can the human capital approach explain life cycle wage differentials between races and sexes i introduction the trends in gender and racial wage gaps have continued to receive the attention of researchers and policy makers due to their mounting social significance substantial literature concludes that after world war ii the black white pay gap shrank rapidly until the mid 1970s this trend was reversed in the 1980s card and dinardo 2002 couch and daly 2002 darity and myers 1998 o neill 1990 smith and welch 1989 1 in contrast the gender pay gap persisted for four decades after world war ii only in the 1980s did it start to narrow yet it showed only a little progress in the 1990s blau ferber and winkler 2002 goldin 1990 o neill 2003 although a large number of studies have been purported to investigate the sources of male female and black white pay gaps most have not addressed the issue of whether or not the individuals being observed have changed their economic status over their lifetimes the major problem is that longitudinal data are not available over a long enough period to determine the age earnings profiles 2 by using the national longitudinal survey of youth data 1979 cohort nlsy79 this paper examines gender and racial wage gaps among individuals of the same age in an effort to eliminate major life cycle differences while at the same time tracking the changes in the wage gaps over their life spans in particular we would like to provide answers to the following questions what factors can account for the narrowing widening gender wage gaps among blacks whites as they age can the observed life cycle wage gaps be attributed to different paths of postschool human capital accumulation since today s individuals regardless of race or sex have on average completed similar years of schooling among the youth cohort the observed disparity in wages between races and sexes may simply reflect the differences in the quality of schooling family background and postschool investment 3 given that school quality and family background are essentially fixed for an individual as he or she ages in order to address the questions above this paper attempts to further examine the differences in postschool human capital investment behavior among individuals past estimates of the structural parameters for the model of postschool human capital accumulation have however not been fruitful benporath 1970 brown 1976 haley 1976 heckman 1976a 1976b rosen 1976 the major reasons as heckman 1976b points out are that dynamic models are difficult to solve explicitly and that the proportion of time spent investing in on the job training cannot be measured directly moreover to fulfill the dynamic concepts of human capital accumulation longer period longitudinal data must be used to explore the life cycle view of individual wages 4 the lack of empirical investigation in relation to the continuous time dynamic model using panel data therefore leads us to develop an alternative empirical version for estimating the structural parameters of the wage function over a lifetime in other words the purpose of our study is to estimate a dynamic structural model based on the theory of optimal human capital accumulation in accordance with this theory of human capital the wage and its life path can be viewed as the outcome of an optimal path of human capital investment over an individual s life cycle instead of comparing the differences in the outcome of this optimization process i e wages we estimate the key parameters in determining the life cycle wage path as well as further empirically identifying the sources of the wage gap our empirical results first suggest that the male female wage gap mainly arises from gender difference in the marginal costs of human capital production as men in general spend more time in the labor market and gain more work experience than women they tend to have lower marginal costs in the process of human capital production

integrated garch and non stationary variances evidence from european stock markets during the 1920s and 1930s abstract this paper provides a study of the persistence of stock return volatility in five european markets during the 1920s and 1930s the empirical investigation is conducted using the integrated garch model results show that for the bulk of the series shocks to volatility are permanent implying a significant impact of volatility on stock prices

asymmetry and leverage in garch models a news impact curve perspective models for conditional heteroskedasticity belonging to the garch class are now common tools in many economics and finance applications among the many possible competing univariate garch models on

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

do financial crises erode potential output evidence from oecd inflation responses this paper presents evidence from a panel investigation of oecd countries that inflationary pressures tend to be stronger during recovery from financial crises compared to recovery from non crisis economic downturns indicating impairment in productive potential

monetary transmission through bank loans or bank liabilities interest in the transmission of monetary fluctuations to real output has dominated macroeconomics since at least the eighteenth century since then many observers have noted the tendency of a monetary expansion to be followed initially by an expansion of real output and later by an increase in prices while the reason for the long run price change is well understood understanding the short run impact of money on nominal output remains an active unresolved research topic most theoretical models explain the transmission of monetary fluctuations to real output as a consequence of sticky prices or expectations the stickiness is either due to informational imperfections or to contractual rigidities while the policy implications of the two types of stickiness differ both types of model predict a transitory response of real output to a shock in nominal money balances neither the informational imperfection nor the contractual rigidity story is completely compelling and both rely on the central role played by movements in real balances and perceived real interest rates yet for thirty five years following world war ii neither significant movements in the anticipated real rate nor large interest elasticities of spending were apparent despite this the empirical correlation of money and output fluctuations has been found in most time periods and countries consequently the need for alternative explanations of monetary transmission or a credible reverse causation story remains strong

securitization and the balance sheet channel of monetary transmission abstract this paper shows that the balance sheet channel of monetary transmission is stronger for us banks that securitize their assets this finding is different in spirit from the widely found negative relationship between financial development and the strength of the lending channel of monetary transmission focusing on the balance sheet channel and using bank level observations we find that securitizing banks are more sensitive to borrowers balance sheets and that monetary policy has a greater impact on this sensitivity for securitizing banks the optimality conditions from a simple partial equilibrium framework suggest that the positive effects of securitization on policy effectiveness could be due to the high sensitivity of security prices to policy rates

