residual wage disparity and coordination unemployment how much of residual wage dispersion can be explained by an absence of coordination among firms to answer we construct a dynamic directed search model with identical workers where firms can create high or low productivity jobs and are uncoordinated in their offers to workers calibrated to the u s economy workers can exploit ex post opportunities once approached by firms and can conduct on the job search the stationary equilibrium wage distribution is hump shaped skewed significantly to the right and with baseline parameters generates residual dispersion statistics 75 90 of those found empirically however the model underestimates the average duration of unemployment

limited commitment and the demand for money understanding money demand is important for our comprehension of macroeconomics and monetary policy its instability has made this a challenge common explications for the instability are financial regulations and financial innovations that shift the money demand function we provide a complementary view by showing that a model where borrowers have limited commitment can significantly improve the fit between the theoretical money demand function and the data limited commitment can also explain why the ratio of credit to m1 is currently so low despite that nominal interest rates are at their lowest recorded levels this article is protected by copyright all rights reserved

a review of the recent empirical literature on displaced workers this article reviews the empirical literature on job displacement job displacement is widespread and strongly countercyclical tending to peak during economic downturns but concentrated in indus

the turning black tide energy prices and the canadian dollar the authors revisit the relationship between energy prices and the canadian dollar in the amano and van norden 1995 equation which shows a negative relationship such that higher real energy prices lead to a depreciation of the canadian dollar

temporary foreign workers and firms theory and canadian evidence abstract temporary foreign worker tfw programs have grown considerably in size when uncapped we develop a simple efficiency wage model to explain this phenomenon and examine the empirical evidence for it we also use the model to evaluate the implications of tfw programs for domestic workers in our framework firms that have been unable to find domestic workers may hire tfws at the wage previously advertised to domestic workers due to the lower outside option for tfws than domestic workers tfws will exert more effort for the same wage firms would thus prefer to hire otherwise identical tfws rather than domestic workers our model identifies an unintended consequence of a tfw program since the repercussions of a failed domestic job search are less severe if a tfw may be hired instead firms have an incentive to lower their wage offers made to domestic workers using canadian data we find that relative to domestic workers tfws work longer hours have lower rates of absenteeism and are less likely to be laid off consistent with higher effort in our model moreover for tfws from home countries with a relatively high outside option effort is lower than for tfws from other countries resume travailleurs etrangers temporaires et entreprises theorie et exemple canadien en l absence de plafonnement les programmes de travailleurs etrangers temporaires ptet se sont considerablement developpes afin d expliquer ce phenomene et d en examiner les preuves empiriques nous avons developpe un modele simple de salaire d efficience nous avons egalement utilise ce modele pour evaluer l incidence des ptet sur les travailleurs domestiques dans notre cadre d etude les entreprises peinant a trouver une main d uvre locale peuvent embaucher des travailleurs etrangers temporaires au salaire prealablement propose aux travailleurs domestiques compte tenu d options exterieures plus faibles les travailleurs etrangers temporaires deploieront davantage d efforts pour le meme salaire les entreprises prefereront donc embaucher des travailleurs etrangers par ailleurs identiques plutot que des travailleurs domestiques notre modele identifie une consequence inattendue aux ptet etant donne que les consequences d une recherche d employes domestiques infructueuse sont attenuees par l embauche de travailleurs etrangers temporaires les entreprises sont incitees a diminuer les offres salariales proposees aux travailleurs locaux en exploitant les donnees propres au canada nous avons decouvert que les travailleurs etrangers temporaires travaillaient plus d heures avaient des taux d absenteisme inferieurs et etaient moins susceptibles de se faire congedier que les travailleurs domestiques conformement au concept d effort accru developpe dans notre modele en outre pour les travailleurs etrangers temporaires originaires de pays a options exterieures relativement elevees l effort sera moindre que pour ceux provenant d autres pays

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

what have we learned from empirical studies of unemployment and turnover unemployment reminds economists that we have a lot to be modest about twenty years ago robert hall 1972 asked why is the unemployment rate so high at full employment at the time hall wrote male unemployment in the united states had risen to 3 5 percent and it would peak at 4 4 percent in the recession of 1971 since then every cyclical low of unemployment has exceeded the one before it the end of the 1980 s expansion reduced unemployment to about 4 5 percent and unemployment peaked at 7 4 percent of the labor force in the recession that just ended the natural rate of unemployment has evidently risen through time which led lawrence summers 1986 to place a modifier in hall s question why is the unemployment rate so very high in what follows i pose three questions about the causes and consequences of rising joblessness first who are the unemployed i will show that unemployment and nonparticipation are heavily concentrated among the least skilled and more importantly that virtually all of the long term increase in joblessness occurs among low wage men unemployment and nonparticipation among highly skilled men are unchanged since the 1960 s second what factors have caused jobless time to rise there are many theories including changes in labor force demographics social programs that discourage employment and changes in the amount of frictional unemployment caused by sectoral shifts none of these is consistent with the evidence which points instead to a secular decline in the demand for lessskilled workers the data also cast doubt on nonmarket clearing models of rising unemployment wages are demonstrably flexible in the long run and they have fallen dramatically among the unskilled whose jobless rates have risen third what happens to the unemployed in contrast to the view that unemployment spells cause transitory reductions in income recent evidence indicates that job losses have substantial and permanent effects on earning power many of the unskilled who are unemployed or out of the labor force appear to have been high wage workers whose specialized skills have become obsolete

