farm settlement with imperfect capital markets a life cycle application to upper canada 1826 1851 farm settlement where borrowing is constrained is addressed with a life cycle model because a pioneer farm must be cleared before becoming productive the settler first accumulates in order to purchase supplies and maintain consumption during the initial years implications of the model are explored using data from upper canada 1826 1851 age at settlement is delayed settlers eventually receive higher incomes than those who do not settle rising life expectancy contributes to settlement an immediate income is a prerequisite to settlement such findings conform to the experience of upper canada and other pioneer areas and may also illuminate aspects of migration jel classification n31 j61 colonisation agricole quand les marches du capital sont imparfaits une application du modele du cycle de vie au haut canada 1826 51 l auteur examine le processus de colonisation agricole quand il y a contraintes sur les emprunts a l aide d un modele de cycle de vie parce qu un pionnier doit d abord defricher avant que la ferme ne soit productive le colon doit avoir prealablement accumule un certain pecule afin de pouvoir acheter le materiel necessaire et maintenir sa consommation durant les premieres annees de colonisation on analyse les implications de ce modele en utilisant les donnees pour le haut canada de 1826 a1851 entre autres resultats on note que l ge ou l on s installe est reporte que ceux qui colonisent eventuellement recoivent des revenus beaucoup plus eleves que ceux qui ne le font pas que la croissance de l esperance de vie tend a encourager la colonisation et qu une source immediate de revenus est un prerequis a la colonisation ces resultats et certains autres sont conformes a ce que l on observe dans le haut canada et dans les autres zones de colonisation et il peuvent jeter un peu de lumiere sur certains aspects du processus de migration

competition and bidding behavior some evidence from the rice market when objects have uncertain value the net effect of competition in sealed bid auctions is ambiguous the risk of succumbing to the winner s curse generally causes bidders to exhibit a non aggressive response in addition to the standard competitive effect sellers can influence the size of the nonaggressive effect by responding to the value uncertainty this paper focuses specifically on individual bidding behavior in a rice auction market in which sellers issue a product quality guarantee the empirical evidence supports my hypothesis that such a guarantee negates the significance of the nonaggressive bidder response

information rigidities and exchange rate expectations abstract sluggish adjustment of expectations to new information is rational in an environment characterized by information costs and signal to noise problems this paper investigates the role of such information rigidities for exchange rate expectations using data from consensus economics for ten emerging and industrial economies from 1999 until 2015 our results confirm the importance of rigidities and show that the inclusion of forecast updates largely accounts for otherwise detected biases in expectation errors moreover we find little evidence for a systematic effect of fundamentals or uncertainty measures on exchange rate disagreement

measuring forecast uncertainty by disagreement the missing link using a standard decomposition of forecast errors into common and idiosyncratic shocks we show that aggregate forecast uncertainty can be expressed as the disagreement among the forecasters plus the perceived variability of future aggregate shocks thus the reliability of disagreement as a proxy for uncertainty will be determined by the stability of the forecasting environment and the length of the forecast horizon using density forecasts from the survey of professional forecasters we find direct evidence in support of our hypothesis our results support the use of garch type models rather than the ex post squared errors in consensus forecasts to estimate the ex ante variability of aggregate shocks as a component of aggregate uncertainty copyright 2010 john wiley sons ltd

man bites dog business cycles the newsworthiness of an event is partly determined by how unusual it is and this paper investigates the business cycle implications of this fact signals that are more likely to be observed after unusual events may increase both uncertainty and disagreement among agents in a simple business cycle model such signals can explain why we observe i occasional large changes in macro economic aggregate variables without a correspondingly large change in underlying fundamentals ii persistent periods of high macroeconomic volatility and iii a positive correlation between absolute changes in macro variables and the cross sectional dispersion of survey expectations

in search of the winner s curse earlier papers on the winner s curse have provided theoretical arguments that winning bidders in an auction will incur ex post losses even when all bidders use reasonable ex ante bidding strategies this paper demonstrates that these arguments are erroneous optimal ex ante bidders will never suffer from a winner s curse in an auction where only the winning bid is announced furthermore such bidders will on the average not suffer from a winner s curse in an auction where all bids are announced thus if a winner s curse is a behavioral reality then bidders are not generally using ex ante optimal strategies

