monetary policy with asset backed money we study the use of asset backed money in a neoclassical growth model with illiquid capital a mechanism is delegated control of productive capital and issues claims against the revenue it earns these claims constitute a form of asset backed money the mechanism determines i the number of claims outstanding ii the dividends paid to claim holders and iii the structure of redemption fees we find that for capital rich economies the first best allocation can be implemented and price stability is optimal however for sufficiently capital poor economies achieving the first best allocation requires a strictly positive rate of inflation in general the minimum inflation necessary to implement the first best allocation is decreasing in capital wealth

currency competition a partial vindication of hayek abstract this paper establishes the existence of equilibria for environments in which outside money is issued competitively such equilibria are typically believed not to exist because of a classic overissue problem if money is valued in equilibrium an issuer produces money until its value is driven to zero by backward induction money cannot have value in the first place this paper shows that overissuance is not a problem if agents believe that if an issuer produces more than some threshold number of notes then only those notes issued up to the threshold will be valued additional notes will be worthless this result is very general applying to any monetary economy in which equilibria with and without valued money exist if the money supply is finite the paper also compares the allocation achieved by a monopolist to that achieved with competitive issuance in both a search and an overlapping generations environment the results depend on the environment considered but two general conclusions arise first it is ambiguous whether competitive issuers can achieve a more desirable allocation than a monopolist second with competitive issuance a licensing agency can always improve on pure laissez faire and achieve the efficient allocation in the long run

the impact of unemployment insurance on job search evidence from google search data job search is a key choice variable in theories of labor markets but is difficult to measure directly we develop a job search activity index based on google search data the google job search index gjsi we validate the gjsi with both survey and web based measures of job search unlike those measures the gjsi is high frequency geographically precise and available in real time we demonstrate the gjsi s utility by using it to study the effects of unemployment insurance policy changes between 2008 and 2014 we find no evidence of an economically meaningful effect of these changes on aggregate search

private versus public money i show that the nature of agents production determines whether they should issue money i use a matching model with no commitment and no enforcement some agents can produce goods whereas others are unproductive all agents can produce at a cost a distinguishable intrinsically useless but durable good notes productive agents produce red notes whereas unproductive agents produce green notes i find that green notes are the most efficient means of exchange as they implement more allocations than red notes and at a lower cost therefore unproductive agents should issue money i associate unproductive agents to agents producing public goods

can currency competition work abstract can competition among privately issued fiat currencies work only sometimes and partially to show this we build a model of competition among privately issued fiat currencies a purely private arrangement fails to implement an efficient allocation even though it can deliver price stability under certain technological conditions although currency competition creates problems for monetary policy it is possible to design a policy rule that uniquely implements an efficient allocation

in which context is the option clause desirable the option clause is a contractual device from free banking experiences meant to prevent banknote redemption duels it has been used within the diamond and dybvig j pol econ 91 401 419 1983 framework to suggest that very simple contractual solutions can act as an alternative to deposit insurance this literature has however been ambiguous on whether the option clause can replace deposit insurance outside of those two contexts it will be argued that the theoretical clause does not generally affect the likelihood that a solvent bank goes bankrupt because of a bank run as empirical evidence suggests it is already near null and that the exercise of the clause will have the effect of diminishing the size of creditor claims on bank assets because it exacerbates the agency problem of bank debt it will therefore be argued that the clause is only desirable in a free banking systems that are historically devoid of bank runs in the first place and have other means of managing debt related agency problems and b under the unrealistic assumption that bank runs are self fulfilling prophecies it will be argued that the agency problem of bank debt makes the option clause undesirable outside of free banking systems

are unemployment and out of the labor force behaviorally distinct labor force states this paper tests the hypothesis that the classifications unemployed and out of the labor force are behaviorally meaningless distinctions this hypothesis is rejected distinct behavioral equations govern transitions from out of the labor force to employment and from unemployment to employment the evidence reported in this paper is broadly consistent with versions of search theory in which unemployment is a state that facilitates the job search process in an appendix we demonstrate that log concavity of the wage offer distribution implies that the exit rate from unemployment is an increasing function of the rate of arrival of job offers

currency competition a hayekian perspective on international monetary integration currency internationalization is examined from the vantage point of friedrich hayek s contributions in the 1970s compared with received commentaries in which only an idealized case for private money is attributed to hayek this paper underscores other dimensions of hayek s work on money and currency hayek s case for choice in currency draws on his theory of competition anticipates competition between government suppliers of fiat money accommodates many aspects of international monetary integration and embodies a distinctive approach to monetary independence choice of exchange rate regime and the transnationalization of currency hayekian predictions are outlined for future developments in currency competition