the long term costs of job displacement for young adult workers using nlsy data the authors estimate the long term costs of job displacement for young adults earnings and wage losses were large for the first three years following displacement compared to earnings losses found by other studies for more mature workers however earnings losses for these young adults were short lived with differences between observed and expected earnings narrowing considerably five years after job loss at that point the shortfall in annual earnings relative to what would have been expected absent job loss was 9 for men and 12 5 for women and the shortfall in hourly wages was 21 2 for men young workers also apparently differ from more established workers in the composition of total earnings losses for older workers total losses largely represent actual immediate earnings losses whereas for young workers the loss of opportunities for rapid earnings growth is more important

the ins and outs of unemployment in canada 1976 2008 this paper studies the flows into and out of unemployment in canada at an aggregate and a number of disaggregated levels i find that inflows into unemployment are countercyclical and outflows are procyclical at an aggregate level changes in the rate at which individuals leave unemployment account for most of the changes in unemployment rates in canada between 1976 and 2008 however flows into unemployment matter more at some disaggregated levels there are also some differences in the contributions of flows into and out of unemployment to changes in unemployment rates across the 1981 82 and 1990 92 recessions ce texte etudie les entrees et sorties du chomage au canada au niveau agrege et a un certain nombre de niveaux de desagregation on decouvre que les entrees en chomage sont contre cycliques et les sorties pro cycliques au niveau agrege les changements dans le taux de sorties du chomage expliquent le gros des changements dans les taux de chomage au canada entre 1976 et 2008 cependant les flux a l entree sont plus importants a certains niveaux de desagregation on note aussi des differences dans la contribution des flux a l entree et a la sortie du chomage aux changements dans les taux de chomage au cours des recessions de 1981 82 et de 1990 92

unemployment and productivity in the long run the role of macroeconomic volatility abstract this paper presents a new empirical regularity between the volatility of productivity growth and long run unemployment for a given level of long run productivity growth a theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding the model tends to fit u s long run unemployment better than a specification based on long run productivity growth only especially during the great moderation and the great recession

on the low frequency relationship between public deficits and inflation summary we estimate the low frequency relationship between fiscal deficits and inflation and pay special attention to its potential time variation by estimating a time varying vector autoregression model for us data from 1900 to 2011 we find the strongest relationship neither in times of crisis nor in times of high public deficits but from the mid 1960s up to 1980 employing a structural decomposition of the low frequency relationship and further narrative evidence we interpret our results such that the low frequency relationship between fiscal deficits and inflation is strongly related to the conduct of monetary policy and its interaction with fiscal policy after world war ii copyright 2015 john wiley sons ltd

is quantity theory still alive this paper investigates whether the quantity theory of money is still alive we argue that it is but that the slippage is not negligible for countries with low inflation the relationship between average inflation and the growth rate of money is tenuous at best a correction for variation in output growth and the opportunity cost of money using theory implied elasticities helps explain the slippage for the period since 1990 inflation targeting at low rates of inflation makes it harder to establish the long run relationship between monetary growth and inflation

the ricardian equivalence hypothesis evidence from bangladesh this article examines the ricardian equivalence hypothesis reh and its sources of failure in the case of bangladesh using various theoretical specifications annual data from 1974 2001 and linear and nonlinear time series techniques the general findings tend to invalidate the reh a finite time horizon and the presence of liquidity constrained individuals are the sources of deviation from the reh empirical results reveal that real per capita private consumption c under various specifications is cointegrated generally at the 5 level with real per capita income y government expenditure before and after interest rate repayments g and g2 taxes t and the interest rate r results reveal that an increase in g g2 t and r reduces c and that an increase in budget deficits raises trade deficits these results highlight the importance of fiscal policies in boosting private consumption and controlling trade deficits which are the prime goals of stabilization policies being followed by bangladesh

an examination of firms employment costs the existence of quasi fixed costs of work may affect firms desired employee hours and number of workers which has important implications for the estimation of labour supply parameters firm level data from the 1982 employment opportunity pilot project is used to estimate the importance to firms of employee quasi fixed costs related to searching hiring training and firing specifically this paper examines how these costs affect number of workers and hours per worker turnover and vacancies to the extent that the costs are determined by the firm s presumably exogenous industrial classification an attempt is made to control for biases due to employee heterogeneity as well results show that higher costs are associated with lower turnover fewer vacancies and longer hours as predicted by a model of labour demand

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

monetary fiscal policy interaction and fiscal inflation a tale of three countries abstract we study the impact of the interaction between fiscal and monetary policy on the low frequency relationship between the fiscal stance and inflation using cross country data from 1965 to 1999 in a first step we contrast the monetary fiscal narrative for germany the u s and italy with evidence obtained from simple regression models and a time varying var we find that the low frequency relationship between the fiscal stance and inflation is low during periods of an independent central bank and responsible fiscal policy and more pronounced in times of non responsible fiscal policy and accommodative monetary authorities in a second step we use an estimated dsge model to interpret the low frequency measure structurally and to illustrate the mechanisms through which fiscal actions affect inflation in the long run the findings from the dsge model suggest that switches in the monetary fiscal policy interaction and accompanying variations in the propagation of structural shocks can well account for changes in the low frequency relationship between the fiscal stance and inflation

don t look down the consequences of job loss in a flexible labour market we estimate the earnings hours and income effects of job loss for a representative sample of uk workers from 1991 2007 we follow workers before and after job loss regardless of their labour market state and we match displaced workers with similar non displaced workers this provides a more comprehensive picture of the effect of job loss in the uk than previously available job loss causes a long run reduction in income which is mainly due to reductions in monthly pay rather than in employment propensity income from other labour market states and from welfare payments does little to compensate for income losses this lack of a safety net means that job loss in the uk has a similar impact to job loss in the us

good jobs versus bad jobs this article develops a model of noncompetitive labor markets in which high wage good and low wage bad jobs coexist minimum wages and unemployment benefits shift the composition of employment toward high wage jobs because the composition of jobs in the laissez faire equilibrium is inefficiently biased toward low wage jobs these labor market regulations increase average labor productivity and may improve welfare

