u s european interest rate linkage a time series analysis for western germany switzerland and the united states the authors investigate whether there was an international linkage of interest rates between the united states west germany and switzerland during the period of flexible exchange rates 1974 84 euro market rates and bond market rates are considered during the two subperiods of falling and increasing u s dollar dm exchange rates 1974 to 1978 and 1979 to 1984 spectral analysis and granger causality tests are applied and trivariate autoregressive models are estimated it is shown that a strong linkage exists during the second period but during the first subperiod there was no or only a weakly pronounced linkage copyright 1987 by mit press

the causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

fixed and flexible wages evidence from panel data using data for the years 1968 84 from the michigan panel study of income dynamics this study analyzes differential flexibility in nominal wages by tenure and occupation the results show that short run sensitivity to both unemployment and inflation is confined largely to low tenure workers and that the cyclical upgrading and downgrading of employment opportunities makes a significant contribution to flexibility in nominal wages the findings are consistent with a model in which long term commitments insulate the wages of senior workers from short run swings in economic conditions and in which nominal wages are largely noncyclical but employment opportunities shrink and expand

the short term mortality consequences of income receipt many studies find that households increase their co nsumption after the receipt of expected income payments a result inconsistent wit h the life cycle permanent income hypothesis consumption can increase adverse healt h events such as traffic accidents heart attacks and strokes in this pape r we examine the short term mortality consequences of income receipt we find that mortality increases following the arrival of monthly social security payments re gular wage payments for military personnel the 2001 tax rebates and alaska permane nt fund dividend payments the increase in short run mortality is large potential ly eliminating some of the protective benefits of additional income

estimating the effect of income on health and mortality using lottery prizes as an exogenous source of variation in income a vast literature has established a strong positive relation between income and health status and a negative relation with mortality this paper studies the effects of income on health and mortality using only the part of income variation due to a truly exogenous factor monetary lottery prizes of individuals the findings are that higher income causally generates good health and that this effect is of a similar magnitude as when traditional estimation techniques are used a 10 percent income increase improves health by about 4 5 percent of a standard deviation

unit roots and granger causality in the ems interest rates the german dominance hypothesis revisited abstract the aim of this paper is twofold first it shows that a sufficient conditions for unit roots found in ar systems to persist in var systems amount to granger non causality in any direction among the variables involved this implies that a necessary condition for the disappearance of one unit root in a var system implies granger causality in at least one direction b for first order models with non explosive variables granger causality is also sufficient for cointegration and c causality and cointegration inference are strongly affected by the omission of an important causing variable second our new analytical framework allows us to formulate and test several new variations of the so called german dominance hypothesis in a unified cointegrating framework which we define as strong semi strong and weak types 1 and 2 german dominance in addition we allow for the possibility that the dominant player may lie outside the ems so that we introduce and test the us dominance hypothesis

exploring the health wealth nexus the causal links between health and economic resources have long concerned social scientists we use four waves of data from the panel study of income dynamics psid to analyze the impact of wealth upon an individual s health status the difficulty in approaching this task that has bedeviled previous studies is that wealth may be endogenous a priori it is just as likely that changes in health affect wealth as vice versa we argue that inheritance is a suitable instrument for the change in wealth and implement a straightforward instrumental variables strategy to deal with this problem our results suggest that the causal relationship running from wealth to health may not be as strong as first appears in the data wealth exerts a positive and statistically significant effect on health status but it is very small in magnitude instrumental variables estimation leaves the point estimate approximately the same but renders it insignificantly different from zero and even when the point estimate is increased by twice its standard error s e the quantitative effect is small we conclude that the wealth health connection is not driven by short run changes in wealth

can targeted transfers improve birth outcomes evidence from the introduction of the wic program abstract the goal of federal food and nutrition programs in the united states is to improve the nutritional well being and health of low income families a large body of literature evaluates the extent to which the supplemental program for women infants and children wic has accomplished this goal but most studies have been based on research designs that compare program participants to non participants if selection into these programs is non random then such comparisons will lead to biased estimates of the program s true effects in this study we use the rollout of the wic program across counties to estimate the impact of the program on infant health we find that the implementation of wic led to an increase in average birth weight and a decrease in the fraction of births that are classified as low birth weight we find no evidence that these estimates are driven by changes in fertility or selection into live births our preferred estimates suggest that wic initiation raised average birth weight by 2 g or by 7 g among infants born to mothers with low education levels these translate into estimated birth weight increases among participating mothers of approximately 18 to 29 g estimated treatments on the treated impacts among infants born to participating mothers with low education are of similar magnitude