affirmative action and the racial wage gap among the many disturbing changes in the structure of wages in recent years the stagnation in the male racial wage gap may be the most disheartening race remains america s oldest and most persistent cause of social and economic disparity but many of us had been encouraged by the steady and significant economic progress since the second world war the recent stagnation challenges that optimism in this paper i attempt to identify the reasons why the wage stagnation took place many americans particularly those in the media and political arena believe they already know the reason according to them this stagnation is the predictable consequence of the affirmative action policies associated with the reagan administration one reason why many believe that the reagan era deserves principal responsibility for the racial stagnation is the belief that equal employment opportunity commission eeoc resources were gutted during this period eeoc inflation adjusted budgets grew almost 15 percent per year during the 1970 s while there was some slowdown in the last half of the decade constantdollar eeoc budgets expanded by 7 2 percent per year during the carter administration and almost 1 400 budgeted positions were added to the eeoc a growth of 50 percent between 1976 and 1980 there is no question that the reagan era witnessed an abrupt end to the growth in resources that would have taken place eeoc constant dollar budgets actually fell during this period and the number of positions declined by almost one thousand and as eeoc resources and personnel fell during the 1980 s so did the measurable outputs the sharp break in the 1980 s was not so much in the aggregate level of activity but in its composition and the resources available per case spurred by the passage of the age discrimination act in 1979 age came into its own during this decade starting with only 14 cases in the year after passage of the act the number of age cases rose at an astonishing pace to over 30 000 by 1992 even without this explosion in age related charges the significance of race was declining while the number of race charges increased by 10 percent after 1980 sex charges were expanding by 40 percent by 1992 only 40 percent of all cases involved race issues compared to 85 percent of all charges in 1970 and 61 percent in 1980 the declining importance of race in the eeoc s agenda reflects a more general dilution of race as the core civil rights labormarket concern since 1965 the road to equal rights has become very crowded the quest for racial justice was the clear moral force behind the civil rights act with women added in an unsuccessful attempt to scuttle the legislation subsequently hispanics have begun to rival blacks in their political clout and protected minority group status was extended to men over 40 those with a disability and gays the end result is that more than three quarters of today s labor force enjoy protected minority group status blacks are now a minority within the protected minority class which itself represents the majority

modelling the link between commodity prices and exchange rates the tale of daily data this paper examines daily data on exchange rates and the prices of three commodities traded on the winnipeg commodity exchange the temporal patterns of commodity prices and exchange rates are shown to be similar daily data are significantly non normal with garch models capturing the processes generating the data commodity prices and exchange rates are examined for cointegration using recent tests proposed by johansen and juselius 1990 currency depreciation is shown to granger cause commodity price inflation this information might be useful to central bankers concerned with reducing general price inflation through targeting commodity price inflation it also suggests that macro events have important effects on commodity markets in canada

how far down the path to free trade the importance of rice price stabilization in developing asia abstract international trade agreements are pushing the world in the direction of free trade but price stabilization which is inconsistent with completely free trade remains important in developing asia because of the large share of rice in economic output a policy of pure price stabilization for rice without consistent protection either subsidization or taxation can help to create the macroeconomic stability that is essential for sustained rapid economic growth by increasing the quantity and efficiency of investment throughout the economy pure price stabilization can also generate significant equity gains by protecting poor consumers and farmers from sharp fluctuations in prices while domestic commodity price stabilization schemes have a checkered history around the world the experience of asian countries in stabilizing rice prices offers more scope for optimism asian governments have been generally successful in stabilizing rice prices and there are several instances where this has been accomplished without sustained protection of either consumers or farmers however there is room for improved stabilization mechanisms that would lower the costs of intervention

theoretical relations between risk premiums and conditional variances many statistical models of time varying risk premiums including the autoregressive conditional heteroscedasticity arch in mean attempt to exploit a relation between risk premiums and conditional variances or covariances of asset returns we examine this relation in numerical versions of a dynamic asset pricing theory and show that it can be increasing decreasing flat or nonmonotonic its shape depends on both the preferences of the representative agent and the stochastic structure of the economy without additional structure the theory does not provide either a general foundation for arch in mean specifications or a simple interpretation of their parameters

bivariate garch estimation of the optimal commodity futures hedge six different commodities are examined using daily data over two futures contract periods cash and futures prices for all six commodities are found to be well described as martingales with near integrated garch innovations bivariate garch models of cash and futures prices are estimated for the same six commodities the optimal hedge ratio ohr is then calculated as a ratio of the conditional covariance between cash and futures to the conditional variance of futures the estimated ohrs reveal that the standard assumption of a time invariant ohr is inappropriate for each commodity the estimated ohr path appears non stationary which has important implications for hedging strategies

skewness and the relation between risk and return the relationship between risk and return has been one of the most important and extensively investigated issues in the financial economics literature the theoretical results predict a positive relation between the two nevertheless the empirical findings so far have been contradictory evidence presented in this paper shows that these contradictions are the result of negative skewness in the distribution of portfolio excess return and the fact that the estimation of intertemporal asset pricing models are based on symmetric log likelihood specifications data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2201 this paper was accepted by jerome detemple finance

white discrimination in provision of black education plantations and towns abstract we present a model of public provision of education for blacks in two discriminatory regimes white plantation controlled and white yeoman town controlled we show that the ability to migrate to a non discriminating district constrains the ability of both types of regimes to discriminate the model produces time series of educational outcomes for whites and blacks that mimic the behavior seen in post reconstruction south carolina to the onset of the civil rights act it also fits the post world war ii black white income differentials

