frontiers of real time data analysis in the past ten years researchers have explored the impact of data revisions in many different contexts researchers have examined the properties of data revisions how structural modeling is affected by data revisions how data revisions affect forecasting the impact of data revisions on monetary policy analysis and the use of real time data in current analysis this paper summarizes many of the questions for which real time data analysis has provided answers in addition researchers and institutions have developed better real time data sets around the world still additional research is needed in key areas and research to date has uncovered even more fruitful areas worth exploring jel c52 c53 c80 e01

longevity risk subjective survival expectations and individual saving behavior abstract we provide evidence of individuals awareness of longevity risk the uncertainty about future survival probabilities based on subjective survival expectations elicited in the survey of health ageing and retirement in europe share and matching data on longevity risk from the human mortality database we find a positive relationship between the forecast dispersion in subjective survival estimates and longevity risk which indicates that individuals are to some extent aware of longevity risk our analysis of savings behavior shows that the dispersion in survival estimates is primarily explained by individuals disagreeing on the survival probability and not by their true awareness of the underlying uncertainty individuals do not save more on average when faced with longevity risk although theory suggests they should

models of inflation expectations formation a comparison of household and economist forecasts the recent appreciation of the critical role played by expectations of inflation in the behavior of macromodels has stimulated empirical studies of the formation of expectations by different groups time series survey data on expectations of inflation exist now for economists households and businesses these data have been used as independent variables in explaining wage behavior gordon 16 turnovsky and wachter 34 and de menil and bhatta 5 prices turnovsky and wachter 34 and wachtel 36 interest rates gibson 14 hendershott and van horne 19 pearce 30 and mishkin 27 and consumption wachtel 36 generally with a significant improvement in explanatory power they have also been used as dependent variables in attempts to determine how expectations are formed by gordon 15 mullineaux 28 jacobs and jones 20 and figlewski and wachtel 9 for the economist survey van duyne 35 for the household survey and leonard 23 and de leeuw and mckelvey 4 for businesses given their different levels of knowlege of economics and perspectives one might expect that the models used by the different groups to forecast inflation would

affirmative action in higher education how do admission and financial aid rules affect future earnings this paper addresses how changing the admission and financial aid rules at colleges affects future earnings i estimate a structural model of the following decisions by individuals where to submit applications which school to attend and what field to study the model also includes decisions by schools as to which students to accept and how much financial aid to offer simulating how black educational choices would change were they to face the white admission and aid rules shows that race based advantages had little effect on earnings however removing race based advantages does affect black educational outcomes in particular removing advantages in admissions substantially decreases the number of black students at top tier schools while removing advantages in financial aid causes a decrease in the number of blacks who attend college

on data a case study of the evolution of income inequality across time and across countries this paper takes income distribution as a case study of the role of data in economics after describing the transformation which has taken place with regard to the availability of data on income inequality it discusses how the comparability of these estimates is brought into question by differences in methodology that cannot be eliminated by simple adjustments recent analyses of the relationships between income inequality and growth or globalisation are shown to be based on time series plagued by discontinuities which can seriously affect regression results the paper concludes by calling for greater attention to data quality in applied economics

did unilateral divorce laws raise divorce rates a reconciliation and new results application of the coase theorem to marital bargaining suggests that shifting from a consent divorce regime to no fault unilateral divorce laws should not affect divorce rates each iteration of the empirical literature examining the evolution of divorce rates across us states has yielded different conclusions about the effects of divorce law liberalization i show that these results reflect a failure to jointly consider both the political endogeneity of these divorce laws and the dynamic response of divorce rates to a shock to the political regime taking explicit account of the dynamic response of divorce rates to the policy shock i find that liberalized divorce laws caused a discernible rise in divorce rates for about a decade but that this increase was substantially reversed over the next decade that said this increase explains very little of the rise in the divorce rate over the past half century both administrative data on the flow of new divorces and measures of the stock of divorcees from the census support this conclusion these results are suggestive of spouses bargaining within marriage with an eye to their partner s divorce threat

new millennium economics how did it get this way and what way is it new millennium economics evolved out of neoclassical economics over the last 100 years the pace of change increased over time and in the first half of the 21st century the economics profession changed as much or more than it did in the last half of the 20th century the changes occurred both because of the internal tensions in the profession in the second part of the 20th century and because of technological changes that affected both the research methods of economics and the structure of higher education generally in this paper i consider that evolution i will organize my discussion in two sections the first focusing on changes in the structure of economic education the second focusing on changes in the content of what economists do from 2000 2050 changes in the structure of graduate economic education although the number of economics graduate students expanded substantially in the 1950s and 1960s the fundamental structure of graduate economic education did not change much at all in the second half of the 20th century however the structure of economic education has undergone profound changes in the 50 years since 2000

on the distribution and dynamics of health care costs using data from the health and retirement survey and the assets and health dynamics of the oldest old survey we estimate the stochastic process that determines both the distribution and dynamics of health care costs we find that the data generating process for log health costs is well represented as the sum of a white noise process and a highly persistent ar 1 process we also find that the innovations to this process can be modelled with a normal distribution that has been adjusted to capture the risk of catastrophic health care costs simulating this model we find that in any given year 0 1 of households receive a health cost shock with a present value of at least 125 000 copyright 2004 john wiley sons ltd