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

the costs of low birth weight birth weight has emerged as the leading indicator of infant health and welfare and the central focus of infant health policy this is because low birth weight lbw infants experience severe health and developmental difficulties that can impose enormous costs on society but would the prevention of lbw generate equally sizable cost savings and health improvements estimates of the return to lbwprevention from cross sectional associations may be biased by omitted variables that cannot be influenced by policy such as genetic factors to address this we compare the hospital costs health at birth and infant mortality rates between heavier and lighter infants from all twin pairs born in the united states we also examine the effect of maternal smoking during pregnancy the leading risk factor for lbw in the united states on health among singleton births after controlling for detailed background characteristics both analyses imply substantially smaller effects of lbw than previously thought suggesting two possibilities 1 existing estimates overstate the true costs and consequences of lbw by at least a factor of four and by as much as a factor of 20 or 2 different lbw preventing interventions have different health and cost consequences implying that policy efforts that presume a single return to reducing lbw will necessarily be suboptimal

why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

economic status and health in childhood the origins of the gradient the well known positive association between health and income in adulthood has antecedents in childhood not only is children s health positively related to household income but the relationship between household income and children s health becomes more pronounced as children age part of the relationship can be explained by the arrival and impact of chronic conditions children from lower income households with chronic conditions have worse health than do those from higher income households the adverse health effects of lower income accumulate over children s lives part of the intergenerational transmission of socioeconomic status may work through the impact of parents income on children s health

interest rate linkages within the european monetary system further analysis j costas karfakis and demetrios m moschos 1990 examine the interest rate linkages within the european monetary system ems concluding that the german interest rate plays a dominate role within the ems the authors reexamine the interest rate linkages within the ems with the addition of the interest rate of the united states their results suggest that both the united states and german interest rates play an important but not dominant role in ems interest rate linkages copyright 1993 by ohio state university press

interest rate linkages in the eurocurrency market contemporaneous and out of sample granger causality tests abstract this paper examines linkages among major eurocurrency interest rates during 1994 2002 eurocurrency interest rate causal linkages are found to be much stronger with additional allowance for contemporaneous causality test results than the inference based solely on granger causality tests the impact of u s interest rates is clearly not dominant in the eurocurrency markets while the japanese interest rates are found to be quite influential german interest rates both cause and are caused by several other eurocurrency interest rates by contrast interest rates on the new currency the euro do not have a substantial influence on other eurocurrency interest rates which underscores its emerging status

the effects of monetary policy using structural factor analysis the traditional vector autoregression var method is widely used to trace out the effects of monetary policy innovations on the economy however this method suffers from the curse of dimensionality so that in practice vars are estimated on a limited number of variables leading to a potential missing information problem in this article we use the method of structural factor analysis to evaluate the effects of monetary policy on key macroeconomic variables in a data rich environment this methodology allows us to extract information on monetary policy and its impact on the economy from a much larger data set than is possible with the traditional var method we propose two structural factor models one is the structural factor augmented vector autoregressive sfavar model and the other is the structural factor vector autoregressive sfvar model compared to the traditional var both models incorporate information from hundreds of data series series that can be and are monitored by the central bank in

do euro exchange rates follow a martingale some out of sample evidence abstract traditional autocorrelation and variance ratio tests are based on serial uncorrelatedness rather than martingale difference as such they do not capture potential nonlinearity in mean which could lead to misleading inferences in favor of the martingale hypothesis this paper employs various parametric and nonparametric nonlinear models as well as several model comparison criteria to examine the potential martingale behavior of euro exchange rates in the context of out of sample forecasts the overall evidence indicates that while martingale behavior cannot be rejected for euro exchange rates with major currencies such as the japanese yen british pound and us dollar there is nonlinear predictability in terms of economic criteria with respect to several smaller currencies

socioeconomic status and child health why is the relationship stronger for older children case lubotsky and paxson 2001 show that the well known relationship between socio economic status ses and health exists in childhood and grows more pronounced with age however in cross sectional data it is difficult to distinguish between two possible explanations the first is that low ses children are less able to respond to a given health shock the second is that low ses children experience more shocks we show using panel data on canadian children that 1 the gradient we estimate in the cross section is very similar to that estimated previously using u s children 2 both high and low ses children recover from past health shocks to about the same degree and 3 that the relationship between ses and health grows stronger over time mainly because low ses children receive more negative health shocks in addition we examine the effect of health shocks on math and reading scores we find that health shocks affect test scores and future health in very similar ways our results suggest that public policy aimed at reducing ses related health differentials in children should focus on reducing the incidence of health shocks as well as on reducing disparities in access to palliative care