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

an evaluation of volatility forecasting techniques the existing literature contains conflicting evidence regarding the relative quality of stock market volatility forecasts evidence can be found supporting the superiority of relatively complex models including arch class models while there is also evidence supporting the superiority of more simple alternatives these inconsistencies are of particular concern because of the use of and reliance on volatility forecasts in key economic decision making and analysis and in asset option pricing this paper employs daily australian data to examine this issue the results suggest that the arch class of models and a simple regression model provide superior forecasts of volatility however the various model rankings are shown to be sensitive to the error statistic used to assess the accuracy of the forecasts nevertheless a clear message is that volatility forecasting is a notoriously difficult task

sensitivity of the bank stock returns distribution to changes in the level and volatility of interest rate a garch m model abstract the objective of this paper is to employ the generalized autoregressive conditionally heteroskedastic in the mean garch m methodology to investigate the effect of interest rate and its volatility on the bank stock return generation process this framework discards the restrictive assumptions of linearity independence and constant conditional variance in modeling bank stock returns the model presented here allows for shifts in the volatility equation in response to the changes in monetary policy regime in 1979 and 1982 to be estimated arch garch and volatility feed back effects are found to be significant interest rate and interest rate volatility are found to directly impact the first and the second moments of the bank stock returns distribution respectively the latter also affects the risk premia indirectly the degree of persistence in shocks is substantial for all the three bank portfolios and sensitive to the nature of the bank portfolio and the prevailing monetary policy regime

the impact of party alternative on the stock market the case of japan this paper tries to clarify whether change in political regime has an effect on the behaviour of the stock market in japan the empirical study finds that the transition of ruling party effect is not a crucial variable to the nikkei 225 the alienation felt by the japanese about the political environment resulting in a succession of prime ministers does not influence the nikkei 225 stock market behaviour therefore former prime ministers who have resigned have become scapegoats for the poor performance of financial and economic policies

nonlinear dependence in finnish stock returns abstract past research into the evolution of finnish stock returns focuses on modeling linear and nonlinear dependence using various arima and garch formulations respectively this paper extends the extant work by using grassberger procaccia correlations dimensions to explore the nature of the nonlinear dynamics in daily finnish stock returns during the 1970s and 1980s nonlinear behavior in both periods is evident a simple garch model removes the nonlinearity in the first decade and dramatically reduces the nonlinearity in the second period this supports the notion that finnish stock returns exhibit nonlinear dependence but that the form of dependence is not chaotic

an analysis of the spillover effects of exchange traded funds this article used the generalized autoregressive conditional heteroscedasticity autoregressive moving average garch arma and the exponentially generalized autoregressive conditional heteroscedasticity autoregressive moving average egarch arma models to study the impact of the spillover and the leverage effects on returns and volatilities of stock index and exchange trade fund etf for developed and emerging markets previous unexpected returns for developed and emerging markets which have an opposite influence pattern on etfs returns were identified the spillover effects from returns are excellent for hong kong followed by singapore meanwhile taiwan s stock index return was recorded to have a strong negative impact on etf return notably this article shows that the spillover effects on stock index and etf volatilities existed with bilateral influences despite a strong positive asymmetric volatility effect in korea s etf market the leverage effect appears to play important roles in the explana

how do the stock prices of new energy and fossil fuel companies correlate evidence from china abstract this study documents the return and volatility spillover effect between the stock prices of chinese new energy and fossil fuel companies using the asymmetric bekk model based on daily samples taken from august 30 2006 to september 11 2012 the dynamics of new energy fossil fuel stock spillover are found to be significant and asymmetric compared with positive news negative news about new energy and fossil fuel stock returns leads to larger return changes in their counter assets news about both new energy and fossil fuel stock returns spills over into variances of their counter assets and the volatility spillovers depend complexly on the respective signs of the return shocks of each asset the empirical results demonstrate that new energy and fossil fuel stocks are generally viewed as competing assets that positive news about new energy stocks could affect the attractiveness of fossil fuel stocks and that new energy stock investment is more speculative and riskier than fossil fuel stock investment these results have potential implications for asset allocation financial risk management and energy policymaking

from t bills to common stocks investigating the generality of intra week return seasonality the authors investigate the extent to which intra week seasonality still exists and whether its pattern is uniform across three stock indices and treasury bonds with seven different maturities they find that intra week seasonality continues to be significant and that its pattern is not uniform either between the stock indices and the treasury bonds or even among the bonds alone a pattern shared by stocks and bonds is that monday returns become increasingly negative with maturity these findings suggest that neither institutional nor general equilibrium explanations by themselves can explain the pattern of intra week seasonality in securities markets

conditional risk and return in asian emerging markets evidence from the banking sector previous studies reach no consensus on the relationship between risk and return using data from one market this study argues that the market factor should be noticed in assessing the risk return relationship in a partially integrated emerging market the analysis aims to provide new insight into the nature of the risk return relationship by a conditional factor garch m framework that controls for time series effects to investigate the banking sector in five asian emerging markets of china hong kong indonesia malaysia and taiwan during the period 1995 to 2004 finally the study provides evidence on these relations before and after the asian financial crisis of 1997 the results are generally consistent across the markets and with expectations and have implications for empirical assessments of the risk return relationship and diversification

loan commitments and optimal monetary policy abstract with loan commitments negotiated in advance the use of tight money to restrain nominal spending has asymmetric effects upon different categories of borrowers this can reduce efficiency even though aggregate demand is stabilized an equilibrium model of financial intermediation with loan commitments is developed and used to analyze the welfare consequences of alternative monetary policies if demand uncertainty relates primarily to the number of borrowers rather than to each one s demand for credit an interest rate smoothing policy is optimal

macro determinants of volatility and volatility spillover in energy markets abstract we analyze the time varying volatility and spillover effects in crude oil heating oil and natural gas futures markets by incorporating changes in important macroeconomic variables and major political and weather related events into the conditional variance equations we allow asymmetric responses to random disturbances in each market as well as to good and bad economic news related to the overall economy results show the presence of asymmetric effects in both random disturbances and macroeconomic variables a bidirectional volatility spillover effect is found between natural gas and crude oil and between the natural gas and heating oil markets crude oil volatility is found to increase following major political financial and natural events seasonality and day of the week effects are found in the crude oil and heating oil markets