time aggregation and the relationship between inflation and money growth using panel data for 99 countries we confirm that the measured elasticity of prices with respect to money is higher and closer to unity the higher is money growth and the longer the time horizon over which the data are averaged we propose two explanations in one the true model of inflation involves a lagged response to money growth in the other there is negative correlation between shocks to inflation and money growth our empirical results can be explained if high money growth countries have i shorter lags or ii less negative correlation when compared to countries with low money growth

the source of the new canadian job stability patterns this paper explores the causes of the recent change in the canadian job stability patterns using the labour force survey master files 1977 2008 i find that what was previously seen as a cyclical increase in job stability is actually a secular change results indicate that the ageing of the workforce the increased educational attainment and the increased labour force attachment of women play important roles in explaining the aggregate job stability patterns that emerge for education the declining importance of low educated workers is the key and not the rising importance of workers with university degrees with respect to gender the evidence points towards a cohortbased explanation surprisingly the changing industry structure has little explanatory powers finally only the rising educational attainment matters for newer jobs leaving a large part of the increase still unexplained

the twin deficits phenomenon evidence from greece this paper explores the relationship between budget and trade deficits in a small open economy using annual data the purpose of the paper is to test empirically the validity and rationale of the keynesian proposition conventional view and the ricardian equivalence hypothesis the econometric methodology is based on cointegration analysis error correction modelling and granger trivariate causality the ecm empirical findings suggest that budget deficit has short and long run positive and significant causal effects on trade deficit

on the sources of macroeconomic stability in the euro area in the mid 1990s the euro area experienced a change in macroeconomic volatility around the same time at business cycle frequencies the correlation between inflation and money growth changed markedly turning from positive to negative distinguishing the periods pre and post 1994 we estimate a dynamic stochastic general equilibrium model with money for the euro area the model accounts for the salient facts we then perform several counterfactual exercises to assess the drivers of these phenomena the moderation of real variables was essentially due to relatively smaller shocks to investment wage markups and preferences the apparent lack of evidence for the quantity theory of money in the short run and the changes in the volatility of nominal variables resulted primarily from a more anti inflationary and gradual monetary policy

the risk and cost of job loss in canada 1978 2008 we assess the risk and cost of worker displacement in canada over the last three decades we show that neither the risk of job loss nor the short term earnings losses of displaced workers trended upwards during that period however short term earnings losses of workers displaced from manufacturing increased in recent years as a smaller proportion found a post displacement job in that sector in line with stevens 1997 and couch and placzek 2010 we find that high seniority workers and individuals with stable labour market attachment experienced five years after displacement earnings losses that ranged between 10 and 18 le risque et le cout d une perte d emploi au canada 1978 2008 on evalue le risque et le cout d un deplacement de travailleur au canada au cours des trois dernieres decennies on montre que ni le risque d une perte d emploi ni les gains perdus a court terme par les travailleurs deplaces n ont eu une tendance a la hausse au cours de cette periode cependant les pertes de gains a court terme des travailleurs deplaces dans le secteur manufacturier ont augmente au cours des annees recentes alors qu une proportion plus faible de ces deplaces ont retrouve un emploi dans ce secteur en coherence avec les resultats de stevens 1997 et de couch et placzek 2010 on decouvre que les travailleurs avec beaucoup de seniorite et les personnes avec un attachement stable au marche du travail ont enregistre cinq ans apres un deplacement des pertes de gains de l ordre de 10 a 18

productivity gains from unemployment insurance this paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs and by encouraging rms to create those jobs we use a quantitative model to investigate whether this eect is comparable in magnitude to the standard moral hazard eects of unemployment insurance our model economy captures the behavior of the u s labor market for high school graduates quite well with unemployment insurance more generous than the current u s level unemployment would increase by a magnitude similar to the micro estimates but because the composition of jobs also changes total output and welfare would increase as well

money and output friedman and schwartz revisited more than fifty years ago friedman and schwartz examined historical data for the united states and found evidence of pro cyclical movements in the money stock which led corresponding movements in output we find similar correlations in more recent data these appear most clearly when divisia monetary aggregates are used in place of the federal reserve s official simple sum measures when we use information in divisia money to estimate a structural vector autoregression identified monetary policy shocks appear to have large and persistent effects on output and prices with a lag that has lengthened considerably since the early 1980s

twin sons of different mothers the long and the short of the twin deficits debate i introduction the relationship between the government budget deficit and the current account deficit has been a contentious subject in empirical macroeconomics for at least the past 20 yr papers have variously found a positive link no link and three recent pieces even find a negative link between the two there are however some things that almost all these studies have in common for example they ignore the possibility of structural breaks in the series when examining their time series properties most previous studies treat the variables under study as being integrated of order 1 which is to say as having a unit root this is a hard assumption to square with the fact that the variables are measured as fractions of gross domestic product gdp and have over the last half century at least shown no inclination toward typical unit root behavior by contrast in three recent pieces corsetti and muller 2006 kim and roubini 2008 muller 2006 the two series are simply treated as pure stationary processes without any pretesting which obviously conflicts with results from the traditional unit root tests in this article we show that both the budget deficit and the current account deficit are stationary around an occasionally shifting mean which is to say that they have structural breaks but are stationary after allowing for those breaks since it is well known that traditional unit root tests have little power when the underlying data contain structural breaks this explains the puzzling finding that the budget deficit and the current account deficit expressed as fractions of gdp test out as i 1 series in practice our findings also cast doubt on the validity of assuming the two series are purely stationary processes given our framework a simple test for the existence of a long run equilibrium relationship between budget and current account deficits is to compare the number and timing of their structural shifts we find that the two series are not closely related either in their number of breaks or in their timing of structural shifts we thus conclude that over the long run genetically the deficits are not twins another factor that existing studies have in common is their treatment of the error structure of the model as homoskedastic despite relatively clear visual evidence of volatility clustering conditional heteroskedasticity in least squares residuals when we consider the short run dynamics of the demeaned variables through a vector autoregression var analysis we show that the error covariance of this var model is significantly conditionally heteroskedastic and go on to specifically account for this phenomenon with a var generalized autoregressive conditional heteroskedasticity garch model we consider a trivariate model that also includes the real interest rate here we find a significant and sizeable positive short run effect of budget deficit innovations on the current account deficit in both the impulse response functions and the variance decompositions of the model our answer to the question of the paternity of the two deficits thus depends on the horizon studied each series has structural breaks that are largely independent of each other so they are not twins at all over the long run however once we allow for these secular shifts the short run dynamics reveal a very strong family resemblance indeed the rest of the article is organized as follows in section ii we review some of the existing empirical literature section iii discusses the time series properties of the data and presents our results about the long run evidence on the twin deficits question section iv sets out our var garch model and presents our results on short run twin deficits behavior section v is a brief conclusion ii an overview of the empirical literature the relationship between current account deficits and government budget deficits has been a subject of extensive study

