on measuring and comparing total factor productivities in extractive and non extractive sectors we explain why comparing the total factor productivities of extractive and non extractive sectors is likely to be misleading then we propose a correction and implement it for the case of asbestos where it turns out to make a significant difference

the term structure of euromarket interest rates an empirical investigation abstract this paper is an empirical investigation of the predictability and co movement of risk premia in the term structure of euromarket interest rates we present regression results which suggest that risk premia in three euromarket term structures and on uncovered foreign asset positions move together we test formally the hypothesis that these risk premia move in proportion to a single latent variable we are unable to reject this hypothesis the single latent variable model can be interpreted as in hansen and hodrick 1983 and hodrick and srivastava 1984 as a specialization of the icapm in which assets have constant betas on a single unobservable benchmark portfolio

the dynamic relationship between the federal funds rate and the treasury bill rate an empirical investigation this article examines the dynamic relationship between two key us money market interest rates the federal funds rate and the 3 month treasury bill rate using daily data over the period from 1974 99 we find a long run relationship between these two rates that is remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting employing a non linear asymmetric vector equilibrium correction model which is novel in this context we find that most of the adjustment toward the long run equilibrium occurs through the federal funds rate in turn there is strong evidence for the existence of significant asymmetries and non linearities in interest rate dynamics that have implications for the conventional view of interest rate behaviour

social behaviour in work absence by making use of a large scale randomized experiment we test whether social behaviour is important for work absence due to illness the individuals treated in the experiment were exposed to less monitoring of their eligibility to collect sickness insurance benefits which sharply increased their non monitored work absence this exogenous variation is exploited in two complementary analyses in both analyses we find significant social behaviour effects using detailed data we conclude that the social behaviour effects most likely stem from fairness concerns

international real interest rate equalization a multivariate time series approach this paper investigates the dynamic behaviour of monthly ex post real interest rates from several countries over the period 1980 to 1991 it is found that real interest rates are stationary over this period and that deviations from real interest parity are significant in the short run but disappear in the long run the latter evidence is established using the concept of co dependent time series proposed by gourieroux and peaucelle 1989 for the analysis of multivariate stationary time series

cointegration and the us term structure abstract using the maximum likelihood analysis of cointegration developed by johansen 1988 1991 we test the cointegration implications of the expectations hypothesis of the term structure on a sample of us pure discount yields by using this approach we are able to analyze systems of more than two interest rates simultaneously as opposed to most previous studies which examine interest rates only in pairs one of the main results is that for the period 1952 1987 the cointegration implications generally seem to hold

nonstationary term premia and cointegration of the term structure this paper proposes a model of the term structure with nonstationary term premia which exhibit a factor structure this explains the common empirical finding of a cointegrating rank smaller than the one predicted by the rational expectations hypothesis of the term structure an application to german interest rate data yields easily interpretable results

no arbitrage near cointegrated var p term structure models term premia and gdp growth abstract the recent macro finance literature does not agree either about the empirical properties of the expectation part and of the term premium on long term bonds or about the importance or even the direction of the relationship between the term premium and future economic activity this paper proposes a two step approach to handle both problems first in a var setting we extract a reliable measure of the term premium by means of averaging estimator techniques aiming at optimally solving prediction problems when highly persistent processes are present and thus providing a so called near cointegrated var p approach second we analyze the dynamic response of gdp to shocks to the term premium by using the new information response function concept as far as the first problem is concerned we find that the ncvar based term premium measure is rather stable and counter cyclical as suggested by interest rates survey based estimation of yield curve models and by its risk compensation role regarding the second problem we find that an increase in the long term spread caused by the term premium induces two effects on future economic activity the impact is negative for short horizons less than 1 year whereas it is positive for longer ones

raising children to work hard altruism work norms and social insurance children who can count on support from altruistic parents may not try hard to succeed in the labor market moreover parental altruism makes withdrawal of such support non credible to promote work

productivity change in canadian mining 1957 1979 this paper calculates multifactor productivity trends in seven canadian mining industries and relates changes in productivity to various factors including changes in output and factor prices and the decline in the quality of the ore being mined it is found that productivity decline in mining has been pronounced and tended to predate that of manufacturing by several years there are indications that the most important factors in the decline have been the fall in mineral grade contraction of output increases in interest rates and an apparent decline in the rate of technical innovation

the term structure of euro interest rates and rational expectations abstract this paper analyzes the short end of the maturity spectrum of euro interest rates using recent monthly data the data for the euro franc and euro dm interest rates support the rational expectations hypothesis whereas those true for euro dollar interest rates do not this result is explained by the different approaches used to conduct monetary policy in the usa switzerland and west germany