deficits explicit debt implicit debt and interest rates some empirical evidence author affiliation zijun wang private enterprise research center allen building room 3028 texas am e mail z wang neo tamu edu corresponding author andrew j rettenmaier private enterprise research center allen building room 3028 texas am e mail a rettenmaier tamu edu acknowledgment we are grateful to kent kimbrough editor and two anonymous referees for their comments which significantly improved the paper financial support from the lynde and harry bradley foundation and the national center for policy analysis ncpa is acknowledged 1 introductionthe effect of government borrowing on interest rates has been a controversial issue for about three decades the federal deficits of the 1980s and the early 1990s caused speculation as to whether higher interest rates would follow the current deficits have renewed interest in the link to higher interest rates since the influential work of barro 1974 much of the discussion has focused on whether the ricardian equivalence hypothesis holds bernheim 1987 barth et al 1991 seater 1993 elmendorf and mankiw 1999 and engen and hubbard 2005 provide excellent reviews of the literature on the topic recent contributions include cebula 1997 gale and orszag 2003 laubach 2003 and ardagna caselli and lane 2004 among others although empirical evidence obtained in earlier studies is mixed as argued by gale and orszag 2003 major macroeconometric models imply an economically significant connection between changes in deficits and long term interest rates empirical evidence assembled by recent studies seems to lean toward the existence of the relationship but there is still no consensus about the magnitude of the effect a missing piece in the debate is a formal investigation of the effect of the implicit debt as embodied in unfunded obligations of social security and medicare theoretically it could be argued that because the ricardian equivalence proposition assumes that households are rational and make decisions for long horizons then like the often discussed public debt explicit debt the implicit debt computed based on 75 year 100 year or infinite horizons might also have a role to play in the determination of interest rates the point we raise here is not new in his 1996 paper reflections on ricardian equivalence barro writes t he basic invariance proposition for intergenerational transfers is that the government s transfers implied by budget deficits or pay as you go social security would be fully undone if family members were connected through voluntary transfers based on altruism p 2 more recently gokhale and smetters 2005 also note that social security s pay as you go financing may crowd out private saving and hence increase interest rates p 12 1 therefore it is problematic to test the ricardian equivalence hypothesis without considering the effect of the implicit debt empirically the explicit debt although large in absolute amount about 4300 billion by the end of 2004 is only a part of the federal government s total obligations according to the office of the chief actuary of the social security administration the social security program alone carries unfunded obligations ranging from about 3700 to 11 200 billion in present values at the beginning of 2004 under various assumptions these numbers are even larger if the trust fund balances are subtracted in particular projected old age survivors and disability insurance payroll tax income will begin to fall short of outlays in 2017 which means that social security will require transfers from general revenues in the next decade social security trustees 2005 while previous studies have investigated the effect of social security wealth on saving and consumption e

the structure of interdependence in international stock markets abstract this study investigates the dynamic structure of nine major stock markets using an error correction model and directed acyclic graphs dag the dag representation provides a structure of causality among these markets in contemporaneous time building on this contemporaneous structure and the estimated error correction model innovation accounting techniques are applied the results show that the japanese market is among the most highly exogenous and the canadian and french markets among the least exogenous in our nine market study the us market is highly influenced by its own historical innovations but it is also influenced by market innovations from the uk switzerland hong kong france and germany the us market is the only market that has a consistently strong impact on price movements in other major stock markets in the longer run

the alaskan labor market during the pipeline era built between 1974 and 1977 the trans alaska pipeline was the largest privately financed construction project in world history the alaskan labor market during the pipeline era provides an ideal opportunity to view labor market responses to a large anticipated and temporary shock to labor demand the paper presents several theoretical models of market responses to temporary demand shocks and then assesses the ability of each model to explain the alaskan data among the findings are that alaskan wages were very flexible labor supply was quite elastic on both the intensive hours per worker and extensive number of workers margins and even a major short run demand shock need not have a long run impact

