian model under the assumption that primary surpluses evolve independently of government liabilities a regime in which the fiscal theory of the price level is valid the resulting analytical solution is useful in characterizing the cross equation restrictions and illustrating the complex interaction between the fiscal theory and price rigidity we also highlight some useful by products of such method which are not easily obtainable for more sophisticated models using time domain methods

structural shocks and the comovements between output and interest rates stylized facts on u s output and interest rates have so far proved hard to match with simple dsge models i estimate covariances between output nominal and real interest rate conditional on structural shocks since such evidence has largely been lacking in previous discussions of the output interest rate puzzle conditional on shocks to technology and monetary policy the results square with simple models moreover permanent inflation shocks accounted for the counter cyclical and inversely leading behavior of the real rate during the great inflation 1959 1979 over the great moderation 1982 2006 technology shocks were more dominant and the real rate has been pro cyclical

supplanting the minnesota prior forecasting macroeconomic time series using real business cycle model priors abstract although general equilibrium models are in wide use in the theoretical macroeconomic literature their empirical relevance is uncertain we develop procedures for using dynamic general equilibrium models to aid in analyzing the observed time series relationships among macroeconomic variables our strategy is based on that developed by doan litterman and sims 1984 who constructed a procedure for improving time series forecasts by shrinking vector autoregression coefficient estimates toward a prior view that vector time series are well described as collections of independent random walks in our case the prior is derived from a fully specified general equilibrium model we demonstrate that like the atheoretical random walk priors real business cycle model priors can aid in forecasting

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

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

the limits of business cycle research assessing the real business cycle model the real business cycle model dominates business cycle research in the new classical tradition typically real business cycle modelers both offer the bold conjecture that business cycles are equilibrium phenomena driven by technology shocks and also novel strategies for assessing the success of the model this article critically examines the real business model and the assessment strategy surveys the literature supporting and opposing the model and evaluates the evidence on the empirical success of the model it argues that on the preponderance of the evidence the real business cycle model is refuted copyright 1997 by oxford university press

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

implementation cycles investment and growth we develop a model of intrinsic cycles driven by the decentralized behavior of entrepreneurs and firms making continuous divisible improvements in their productivity we show that when the introduction of productivity improvements is endogenous implementation cycles arise even in the presence of reversible investment and consumption smoothing the implied cyclical equilibrium is unique within its class and shares several features in common with actual business cycles in particular its predictions are qualitatively consistent with the joint behavior of the investment rate and tobin s q during u s recessions

overtime effort and the propagation of business cycle shocks abstract this paper presents and estimates a variant of hansen and sargent s 1988 real business cycle model with straight time and overtime the model presented has only one latent variable the state of technology yet it does a better job propagating and magnifying shocks than the labor hoarding models which incorporate unobserved effort this model as well as a version of burnside eichenbaum and rebelo s 1993 labor hoarding model is estimated using maximum likelihood the maximum likelihood parameter estimates are compared to those using gmm

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

time to build capital revisiting investment cash flow sensitivities a large body of empirical work has established the significance of cash flow in explaining investment dynamics this finding is further taken as evidence of capital market imperfections we show using a perfect capital markets model that time to build for capital projects creates an investment cash flow sensitivity as found in empirical studies that may not be indicative of capital market frictions the result is due to mis specification present in empirical investment q equations under time to build investment in addition time aggregation error can give rise to cash flow effects independently of the time to build effect importantly both errors arise independently of potential measurement error in q evidence from a large panel of u k manufacturing firms confirms the validity of the time to build investment channel

corruption competition and democracy abstract this paper presents a model of the interaction between corrupt government officials and industrial firms to show that corruption is antithetical to competition it is hypothesized that a government agent that controls access to a formal market has a self interest in demanding a bribe payment that serves to limit the number of firms this corrupt official will also be subject to a detection technology that is a function of the amount of the bribe payment and the number of firms that pay it under quite normal assumptions about the shape of the graph of the detection function multiple equilibria can arise where one equilibrium is characterized by high corruption and low competition and another is characterized by low corruption and high competition some suggestive empirical evidence is presented that supports the main hypothesis that competition and corruption are negatively related