the general equilibrium impacts of unemployment insurance evidence from a large online job board abstract during the great recession u s unemployment benefits were extended by up to 73 weeks theory predicts that extensions increase unemployment by discouraging job search a partial equilibrium effect using data from the large job board careerbuilder com i find that a 10 increase in benefit duration decreased state level job applications by 1 but had no robust effect on job vacancies job seekers thus faced reduced competition for jobs a general equilibrium effect calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 39

job search and unemployment insurance new evidence from time use data article i nfo this paper provides new evidence on job search intensity of the unemployed in the u s modeling job search intensity as time allocated to job search activities the major findings are 1 the average u s unemployed worker devotes about 41 min to job search on weekdays which is substantially more than their european counterparts 2 workers who expect to be recalled by their previous employer search substantially less than the average unemployed worker 3 across the 50 states and d c job search is inversely related to the generosity of unemployment benefits with an elasticity between 1 6 and 2 2 4 job search intensity for those eligible for unemployment insurance ui increases prior to benefit exhaustion and 5 time devoted to job search is fairly constant regardless of unemployment duration for those who are ineligible for ui

the impact of the potential duration of unemployment benefits on the duration of unemployment abstract this paper examines the impact of the potential duration of unemployment insurance ui benefits on unemployment in the united states first we use a large sample of household heads to examine differences in the unemployment spell distributions of ui recipients and nonrecipients sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for ui recipients around the time of benefits exhaustion such increases are not apparent at similar points of spell duration for nonrecipients second our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of ui recipients by 0 16 to 0 20 weeks

examining the externality of unemployment insurance on children s educational achievement i exploit differences in the generosity of unemployment insurance ui benefits across states and over time to investigate the link between ui and children s academic achievement estimates show that a 1 increase in maximum weekly ui benefits reduces the probability that a child repeats a grade by around 0 03 percentage points the effect is concentrated among children of low and middle income families this paper s findings which are the first in the literature to show evidence of a positive effect of ui on children s educational outcomes provide insight into the role of ui in the human capital accumulation of children jel i20 i38 j65

inside and outside money as alternative media of exchange we study a random matching model of money in which a subset of people called bankers have known histories and the rest called nonbankers have unknown histories earlier we showed that if there are no outside assets then an optimal arrangement has bankers issuing objects banknotes that are used in trades involving nonbankers here the same model is used to compare such exclusive use of inside money to the exclusive use of outside money we show that the set of implementable outcomes using outside money is a strict subset of the set using inside money

unemployment insurance recall expectations and unemployment outcomes this paper empirically examines the importance of explicitly accounting for the layoff rehire process in the analysis of unemployment outcomes in the united states we find that the spells of individuals who initially expect to be recalled account for much more of the unemployment of unemployment insurance ui recipients than do spells actually ending in recall our results indicate that the recall and new job escape rates from unemployment have quite different time patterns and are often affected in opposite ways by explanatory variables we also find that the probability of leaving unemployment both through recalls and new job finding increases greatly around the time that ui benefits lapse over the past fifteen years many studies have empirically analyzed the determinants of individual unemployment spell durations in the united states much of this literature has used a job search framework in which the unemployed are viewed as permanently displaced workers who are unattached to jobs the possibility of recall to a former job a process not requiring search has been omitted from explicit consideration in the majority of these studies 2 an explicit treatment of the layoff rehire process is necessary for a proper understanding of the determinants of unemployment durations and of the impacts of unemployment policies in the united states for at least three reasons first temporary layoffs in which workers are often rehired by their original employers are a quantitatively quite important feature of the u s labor market 3 second expectations concerning the likelihood of recall are likely to affect the responses of employers and unemployed workers to labor market interventions such as reemployment bonuses and subsidies

some simple bitcoin economics abstract we provide a model of an endowment economy with two competing but intrinsically worthless currencies dollar bitcoin dollars are supplied by a central bank to achieve its inflation target while the bitcoin supply grows deterministically our fundamental pricing equation implies in its simplest form that bitcoin prices form a martingale mutual impatience implies absence of speculation price volatility therefore does not invalidate the medium of exchange function bitcoin block rewards are not a tax on bitcoin holders they are financed with a dollar tax we discuss monetary policy implications bitcoin production taxation welfare and entry and characterize the range of equilibria