a note on euroyen and domestic yen interest rates abstract this study examines interest rate transmission between the london euroyen market and the japanese domestic cd market the results which span 1984 through the beginning of 1993 indicate that these two interest rate series are cointegrated in the earlier part of the sample period causality is strongest from the euroyen market to domestic yen interest rates however strong feedback effects are observed in both directions in more recent years the use of both vector autoregressive modeling and cointegration analysis for forecasting is supported over random walk models

the real time predictive content of money for output abstract data on monetary aggregates are subject to periodic redefinitions presumably in part to improve their link to measures of output money data are also revised on a regular basis taking these data imperfections into account we reassess the evidence on the marginal predictive content of m1 and m2 for real and nominal output in particular first by using the latest version of the data that is available and then using sequences of historical time series that would have been available to forecasters in real time we are able to provide a comprehensive assessment of whether money is useful for predicting output we conclude that the generally significant marginal predictive content of m1 or m2 for output that is found using a recently revised data set is not duplicated in a real time setting although m2 is shown to remain useful when 1 year ahead forecasts are constructed using fitted vector autoregressive models

the multiscale causal dynamics of foreign exchange markets abstract this paper relies on wavelet multiresolution analysis to investigate the dependence structure and predictability of currency markets across different timescales it explores the nature and direction of causality among the exchange rates with respect to the us dollar of the most widely traded currencies namely euro great britain pound and japanese yen the timescale analysis involves the estimation of linear nonlinear and spectral causal relationships of wavelet components and aggregate series as well as the investigation of their out of sample predictability moreover this study attempts to probe into the micro foundations of across scale causal heterogeneity on the basis of trader behavior with different time horizons the examined period starts from the introduction of the euro and covers the dot com bubble the financial crisis of 2007 2010 and the eurozone debt crisis technically this paper presents an invariant discrete wavelet transform that deals efficiently with phase shifts dyadic length and boundary effects it also proposes a new entropy based methodology for the determination of the optimal decomposition level and a wavelet based forecasting approach overall there is no indication of a global causal behavior that dominates at all timescales in the out of sample analysis wavelets clearly outperform the random walk for the volatility series moreover the synergistic application of wavelet decomposition and artificial neural networks provided with an enhanced predictability in many forecast horizons for the returns these results may have important implications for market efficiency and predictability

estimating a household production function heterogeneity the demand for health inputs and their effects on birth weight the household production literature emphasizes that technical or biological processes condition input selection by households in their production activities along with prices and income exogenous variations in health to the extent that they are perceived by individuals heterogeneity lead to correlations between inputs and health outcomes that cannot be used to derive causal conclusions therefore estimates of health technology must be obtained from a behavioral model in which health inputs are themselves choices consistent estimates are reported of the effect of endogenous inputs such as medical care smoking and fertility on birth weight and fetal growth in the presence of health heterogeneity

welfare and child health the link between afdc participation and birth weight the stated goal of the aid for families with dependent children program is to improve the well being of children in poor families the program has come under considerable attack in recent years from critics who argue that participation in afdc is associated with maternal behaviors that are bad for children we investigate this question using birth weight as a measure of child health we find that participation in afdc during pregnancy is associated with delays in obtaining prenatal care smoking and drinking during pregnancy younger maternal age at the birth and ultimately with lower birth weights even when observable characteristics of the mother are controlled for however we show that when unobservable characteristics of the mother are controlled for there is actually a positive association between participation in afdc and the birth weights of children of white women from poor families we find no association between birth weight and maternal participation in afdc among black children

does the dm dominate the euro market an empirical investigation starting point is the german dominance hypothesis according to which germany has a dominant position within the ems this makes it impossible for other member countries to pursue their own monetary policies using monthly data of three month euro market rates from 1980 to 1988 for the u s germany the u k the netherlands france and italy we test this hypothesis in a multivariate cointegration framework we find that germany has a strong position in europe which is not restricted to the ems concerning long run development one might speak of a dominant position however there are short run relations between european countries which are not linked to relations with germany copyright 1993 by mit press

