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

news shock firm dynamics and business cycles evidence and theory abstract the literature of expectation driven business cycles has overlooked the role played by endogenous entry this paper documents empirically news shock as a major source of fluctuations in firm dynamics and comovement between firm entry and gdp using structural vector auto regressions we then develop a tractable dynamic stochastic general equilibrium model to study the propagation mechanism assuming fixed operating costs for incumbents and decreasing survival rates for entrants our quantitative prediction closely matches the positive comovement between firm entries and core macroeconomic indicators upon news shock these results remain robust at the sectoral level when the baseline model is extended to a two sector setup

examining the global environmental impact of regional consumption activities part 2 review of input output models for the assessment of environmental impacts embodied in trade this paper offers a detailed review of recently described single and multi region input output models used to assess environmental impacts of internationally traded goods and services it is the second part of a two part contribution in part 1 turner k lenzen m wiedmann t and barrett j in press examining the global environmental impact of regional consumption activities part 1 a technical note on combining input output and ecological footprint analysis ecological economics we describe how to enumerate the resource and pollution content of inter regional and inter national trade flows with the aim to illustrate an ideal accounting and modelling framework for the estimation of ecological footprints a large number of such environment economic models have been described but only in the last few years models have emerged that use a more sophisticated multi region multi sector input output framework this has been made possible through improvements in data availability and quality as well as computability we identify six major models that employ multi sector multi region input output analysis in order to calculate environmental impacts embodied in international trade results from the reviewed studies demonstrate that it is important to explicitly consider the production recipe land and energy use as well as emissions in a multi region multi sector and multi directional trade model with global coverage and detailed sector disaggregation only then reliable figures for indicators of impacts embodied in trade such as the ecological footprint can be derived

intersectoral labor immobility sectoral comovement and news shocks sectoral comovement of output and hours worked is a prominent feature of business cycle data however most two sector neoclassical models fail to generate this sectoral comovement we construct and estimate a two sector neoclassical dynamic stochastic general equilibrium dgse model generating sectoral comovement in response to both anticipated and unanticipated shocks the key to our model s success is a significant degree of intersectoral labor immobility which we estimate using data on sectoral hours worked furthermore we demonstrate that imperfect intersectoral labor mobility provides a better explanation for the sectoral comovement than an alternative model emphasizing the role of labor supply wealth effects

bank capital shocks and countercyclical requirements implications for banking stability and welfare abstract this paper incorporates anticipated and unanticipated shocks to bank capital into a dsge model with a banking sector we apply this model to study basel iii countercyclical capital requirements and their implications for banking stability and household welfare we introduce three different countercyclical capital rules the first countercyclical capital rule responds to credit to output ratio the second countercyclical rule reacts to deviations of credit to its steady state and the third rule reacts to credit growth the second rule proves to be the most effective tool in dampening credit supply housing demand and household debt as well as in enhancing the banking stability by ensuring that banks have higher bank capital and capital to asset ratio after conducting a welfare analysis we find that the second rule outranks the other ones followed by the first rule the baseline and the third rule respectively in terms of welfare accumulation

quantifying the uncertainty about the fit of a new keynesian pricing model abstract recent studies by gali and gertler 1999 inflation dynamics a structural econometric analysis journal of monetary economics 44 195 222 and sbordone 2002 prices and unit labor costs testing models of pricing journal of monetary economics 49 265 292 conclude that a theoretical inflation series implied by a forward looking new keynesian pricing equation fits post 1960 u s inflation closely their theoretical inflation series is conditional on i a reduced form forecasting process for real marginal cost and ii the calibration of the pricing equation the present paper shows that both of these determinants are surrounded by considerable uncertainty when quantifying the impact of this uncertainty on theoretical inflation we can no longer say whether the forward looking pricing equation explains observed inflation dynamics very well or very poorly

