the demand for housing in sweden equilibrium choice of tenure and type of dwelling abstract most studies of housing demand and tenure choice only identify two modes of tenure owner occupied one family houses and rental apartments furthermore they are typically based on a cross section across all households in this study we use recent swedish data to overcome these weaknesses we identify owner occupied apartments coop shares as a third mode of tenure and show that this should be treated separately we also use information about the household s own assessment of its probability of moving during the next year we demonstrate that it makes a large difference if likely movers are eliminated from the sample

central bank design abstract starting with a blank slate how could one design the institutions of a central bank for the united states this paper explores the question of how to design a central bank drawing on the relevant economic literature and historical experiences while staying free from concerns about how the fed got to be what it is today or the short term political constraints it has faced at various times the goal is to provide an opinionated overview that puts forward the trade offs associated with different choices and identifies areas where there are clear messages about optimal central bank design

analysis of the changing influences on traditional households ownership patterns abstract sociological and economic forces have begun to alter ownership patterns in ways not yet captured by movements in the aggregate ownership rate while demographic factors such as marital status and family structure remain influential in determining tenure choice their impact has waned particularly among the best educated households and those with rising real incomes labor market conditions as evidenced by increasing returns to skill are more strongly felt than ever before in the housing market the impact on owning of being highly educated now rivals the influence of being married with minor children increasingly delayed ownership is a reality even for traditional family units with 36 to 45 year old heads that have not prospered in the labor market the rising real cost of even relatively inexpensive suburban housing is also beginning to be reflected in a heightened impact for real family income on tenure choice finally race currently is more adversely influential in determining suburban ownership for young middle aged minority families than it was in 1960 particularly if the household head is not well educated we suspect this is due to racially disparate impacts of increasingly rigorous zoning regulations and higher impact fees in the suburbs

mundell meets poole managing capital flows with multiple instruments in emerging economies abstract we study the optimal management of capital flows in a small open economy model with financial frictions and multiple policy instruments the paper reports two main findings first both foreign exchange intervention fxi and macroprudential policies are tools complementary to the monetary policy rate that can greatly reduce inflation and output volatility in a scenario of capital outflows second the optimal policy mix depends on the underlying shock driving capital flows fxi takes the leading role in response to foreign interest rate shocks while macroprudential policy becomes the prominent tool for domestic risk shocks these results blend the policy prescriptions of mundell 1968 who stated that policies should be paired with the objectives on which they have the most influence and poole 1970 who showed that the optimal policy instrument ultimately depends on the underlying shock hitting the economy

an empirical investigation of alternative approaches to estimating the equilibrium demand for housing two approaches to estimating the desired or equilibrium housing demand parameters have been utilized in recent literature one approach commonly referred to as the conventional model assumes that households continuously consume their temporal equilibrium housing services where a temporal equilibrium is defined with respect to the household s current economic and demographic characteristics based upon this assumption conventional demand studies have employed random samples which include a majority of households that have not recently moved see lee and kong 6 or carliner 2 a problem with this approach is its failure to recognize moving costs households must pay to alter their housing service consumption the existence of moving costs suggests that households may not respond rapidly to changes in their desired consumption of housing but instead remain in their dwelling unit until the cost incurred from consuming the non equilibrium level of services exceeds the cost of relocating if so demand samples employed in conventional studies may include a significant number of disequilibrium observations this causes two problems first there exist measurement errors in independent variables that have changed since the household was last in equilibrium second the true equilibrium effect of an independent variable may be incorrectly estimated due to its correlation with either the occurrence of disequilibrium or the length of the housing adjustment lag the second approach to estimating the equilibrium parameters attempts to minimize these problems by restricting the sample to households that have recently moved see hanushek and quigley 3 or aaron l

measuring racial discrimination with fair housing audits caught in the act a survey technique called a fair housing audit provides a direct measure of racial discrimination in housing this paper examines the econometric issues raised by audit data measures the discrimination uncovered by a 1981 boston study and tests hypotheses about the causes of discrimination the estimated level of discrimination is high black housing seekers are told about 30 percent fewer available housing units than are whites the hypothesis tests indicate that the primary cause of this discrimination is that housing agents illegally promote their economic interests by catering to the racial prejudice of their current or potential white customers

residential attachment and housing demand in this paper a model of housing demand behavior is proposed in which both monetary and non monetary adjustment costs termed attachment are allowed to affect demand levels an empirical implication of the model is that the individual variance around the housing demand curve is likely to increase directly with total adjustment costs a cross section housing demand curve is estimated with the variance specified as a linear function of variables thought to be correlated with total adjustment costs the results provide qualified support for the assertion that adjustment costs influence housing demand behavior in the manner suggested by the theoretical model

which are the real determinants of tenure a comparative analysis of different models of the tenure choice of a house tenure choice is closely bound to other vital individual decisions of great importance not only for the individual but also for the country in which he or she resides the present paper includes a comparison of the different approaches that have been used in the economic literature in the analysis of the individual s housing tenure choice according to their dependent variable the different models can be divided into those whose dependent variable is tenure classical models recent movers models and sequential models and those in which the dependent variable is transition from renting to the position of ownership duration models and choice based models results show the best performance for the models in which the variable to be explained is the transition from renting to ownership and highlight real determinants of tenure life cycle variables and transition life cycle variables prices and transaction costs finally marital status stands out as the variable with the highest incidence

maximum score estimates of the determinants of residential mobility implications for the value of residential attachment and neighborhood amenities abstract this paper uses a semiparametric empirical technique maximum score to estimate the determinants of the decision of low income renters to move out of their dwelling the maximum score estimates prove to be far more precise than probit estimates the estimates are used to show that low income residents highly value remaining in their dwelling in addition these estimates are used to illustrate an alternative method to measure willingness to pay for neighborhood amenities which we argue to be superior to hedonic based wtp measures

residential mobility with job location uncertainty abstract this paper investigates the relationship between job changes and residential mobility a job change may be prompted by reasons unrelated to factors associated with housing consumption however a job change may lead to an adjustment to housing consumption i e residential relocation previous studies find that job relocations are positively associated with residential mobility this paper departs from previous studies by looking at the effects of an uncertain future job location on residential mobility and mobility expectation it is conjectured that with the existence of costs of residential mobility a household head s likelihood for changing jobs in the future dampens the household s propensity to move but encourages the formation of mobility expectation these conjectures are examined empirically using data from the panel study of income dynamics and they are confirmed