a multivariate analysis of forecast disagreement confronting models of disagreement with survey data abstract this paper documents multivariate forecast disagreement among professional forecasters and discusses implications for models of heterogeneous expectation formation disagreement varies over time and is positively correlated with general economic uncertainty the degree to which individual forecasters disagree with the average forecast tends to persist over time models of heterogeneous expectation formation can be modified by introducing heterogeneous signal to noise ratios to match this feature furthermore disagreement about correlations of different macroeconomic variables is high on average in general multivariate forecast data can be used more effectively than it has been to estimate models with heterogeneous expectations and to test the mechanisms used to generate disagreement in these models

multivariate density forecast evaluation and calibration in financial risk management high frequency returns on foreign exchange we provide a framework for evaluating and improving multivariate density forecasts among other things the multivariate framework lets us evaluate the adequacy of density forecasts involving cross variable interactions such as time varying conditional correlations we also provide conditions under which a technique of density forecast calibration can be used to improve deficient density forecasts and we show how the calibration method can be used to generate good density forecasts from econometric models even when the conditional density is unknown finally motivated by recent advances in financial risk management we provide a detailed application to multivariate high frequency exchange rate density forecasts

the relationships among expected inflation disagreement and uncertainty evidence from matched point and density forecasts abstract this paper examines matched point and density forecasts of inflation from the survey of professional forecasters to analyze the relationships among expected inflation disagreement and uncertainty we undertake the empirical analysis within a seemingly unrelated regression framework and derive measures of uncertainty using a decomposition proposed by wallis 2004 2005 and by drawing on the concept of entropy the results offer little evidence that disagreement is a useful proxy for uncertainty and mixed evidence that increases in expected inflation are accompanied by heightened uncertainty conversely we document a quantitatively and statistically significant positive association between disagreement and expected inflation

explaining disagreement on interest rates in a taylor rule setting most studies on disagreement focus on one specific variable thereby neglecting the fact that disagreement can be co moving with disagreement on other variables in this paper we explore to what extent disagreement regarding the interest rate is driven by disagreement on inflation and unemployment this relationship can be motivated by the theoretical concept of the taylor rule using survey microdata for both professional forecasters and consumers we provide evidence that disagreement on the interest rate is mainly driven by disagreement on inflation we further show that disagreement is significantly influenced by central bank transparency as well as news on money and credit conditions

international migration with capital constraints interpreting migration from the netherlands to canada in the 1920s an inability to borrow affected migration from europe to north america this capital constraint is formalized with a life cycle model where agents jointly choose how much to save the optimal period to finance migration and whether to migrate using a life cycle model we show that preference for the home country the period of adjustment after arrival and the direct cost of migration affect the savings of migrants age at migration and who migrates these results are discussed in light of wages in canada and the netherlands and the characteristics of dutch immigrants drawn from ship passenger manifests capital constraints delayed migration and help explain the large wage gap between the netherlands and canada jel classification j61 n32 n34 une incapacitea emprunter a affecte la migration de l europe vers l amerique du nord cette contrainte sur l acces au capital est formalisee a l aide d un modele de cycle de vie ou les agents choisissent conjointement combien epargner la periode optimale pour financer la migration et le choix de migrer ou non a l aide d un modele de cycle de vie on montre que la preference pour le pays d origine la periode d ajustement apres l arrivee et le cout direct de la migration affectent l epargne des emigrants l ge auquel ils migrent et qui emigre ces resultats sont discutes a la lumiere des salaires au canada et au pays bas et des caracteristiques des immigrants hollandais tirees de listes de passagers de bateaux les contraintes sur l acces au capital ont retarde la migration et aident a expliquer le grand ecart entre les salaires en hollande et au canada

why do forecasters disagree lessons from the term structure of cross sectional dispersion abstract key sources of disagreement among economic forecasters are identified by using data on cross sectional dispersion in forecasters long and short run predictions of macroeconomic variables dispersion among forecasters is highest at long horizons where private information is of limited value and lower at short forecast horizons moreover differences in views persist through time such differences in opinion cannot be explained by differences in information sets our results indicate they stem from heterogeneity in priors or models differences in opinion move countercyclically with heterogeneity being strongest during recessions where forecasters appear to place greater weight on their prior beliefs

