money growth output gaps and inflation at low and high frequency spectral estimates for switzerland abstract while central banks generally have abandoned monetary targeting many continue to attach weight to monetary aggregates in setting policy this raises the issue of how money can be combined with other variables when analysing inflation we decompose inflation in switzerland into two frequency bands and show that inflation is granger caused by monetary factors at low frequencies defined as those corresponding to periodicities of more than 4 years but is granger caused by the output gap at high frequencies we also estimate phillips curve models that are augmented by the low frequency components of the monetary factors

multiple experiments for the causal link between the quantity and quality of children this article presents evidence on the child quantity child quality trade off using quasi experimental variation due to twin births and preferences for a mixed sibling sex composition as well as ethnic differences in the effects of these variables our sample includes groups with very high fertility an innovation in our econometric approach is the juxtaposition of results from multiple instrumental variables strategies capturing the effects of fertility over different ranges for different sorts of people to increase precision we develop an estimator that combines different instrument sets across partially overlapping parity specific subsamples our results are remarkably consistent in showing no evidence of a quantity quality trade off

is the price level tied to the m2 monetary aggregate in the long run a long run link between money and prices is evident for the united states since the korean war if the m2 measure of money is used and the velocity of m2 v2 is modeled as a mean reverting series this link between m2 and prices is the basis for a dynamic model of inflation that compares favorably in forecasting exercises with phillips curve and more typical monetarist approaches the behavior of v2 is examined from 1870 to the present providing a basis for reconsidering previous findings that v2 follows a random walk copyright 1991 by american economic association

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

is there a role for monetary aggregates in the conduct of monetary policy abstract we examine the potential policy role of monetary aggregates by attempting to use them as effectively as possible in the analysis of empirical relationships we focus on their role as information variables since any more ambitious use such as in a policy rule would presuppose some information content in the aggregates our results show that in the united states since 1979 the monetary aggregates fall considerably short of those requirements and results with german m3 are hardly more favorable we also investigate whether empirical relationships are not reflective of information relationships because of the use of these variables in countercyclical policy the results are not consistent with that interpretation

the effects on agriculture in the united states of an oil import fee this paper focuses on the effect that a crude oil import fee would have on the various producing sectors consuming sectors and household categories in the united states where the interrelationships between these entities is explicitly considered special attention is given to the agricultural sectors of the economy thus in the context of a general equilibrium model the effect of a 5 00 per barrel import fee on the producing sectors in general and the three agricultural sectors plus forestry in particular on the consuming sectors on households and on the government is calculated over the period 1984 90 with such an import fee relative to the absence of a crude oil import fee the model results suggest that there will be a reduction in output by all producing sectors except the crude oil industry by about 13 924 billion there will be a fall in the consumption of goods and services by about 318 million and there will be a decline in aggregate social welfare measured as utility by about 208

educational assortative mating and earnings inequality in the united states1 this article investigates how changes in educational assortative mating affected the growth in earnings inequality among households in the united states between the late 1970s and early 2000s the authors find that these changes had a small negative effect on inequality there would have been more inequality in earnings in the early 2000s if educational assortative mating patterns had remained as they were in the 1970s given the educational distribution of men and women in the united states educational assortative mating can have only a weak impact on inequality and educational sorting among partners is a poor proxy for sorting on earnings

the two pillars of the european central bank i interpret the european central bank s two pillar strategy by proposing an empirical model for inflation that distinguishes between the short and long run components of inflation the latter component depends on an exponentially weighted moving average of past monetary growth and the former on the output gap estimates for the 1971 2003 period suggest that money can be combined with other indicators to form the broadly based assessment of the outlook for future price developments that constitutes the ecb s second pillar however the analysis does not suggest that money should be treated differently from other indicators while money is a useful policy indicator all relevant indicators should be assessed in an integrated manner and a separate pillar focused on monetary aggregates does not appear necessary stefan gerlach

interpreting euro area inflation at high and low frequencies abstract several authors have recently interpreted the european central bank s ecb s two pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands the ecb has publicly supported this understanding of the framework this paper presents further evidence on the behaviour of euro area inflation using band spectrum regressions which allow for a natural definition of the short and long run in terms of specific frequency bands and causality tests in the frequency domain the main finding is that variations in inflation are well explained by low frequency movements of money and real output growth and high frequency fluctuations of the output gap

