a re evaluation of the relation between wages and unemployment in the united kingdom this paper examines the long run or equilibrium relationship between wages prices and the unemployment rate in the united kingdom using annual data covering the period 1860 1999 using johansen s maximum likelihood method of testing for cointegration two long run relations are found in a small system of four variables the first relation depicts the co movement of the level of real wages adjusted for productivity together with the unemployment rate and the rate of inflation the second relation shows the co movement between the rate of inflation and deviations of productivity from its trend growth

estimation of economies of scale in banking using a generalized functional form this paper addresses four issues that arise in the estimation of economies of scale in the commercial banking industry first a common assumption underlying many of the studies of economies of scale in banking is the assumption of a cobb douglas production function with exogenous input prices the use of a cobb douglas production function facilitates the estimation of the output elasticity of cost however there does not appear to be any other reason a priori for such an assumption this paper utilizes a box cox hereafter b c generalized functional form methodology to directly test the assumption of an underlying cobb douglas production function second if the assumption of a cobb douglas production function is inappropriate as a description of the production process of the financial firm estimates of the output elasticity may be biased the sensitivity of the estimates of this elasticity to the choice of functional form can also be examined through the use of a generalized functional form methodology third no general consensus has been reached regarding the appropriate definition of bank output thus a diversity of measures of bank output have been employed in previous estimates of economies of scale in banking the sensitivity of the estimated output elasticity of cost to the selection of several alternative measures of output is examined through the use of the generalized functional form methodology finally the b c estimates of the cost function for commercial banks can be used

monetary non neutrality in the sidrauski model under uncertainty abstract introducing uncertainty in the reis s reis r 2007 the analytics of monetary non neutrality in the sidrauski model economics letters 94 1 129 135 version of the sidrauski model leads to a monetary policy that is not super neutral even though money and consumption are separable in the utility function this is because the real interest rate is affected by such a policy only in the case of an interest rate inelastic money demand does the super neutrality result survive

a revised tobin effect from inflation relative input price and capital ratio realignments usa and uk 1959 1999 the paper studies the realignments induced by inflation within an endogenous growth monetary economy accelerating inflation raises the ratio of the real wage to the real interest rate and so raises the use of physical capital relative to human capital across all sectors we find cointegration evidence for the us and uk economies consistent with a general equilibrium tobin type effect of inflation on input prices and capital intensity even while the growth rate of output is reduced by inflation

regime changes in international real interest rates are they a monetary phenomenon in this paper we use the bai and perron 1998 2001 2003 methodology to test for multiple structural breaks in the mean real interest rate for 13 industrialized countries we find extensive evidence of structural breaks in the mean real interest rate for all 13 countries in an attempt to explain the breaks in international real interest rates we also test for multiple structural breaks in the mean inflation rate for the 13 countries once again we find extensive evidence of structural breaks in the mean inflation rate for all of the countries interestingly the breaks in inflation rates and real interest rates often coincide with increases decreases in the mean inflation rate as we move from one regime to the next typically associated with decreases increases in the mean real interest rate

inflation and growth stories short and tall this paper reviews the stories that economists tell about the growth effects of inflation informal accounts are common but there are few models that get to grips with the effects that are probably central partly as a result of this and partly as a result of many econometric problems much of the empirical evidence remains unconvincing the paper assesses the various contributions and suggests possible improvements

does a college education cause better health and health behaviours in this article we exploit the recent higher education expansion in china to apply a regression discontinuity method to identify the causal effects of higher education on health and health behaviours we do not find causal effect of a college education on better smoking and drinking behaviours for our selected measures of health we do not find causal effect of a college education on better self assessed health less chance of having illness in the past 3 months and keeping normal body weight however we find that a college education could significantly reduce the probability of having hypertension

health related life cycle risks and public insurance abstract based on a dynamic life cycle model this study analyzes health related risks of consumption and old age poverty the model allows for health effects on employment risks on productivity on longevity the correlation between health risks productivity and preferences and the financial incentives of the german public insurance schemes the estimation uses data on male employees and an extended expectation maximization algorithm simulations suggest that health shocks induce average losses in annual consumption of about 10 and account for more than two thirds of the cases of old age poverty annuity markets that account for differences in the longevity risk by health status can effectively reduce the consumption risks but only slightly decrease old age poverty a policy analysis of minimum pension benefits indicates that a means test mitigates the associated moral hazard problem substantially

the impact of 9 year compulsory education quasi experimental evidence from taiwan using a regression discontinuity design this article investigates the causal impacts of 9 year compulsory education on students educational attainment and dropout rate by taiwan population and ho

