relationships among exchange rates intervention and interest rates an empirical investigation abstract this study uses herefore unavailable daily data on official intervention to test the joint hypotheses of perfect asset substitutability and exchange market efficiency this joint hypothesis is generally soundly rejected for six exchange rates over various sample periods in contrast to evidence elsewhere from weekly or monthly data lagged intervention is a significant determinant of realized profits in about half the cases this evidence is consistent with existence of a portfolio balance channel at least in the short run other evidence indicates that coordinated intervention sometimes may have an impact significantly different from intervention by one central bank alone

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

monetary mystique secrecy and central banking abstract the paper contains a discussion of the role of secrecy in the implementation of monetary policy it documents the federal reserve s defense of secrecy as argued in a recent freedom of information act suit the federal reserve s arguments are evaluated on the basis of economic theory theoretical papers related to the secrecy issue are reviewed the discussion highlights a number of potential benefits and costs of central bank secrecy and identifies some conditions under which secrecy could be socially beneficial

do sales of foreign exchange reserves lead to currency appreciation we employ novel time stamped reserve sales data provided by the czech national bank cnb to carry out a time series analysis of the exchange rate implications of czech reserve sales aimed at mitigating valuation losses on euro denominated assets the sales were explicitly not intended to influence the value of the koruna relative to the euro the period under study includes a well defined regime change in the cnb s approach to reserves sales allowing us to address whether the manner in which the sales are carried out matters for their influence on the relative value of the domestic currency we find little evidence that reserve sales influence the exchange rate when sales are carried out on a discretionary and relatively infrequent basis however when the sales are carried out daily we find a statistically and economically significant appreciation of the domestic currency follows

model uncertainty learning and the gains from coordination this paper considers gains from international economic policy coordination when there is uncertainty concerning the functioning of the world economy but also learning about the true model on the part of policymakers the paper reports estimates of plausible alternative versions of a standard two country model activist policy either coordinated or uncoordinated may produce large welfare losses in the absence of learning if policymakers behave in the wrong model hence exogenous money targets and freely flexible exchange rates may be best however model learning from observations on macroeconomic variables causes coordinated policies to dominate activist uncoordinated policies or exogenous money targets copyright 1991 by american economic association

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

decomposing world health inequality this study explores global inequality in health status and decomposes it into within and between country inequality we rely on standardized height as our health indicator since it avoids the measurement pitfalls of more traditional measures of health such as morbidity mortality and life expectancy it also avoids measurement problems associated with using monetary variables such as income or expenditure across time or place to compare welfare our calculation of world height inequality indicates that in contrast with similar research on income inequality within country variation is the source of most inequality rather than the differences between countries

approaches to inequality of opportunity principles measures and evidence we put together the dierent conceptual issues involved in measuring inequality of opportunity discuss how these concepts have been translated into computable measures and point out the problems and choices researchers face when implementing these measures our analysis identies and suggests several new possibilities to measure inequality of opportunity the relevance of the conceptual issues and modelling choices are illustrated with ndings from the empirical literature on income inequality of opportunity

central bank secrecy in the foreign exchange market abstract this paper argues that with sticky goods prices and a forward looking exchange rate the central bank will only want a partial dissemination of its information about shocks to the economy it is shown that in such a model the central bank may prefer to intervene secretly in the foreign exchange markets when responding in anticipation of future shocks but openly when reacting to current shocks the model thus provides a rationale for secrecy in central bank foreign exchange operations the model also elucidates the relationship between the signaling and portfolio balance channels of sterilized intervention

risk arbitrage in takeovers this article studies the role of risk arbitrageurs in takeovers and the source of their advantage we show how the presence of arbitrageurs affects the value of the target shares since arbitrageurs are more likely to tender therefore an arbitrageur has the informational advantage of knowing he bought shares in equilibrium the number of arbitrageurs buying shares and the price they pay are determined endogenously we also present several empirical implications including the relationship among trading volume takeover premium liquidity of the shares and the number of risk arbitrageurs investing in one particular deal copyright 2002 oxford university press