the winner s curse and bidder competition in acquisitions evidence from failed bank auctions this study examines the effect of bidder competition in acquisitions we use predictions from auction theory to test whether acquirers of failed banks overpay the winner s curse when bidding in fdic sealed bid purchase and assumption p a transactions auctions the empirical results indicate that winning bids tend to increase as the number of competitors increases as predicted by theory we also find that bid levels of all bidders increase with increased competition which is consistent with bidders failing to adjust for the winner s curse in a common value auction setting however additional tests using winning bids only are consistent with both a common value and a private values model so this result should be interpreted with caution the winner s curse hypothesis states that the winner of a sealed bid auction in which the value of the object being competed for is uncertain tends to be the one who most overestimates the true value of the auctioned object as a result auction winners who fail to recognize this possibility are likely to be cursed by having paid more for the object than its true worth this hypothesis has been applied to various situations including bidding on oil and gas leases capen et al 3 and corporate takeovers roll 16 varaiya 19 support for the existence of the winner s curse has been reported primarily from laboratory experiments bazerman and samuelson 1 kagel and levin 12 testing of the winner s curse hypothesis with market data is in its early stages gilley karels and leone s 7 study of bidding for oil leases provides mixed suport brannman klein and weiss 2 examine bidding behavior in a variety of auction markets and interpret some of their results as supporting the winner s curse hypothesis our study examines the effects of bidder competition and the winner s curse hypothesis within the context of fdic auctions of failed banks our study may also have relevance for the broader corporate control literature this literature uniformly indicates that shareholders of acquired firms earn large

the measurement and characteristics of professional forecasters uncertainty there is increased interest in extracting indicators of macroeconomic risk and uncertainty from forecast surveys that include questions about density forecasts in this paper we consider several statistical issues that arise in the construction and interpretation of measures of uncertainty from such data with application to the bank of england survey of external forecasters we find substantial heterogeneity of individual forecast uncertainty and significant persistence in individual relative uncertainty this is an individual characteristic akin to the individual optimism and pessimism already established among point forecasts and which is seen to be present in the current data in a bivariate sense with respect to forecasts of inflation and output growth whether disagreement among point forecasts is a useful indicator of uncertainty is seen to depend on the underlying macroeconomic environment in an appendix the main findings of the paper are replicated with data from the european central bank survey of professional forecasters

measuring consumer uncertainty about future inflation we introduce a survey based measure of uncertainty about future inflation asking consumers for density forecasts across inflation outcomes consumers are willing and able to express uncertainty showing high response rates and response patterns that are reliably related to qualitative measures of uncertainty heterogeneity in expressed uncertainty is associated with demographic characteristics and financial literacy and measures of central tendency derived from density forecasts are strongly correlated with point forecasts furthermore expressed uncertainty is positively related to point forecast levels and to larger revisions in point forecasts over time copyright 2011 john wiley sons ltd

inattentive professional forecasters abstract using the ecb survey of professional forecasters to characterize expectations at the micro level we emphasize two new facts forecasters i fail to systematically update their forecasts and ii disagree even when updating it is moreover found that forecasters have predictable forecast errors these facts are qualitatively supportive of recent models of inattention and suggest a setup where agents imperfectly process information due to both sticky information a la mankiw reis and noisy information a la sims however building and estimating such an expectation model we find that it cannot quantitatively replicate the error and disagreement observed in the data

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

differential interpretation of public signals and trade in speculative markets most models of trade in speculative markets assume that agents interpret public information identically we provide empirical evidence on the relation between the volume of trade and stock returns around public announcements and we argue that the evidence is inconsistent with this assumption we then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume return relation then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts earnings forecasts the hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data

when are gdp forecasts updated evidence from a large international panel based on a large international panel of surveyed gdp forecasts i analyze the frequency of forecast revisions and the factors that influence the likelihood of forecast revisions i find that each month on average 40 50 of forecasters revise their forecasts in addition i find that the likelihood of forecast revisions significantly depends on a number of factors such as the forecast horizon the business cycle or strategic interactions between forecasters my results suggest that a realistic modeling of expectations forecasts of agents has to take into account cross sectional heterogeneity strategic interaction between agents and effects of the economic environment features that existing models such as the sticky information framework are missing