trends in intergenerational income mobility previous studies of recent u s trends in intergenerational income mobility have produced widely varying results partly because of large sampling errors by making more efficient use of the available information in the panel study of income dynamics we generate more reliable estimates of the recent time series variation in intergenerational mobility our results which pertain to the cohorts born between 1952 and 1975 do not reveal major changes in intergenerational mobility

intergenerational income mobility in permanent and separated families abstract we focus on the father definition in studies of intergenerational income mobility the association between sons income and their biological fathers income is weaker the less they lived together we also find weaker associations for nonbiological fathers than for biological

the impact of technical change on the aggregate production function this study endeavours to look at both disembodied technical progress and embodied technical progress in the capital stock and in the labour force in the united states over the period 1947 80 the results suggest that disembodied technical progress has been about 3 per year embodied technical progress in the capital stock is approximately 3 4 per year and educational attainment significantly enhances labour productivity finally when the issue of structural stability of the underlying production relationship is addressed the period 1971 80 gives rise to some inconsistency

racial inequality trends and the intergenerational persistence of income and family structure racial disparity in family incomes remained remarkably stable over the past 40 years in the united states despite major legal and social reforms previous scholarship presents two primary explanations for persistent inequality through a period of progressive change one highlights continuity because socioeconomic status is transmitted from parents to children disparities created through histories of discrimination and opportunity denial may dissipate slowly the second highlights change because family income results from joining individual earnings in family units changing family compositions can offset individuals changing economic chances i examine whether black white family income inequality trends are better characterized by the persistence of existing disadvantage continuity or shifting forms of disadvantage change i combine cross sectional and panel analysis using current population survey panel study of income dynamics census and national vital statistics data results suggest that african americans experience relatively extreme intergenerational continuity low upward mobility and discontinuity high downward mobility both helped maintain racial inequality yet intergenerational discontinuities allow new forms of disadvantage to emerge on net racial inequality trends are better characterized by changing forms of disadvantage than by continuity economic trends were equalizing but demographic trends were disequalizing as family structures shifted family incomes did not fully reflect labor market gains

the polarization of the u s labor market this paper analyzes a marked change in the evolution of the u s wage structure over the past fifteen years divergent trends in upper tail 90 50 and lower tail 50 10 wage inequality we document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years since 1980 wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987 but it has ceased growing and for some measures actually narrowed since the late 1980s furthermore we find that occupational employment growth shifted from monotonically increasing in wages education in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage education distribution in the 1990s we characterize these patterns as the u201cpolarization u201d of the u s labor market with employment polarizing into high wage and low wage jobs at the expense of middle wage work we show how a model of computerization in which computers most strongly complement the non routine abstract cognitive tasks of high wage jobs directly substitute for the routine tasks found in many traditional middle wage jobs and may have little direct impact on non routine manual tasks in relatively low wage jobs can help explain the observed polarization of the u s labor market this abstract was borrowed from another version of this item

a simple adaptive measure of core inflation this paper proposes a new measure of core inflation and compares it with several existing measures the new measure is adaptive and is designed to track sudden and persistent movements in inflation such as those arising from changes in monetary policy regimes the adaptive measure filters out transients more effectively than existing measures and it is a superior predictor of locally mean reverting components of inflation

money in monetary policy design a formal characterization of ecb style cross checking the european central bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision the case against including money in the central bank s interest rate rule is based on a st andard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades in this paper we develop a justifi cation for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates we formulate a novel characterization of ecb style monetary cross checking and show that it can generate substantial stabilization benefits in the event of persistent policy mis perceptions regarding potential output

price of oil and world inflation and recession new evidence shows that the commonly held assumption that the 1973 74 oil price increase directly affected us and world inflation and subsequent recession is consistent with the empirical data an extended lucas varro real income equation applied to the us united kingdom canada france germany italy japan and the netherlands gives mixed results partly because of price control and decontrol programs simulation experiments on the price control variable using us data finds strong effects further studies can be made when consistent international data is available for the 1979 80 period 18 references 4 figures 3 tables dck