have large budget deficits caused rising trade deficits for the united states the 1980s have been years of both large and unprecedented trade deficits as well as massive federal budget deficits the trade deficit rose from 25 billion in 1980 to 124 billion in 1985 during this same period federal budget deficits soared from 74 billion in 1980 to more than 212 billion in 1985 it is widely believed that the u s trade deficit rose mainly because of the skyrocketing federal budget deficit presenting such a view are for example hutchison and pigott 25 hutchison and pyle 26 clark 11 modigliani 30 and aschauer 2 besides economists many labor unions i e afl cio and official government documents see the economic report of the president particularly of 1984 have all shared similar views the issues involved have important policy implications suppose that the basic reason for rising trade deficits is indeed the escalating federal budget deficit in this case policy makers may focus on curtailing the budget deficit in order to resolve the trade deficit problem that has adversely affected several sectors such as manufacturing industries and agriculture however if such a view concerning the causal role of the budget deficit is incorrect then reductions in the federal budget deficit may not resolve the trade deficit dilemma and moreover attention will be diverted from more relevant and urgently needed policy options 6 the purpose of this paper is to empirically investigate the conventional argument that high federal budget deficit has been the prime cause of the escalating u s trade deficit finding only partial empirical evidence to support it in section ii i argue that most of previous studies in this area appear flawed by a methodological error rendering their tests unreliable for discriminating between a number of equally plausible hypotheses section iii describes the data and methodology used in the paper section iv presents the empirical results section v summarizes and concludes the paper

earnings losses of displaced workers revisited recent literature reviews conclude that job displacement results in sustained earnings losses bruce c fallick 1996 lori g kletzer 1998 and that estimates of the size of those reductions vary with the type of data used in the analysis the industry within which displacement occurs and business cycle conditions the largest estimated losses were obtained using administrative data from pennsylvania during the 1970s and 1980s louis s jacobson robert j lalonde and daniel g sullivan 1993a the data covered a period of high unemployment in a heavily indus trialized state characterized by disproportionate job losses in manufacturing thus the ability to generalize those results to more favorable economic times and states with a greater reliance on service sector employment has been questioned to address these issues administrative data are used to similarly examine the impact of job displacement on earnings losses of workers in connecticut from 1993 to 2004 the work of jacobson lalonde and sullivan jls also provided important methodologi cal advancement by adapting analytical techniques developed for program evaluation james j heckman and v joseph hotz 1989 to the context of job displacement the same techniques fixed effects and time trend estimators as those used in the original jls publication are initially employed here then the methods are extended to include matching estimators developed since their publication both nearest neighbor estimators of average treatment on the treated att and differenced average treatment on the treated datt are adapted to the context of this study heckman hidehiko ichimura and petra todd 1997 heckman et al 1998 and rajeev h dehejia and sadek wahba 1999 2002 the results presented here for connecticut differ in some ways from those found in the work of jls using data from pennsylvania in the period immediately following job loss regardless of the technique employed earnings reductions for workers displaced through mass layoff range from 32 percent to 33 percent jls reported immediate losses of more than 40 percent six years later using the same estimators as jls earnings reductions in connecticut range from 13 percent to 15 percent they report sustained losses in pennsylvania of 25 percent the smaller long term impacts in connecticut demonstrate that under more ordinary economic times esti mated losses from administrative data lie within the range observed using other data sources this finding resolves a long standing conflict among the results of high quality studies that have used differing data sources to study earnings reductions following job loss 1 using two different matching estimators earnings losses six years after mass layoff are 12 percent the matching estimators compare those who experienced mass layoff to compari sons with the same ex ante probability of the event these smaller losses are consistent with the

permanent layoffs in canada overview and longitudinal analysis canadians are increasingly concerned about permanent layoffs since many feel job instability has increased in the 1990s this paper uses a new longitudinal data source on worker separations to address three issues first what are the underlying causes of most permanent layoffs second has there been an increase in the permanent layoff rate in the 1990s third are most permanent layoffs rare events for workers or are they a continuation of a pattern of repeated layoffs the type of postdisplacement adjustment assistance required depends on whether layoffs are rare or frequent events for most workers ordered logistic analysis is used to address this third issue