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

international spillovers of large scale asset purchases this paper evaluates the international spillover eects of large scale asset purchases lsaps using a two country dynamic stochastic general equilibrium model with nominal and real rigidities and portfolio balance eects portfolio balance eects arise from imperfect substitution between short and long term bond portfolios in each country as well as between domestic and foreign bonds within these portfolios we show that lsaps lower both domestic and foreign long term yields and stimulate economic activity in both countries international spillover eects

the spirit of capitalism and savings behavior abstract this paper presents a capitalist spirit model of savings by including wealth in the intertemporal utility function while this model includes the life cycle model and bequest model as two special cases it sheds light on why wealth holding has tended to increase with age why decumulation of wealth after retirement has not happened and why households with and without children have not shown significant differences in their savings behavior the capitalist spirit approach is especially useful for understanding savings by the rich and savings across countries and over time jel e21 b10

regional size industrial location and input output expenditure coefficients mccann p and dewhurst j h ll 1998 regional size industrial location and input output expenditure coefficients reg studies 32 435 444 this paper develops some of the themes raised in a recent paper by flegg et al 1995 the question we explore is the relationship between the size of a region and the values of the expenditure coefficients as estimated using location quotients by using hypothetical examples we show that there is no theoretical relationship between regional size and the value of a regional expenditure coefficient the reason is that it depends on the spatial distribution of activity and industrial linkages on the other hand it would also appear that in many cases there does seem to be an empirical relationship and that this observation is worthy of further research mccann p et dewhurst j h ll 1998 taille des regions localisation industrielle et coefficients input output de depense reg studies 32 435 444 cet article developpe certaines des questions soulevees re

interregional multipliers looking backward looking forward backward linkages are usually measured using output multipliers as based on the input matrix similarly value added and import multipliers are derived by additionally using the corresponding primary input coefficients for measuring forward linkages input multipliers have been frequently used within a supply driven input output model these multipliers are obtained from the output matrix the present paper extends this notion by taking into account also the final output coefficients this yields consumption export and investment multipliers in an empirical analysis multipliers are calculated for an intercountry input output table of six european union eu countries the multipliers are decomposed into intracountry effects intercountry spillover effects and intercountry feedback effects d habitude les liens en amont sont mesures a partir des multiplicateurs de production bases sur la matrice des facteurs de production de la meme maniere des multiplicateurs de valeur ajoutee et d importation s

does labor s share drive inflation a number of researchers have recently argued that the new keynesian phillips curve matches the empirical behavior of inflation well when the labor income share is used as a driving variable but fits poorly when deterministically detrended output is used the theoretical motivation for these results rests on the idea that the output gap the deviation between actual and potential output is better captured by the labor income share in turn implying that central banks should raise interest rates in response to increases in this variable we show that the empirical evidence generally suggests that the labor share version of the new keynesian phillips curve is a very poor model of price inflation we conclude that there is little reason to view the labor income share as a good measure of the output gap or as an appropriate variable for incorporation in a monetary policy rule

the study of regional economic structure using input output tables jensen r c west g r and hewings g j d 1988 the study of regional economic structure using input output tables reg studies 22 209 220 this paper reports an attempt to describe economic structure using input output tables the various attempts to develop holistic matrix descriptors are summarized analysis of the relationship between the corresponding cells of ten transactions tables of queensland regions and the economic size of these regions shows that many cells are individually predictable and that patterns of predictability are identifiable specifically it is possible to recognize a group of cells on the more tertiary end of the primary tertiary continuum which appear to constitute a predictable fundamental structure of regional economies jensen r c west g r et hewings g j d 1988 une etude de la structure regionale economique a partir des tableaux d echanges intersectoriels reg studies 22 209 220 cet article rend compte de la tentative de decrire la structure economi

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

estimating new keynesian phillips curves a full information maximum likelihood approach abstract the new keynesian phillips curve has recently become an important ingredient in monetary policy models however using limited information methods the empirical support for the new keynesian phillips curve appear to be mixed this paper argues by means of monte carlo simulations with a simple new keynesian sticky price model that single equations methods e g gmm are likely to produce imprecise and biased estimates then it is argued that estimating the model with full information maximum likelihood fiml is a useful way of obtaining better estimates finally a version of the model used in the monte carlo simulations is estimated on u s data with fiml and although the pure forward looking new keynesian phillips curve is rejected a version with both forward and backward looking components provides a reasonable approximation of u s inflation dynamics

environmental and social accounting for brazil an environmentally extendedsocial accounting matrix sam has beenconstructed for brazil for the first time wereview in detail previous studies in thisfield describe the construction structure anddata sources of the brazilian sam anddemonstrate the effect of system closure examining a range of type i and type iimultipliers we show that incomes generated byfinal consumption are highly skewed towardsrich households but energy requirements andcarbon emissions are higher for the consumptionof the poor a significant negative correlationexists between employment and income on onehand and energy requirements and carbonemissions on the other while a significantpositive correlation exists between imports and energy and carbon these correlationsdemonstrate that there is scope for policiesthat pursue imports substitution and reduceenergy consumption and carbon emissions whilstincreasing employment and income