corruption and market competition evidence from post communist countries summary this paper empirically examines whether market competition is associated with greater bribe payments we use firm level data from the business environment and enterprise performance surveys since market competition could be endogenous and some firms report zero bribes we employ a tobit estimation methodology instrumenting for market competition we find that greater market competition increases the amount of bribes paid results are robust across several measures of market competition however market competition is less strongly associated with bribes in the presence of other obstacles of doing business that could also lead to more bribes

explaining business cycles a multiple shock approach abstract aiyagari 1992 and prescott 1986 1991 claim that a large fraction of the variance of united states quarterly detrended real gnp is attributable to an unobservable shock to total factor productivity this paper argues that the importance of a productivity shock in explaining the variance of output is fundamentally indeterminate any model that is in accord with the several time series that make up united states macroeconomic data must feature multiple shocks that are correlated at all leads and lags sorting out the separate effects of these various shocks on a single variable such as real gnp is impossible we illustrate this argument using a multiple shock version of the king plosser rebelo 1988 benchmark real business cycle model

real exchange rate dynamics revisited a case with financial market imperfections abstract in this paper we investigate the relationship between real exchange rate dynamics and financial market imperfections for this purpose we first construct a new open economy macroeconomics noem model that incorporates staggered loan contracts as a simple form of the financial market imperfections our model with such a financial market friction replicates persistent volatile and realistic hump shaped responses of real exchange rates which have been thought very difficult to materialize in standard noem models remarkably these realistic responses can materialize even with both supply and demand shocks such as cost push loan rate and monetary policy shocks this implies that the financial market development is a key element for understanding real exchange rate dynamics

corruption and product market competition an empirical investigation abstract we analyze the relationship between product market competition and corruption the existing literature typically views corruption as extortion of pre existing rents this perspective suggests that competition usually reduces corruption although generally the sign of this relationship is ambiguous shleifer and vishny 1993 however show that cost reducing corruption is promoted by product market competition that is the effect of competition on corruption depends of the nature of corruption unlike the existing empirical studies that employ cross country data and general measures of corruption we test the competition corruption relationship using firm level information our approach overcomes significant estimation difficulties that result from relying on cross country data for instance we include country fixed effects and we deal with potential endogeneities by instrumenting competition with us capital labor ratios for the appropriate industries contrary to the existing empirical work we show that stronger product market competition is associated mostly with greater corruption of the cost reducing variety

can a real business cycle model pass the watson test abstract watson 1993 measures of fit for calibrated models journal of political economy 101 6 1011 1041 proposes a procedure for evaluating the fit of a dynamic equilibrium business cycle model under watson s criterion the standard real business cycle rbc model fails dramatically in reconciling the dynamics of the model with the data this inability to account for the dynamics of us aggregate data remains a major challenge to rbc theory this paper demonstrates that reasonable modifications can bring rbc theory into closer conformity with the data the empirical results indicate that when habit formation on leisure choice and employment externality are incorporated into the analysis the striking spectral density differentials documented by watson virtually vanish at business cycle frequencies

corruption and microenterprises in russia abstract in russia compliance with the rules and regulations that govern almost all aspects of economic life has created a hostile environment for microenterprises more serious than the regulations per se however is the potential niche they create for opportunistic behavior by regulatory authorities in russia the regulatory state has created a corrupt cadre of government bureaucrats who frequently engage in rent seeking behavior while enforcing regulations firms are not uniformly affected by corruption however this paper shows empirical evidence of differential incidence of extortion based on firm and entrepreneurial characteristics corruption in russia is similar to a regressive tax and acts as a disincentive to innovation and growth it may induce technologically inefficient production decisions and can dilute economies of scale and scope

economic regulations red tape and bureaucratic corruption in post communist economies summary should state regulatory involvement in the economy necessarily generate corruption while excessive regulatory burden is often treated as a cause of corruption this paper argues otherwise it distinguishes regulatory policy or de jure regulatory regimes from regulatory implementation and offers a more nuanced argument about the relationship between state regulations and bureaucratic corruption the analysis of business survey data covering 25 post communist economies demonstrates that mechanisms of regulatory implementation rather than heavy handed regulatory policy are responsible for bribery this analysis draws attention to the theoretical distinction between different types of regulatory hurdles and their differential effects on the quality of governance