evaluation of the subjective probabilities of survival in the health and retirement study in the health and retirement study respondents were asked about the chances they would live to 75 or to 85 we analyze these responses to determine if they behave like probabilities of survival if their averages are close to average probabilities in the population and if they have correlations with other variables that are similar to correlations with actual mortality outcomes we find that generally they do behave like probabilities and that they do aggregate to population probabilities most remarkable however is that they covary with other variables in the same way actual outcomes vary with the variables for example respondents with higher socioeconomic status give higher probabilities of survival whereas respondents who smoke give lower probabilities we conclude that these measures of subjective probabilities have great potential use in models of intertemporal decision making under uncertainty

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

financial market efficiency the decomposition of anticipated versus unanticipated money growth and further tests of the relation between money and real output note probably the most controversial empirical findings in macroeconomics in the last decade stem from robert barro s investigations into the relative effects of unanticipated versus anticipated money growth on unemployment and real output these studies generally proceed by decomposing observed money growth into what is defined to be its anticipated and unanticipated components and then test the restriction that only the unanticipated money measure has important effects for unemployment and real output in black box reduced form real side equations that include determinants of the natural rates of unemployment and real output as additional explanatory variables l the results of these tests for the annual postwar u s data generally cannot reject the hypothesis that only unanticipated money growth is important for the determination of aggregate real activity 2 anticipated money growth is found to be neutral for unemployment and real output these results are important because they give empirical support to the assertion that the apparent nonneutrality of observed money growth does not provide any firm basis for the efficacy of a systematic countercyclical monetary policy it should be clear that a crucial problem in testing for the neutrality nonneutrality of anticipated unanticipated money growth lies in developing an appropriate decomposition of observed money growth into its anticipated and unanticipated parts small 13 mishkin 8 and weintraub 14 among others have

the response of short term interest rates to weekly money announcements each friday at 4 10 p m est the federal reserve announces its estimate of the narrowly defined money stock for the statement week ending nine days previously these money announcements have become one of the main events in financial markcts if for no other reason than the fact that significant movements in interest rates have been associated with large unanticipated changes in the money stock moreover since the late 1970s interest rate fluctuations in response to money stock announcements have dramatically increased over the 1l 2 hour intervals spanning the weekly announcements for example the variance of the change in the threemonth treasury bill yield in the three years since october 1979 is more than thirty times larger than that of the previous two year period l two factors may account for a large portion of the increased volatility of shortterm interest rates first on october 6 1979 the federal reserve adopted a reserve aggregate approach to monetary control replacing a procedure that emphasized stability of short term yields second despite the greater emphasis placed on monetary control the variance of weekly announced changes in the money stock has risen by about 70 percent since late 1979 in turn if greater volatility of announced changes makes future changes more difficult to predict the volatility of unanticipated weekly changes in money would have also increased 2 thus if financial markets are efficient and if weekly money announcements contain relevant information larger unanticipated changes in money may have caused larger fluctuations in interest rates

expectations life expectancy and economic behavior this study analyzes responses to a questionnaire designed to elicit subjective expectations and probabilities of survival people do extrapolate past improvements in longevity when they determine their subjective horizons and they are fully aware of levels of and movements within todays life tables the subjective distribution has greater variance than its actuarial counterpart and the subjective variance decreases with age the implications of these findings for optimal social security for the construction of annuities for the analysis of savings behavior and for evaluating lifetime earnings are discussed the data were collected in the united states from a sample of 411 white male economists and a sample of 363 white males in a midwestern smsa excerpt

uncertain medical expenses and precautionary saving near the end of the life cycle this paper introduces a dynamic structural model of household consumption decisions in which elderly families consider the effects of uncertain future medical expenses when deciding current levels of consumption the model with uncertain medical expenses implies a potentially important role for precautionary saving incentives to explain slow rates of dissaving among elderly americans during retirement rather than just simulating the stochastic dynamic model preference parameters are estimated using panel data on health wealth and expenditures for retired families the health uncertainty model predicts consumption levels closer to observed expenditures than a life cycle model with uncertain longevity however elderly families typically dissave their financial assets more slowly than even the baseline health uncertainty model predicts is optimal

evidence on preferences and subjective beliefs of risk takers the case of smokers abstract one reason that cigarette consumption is highly regulated is because of the paternalistic view that smokers would not make rational choices even if fully informed about the risks a deficiency of this view is that in the presence of preference heterogeneity regulating smoking may lead to smokers finding ways to circumvent the regulations though there is widespread recognition that preference heterogeneity may exist there is very little documentation of it in this study we provide empirical evidence on the relationship between smoking status and time and risk preference valuation of health and subjective beliefs about future macroeconomic events using panel data from the health and retirement study we find that smokers are more impatient than nonsmokers and are more pessimistic about future macroeconomic events which may reinforce their present orientation smokers are also more risk tolerant this suggests that smokers may more willingly bear risk and trade off current utility against future costs of smoking however they do not value being in excellent health differently from others our results also suggest that being more present oriented and risk tolerant is not caused by smoking but represents innate characteristics an implication of our results for product regulation is that restricting access to cigarettes is likely to be circumvented by smokers through other means in particular our results are consistent with the finding that smokers in states with higher taxes smoke longer cigarettes that are also higher in nicotine and tar content