constructing historical euro zone data existing methods of reconstructing historical euro zone data by aggregation of the individual countries aggregate data raises numerous difficulties especially due to past exchange rate changes the approach proposed here is designed to avoid such distortions and aggregate exactly when exchange rates are fixed we first compute growth rates within states aggregate these then cumulate this euro zone growth rate to obtain the aggregated levels variables the aggregate of the implicit deflator plice index coincides with the implicit deflator of our aggregate nominal and real data we apply the method to euro zone m3 gdp and prices over the previous two decades 1 background with the introduction on 31 december 1998 of the irrevocably fixed euro exchange rates eleven countries of the european union entered a new monetary union from that date onwards monetary policy for these countries is set by the newly formed european central bank ecb the governing council of the ecb bases its monetary policy on medium term assumptions regarding real gdp growth and the trend decline in the velocity of circulation of m3 ecb 1999a p 40 therefore the construction of historical data for aggregate m3 and gdp for the euro zone is of practical relevance to policy makers in addition any econometric model for euro zone countries requires such historical data this paper describes an approach to doing so from the aggregate data of the individual member states a number of previous reconstructions are noted but as these have important drawbacks an approach related to that in t6rnqvist 1936 is proposed and its properties are discussed although there have been many important contributions to index number theory see section 4 few are directly relevant to the problem confronted here where we wish to use the national aggregates from member states not the individual item data usually input into index calculations to construct a euro zone aggregate moreover the inherently non stationary nature of those national aggregates both from unit roots inducing integrated time series

inequality among american families with children 1975 to 2005 from 1975 to 2005 the variance in incomes of american families with children increased by two thirds in attempting to explain this trend labor market studies emphasize the rising pay of college graduates while demographers typically highlight the implications of family structural changes across time in this article we join these lines of research by conceiving of income inequality as the joint product of the distribution of earnings in the labor market and the pooling of incomes in families we develop this framework with a decomposition of family income inequality using annual data from the march current population survey our analysis shows that disparities in education and single parenthood contributed to income inequality but rising educational attainment and women s employment offset these effects most of the increase in family income inequality was due to increasing within group inequality which was widely shared across family types and levels of schooling

the dynamics of population growth differential fertility and inequality studies of population growth relative to income distribution from single equation and simultaneous equation models have shown that higher population growth rates increase inequality the reasons for this inequality contain important welfare issues including the fact that different income groups grow at different rates with lower income the fastest the differential fertility of the income groups complicates these issues the lorenz curve has often been used as a foundation of the theory of inequality comparisons and uses cumulative shares of income as a function of cumulative shares of population the mortality rates age of new entrants and the mobility across income groups must be factored in these can be analyzed simultaneously using a multistate life table which describes simultaneous transitions across age groups and states data from brazil was used to test whether increase in the fertility rates of the poor would affect income inequality the results indicate a 100 increase in the fertility of the poor which increases the percentage of poor in the equal fertility case there were decreases in the percent of poor from the original number these results confirm that inequality measures can give conflicting signals and could be inconsistent with real changes in relative welfare analyzing relationships between population growth and inequality is difficult and standard measures are inadequate to test hypotheses about the distribution effects of migration or high fertility it appears to be impossible to differentiate changes in population make up from changes in economic status

effects of growing wage disparities and changing family composition on the u s income distribution abstract u s income inequality soared after 1979 the present paper estimates the contribution of increased earnings inequality to the surge in overall income inequality between 1979 and 1996 the direct contribution of increased earnings inequality is surprisingly modest even if male and female earnings inequality had remained unchanged at their 1979 levels about two thirds of the observed increase in overall u s inequality would have occurred other factors contributing to higher overall inequality include the growing correlation of husband and wife earned incomes and the increasing percentage of americans who live in single adult families families that typically have much more unequal incomes than husband wife families

the future of monetary aggregates in monetary policy analysis this paper considers the role of monetary aggregates in modern macroeconomic models of the new keynesian type the focus is on possible developments of these models that are suggested by the monetarist literature and that in addition seem justified empirically both the relation between money and inflation and between money and aggregate demand are considered regarding the first relation it is argued that both the mean and the dynamics of inflation in present day models are governed by money growth this relationship arises from a conventional aggregate demand channel claims that an emphasis on the link between monetary aggregates and inflation requires a direct channel connecting money and inflation are wide of the mark the relevance of money for aggregate demand in turn lies not via real balance effects or any other justification for money in the is equation but on money s ability to serve as a proxy for the various substitution effects of monetary policy that exist when many asset prices matter for aggregate demand this role for monetary aggregates which is supported by empirical evidence enhances the value of money to monetary policy