testing the expectations hypothesis in the brazilian term structure of interest rates a cointegration analysis in this article the expectations hypothesis eh is tested using cointegration techniques for maturities ranging from 1 to 12 months for the brazilian market we found evidence suggesting that for the period 1995 2006 the cointegration implication generally seems to hold we also found strong evidence supporting causality from short to long rates and also in the opposite direction empirical evidence supports the expectations theory of the term structure of interest rates

measures of fit for rational expectations models this survey provides a detailed description of some of the recent theoretical and empirical literature on rational expectations econometrics the survey pays special attention to non stationarity of the data and to the various methods for evaluating rational expectations models that have been developed as alternatives to the classical statistical approach of testing overidentifying restrictions these methods have become very popular and widely used in empirical research we provide an illustration using danish stock market data and we summarize the many results obtained recently using these measures in areas as diverse as stock prices the term structure of interest rates exchange rates consumption and saving the balance of payments tax smoothing hyperinflation and linear quadratic adjustment cost models for inventories labour demand and money demand

a money demand system for euro area m3 in order to assess the importance of monetary and financial developments for key macroeconomic variables in the euro area a money demand system for m3 is estimated adopting a structural cointegrating var approach while maintaining a good statistical representation of the data long run relationships are based on economic theory by using generalized response profiles the dynamics of the money demand system is investigated without any further identifying assumptions error bounds of the profiles are derived using bootstrap simulations

the term structure of eurodollar interest rates and its relationship to the us treasury bill market abstract this paper examines an efficient market of the term structure of eurodollar interest rates and its relationship with the us treasury bill market standard test procedures and granger causuality tests are conducted which provide evidence showing that past changes in short term eurodollar or domestic interest rates are not useful in predicting changes in long term eurodollar interest rates the eurodollar market appears to be efficiently integrated with the us domestic financial market

imitation contagion or exertion using a tax reform to reveal how colleagues sick leaves influence worker behaviour we analyse the social interaction effects in sick leave behaviour in the workplace using high quality norwegian matched employer employee data with detailed individual information on sick leaves during the 2004 2006 period we find that social interaction effects in sick leave behaviour in the workplace do exist and that the effects are noticeable in size the strong relationship between the sick leave rates among colleagues is not solely the result of contagious diseases nor is it caused by improved informational quality or by the increased workload for the non absent workers evidence supports the existence of reciprocal worker behaviour that is unrelated to joint leisure seeking activities

treasury yield curves and cointegration previous studies find that there is only one common stochastic trend in a set of interest rate series the result is interpreted as the evidence for supporting the expectations hypothesis cf hall et al 1992 this study finds that there are three common stochastic trends when whole spectrum stucture is analysed the three common stochastic trends can be interpreted as the shift the slope and the curvature of the term structure

dynamic strategies for fixed income investment the last 30 years have witnessed an enormous growth in fixed income markets how long term fixed income strategies should be implemented for the welfare of investors has become a major concern of bond managers this study makes use of stochastic optimal control to formulate a multi period portfolio selection model and implements it using backward recursion algorithm to find numerically the optimal allocation of wealth between long and short term bonds for an investor with power utility and an investment horizon of 10 years by way of a technical manipulation this study uses the fact that the long rate and the spread difference between long rate and short rate are uncorrelated to simplify model formulation and parameter estimation the results show that an investor would increase his her holding of short term bond if his her investment horizon becomes shorter or if he she is more risk averse or both

does the labor income process contain a unit root evidence from individual specific time series employing econometric methods for univariate time series this paper investigates the empirical validity of assuming a unit root in indiv iduals labor income processes using a swedish register based longitudinal dataset which a llows us to follow a cohort of workers from 1968 to 2005 we are able to obtain distributi ons of median unbiased estimates of localto unity parameters the results indicate that earn ings for the representative worker are governed by a process where shocks to earnings have fairly high persistence but are both economically and statistically significantly differ ent from having permanent effects that is the largest autoregressive root is less than unity these results add to the studies that question the heavy use of unit root processes for earnings i n calibrations of life cycle models

cultural transmission and discrimination workers can have good or bad work habits these traits are transmitted from one generation to the next through a learning and imitation process which depends on parents investment in the trait and the social environment where children live if a sufficiently high proportion of employers have taste based prejudices against minority workers we show that their prejudices are always self fulfilled in steady state and minority workers end up having on average worse work habits than majority workers this leads to a ghetto culture affirmative action can improve the welfare of minorities whereas integration can be beneficial to minority workers but detrimental to workers from the majority group

linkage in ems term structures evidence from common trend and transitory components abstract we test for the link among selected ems term structures during 1979 1995 by decomposing each term structure into its common trend and transitory components we find that ems common trends move together over time that the german trend is not the driving source of the shared co movements and that the transitory components spread are more loosely linked in recent years perhaps due to widened exchange rate bands our findings refute arguments that germany plays a dominant role in setting policy and raise doubts that it will play a dominant role if and when emu takes place