whither monetary economics i argue that monetary economics should be pursued by applying implementation theory to models which contain explicit frictions that make money essential the argument has two parts first i argue that models in which real balances are assumed to be productive models with money in utility or production functions or with cash in advance constraints contain hidden inconsistencies second i argue that the approach advocated is capable of providing new insights about some of the main issues in monetary economics the effects of monetary shocks the welfare cost of inflation and the roles of inside and outside money

the cost of inflation a mechanism design approach abstract i apply mechanism design to quantify the cost of inflation that can be attributed to monetary frictions alone in an environment with pairwise meetings the money demand that is consistent with an optimal incentive feasible allocation takes the form of a continuous correspondence that can fit the data over the period 1900 2006 for such parameterizations the cost of moderate inflation is zero this result is robust to the introduction of match specific heterogeneity and endogenous participation decisions

the political economy of bitcoin i introduction on october 14 2013 baidu a web services company that runs the largest search engine in china began accepting bitcoin this single action opened the bitcoin network to roughly 570 million internet users in china and prompted other internet companies to consider the cryptocurrency more seriously the closing price of bitcoin which averaged just 124 over the 2 week period prior to the announcement increased to 170 over the 2 week period following the announcement 1 as the demand for bitcoin increased the authorities took notice the people s bank of china issued a statement on december 5 2013 prohibiting financial institutions and payment companies from buying selling quoting prices in or insuring products linked to bitcoin baidu stopped accepting bitcoin the very next day china is not the only user although the network of bitcoin users is relatively small at present and economists are for the most part skeptical that bitcoin will ever gain widespread acceptance the rapid growth of the bitcoin network has prompted some governments to ban or discourage the use of bitcoin 2 government officials seem to worry that bitcoin which offers a secure and quasi anonymous way to make digital payments will be used for illicit transactions and will impede the administration of monetary policy or raising revenues in some important respects the legal issues surrounding bitcoin echo older debates the idea that governments issue money and declare what qualifies as legal tender is an ancient notion middlebrook and hughes 2014 848 explain the history of regulating money and legal tender suggests that it is not likely that governments will surrender their privileges to regulate cryptocurrency issuers exchanges administrators or users can a government successfully prevent bitcoin transactions in what follows we consider whether government transactions policy would eliminate the use of bitcoin or simply relegate its use to areas effectively beyond the reach of government e g black markets small value exchange etc using a monetary model with endogenous search and random consumption preferences developed by hogan and luther 2014 we articulate the conditions under which a government issued currency and bitcoin might coexist as well as the conditions under which one or neither of the different forms of money circulate then we impose a government transactions policy whereby those agents controlled by the government refuse to accept bitcoin as payment and examine the effects of this policy on the circulation of bitcoin the model employed herein combines insights from kiyotaki and wright 1993 in which agents are matched randomly for trade and corbae et al 2003 in which agents deliberately choose with whom to trade agents in the model deliberately choose with whom to trade but are then subject to random consumption preferences one way to think of this assumption is that agents who wish to consume arrive at a place where they would like to make a purchase but might decide not to buy anything although the decision to buy is random the choice of where to shop is not 3 allowing agents to choose their trading partners means that some transactions might exist beyond the reach of government the use of a government transactions policy follows from aiyagari and wallace 1997 and li and wright 1998 others have used government transactions policies to consider the implications of competing money assets however our analysis differs from previous works in important ways for example lotz and rocheteau 2002 consider whether a government transactions policy can support the launch of a new currency they use a random matching model and only consider a transactions policy that compels agents to hold government issued money similarly waller and curtis 2003 consider the use of government transactions policy in the context of competing international currencies

labor market effects of unemployment insurance design with the emergence of the great recession unemployment insurance ui is once again at the heart of the policy debate in this paper we review the recent theoretical and empirical evidence on the labor market effects of ui design we also discuss policy issues related to ui design including the structure of benefits the role of liquidity constraints and the pros and cons of a ui system in which the generosity of ui benefits is varying over the business cycle finally we identify potential areas of future research

banks as secret keepers banks are optimally opaque institutions they produce debt for use as a transaction medium bank money which requires that information about the backing assets loans not be revealed so that bank money does not fluctuate in value reducing the efficiency of trade this need for opacity conflicts with the production of information about investment projects needed for allocative efficiency intermediaries exist to hide such information so banks select portfolios of information insensitive assets for the economy as a whole firms endogenously separate into bank finance and capital market stock market finance depending on the cost of producing information about their projects

on the job search and wage dispersion new evidence from time use data this paper provides new evidence on time devoted to job search by the employed in the u s i find that search effort decreases with the current wage with an elasticity between 0 7 and 1 3