financial shocks and trade finance evidence from korea using two novel measures of bank intermediated trade finance in korea this paper empirically assesses the effects of financial shocks on the availability of trade finance and finds that these effects are generally negative and last for at least three months implying significant delays and losses for traders

a note on optimal estimation from a risk management perspective under possibly misspecified tail behavior many financial time series show leptokurtic behavior that is fat tails such tail behavior is important for risk management in this article i focus on the calculation of value at risk var as a downside risk measure for optimal asset portfolios using a framework centered on the student t distribution i explicitly allow for a discrepancy between the fat tailedness of the true distribution of asset returns and that of the distribution used by the investment manager as a result numbers for the overestimation or underestimation of the true var of a given portfolio can be computed these numbers are used to rank several well known estimation methods for determining the unknown parameters of the distribution of asset returns minimizing the absolute percentage mismatch between the nominal and actual or true var leads to the choice of a gaussian maximum quasilikelihood estimator that is a least squares type of estimator the maximum likelihood estimator has less satisfactory behavior outlier robust es

stock market volatility and the crash of 1987 evidence from six emerging markets abstract this paper studies volatility risk premia and the persistence of volatility in six emerging stock markets before and after the 1987 stock market crash the empirical investigation is conducted by means of the garch in the mean model garch m and monthly data from argentina greece india mexico thailand and zimbabwe between january of 1976 and august of 1994 results indicate changes in the arch parameter risk premia and persistence of volatility before and after the 1987 crash but these noted changes are not uniform and depend upon the individual markets factors other than the 1987 crash may also be responsible for the changes

u s commercial bank lending through 2008 q4 new evidence from gross credit flows i introduction debate about the behavior of the banking sector has intensified in the popular press as well as within academia as the financial crisis continues to gather steam many of the questions raised about the behavior of banks during the current crisis rely on net aggregate data on bank lending activity however the banking sector is very heterogeneous and aggregate data can be hard to interpret if not combined with observations at the individual bank level as argued by chari christiano and kehoe 2008 and cohen cole et al 2008 in this paper we use publicly available balance sheet data for the entire population of commercial banks to construct quarterly gross credit flows for the u s banking system during the period 1999 q1 2008 q4 and to provide new evidence about the behavior of regulated commercial banks during the financial crisis that began in 2007 loosely speaking the weighted sum of positive changes in credit for banks that increased loans is a measure of credit expansion while the weighted sum of negative changes in credit is a measure of credit contraction while net flows are a measure of aggregate credit change in the overall economy gross flows are a measure of how much credit is expanding and contracting or the reallocation of lending across borrowers although we use comprehensive balance sheet data to calculate our measures of credit contraction and expansion we caution that without actual loan origination data or a careful accounting for unused loan commitments we cannot capture the complete dynamics of credit flows for commercial banks and therefore our results should be interpreted cautiously several recent papers have highlighted the importance of considering gross credit flows rather than net lending in both a domestic context where credit is provided by banks dell ariccia and garibaldi 2005 craig and haubrich 2006 and firms herrera kolar and minetti 2007 and an international context where credit is provided by countries contessi de pace and francis 2008 in the banking sector aggregate changes obscure changes in gross lending and the heterogeneous patterns of contraction and expansion within regions sectors and groups of banks moreover the elements determining bank level credit expansion are fundamentally different from those of credit contraction when banks increase lending they face informational asymmetries and the costs of information acquisition searching for new clients or evaluating new projects conversely when loans are retired because of expiry or nonperformance different costs occur which depend on the liquidity of borrowers and on the steps that must be taken to ensure repayment the different activities underlying expansion and contraction lead to different cyclical properties and volatility measures that we discuss in this paper 1 we follow two steps in our analysis of gross loan flows first we present several findings about gross credit flows in the u s banking system between 1999 q1 and 2008 q4 and use previous estimates by dell ariccia and garibaldi 2005 as our main term of comparison a similar paper by craig and haubrich 2006 focuses more on entry and exit which are relatively less important for the period we study 2 we then focus on the recent financial crisis and compare behavior during the current recession to the previous four recessions to put current behavior in context our results reveal that gross flows are much larger than net flows so at any phase of the business cycle significant credit contraction and credit expansion co exist we also find significant credit contraction and expansion within banks of similar size categories of loan real estate individual commercial and industrial c i and across states even with the significant restructuring of the u s banking system and attendant reduction in the number of banks between the dell ariccia and garibaldi 2005 sample 1979 1999 and ours 1999 2008 and an increase in the size of the average bank we find that a substantial amount of heterogeneity remains

affirmative action and labor markets affirmative action remains controversial the controversy extends from the original antidiscrimination legislation and its interpretation to estimates of affirmative action s effect on the labor market this paper provides a progress report on our recent efforts at detecting the effects of affirmative action on minority wages and employment although we find a substantial increase in wages for black men and black women over our sample period the timing of these wage changes is surprising most of the wage gains came prior to 1974 before the establishment of an effective monitoring structure for affirmative action indeed when the powers of the eeoc and ofcc are greatest the wage effects for young blacks are somewhat perverse using eeo 1 reports we find a major shift in black employment toward firms most vulnerable to the monitoring and potential sanctions of the affirmative action programs as with wages the shift in minority employment came prior to the expansion of the powers and budgets of the ee