additional precision provided by region specific data the identification of fuel use and pollution generation coefficients in the jersey economy turner k 2006 additional precision provided by region specific data the identification of fuel use and pollution generation coefficients in the jersey economy regional studies 40 347 364 a debate is currently ongoing in the uk regarding the need to collect and report data at the regional level one specific area of this debate is the extent to which region specific economic and environmental data are required to carry out analyses of devolved sustainability policy issues this paper uses the jersey economy as a case study to assess the added precision from using good quality region specific data compared with adjusted national uk data it is found that due to differences in polluting technology between jersey and the uk estimates based on national emissions intensities produce results that are misleading in terms of both absolute pollution levels and the relative contribution of different activities to total emissions in the economy while jersey may be regarded as atypical in many ways relative

the spatial diffusion of secondary impacts rural urban spillovers in grampian scotland the paper analyzes rural urban spillover effects using a bi regional sam model which allows for flows of commodities and factor incomes between the two areas multiplier decomposition is used to investigate the nature of spillovers the results indicate stronger spillover effects from urban to rural grampian than viceversa in contrast results from a restricted input output version of the model suggest that the effects are more consistent with nodal response input output an alysem say produce biased results and studies of contemporary rural urban relationships should look beyond production linkages to the broader range of relationships within a sam framework

modeling production externalities in the maquila industry in the past decade the maquiladora export industry surpassed both tourism and petroleum products to become the number one source of earned foreign exchange for mexico the continued growth of the maquila industry suggests that there may be significant production spillovers into the local environments dynamic modeling using stella provides a framework for quantifying the environmental impacts emanating from the growth of the maquila industry focusing on wastewater treatment consequences and resulting infrastructural policy considerations such detailed modeling of industrial infrastructural and ecological linkages has not yet been a feature of research on this region despite the potential for significant human health ramifications an environmental model is therefore developed for two focal urban communities nogales and mexicali facing potential wastewater treatment concerns due to the growth of nearby maquila factories in the former case the analysis revealed the inadequacy of the capacity planning for the treatment of effluent in the latter case conservative projections reveal that the system upgrades should be able to handle demands through 2020

behavioral heterogeneity in u s inflation dynamics in this article we develop and estimate a behavioral model of inflation dynamics with heterogeneous firms in our stylized framework there are two groups of price setters fundamentalists and rando

rethinking the economics of location and agglomeration fundamental problems exist with the classical characterisation of agglomeration economies since such definitions do not reflect the various cost issues on which firms may wish to economise a lack of understanding of the relationship between the notions of market hierarchies and locational behaviour leads to confusion not only in applied economic interpretation but more fundamentally in the construction of theoretical location models in particular neo classical location theory can be shown to be crucially flawed as a basis for spatial analysis this paper therefore attempts to provide an alternative definition of the various types of agglomeration economies such that the various strands of economic theory might be used in a more rigorous manner in the discussion of spatial increasing returns

firm dynamics in news driven business cycles the role of endogenous survival rate evidences from the structural vector error correction model shows that the new business formation and stock prices co moves with output under news shocks however simply incorporating firm dynamics into jaimovich and rebelo s jaimovich and rebelo 2009 model cannot explain these empirical findings we show that this problem can be resolved by introducing endogenous survival rates for the new entrants

when can changes in expectations cause business cycle fluctuations in neo classical settings abstract it is often argued that changes in expectation are an important driving force of the business cycle however it is well known that changes in expectations cannot generate positive co movement between consumption investment and employment in the most standard neo classical business cycle models this gives rise to the question of whether changes in expectation can cause business cycle fluctuations in any neo classical setting or whether such a phenomenon is inherently related to market imperfections this paper offers a systematic exploration of this issue our finding is that expectation driven business cycle fluctuations can arise in neo classical models when one allows for a sufficiently rich description of the production technology however such a structure is rarely allowed or explored in macro models in particular we identify a multi sector setting and a setting with a costly distribution system in which expectation driven business cycles can arise