inside the war on poverty the impact of food stamps on birth outcomes this paper evaluates the health impacts of a signature initiative of the war on poverty the introduction of the modern food stamp pro gram fsp using variation in the month fsp began operating in each u s county we find that pregnancies exposed to fsp three months prior to birth yielded deliveries with increased birth weight with the largest gains at the lowest birth weights we also find small but statistically insig nificant improvements in neonatal mortality we conclude that the sizable increase in income from fsp improved birth outcomes for both whites and african americans with larger impacts for african american mothers n this paper we evaluate the health consequences of a sizable improvement in the resources available to ameri ca s poorest in particular we examine the impact of the food stamp program fsp which in 2007 provided 34 billion in payments to about 13 million households on infant health our paper makes two distinct contributions first although the goal of the fsp is to increase the nutri tion of the poor few papers have examined its impact on health outcomes second building on work by hoynes and schanzenbach 2009 we argue that the fsp treatment represents an exogenous increase in income for the poor our analysis therefore represents a causal estimate of the impact of income on health an important topic with little convincing evidence due to concerns about endogeneity and reverse causality currie 2009 we use the natural experiment afforded by the nation wide rollout of the modern fsp during the 1960s and early 1970s our identification strategy uses the sharp timing of the county by county rollout of the fsp which was initially constrained by congressional funding authorizations and ultimately became available in all counties by 1975 speci fically we use information on the month the fsp began operating in each of the roughly 3 100 u s counties and examine the impact of the fsp rollout on mean birth weight low birth weight gestation and neonatal mortality throughout the history of the fsp the program para meters have been set by the u s department of agriculture usda and are uniform across states in the absence of the state level variation often leveraged by economists to eval uate transfer programs previous fsp research has typically resorted to strong assumptions as to the comparability of fsp participants and eligible nonparticipants currie 2003 not surprisingly the literature is far from settled as to what casual impact if any the fsp has on nutrition and health hoynes and schanzenbach 2009 use this county rollout to examine the impact of the fsp on food consumption using the psid they found that the introduction of the fsp increased total food spending and decreased out of pocket food spending importantly consistent with the predictions of canonical microeconomic theory the magnitude of the increase in food expenditures was similar to an equivalent sized income transfer implying that most recipient house holds were inframarginal that is they would spend more on the subsidized good than the face value of the in kind transfer as one of the largest antipoverty programs in the united states comparable in cost to the earned income tax credit eitc and substantially larger than temporary assistance to needy families tanf understanding fsp effects is valuable both in its own right and for what it reveals about the relationship between income and health 1

a multivariate cointegration analysis of interest rates in the eurocurrency market abstract a multivariate cointegration methodology is utilized to analyze relations among interest rates on us dollars uk pounds german marks french francs and japanese yen in the eurocurrency market over a period with major capital market deregulations and increasingly globalized money market trading three major results appear it is appropriate to model these interest rates as a multivariate cointegrated system no interest rate may be excluded from the cointegrating relations a recursive cointegration approach indicates that the number of cointegration vectors increases in the later part of the sample period consequently this study supports the hypothesis of a substantial increase in euromarket interest rate comovements jel e40 f02 1997 elsevier science ltd

money transfer and birth weight evidence from the alaska permanent fund dividend the positive relationship between income and health is well established however the direction of causality remains unclear do economic resources influence health or vice versa exploiting a new source of exogenous income variation this study examines the impact of the alaska permanent fund dividend apfd on newborns health outcomes the results show that income has a significantly positive but modest effect on birth weight we find that an additional 1 000 2 331 in 2011 dollars increases birth weight by 17 7 g and substantially decreases the likelihood of a low birth weight a decrease of around 14 of the sample mean furthermore the income effect is higher for less educated mothers based on a gestation weight profile in the sample increased gestation owing to the apfd could explain a maximum of 34 57 of the measured weight increase although we are unable to examine all the potential mechanisms jel i10 i18 i12

why do mexican americans earn low wages using current population survey data from november 1979 and 1989 i find that mexican americans earn low wages primarily because they possess less human capital than other workers not because they

dynamics and causality in industry specific volatility abstract this paper presents comprehensive empirical evidence on the dynamics and causality within 30 us industry specific volatilities during july 1963 and june 2008 we find that linear trends are present in 17 of the 30 industry volatilities granger causality tests reveal that the industry of business supplies and the industry of finance are the most important lead indicators of industry volatilities to uncover contemporaneous causal relationships in the market we implement an emerging data driven method of directed acyclic graphs the results suggest that volatility shocks originating from business supplies machinery and consumer goods industries are sources of risks that affect most other industries by contrast volatilities in the two traditionally important industries oil and autos do not appear to have a substantial influence on other large industries in the contemporaneous time finally business equipment and services both containing information technology components are the most important driving forces of the industry volatility surge in the late 1990s