economic growth and the defense burden in africa and latin america simulations from a dynamic model since e benoit first provided evidence of a link between the rate of economic growth and defense spending a number of scholars have reported their research on the subject their results have been varied some concluding the relationship is positive others concluding the opposite recently some have argued that no general and significant link exists for less developed countries ldcs and have suggested that the varied results are due primarily to varied specifications sample periods and differences among countries 2 s chan goes further by suggesting that researchers deemphasize the search for universal links and concentrate on time series as opposed to cross section analysis he also recommends that explanations of the defense spendingeconomic growth link take into account among other things a country s capacity utilization total foreign receipts and fiscal and monetary policies 3 the point of departure for the research reported here is a paper by r faini p annez and l taylor hereafter faanta 4 their analysis concludes that higher defense burdens are associated with lower growth rates across countries however i will argue that they have either misstated or misinterpreted their primary result and furthermore that there are some serious problems with their analysis and the underlying model these problems aside the faanta model either already includes or can be respecified to include most of the features recommended by chan therefore i will estimate a significantly modified version of their model for african and latin american countries after attempting to replicate their results for these two regions simulations of my model lead to the conclusion that maintaining a larger defense

verifying the solution from a nonlinear solver a case study we are pleased to confirm that any doubt our article mccullough and vinod 2003 hereafter mv03 may have cast on ron shachar and barry nalebuff 1999 hereafter sn99 must be removed we are especially pleased because we thought it quite unfair that other researchers were able to exempt themselves from such detailed scrutiny it appears that such researchers no longer will have the luxury of reneging on their agreement to honor the replication policy as this journal now requires authors of accepted empirical papers to provide all programs and data files for posting on the aer web site as a precondition of publication the primary aim of our article mv03 was to provide a four part methodology for verifying the solution from a nonlinear solver check the gradient examine the trace analyze the hessian and profile the likelihood we adduced copious evidence mv03 p 873 that solvers used by economists can produce inaccurate answers gave examples of different packages giving different answers to the same nonlinear problems mv03 p 874 and showed mv03 pp 873 74 at least in this journal that researchers make no effort to verify the solutions from the solvers that they use we believe this uncritical acceptance of solutions from nonlinear solvers to be a systemic problem in economic research that is why we wrote the article certainly econometrics texts do not show how to verify the solution from a nonlinear solver in passing we also showed how a problem can be too large for conventional pc methods and indicated the failure of replication policies in this journal and other journals we used the data and likelihood function from sn99 to illustrate the methodology in the course of this illustration we noted that the hessian was ill conditioned suggested that there might exist multiple optima and that inference based on the wald statistic was not appropriate we concluded that the solution we found was at best a tentative solution however as shown in shachar and nalebuff 2004 hereafter sn04 when the problem is rescaled the hessian is not ill conditioned they have correctly identified the difference between the condition number of the badly scaled version of the problem that we analyzed in mv03 and the well scaled problem that they have analyzed when the problem is correctly scaled the hessian is well conditioned the model is locally identifiable the problem can be solved on a pc a solution to the problem exists and sn present it in their table 1 though we were aware that rescaling could ameliorate ill conditioning mv03 p 882 we were unaware of the distinction between artificial ill conditioning and inherent ill conditioning so the method we suggested for analyzing the hessian contained an error of omission this error caused us to reach an incorrect conclusion concerning the existence of a solution to the problem we apologize to professors shachar and nalebuff and we thank them for their gracious understanding in this regard accordingly we have amended our prescription for analyzing the hessian see our nearby exchange with david m drukker and vince wiggins 2004 hereafter dw for complete details our

cohort and target age effects on subjective survival probabilities implications for models of the retirement phase abstract subjective survival scaling factors are often estimated from one observation of life expectancy and treated as constant to any target age using new survey data on subjective survival probabilities we estimate a model incorporating cohort and target age varying beliefs in scaling factors both cohort age and target age matter respondents are pessimistic about overall life expectancy but optimistic about survival at advanced ages and older respondents are more optimistic than younger we propose a new theoretical model incorporating cohort and target age varying beliefs and illustrate their effects on the perceived value of annuities and on retirement phase consumption plans

high noon for microfinance impact evaluations re investigating the evidence from bangladesh recently microfinance has come under increasing criticism raising questions of the validity of iconic studies which have justified it such as pitt and khandker chemin applied propensity score matching to the pitt and khandker data finding different impacts but does not disaggregate by gender of borrower we first replicate chemin and extend his analysis in two ways we test the robustness of propensity score matching results to selection on unobservables using sensitivity analysis and we investigate propensity score matching estimates of impacts by gender of borrowers the mainly insignificant impacts of microfinance differ greatly by gender of borrower but are all vulnerable to selection on unobservables we are therefore not convinced that the relationships between microfinance and outcomes are causal with these data