on the job learning and news driven business cycles this paper proposes a new channel of on the job learning to explain the positive comovement between consumption and employment following good news about future productivity the new recruits can generate an additional stream of output production in all future periods and the firm s labor demand is thus characterized by the forward looking property therefore the firm is motivated to hire more new recruits in advance in response to good news about future productivity once the increase in labor demand is greater than the decrease in labor supply caused by the income effect the coincident rise in consumption and employment can be driven by the news shock when such a channel is paired with investment adjustment costs and the endogenous capacity utilization rate this paper provides a plausible explanation for simultaneous booms in current consumption investment output and employment to match the empirical evidence under the news shock

time preference and the distributions of wealth and income this paper presents a dynamic competitive equilibrium model in which heterogeneity in time preferences alone can generate the observed patterns of wealth and income inequality in the united states this model generalizes the standard deterministic neoclassical growth model by introducing i a direct preference for wealth by the consumers and ii human capital formation the rst feature prevents the wealth distribution from collapsing into a degenerate distribution the second feature generates a strong positive correlation between earnings and wealth across agents a calibrated version of this model is able to replicate the wealth and income distributions of the united states

the spirit of capitalism and expectation driven business cycles abstract while news shocks are believed to be instrumental in explaining business cycles many existing models fail to predict a boom in consumption investment employment output and asset prices in response to good news about future productivity a model with the intrinsic desire for wealth is shown to generate the aforementioned responses a news driven boom is explained predominantly by an expansion of labor supply and is characterized by the falling real wage the simulated model not only captures well conventional business cycle statistics but also reproduces countercyclical real returns and hump shaped responses of hours and output to an unexpected technology shock

the spirit of capitalism and optimal capital taxation abstract the paper reexamines the famous chamley judd zero capital tax theorem in model economies where the agents are endowed with the spirit of capitalism it is shown that the limiting capital income tax is not zero in general and depends on the utility specifications rather than the production technology the similar formulas of optimal capital taxes are derived in more general settings with multiple physical capitals or heterogeneous agents capitalists and workers

matriz de contabilidade social regional procedimentos metodologicos e aplicacao ao rio grande do sul the formulation of regional computable general equilibrium cge models demands the set up of a coherent and consistent data bank of the economy under investigation this data bank is provided by the social accounting matrix sam which specifies the interdependencies between the economic agents and the direction of the incoming flows between them the objective of this work is to describe the procedures used to generate a sam for the rio grande do sul and to build a regional cge for this state publishing the procedures adopted for the creation of the sam the authors hope to stimulate the assemblage of cge models for the remaining brazilian states when both sams and cge models become available for all of the brazilian regional economies it will be possible to perform cross multi regional analyzes

decomposing multipliers for economic systems involving regional and world trade this paper is concerned with the analysis of linkages between economic systems and the spillover and possible feedback effects one system may have on another it is not a new topic the initial stimulus in the literature coming from machlup i943 and the seminal papers by metzler i950 and chipman i950 almost precisely the same questions raised by these authors have been readdressed subsequently by many writers and in a variety of contexts most recently goodwin i983 has developed a world matrix multiplier with much the same overall objectives as machlup and metzler in mind metzler s proposition was to understand the mechanism by which an expansion or contraction of income in one region or country is transmitted to other regions or countries in addition he assumed that the conclusions apply without modification to the regions within a single country or indeed to any regional classification of the world economy such as the economies comprising eastern europe western europe latin america and similar regions 2 in fact the question has also long occupied the attention of many regional economists working in the context of sub national regions the question of interdependence between sub national regional economies generally assumes a special importance simply because such regions are relatively open economies and are subject to fewer natural and artificial barriers to commodity trade and factor movements than may exist between countries 3 even so interest has focused almost exclusively on regional interdependence through commodity trade and within the framework of multiregional input output systems 4 however there are some exceptions klein and glickman i 9 77 have developed a multiregional model of a fairly aggregative nature which incorporates other regional interdependencies a review of this and similar models has been carried out by glickman i97 7 paralleling this interest in inter regional interdependence at the sub national level there has been a revived interest in questions of linkage at the international level with the advent of the project link model pioneered by klein and hickman 5 the united nations model of the world economy leontief et al