technology shocks and aggregate fluctuations in an estimated hybrid rbc model this paper contributes to the on going empirical debate regarding the role of the rbc model and in particular of technology shocks in explaining aggregate fluctuations to this end we estimate the model s posterior density using markov chain monte carlo mcmc methods within this framework we extend ireland s 2001 2004 hybrid estimation approach to allow for a vector autoregressive moving average varma process to describe the movements and co movements of the model s errors not explained by the basic rbc model the results of marginal likelihood ratio tests reveal that the more general model of the errors significantly improves the model s fit relative to the var and ar alternatives moreover despite setting the rbc model a more difficult task under the varma specification our analysis based on forecast error and spectral decompositions suggests that the rbc model is still capable of explaining a significant fraction of the observed variation in macroeconomic aggregates in the post war u s economy

gender and corruption in business abstractare firms with female owners or managers less corrupt than other firms we test this question using firm level data on corruption ownership and management we find that women in positions of influence are associated with less corruption female owners are associated with a lower incidence of bribery and report smaller levels of bribery moreover corruption is seen as less of an obstacle in companies where women are represented in top management by providing evidence that women are associated with lower levels of corruption in business our research contributes to the literature on development gender equality and corruption

estimation of dsge models when the data are persistent dynamic stochastic general equilibrium dsge models are often solved and estimated under specific assumptions as to whether the exogenous variables are difference or trend stationary however even mild departures of the data generating process from these assumptions can severely bias the estimates of the model parameters this paper proposes new estimators that do not require researchers to take a stand on whether shocks have permanent or transitory effects these procedures have two key features first the same filter is applied to both the data and the model variables second the filtered variables are stationary when evaluated at the true parameter vector the estimators are approximately normally distributed not only when the shocks are mildly persistent but also when they have near or exact unit roots simulations show that these robust estimators perform well especially when the shocks are highly persistent yet stationary in such cases linear detrending and first differencing are shown to yield biased or imprecise estimates

what do residuals from first order conditions reveal about dge models the first order condition foc associated with labour in many dynamic general equilibrium models involves only current period variables residuals constructed from this foc are inconsistent with aggregate us data in that they are very large and highly persistent the persistence suggests that models which introduce dynamic terms in the labour foc may be more consistent with the data three such models one with learning by doing one with habit formation and one with labour adjustment costs confirm that they can reduce the persistence in the residuals making the models more consistent with the joint dynamics of consumption output and hours

estimating and testing rational expectations models when the trend specification is uncertain abstract this paper explores various strategies for estimating and testing rational expectations models when the trend specification is uncertain one approach seeks to make estimators and tests robust to trend misspecification by reducing the influence of low frequency dynamics however contrary to intuition the effects of trend specification errors are not confined to low frequencies but are spread across the entire frequency domain thus operations that damp low frequency components do not remove trend specification errors and are not sufficient for constructing robust estimators and tests another approach seeks representations of approximating models that do not condition on a specification of the trend and it uses gmm to estimate parameters and test over identifying restrictions because these methods do not condition on assumptions about trends they are robust to errors in that part of the approximating model

no news in business cycles this paper uses a structural large dimensional factor model to evaluate the role of news shocks shocks with a delayed eect on productivity in generating the business cycle

does competition destroy ethical behavior explanations of unethical behavior often neglect the role of competition as opposed to greed in assuring its spread using the examples of child labor corruption excessive executive pay corporate earnings manipulation and commercial activities by universities this paper clarifies the role of competition in promoting censured conduct when unethical behavior cuts costs competition drives down prices and entrepreneurs incomes and thereby reduces their willingness to pay for ethical conduct nonetheless i suggest that competition might be good for ethical behavior in the long run because it promotes growth and raises incomes higher incomes raise the willingness to pay for ethical behavior but may also change what people believe to be ethical for the better this abstract was borrowed from another version of this item