the importance of bundling in a gorman lancaster model of earnings the idea that the labor market of individuals can be decomposed into payments to separate productive attributes has an enduring appeal in economics assuming that demographic groups differ only in their endowments of productive characteristics it is possible to rationalize observed demographic earnings differentials without invoking the arguments that characteristics specific to a particular demographic group are direct objects of employer demand by aggregating skills over all demographic groups it is possible to produce a theory of the market determination of the prices of skills held in different amounts by different demographic groups this paper considers conditions under which characteristics are uniformly priced across sectors of a multisector economy the paper presents empirical evidence that rejects uniform pricing of characteristics as a description of the us labor market bundling may account for this evudence but other hypotheses do as well authors

the intraday effects of central bank intervention on exchange rate spreads abstract we investigate the intraday effects of intra marginal intervention in a horizontal band on the exchange rate spread official intraday data on danish intervention transactions in the erm ii the exchange rate mechanism of the european union facilitates our analysis we show that intervention purchases and sales both exert a significant influence on the exchange rate spread but in opposite directions intervention purchases of the small currency on average narrow the spread while intervention sales of the small currency on average widen the spread this is a novel finding that differs from those of existing studies that find intervention always widens the exchange rate spread and increases market uncertainty

cheap talk and the fed a theory of imprecise policy announcments this paper examines the problem faced by the federal reserve in announcing its private information about its future policies because it would like to manipulate expectations and pursue a time inconsistent policy the fed cannot reveal its policy objectives precisely and credibly it can however communicate some information about its goals through the cheap talk mechanism of vincent crawford and joel sobel making announcements that are imprecise and only giving ranges within which these goals may lie copyright 1989 by american economic association

why doesn t society minimize central bank secrecy i introduction central banks have repeatedly revealed a preference for secrecy in conducting monetary policy in the united states for example the federal reserve has expressed its bias towards policy secrecy in a number of ways ranging from delays in releasing the minutes of federal open market committee fomc meetings to ambiguous policy statements at congressional hearings 1 nevertheless the degree of disclosure required by congress and the court system does not appear to minimize central bank secrecy indeed the fed s right to limit disclosure of policy intentions was upheld in a recent supreme court case 2 furthermore similar social tolerance of central bank secrecy appears in the banking institutions of other countries since legal and social institutions allow for central bank secrecy its presence may be attributed to the preferences of the social planners who designed these institutions in the first place forward looking planners know that monetary policy in future periods will be the outcome of a symbiotic relationship between monetary authorities politicians and private interest groups 3 as the relative importance of these different groups and their preferences change over time so will the policy objectives of the monetary authorities if secrecy is allowed monetary authorities could effect policy changes in response to relationship changes without immediate detection by private markets recognizing this policy effect of secrecy a social planner would design institutions to affect the environment so that desirable future policy formation takes place 4 this paper offers two explanations for why social institutions do not legally minimize central bank secrecy 5 first when establishing institutional disclosure requirements for central banks social planners recognize the tendency for central bankers to be secretive this secrecy imposes costs upon members of society by making shifts in policy objectives more difficult to detect faced with this tendency members of society set legal institutions that appear to require less disclosure because more restrictive laws would induce central bankers to become more secretive in other less informative ways 6 second if the policy objectives that society finds desirable change over time then members of society may directly prefer some degree of central bank secrecy economic theory holds that unanticipated changes in monetary policy can have an economic effect intuitively secrecy allows central banks to conduct unanticipated policy actions in periods when on average society most prefers them for example in periods when public opinion favors pushing down unemployment central banks may conduct a surprise monetary expansion 7 the paper develops examples of each of these two effects using a discretionary equilibrium similar to that in cukierman and meltzer 1986a the desired trade off between two policy objectives changes over time in response to changing political pressures although i use the trade off between output and inflation as an example the basic results hold with any policy trade off that varies over time the policy objectives could include targets for real exchange rates or interest rates for instance the plan of the paper is as follows section ii describes the discretionary equilibrium given institutional settings for the conduct of monetary policy sections iii and iv describe examples of each of the two explanations for secrecy described above concluding remarks follow ii the degree of policy disclosure in a discretionary equilibrium when the policy objectives of the monetary authorities shift over time due to changing economic or political circumstances their choice of discretionary policy also shifts 8 in the absence of a mechanism to pre commit to a particular policy rule the authorities will implement policy changes