unemployment and interindustry labour mobility in canada in the 1980s the determinants of interindustry mobility of labour and its relationship to the unemployment rate is examined using micro data on canadian workers from 1980 81 1982 83 and 1985 86 it contrasts the implications of the dynamic reallocation model lilien 1982 in which rising aggregate unemployment is due to in creased dispersion in the net hiring rates of firms implying positive covariance of interindustry mobility and unemployment rates with the older keynesian perspective that high unemployment chills labour market mobility implying a neative relationship qualified support is obtained for the chilling model as well as standard results on the role of job tenure hours worked etc the general moral is the cyclical sensitivity of labour market behaviour i e individuals appear to react to the aggregate unemployment rate

indeterminacy and learning an analysis of monetary policy in the great inflation abstract the great inflation of the 1970s can be understood as the result of equilibrium indeterminacy in which loose monetary policy engendered excess volatility in macroeconomic aggregates and prices the federal reserve inadvertently pursued policies that were not anti inflationary enough because it did not fully understand the economic environment it was operating in specifically it had imperfect knowledge about the structure of the economy and was subject to data misperceptions the combination of learning about the economy and the use of mis measured data resulted in policies which the federal reserve believed to be optimal but when implemented led to equilibrium indeterminacy

accounting for us current account deficits an empirical investigation the sources of us current account deficits are investigated using a number of macroeconomic variables and a vector error correction model the variables are those typically emphasized by the traditional income expenditure approach and the intertemporal ricardian approach the results indicate that macroeconomic variables explain the current account reasonably well and the evidence seems to support the traditional approach where budget deficits and increases in real interest rates and terms of trade are associated with current account deficits

performance pay and the white black wage gap we show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers this results in the white black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs we show that this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks we explore reasons behind our finding focusing on the interactions between discrimination unmeasured ability and selection

is job insecurity on the rise evidence from canadian perception data this paper examines the unexplored issue of worker insecurity perception in canada specifically we explore for changes in worker perceptions of job security using canadian gallup data for the 1977 2006 period we find that the high levels of perceived insecurity of the early to mid 1990s were only cyclical in nature not evidence of structural change we also explore for differences across socio economic groups and find that university educated workers full time workers and white collar workers all felt relatively more secure about present and future job prospects interestingly union members tend to be more concerned about job security than non union ce memoire examine le probleme inexplore de la perception de la precarite de l emploi au canada specifiquement on explore les changements dans les perceptions de precarite d emploi des travailleurs a l aide de donnees gallup pour la periode 1977 2006 il appert que les hauts niveaux de precarite percue du debut au milieu des annees 90 etaient de nature cyclique et non pas le resultat d un changement structurel on examine aussi les differences entre groupes socio economiques et on decouvre que les travailleurs avec une formation universitaire les travailleurs a temps plein et les collets blancs se sentaient relativement plus en securite quant aux perspectives d emploi presentes et futures il est interessant de noter que les travailleurs syndiques sont davantage inquiets quant a la precarite de l emploi que les non syndiques

technology shocks in the new keynesian model in the new keynesian model preference cost push and monetary shocks all compete with the real business cycle model s technology shock in driving aggregate fluctuations a version of this model estimated via maximum likelihood points to these other shocks as being more important for explaining the behavior of output inflation and interest rates in the postwar u s data these results weaken the links between the current generation of new keynesian models and the real business cycle models from which they were originally derived they also suggest that federal reserve officials have often faced difficult trade offs in conducting monetary policy

the impact of the volatility of monetary policy shocks this paper studies the impact of the volatility of monetary policy using a structural vector auroregression svar model enriched along two dimensions first it allows for time varying variance of monetary policy shocks via a stochastic volatility specification second it allows a dynamic interaction between the level of the endogenous variables in the var and the time varying volatility the analysis establishes that the nominal interest rate output growth and inflation fall in reaction to an increase in the volatility of monetary policy the analysis also develops a dynamic stochastic general equilibrium model enriched with stochastic volatility to monetary policy that generates similar responses and provides a theoretical underpinning of these findings

monetary aggregates as monetary targets a statistical investigation in this paper the authors analyze statistical properties of the monetary base m1 and m2 for the postwar u s data record the authors are specifically interested in answering three policy related questions first to what extent do these monetary aggregates contain information useful for predicting movements in prices and real output second how do the aggregates rank as to their predictive usefulness third how do these aggregates rank as to the stability of their relationship to the macroeconomy copyright 1992 by ohio state university press

on the welfare cost of inflation and the recent behavior of money demand post 1980 u s data trace out a stable long run money demand relationship of cagan s semi log form between the m1 income ratio and the nominal interest rate with an interest semi elasticity of 1 79 integrating under this money demand curve yields estimates of the welfare cost of modest departures from friedman s zero nominal interest rate rule for the optimum quantity of money that are quite small the results suggest that the federal reserve s current policy which generates low but still positive rates of inflation provides an adequate approximation in welfare terms to the alternative of moving all the way to the friedman rule jel e31 e41 e52

a century of inflation forecasts abstract we investigate inflation predictability in the united states across the monetary regimes of the twentieth century the forecasts based on money growth and output growth were significantly more accurate than the forecasts based on past inflation only during the regimes associated with neither a clear nominal anchor nor a credible commitment to fight inflation these include the years from the outbreak of world war ii in 1939 to the implementation of the bretton woods agreements in 1951 and from nixon s closure of the gold window in 1971 to the end of volcker s disinflation in 1983

terms of trade and real exchange rates the canadian evidence abstract this paper presents empirical evidence linking the canada us real exchange rate with the terms of trade using recently developed econometric methods for nondashstationary data we find that the real exchange rate is cointegrated with terms of trade variables and that causality runs from the terms of trade to the exchange rate we then construct a simple exchange rate equation that satisfies several specification tests and performs better than a random walk in post sample forecasting experiments the results suggest that much of the variation in the real exchange rate is attributable to movements in the terms of trade and that the influence of monetary factors is secondary