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

can welfare abuse be welfare improving abstract i analyze quantitatively a model of labor search with unemployment insurance ui savings voluntary quits and various labor attachment requirements in particular i study welfare consequences of a powerful reform giving ui entitlement to workers quitting their jobs voluntarily in order to search for another one results of the model calibrated to the us labor market show that there may be significant welfare gains associated with pursuing a generous entitlement policy for quitters as compared to the us status quo moreover i employ the assumption of monetary search costs and show that it can explain the empirically documented unemployed worker search behavior finally by inducing different unemployment benefit eligibility requirements the model identifies a concrete policy that could help us understand differences in the unemployment rate match quality and income inequality between the us and europe

endogenous supply of fiat money abstract we consider whether reputation concerns can discipline the behavior of a long lived self interested agent who has a monopoly over the provision of fiat money we obtain that when this agent can commit to a choice of money supply there is a monetary equilibrium where it never overissues we show however that monetary equilibria with no overissue do not exist when there is no commitment this happens because the incentives this agent has to maintain a reputation for providing valuable currency disappear once its reputation is high enough more generally we prove that in the absence of commitment overissue happens infinitely often in any monetary equilibrium we conclude by showing that imperfect memory can restore the positive result obtained with commitment

unemployment insurance take up rates in an equilibrium search model abstract from 1989 to 2012 on average 23 of those eligible for unemployment insurance ui benefits in the us did not collect them to understand the implications of these unclaimed benefits we develop a directed search model with an endogenous ui take up rate in equilibrium ui collectors have longer unemployment durations relative to non collectors the difference results from two forces a consumption effect and a private information effect as ui collection histories are unobservable we characterize both effects analytically and quantitatively with an endogenous take up rate the unemployment rate and average duration of unemployment respond significantly slower to changes in the ui benefit level relative to the standard model with a 100 take up rate the private information effect on non collector job finding rates plays an important role in this result

has government any role in money abstract recent interest in monetary reform has been sparked by the emergence of a world irredeemable paper money system in light of this interest we review the current validity of four good reasons friedman advanced in 1960 to rationalize government intervention we conclude that the forces that produced government involvement in the past will persist deregulation of financial intermediaries is desirable on grounds of market efficiency though it is an open question whether government should continue as lender of last resort we expect that the present world fiat money standard will neither degenerate into hyperinflation nor revert to a commodity standard

time use during the great recession using data from the american time use survey between 2003 and 2010 we document that home production absorbs roughly 30 percent of foregone market work hours at business cycle frequencies leisure absorbs roughly 50 percent of foregone market work hours with sleeping and television watching accounting for most of this increase we document significant increases in time spent on shopping child care education and health job search absorbs between 2 and 6 percent of foregone market work hours we discuss the implications of our results for business cycle models with home production and non separable preferences jel codes d13 e32 j22

money as meta rule buchanan s constitutional economics as a foundation for monetary stability this paper explores james buchanan s contributions to monetary economics and argues these contributions form the foundation of a robust monetary economics paradigm while often not recognized for his contributions to monetary economics buchanan s scholarship offers important insights for current debates especially the renewed interest in narrow banking in the wake of the financial crisis we argue that the post 2007 crisis milieu creates a unique opportunity to recognize as buchanan did the vital role that money plays in the market as the grammar of commerce that recognition makes the need for more fundamental reform of our monetary regimes at the constitutional level more apparent making buchanan s work on monetary constitutions more relevant than ever before we then discuss how adopting buchanan s monetary framework can improve both monetary scholarship and institutions

in defence of demand deposits contractual solutions to the barnett and block and bagus and howden debate this article contributes to a recent debate between barnett and block j bus ethics 88 4 711 716 2009 bagus and howden j bus ethics 90 3 399 406 2009 barnett and block j bus ethics 100 299 238 2011 cachanosky j bus ethics 104 219 221 2011 and bagus and howden j bus ethics 106 295 300 2012a regarding the conceptual distinction between demand deposits and time deposits it is argued that from an economic perspective there is nothing inherently fraudulent or illegitimate about deposit accounts that are available on demand but that this relies on certain contractual provisions particular attention is drawn to option clauses and withdrawal clauses which solve the problems raised by barnett and block and bagus and howden previous authors have also neglected the asset side of banks balance sheets and this is shown to further justify the legitimacy of fractional reserve banking