the wages of older men in this paper net depreciation rates in human capital are estimated from wage data on a longitudinal sample of men aged 45 to 64 the results indicate that wage rates begin to decline in the early fifties at rates under 1 percent annually and decline at about 2 percent annually after age 60 this decrease was offset by the general increase in wage levels so that on average the real wages of men approaching retirement did not decline during the period studied the general increase was larger for blacks than for whites probably because of decreases in labor market discrimination between 1966 and 1974 an appendix presents a gls estimator for a variance components model in which the number of observations per individual varies

european integration and asymmetry in the ems abstract the empirical literature offers conflicting views of german dominance in the european monetary system we examine the validity of the german dominance hypothesis gdh by analyzing the responses of european central banks and money markets to monetary innovations originating both in europe european asymmetry and abroad international asymmetry our results reconcile the conflicting views in the literature the gdh is confirmed when the analysis is conducted with intervention rates before german unification results support european asymmetry with short rates before 1990 but not international asymmetry after 1990 the gdh is not supported by either set of rates

the international price transmission in stock index futures markets i introduction numerous studies have investigated market linkages and price transmission mechanisms in major international equity markets employing the analytical framework of the vector autoregression var or its variant the error correction model ecm 1 studies such as von furstenberg and jeon 1989 eun and shim 1989 and koch and koch 1991 focus on the short run dynamic pattern of price transmission others like taylor and tonks 1989 and francis and leachman 1998 are primarily interested in the long run pattern of price transmission more recently an increasing number of studies explore both long and short run patterns of price transmission included in this last set are the works of malliaris and urrutia 1992 arshanapalli and doukas 1993 masih and masih 2001 and bessler and yang 2003 among others this study extends the examination of international price transmission to stock index futures markets the article contributes to the existing literature in three aspects first a relatively new empirical framework is applied to allow for inferences of price transmission at three different time horizons instantaneous the short run and the long run building on recent advances in statistical analysis of causal modeling using directed acyclic graphs dags as in spirtes et al 2000 pearl 1995 2000 and swanson and granger 1997 this study is able to explore the contemporaneous causal pattern underlying the correlations among market innovations the existence of strong contemporaneous correlations among market innovations has been well documented in the united states and international stock markets by agmon 1972 eun and shim 1989 koch and koch 1991 housbrouk 1995 and bessler and yang 2003 it is also well recognized by agmon 1972 849 and eun and shim 1989 246 that contemporaneous correlations among market innovations reflect the phenomenon that new information in one market is transmitted and shared by other markets in contemporaneous time due to immediate response to price changes between markets however more in depth analysis on exactly how instantaneous price transmission among market innovations is conducted in international equity markets has not yet been well addressed in the existing literature although bessler and yang 2003 touch on the issue the necessity of imposing constraints in the spirit of the block recursive structure noted by koch and koch 1991 in the dag analysis of var innovations is proposed and discussed thoroughly in this study second innovation accounting analysis is more thoroughly explored in the study innovation accounting tools i e impulse response analysis and forecast error variance decomposition have been commonly used to summarize the dynamic pattern of price transmission among international financial markets the importance of the factorization of innovations i e var residuals in yielding sound inference has been well acknowledged theoretically by bernanke 1986 sims 1986 and swanson and granger 1997 the application of the dag technique as discussed in swanson and granger 1997 and explained in the next section is further key to innovation accounting analysis in this study the instantaneous price transmission pattern between market innovations as identified by the dag analysis provides a data determined solution to the basic problem of orthogonalization of residuals from the ecm and thus is critical to impulse response analysis or forecast error variance decompositions swanson and granger 1997 argue that compared to the choleski decomposition the dag based structural decomposition is sensible but not subjective because it allows for the properties exhibited by the data although several recent studies such as those by bessler and yang 2003 bessler et al 2003 haigh and bessler forthcoming and yang 2003 have used the dag based structural decomposition in a similar setting the study is the first attempt responding to the suggestion by swanson and granger 1997 364 of investigating the empirical implications of the dag based contemporaneous causal modeling

dynamic linkages among real interest rates in international capital markets abstract short run and long run dynamic linkages among weekly real interest rates for g 10 countries are examined using a variety of time series tests these tests give special attention to the time series properties of nominal interest rates ex ante expected rates of inflation and real interest rates term structure information is used to recover a theoretically consistent measure of ex ante expected inflation in sample and out of sample granger causality tests are also examined to evaluate lead lag relationships among real interest rates the results provide strong support for well integrated markets particularly in the long run the results imply leadership roles for the us in international asset markets