social security and private saving new time series evidence in an important article in the journal of political economy martin feldstein 1974 estimated that the introduction of the social security system had reduced personal saving by 50 percent with serious consequences for capital formation and output his conclusion was based on a consumer expenditure function estimated with u s time series data and incorporating a social security wealth variable of his construction this paper presents new evidence that casts considerable doubt on feldstein s conclusion first the social security wealth variable used by feldstein was seriously flawed as a result of a computer programming error simply correcting this error substantially changes the estimated effect of social security on saving second the statistical evidence depends upon assumptions which are embedded in the construction of the social security wealth variable assumptions that are not demonstrably preferable and are in some cases inferior to alternative assumptions these assumptions relate first to how individuals form their expectations about the social security benefits they expect to receive and the social security taxes they expect to pay and second to estimates of the number of workers dependent wives and surviving

testing the mechanisms of structural models the case of the mickey mantle effect the article assesses the ability of structural econometric models to reasonably predict economic behavior a lack of consideration of inherent variables in most structural models is found there is no current means of recording how parental wealth transfers to children affect the child s college attendance choices although it is recognized as an obvious factor research into free health insurance has found it does not lead to riskier behavior by consumers contrary to the traditional moral hazard model health insurance is examined for what the authors call the mickey mantle effect mantle died prematurely due to alcohol abuse and once observed he d have taken better care of himself had he known he d live as long as he did that comments represents how thee subjective thoughts of consumers affect economic models an analysis of data on medical patients life expectancy finds a strong correlation between shorter expectations and smoking while results linking heavy drinking and high body mass index were mixed

the meaning of failed replications a review and proposal the welcome rise of replication tests in economics has not been accompanied by a consensus standard for determining what constitutes a replication a discrepant replication in current usage of the term can signal anything from an unremarkable disagreement over methods to scientific incompetence or misconduct this paper proposes a standard for classifying one study as a replication of some other study it is a standard that places the burden of proof on a study to demonstrate that it should have obtained identical results to the original a conservative standard that is already used implicitly by many researchers it contrasts this standard with decades of unsuccessful attempts to harmonize terminology and argues that many prominent results described as replication tests should not be described as such adopting a conservative standard like this one can improve incentives for researchers encouraging more and better replication tests

do house prices affect consumption a re assessment of the wealth hypothesis this paper revives the debate in the literature about the relationship between house prices and consumption by exploring conflicting results in the uk campbell and cocco 2007 find that old owners benefit most from a house price increase and young renters least confirming the so called wealth hypothesis in contrast attanasio et al 2009 find that house prices have the same impact on consumption across age groups we rule out several potential explanations related to data construction and provide evidence that the functional form can reconcile the conflicting results in the two papers

can the reserves approach to monetary control really work on october 6 1979 the board of governors bog of the federal reserve system announced that the federal open market committee fomc was abandoning its historical preoccupation with an interest rate approach to monetary control in favor of a reserve aggregate approach 1 underlying this new approach is the fact that at time t any money stock concept m is the product of a money multiplier m and a reserve aggregate r that is

viewpoint replication in economics this examination of the role and potential for replication in economics points out the paucity of both pure replication checking on others published papers using their data and scientific replication using data representing different populations in one s own work or in a comment several controversies in empirical economics are used to illustrate how and how not to behave when replicating others work the incentives for replication are examined and proposals aimed at journal editors and authors are advanced that might stimulate an activity that most economists applaud but few perform

meta regression analysis a quantitative method of literature surveys abstract pedagogically literature reviews are instrumental they summarize the large literature written on a particular topic give coherence to the complex often disparate views expressed about an issue and serve as a springboard for new ideas however literature surveys rarely establish anything approximating unanimous consensus ironically this is just as true for the empirical economic literature to harmonize this dissonance we offer a quantitative methodology for reviewing the empirical economic literature meta regression analysis mra is the regression analysis of regression analyses mra tends to objectify the review process it studies the processes that produce empirical economic results as though they were any other social scientific phenomenon mra provides a framework for replication and offers a sensitivity analysis for model specification in this brief essay we propose a new method of reviewing economic literature mra and discuss its potential

the causal direction between money and prices abstract causality is viewed as a matter of control controllability is captured in simon s analysis of causality as an asymmetrical relation of recursion between variables in the unobservable data generating process tests of the stability of marginal and conditional distributions for these variables can provide evidence of causal ordering the causal direction between prices and money in the united states 1950 1985 is assessed the balance of evidence supports the view that money does not cause prices and that prices do cause money

what s to know about the credibility of empirical economics the scientific credibility of economics is itself a scientific question that can be addressed with both theoretical speculations and empirical data in this review we examine the major parameters that are expected to affect the credibility of empirical economics sample size magnitude of pursued effects number and pre selection of tested relationships flexibility and lack of standardization in designs definitions outcomes and analyses financial and other interests and prejudices and the multiplicity and fragmentation of efforts we summarize and discuss the empirical evidence on the lack of a robust reproducibility culture in economics and business research the prevalence of potential publication and other selective reporting biases and other failures and biases in the market of scientific information overall the credibility of the economics literature is likely to be modest or even low