mean reversion in interest rates new evidence from a panel of oecd countries previous studies show that the standard univariate unit root tests cannot reject the hypothesis that interest rates follow integrated processes in this paper the authors pool interest rate data of twelve oecd countries and implement a multivariate test it is found that the unit root hypothesis can be decisively rejected copyright 1996 by ohio state university press

co integrating var models and economic policy this paper surveys some relevant contributions to the economic literature on co integrating vector autoregressive var models vector error correction mechanisms vecms emphasizing their usefulness for economic policy it further discusses some theoretical aspects that are necessary for a complete understanding of their potential the theoretical introduction of the co integrating var model is followed by an illustration of its applications to monetary policy fiscal policy and exchanges rates as well as in establishing the effects of structural bilateral shocks between countries the so called global var or gvar models special attention is paid to the vecm capacities of being used in conjunction with dynamic stochastic general equilibrium models and of jointly specifying the short and long run dynamics thus representing the steady state of economic systems by means of the co integration relations and the short run dynamics around it

sources of regime switching in short term interest rates for canada the purpose of this study is to identify sources of regime switching in short term interest rates for canada the choice of information variables is based on three well known hypotheses about interest rates the expectations hypothesis the fisher relationship and the condition for uncovered interest parity the empirical framework consists of an autoregressive distributive lag adl model in error correction form with information spreads and a markov regime switching estimation methodology the models choose interest rate regimes that are similar in many respects to those found for the usa the different regimes in canada are driven by movements in the monetary policy rate the us short term rate and the long term yield the monetary policy rate is found to trigger very large changes in the short term rate responding one for one in the high variance regime and slightly less in the more normal interest rate regime both the us short rate and long term yield are also found to trigger relatively large

near unit roots cointegration and the term structure of interest rates the term structure of interest rates is often modelled as a cointegrated system with the yield spreads forming the cointegrating vectors testing whether the yield spreads span the cointegration space is problematic because conventional tests on the cointegration vectors tend to overreject when the largest autoregressive roots deviate from unity as is likely to be the case with interest rates a new test that is robust w r t deviations from the exact unit root assumption is developed and applied to monthly us interest rate data from 1952 1 1991 2 taking into account the regime shift in 1979 the hypothesis of the yield spreads being the cointegrating vectors cannot be rejected using the robust test copyright 2000 john wiley sons ltd

the predictive power of yield spreads for future interest rates evidence from the danish term structure the predictive power of yield spreads for future interest rates is examined using a new database of zero coupon bonds yields from the danish bond market the evidence shows that during the period of monetary targeting 1976 1 1985 7 yield spreads have substantial predictive power and the results tend to support the rational expectations version of the classical expectations theory of the term structure however for the recent period 1985 8 1991 12 characterized by a shift to a policy of interest rate targeting the predictive power of yield spreads disappears

the empirical failure of the expectations hypothesis of the term structure of bond yields this paper tests the expectations hypothesis eh using us monthly data for bond yields spanning the 1952 2003 sample period and ranging in maturity from 1 month to 10 years we apply the lagrange multiplier test developed by bekaert and hodrick 2001 and extend it to increase the test power a by introducing economic variables as conditioning information and b by using more than two bond yields in the model and testing the eh jointly on more than one pair of yields while the conventional bivariate procedure provides mixed results the more powerful testing procedures suggest rejection of the eh throughout the maturity spectrum examined

the adjustment of expectations to a change in regime a study of the founding of the federal reserve the founding of the federal reserve system in 1914 led to a substantial change in the behavior of nominal interest rates the authors examine the timing of this change and the speed with which it was effected they then use data on the term structure of interest rates to determine how expectations responded their results indicate that the change in policy regime was rapid and that individuals quickly understood the new environment they were facing copyright 1987 by american economic association

understanding welfare stigma taxpayer resentment and statistical discrimination abstract welfare stigma is widely regarded to be of central importance in understanding the impact of welfare programs in their goal of alleviating poverty it affects both the decision to take up benefits and the well being of those who actually do this paper develops alternative models of the determinants of welfare stigma we identify two views a statistical discrimination approach and a taxpayer resentment view we discuss how each may be formalized and derive their implications we then examine what they imply about the relationship between stigma and program design