wage changes and job changes of canadian women the paper employs data from the 1986 87 labour market activity survey to investigate empirically how the wage rates of female paid workers in canada change when they change jobs in particular whether canadian women realize short run wage gains from job mobility following mincer 1986 we estimate the short run wage gain to job mobility by comparing the between job wage changes of current period job movers with the on the job wage growth of next period job movers the findings indicate that canadian women who changed jobs in 1986 realized short run wage gains of 8 9 percent and that women who quit their first job for nonpersonal job related reasons realized substantially greater wage gains than did women who quit for personal reasons were laid off or separated for other reasons

the aggregate effects of sectoral reallocations abstract can a one time permanent change in the fundamentals behind the sectoral composition of the economy prompt an aggregate downturn can this downturn be non negligible even if one uses us data to determine the relative size of gross vs net job flows and the importance of job creation costs can one consider the military build down of the 1990s as a plausible cause for the 1990 1991 recession do sectoral reallocations generate responses that are qualitatively similar to productivity shocks we use a variant of the mortensen pissarides 1994 review of economic studies 61 397 415 job creation destruction model calibrate it to us labor market data and run experiments that suggest one can answer yes to all these questions

the decline of job loss and why it matters there is considerable evidence that american workers face lower risks of job loss in recent years than 10 20 or 30 years earlier i summarize some of the evidence for this claim and explain why the decline of job loss matters my attention centers on unwelcome job loss employer initiated separations that lead to unemployment temporary or persistent drops in earnings and other significant costs for job losers since there is no fully satisfactory statistic for the incidence of job loss i consider several measures and data sources

estimation of unemployment duration from grouped data a comparative study economists have often found it useful to look at the average length of an unemployment spell in evaluating labor market conditions and in considering the labor market experience of the unemployed usually this statistic has to be estimated from grouped observations on interrupted incomplete unemployment spells this paper is a comparative study of some nonparametric and parametric methods of estimating this quantity using australian department of social security data on unemployment benefit recipients

inter industry mobility and the cyclical upgrading of labor we investigate whether a market clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor we demonstrate that roy s 1951 market clearing

current account and budget deficits twins or distant cousins the paper develops a two country micro theoretic model consistent with the ricardian equivalence hypothesis reh specifically tax increases used to retire government debt will not affect private spending or the current account balance however increases in government spending regard less of the means of finance can be expected to induce a current account deficit an unconstrained vector autoregres sion shows some patterns in the recent u s data which appear to be inconsistent with the reh rigorous testing of the model however does not allow us to reject the indepen dence of the record federal government budget and current account deficits

unemployment insurance and job duration in canada we use data from the canadian 2 year longitudinal labour market activity survey of 1986 87 to estimate the effect of the unemployment insurance ui system on job duration particular attention is focused on the entrance requirements of the ui system which relate eligibility for ui benefits to an individual s recent employment history the article makes operational the ui entrance requirement provisions which take into account variations in the regional unemployment rate controlling for many personal and job characteristics we find evidence that a significant number of jobs terminate when they have reached the duration that would permit a ui claim

has job stability declined yet new evidence for the 1990 s we update the evidence on changes in job stability through the mid 1990s using recently released current population survey data for 1995 that parallel earlier job tenure supplements in the aggregate job stability declined modestly in the first half of the 1990s moreover the relatively small aggregate changes mask rather sharp declines in stability for workers with more than a few years of tenure nonetheless the data available to this point do not support the conclusion that the downward shift in job stability for more tenured workers and the more modest decline in aggregate job stability reflect long term trends

business cycles unemployment insurance and the calibration of matching models this paper theoretically and empirically documents a puzzle that arises when an rbc economy with a job matching function is used to model unemployment the standard model can generate sufficiently large cyclical fluctuations in unemployment or a sufficiently small response of unemployment to labor market policies but it cannot do both variable search and separation finite ui benefit duration efficiency wages and capital all fail to resolve this puzzle however either sticky wages or match specific productivity shocks can improve the model s performance by making the firm s flow of surplus more procyclical which makes hiring more procyclical too

lost in transition the costs and consequences of sectoral labour adjustment this paper uses an equilibrium search and matching model to study canada s sectoral labour adjustment in 2002 2006 during an increase in global commodity prices and exchange rate appreciation i estimate economically significant adjustment costs for the aggregate economy in this episode and demonstrate that difficulty in transferring skills between jobs for individual workers can be an important contributor to these aggregate costs the analysis also demonstrates that the level of unemployment benefits impacts the economy s sectoral composition its aggregate productivity and the speed of its adjustment to shocks ce texte utilise un modele d equilibre de la recherche et de l arrimage pour etudier les ajustements sectoriels du travail au canada dans la periode 2002 2006 une periode d appreciation des prix globaux des produits de base et du taux de change j estime que les couts d ajustement sont economiquement significatifs pour l economie agregee au cours de cet episode et que la difficultea transferer les competences entre emplois pour les travailleurs individuels peut etre une source importante de ces couts agreges les analyses montrent aussi que le niveau des prestations d assurance emploi a un impact sur la composition sectorielle de l economie sur la productivite et sur la vitesse des ajustements aux chocs

monetary facts revisited abstract this paper uses data from 46 economies over the post war period to revisit two key monetary facts i the link between money growth and inflation and ii the link between credit growth and financial crises the analysis reveals that the former has weakened over time while the latter has become stronger this suggests that there is an inverse relationship between the two monetary facts the money inflation link is weak and the credit crisis nexus is strong when inflation is low and financial systems are liberalised while the reverse holds true in environments of high inflation and less liberalised financial systems