what really happened to u s bond yields analysts have been able to say surprisingly little about the sources of the very volatile yields of long term u s bonds in recent decades we used surveys of economists forecasts to decompose long term bond yields into expectations of future inflation expected real short term interest rates and the expected bond risk premium variation in the bond risk premium accounts for most of the variation in yields from period to period but declines in all three components have contributed to the decline in yields of the past decade and a half

technology shocks and the business cycle on empirical investigation abstract this paper uses maximum likelihood to estimate a prototypical real business cycle model under several different assumptions regarding the stochastic process governing technological change the estimation approach permits the use of formal statistical hypothesis tests to help discriminate between competing specifications the approach also allows each specification to be evaluated based on its ability to generate accurate out of sample forecasts overall the results indicate that the data prefer a version of the model in which technology shocks are extremely persistent but still trend stationary

using micro surveys to measure and explain corruption summary this paper discusses survey techniques aimed at a better measurement of corruption at the micro level and argues that with appropriate survey methods and interview techniques it is possible to collect quantitative micro level data on corruption public expenditure tracking surveys service provider surveys and enterprise surveys are highlighted with several applications these surveys permit measurement of corruption at the level of individual agents such as schools health clinics or firms they also permit the study of mechanisms responsible for corruption including capture of public funds and bribery 2005 elsevier ltd all rights reserved

persistence of corruption some theoretical perspectives summary the paper examines how pervasive corruption can be persistent despite the presence of anti corruption measures and incentives corruption has a strong tendency to persist in the first part we discuss how a high level of corruption or a low level of compliance can be an equilibrium outcome in such a case corruption becomes the social norm in the second part of the paper we use ides from evolutionary game theory to discuss how corrupt behavior can be immune to interventions and it can sustain itself against different individual behavioral norms

posterior predictive evidence on us inflation using extended new keynesian phillips curve models with non filtered data changing time series properties of us inflation and economic activity measured as marginal costs are modeled within a set of extended new keynesian phillips curve nkpc models it is shown that mechanical removal or modeling of simple low frequency movements in the data may yield poor predictive results which depend on the model specification used basic nkpc models are extended to include structural time series models that describe typical time varying patterns in levels and volatilities forward and backward looking expectation components for inflation are incorporated and their relative importance is evaluated survey data on expected inflation are introduced to strengthen the information in the likelihood use is made of simulation based bayesian techniques for the empirical analysis no credible evidence is found on endogeneity and long run stability between inflation and marginal costs backward looking inflation appears stronger than forward looking inflation levels and volatilities of inflation are estimated more precisely using rich nkpc models the extended nkpc structures compare favorably with existing basic bayesian vector autoregressive and stochastic volatility models in terms of fit and prediction tails of the complete predictive distributions indicate an increase in the probability of deflation in recent years

housing cycles and the period of production us fixed residential investment is one of the most periodic economic time series a theory of housing cycles is analysed on the basis of the period of housing construction substantial lags between planning and completion phases of housing construction cause housing investment to respond cyclically to exogenous shocks in demand and production costs known structural parameters of the housing industry provide sharp numerical benchmarks for the resulting dynamic system the calibrated model with two construction lags describes the housing data and cycles well

maximum likelihood in the frequency domain the importance of time to plan abstract we illustrate the use of various frequency domain tools for estimating and testing dynamic stochastic general equilibrium models we show how to exploit the well known fact that the log gaussian density function has a linear decomposition in the frequency domain we also propose a new resolution to the problem that the phase angle between two variables is not uniquely determined these methods are applied to the analysis of business cycles our substantive findings confirm existing results in the literature which suggest that time to plan in the investment technology has a potentially useful role to play in business cycle analysis

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

does competition kill corruption corrupt agents officials or gangsters exact money from firms corruption affects the number of firms in a free entry equilibrium the degree of deep competition in the economy increases with lower overhead costs relative to profits and with a tendency toward similar cost structures increases in competition may not lower corruption the model explains why a rational corrupt agent may extinguish the source of his bribe income by causing a firm to exit assessing the welfare effect of corruption is complicated by the fact that exit caused by corruption does not necessarily reduce social welfare