personal liberties religiosity and effort abstract in this paper we study the role of religiosity in influencing the choice of labor effort many religions promote restrictions on personal liberties such as divorce abortion gender parity or gay marriage often regulated by law we assume that the higher the degree of religiosity of an individual the less he enjoys such personal liberties and the less he likes to be in a society which allows them while seculars enjoy such liberties by standard consumer theory the differential valuation induced by religiosity influences individual decisions on other dimensions as well notably labour supply we show empirically that this nexus holds and that the size of the effect is large specifically we construct an index of personal liberties and find solid evidence in support of the joint effect of religiosity and liberties on labor effort our empirical results indicate that religiosity interacted with the legal level of liberties has a significant and strong negative effect on labor supply and that increases in the cap on liberties have a negative effect on the labor supply of the religious individuals and positive for the secular

arbitrage cointegration and testing the unbiasedness hypothesis in financial markets we use a no arbitrage cost of carry asset pricing model to show that the existence of coin tegration between spot and forward futures prices depends on the time series properties of the cost of carry we argue that the conditions for cointegration are more likely to hold in currency markets than in commodity markets explaining many of the empirical results in the literature we also use this model to demonstrate why the forward rate forecast error the basis and the forward premium are serially correlated and to develop econometric tests ofthe unbiasedness hypothesis sometimes called the simple efficiency hypothesis in various financial markets the unbiasedness hypothesis is so prevalent in the finance liter ature that many tests for it have been developed we examine four of the common tests and and use our cointegration results to demonstrate why each of these tests should reject the null hypothesis of unbiasedness we find strong support for our hypothesis in the existing empirical literature

a critical reexamination of the empirical evidence on the arbitrage pricing theory this paper demonstrates that the roll and ross rr and other previously published tests of the apt are subject to several basic limitations there is a general nonequivalence of factor analyzing small groups of securities and factor analyzing a group of securities sufficiently large for the apt model to hold it is found that as one increases the number of securities the number of factors determined increases this increase in the number of factors with larger groups of securities cannot readily be explained by a distinction between priced and nonpriced risk factors as it is impermissible to carry out tests on whether a given risk factor is priced using factor analytic procedures the apt model as exposited by ross 17 18 and extended by huberman 9 has provided the basis of an extensive literature as for example brown and weinstein 1 chen 3 hughes 10 ingersoll 11 jobson 12 reinganum 15 roll and ross rr 16 and shanken 17 to mention but a few it has also been treated in a more general context by chamberlain and rothschild 2 our purpose here is not to comment on this collection of papers many of which are unpublished but to reexamine the evidence presented by rr and point out major pitfalls involved in the empirical methodology employed by them and others who have followed their lead rr claim that on theoretical and more importantly on empirical grounds arbitrage pricing theory apt is an attractive alternative to the capital asset pricing model capm the apt it is argued requires less stringent and presumably more plausible assumptions is more readily testable since it does not require the measurement of the market portfolio and may be better able to explain the anomalies found in the application of the capm to asset returns the acceptability of the apt like that of the capm or any other theory ultimately depends on its ability to explain the relevant empirical evidence our subsequent discussion will show that many of the prqblems associated with the capm are also present in the apt context and that its ability to explain the relevant empirical evidence is not markedly superior moreover it raises questions not only about the rr and related empirical investigations of the apt but also about the testability of that theory in the present state of the art a major part of the problem results from the necessity to break down the universe being analyzed through the apt model this is forced upon the investigator by the fact

women s career choices social norms and child care policies our model explains the observed gender specific patterns of career and child care choices through endogenous social norms we study how these norms interact with the gender wage gap we show that via the social norm a couple s child care and career choices impose an externality on other couples so that the laissez faire is inefficient we use our model to study the design and effectiveness of three commonly used policies we find that child care subsidies and women quotas can be effective tools to mitigate or eliminate the externality parental leave however may even intensify the externality and decrease welfare

federal funds rate prediction we examine the forecasting performance of a range of time series models of the daily us effective federal funds ff rate recently proposed in the literature we find that i most of the models and predictor variables considered produce satisfactory oneday ahead forecasts of the ff rate ii the best forecasting model is a simple univariate model where the future ff rate is forecast using the current difference between the ff rate and its target iii combining the forecasts from various models generally yields modest improvements on the best performing model these results have a natural interpretation and clear policy implications

grade selection under uncertainty least cost last and other anomalies abstract grade selection rules for heterogeneous resource deposits with increasing marginal extraction costs are derived it is shown that contrary to the conventional wisdom it can be optimal to extract the least cost deposits last there are a number of rules that are compatible with dynamic profit maximization under certainty nevertheless none explains empirical regularities in actual extraction patterns when uncertainty about future price is introduced however the theoretical model conforms closely not only to observed grade selection patterns but also to observed mineral industry price paths

the revival of the expectations hypothesis of the us term structure of interest rates abstract us interest rate data from 1987 to 1995 show a substantial predictive power of the spread for the short rate in line with the expectations hypothesis the estimation of a mccallum policy reaction model supports our conjecture that this striking result can be attributed to the adoption of the spread as an indicator for us monetary policy since the late eighties 1997 elsevier science s a