has monetary policy become more efficient a cross country analysis over the past twenty years macroeconomic performance has improved in industrialized and developing countries alike in a broad cross section of countries inflation volatility has fallen markedly while output variability has either fallen or risen only slightly this increased stability can be attributed to either 1 more efficient policymaking by the monetary authority 2 a reduction in the variability of the aggregate supply shocks or 3 changes in the structure of the economy in this paper we develop a method for measuring changes in performance and allocate the source of performance changes to these two factors our technique involves estimating movements toward an inflation and output variability efficiency frontier and shifts in the frontier itself we study the change from the 1980s to the 1990s in the macroeconomic performance of 24 countries and find that for most of the analyzed countries more efficient policy has been the driving force behind improved macroeconomic performance

regime switching stochastic volatility evidence from the crude oil market this paper incorporates regime switching into the stochastic volatility sv framework in an attempt to explain the behavior of crude oil prices in order to forecast their volatility more specifically it models the volatility of oil return as a stochastic volatility process whose mean is subject to shifts in regime the shift is governed by a two state first order markov process the bayesian markov chain monte carlo method is used to estimate the models the main findings are first there is clear evidence of regime switching in the oil market ignoring it will lead to a false impression that the volatility is highly persistent and therefore highly predictable second incorporating regime switching into the sv framework significantly enhances the forecasting power of the sv model third the regime switching stochastic volatility model does a good job in capturing major events affecting the oil market

analysis of the term structure of implied volatilities from various empirical work it is well known that the volatility of asset returns changes over time this might be one of the reasons that implied volatilities differ for options that only differ in time to maturity we construct models for the relation between short and long term implied volatilities based on three different assumptions of stock return volatility behavior i e mean reverting garch and egarch models we test these relations on option price data and conclude that egarch gives the best description of asset prices and the term structure of options implied volatilities

political economy of rice price protection in asia rice continues to be the most important food staple in asia contributing 40 80 of total calorie intake rice is also the major source of livelihood of small farmers and agricultural labor households in this region where at least two thirds of arable land is planted to rice at least half of that rice area is rain fed and vulnerable to drought and floods even in irrigated areas higher cropping intensity has increased pest problems contributing further to the production instability that characterizes the rice economy of monsoon asia because of the economic and political importance of rice in asia no government has left its domestic rice sector freely influenced by market demand and supply forces invariably the central food policy question confronting asian governments is how to reconcile the conflicting objectives of providing low rice prices to consumers and remunerative incentives to farmers maintaining stable domestic rice prices to both consumers and producers is a separate and equally important concern moreover given the political importance of rice and the instability of the world rice market most asian countries aim for rice selfsufficiency rather than rely on international trade to pursue their food security goals among rice exporters on the other hand raising government revenues from rice exports is another policy objective to achieve the above objectives a wide variety of policy instruments have been used to influence output and input prices directly or to increase productivity except for thailand most asian governments control rice prices in the short run through a monopoly on international trade as well as by engaging in domestic marketing operations 1 on the other hand governments also invest in irrigation

the microeconomics of the developmental paradox on the political economy of food price policy abstract a longstanding puzzle in comparative economics is the developmental paradox the tendency for government support for agriculture to increase with national income and to decrease with the proportion of economic activity and of the population in agriculture this paper offers a microeconomic explanation for that puzzle it establishes analytically the microeconomic basis for coalition alignments with respect to food price policy then numerically simulates the comparative static effects of alternative food policies on coalition structure a parsimonious household model applied to a heterogeneously endowed society demonstrates how variation in individual welfare effects might beget distinct coalitions in the debate over food price policy and how those policies are inextricably linked to land population and technology policies in food agriculture moreover coalition alignments on particular policy debates are path dependent in particular food price policy creates its own political support

relationships and rationing in consumer loans we empirically examine how relationships between individual households and their creditors affect the probability of being credit rationed using a data set where the credit rationing of individual households is observed directly we show that relationship duration and the number of activities between a family and a potential lender significantly lower the probability of being credit rationed additionally we examine the relative role of relationships in determining the interest rates of two consumer loans a mortgage loan and a special purposes loan and show that mortgage loan rates are driven less by relationship factors than the special purposes loan rates copyright 1999 by university of chicago press

identifying the balance sheet and the lending channels of monetary transmission a loan level analysis abstract we make a novel attempt at comparing the strength of the lending and balance sheet channels of monetary transmission to make this comparison we use loan level data to determine how borrower balance sheets and bank liquidity are related to bank lending decisions and how monetary policy can affect these relationships the key innovation in this paper is the use of loan level data this enables us to measure the independent effects of the two channels and directly account for borrower balance sheets and lender liquidity instead of using proxies our results show that the balance sheet channel is the main mechanism through which monetary policy shocks are transmitted to the economy and that the lending channel does not play a significant role

the fear and exuberance from implied volatility of s p 100 index options i study the relation between option traders risk perception and contemporaneous market conditions risk perception tends to increase when downside volatility increases more than upside volatility the risk return relation is asymmetric and nonlinear best described as a downward sloping reclined s curve that prior gains appear to have some mitigating effect on the fear of loss relative to prior losses points to a house money effect broader market conditions influence the perception of risk in a manner consistent with the keeping up with the joneses effect leverage is a weak explanation for the risk return relation

a note on the estimated garch coefficients from the s p1500 universe we employ 1440 stocks listed in the s p composite 1500 index of the nyse three benchmark garch models are estimated for the returns of each individual stock under three alternative distributions

central bank intervention and foreign exchange rates new evidence from figarch estimations abstract in this paper we investigate the effects of official interventions on the short run evolution and volatility of exchange rates to this aim we rely on a new measure of volatility implied by the figarch model that outperforms the traditionally used garch one it is found that central bank interventions exert an incorrectly signed effect on the levels of exchange rates and tend to increase their volatility in the short run in general our results also show that the traditional garch estimations tend to underestimate the effects in terms of volatility