a developing country view of the current global crisis what should not be forgotten and what should be done macroeconomic theory will surely be affected by the current global crisis there are signs that some old theories and insights will have a comeback this paper argues that among them economists should not forget the lessons that have been learnt from three decades of several financial crises in developing countries we emphasise two important lessons first preventing crises in developing countries requires not only the regulation of domestic financial systems but also a consistent set of macroeconomic policies in particular we stress the need for consistency between the exchange rate rule the capital account regime and the domestic financial market regulations second financial crises in developing countries tend to worsen both the balance of payments and the fiscal balance traditional adjustment policies tend to exacerbate the recessive trends in output and employment this is just the opposite of what is required and what governments in developed countries are able to do developing countries should push for an agenda that helps them deal with these problems

non contractible investments and vertical integration in the mexican footwear industry abstract this paper examines patterns of integration among manufacturers and retailers using data from a survey of footwear manufacturers in mexico the property rights framework developed in papers by grossman and hart 1986 j polit econ 94 691 and hart and moore 1990 j polit econ 98 1119 is differentiated from the standard empirical transactions cost framework in the context of this industry the most relevant distinction between the two frameworks is that the property rights framework addresses both the benefits and costs of integration while the transactions cost framework focuses only on variation in the benefits of integration we show that the costs of integration are highest where the retailer s non contractible investment has an important effect on the overall profits from the relationship consistent with the property rights framework the data suggest that integration is less likely in these circumstances

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

credit rationing and the demand for owner occupied housing abstract this study applies cross sectional data to test whether default risk induced credit constraints affect the demand for owner occupied housing credit constrained households are argued to exhibit different elasticities of demand for housing than less constrained households housing demand elasticities are then estimated separately for households obtaining va insured and non va loans the government guarantee on va loans insures lenders against default enabling lenders to apply easier nonprice terms of credit results indicate that observed demand elasticities differ significantly across va and conventional mortgage holders that marginal changes in credit constraints affect housing demand and that fha financing mitigates the effect of mortgage constraints

principles of fiscal and monetary policy abstract this paper describes a complete and internally consistent set of principles for the conduct of a welfare maximizing fiscal and monetary policy issues of time consistency that arise in applying these principles to actual economics are also discussed

a few counter factual hypotheses on the current economic crisis the economic and financial problems of the present devastating crisis are terribly practical sraffa s little book is highly theoretical to relate the two we must avoid stopping at keynes and include the whole group of economists around him in cambridge resuming the discussions that have been pushed into oblivion by the mainstream the capital theory controversy was not the only one here more relevant is the controversy on growth income distribution savings and profits between samuelson modigliani and kaldor pasinetti as a result a theorem associated with modigliani miller was brought to fame and hailed as the core of modern corporate finance its surprisingly wide acceptance is here harshly criticised and indicted of major responsibility for the present crisis inevitably this is argued through counter factual hypotheses yet even with less sophisticated analytical tools a framework does exist much nearer to common sense implying the needed flexibility and openness of mind for the major restructuring of financial institutions which today so clearly emerges as the major task to undertake copyright oxford university press

tenure changes in the context of micro level family and macro level economic shifts almost all the work to date on tenure changes specifically the move from rent to own has been derived from cross sectional analysis of this important housing market decision economists have emphasised the investment nature of the housing consumption decision while demographers and geographers have investigated tenure change in relationship to the demographic characteristics of the household now the developing notions of life course analysis and the availability of longer panel series enable us to investigate not just the demographic relatives of tenure change but the critical aspects of timing as well specifically many couples choose to buy and make the transition to a family within 2 3 years we show also that tenure change is influenced by both spatial and temporal economic contexts

a frontier approach to measuring the effect of market discrimination a housing illustration one area of particular interest to analysts and policymakers concerned with poverty and discrimination has been the housing market since world war ii housing has been a focus for antipoverty policies and therefore an area in which discrimination could not be tolerated however even though the civil rights act of 1968 expressly prohibits the offering of housing to nonwhites at terms that are different than those afforded whites it has been clearly demonstrated that discrimination continues to be a real problem in both the rental and owner occupied segments of the housing market 17 as james heilbrun points out in his summary of the 1977 survey of housing market practices conducted by the department of housing and urban development

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

residential mobility and job changes under uncertainty abstract this paper empirically investigates households residential mobility and job change decisions under uncertainty we allow households degree of risk aversion to be a confounding factor in the joint decision of residential mobility and job changes using panel data to estimate a random effects multinomial probit model of households joint decision of residential and job mobility our empirical results show that risk aversion discourages a household from making any changes moreover when compared to single changes in either job or residential locations risk aversion is more discouraging for joint changes to more central residential locations and less discouraging for joint changes to more distant residential locations these effects are statistically significant albeit small in magnitude our empirical results demonstrate the uncertainty does play a role in households job and residential mobility decisions

entry to home ownership in germany some comparisons with the united states new research on migration mobility and housing tenure choice using the concept of the life course is providing an enriched analysis of the context within which housing choices are made and of the demographic and economic variables which are critical determinants of the decisions to move and to change tenures the availability of panel series data for the us and germany allows cross national comparisons of the migration and tenure choice processes there are substantial differences in the rates of mobility and the rates of moves of households from the rental sector to ownership especially for couples but the results confirm the overall similarities in the mobility and tenure choice processes despite the differing government commitments to housing policy the models show that it is primarily couples and families who make the transition to ownership and that income and number of earners are important in both contexts and german households have even higher incomes before they make the transition to ownersh

life cycle theory inflation and the demand for housing there has been considerable interest lately in the influence of economywide inflation on the demand for housing under suitable equilibrium conditions such inflation creates three effects each of which may influence housing decisions first inflation raises initial mortgage payments through higher interest rates second it causes such payments to fall rapidly over time in real terms and third it creates a real growth in housing equity as borrowed debt is leveraged against the inflating value of homes two empirical studies one by kearl 6 and more recently by follain 3 have concluded that the sum of these impacts is adverse that is housing demand is reduced by greater economy wide inflation each suggests that credit constraints may explain this result in an attempt to understand better the microeconomic foundations of this empirical result schwab 9 and dougherty and van order 2 have developed fisher type models of intertemporal utility maximization which include a housing consumption choice schwab concludes that with a perfect capital market inflation should induce no distortion in consumer decisions about housing consumption dougherty and van order building on some unpublished work by poterba 8 argue that with interest deductibility from income taxes inflation reduces the after tax cost of housing capital and thereby increases housing demand these conclusions suggest that capital market imperfection must exist to explain the empirical results but just what kind schwab s paper addresses this question by introducing a borrowing constraint into a two period model 9 the constraint is absolute although schwab acknowledges that allowing collateralized borrowing is more realistic schwab s conclusions are two first he argues that if the constraint is nonbinding then the perfect capital market results prevail and second he demonstrates that if the constraints are binding the effect of inflation on