moral hazard vs liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives

the spike at benefit exhaustion leaving the unemployment system or starting a new job in this paper we review the literature on the spike in unemployment exit rates around benefit exhaustion and present new evidence based on administrative data for a large sample of job losers in austria we find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion both in existing studies and in our austrian data spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system in austria the exit rate from registered unemployment rises by over 200 at the expiration of benefits while the hazard rate of re employment rises by only 20 the difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work the modest spike in re employment rates implies that most job seekers do not wait until their ui benefits are exhausted to return to work fewer than 1 of jobless spells have an ending date that is manipulated to coincide with the expiration of ui benefits this abstract was borrowed from another version of this item

ethical differences between loan maturity mismatching and fractional reserve banking a natural law approach in a number of recent articles the debate on the ethics of fractional reserve free banking has been extended to loan maturity mismatching specifically the banking practice of borrowing short and lending long barnett and block j bus ethics 88 4 711 716 2009 2010 claim the practice is illicit because like fractional reserve banking it creates duplicate property titles they argue there is a continuum in the time dimension between the two kinds of activities bagus and howden j bus ethics 90 3 399 406 2009 106 3 295 300 2012a eur j law econ 2012b bus ethics 22 3 235 245 2013 maintain that loan maturity mismatching does not create duplicate titles and is not illicit and that from an economic and legal perspective there is no continuum with fractional reserve banking cachanosky j bus ethics 104 219 221 2011 and evans j bus ethics 2013 enter the debate from the free banking standpoint and view both practices as legitimate in this paper i agree with the conclusions of bagus and howden but adopt a different approach to support this position using the title transfer theory of contract i demonstrate from first principles why loan maturity mismatching does not create duplicate property titles and is a legitimate practice employing this same theory i then present a novel argument to show why the contractual arrangements found in fractional reserve banking are logically contradictory and illegitimate

reprint of the general equilibrium impacts of unemployment insurance evidence from a large online job board abstract during the great recession u s unemployment benefits were extended by up to 73 weeks theory predicts that extensions increase unemployment by discouraging job search a partial equilibrium effect using data from the large job board careerbuilder com i find that a 10 increase in benefit duration decreased state level job applications by 1 but had no robust effect on job vacancies job seekers thus faced reduced competition for jobs a general equilibrium effect calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 39

job search by employed and unemployed youth analysis of data from the new youth cohort of the national longitudinal survey yields evidence that young unemployed job seekers chose higher levels of search effort as measured by number of methods used and time spent per method and lower reservation wages relative to offered wages than did comparable employed job seekers in 1981 these differences in search choices at least partly explain differences in search outcomes between the two groups unemployed searchers apparently were more likely than employed searchers to gain new employment and the wages they obtained were slightly lower the author argues that the greater search effort by unemployed job seekers is due to the higher costs of search they bear because of foregone earnings

do we need a distinct monetary constitution abstract elements of the chicago and virginia traditions of political economy have rejected both competitive money production and money s politicization via post constitutional bargaining opting instead for constitutionalization this paper argues that competitive money production is not subject to the pro cyclicality that concerns constitutional political economy it also meets the standard of predictability that motivates constitutional perspectives although at the level of individual prices rather than the price level an effective monetary constitution is implicit in any constitution that protects rights to property contract and exchange and sets limits on the democratic process

unemployment insurance and cigarette smoking abstract we provide evidence for the causal relationship between unemployment insurance ui and individuals smoking behavior using the 1995 2011 current population survey tobacco use supplement data our identification relies on the exploitation of the exogenous variations of the maximum ui weekly benefits across states and over years instead of focusing on all unemployed people we concentrate on those who are eligible for ui benefits we find that when the maximum ui weekly benefit level increases by 100 smoking cessation increases by approximately 2 9 percentage points among the ui eligible unemployed the results are robust to various model specifications we also explore the mechanism and find suggestive evidence that the increase in the maximum ui weekly benefit leads to a decrease in the probability of over work of the respective spouse moreover the unemployed who are less educated are more responsive to the increasing ui benefits