on risk rationality and the predictive ability of european short term adjusted yield spreads abstract in this paper a rolling vector error correction model vecm is proposed to construct measures of the market s time varying conditional expectations of the 3 month money rates starting 13 weeks hence for several major ems member countries vecm based predictions provide the basis for computing ex ante out of sample estimates of the term premia these term premia are then used to adjust the yield spreads as a prelude to investigating their ability to predict future interest rates the source s of the yield spread bias are discussed while the expectations hypothesis is resoundingly rejected using the standard test specification yield spreads adjusted for time varying term premia are found to possess substantial predictive ability and in many instances the expectations hypothesis is not rejected the robustness of the results across the different european money markets and sample periods is highly encouraging the test results underscore the importance of incorporating into the test specification the equilibrium cointegrating constraints if they exist jel g15 1997 elsevier science ltd

norm conformity across societies this paper studies the aggregate distribution of declared opinions and behavior when heterogeneous individuals make the trade off between being true to their private opinions and conforming to a social norm the model sheds light on how various sanctioning regimes induce conformity and by whom and on phenomena such as societal polarization and unimodal concentration in strict societies individuals will tend to either fully conform to the social norm or totally ignore it while individuals in liberal societies will tend to compromise between these two extremes furthermore the degree of strictness determines whether those who nearly agree with the norm or those who strongly disagree with it will conform the degree of liberalism similarly determines which individuals will compromise the most a number of empirical predictions and several methods of how to test them are suggested

testing the expectations hypothesis in eurodeposits abstract analyzing data on euro rates for 1978 1998 we find some consistent evidence in favor of the expectations hypothesis eh of the term structure a interest rates offered on deposits in a given currency form a cointegrated system b the restrictions of the eh on the cointegrating relationships are not rejected c forward rates contain significant explanatory power on future interest rates unbiasedness being an acceptable hypothesis as a cointegrating relationship between forward rates and the appropriate future value of the corresponding short term interest rate however we also provide evidence that past rates contain information additional to that in forward rates to predict future short term rates against the rational expectations version of the eh and market efficiency

benchmarking the expectations hypothesis of the interest rate term structure an analysis of cointegration vectors i test cointegration restrictions that are consistent with the expectations hypothesis of the term structure by employing the full information maximum likelihood methods developed by johansen yield curves appear to be the result of cointegration among interest rates the cointegration vectors that best describe the long term impact of interest rate levels on interest rate changes can often be written as linear combinations of interest rate spreads there is however difficulty in keeping short term yields in such a restricted cointegrated system with other interest rates short term speculative returns from long term bonds do not conform to the expectations hypothesis

a synthetic factor approach to the estimation of value at risk of a portfolio of interest rate swaps in this paper we decompose the interest rate swap yield curves of 10 major currencies into their common factors and find that the first two factors interpreted as parallel shift and rotation explain between 97 1 and 98 6 of the variation in the interest rate swap rates across all 10 currencies the main contribution of the paper however is that we then model these two factors as simplified synthetic factors so that they may be used to develop an innovative approach to the computation of value at risk var for a portfolio of interest rate swaps 2000 elsevier science b v all rights reserved

social insurance networks based on administrative panel data from norway we examine how social insurance dependency spreads within neighborhoods families ethnic minorities and among former schoolmates we use a fixed effects methodology that accounts for endogenous group formation contextual interactions and time constant as well as time varying confounders we report evidence that social insurance dependency is contagious the estimated network effects are both quantitatively and statistically significant and they rise rapidly with relational closeness in a way that establishes endogenous social interaction as a central causal mechanism social interactions do not cross ethnic borders

price relationships in the petroleum market an analysis of crude oil and refined product prices in this paper the relationships between crude oil and refined product prices are investigated in a multivariate framework this allows us to test several partly competing assumptions of earlier studies in particular we find that the crude oil price is weakly exogenous and that the spread is constant in some but not all relationships moreover the multivariate analysis shows that the link between crude oil prices and several refined product prices implies market integration for these refined products this is an example of supply driven market integration and producers will change the output mix in response to price changes

shifting endpoints in the term structure of interest rates abstract this paper links the term structure to perceptions of monetary policy long horizon forecasts of short rates required by no arbitrage term structure models are heavily influenced by the endpoints or limiting conditional forecasts of the short rate process common assumptions that the short rate is mean reverting or contains a unit root are shown to generate unrealistic yield predictions failures occur because these assumptions inadequately account for historical shifts in market perceptions of the policy target for inflation this paper links endpoint shifts to agent learning about shifts in long term policy goals shifting endpoints in short rate processes significantly improve yield predictions