a markov switching model of the conditional volatility of crude oil futures prices abstract this paper examines the temporal behaviour of volatility of daily returns on crude oil futures using a generalised regime switching model that allows for abrupt changes in mean and variance garch dynamics basis driven time varying transition probabilities and conditional leptokurtosis this flexible model enables us to capture many complex features of conditional volatility within a relatively parsimonious set up we show that regime shifts are clearly present in the data and dominate garch effects within the high volatility state a negative basis is more likely to increase regime persistence than a positive basis a finding which is consistent with previous empirical research on the theory of storage e g fama and french 1988a fama and french 1988b and ng and pirrong 1994 the volatility regimes identified by our model correlate well with major events affecting supply and demand for oil out of sample tests indicate that the regime switching model performs noticeably better than non switching models regardless of evaluation criteria we conclude that regime switching models provide a useful framework for the financial historian interested in studying factors behind the evolution of volatility and to oil futures traders interested short term volatility forecasts

hourly volatility spillovers between international equity markets abstract this paper examines the timing of mean and volatility spillovers between new york and london equity markets using an arch model it is found that the evidence of volatility spillovers between these markets is minimal and have a duration which lasts only an hour or so the most significant effects surround the movement of share prices around the new york opening but these results are not strong several new arch models are estimated including an asymmetric or leverage model and a non linear model which allows big shocks to have a different impact from small shocks

the credit effects of monetary policy evidence using loan commitments in addition to the usual channels monetary policy may affect spending by changing the supply of bank loans and the creditworthiness of borrowers this paper tests for these credit effects using a contractual difference across commercial bank loans the author finds that bank loans not made under a commitment slow after tight policy while loans under commitment accelerate or are unchanged this divergence coincides with reports of tighter credit by lenders and by small firms suggesting the divergence reflects a reduction in the supply of credit to the firms without commitments rather than a reduction in their demand for loans

the predictive power of the implied volatility of options traded otc and on exchanges abstract this paper investigates the efficiency of stock index options traded over the counter otc and on the exchanges in hong kong and japan our findings suggest that implied volatility is superior to either historical volatility or a garch type volatility forecast in predicting future volatility in both the otc and exchange markets this paper is also one of the first to compare the predictive power of the implied volatility of stock index options traded otc to that of exchange traded stock index options our evidence suggests that the otc market is more efficient than the exchanges in japan but that the opposite is true in hong kong

risk inflation and the stock market most explanations for the decline in share values over the past two decades have focused on the concurrent increase in inflation this paper considers an alternative explanation a substantial increase in the riskiness of capital investments we show that the variance of firms real gross marginal return on capital has increased significantly increasing the relative riskiness of investors returns on equity and that this can explain a large part of the market decline we also assess the effects of increase in the mean and variance of the inflation rate and a decline in firms expected return on capital this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

interest rates and the channels of monetary transmission some sectoral estimates abstract we estimate a small sectoral var model of the uk macroeconomy this model is then used to simulate the effects of an exogenous monetary policy shock upon asset prices bank balance sheet variables and final target variables activity and prices for the personal and corporate sectors significant sectoral differences are found among the channels of monetary transmission in addition the use of sectoral data facilitates the identification of distinct money and credit channels in the transmission of monetary policy these results contrast with the ambiguous findings on the roles of money and credit in the literature to date

does idiosyncratic risk really matter goyal and santa clara 2003 find a significantly positive relation between the equalweighted average stock volatility and the value weighted portfolio returns on the nyse amex nasdaq stocks for the period of 1963 08 to 1999 12 we show that this result is driven by small stocks traded on the nasdaq and is in part due to a liquidity premium in addition their result does not hold for the extended sample of 1963 08 to 2001 12 and for the nyse amex and nyse stocks more importantly we find no evidence of a significant link between the value weighted portfolio returns and the median and value weighted average stock volatility the intertemporal relation between risk and return has long been an important topic in asset pricing literature most asset pricing models postulate a positive relationship between a stock portfolio s expected returns and risk which is often modeled by the variance or standard deviation of the portfolio s returns however there is no agreement about the existence of such a trade off for stock market indices 1 while return volatility is an intuitively appealing measure of risk different approaches used by previous researchers suggest that no clear consensus has emerged regarding its relevance 2 whether or not investors require a larger risk premium on average for investing in a security during times when the security is more risky remains an open question

stock returns and volatility an empirical study of the uk stock market abstract attempts to quantify the relationship between stock returns and volatility have produced conflicting conclusions in recent u s studies our paper examines this issue in the u k context for the first time using daily weekly fortnightly and monthly returns on the financial times all share index from january 1965 to december 1989 volatility estimates are obtained from monthly sample variances and arch models expected returns are shown to have had a positive though not statistically significant relationship with expected volatility the relationship between the unexpected components of the returns and volatility series is less clear we find evidence for a negative relationship but only when volatility expectations are represented by standard deviations

trading breaks and asymmetric information the option markets abstract we find that weekend holiday and overnight trading breaks generate excessive perceived risk in the option markets presumably due to asymmetric information which in turn encourages uninformed option traders to postpone trading this perceived risk subsides after two days accompanied by an increase in the option trading volume and the underlying index s actual price volatility these results shed light on the informational role of index options and suggest that the theoretical models results regarding information processing and price discovery in the presence of private information are not limited to single stocks but also apply to the market as a whole