the demand for rental housing evidence from the housing allowance demand experiment abstract this paper provides new evidence on the price and income elasticities of demand for rental housing by low income households housing expenditures of households participating in the housing allowance demand experiment and receiving housing allowances in the form of a proportional rent rebate are analyzed these rent rebates experimentally vary the effective relative price of housing and thus enable estimation of the price elasticities natural income variation enables estimation of income elasticities analysis is carried out using two functional forms and a variety of models of housing dynamics the estimated income and price elasticities of demand are 0 36 and 0 22 respectively when the sample is restricted to include only households headed by couples the elasticity estimates are 0 47 for income and 0 36 for price these estimates are lower in absolute value than have been previously estimated and it is suggested that this may be due to the low income nature of the sample

is the elasticity of intertemporal substitution constant in all common models of inter temporal allocation the assumption of a constant elasticity of intertemporal substitution eis imposes surprising limitations on within period budget allocations consequently the constant eis assumption can be tested with demand data in fact the eis is pinned down completely by the shape of engel curves if the eis is constant then the eis can be estimated without variation in the interest rate that a price elasticity can be estimated without variation in the relevant price illustrates just how strong the constant eis assumption is the constant eis assumption is rejected by demand data

an analysis of household mobility and tenure choice an empirical study of korea abstract this paper develops a model of households joint mobility tenure decisions which improves upon the sole existing model in two important ways first the probabilistic structure is appropriately framed to capture the simultaneity of the mobility and tenure decisions second the model is based more directly on utility maximization theory an additionally distinguishing characteristic of the model is the fact that all independent variables in the estimation are expressed in flow terms this is done in an effort to more truly reflect their importance in the decision making of the household the model is estimated using microlevel data from korea the coefficients and derived elasticities are consistent with expectations and korean households are found to behave in a manner similar to that in the united states this suggests that the basic motivations underlying households mobility tenure decisions are invariant across countries

length of residence discounts and rental housing demand theory and evidence the improved availability of crosssectional household level data over the past decade has led to substantive improvements in estimates of housing demand better techniques have been developed to measure permanent income and housing price to determine proper functional forms for demand equations and to consider the endogenous nature of the mobility move non move and or the tenure own rent decision this paper examines two rental housing market features which have been alluded to elsewhere but which have not received systematic attention first many analysts have estimated substantial length of residence discounts for example merrill 1977 lowery 1980 follain and malpezzi 1980 downs 1980 and marshall and guasch 1983 35778 these discounts are consistent with several explanations including turnover minimization by landlords screening of good tenants or sample truncation due to random error in the setting of rental prices irrespective of the source they imply that any crosssection sample of tenants will indicate rental prices that decrease all else equal with length of residence their pervasive nature suggests that they will be expected by consumers who will act accordingly in housing demand decisions this consumer optimization is the second feature of the analysis in what might be termed the equilibrium disequilibrium question the substantial search and moving costs that often accompany a housing purchase suggest that the random cross sectional

a structural model of the demand for owner occupied housing abstract the goal of the analysis in this paper is to estimate a structural model of the demand for owner occupied housing in our framework the buyer selects the value of the house the size of the mortgage and the length of stay in the house we estimate a housing demand equation which includes both the length of stay and the loan to value ratio as endogenous variables one empirical result of interest is that the income elasticity of demand for housing found in the structural housing demand equation is much larger than the value estimated in the reduced form we also point out some occasions when it is important to distinguish between a reduced form and a structural model of housing choices

optimal taxation without state contingent debt in an economy studied by lucas and stokey tax rates inherit the serial correlation structure of government expenditures belying barro s earlier result that taxes should be a random walk for any stochastic process of government expenditures to recover a version of barro s random walk tax smoothing outcome we modify lucas and stokey s economy to permit only risk free debt having only risk free debt confronts the ramsey planner with additional constraints on equilibrium allocations beyond one imposed by lucas and stokey s assumption of complete markets the ramsey outcome blends features of barro s model with lucas and stokey s in our model the contemporaneous effects of exogenous government expenditures on the government deficit and taxes resemble those in lucas and stokey s model but incomplete markets put a near unit root component into government debt and taxes an outcome like barro s however we show that without ad hoc limits on the government s asset holdings outcomes can diverge in importa

the income elasticity of demand for single family owner occupied housing an empirical reconciliation abstract past studies estimate the permanent income elasticity of demand for single family owner occupied housing to range from 0 14 to 1 5 a range much too broad to be of any use for solving policy questions data from the panel study of income dynamics are used herein to test the sensitivity of this income elasticity to several factors the results suggest that differences in sample population with respect to duration of housing tenure explain a large portion of the variation in the estimates of this elasticity the paper concludes that for short run applications the probable value of this elasticity is approximately 0 70 and for long run applications the probable value of this elasticity might best be taken as approximately 1 00

estimation of dynamic linear expenditure functions for housing the effectiveness of programs designed to improve the housing of low income renter households by increasing their demand for housing through income supplements or price discounts has recently been questioned based largely on the results of the experimental housing allowance program ehap the results from ehap generally indicate small consumption responses on the part of low income households i e inelastic price and income elasticities of demand for housing see friedman and weinberg 1978 mulford 1979 and hanushek and quigley 1979 however using a cross section of households sampled before the experiment began and a static linear expenditure specification cronin 1979 obtains static price elasticity estimates substantially exceeding in absolute value those estimated with experimental data i e 0 53 to 1 00 for the former versus 0 16 to 0 21 for the latter the estimates of static current income elasticities about 0 2 to 0 3 were similar to those found in ehap this paper extends the previous analysis by obtaining dynamic estimates of housing income and price elasticities from the linear expenditure system results indicate that the responsiveness of households may be greater than previously indicated short run elasticities are found to be highly inelastic however when households are stratified by the time period since their move to allow for varying adjustment toward equilibrium long run elasticities are often found to approach unity the conceptual framework for the analysis is presented in section ii data samples of households and definitions of variables are discussed in the first part of section iii results are presented and discussed in the second part

internet start ups access to the bank loan market evidence from italy the analysis of the bank sector s ability to efficiently fuel the birth of new italian business ventures in internet related services is studied in particular through the specification and the estimate of a series of econometric models this paper aims at investigating which characteristics of a large sample of internet start ups and their relative founders facilitate access to the loan market more precisely the role played by founders human capital as a possible significant signal used by banks to evaluate investment projects is addressed estimation results suggest that highly qualified human resources possessed by internet founders do not represent an important driver for gaining access to bank credit and they do not affect the amount of the incurred debt