health behavior health knowledge and schooling the positive correlation between schooling and good health is well documented one explanation is that schooling helps people choose healthier life styles by improving their knowledge of the relationship between health behaviors and health outcomes that is schooling improves the household s allocative efficiency in producing health this empirical study uses direct measures of health knowledge to test this explanation part of the relationship between schooling and the consumption of cigarettes alcohol and exercise is explained by differences in health knowledge however most of schooling s effects on health behavior remain after differences in knowledge are controlled for

money and growth an alternative approach this paper takes an alternative approach to the topic of money and growth by developing a model in which the effects of sustained capital accumulation on an evolving system of payments in addition to the conventional effects of sustained inflation on growth are examined while the effects of inflation on growth are small the effects of growth on the monetary system are substantial the results are consistent with ideas about money and growth contained in work that predates that of james tobin and miguel sidrauski as well as with evidence that money and asset demands vary systematically within economies as they develop copyright 1994 by american economic association

permanent and temporary inflation uncertainty and investment in the united states abstract we estimate the impact on us non residential fixed investment of permanent and temporary inflation uncertainty we find that while both have a negative effect temporary uncertainty is more important for investment this study has implications for monetary policy and applied econometric practice

endogenous growth and real effects of monetary policy r d and physical capital complementarities we study the real long run effects of the structural stance of monetary policy and of inflation in the context of a monetary growth model where r d is complemented with physical capital accumulation we look into the effects on a set of real macroeconomic variables that have been of interest to policymakers the economic growth rate real interest rate physical investment rate capital to labor ratio r d intensity and velocity of money these variables have been previously analyzed from the perspective of different separated strands of the theoretical and empirical literature additionally we analyze the long run relationship between inflation and both the effectiveness of real industrial policy shocks and the market structure assessed namely by average firm size we present novel cross country evidence on the empirical relationship between the latter and long run inflation

the indian inflation growth relationship revisited robust evidence from time frequency analysis abstractthis article re visits the inflation growth nexus in india using the tools of wavelet i e wavelet correlation wavelet cross correlation and scale by scale granger causality test wavelet

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

fundamentals panics and bank distress during the depression we assemble bank level and other data for fed member banks to model determinants of bank failure fundamentals explain bank failure risk well the first two friedman schwartz crises are not associated with positive unexplained residual failure risk or increased importance of bank illiquidity for forecasting failure the third friedman schwartz crisis is more ambiguous but increased residual failure risk is small in the aggregate the final crisis early 1933 saw a large unexplained increase in bank failure risk local contagion and illiquidity may have played a role in pre 1933 bank failures even though those effects were not large in their aggregate impact

transaction services inflation and welfare this paper is motivated by empirical observations on the comovements of currency velocity inflation and the relative size of the credit services sector we document these comovements and incorporate into a monetary growth model a credit services sector that provides services that help people economize on money our model makes two new contributions first we show that direct evidence on the appropriately defined credit service sector for the united states is consistent with the welfare cost measured using an estimated money demand schedule second we provide estimates of the welfare cost of inflation that have some new features

a banking explanation of the us velocity of money 1919 2004 the paper shows that us gdp velocity of m1 money has exhibited long cycles around a 1 25 per year upward trend during the 1919 2004 period it explains the velocity cycles through shocks constructed from a dsge model and annual time series data ingram et al 1994 model velocity is stable along the balanced growth path which features endogenous growth and decentralized banking hat produces exchange credit positive shocks to credit productivity and money supply increase velocity as money demand falls while positive goods productivity shock raises temporary output and velocity the paper explains such velocity volatility at both business cycle and long run frequencies with filtered velocity turning negative starting during the 1930s and the 1987 crashes and again around 2003 results suggest that the money and credit shocks appear to be more important for velocity during less stable times and the goods productivity shock more important during stable times

the relationship between education and adult mortality in the united states prior research has uncovered a large and positive correlation between education and health this paper examines whether education has a causal impact on health i follow synthetic cohorts using successive u s censuses to estimate the impact of educational attainment on mortality rates i use compulsory education laws from 1915 to 1939 as instruments for education the results suggest that education has a causal impact on mortality and that this effect is perhaps larger than has been previously estimated in the literature copyright 2005 wiley blackwell

intergenerational transmission of education and mediating channels evidence from a compulsory schooling reform in germany in this paper i estimate the causal effect that an additional year of schooling for parents has on their children s education by exploiting a compulsory schooling reform that was implemented in all west german states between 1946 and 1969 although previous research indicates that the reform had no effect on earnings i find that an additional year of schooling for women strongly affects the education of their sons there is no effect for the other parent child gender pairs i investigate numerous channels that might mediate the positive effect of the education of mothers most importantly i find that individuals with more schooling value their children s educational success as more important