conditional volatility and the informational efficiency of the phlx currency options market abstract the relative performance of implied and historical volatility predictors is compared for four exchange rates from 1985 to 1991 for three currencies arch models estimated up to 1989 show that phlx implied volatilities provide specifications for daily conditional variances which can not be significantly improved by using past returns this result is consistent with the informational efficiency of the philadelphia currency options market out of sample forecasts of the average volatility over four week periods are evaluated for 1990 and 1991 once more the implied predictors are superior to historical predictors

intraday linkages between the spanish and the us stock markets evidence of an overreaction effect this paper focuses on short term information transmission between the us stock market properly the dow index and the main spanish stock index ibex 35 in its early and final hours we follow the approaches of lin engle and ito 1994 susmel and engle 1994 and baur and jung 2005 who use a garch model to analyze the influence of the previous daytime and overnight returns and volatility of the dow upon the overnight returns and daytime returns of the ibex from open to 3 30 and from 3 30 to close the results suggest that the spanish stock market usually has a low price movement till wall street opens additionally they indicate that the spanish market reacts quickly to the news basically in the first four minutes following the opening of the us market furthermore we find the existence of an overreaction effect during the two hours before the closing of the spanish market

foreign investor reactions to risk and uncertainty in antitrust u s merger policy investigations and the deterrence of foreign acquirer presence motivated by the potential for antitrust and competition policies to be protectionist in effect we formulate the theoretical prior that merger policy deters foreign acquirer participation in local m a markets the policy risk and policy uncertainty characteristic of merger review may negatively affect foreign acquirers more so than domestic acquirers thereby disadvantaging foreign acquisitions of local firms and deterring future cross border investment activities we test this prior by employing sector level data on u s merger policy investigations and foreign acquirer presence in u s m a markets over the 2002 2017 period our panel data methodological approach indicates that the risk and uncertainty characteristic of u s merger policy disproportionately deters the acquisition activities of foreign investors the empirical results also suggest that the application of competition and merger policies in other national jurisdictions where there is less of a strong commitment to antitrust principles might also be effectively protectionist

the leverage effect puzzle disentangling sources of bias at high frequency the leverage effect refers to the generally negative correlation between an asset return and its changes of volatility a natural estimate consists in using the empirical correlation between the daily returns and the changes of daily volatility estimated from high frequency data the puzzle lies in the fact that such an intuitively natural estimate yields nearly zero correlation for most assets tested despite the many economic reasons for expecting the estimated correlation to be negative to better understand the sources of the puzzle we analyze the different asymptotic biases that are involved in high frequency estimation of the leverage effect including biases due to discretization errors to smoothing errors in estimating spot volatilities to estimation error and to market microstructure noise this decomposition enables us to propose novel bias correction methods for estimating the leverage effect

the persistence of volatility and stock market fluctuations this paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices it demonstrates that volatility is only weakly serially correlated implying that shocks to volatility do not persist these shocks can therefore have only a small impact on stockmarket prices since changes in volatility affect expected required rates of return for relatively short intervals these findings lead us to be skeptical of recent claims that the stock market s poor performance during the 1970 s can be explained by volatility induced increases in risk premia this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

labor market dropouts and trends in the wages of black and white men there is continuing debate over whether and to what degree estimations of black white wage convergence are biased because they leave labor market dropouts out of the picture if a high proportion of blacks become discouraged and cease searching for jobs and if those dropouts have on average poor job prospects the average wage of black workers who remain in the labor market will be an upwardly biased estimate of the average wage across the population this paper introduces a simple method of imputing wages to non workers when non workers are accounted for in the calculations real wage growth for prime age black men over the 1969 98 period is reduced approximately 40 and black white wage convergence is reduced by approximately one third the author finds that a source of bias as important as falling employment rates is the growing gap between wages of workers and potential wages of non workers

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

the role of exchange rates in intertemporal risk return relations abstract this paper investigates the significance of an intertemporal relation between expected returns on countries stock market portfolios and their risk exposures to the world market portfolio we find that the intertemporal risk return relation differs significantly under different currency denominations the slope coefficient is the largest at around seven when the returns are denominated in japanese yen moderate at about five when the returns are denominated in the canadian or us dollars and the smallest at around three when the returns are denominated in pound or euro and its predecessors the ranking of the risk return coefficients across different currency denominations remains the same when we replace country equity indices with global industry portfolios in estimating the intertemporal relations when we change the return frequency from monthly to daily and when we consider different specifications for the conditional covariance process

does monetary policy lose effectiveness during a credit crunch this article investigates the effectiveness of monetary policy during a credit crunch by estimating a vector autoregression on the us economy we present evidence that interest rate cuts have a diminished impact on growth due to impairment in the relationship between monetary policy and the supply of intermediated credit

how important is the credit channel in the transmission of monetary policy in mexico abstractthis article empirically examines the importance of the credit channel of monetary policy in mexico for the period 2004 2013 we estimate a vector autoregressive var model to analyse the effects of a monetary policy shock on real output and we also use a threshold var model to investigate asymmetric effects of contractionary and expansionary policies the empirical results suggest that a contractionary monetary policy results in a fall in the supply of loans together with an increase in the spread between the lending and deposit rate to the extent that some borrowers are dependent on bank loans for credit the reduced supply of loans amplifies the effects of monetary policy on output associated with the traditional interest rate channel our results also suggest that the importance of the credit channel is larger for contractionary shocks than for expansionary shocks