an empirical note on the term structure and interest rate stabilization policies the expectations theory of the term structure of interest rates supplemented by the rational expectations and time invariant risk premium assumption implies that the spread between the long and the short rate has in general predictive power for the short rate this implication was consistently rejected in recent studies shiller campbell and schoenholtz 1983 fama 1984 mankiw and summers 1984 with data at the short end of the maturity spectrum threeand six month treasury bills time variations of the risk premium which are probably important for the behavior of the yield on long term bonds are not an entirely satisfactory explanation for these findings in a more recent article of mankiw and miron 1986 who analyzed quarterly data for threeand six month interest rates over the period 1890 1979 an interesting new explanation for the failure of the expectations theory emerged they showed that the spread had substantial predictive power for changes in the short rate in the period before the founding of the federal reserve 1890 1914 whereas for all other periods considered 1915 1933 1934 1951 1951 1958 and 1959 1979 the spread did not help to predict the short rate thus mankiw and miron suggested that the rejection of the expectations theory with recent data is a consequence of the commitment of the federal reserve to stabilize interest rates resulting in random walk behavior of the short rate under these circumstances expected future short rates are equal to the actual short rate and variations of the spread are only brought about by changes in the risk premium in this note the short term interest rate stabilization explanation for the failure of the predictive implications of the expectations theory of the term structure is subjected to an additional empirical test using recent monthly data thereby the short end of the term structure of swiss german and u s interest rates is analyzed for the years 1974 1986 these three cases are of great interest in our context the swiss national bank and the german federal bank used the opportunity offered by the flexible exchange rate system to implement money supply targets and did not attempt to stabilize short term interest rates whereas the federal reserve was at

forecasting canadian short term interest rates the author investigates the forecasting performance of a number of simple prediction techniques for short term interest rates in particular quarterly forecasts of canadian three month t bill rates from one to forty quarters in the future are generated during 1963 92 using several time series methods and market based yield curve strategies comparison is made with the martingale and for a shorter recent sample with the predictions made by several economic forecasters for the most part utilization of the yield curve proved best though it must be granted that no methodology was able to outperform the martingale for horizons up to a year

the volatility of long term bond returns persistent interest shocks and time varying risk premiums we develop an almost affine term structure model with a closed form solution for factor loadings in which the spot rate and the risk price are fractionally integrated processes with different integration orders this model is used to explain two stylized facts first predictability of longterm excess bond returns requires sufficient volatility and persistence in the risk price second the large volatility of long term bond returns requires persistence in the spot rate decomposing long term bond returns we find that the expectations component from the level factor is more volatile than returns themselves and that the risk premium correlates negatively with level factor innovations

on the number of common unit roots in the term structure of interest rates 1994 on the number of common unit roots in the term structure of interest rates applied economics vol 26 no 8 pp 815 820

the expectations hypothesis of the term structure tests on us german french and uk euro rates abstract this paper tests the expectations hypothesis of the term structure on us german french and uk euro rates three tests are examined the first is based on forward rates and the other two are based on the interest rates spread first we show that the sign puzzle highlighted by campbell and shiller campbell j y shiller r j 1991 yield spreads and interest rate movements a bird s eye view review of economic studies 58 495 514 for us data does not arise in the cases of french and uk short term rates second we propose tests for the expectations hypothesis based on error correction models with these tests the sign puzzle disappears but the country puzzle remains

testing the expectations hypothesis when interest rates are near integrated nominal interest rates are unlikely to be generated by unit root processes using data on short and long interest rates from eight developed and six emerging economies we test the expectations hypothesis using cointegration methods under the assumption that interest rates are near integrated if the null hypothesis of no cointegration is rejected we then test whether the estimated cointegrating vector is consistent with that suggested by the expectations hypothesis the results show support for cointegration in 10 of the 14 countries we consider and the cointegrating vector is similar across countries however the parameters differ from those suggested by theory we relate our findings to existing literature on the failure of the expectations hypothesis and to the role of term premia

information shares in the us treasury market abstract this paper highlights the previously neglected role of the futures markets in us treasury price discovery the estimates of 5 and 10 year govpx spot market information shares typically fail to reach 50 from 1999 on the govpx information shares for the 2 year contract are higher than those of the 5 and 10 year maturities but also decline after 1998 relative bid ask spreads number of trades and realized volatility are statistically significant and explain up to 21 of daily information shares in roughly 1 4 of cases when public information is released the futures market gains information share but macroeconomic announcements rarely explain information shares independently of liquidity