health economics and econometrics it seems worthwhile to pause occasionally and take stock of the balance of trade between economics and health economics martin feldstein 1974 did this fourteen years ago at the assa meetings and sufficient time has lapsed to bring up the issue again here however i undertake only a fragment of the task confining the discussion to some remarks about econometrics and health economics if one were writing about economic theory and health economics one might focus on the importance for health economics of both uncertainty and the physician s dual role as supplier and patient agent in discussing econometrics and health economics however other features of health economics are relevant

the relative impacts of economics journals 1970 1990 our data collection and database assembly efforts were assisted by john p sophocleus mark gwartney michele butler and scott ralston we received extremely valuable computer programming assistance from jon brunson and edward novak constructive comments were receivedfrom two anonymous reviewers financial supportfrom the faculty development committee at salisbury state university is gratefully acknowledged

a meta analysis of the union nonunion wage gap the authors use meta regression analysis a new method for synthesizing empirical results reported in the economic literature to corroborate and extend h gregg lewis s landmark 1986 research on t

differential mortality and wealth accumulation the issue of asset accumulation and decumulation is central to the life cycle theory of consumer behavior and to many policy questions one of the main implications of the life cycle model is that assets are decumulated in the last part of life most empirical studies in this area use cross sectional data of estimate mean or median wealth age profiles the use of cross sections to estimate the age profile of assets is full of pitfalls for example if wealth and mortality are related in that poorer individuals die younger one overestimates the last part of the wealth age profile when using cross sectional data because means or other measures of location are taken over a population which becomes richer as it ages this paper examines the effect of differential mortality on cross sectional estimates of wealth age profiles our approach is to quantify the dependence of mortality rates on wealth and use these estimates to correct wealth age profiles for sample selection due to differential mortality we estimate mortality rates as a function of wealth and age for a sample of married couples drawn from the survey of income and program participation sipp our results show that accounting for differential mortality produces wealth profiles with significantly more dissaving among the elderly

estimating intertemporal supply response in the fed beef market comment in a recent article in this journal marsh estimated a monthly supply equation for beef slaughter fed marketings that was intended to resolve past discrepancies of the signs of own price elasticities he concluded that the discrepancy could be explained by introducing dynamics that allowed different signs for short run and long run elasticities marsh also estimated a dynamic demand equation for the feeder cattle input his study is recent well executed and representative of much agricultural supply response work it may not be a key model in the sense used by tomek and therefore a candidate for duplication though the study does engage in the spirit of tomek s improvement criterion marsh specifies a model that satisfies the traditional measures of model performance that is it exhibits a good durbinwatson statistic a good r2 and significant t statistics it accounts for the presence of lagged dependent variables and autocorrelated disturbances by implementing a nonlinear least squares algorithm burt townsend and lafrance that allows for consistent and asymptotically efficient estimates however we find his model turns out flawed when confronted with other statistical and economic

longevity and life cycle savings we add health and longevity to a standard model of life cycle saving and show that under plausible assumptions increases in life expectancy lead to higher savings rates at every age even when retirement is endogenous in a stationary population these higher savings rates are offset by increased old age dependency but during the disequilibrium phase when longevity is rising the effect on aggregate savings rates can be substantial we find empirical support for this effect using a cross country panel of national savings rates

federal reserve policy interest rate volatility and the u s capital raising mechanism the object of this paper is to examine in detail on the basis of the experience of the u s financial markets under the federal reserve system s new monetary policy procedures announced on october 6 1979 one potentially important effect on the nonfinancial economy due to the resulting increase in interest rate volatility in particular the possibility that increased volatility has impaired the market mechanism for raising long term business capital interest rate volatility has been a controversial issue in central bank policymaking for a long time the ultimate objectives that central banks pursue almost always refer to nonfinancial aspects of economic activity and well being like price stability and economic growth in carrying out policies designed to further these objectives however central banks typically operate exclusively in the financial markets their actions therefore affect interest rates directly and visibly whether to use this influence on interest rates to smooth out short run fluctuations or alternatively to implement actions focused solely on other objectives and hence leave interest rates to vary freely with the pulse of market pressures is the central question in the united states the evolution of the federal reserve system s monetary policy procedures during the last decade including in particular the changes an

the aid effectiveness literature the sad results of 40 years of research abstract the aid effectiveness literature ael consists of empirical macroeconomic estimates of the effects of development aid by the end of 2004 it comprised 97 econometric studies of three families of related effects each family has been analyzed in a separate meta analysis the ael is an ideal subject for meta analysis as it uses only a few formally similar models to estimate the same underlying effects it is also an area with strong beliefs often generated by altruism when this whole literature is examined a clear pattern emerges after 40 years of development aid the preponderance of the evidence indicates that aid has not been effective we show that the distribution of results is significantly asymmetric reflecting the reluctance of the research community to publish negative results the dutch disease effect on exchange rates provides a plausible explanation for the observed aid ineffectiveness