property taxation and the demand for housing an econometric analysis abstract there is disagreement among economists regarding the effect of a local increase in property taxation on the housing market in defining the price of housing services studies of the demand for housing have treated the property tax exclusively as an excise tax on housing consumption two recent theoretical developments suggest this is a misrepresentation of the tax one theory holds that the excise effects of property taxation may be shifted backward to the factors employed in the production of housing the other theory concludes that the property tax is not an excise but rather serves as an efficient price for local public services to investigate these hypotheses data from the annual housing survey were employed to estimate a housing demand model which included the net effective property tax rate among the set of independent variables in addition to revealing the property tax housing demand relationship the model provides more reliable estimates of income and price elasticities by eliminating specification errors found in previous studies results indicate that the property tax reduces the housing consumption of central city homeowners but does not distort the suburban housing market

seeing like the fed culture cognition and framing in the failure to anticipate the financial crisis of 2008 one of the puzzles about the financial crisis of 2008 is why regulators particularly the federal open market committee fomc were so slow to recognize the impending collapse of the financial sys

optimal fiscal and monetary policy some recent results this paper studies the quantitative properties of fiscal and monetary policy in business cycle models in terms of fiscal policy optimal labor tax rates are virtually constant and optimal capital income tax rates are close to zero on average in terms of monetary policy the friedman rule is optimal nominal interest rates are zero and optimal monetary policy is activist in the sense that it responds to shocks to the economy

moving costs and housing demand abstract several recent housing demand studies use samples of recent movers based on the presumption that only such households are on their demand curves we find contrary to this presumption that the absolute values of the residuals from a standard housing demand equation fall with duration in the present dwelling this shows that the correlation pattern between housing and the explanatory variables at the moving date does not correspond to the average pattern over a typical housing spell we interpret this as evidence of forward looking behavior and show how it may be handled in econometric work with cross section samples

participation and evaluation for sustainable river basin governance this paper introduces a special section devoted to participation and evaluation for sustainable river basin governance the departing point for this research was the recognition that although there is a relative agreement regarding the need to develop new multi dimensional inclusive and plural approaches to water resource management there is still a deficiency of related methodologies and tools this acknowledgement has motivated the undertaking of the advisor integrated evaluation for sustainable river basin governance research project which aimed at improving the understanding of evaluation processes as part of river basin planning and management and to test the use of specific tools to support the conduct of participatory processes the paper starts with a discussion of the concept of integrated water resources management and an illustration of the water policies that have been adopted in different countries as a response to these trends the conceptual framework that was developed in advisor is then presented as well as the main results from the ex post analysis of the decision processes regarding five water related projects in different european countries this analysis concluded that in most situations the decision making processes fell short of including the interests perceptions and values of affected parties the remaining of the paper introduces the articles that form this special section mostly devoted to the testing of new platforms for participation and deliberation in the final section a discussion on the assumptions and limitations of deliberative processes is presented based on the results from the application of the different methods further research needs on the integration of different deliberative tools and on the integration of deliberation with decision processes are identified

participative multi criteria analysis for the evaluation of water governance alternatives a case in the costa del sol malaga this paper presents the results of a participatory multi criteria evaluation of urban water supply alternatives in costa del sol occidental in malaga spain multi criteria and social research techniques were combined relying on social actors involvement throughout the research work the paper documents that participatory processes allowed to unveil framings perspectives values and interests as well as understanding of the social and institutional context in which the waters are governed the deployment of this methodological approach has in this case provided an extended diagnosis which was the starting point to explore non a priori foreseen management alternatives by the researchers the methodological approach proved useful for problem structuring in a collective flexible and iterative way unveiling existing water management conflicts and their motivations and improving the quality and effectiveness of the information exchange and the reflection process among social actors even if the whole process developed in a research setting rather than in a policy for real one participatory multi criteria evaluation could in this case contribute to identify policy options that could be better defended before all the social actors including the general public thus attempting to achieve shared ground the paper suggests some methodological considerations for applying participatory multi criteria evaluation based on the outcomes of the case study application

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

tenure choice and housing demand in japan abstract this paper reports the results of an empirical analysis of tenure choice and housing demand that makes use of household level data from japan the paper finds that the price and permanent income elasticities of demand for owneroccupied housing are approximately 0 8 and 1 4 respectively and that these estimates are highly robust the price elasticity estimate is comparable to those for other countries but the income elasticity estimate is much higher possibly because of the greater accuracy of the income variable it is also found that the tenure choice and housing demand decisions are apparently not made simultaneously

the impact of dwelling quality and neighbourhood quality on the estimation of the income elasticity of demand for rental housing in jeddah saudi arabia this study provides new evidence on the estimation of the income elasticity of demand for rental housing based on individual interviews with 405 households it looks specifically at the impact of both dwelling and neighbourhood quality aspects on the evaluation of this elasticity the study finds that the income elasticity of demand for rental housing in jeddah is 0 519 when the sample is restricted to include saudi households only the elasticity estimate is 0 465 these values are within the range of previous empirical estimates the results also indicate that for a range of various quality measures the income elasticity is estimated to be less than unity but our suggested quality aspects were found to exert sizeable differences on the magnitude of this elasticity for the full sample from 0 351 to 0 802 as well as for the saudi sample from 0 382 to 0 603 stratified income elasticity estimates for saudis were also found to be generally less than those for the whole sample

tenure choice and expected mobility a synthesis abstract this study employs a joint logit probability model to estimate the effects of a vector of independent variables on the household s current tenure choice and expected mobility which are hypothesized to be simultaneously determined in the empirical analysis it was found that the coefficient on the endogenous variables tenure choice and expected mobility is the most highly significant of all the coefficients estimated in addition in previous analyses the age of the household head has always exhibited a highly significant positive effect on the probability of ownership however in this analysis it is demonstrated that this age variable was acting as a proxy for the expected mobility and wealth of the household

optimal fiscal and monetary policy equivalence results in this article we analyze the implications of price setting restrictions for the conduct of cyclical fiscal and monetary policy we consider standard monetary economies that differ in the price setting restrictions imposed on the firms we show that independently of the degree or type of price stickiness it is possible to implement the same efficient set of allocations and that each allocation in that set is implemented with policies that are also independent of the price stickiness in this sense environments with different price setting restrictions are equivalent