the information content of money in forecasting euro area inflation this article contributes to the debate on the role of money in monetary policy by analysing the information content of money in forecasting euro area inflation we compare the predictive performance within and among various classes of structural and empirical models in a consistent framework using bayesian and other estimation techniques we find that money contains relevant information for inflation in some model classes money based new keynesian dynamic stochastic general equilibrium dsge models and vector autoregressions vars incorporating money perform better than their cashless counterparts but there are also indications that the contribution of money has its limits the marginal contribution of money to forecasting accuracy is often small money adds little to dynamic factor models and it worsens forecasting accuracy of partial equilibrium models finally nonmonetary models dominate monetary models in an all out horserace

the more the merrier the effect of family size and birth order on children s education there is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family however there is little causal evidence that speaks to this theory using a rich dataset on the entire population of norway over an extended period of time we examine the effects of family size and birth order on the educational attainment of children while we find a negative correlation between family size and children s education when we include indicators for birth order and or use twin births as an instrument family size effects become negligible in addition birth order has a significant and large negative effect on children s education we also study adult earnings employment and teenage childbearing and find strong evidence for birth order effects with these outcomes particularly among women these findings suggest the need to revisit economic models of fertility and child production focusing not only on differences across families but differences within families as well

the impacts of family size on investment in child quality using multiple births as an exogenous shift in family size i investigate the impact of the number of children on child investment and child well being using data from the 1980 us census five percent public use micro sample 2sls results demonstrate that parents facing a change in family size reallocate resources in a way consistent with becker s quantity quality model a larger family generated by twins in a later birth reduces the likelihood that older children attend private school reduces the mother s labor force participation and increases the likelihood that parents divorce the impact of family size on a measure of child outcome such as grade retention is less clear the results indicate that for both measures of child investment and child well being the 2sls estimates are statistically distinguishable from ols estimates indicating an omitted variables bias in the single equation model

long run waves or short run fluctuations what establishes the correlation between oil and food prices abstractthe strong correlation between food prices and energy prices has gained much attention in the public debate in this article we focus on the so called excess co movement which is the correlation between crude oil price and the prices of food commodities after controlling for economic activity we use a frequency domain granger causality test to analyse short run and long run relationships between crude oil prices and prices of food commodities for important biofuel inputs like maize soybeans rapeseed and eu sugar we find evidence for long run granger causality in particular for the period after 2007 this supports the hypothesis that the increasing biofuel production creates the link between the prices of crude oil and food commodities however we also find short run granger causality for various food commodities this result is more in line with herd behaviour or speculation in commodity markets

the effects of money growth on inflation and interest rates across spectral frequency bands band spectral regression techniques are used to identify the frequency bands that are most important in the relationships between money growth and inflation and between money growth and the nominal interest rate the results show that cycles in the growth rate of m1 from one to two years long produce higher frequency cycles in inflation and two distinct sets of higher frequency cycles in changes in the nominal interest rate the results support models where predictable changes in money growth produce liquidity and anticipated inflation effects on nominal interest rates copyright 1994 by ohio state university press

a reassessment of the effect of income maintenance on marital dissolution in the seattle denver experiment cain and wissoker claim that income maintenance treatment had no effect on marital dissolution in the seattle denver income maintenance experiment yet parametric and nonparametric analyses reveal that there was a significant increase in the dissolution rate for blacks and whites but not chicanos this conclusion holds for many different specifications including a number that allow free form time variation in response while cain and wissoker s analyses and results differ in many ways from that of groeneveld hannan and tuma consideration of the full set of estimates including both main effects and interaction effects and analyses of the complete samples reveal that their analyses agree that the income maintenance treatment increased rates of marital dissolution for blacks and whites

two illustrations of the quantity theory of money of two central implications of the quantity theory of money that a given change in the rate of change in the quantity of money induces i an equal change in the rate of price inflation and ii an equal change in nominal rates of interest the illustrations were obtained by comparing moving averages of the three variables in question using quarterly u s time series for the period 1953 77 readers may find the results of interest as additional confirmation of the quantity theory as an example of one way in which the quantity theoretic relationships can be uncovered via atheoretical methods from time series which are subject to a variety of other forces or as a measure of the extent to which the inflation and interest rate experience of the postwar period can be understood in terms of purely classical monetary forces the theoretical background of the study is reviewed very briefly as it is familiar material in the next section the data processing methods are described and rationalized in section ii the illustrations