how important is intertemporal risk for asset allocation how important is merton s intertemporal risk for asset allocation decisions to address this question we jointly estimate and test a conditional asset pricing model which includes long term interest rate risk as a potentially priced factor for four broad classes of assets large stocks small stocks long term treasury bonds and corporate bonds we find that the premium for long bond risk is the main component of the risk premiums of treasury bond and corporate bond portfolios while it represents a small fraction of total risk premiums for equities our results suggest that investors perceive stocks and especially small stocks as hedges against variations in the investment opportunity set since these four asset classes represent some of the most important for investors we proceed to use our estimates to compute the optimal asset allocations for investors who optimize with or without taking into account the intertemporal risk we provide a set of measures to investigate the importance of this risk we find that at average market volatility levels investors can earn annual premiums between 3 6 during expansions and 5 8 during recessions for bearing intertemporal risk alone these results underscore the importance of explicitly considering intertemporal risk in asset allocation decisions especially during down markets and business recessions

are price controls necessarily bad the case of rice in vietnam abstract most economists instinctive reaction to price controls is that they are harmful its strong enforcement results in shortages and resource misallocation while weak enforcement often leads to black markets and high transaction costs given these instincts this paper assesses the pros and cons of rice price controls in vietnam using a multi sector multi household general equilibrium model these price controls fix producer prices and allow government marketing agencies to sell at higher prices and hence are in part a revenue raising device as such they may be part of an efficient tax mix particularly so since agricultural incomes and production go untaxed under the formal tax system it is argued that such controls can act to dampen costly domestic adjustments in the face of volatile world prices it is shown that this system can be supported as welfare enhancing under conditions currently prevailing in vietnam

the pricing of japanese equity warrants discrepancies between the black scholes value of japanese equity warrants and their observed prices are explained in part by the stochastic volatility of changes in prices of the underlying stocks we fit garch and egarch models to the stochastic volatility and briefly compare their performance to the cev model a hopscotch algorithm is used to value the warrants in the presence of the stochastic stock price volatility the stochastic volatility hopscotch warrant values still differ substantially from corresponding prices in contrast away from the money short term nikkei 225 options valued with the same stochastic volatility models are close to observed prices a regression model is used to fit the differences between warrant values and prices as a function of proxies for market impediments

modelling the conditional volatility of commodity index futures as a regime switching process commodity index futures offer a versatile tool for gaining different forms of exposure to commodity markets volatility is a critical input in many of these applications this paper examines issues in modelling the conditional variance of futures returns based on the goldman sachs commodity index gsci given that commodity markets tend to be choppy webb 1987 a general econometric model is proposed that allows for abrupt changes or regime shifts in volatility transition probabilities which vary explicitly with observable fundamentals such as the basis garch dynamics seasonal variations and conditional leptokurtosis the model is applied to daily futures returns on the gsci over 1992 1997 the results show clear evidence of regime shifts in conditional mean and volatility once regime shifts are accounted for garch effects are minimal consistent with the theory of storage returns are more likely to switch to the high variance state when the basis is negative than when the basis is positive the regime switching model also performs well in forecasting the daily volatility compared to standard garch models without regime switches the model should be of interest to sophisticated traders who base their trading strategies on short term volatility movements managed commodity funds interested in hedging an underlying diversified portfolio of commodities and investors of options and other derivatives tied to gsci futures contracts copyright 2001 john wiley sons ltd

some evidence on the empirical significance of credit rationing this paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988 while commercial loan rates are sticky consistent with rationing this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory in addition the proportion of new loans issued under commitment does not increase significantly when credit markets are tight despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing overall the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon

the asymmetric relation between initial margin requirements and stock market volatility across bull and bear markets higher initial margin requirements are associated with lower subsequent stock market volatility during normal and bull periods but show no relationship during bear periods higher margins are also negatively related to the conditional mean of stock returns apparently because they reduce systemic risk we conclude that a prudential rule for setting margins or other regulatory restrictions is to lower them in sharply declining markets in order to enhance liquidity and avoid a depyramiding effect in stock prices but subsequently raise them and keep them at the higher level in order to prevent a future pyramiding effect copyright 2002 oxford university press

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets

weekend effects on stock returns a note some researchers have apparently been surprised to discover that the distribution of stock returns depends on the day of the week kenneth french 3 for example in testing whether daily stock returns are generated by a trading time or calendar time hypothesis provided convincing evidence of a negative market return on mondays as french carefully notes this finding runs counter to both hypotheses since a trading time view would have expected stock returns equal on different days and a calendar time view would have higher expected returns on monday to compensate for the longer holding period in this paper we offer a partial explanation for the apparently puzzling discovery of different daily returns we argue that the expected stock returns as measured for example from closing to closing prices should depend on the day of the week in general we argue that the expected returns on mondays should be lower than would be implied simply by a trading time or calendar time model and the returns on fridays should be higher in addition we anticipate that holidays will have complex effects on stock returns on other days of the week our argument is based on the delay between trading and settlements in stocks and in clearing checks the explanation that we offer for different measured daily returns does not contradict the efficient market hypothesis as correctly adjusted expected returns should not differ according to the day of the week

stock returns and volatility most asset pricing models postulate a positive relationship between a stock portfolio s expected returns and risk which is often modeled by the variance of the asset price this paper uses garch in mean models to examine the relationship between mean returns on a stock portfolio and its conditional variance or standard deviation after estimating a variety of models from daily and monthly portfolio return data we conclude that any relationship between mean returns and own variance or standard deviation is weak the results suggest that investors consider some other risk measure to be more important than the variance of portfolio returns

investigating the intertemporal risk return relation in international stock markets with the component garch model abstract daily data and component garch cgarch models strongly support a positive risk return relation in contrast to previous international results long run volatility appears to be important in determining the conditional equity premium but the evidence might be spurious