the importance of lifetime jobs in the u s economy though the u s labor market is justly notorious for high turnover and consequent high unemployment it also provides stable near lifetime employment to an important fraction of the labor force this paper investigates patterns of job duration by age race and sex with the following major conclusions 1 the typical worker today is holding a job which has lasted or will last about eight years over a quarter of all workers are holding jobs which will last twenty years or more sixty percent hold jobs which will last five years or more 2 the jobs held by middle aged workers with more than ten years of tenure are extremely stable over the span of a decade only twenty to thirty percent come to an end 3 among workers aged thirty and above about forty percent are currently working in jobs which eventually will last twenty years or more three quarters are in jobs which will last five years or more 4 the duration of employment among blacks is just as long as among whites even though the jobs held by blacks are worse in almost every other dimension they are no more unstable than those held by whites 5 women s jobs are substantially shorter than men s on the average only about a quarter of all women over the age of thirty are employed in jobs which will last over twenty years whereas over half of men over thirty are holding these near lifetime jobs this abstract was borrowed from another version of this item

labor demand and the structure of adjustment costs this study examines the costs firms face in adjusting labor demand to exogenous shocks evidence on monthly plant level data shows that adjustment proceeds in jumps employment is unchanged in response to small shocks but moves instantaneously to a new equilibrium if the shocks are large results in the large literature that assumes smooth adjustment are due to aggregation of this nonlinear relation the finding has implications for cyclical changes in productivity for severance pay layoff and plant closing restrictions and for all other policies that affect the cost of adjusting employment copyright 1989 by american economic association

endogenous money or sticky prices abstract what explains the correlations between nominal and real variables in the postwar us data are these correlations indicative of significant nominal rigidity or do they simply reflect the particular way that monetary policymakers react to developments in the real economy to answer these questions this paper uses maximum likelihood to estimate a model of endogenous money this model allows but does not require nominal prices to be sticky the results show that nominal price rigidity over and above endogenous money plays a role in accounting for key features of the data

aggregate employment dynamics building from microeconomic evidence this paper studies quarterly employment flows of approximately 10 000 u s manufacturing establishments the authors use establishments hours week to construct measures of the deviation between desired and actual employment and use these as the establishments main state variables the main findings are 1 microeconomic adjustment functions are nonlinear with plants adjusting disproportionately to large shortages 2 adjustments are often either large or nil suggesting the presence of nonconvexities in the adjustment cost technologies 3 the bulk of average employment fluctuations is accounted for by aggregate rather than reallocation shocks and 4 microeconomic nonlinearities amplify the impact of large aggregate shocks copyright 1997 by american economic association

estimating the evolution of money s role in the u s monetary business cycle we assess money s role in the post wwii u s business cycle by employing both fixed coefficient and rolling window bayesian estimations of a structural model of the business cycle with money our empirical evidence favors a specification with drifting parameters for money consumption nonseparability and the federal reserve s reaction to nominal money growth the role of money is estimated to have been important during the 1970s and declined afterward the omission of money produces severely distorted impulse response functions relative to the model with money money is found to be important in replicating the u s output volatility during the great inflation

the evolution of job stability in canada trends and comparisons with u s results using data from the 1976 2001 canadian labour force survey we examine the stability of currently held jobs and find no period long drop in job stability however job stability declined across the 1980s and rose across the 1990s for workers with less than one year of tenure when 1987 and 1995 are compared it can be seen that job stability was steady in canada but fell slightly in the united states with the difference concentrated among medium tenured workers we suggest that this difference was due to a slower recovery in canada in the 1990s which caused canadian workers to be less mobile jel classification j63 l evolution de la stabilite des emplois au canada tendances et comparaisons avec les resultats aux etats unis en utilisant les donnees de l enquete sur la population active pour la periode de 1976 a 2001 l auteur examine la stabilite des emplois detenus pour le moment et trouve qu il n y a pas eu de chute de la stabilite des emplois en longue periode cependant la stabilite des emplois a chute dans les annees 1980 et cru dans les annees 1990 pour les travailleurs qui detenaient leur emploi depuis moins d un an si l on compare 1987 et 1995 la stabilite des emplois se maintient au canada mais chute un peu aux etats unis la difference est concentree dans le groupe de travailleurs qui ne detenaient leur emploi que depuis une periode moyennement longue on suggere que les differences entre les deux pays sont attribuables a une reprise economique plus lente au canada dans les annees 1990 qui aurait rendu les travailleurs canadiens moins mobiles

a picture of job insecurity facing british men this paper considers three aspects of the job insecurity facing british men in the last two decades the probability of becoming unemployed the costs of unemployment in terms of real wages losses and the probability that the continuously employed will experience substantial real wage losses the first of these has not risen in the last two decades the second has risen by around 50 percent and the third has risen particularly for the top skill groups

intersectoral labor mobility and the growth of the service sector one of the most striking changes in the u s economy over the past 50 years has been the growth in the service sector between 1950 and 2000 service sector employment grew from 57 to 75 percent of total employment however over this time the real hourly wage in the service sector grew only slightly faster than in the goods sector in this paper we assess whether or not the essential constancy of the relative wage implies that individuals face small costs of switching sectors and we quantify the relative importance of labor supply and demand factors in the growth of the service sector we specify and estimate a two sector labor market equilibrium model that allows us to address these empirical issues in a unified framework our estimates imply that there are large mobility costs output in both sectors would have been double their current levels if these mobility costs had been zero in addition we find that demand side factors that is technological change and movements in product and capital prices were responsible for the growth of the service sector

the income losses of displaced workers abstract we use a new matched worker firm dataset for the united kingdom to estimate the income loss resulting from firm closure and mass layoffs we track workers for up to nine years after the displacement event and the availability of predisplacement characteristics allows us to implement difference in differences estimators using propensity score matching methods income losses during the first five years after the displacement event are in the range 18 35 percent per year for workers whose firm closes down and 14 25 percent for workers who exit a firm which suffers a mass layoff these losses are largely due to periods of nonemployment which is consistent with previous work from europe but contrasts with that from the united states