dynamic modeling of housing tenure choice abstract in this study a dynamic random effects simultaneous equation model is developed to model household tenure choice decision the novelty of the study lies in accounting for the dynamic aspects of housing tenure mode namely a move is prerequisite to a change in tenure mode and they are determined jointly expected mobility and tenure choice are interdependent decisions and tenure choice may be state dependent i e taste for ownership acquired or reinforced through the experience of being an owner in addition unobservable household heterogeneity is controlled by imposing a random effects specification the estimation is based on panel data from the psid using the method of maximum simulated likelihood

estimating engel curves under unit and item nonresponse summary this paper estimates food engel curves using data from the first wave of the survey on health aging and retirement in europe share our statistical model simultaneously takes into account selectivity due to unit and item nonresponse endogeneity problems and issues related to flexible specification of the relationship of interest we estimate both parametric and semiparametric specifications of the model the parametric specification assumes that the unobservables in the model follow a multivariate gaussian distribution while the semiparametric specification avoids distributional assumptions about the unobservables copyright 2011 john wiley sons ltd

central bank independence and macroeconomic performance some comparative evidence this note uses information on a sample of sixteen oecd countries to assess the relationship between central bank independence and macroeconomic performance as previous work suggests politically controlled central banks are more likely to pursue policies that lead to high and variable inflation however the authors find little evidence that political control of central bank policy has any impact on measures of the level or variability of growth unemployment or the ex ante real interest rate copyright 1993 by ohio state university press

housing demand and disequilibrium abstract researchers have recently begun relying heavily on samples of recent movers to estimate housing demand parameters estimates from mover equilibrium and disequilibrium samples are compared to determine whether significant differences exist the results suggest that income elasticities are not affected by the sample distinctions but demographic effects vary across the different subsamples

intra urban mobility migration and tenure choice this analysis develops a model in which for the first time households mobility decisions are separated into intra urban movements and migrations these two mobility decisions and the households tenure own rent choice are estimated as part of a multinomial logit framework and are found to be jointly determined the literature suggests that the intra urban mobility and migration decisions are motivated by quite different factors consequently by separating the two choices for the purpose of estimation each equation can be specified more correctly in addition variables which affect migration can be shown to have an impact on intra urban mobility and tenure choice which would otherwise be ignored copyright 1991 by mit press

on the optimal provision of social insurance progressive taxation versus education subsidies in general equilibrium in this paper we compute the optimal tax and education policy transition in an economy where progressive taxes provide social insurance against idiosyncratic wage risk but distort the education decision of households optimally chosen tertiary education subsidies mitigate these distortions we highlight the quantitative importance of general equilibrium feedback effects from policies to relative wages of skilled and unskilled workers subsidizing higher education increases the share of workers with a college degree thereby reducing the college wage premium which has important redistributive benefits we also argue that a full characterization of the transition path is crucial for policy evaluation we find that optimal education policies are always characterized by generous tuition subsidies but the optimal degree of income tax progressivity depends crucially on whether transitional costs of policies are explicitly taken into account and how strongly the college premium responds to policy changes in general equilibrium

housing consumption and permanent income in developing countries estimates from panel data in el salvador the estimation of the parameters of housing demand equations occupies a prominent place in the urban economics literature of developed countries see de leeuw 4 and mayo 20 for thorough reviews of the state of the empirical art most research has focused on income and price elasticities of housing demand using both aggregated and micro level data the main conclusions of those studies which do not suffer from aggregation or other biases seem to be that a on average for a large segment of the population including both renters and owners permanent income elasticities are well below one b permanent income elasticities for owners ranging mostly from 0 5 to 0 7 in mayo s review are slightly higher than estimates for renters which ranged mostly from 0 3 to 0 5 c as predicted by the theory the permanent income demand elasticity generally exceeds that of current

participatory processes in the soy conflicts in paraguay and argentina abstract within emerging environmental conflicts different participatory processes have developed as alternatives to the top down models that have dominated policy making in this paper we focus on conflicts over the expansion of soy production we analyze three issues related to top down vs bottom up participatory processes and how they affect the proposals coming out of these processes who counts as stakeholder the role of social movements what counts as participation the role of mobilization and who has power to select stakeholders and issues make decisions and influence preferences to explore these issues we present a case study of two parallel participatory processes in rural areas of paraguay and argentina one of these the roundtable on responsible soy is top down created by large agri business multinationals and international conservation ngos with the support of the governments in the region and has focused on establishing criteria for responsible soy the other is bottom up self organized by peasant and civil society organizations and focused on stopping soy expansion and promoting food sovereignty the findings highlight the potential of bottom up processes to promote true agricultural sustainability while at the same time emphasizing the need for more research on grassroots participatory processes and their potential and limitations in different contexts

geographical labour mobility migration or commuting eliasson k lindgren u and westerlund o 2003 geographical labour mobility migration or commuting reg studies 37 827 837 in this paper we examine how individual labour market status and spatial variations in employment opportunities influence interregional job search behaviour and mobility decisions in sweden the econometric analysis is based on 290 000 individual observations and refers to the years 1994 95 the empirical results show that the probability of interregional labour mobility unexpectedly decreases with the accessibility to employment opportunities in neighbouring regions as expected the findings reveal that accessibility to job openings in surrounding regions significantly increases the likelihood of choosing commuting as the mobility mode moreover the empirical findings indicate that individual unemployment experience increases the likelihood of mobility as well as migration eliasson k lindgren u et westerlund o 2003 la mobilite geographique du travail la migration

inflation targeting a new framework for monetary policy he world s central bankers and their staffs meet regularly in venues from basle to washington to share ideas and discuss common problems perhaps these frequent meetings help explain why changes in the tactics and strategy of monetary policymaking such as the adoption of money growth targets in the 1970s the intensification of efforts to reduce inflation in the 1980s and the recent push for increased institutional independence for central banks tend to occur in many countries more or less simultaneously whatever their source major changes in the theory and practice of central banking are of great importance for both individual countries and the international economy in this article we discuss a new strategy for monetary policy known as inflation targeting which has sparked much interest and debate among central bankers and monetary economists in recent years this approach is characterized as the name suggests by the announcement of official target ranges for the inflation rate at one or more horizons and by explicit acknowledgment that low and stable inflation is the overriding goal of monetary policy other important features of inflation targeting include increased communication with the public about the plans and objectives of the monetary policymakers and in many cases increased accountability of the central bank