does longer compulsory schooling affect mental health evidence from a british reform abstract in this paper we examine whether longer compulsory schooling has a causal effect on mental health exploiting a 1972 reform which raised the minimum school leaving age from age 15 to 16 in great britain using a regression discontinuity design we find that the reform did not improve mental health we provide evidence that extending the duration of compulsory schooling impacts mental health through channels other than increased educational attainment we argue that these effects may mitigate or offset the health returns to increased educational attainment

theory measurement and calibration of macroeconomic models abstract calibration has become a standard tool of macroeconomics this paper extends and refines the calibration methodology along several important dimensions first accounting for home production is important both in measuring calibration targets and in organizing the data in a model consistent fashion for this reason thinking about home production is important even if the model under consideration does not include home production second investment specific technological change is included because of its strong balanced growth parameter restrictions third the measurement strategy is laid out as transparently as possible so that others can easily replicate the underlying calculations the data and calculations used in this paper are available at http clevelandfed org research models rbc index cfm

changes in compulsory schooling and the causal effect of education on health evidence from germany in this paper we investigate the causal effect of years of schooling on health and health related behavior in west germany we apply an instrumental variables approach using as natural experiments several changes in compulsory schooling laws between 1949 and 1969 these law changes generate exogenous variation in years of schooling both across states and over time we find evidence for a strong and significant causal effect of years of schooling on long term illness for men but not for women moreover we provide somewhat weaker evidence of a causal effect of education on the likelihood of having weight problems for both sexes on the other hand we find little evidence for a causal effect of education on smoking behavior overall our estimates suggest significant non monetary returns to education with respect to health outcomes and not necessarily with respect to health related behavior

inflation tax rules and investment some econometric evidence this paper presents econometric evidence on the effect of tax incentives on business investment in the united states in the period from 1953 through1978 the analysis emphasizes that the interaction of inflation and existing tax rules has contributed substantially to the decline of business investment since the late 1960 s because the investment process is far too complex for any simple econometric model to be convincing i have estimated three quite different models of investment behavior the strength of the empirical evidence rests on the fact that all three specifications support the same conclusion more generally the analysis and evidence show that theoretical models of macroeconomic equilibrium should specify explicitly the role of distortionary taxes especially taxes on capital income the failure to include such tax rules can have dramatic and misleading effects on the qualitative as well as the quantitative properties of macroeconomic theories this paper was presented as the fisher shultz lecture at the fourth world congress of the econometric society 29 august 1980 in aix en province this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this abstract was borrowed from another version of this item

divisia monetary aggregates the great ratios and classical money demand functions king et al 1991 evaluate the empirical relevance of a class of real business cycle models with permanent productivity shocks by analyzing the stochastic trend properties of postwar u s macroeconomic data they find a common stochastic trend in a three variable system that includes output consumption and investment but the explanatory power of the common trend drops significantly when they add money balances and the nominal interest rate in this paper we revisit the cointegration tests in the spirit of king et al using improved monetary aggregates whose construction has been stimulated by the barnett critique we show that previous rejections of the balanced growth hypothesis and classical money demand functions can be attributed to mismeasurement of the monetary aggregates

collateral damage the german food crisis educational attainment and labor market outcomes of german post war cohorts using the german 1970 census to study educational and labor market outcomes of cohorts born during the german food crisis after world war ii i document that those born between november 1945 and may 1946 have significantly lower educational attainment and occupational status than cohorts born shortly before or after several alternative explanations for this finding are tested most likely a short spell of severe undernutrition around the end of the war has impaired intrauterine conditions in early pregnancies and resulted in long term detriments among the affected cohorts this conjecture is corroborated by evidence from austria

money velocity in an endogenous growth business cycle with credit shocks the explanation of velocity has been based in substitution and income effects since keynes s 1923 interest rate explanation and friedman s 1956 application of the permanent income hypothesis to money demand modern real business cycle theory relies on a goods productivity shocks to mimic the data s procyclic velocity feature as in friedman s explanation while finding money shocks unimportant and not integrating financial innovation explanations this paper sets the model within endogenous growth and adds credit shocks it models velocity more closely with significant roles for money shocks and credit shocks along with the goods productivity shocks endogenous growth is key to the construction of the money and credit shocks since they have similar effects on velocity through substitution effects from changes in the nominal interest rate and in the cost of financial intermediation but opposite effects upon growth through permanent income effects that are absent with exogenous growth