the taylor rule and optimal monetary policy where it denotes the fed s operating target for the federal funds rate pt is the inflation rate measured by the gdp deflator yt is the log of real gdp and y t is the log of potential output identified empirically with a linear trend the rule has since been subject to considerable attention both as an account of actual policy in the united states and elsewhere and as a prescription for desirable policy taylor argues for the rule s normative significance both on the basis of simulations and on the ground that it describes u s policy in a period in which monetary policy is widely judged to have been unusually successful taylor 1999 suggesting that the rule is worth adopting as a principle of behavior here i wish to consider to what extent this prescription resembles the sort of policy that economic theory would recommend i consider the question in the context of a simple but widely used optimizing model of the monetary transmission mechanism which allows one to reach clear conclusions about economic welfare the model is highly stylized but incorporates important features of more realistic models and allows me to make several points that are of more general validity out of concern for the robustness of the conclusions reached the analysis here addresses only broad qualitative features of the taylor rule and attempts to identify features of a desirable policy rule that are likely to hold under a variety of model specifications

on the cultural transmission of preferences for social status abstract we study the formation of preferences for social status as the result of intergenerational transmission of cultural traits we characterize the behavior of parents with preferences for status in terms of socialization of their children to this particular cultural trait we show that degenerate distributions of the population whereby agents have either all status preferences or all non status preferences are dynamically unstable moreover under some conditions there exists a unique stationary distribution which is non degenerate in which both status and non status preferences co exist in the population and this distribution is locally stable finally we study the dependence of the stable stationary distribution of status preferences on institutional technological and policy parameters which affect agents economic conditions

news shocks and labour market dynamics in matching models we enrich a baseline real business cycle rbc model with search and matching frictions on the labour market and real frictions that are helpful in accounting for the response of macroeconomic aggregates to shocks the analysis allows shocks to have an unanticipated and a news i e anticipated component the bayesian estimation of the model reveals that the model that includes news shocks on macroeconomic aggregates produces a remarkable fit of the data news shocks in stationary and non stationary tfp investment specific productivity and preference shocks significantly affect labour market variables and explain a sizeable fraction of macroeconomic fluctuations at medium and long run horizons historically news shocks have played a relevant role for output but they have had a limited influence on unemployment

prospect theory and mean variance analysis the experimental results of prospect theory pt reveal suggest that investors make decisions based on change of wealth rather than total wealth that preferences are s shaped with a risk seeking segment and that probabilities are subjectively distorted this article shows that while pt s findings are in sharp contradiction to the foundations of mean variance mv analysis counterintuitively when diversification between assets is allowed the mv and pt efficient sets almost coincide thus one can employ the mv optimization algorithm to construct ptefficient portfolios the markowitz 1952a tobin 1958 mean variance mv rule is probably the most popular investment decision rule under uncertainty in economics and in finance and it is widely employed by both academics and practitioners the strength of the mv analysis is that in the case of normal return distributions the choice of any expected utility maximizing risk averse individual will be according to the mv rule 1 the mv framework is the foundation of the sharpe 1964 lintner 1965 capital asset pricing model capm which is a cornerstone of modern finance moreover the mv framework provides a very important practical procedure for the construction of efficient portfolios while standard economic theory and in particular mv analysis assume expected utility maximization and risk aversion in a breakthrough article kahneman and tversky 1979 show that the actual behavior of individuals systematically and consistently violates these

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

news driven business cycles insights and challenges there is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations the news view of business cycles offers a formalization of this perspective in this paper we discuss mechanisms by which changes in agents information due to the arrival of news can cause business cycle fluctuations driven by expectational change and we review the empirical evidence aimed at evaluating their relevance in particular we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established jel d83 d84 e13 e32 o33

an exploration into pigou s theory of cycles abstract this paper explores a theory of business cycles in which recessions and booms arise due to difficulties encountered by agents in properly forecasting the economy s future needs in terms of capital the idea has a long history in the macroeconomic literature as reflected by the work of pigou industrial fluctuation macmillan london 1926 the contribution of this paper is twofold first we illustrate the type of general equilibrium structure that can give rise to such phenomena second we examine the extent to which such a model can explain the observed pattern of u s recessions frequency depth without relying on technological regress we argue that such a model offer a framework for understanding elements of both the recent u s recession and of the asia downturns of the late 1990s