fiscal policy and trade adjustment are the deficits really twins i introduction the unprecedented increase of both the fiscal and trade deficits in the united states during the 1980s led many observers to posit a causal linkage a sizable contingent of economists believe that the twin deficits concept aptly characterizes the recent relationship between federal budgetary policy and the u s trade balance in this view increased federal fiscal deficits during the 1980s were a primary cause of the massive u s trade deficits experienced as the decade unfolded however this posited causal relationship does not command universal acceptance in this paper we examine data on u s trade and federal fiscal measures along with exchange and interest rates to uncover the empirical relationship between them and to discover whether fiscal policy plays an essential role in the adjustment of the massive u s trade imbalance the twin deficits concept asserts that the deficits are twins because they are related in the following manner increased government deficits are thought to put incipient upward pressure on real interest rates this induces incipient capital in flows that lift or appreciate the real exchange value of the currency which erodes competitiveness and after a time lag results in increased trade deficits a number of recent papers examine the relationship between budget and trade deficits each contributes important insights but nothing approaching a consensus has yet emerged miller and russek 1989 find evidence of a secular relationship between the deficits under two of the three statistical techniques they employ bernheim 1988 concludes that the government deficit is a prime determinant of u s trade deficits whereas evans 1989 enders and lee 1990 and dewald and ulan 1990 find no such causal impact of fiscal deficits darrat 1988 and abell 1990 report somewhat mixed results the conflicting results in the existing literature stem from wide differences in the empirical techniques data measures and samples employed further we have found in the literature and in our work reported below that the use of differenced data versus data in level form has a major impact on the results produced and inferences drawn recent empirical literature suggests that stationarity of data is a crucial element in model specification thus the question of whether or not to difference the data should be addressed before estimation and inference classical inference about stationarity of data suffers from what sims 1988 refers to as a discontinuity in the asymptotic theory hence the classical tests used in much of the previous literature have low power to reject the null hypothesis of nonstationarity in levels bayesian inference does not suffer from this problem therefore we generate posterior probabilities using monte carlo integration that estimate probabilities that suggest whether the data are better analyzed in level or difference form despite somewhat contrasting results the classical augmented dickey fuller tests and the bayesian probability estimates both suggest that a difference specification is inappropriate we analyze empirically a five variable nonstructural vector autoregressive var model the model includes both a federal government balance and a government purchases measure to summarize fiscal policy along with these two variables and a trade balance measure we constructed real interest rate and real exchange rate variables spanning a quarterly data sample from 1961 to 1989 we estimate the model in both levels and difference form using the level specification we find strong support for the twin deficit notion that government deficits are a cause of trade deficits whereas in differences we find no such relationship furthermore the results from our monte carlo work imply that the model specified in levels is likely most appropriate for estimation and inference ii contrasting theoretical frameworks the presence of both deficits in a variant of the basic savings investment identity may provide a useful reference as in bernheim 1988 and branson 1985 for discussing the hypothesized causal relationship embodied in popular twin deficits stories 1 tdef gdef i s

two illustrations of the quantity theory of money breakdowns and revivals by extending his data we document the instability of low frequency regression coefficients that lucas 1980 used to express the quantity theory of money we impute the differences in these regression coefficients to differences in monetary policies across periods a dsge model estimated over a subsample like lucas s implies values of the regression coefficients that confirm lucas s results for his sample period but perturbing monetary policy rule parameters away from the values estimated over lucas s subsample alters the regression coefficients in ways that reproduce their instability over our longer sample jel c51 e23 e31 e43 e51 e52 robert e lucas jr 1980 used near unit slopes of univariate regressions of moving averages of inflation and interest rates on money growth for the united states for the period 1953 1977 to illustrate 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 lucas said that those two quantity theoretic propositions

job stability in the united states two key attributes of a job are its wage and its duration much has been made of changes in the wage distribution in the 1980s but little attention has been given to job durations since hall we fill this void by examining the temporal evolution of job retention rates in u s labor markets using data assembled from the sequence of current population survey job tenure supplements there have been relative declines in job stability for some of the groups that experienced the sharpest declines in relative wages however we find that aggregate job retention rates have remained stable

the employment and wage effects of oil price changes a sectoral analysis in this paper we use micro panel data to examine the effects of oil price changes on employment and real wages at the aggregate and industry levels we also measure differences in the employment and wage responses for workers differentiated on the basis of skill level we find that oil price increases result in a substantial decline in real wages for all workers but raise the relative wage of skilled workers the use of panel data econometric techniques to control for unobserved heterogeneity is essential to uncover this result which is completely hidden in ols estimates while the short run effect of an oil price increase on aggregate employment is negative the long run effect is in fact positive we find that changes in oil prices induce changes in employment shares and relative wages across industries however we find little evidence that oil price changes cause labor to consistently flow into those sectors with relative wage increases copyright 1996 by mit press

federal reserve policy viewed through a money supply lens abstract federal reserve nonborrowed reserve supply systematically responded to changes in inflation and in the output gap over the period 1969 2000 while the feedback from output gap is always negative the response of money supply to changes in inflation varies considerably across time nonborrowed reserves decreased with inflation in the post 1979 period and increased in the pre 1979 period applying a standard macro model the estimated reaction functions are shown to ensure equilibrium determinacy viewed through the money supply lens federal reserve policy substantially changed over time but has never allowed for endogenous fluctuations which contrasts conclusions drawn from federal funds rate analyses

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

job finding and separation rates in the oecd abstract we provide a set of comparable estimates of average monthly job finding and separation rates for over 20 oecd countries that can be used for the cross country analysis of labor markets