modern macroeconomics in practice how theory is shaping policy over the last three decades macroeconomic theory and the practice of macroeconomics by economists have changed significantly for the better macroeconomics is now firmly grounded in the principles of economic theory we focus on the role of economic theory in shaping policy over the last several decades the united states and other countries have undertaken a variety of policy changes that are precisely what macroeconomic theory of the last 30 years suggests the evidence that theoretical advances have had a significant effect on the practice of policy is often hard to see for policymakers and advisers involved in the hurly burly of day to day policymaking but easy to see if one steps back and takes a longer term perspective examples of the effects of theory on the practice of policy include increased central bank independence adoption of inflation targeting and other rules to guide monetary policy increased reliance on consumption and labor taxes instead of capital income taxes and increased awareness of the costs of policies that distort labor markets

moving and improving strategies for attaining housing equilibrium the concept of equilibrium consumption is central to much housing market analysis yet analysts must contend with the likelihood that many housing consumers are not at an exact equilibrium level of

does investment risk affect the housing decisions of families i introduction the purpose of this article is to investigate the effect of heightened price volatility in housing markets on homeownership and housing demand the literature on housing markets has recognized that buying a home involves consumption and investment motives as in ranney 1981 henderson and ioannides 1983 and fu 1995 purchasing a home requires a concentrated investment in housing stock that for most families is not easily diversified caplin et al 1997 indeed in 1995 the typical american household had most of its gross assets in real estate and held no corporate equity and only households in the top 10 of the wealth distribution held portfolios that were diversified tracy et al 1999 in 1998 despite strong stock market gains home equity was a dominant investment for most households although roughly two thirds owned their homes less than half of all households held stock of those households owning both stocks and homes 60 had more wealth in home equity than in stocks di 2001 nominal house prices in u s cities have generally risen over time with some cities experiencing periods of steep house price appreciation however homeowners in many cities have been exposed to considerable downside risk according to repeat sales price indexes published by the federal home loan mortgage corporation freddie mac significant one year declines in home prices are not uncommon for example nominal declines of 15 5 and 9 occurred in san antonio in 1985 denver in 1987 and boston in 1990 respectively sustained house price declines have occurred in texas california and the eastern states for example in the long beach los angeles metropolitan area the nominal price of single family homes declined 22 from 1990 to 1996 1 furthermore there is evidence that losses at the time of sale are surprisingly common 2 what is not clearly understood is the extent to which families are responsive to such house price risk the investment literature has demonstrated that risk averse households prefer to hold less risk at a given expected rate of return when house prices are uncertain homeownership and demand relationships depend on the distribution of the random price variable 3 fu 1991 characterizes the price distribution by its first and second moments and shows that the likelihood of homeownersbip and the demand for owner occupied housing are increasing in the expected rate of house price appreciation and decreasing in house price volatility these results do not hold however for liquidity constrained households when households cannot borrow against the expected future gains of housing investment for current consumption the theoretical effects on housing choices of the expected rate of return and house price uncertainty are ambiguous fu 1995 thus the effect of price volatility on housing choices remains to be determined empirically the empirical research on housing markets includes a number of micro level econometric studies on the determinants of homeownership and housing demand these studies provide a framework for the present study and have shown that a household s after tax relative cost of homeownership permanent and transitory income and family composition are important in explaining housing decisions e g see rosen 1979 dynarski and sheffrin 1985 henderson and ioannides 1987 1989 in addition homeownership is negatively impacted by income uncertainty haurin 1991 and by an inability to generate savings for a down payment as in henderson and ioannides 1987 linneman and wachter 1989 haurin et al 1994 and gyourko et al 1999 nevertheless despite the importance of owner occupied housing in the portfolios of homeowners surprisingly little empirical work exists on the housing choices of families in the presence of house price uncertainty rosen et al 1984 provide some empirical evidence on the question of housing choices and risk

a residence time model of housing markets abstract this paper estimates a semi markov model of housing markets in which families move from one home to another spend a random amount of time in each home and choose whether to own or to rent at each move limiting conditions of the semi markov process are used to characterize the steady state frequency of owner occupied housing and to simulate the impact of changes in housing tax policy this approach differs markedly from previous studies of housing tax policy which focus on the entire population as opposed to the movers and ignore the effect of household residence times see king 1980 rosen 1979 white and white 1977 or laidler 1969 residence times further influence the analysis by affecting the relative cost of owning to renting in the tenure choice model homeowners pay legal and realtor fees at the time they move out of their homes which renters do not have to pay the discounted value of these fees declines with length of stay and provides a structural explanation of why families with longer residence times have a greater propensity to own results from the empirical analysis suggest that the semi markov model closely predicts conditions in the united states and provide important insights into the effects of housing tax policy residence times are also found to influence household tenure choice through their impact on the discounted legal and realtor fees paid by homeowners

optimal unemployment insurance this paper considers the design of an optimal unemployment insurance system the problem is modeled as a repeated principalagent problem involving a risk averse agent the unemployed worker and a risk neutral principal which cannot monitor the agent s search effort the optimal long term contract subject to the associated incentive constraints is characterized this contract involves a replacement ratio that decreases throughout the unemployment spell and a wage tax after reemployment that under some mild regularity conditions increases with the lenght of the unemployment spell some numerical results are presented that suggest that the gains from switching to this optimal unemployment insurance scheme could be quite large the performance of this optimal contract is also compared to alternative liquidity provision mechanisms

motives behind willingness to pay for improving biodiversity in a water ecosystem economics ethics and social psychology this paper reports on empirical work extending the standard economic approach to valuation by including psychological and philosophical factors more specifically a contingent valuation method survey was applied to biodiversity improvement while simultaneously assessing rights based beliefs consequentialism and the theory of planned behaviour the latter was assessed using measures of attitudes subjective norms and perceptions of control over willingness to pay the results show that standard socio economic explanatory variables are far inferior to those of social psychology and philosophy and that these factors offer a better understanding of the motives behind responses to contingent valuation the implication is that alternative means of measuring an individual s pluralistic values should be taken into account in order to assess the validity and meaning of willingness to pay

an analysis of the housing market in the netherlands housing research in the netherlands has long been dominated by demographic orientated research this was quite logical because of the distinctive demographic development of the netherlands relative to other west european countries the rate of increase in population in the period 1960 1981 was among the highest in western europe economic influences on housing consumption have therefore long been neglected in the 1980s a period with declining incomes and a government policy to increase rents suddenly economic influences came into the picture housing demand tends to diminish and the traditional housing shortage since the second world war seems to disappear rising rents can even lead to rising vacancy rates because demand diminishes and supply increases because of higher rates of return the reverse of the consequences of rent control this article presents a recent econometric analysis of the housing market in the netherlands and places the results in the context of the broad and sometimes confusing