european inflation dynamics abstract we provide evidence on the fit of the new phillips curve npc for the euro area over the period 1970 1998 and use it as a tool to compare the characteristics of european inflation dynamics with those observed in the u s we also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs as well as that of its two main components namely labor productivity and real wages some of the findings can be summarized as follows a the npc fits euro area data very well possibly better than u s data b the degree of price stickiness implied by the estimates is substantial but in line with survey evidence and u s estimates c inflation dynamics in the euro area appear to have a stronger forward looking component i e less inertia than in the u s d labor market frictions as manifested in the behavior of the wage markup appear to have played a key role in shaping the behavior of marginal costs and consequently inflation in europe

news about aggregate demand and the business cycle abstract the plausibility of expectations driven cyclical fluctuations in an otherwise standard one sector real business cycle model with variable capital utilization and mild increasing returns to scale in production is examined due to a dominating wealth effect our model is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news impulses to future consumption demand or government spending on goods and services when the economy is subject to anticipated total factor productivity or investment specific technology shocks the relative strength of the intertemporal substitution effect needs to be enhanced for our model to exhibit positive macroeconomic co movement and business cycle statistics that are consistent with the data

examining the global environmental impact of regional consumption activities part 1 a technical note on combining input output and ecological footprint analysis in recent years there have been a number of attempts to develop a more comprehensive approach to the issue of measuring resource use and or pollution generation embodied in trade flows including contributions that combine input output techniques and ecological footprint analysis in this two part paper we describe how to enumerate the resource and or pollution content of inter regional and inter national trade flows part 1 and we present a literature review of recent methodological and empirical developments part 2 it is straightforward in principle to extend the basic input output approach to capture international trade flows however in practice problems of data availability and compatibility and of computability of extended input output matrices mean that simplifying assumptions are generally applied but with the implications of these assumptions often not made fully explicit what appears to be absent from previous applications is an account of the analytical method by which ecological footprints should ideally be estimated in an international input output accounting analysis this allows an explicit analysis of the problems that prevent the application of the full method and identification of the most appropriate short cut methods in a transparent way the objective of this paper is to provide such an account

news and financial intermediation in aggregate fluctuations an important disconnect in the news view of fluctuations is the lack of consistent evidence suggestive of significant macroeconomic effects of news shocks findings from estimated dsge models that in theory allow news shocks to matter quantitatively suggest that they do not this disconnect can be resolved once we augment a dsge model with a financial channel that provides amplification to news shocks our results suggest that news shocks to the future growth prospects of the economy are significant drivers of u s fluctuations explaining as much as 50 and 37 of the variance in hours worked and output respectively in cyclical frequencies

new tests of the new keynesian phillips curve abstract lagged dependent variables typically play an important role in empirical models of inflation do these lags reflect backward looking inflation expectations or do they proxy for rational forward looking expectations as in the new keynesian phillips curve gali and gertler 1999 inflation dynamics a structural econometric analysis journal of monetary economics 44 195 222 attempt to answer this question using gmm to estimate specifications incorporating both lagged and future inflation they report small coefficients on lagged inflation and conclude that the new keynesian model provides a good first approximation to inflation dynamics we show that these tests have low power against alternative backward looking specifications and demonstrate that their results are also consistent with a backward looking phillips curve using an alternative approach we find that the new keynesian pricing model cannot explain the importance of lagged inflation in standard inflation regressions and find that forward looking terms play a very limited role in explaining inflation dynamics

the spirit of capitalism and stock market prices in existing theory wealth is no more valuable than its implied consumption rewards in reality investors acquire wealth not just for its implied consumption but for the resulting social status max m weber 1958 refers to this desire for wealth as the spirit of capitalism the authors examine both analytically and empirically implications of weber s hypothesis for consumption savings and stock prices when investors care about relative social status propensity to consume and risk taking behavior will depend on social standards and stock prices will be volatile the spirit of capitalism seems to be a driving force behind stock market volatility and economic growth copyright 1996 by american economic association

a simple test of the new keynesian phillips curve we propose a way to test the new keynesian phillips curve nkpc without estimating the structural parameters governing the curve i e price stickiness and firms backwardness using this strategy we can test the nkpc avoiding the identification problems related to the gmm approach we find that it does not exist a combination of the structural parameters which is consistent with us data this result does not necessarily imply that the idea of a forward looking price setting behaviour should be entirely disregarded as the rejection might be due to the failure of the joint hypothesis of rational expectations thus further research should be aimed at providing alternative models for agents expectations