international evidence on the long run impact of inflation in this paper i use a structural vector autoregression framework to analyze the effects of a permanent change in inflation on the long run real interest rate and real output level in 14 industrialized countries long run monetary superneutrality is rejected for all 14 countries using annual data the results indicate that a permanent increase in inflation lowers the long run real interest rate in each country a permanent increase in inflation also increases the long run real output level in a number of countries long run monetary superneutrality is also rejected for four out of the five countries examined using quarterly data under long run monetary superneutrality lrsn a per

the failure of the bank of united states a defense of joseph lucia note in a recent article in an economic history journal joseph l lucia 1985 reappraised the analysis by milton friedman and anna j schwartz 1963 of the failure of the bank of united states in december 1930 in their extraordinary reply friedman and schwartz 1986 question lucia s scientific integrity as well as the scientific standards of the journal in which lucia s article appeared their opening paragraph states

does the time consistency problem explain the behavior of inflation in the united states abstract this paper derives the restrictions imposed by barro and gordon s theory of time consistent monetary policy on a bivariate time series model for inflation and unemployment and tests those restrictions using quarterly us data from 1960 through 1997 the results show that the data are consistent with the implications of the theory for the long run behavior of the two variables indicating that the theory can explain the initial rise and subsequent fall of inflation over the past four decades the results also suggest that the theory must be extended to account more fully for the short run dynamics that appear in the data

contrasting models of the effect of inflation on growth the paper formulates a nesting model for studying the theoretical literature on inflation and endogenous growth it analyses different classes of endogenous growth models with different usage of physical and human capital with different exchange technologies first the paper shows that a broad array of models can all generate significant negative effects of inflation on growth second it shows that these models can be differentiated primarily by the fact whether there is a tobin type effect of inflation and also whether the inflation growth effect becomes weaker as the inflation rate rises a non linearity or stays essentially constant over the range of inflation rates the paper compares these features of the models to empirical evidence as a way to summarize the efficacy of the models

household credit and the monetary transmission mechanism this paper evaluates the importance of household credit in the transmission of monetary policy and explaining the positive correlation between money and credit services over the business cycle it does so in the context of a general equilibrium framework with an explicit financial sector within this sector there are firms which specialize in the production of household credit services and financial intermediaries who provide interest bearing accounts for households and loanable funds to credit producers it is shown that monetary injections which occur through the financial sector can generate a liquidity effect that positively influences the availability of household credit services and overall real activity furthermore the model predicts that liquidity effects working through this channel lowers the real costs associated with consumption and can quantitatively dominate the anticipated inflation effect thus resolving a difficulty with recent liquidity effects models which emphasize only the business lending channel

anticipated inflation and the capital stock in a cash in advance economy abstract an economy is constructed in which the steady state capital stock is inversely related to the rate of inflation as a result that is directly opposite the usual conclusion

inflation human capital and tobin s q a pervasive empirical finding for the us economy is that inflation is negatively correlated with the normalized market price of capital tobin s q and growth a dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts in this model human capital is the principal driver of self sustained growth long run comparative statics analysis suggests that inflation diverts scarce time resource to leisure which lowers human capital utilization this impacts growth adversely and modulates capital adjustment cost downward resulting in a decline in tobin s q for the short run a tobin effect of inflation on growth weakens the negative association between inflation and q

money and growth revisited abstract conventional wisdom is that if public policy can affect the growth rate of the economy the welfare implications of alternative policies will be large in this paper a stochastic dynamic general equilibrium model with endogenous growth and money is examined in this setting inflation lowers growth through its effect on the return to work however the welfare costs of higher inflation are modest the endogenous labor supply is important in producing this result

inflation investment and growth a money and banking approach output growth investment and the real interest rate in long run evidence tend to be negatively affected by inflation theoretically inflation acts as a human capital tax that decreases output growth and the real interest rate but increases the investment rate opposing evidence this paper resolves this puzzle by requiring exchange for investment as well as consumption inflation then decreases the investment rate and still decreases both output growth and real interest up to some moderately high rate of inflation above which increasingly low investment finally causes capital to fall relative to labour and the real interest rate to rise

an economy of scales a selective review of obesity s economic causes consequences and solutions this paper reviews the economic research on obesity covering topics such as the measurement of and trends in obesity the economic causes of obesity e g the monetary price and time cost of food food assistance programs income education macroeconomic conditions and peer effects and the economic consequences of obesity e g lower wages a lower probability of employment and higher medical care costs it also examines the extent to which obesity imposes negative externalities and economic interventions that could potentially internalize such externalities such as food taxes subsidies for school based physical activity programs and financial rewards for weight loss it discusses other economic rationales for government intervention with respect to obesity such as imperfect information time inconsistent preferences and irrational behavior it concludes by proposing a research agenda for the field overall the evidence suggests that there is no single dominant economic cause of obesity a wide variety of factors may contribute a modest amount to the risk there is consistent evidence regarding the economic consequences of obesity which are lower wages and higher medical care costs that impose negative externalities through health insurance studies of economic approaches to preventing obesity such as menu labeling taxes on energy dense foods and financial rewards for weight loss find only modest effects on weight and thus a range of policies may be necessary to have a substantial effect on the prevalence of obesity