the expectations hypothesis term premia and the canadian term structure of interest rates in this paper monthly data are used over the period 1960 7 to 1995 12 to examine the determinants of term premia implicit in the canadian t bill term structure of interest rates in sharp contrast to u s evidence the conditional variances of canadian macroeconomic variables are found to be insignificant predictors of term premia in the canadian t bill term structure the conditional variances of u s macroeconomic variables however are found to be important determinants of canadian term premia jel classification e43 g1 l hypothese des anticipations les primes de temps et la structure temporelle des taux d interet canadiens ce memoire utilise des donnees mensuelles de juillet 1960 a decembre 1995 pour examiner les determinants des primes de temps implicites dans la structure des taux d interet pour les bons du tresor canadiens contrairement a ce que l on trouve aux etats unis il semble que les variances conditionnelles des variables macroeconomiques canadiennes ne sont pas des predicteurs utiles de ces primes cependant il appert que les variances conditonnelles des variables macroeconomiques des etats unis sont des determinants importants de ces primes

social norms and economic incentives in firms abstract this paper studies the interplay between economic incentives and social norms in firms we introduce a general framework to model social norms arguing that norms stem from agents desire for or peer pressure towards social efficiency in a simple model of team production we examine the interplay of three types of contracts with social norms we show that one and the same norm can be output increasing neutral or output decreasing depending on the contract multiplicity of equilibria and crowding out effects of steeper incentives can arise

endogenous term premia and anomalies in the term structure of interest rates explaining the predictability smile abstract numerous studies have documented a predictability smile in the post war term structure of interest rates spreads between long rates and short rates predict subsequent movements in short rates provided the long horizon is less than three months or greater than two years but not for intermediate maturities proposed explanations of the smile involve interest rate smoothing by the fed time varying risk premia peso problems and measurement error we show that despite their highly restrictive nature some parameterizations of the cox ingersoll ross cir and chen scott cs models of the term structure can account for the predictability smile cir and cs parameterizations which are consistent with the smile regularity are inconsistent with other features of the data however

common stochastic trends in a system of eurocurrency rates abstract this paper investigates the temporal relationship between interest rates on eurodeposit instruments ranging in maturity from seven days to one year for seven different currency denominations over the 1986 1992 period multivariate tests of cointegration reveal strong evidence in favor of the presence of common factors in the univariate time series representation of each eurocurrency term structure specifically the hypothesis of noncointegration was rejected in all seven eurocurrency term structures of interest rates examined in this study this is consistent with the hypothesis that each eurocurrency term structure of interest rates possesses a cointegrating structure that prevents these rates from drifting too far apart from equilibrium so that profitable opportunities do not persist the estimation of an error correction model which used this information i e the cointegrating equilibrium error term produced interest rate forecasts that outperformed the forecasts of a naive and a var model that ignore the cointegration of eurodeposit rates finally we examined the extent of interdependence among five maturities of seven dimensional intercurrency eurodeposit rate series and found a strong cointegrating structure across intercurrency eurodeposit rates that forces convergence among these rates

gender inequality endogenous cultural norms and economic development this research focuses on the role played by cultural norms in the long run persistence of gender inequalities cultural norms about gender roles are considered to be endogenous and can generate gender inequality and low development traps indeed when the gender gap is internalized it leads to inegalitarian views about gender roles due to these inegalitarian beliefs boys receive more education and the initial gender gap is reinforced the existence of gender inequality traps is pointed out by the world bank as a major obstacle for economic development wdr 2006 the present article allows for a better understanding of the persistence of such traps and the means to escape

value at risk models for dutch bond portfolios this study investigates the consequences of dynamics in the term structure of dutch interest rates for the accurateness of value at risk models therefore value at risk measures are calculated using both historical simulation variance covariance and monte carlo simulation methods for a ten days holding period the best results were obtained for a combined variance covariance monte carlo method using a term structure model with a normal distribution and garch specification term structure models with a t distribution or with cointegration performed much worse 2000 elsevier science b v all rights reserved jel classification e43 g28

the treasury yield curve as a cointegrated system this paper examines the temporal relationship between interest rates on treasury securities ranging in maturity from three months to 30 years we find strong empirical support that the seven treasury rates selected are cointegrated a conclusion that is insensitive to the normalization chosen in particular the hypothesis of noncointegration is rejeeted decisively regardless of the rate selected as the dependent variable in the cointegrating equation to determine whether this information can be used to improve forecasts of treasury rates the seven rates are forecasted with a corresponding erroreorrection model that is shown to outperform an augmented var model that ignores the cointegration of the rates the results are consistent with the belief that arbitrage limits the extent to which rates on different maturities of a given security diverge in addition the results confirm the appropriateness of imposing a common stochastic process for interest rates in equilibrium models of the term structure