the financial markets and customer satisfaction reexamining possible financial market mispricing of customer satisfaction we investigate the association between information contained in the american customer satisfaction index acsi metric and future stock market performance some past research has provided results suggesting that the financial markets misprice customer satisfaction i e firms advantaged in customer satisfaction are posited to earn positive future period abnormal stock returns we reexamine this relationship and find that statistically significant evidence of financial market mispricing of customer satisfaction is limited to firms in the computer and internet sector the results suggest that the mispricing anomaly reported in past research appears not to stem from a systemic failure of the financial markets to impound the financial implications of customer satisfaction into current stock price but rather from abnormal returns achieved by a small group of satisfaction leaders in the computer and internet sector over the period of study analyses based on unconditional risk covariates and analyses using conditional risk covariates estimated from short window high frequency data support this finding

what is meant by replication and why does it encounter resistance in economics this paper discusses recent trends in the use of replications in economics we include the results of recent replication studies that have attempted to identify replication rates within the discipline these studies generally find that replication rates are relatively low we then consider obstacles to undertaking replication studies and highlight replication initiatives in psychology and political science behind which economics appears to lag

a proposal to organize and promote replications we make a two pronged proposal to i strengthen the incentives for replication work and ii better organize and draw attention to the replications that are conducted first we propose that top journals publish short replication reports these reports could summarize novel work replicating an existing high impact paper or they could highlight a replication result embedded in a wider scope published paper second we suggest incentivizing replications with the currency of our profession citations enforcing a norm of citing replication work alongside the original would provide incentives for replications to both authors and journals

a re examination of an irish popularity function this paper focuses on replication in the sense of herrnson 1995 it re examines the only study of an irish popularity function borooah and borooah 1990 in the light of recent developments in econometric methodology and in irish politics using error correction models the analysis provides an alternative account of the relationship between economics and government popularity to that provided by borooah and borooah the findings indicate that the short term impact of the economy is weaker than and different from that suggested by them economic influences at most set the general level of government approval rather than determine the quarter by quarter fluctuations

savings of the elderly and desired bequests cross section data often show that the wealth of the elderly increases with age even at advanced ages these and other results suggest that the life cycle hypothesis of consumption should be augmented to include a bequest motive for saving in this paper the author proposes a model of bequests and a test for a bequ est motive using panel data he finds that over a ten year period the elderly in the data set dissaved in contradiction to most cross section results the test offers no support for a bequest motive copyright 1987 by american economic association

does banning affirmative action lower college student quality banning affirmative action from college admissions cannot prevent an admissions office that cares about diversity from achieving it in ways other than explicitly considering race we model college admissions where candidates from two groups with different average quali cations compete for a xed number of seats under affirmative action an admissions office that cares both about quality and diversity admits the best quali ed candidates from each group under a ban it may promote diversity by partially ignoring candidates quali cations and therefore not admitting the best quali ed candidates from either group a ban always reduces diversity and may also lower quality jel j71 j 15 i28

subjective mortality expectations and consumption and saving behaviours among the elderly life expectancy is an important factor that individuals have to take into account for saving and consumption choices the life cycle model of consumption and saving behaviour predicts that consumption growth should decrease with higher mortality rates the aim of this study is to test this hypothesis based on data about subjective longevity expectations from the health and retirement study merged with detailed consumption data from two waves of the consumption and activities mail survey this study finds that an increase in subjective mortality by 1 corresponds to an annual decrease in consumption of non durable goods of around 1 8 l esperance de vie est un facteur important dont les personnes doivent tenir compte dans leurs choix de consommation et d epargne le modele de comportement de consommation et d epargne au cours du cycle de vie predit que la croissance de la consommation devrait decroitre a mesure que le taux de mortalite augmente cette etude met au test cette hypothese a l aide de donnees sur l esperance de vie subjective tirees des resultats d une etude sur la sante et la retraite arrimes aux resultats de deux vagues d enquetes postales sur la consommation et les activites qui ont produit des donnees detaillees sur la consommation cette etude montre qu un accroissement de un pour cent dans l anticipation subjective de mortalite correspond a un declin d a peu pres 1 8 dans la consommation annuelle de biens non durables

precautionary saving and consumption fluctuations this paper uses the consumption euler equation to derive a decomposition of consumption growth into four sources these four sources are new information and three sources of predictable consumption growth intertemporal substitution changes in the preferences for consumption and incomplete markets for consumption insurance using household level data we implement this decomposition for the average growth rate of consumption expenditures on nondurable goods in the united states from 1982 to 1997 the economic importance of precautionary saving rivals that of the real interest rate but the relative importance of each source of movement in the volatility of consumption is not precisely measured

education and earnings in the netherlands an empirical analysis abstract in this paper three models which describe the relation between earnings and education are estimated using one single data set one model is a simple dummy regression model in which the educational variables are exogenous both other models take account of the fact that individuals choose their optimal amount of education and is therefore endogenous in all three models i try to specify the equations in the same way as others have done with other data sets it turns out that in each model important conclusions reached in earlier research are not supported by the empirical findings reported here

marriage and divorce comment the author comments on an article by h elizabeth peters concerning the impact of state laws particularly no fault divorce laws on divorce rates in the united states a reply by peters is included pp 686 93 annotation