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

disagreement a la taylor evidence from survey microdata there is a growing interest in studying the disagreement of economic agents most studies however focus on the disagreement regarding one specific variable hereby neglecting that disagreement may be comoving with disagreement on other variables in this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment this relationship can be motivated by the existence of the taylor rule using micro survey data for both professional forecasters and consumers we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation exploring further determinants we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement

non aggressive bidding behavior and the winner s curse previous authors have noted a curious result that arises within the context of sealed bid auctions in certain situations it is in the bidder s interest to respond non aggressively to increased competition we consider a decision theoretic formulation of the bidder s problem and derive necessary conditions for the choice of a non aggressive bidding strategy the resulting conditions relate closely to a phenomenon that has been described rather loosely by bidding practitioners as the winner s curse in the course of this paper we develop a specific definition of the winner s curse and demonstrate how it affects the firm s competitive behavior

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

state capacity and economic development causal mechanism or correlative filter abstract in this paper we explore why there are no examples of societies with low state capacity and high economic development we argue that such an outcome is unlikely because of the nature of investments in state capacity societies that become rich in the absence of a strong state invite predation by societies that develop such states thus societies invest in state capacity in part to plunder other societies wealth those investments are a form of rent seeking potentially preyed upon societies are forced to invest in state capacity in turn so as to deter potential attackers this entails that as soon as a rent seeker enters the game the likelihood of a low capacity high development society surviving falls this explains the historical lack of such societies we thus interpret state capacity not as a causal condition for widespread economic prosperity but a survivability condition for enjoying this prosperity

the implications of central bank transparency for uncertainty and disagreement abstract using survey data from 25 economies we provide evidence that greater transparency surrounding monetary policy reduces uncertainty of interest rates and inflation primarily by reducing uncertainty that is common to agents rather than disagreement between agents this suggests that studies that focus on disagreement as a proxy for uncertainty understate the benefits of monetary policy transparency the adoption of inflation targets and forward guidance are both associated with lower uncertainty although inflation targets have a stronger impact on reducing uncertainty than forward guidance moreover there are diminishing benefits from ever higher levels of transparency taken as a whole our results support the contention that clarity of communication is as important as the magnitude of transparency

uncertainty experience and the winner s curse in ocs lease bidding this paper presents an empirical test of the major hypothesis of the currently accepted bidding models in two regions of differing tract value uncertainty the most significant result is an empirical verification that the more bidders that bid on a particular parcel in the face of great uncertainty the lower the bid levels of individual firms that participate given all else is constant no such relationship was observed however in the sale where there was previous bidding experience and prior ownership of closely related tracks prior models have not been able to identify the inverse relationship because of a bias that occurs when only positive bids are employed in these models and the use of data where previous experience reduces uncertainty in the analysis of the competitive bidding situation we use a two stage procedure which adjusts for this selection bias by allowing for the incorporation of information from the dichotomous bid no bid decision in the modeling of bid level

blue chip rationality tests this paper tests the rationality of forecasts made by individuals who contribute to the blue chip consensus forecasting service and tries by means of a questionnaire on forecasting methods to establish why some forecasters appear more rational than others tests based on consensus forecasts prove unreliable as guides to the number of individuals who produce rational forecasts individual forecasts are more likely to be rational if they are based on a mainstream economic theory and incorporate a substantial element of judgment copyright 1991 by ohio state university press

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

modelling multi period inflation uncertainty using a panel of density forecasts this paper examines the determinants of inflation forecast uncertainty using a panel of density forecasts from the survey of professional forecasters spf based on a dynamic heterogeneous panel data model we find that the persistence in forecast uncertainty is much less than what the aggregate time series data would suggest in addition the strong link between past forecast errors and current forecast uncertainty as often noted in the arch literature is largely lost in a multi period context with varying forecast horizons we propose a novel way of estimating news and its variance using the kullback leibler information and show that the latter is an important determinant of forecast uncertainty our evidence suggests a strong relationship of forecast uncertainty with level of inflation but not with forecaster discord or with the volatility of a number of other macroeconomic indicators copyright 2006 john wiley sons ltd