intertemporal analysis of employment decisions on agricultural holdings in slovenia the article attempts to quantify determinants influencing the dynamics of employment decisions on agricultural holdings in slovenia and to test specific aspects of labor reallocation during the transition period by the application of an agricultural household model through the use of a 1991 2000 longitudinal data set for 22 055 farm households quantitative analysis of intertemporal employment decisions by farm holders is carried out using probit techniques the determinants tested relate to the personal characteristics of farm holders gender age education level and potential off farm income household characteristics size structure characteristics of the agricultural holding economic size labor intensity and local labor market conditions the model results generally confirm existing empirical evidence on asymmetrical and irreversible participation of holders on the labor market despite intensive restructuring of agriculture and profound changes in the nonfarm labor market in the analyzed period labor supply of farm holders remains rigid the mobility of labor supply is lower than expected which can be attributed to the importance of structural problems constraining intersectoral mobility low labor mobility reduces the efficiency of labor allocation on agricultural holdings in slovenia elements of this problem emerge on both supply e g low level of educational and professional attainment of reference persons and demand sides of the labor market e g unfavorable local labor market conditions a marked tendency toward maintaining the same employment status is more distinct in the case of holders employed on farm only

prosperity and depression prosperity and depression are relative concepts today both france and japan are depressed relative to the united states equivalently the united states is prosperous relative to these countries i say these countries are depressed relative to the united states because their output per working age person is 30 percent less than the u s level an interesting and important policy question is why are these countries depressed the answers for these two countries turn out to be very different the united states is prosperous relative to france because the u s intratemporal tax wedge that distorts the trade off between consumption and leisure is much smaller than the french wedge i will show that if france modified its intratemporal tax wedge so that its value was the same as the u s value french welfare in consumption equivalents would increase by 19 percent consumption would have to increase by 19 percent now and in all future periods to achieve as large a welfare gain as that resulting from this tax reform the united states is prosperous relative to japan because production efficiency is higher in the united states in the united states total factor productivity is approximately 20 percent higher than in japan if japan suddenly became as efficient in production as the united states its welfare gain in consumption equivalents would be 39 percent equally interesting and important are big changes over time in relative output per working age person across countries why are new zealand s and switzerland s economies depressed by over 30 percent relative to their 1970 trend corrected levels both of these countries have small populations but depressions are not restricted to small countries japan with its 125 million people is now depressed by 20 percent relative to its 1991 trend corrected level on the prosperity side why are ireland and south korea so prosperous now relative to their 1970 trend corrected levels this lecture is concerned primarily with big international differences among relatively rich industrial countries and changes in these differences over time the countries that receive primary attention all have market economies and healthy well educated populations in the countries considered the variations in aggregate output per working age person are large and reasonably good measures of the factor inputs are available this permits in many cases the identification of the change in policy or the difference in policy that gave rise to prosperity or depression this is in contrast to business cycle theory which provides little guidance to policy except for the important policy implication that a stabilization effort will have either no effect or a perverse effect the output variations studied and analyzed in this lecture are big an order of magnitude larger than the much studied business cycle fluctuations the variations studied however are an order of magnitude smaller than the muchstudied differences between the richest and poorest countries surprisingly only recently have depressions been systematically studied from the perspective of growth theory which is the theory used university of minnesota and federal reserve bank of minneapolis i thank my colleagues at the university of minnesota and the federal reserve bank of minneapolis for helpful discussions and comments in particular i thank tim kehoe ellen mcgrattan and nancy stokey for their help i also thank martin weale and franck portier for providing some british and french tax information used in this lecture thanks also go to sami alpanda and james macgee for research assistance and helpful discussions this lecture draws heavily on collaborative research with fumio hayashi i thank the economic and social research institute cabinet office government of japan and the u s national science foundation for financial support the views expressed herein are those of the author and not necessarily those of the federal reserve bank of minneapolis or the federal reserve system

on efficient distribution with private information this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers each of whom is subject to private idiosyncratic taste shocks we propose a recursive method for finding feasible allocations that are incentivecompatible and that are pareto optimal within this set the method is applied to several parametric examples we find that in an efficient allocation the degree of inequality continually increases with a diminishing fraction of the population receiving an increasing fraction of the resources we discuss the extent to which these allocations can be decentralized via market arrangements this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with private information the economy we study has a constant endowment flow of a single non storable consumption good which is to be allocated each period among a large number of consumers each period these consumers experience unpredictable idiosyncratic privately observed taste shocks affecting their marginal utility of current consumption efficiency dictates that more resources be allocated to those consumers who in any given period have a high marginal utility of current consumption

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

optimality of the friedman rule in economies with distorting taxes abstract we find conditions for the friedman rule to be optimal in three standard monetary models our main contribution is to shed light on two issues in the literature first the conventional view maintains that when money is a final good its services should be taxed moreover if money demand is interest inelastic its services should be taxed heavily we show that this view is incorrect second there is an ongoing controversy about whether the optimality of the friedman rule is connected to the intermediate goods result from public finance we resolve this controversy by showing a deep connection between these results

does inflation affect real behavior the case of housing an important tradition in economics is to assume that demand depends upon relative prices and is homogenous of degree zero for the most part this has been interpreted as meaning inflation changes in the price level leaves demand unchanged recent work by a number of economists has challenged this position for the case of housing demand two arguments have been made that inflation acting in concert with existing institutions alters the quantity of housing demanded and the decision to rent or own a house the first argument states that inflation and the standard fixed payment mortgage combine to reduce the size of the mortgage loan a household can obtain for the purpose of buying a home this works to reduce the quantity of owner occupied housing demanded given the importance of mortgage finance to the demand for owner occupied housing the second argument focuses on the inflation adjusted after tax cost of owner occupied housing it simply states that an increase in the rate of anticipated inflation of the general price level reduces the after tax cost of housing thus increasing the demand for housing and the demand for homeownership there has been little empirical testing of these two arguments the purpose of this paper is to formulate and estimate a model which will give an indication of the quantitative significance of the two arguments a housing demand equation and a tenure choice equation own versus rent are estimated using a sample of about 6000 households from the 1975 annual housing survey 10 the estimates suggest that inflation dampens housing demand and homeownership opportunity for most households even though the inflation adjusted after tax cost of owner occupied housing declines as inflation heats up the paper consists of six sections including the introduction section two examines the ways inflation affects housing choices in more detail the third section contains the specification of the econometric model that forms the basis of the study section four is a discussion of econometric problems and the data used the results of the estimates are discussed in the fifth section the paper concludes with a presentation of the major conclusions and policy implications of the study

sins of the sons of samuelson vision pedagogy and the zig zag windings of complex dynamics abstract the standard economics text is centered on a vision of a naturally self regulated dynamically stable system with a unique global attractor this paper discusses how we got there and how recent developments in the study of dynamical systems allow us to go beyond that it traces the evolution of the teaching of economics from alfred marshall who built his supply and demand framework within a complexity vision of the economy it suggests that that complexity vision was lost as economists formalized the supply demand framework and extended it to the entire economy this paper argues that the current textbook presentation of economics should not and cannot serve as the only intellectual frame we provide to our students