monetary and public debt shocks tests and efficient estimates in an article in the jmcb barro 1 defined a form of intertemporal efficiency for the behavior of marginal tax rates and expected tax rates given certain additional conditions on government expenditures barro s definition of efficiency implied that particular relationships and time paths would characterize federal deficits in that paper two of the seven predicted relationships were tested 1 the sign of the relationship between the deficit and the ratio of output to its trend value and 2 the effect of anticipated inflation on the deficit those tests were performed under the joint assumptions of the rational expectations hypothesis reh and predictable policy irrelevance or structural neutrality sn with regard to both monetary and debt policies in this paper barro s tests of the efficiency hypothesis are reexamined within a wider context by means of the statistically efficient full information maximum likelihood fiml method 4 6 1 specifically by allowing the imposition of cross equation and within equation parameter constraints the fiml method makes it possible to a directly test the reh and sn propositions jointly and separately

supply vs demand under an affirmative action ban estimates from uc law schools affirmative action bans can reduce black enrollment not only by reducing black admission advantages contracting demand but also by reducing applications contracting supply from black students who can still gain admission but prefer alternative schools that still practice affirmative action when affirmative action was banned at uc law schools berkeley s black applications and enrollment declined by almost half even as black admission rates rose relative to whites i ask whether black enrollment at uc law schools would have markedly declined even if black supply had not contracted i find in a large sample of students applying to law schools nationwide that black supply contractions were driven mostly or entirely by students unlikely to gain admission under the ban yielding stronger post ban black applicant pools holding applicant pools constant i estimate that the ban reduced black admission rates at both berkeley and ucla by half hence black enrollment would likely have plummeted even if black supply had not contracted as could occur under a nationwide ban that eliminates affirmative action practicing alternatives

estimates of the variance of u s inflation based upon the arch model it is generally agreed that the unpredictability of future inflation is a major component of the welfare loss associated with inflation perfectly predicted inflation might induce some costs through institutional rigidities governmental interference and transaction costs but in the long run these should be rather minimal as these institutions adopt various forms of indexing when inflation is unpredictable risk averse economic agents will incur a loss even if prices and quantities are perfectly flexible in all markets inflation is a measure of the relative price of goods today and goods tomorrow thus uncertainty in tomorrow s price impairs the efficiency of today s allocation decisions friedman in his nobel lecture 8 argues convincingly that higher variability of inflation would lead to decreased output ceteris paribus he then conjectures that higher rates of inflation are generally associated with higher variability of inflation and presumably greater uncertainty about future rates if this is true then higher rates of inflation would also be associated with low levels of output which implies a positively sloped phillips curve this paper uses a new statistical technique arch to estimate the conditional mean and variance of inflation from u s time series data the main finding is that the variance of inflation in the seventies was only slightly greater than in the sixties

income segregation and intergenerational mobility across colleges in the united states we construct publicly available statistics on parents incomes and students earnings outcomes for each college in the united states using deidentified data from tax records these statistics reveal that the degree of parental income segregation across colleges is very high similar to that across neighborhoods differences in postcollege earnings between children from low and high income families are much smaller among students who attend the same college than across colleges colleges with the best earnings outcomes predominantly enroll students from high income families although a few mid tier public colleges have both low parent income levels and high student earnings linking these income data to sat and act scores we simulate how changes in the allocation of students to colleges affect segregation and intergenerational mobility equalizing application admission and matriculation rates across parental income groups conditional on test scores would reduce segregation substantially primarily by increasing the representation of middle class students at more selective colleges however it would have little effect on the fraction of low income students at elite private colleges because there are relatively few students from low income families with sufficiently high sat act scores differences in parental income distributions across colleges could be eliminated by giving low and middle income students a sliding scale preference in the application and admissions process similar to that implicitly given to legacy students at elite private colleges assuming that 80 of observational differences in students earnings conditional on test scores race and parental income are due to colleges causal effects a strong assumption but one consistent with prior work such changes could reduce intergenerational income persistence among college students by about 25 we conclude that changing how students are allocated to colleges could substantially reduce segregation and increase intergenerational mobility even without changing colleges educational programs

replication in empirical economics the journal of money credit and banking project this paper examines the role of replication in empirical economic research it presents the findings of a two year study that collected programs and data from authors and attempted to replicate their published results the research provides new and important information about the extent and causes of failures to replicate published results in economics the findings suggest that inadvertent errors in published empirical articles are a commonplace rather than a rare occurence copyright 1986 by american economic association