on the effects of sterilized intervention an analysis of weekly data abstract as the recent empirical studies surveyed here illustrate it is very difficult to demonstrate that the exchange rate risk premium depends through a portfolio balance channel on the currency composition of outside assets the existence of a portfolio balance effect is a necessary condition for sterilized intervention to be a genuinely independent tool of monetary policy this paper studies u s canadian data and attempts to improve on earlier studies by using higher frequency weekly data and by implementing an appropriate instrumental variables technique 2s2sls however we still fail to detect evidence of a portfolio balance effect

central bank secrecy fed watching and the predictability of interest rates abstract a common criticism of central bank secrecy is the assertion that it will lead to lower forecast accuracy on the part of private agents the model considered here demonstrates that reducing central bank secrecy can actually reduce the forecasting accuracy of many of the private agents in the economy when it is recognized that some agents engage in fed watching and others do not this result comes about because the interest rate process depends in part on the information that agents use in forecasting future interest rates

a structural threshold model of the exchange rate under optimal intervention abstract by considering a social trade off between targeting the exchange rate and minimizing intervention costs nonlinear exchange rate dynamics can be captured by a structural threshold model this article provides a theory based empirical exchange rate model and shows how to put the model into an empirical investigation to estimate the structural threshold model we propose a two step procedure which separately estimates the permanent and temporary fundamentals of the foreign exchange market a demonstration of our approach is applied to 1981q3 2008q3 taiwan s foreign exchange market with a brief review of its monetary policies and central bank given prior estimation results are consistent with theoretical predictions and many intervention operations of taiwan s central bank are successfully identified

equality of opportunity policy and measurement paradigms abstract equality of opportunity is a widely accepted principle of distributive justice and it is the leading idea of most political platforms in several countries according to this principle a society might institute policies that secure an equal distribution of the means to reach a valuable outcome among its members once the set of opportunities have been equalized which particular opportunity the individual chooses from those open to her is outside the scope of justice ex ante inequalities and only those inequalities should be eliminated or compensated for by public intervention the recent literature on the opportunity egalitarianism often merges these questions introducing two different economic issues on one side the design of a public policy intended to implement the equality of opportunity view and on the other side the problem of measuring the degree of opportunity inequality in a society we describe the basic setting and assumptions of some different approaches derived by roemer s algorithm for public policy and then we discuss some theoretical and empirical studies to separate and test alternative paradigms on the measurement of inequality of opportunity accordingly an extended critique on the causality issue on policies and measurements is taken into account

lower bounds on inequality of opportunity and measurement error when measuring inequality of opportunity researchers usually opt to eliminate within type variation provided that in practice it is impossible to observe all circumstances this implies that the researcher estimates a lower bound of the true level of inequality of opportunity by using data drawn from 27 demographic household surveys circa 2008 it is found that lower bound estimates can have substantial measurement error and that measurement error can vary considerably across countries as a consequence lower bound estimates of inequality of opportunity can demand too little redistribution to equalize inequalities due to circumstances and can make the traditional cross country comparisons misleading

robust cross country analysis of inequality of opportunity abstract international rankings of countries based on inequality of opportunity indices may not be robust vis a vis the specific metric adopted to measure opportunities indices often aggregate relevant information and neglect to control for normatively irrelevant distributional factors this paper shows that gap curves can be estimated from cross sectional data and adopted to test hypotheses about robust cross country comparisons of in equality of opportunity

is it signalling exchange intervention and the dollar deutschemark rate abstract the portfolio balance channel for sterilised intervention is tested by examining the effects of changes in relative asset supplies on the dollar deutschemark rate during the 1980s in contrast to previous studies we control for any signalling effects of central bank intervention and find a weak but statistically significant portfolio balance influence on the exchange rate

ex ante versus ex post equality of opportunity we study the difference between the ex post and ex ante perspectives in equality of opportunity we show that the well documented conflicts between compensation and reward are but an aspect of a broader conflict between ex ante and ex post perspectives the literature that takes the goal of providing equal opportunities as the guiding principle generally considers that this is implemented only when ex post all individuals with the same effort obtain equal success it is easy to believe that ex ante compensation is another natural embodiment of the same idea we show that this is not true