what does the term structure tell us about future inflation abstract this empirical analysis indicates that for maturities of six months or less the term structure of nominal interest rates provides almost no information about the future path of inflation but does provide information about the term structure of real interest rates however as maturities lengthen to nine and twelve months the nominal term structure begins to contain information about future inflation but ceases to provide information about the real term structure these results are explained by differences in the relative variability of expected future inflation changes and real term structure slopes at different points in the term structure

testing for cointegration abstract monte carlo experiments indicate that temporal disaggregation often yields significant power increases in augmented dickey fuller cointegration tests this result is contrary to the properties of adf unit root tests and is robust to several lag specifications and test misspecifications

the expectation hypothesis in emerging financial markets the case of malaysia this article deals with the expectation hypothesis of the term structure of interest rates it is argued that the rapid progress and financial market liberalization that is occurring in emerging financial markets could provide additional evidence for testing the expectation hypothesis this article employs data from the malaysian government securities market which represents one of the examples of an emerging financial market cointegration and error correction analyses show significant empirical validity for the expectation hypothesis the long and short term interest rates are shown to be cointegrated and subject to a long run equilibrium path in addition to shedding some light on the experience of emerging financial market this article explicitly identifies the process of adjustment towards the long run equilibrium for the long run the results are in favour of the long to short version of expectation hypothesis with longer term interest rates playing a greater role as equilibrium attractor howeve

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

the term structure of interest rates and regime shifts some empirical results abstract a test of the expectations theory of the term structure in the framework of a regime switching var model for a change in the short rate and the short long spread with euro us and euro swiss franc rate data points to the importance of uncertainty about the procedures of monetary policy for the rejection of the expectations theory in the us case whereas in the swiss case a time varying term premium also seems to be relevant

heterogeneity of the determinants of euro area sovereign bond spreads what does it tell us about financial stability abstract in this paper we assess the movements of euro area sovereign bond yield spreads vis a vis the german bund as processes specified across different levels of volatility and subject to movements in asset prices and economic conditions the determinants we use are grouped into domestic and euro area aggregates thus allowing us to derive results on their relative explanatory power and compare them across time and the spectrum of countries we find that volatility influences the deterministic processes of the euro area sovereign spreads and that identical determinants have effects on spreads that vary considerably across countries furthermore we find that variables reflecting investment confidence conditions and perceptions for the upcoming economic activity are significant determinants and their significance remains to a large extent even when controlling for fiscal variables

optimal redistribution with endogenous social norms in this paper we examine the effect of social norms on redistributive policies where social norms are reflected in the degree of work participation among the different skill classes participation is driven both by the material incentives and heterogeneous preferences for leisure of each skill class and by an endogenous social norm results for optimal redistributive taxation show that when the social norm enters as a benefit or cost for participants participation taxes are generally lower than in its absence multiple participation equilibria can occur and an engineered shift from a low to a high participation equilibrium can be pareto improving in the long run

resource taxation with heterogeneous quality and endogenous reserves abstract this paper analyzes the impact of mining taxation on the intertemporal extraction profile for a heterogeneous ore body the extraction profile specifies both quantities and qualities extracted in each period total extraction is thus endogenously determined the taxes explicitly considered are severance taxes ad valorem or per unit on metal or on ore property taxes and profits taxes with depletion allowance the intertemporal framework integrates economic and geological factors generating new results on extraction distortions and providing qualification or reconciliation of previous diverse results in this area

social norms and welfare state dynamics the paper analyses the interaction between economic incentives and work norms in the context of social insurance if the work norm is endogenous in the sense that it is weaker when the population share of beneficiaries is higher then voters will choose less generous benefits than otherwise we also discuss welfare state dynamics when there is a time lag in the adjustment of the norm in response to changes in this population share and show how a temporary shift in the unemployment rate may cause persistence in the number of benefi

term structure anomalies term premium or peso problem abstract the goal of this paper is to develop a test for the relative importance of the time varying term premium and the peso problem for rejection of the expectation hypothesis of the term structure ehts our reasoning is based on a term structure model that allows for both phenomena simultaneously if we assume that only one regime is observed ex post we can estimate all the information we need to evaluate distortions generated by both hypotheses we can also test the presence of a peso problem firstly we find that a peso problem might explain rejection of the ehts in germany and the united kingdom after the european exchange rate crisis secondly we show that this explanation appears inappropriate to explain the ehts failure in the united states

productivity and metal mining evidence from copper mining firms one of the aims of productivity measurement is to assess the performance of various sectors of the economy with respect to their use of scarce inputs in this paper the emphasis is on the effects of firm behaviour on simple index number measurement of total factor productivity in non renewable resource industries economic theory predicts that when the stock of ore is known and there is positive discount rate an intertemporally profit maximizing firm will often process the best ore first that is ores that are of high grade and or are most easily accessible will be correspond to the lowest cost units of final metal output less capital labour energy and matgerials will be needed in the mining and milling processes