money growth output growth and inflation a reexamination of the modern quantity theory s linchpin prediction 1 introductionover the years the quantity theory of money has been extended and refined all versions however begin with the well known equation of exchange mv pq where q is the level of national output real gross domestic product gdp p is the general price level v is the velocity of money circulation and m is the quantity of money to convert this equation actually an identity into a theory one of the four variables contained therein must be specified as functionally dependent on the other three monetarists argue that p is the dependent variable sprinkel 1971 specifically they argue that m is determined by the national monetary authority that v is determined by a variety of both secular and cyclical factors 1 that changes in v do not consistently offset changes in m and that q is determined by capital labor and technological advances sprinkel 1971 the monetarist theory of inflation is a long run theory it does not purport to explain short run increases in the general price level hafer and wheelock 2001 monetarists argue that short run inflation stabilization is not feasible and therefore that monetary policy should be confined to inflation concerns over a relatively long horizon 2john moroney 2002 p 399 asserts that in the traditional version of the quantity theory a country s long run inflation rate increases one to one with its money growth rate the modern wrinkle is that inflation is mitigated by real gdp growth emphasis added this assertion is consistent with the famous dictum of milton friedman 1968 p 18 that inflation is always and everywhere a monetary phenomenon produced in the first instance by an unduly rapid growth in the quantity of money emphasis added friedman s assertion is not that an increased money growth rate is the sole cause of inflation in the long run just the most important cause friedman and friedman 1980 an increase in inflation can also be caused by a decrease in the growth rate of q or theoretically even an increase in the growth rate of v as is easily seen by solving the equation of exchange for p and then taking logs and first differences after taking logs and first differences 3 moroney 2002 obtains an estimating equation in which inflation is functionally dependent on the growth rates of the money stock and real gdp formula omitted see article image where y is ln p x is ln m z is ln q and u is a random disturbance term that includes velocity changes is the first difference operator the modern quantity theory s model implied restrictions which are testable predictions are that the intercept is zero the coefficient of the money stock growth rate is plus one and the coefficient of the growth rate of real gdp is minus one arguably this joint hypothesis is the linchpin prediction of the modern quantity theory if the hypothesis is rejected by the data the theory falls using long run 1980 1993 cross section data on 81 countries which he takes from the world bank s world development report 1995 moroney 2002 tests the joint hypothesis 0 0 1 1 2 1 and incorrectly claims that the hypothesis cannot be rejected at even the 0 01 level of significance 4 as will be shown in the next section the joint hypothesis is rejected decisively fortunately however it will also be shown that a modification to moroney s model specification helps to salvage the most substantive part of the modern quantity theory s implied restrictions 2 modification to the quantity theory setupin contrast to the conventional quantity theory setup in which the economy s real activity is determined entirely outside its monetary sector fama 1982 moroney 2002 that is in which no provision is made for the possibility that the monetary authority s actions could have an adverse effect on output5 the present article entertains the possibility that y and z are jointly determined

barro s fertility equations the robustness of the role of female education and income barro and lee 1994 and barro and sala i martin 1995 find that real per capita gdp and both male and female education have important effects on fertility in their cross country empirical studies in order to assess the robustness of their results their estimated models are subjected to specification and diagnostic testing the effects on the model of using the improved barro and lee 1996 cross country data on educational attainment of the population aged 15 and over are examined and the different specifications used by barro and lee and by barro and sala i martin compared the results obtained suggest that their fertility equations do not perform well in terms of diagnostic testing and are very sensitive to the use of different vintages of the educational attainment proxies and of the summers heston cross country income data a robust explanation of fertility to link with empirical growth equations has therefore not yet been found further work is required in this area

transaction costs and the interest parity theorem comment a recent empirical study by bahmani oskooee and das 1985 concludes that transaction costs fail to explain the variation in absolute percentage spreads between actual forward rates and rates implied by covered interest rate arbitrage denoted by ipi this strong conclusion is based on a regression that has several problems first the data contain both errors and omissions which we correct second their econometric model does not effectively capture the effect they are seeking to measure and is inconsistent a more complete statistical model is necessary both for consistent parameter estimation and for drawing inferences that shed light on the condition they attempt to test without subscribing to the modeling approach of bahmanioskooee and das this study finds that i correcting the errors and omissions in their data changes the regression results significantly including a significant sign change for the transaction cost effect ii using their variable definitions one may obtain a zero r2 and zero coefficient for transaction costs even if they explained all the variation in ipi and iii an alternative measure of the effects of transaction costs that is more consistent with the authors approach and theory suggests that transaction costs may explain up to 60 percent of the variation in ipi in addition this study cautions against drawing strong conclusions from data derived from the standard sources employed by bahmani oskooee and das even after the errors are removed section i discusses some of the problems with the data in bahmanioskooee and das these problems are important in an era of heightened awareness regarding the issue of replicability see for example dewald thursby and anderson 1986 on the journal of

hiv testing subjective beliefs and economic behavior this paper examines the effects of learning hiv status on economic behavior among rural malawians according to economic life cycle models if learning hiv results is informative about additional years of life being diagnosed hiv positive or negative should predict changes in consumption investment and savings behavior with important micro and macro economic implications using an experiment that randomly assigned incentives to learn hiv results i find that while learning hiv results had short term effects on subjective belief of hiv infection these differences did not persist after two years consistent with this there were relatively few differences two years later in savings income expenditures and employment between those who learned and did not learn their status

from the econometrics of capital punishment to the capital punishment of econometrics on the use and abuse of sensitivity analysis the academic debate over the deterrent effect of capital punishment has intensified again with a major policy outcome at stake about two dozen empirical studies have recently emerged that explore the issue donohue and wolfers 2005 claim to have examined the recent studies and shown the evidence not to be robust to specification changes we argue that the narrow scope of their study does not warrant this claim moreover focusing on our two studies that they have examined we show the deterrence findings to be robust while their work has serious flaws and their reporting appears to be selective the selectivity is biased towards showing no deterrence