zero returns to compulsory schooling in germany evidence and interpretation abstract we estimate the impact of compulsory schooling on earnings using changes in compulsory schooling laws in west germany after world war ii most estimates in the literature indicate returns in the range of 10 to 15 while our research design is very similar to studies for various other countries we find a zero return we find no evidence that this is due to labor market institutions or the apprenticeship training system in germany the result might be due to the fact that the basic skills most relevant for the labor market are learned earlier in germany than in other countries

inflation and balanced path growth with alternative payment mechanisms the paper shows that contrary to conventional wisdom an endogenous growth economy with human capital and alternative payment mechanisms can robustly explain major facets of the long run inflation experience a negative inflation growth relation is explained including a striking nonlinearity found re peatedly in empirical studies a set of tobin 1965 effects are also explained and further linked in magnitude to the growth effects through the interest elasticity of money demand undis closed previously this link helps fill out the intuition of how the inflation experience can be plausibly explained in a robust fashion with a model extended to include credit as a payment mechanism

inflation investment and economic performance the role of internal financing abstract this paper studies a link between inflation and economic activity that is built on two hypotheses first firms mitigate informational frictions in financial markets by accumulating retained earnings over a period of time second firms allocate earnings among three competing uses dividends current investment and the accumulation of internal funds and inflation directly distorts this allocation decision as well as the real value of accumulated internal funds the model predicts that the level of inflation both unanticipated and expected inflation as well as the variability of inflation distort firms internal financing decisions increases frictions in financial markets reduces the level and efficiency of investment and reduces aggregate output the marginal effects of inflation are increasing in the inflation rate

on the employment investment and current account effects of inflation abstract the effects of inflation targets are examined for a small open economy with cash in advance constraints an increase in the inflation rate by increasing the price of consumption relative to leisure reduces consumption and labor supply the fall in labor reduces the marginal productivity of capital and a fall in investment the country runs a current account surplus despite the fall in output the dynamics of the model for permanent and temporary policy changes are fully worked out with the aid of a diagrammatic apparatus quantitative analysis of the model reveals substantial impact and steady state effects

estimating average and local average treatment effects of education when compulsory schooling laws really matter the change to the minimum school leaving age in the united kingdom from 14 to 15 had a powerful and immediate effect that redirected almost half the population of 14 year olds in the mid twentieth century to stay in school for one more year the magnitude of this impact provides a rare opportunity to a estimate local average treatment effects late of high school that come close to population average treatment effects ate and b estimate returns to education using a regression discontinuity design instead of previous estimates that rely on difference in differences methodology or relatively weak instruments comparing late estimates for the united states and canada where very few students were affected by compulsory school laws to the united kingdom estimates provides a test as to whether instrumental variables iv returns to schooling often exceed ordinary least squares ols because gains are high only for small and peculiar groups among the more general population i find instead that the benefits from compulsory schooling are very large whether these laws have an impact on a majority or minority of those exposed

schooling health knowledge and obesity the connection between schooling and health is well documented an important empirical issue that needs to be examined however is whether schooling s effects are due to individual health knowledge differences this empirical study examines this issue with an increasingly important health indicator obesity since provision of health knowledge is a major tool of public agencies promoting health this empirical study uses a new direct measure of health knowledge to test this hypothesis the results show that knowledge is inversely related to the probability that an individual is obese schooling s effects on relative weight and the probability of being obese are explained by differences in knowledge this result may imply that schooling s effect on the allocative efficiency of the household production of health is the main reason schooling is linked to health behaviour the result also may imply that the most effective method of health education is to highlight the disease element of poor dietary habits a

effect of secondary school fees on educational attainment in this study the heterogeneity of the fee abolition process in west german secondary schools is used to identify the effect of school fees on educational attainment and to obtain an estimate of the price elasticity of upper secondary education the analysis is based on representative individual level data from three annual surveys of the german mikrozensus while coefficients cannot be estimated precisely the results suggest that on average upper secondary school attainment increased by at least 8 percent in response to the fee abolition the educational attainment of females appears to be more price sensitive than that of males