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

loss severities on residential real estate debt during the great recession abstract this study develops estimates of expected loss severities on mortgage exposures using data from florida during the great recession this paper marks the first attempt at addressing sample selectivity in the context of loss models we also construct measures of home equity that are more accurate than those employed in previous studies we find that failing to address sample selection and the use of noisy equity measures in loss models can bias loss estimates significantly we also find significantly higher loss severities and a greater sensitivity of loss severity to equity than what previous studies report

suspension of payments bank failures and the nonbank public s losses abstract we present evidence on the effects of suspensions of payments from an episode that is close to a controlled experiment for examining those effects in 1861 about 44 of the banks in wisconsin closed 81 of the banks in illinois closed and noteholders suffered substantial losses the historical record suggests that an effective suspension of payments in wisconsin but not in illinois may explain the difference our statistical evidence indicates that the suspension of payments increased the probability of a bank remaining open by about 21 percentage points and decreased noteholders losses by about 14 cents per dollar

optimal fiscal and monetary policy under sticky prices this paper studies optimal fiscal and monetary policy under sticky product prices the theoretical framework is a stochastic production economy without capital the government finances an exogenous stream of purchases by levying distortionary income taxes printing money and issuing one period nominally risk free bonds the main findings of the paper are first for a miniscule degree of price stickiness i e many times below available empirical estimates the optimal volatility of inflation is near zero this result stands in stark contrast with the high volatility of inflation implied by the ramsey allocation when prices are flexible the finding is in line with a recent body of work on optimal monetary policy under nominal rigidities that ignores the role of optimal fiscal policy second even small deviations from full price flexibility induce near random walk behavior in government debt and tax rates third sluggish price adjustment raises the average nominal interest rate above the one called for by the friedman rule finally an interest rate feedback rule whereby the nominal interest rate depends on inflation and output fits well the data emanating from the ramsey economy however the fitted rule is not of the taylor type for the implied inflation coefficient is less than one and close to zero and the output coefficient is negative jel classification e52 e61 e63

water accounting in australia abstract this paper introduces water accounting as produced by the australian bureau of statistics abs it provides information about the abs water accounts and highlights the many other organisations involved in the provision and use of water related data in australia the abs water accounts have built upon previous reports on australian water resources and the system of environment and economic accounting un united nations 2003 draft handbook integrated environmental and economic accounting studies in methods series f no 61 rev 1 united nations european commission international monetary fund organisation for economic cooperation and development world bank new york information from the abs water accounts is presented along with examples of their use in economic analyses designed to inform public debate and government decision makers a key feature of the australian environment is that water is relatively scarce when compared with other inhabited continents rainfall displays a high level of spatial and temporal variability and droughts are common in 2004 an intergovernmental agreement on a national water initiative nwi was reached by australia s national and eight state and territory governments the nwi aims to address environmental economic and social concerns about the current and future state of australia s water resources the nwi specifically calls for the preparation of annual water accounts which clearly indicates the expected usefulness of national and regional water accounts

optimal fiscal and monetary policy with sticky prices in this paper i consider the role of state contingent inflation as a fiscal shock absorber in an economy with nominal rigidities i study the ramsey equilibrium in a monetary model with distortionary taxation nominal non state contingent debt and sticky prices with sticky prices the ramsey planner must balance the shock absorbing benefits of state contingent inflation against the associated resource misallocation costs for government spending processes resembling post war experience introducing sticky prices generates striking departures in optimal policy from the case with flexible prices for even small degrees of price rigidity optimal policy displays very little volatility in inflation tax rates display greater volatility compared to the model with flexible prices with sticky prices tax rates and real government debt exhibit behavior similar to a random walk for government spending processes resembling periods of intermittent war and peace optimal policy displays extreme inflation volatility even when the degree of price rigidity is large as the variability in government spending increases smoothing tax distortions across states of nature becomes increasingly important and the shock absorber role of inflation is accentuated

does the academic labor market initially allocate new graduates efficiently it is not surprising that economics graduate students from elite and very good schools find better jobs after completion of their ph d degree on average than do candidates from less prestigious universities yet the job market outcome for candidates from the same university varies quite a lot while the top candidates from the elite schools are often able to find jobs in other elite universities it is unclear how average candidates from elite schools fare compared to the top students from relatively less prestigious schools and how the relative job market outcome relates to future success as a researcher the objective of this paper is to investigate these issues in this paper we compare the career trajectories of candidates coming from three different types of schools elite universities very good universities and good universities we define three types of graduates within each group those who placed best those who had an average placement and those who found jobs at lower levels then for each of these nine groups we look at initial and current affiliations and we compare publication patterns of the graduates more than a decade into their academic careers can we say that the initial allocation was efficient in the sense that those who placed higher were also more productive in research terms and to what extent does the labor market for economists adapt and allow economists to move between schools as the ability of individuals to publish their work manifests itself over time

discrete choice modelling of urban housing markets a critical review and an application the housing choice literature is a vast area of housing research which has resulted in giant leaps forward in recent years in terms of its econometric modelling this is due in large part to the significant increases now available in computing power allowing researchers to combine the latest advances in theory with empirical application this paper brings together and critically reviews the housing choice literature and techniques that have been used to model the household s housing choice decision the basic multinomial logit model is reviewed alongside the more recent advances in discrete choice modelling the nested multinomial logit model and the heteroscedastic extreme value model the various techniques are illustrated using data from the australian census of 1986 and 1996 to model housing choice in sydney the results show that careful consideration must be given to the assumptions underlying any chosen modelling technique if one is not to draw misleading conclusions from the analysis

asset trading mechanisms and expansionary policy abstract previous authors have argued that the otimal monetary policy is contractionary if buyers value consumption substantially more than sellers there is some randomness and informational constraints make asset trading useful we show that there is an incentive compatible expansionary policy that dominates all incentive compatible contractionary policies