a quantitative analysis of unemployment benefit extensions abstract extensions of unemployment insurance ui benefits have been implemented in response to the great recession this paper measures the effect of these extensions on the unemployment rate using a calibrated structural model featuring job search and consumption saving decisions skill depreciation and ui eligibility the ongoing ui benefit extensions are found to have raised the unemployment rate by 1 4 percentage points which is about 30 of the observed increase since 2007 moreover the contribution of the ui benefit extensions to the elevated unemployment rate increased during 2009 2011 while the number of vacancies recovered the successive extensions kept search intensity down

duration dependence and labor market conditions evidence from a field experiment this article studies the role of employer behavior in generating negative duration dependence the adverse effect of a longer unemployment spell by sending fictitious resumes to real job postings in 100 u s cities our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker s unemployment spell with the majority of this decline occurring during the first eight months we explore how this effect varies with local labor market conditions and find that duration de pendence is stronger when the local labor market is tighter this result is consistent with the prediction of a broad class of screening models in which employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets jel code j64

unemployment at risk the policy determinants of labour market exposure to economic shocks this paper examines the vulnerability of labour markets to adverse economic shocks we define labour market exposure as the cumulated amount of excess unemployment generated by a shock before unemployment returns to steady state we use a panel of 19 countries covering the period 1985 2010 to assess the influence of labour market policies on labour market exposure which is also calculated country by country we find that less generous unemployment insurance more active labour market policies or a lower minimum wage imply a trade off between average unemployment and labour market exposure as they help low skilled workers to get out of unemployment at the cost of increased vulnerability to adverse shocks on the other hand reducing the tax wedge is conducive to both lower steady state unemployment and labour market exposure alain de serres and fabrice murtin

training and search during unemployment displaced workers often experience large losses in earnings even a long time after reemployment training programs during unemployment mitigate these losses but also affect the unemployed s willingness to search this paper analyzes how mandatory training programs affect the optimal design of unemployment insurance and how the training intensity should evolve during the unemployment spell the introduction of training reverses the optimal consumption dynamics during the unemployment spell and makes it optimal to incentivize the long term unemployed to find employment despite the depreciation of their human capital targeting training programs towards the long term unemployed however is optimal only if the fall in human capital upon displacement is small relative to the depreciation during unemployment

bargaining and the value of money abstract search models of monetary exchange have typically relied on nash 1950 the bargaining problem econometrica 18 155 162 bargaining or strategic games that yield an equivalent outcome to determine the terms of trade by considering alternative axiomatic bargaining solutions in a search model with divisible money we show that the properties of the bargaining solutions do matter both qualitatively and quantitatively for questions of first degree importance in monetary economics such as i the efficiency of monetary equilibrium ii the optimality of the friedman rule and iii the welfare cost of inflation

shopping externalities and self fulfilling unemployment fluctuations we propose a novel theory of self fulfilling fluctuations in the labor market a firm employing an additional worker generates positive externalities on other firms because employed workers have more income to spend and have less time to shop for low prices than unemployed workers we quantify these shopping externalities and show that they are sufficiently strong to create s complementarities in the employment decisions of different firms and to generate multiple rational expectations equilibria equilibria differ with respect to agents rational expectations about future unemployment we show that negative shocks to agents expectations lead to fluctuations in vacancies unemployment labor productivity and the stock market that closely resemble those observed in the us during the great recession

financial development and economic growth nexus a time series evidence from india this study examines the relationship between financial development and economic growth in india for the period 1951 52 to 1995 96 the long run equilibrium and short run dynamic models are estimated using financial interrelations ratio and new issue ratio as the measures of financial development a la goldsmith 1969 the johansen 1991 estimator rejects the null of zero cointegrating vector and shows the presence of long run equilibrium relationship between financial development and economic growth the error correction model impulse response and variance decomposition analyses sims 1980 and the toda and yamamoto 1995 estimator show the presence of bidirectional granger causality between financial development and economic growth the presence of bidirectional granger causality suggested by these estimators points towards the possible problem of endogeneity and simultaneity bias in the growth models that examine the contemporaneous effect of financial development on economic growth the economic

hedonic prices for cars an application to the spanish car market 1981 2005 in this article we provide a comparison of different formulations for hedonic regression analysis in order to construct a quality adjusted price index for the spanish car market over the period 1981 to 2005 specifically we address the issue of instability of coefficients over time and propose two alternative estimation procedures based firstly on a moving sample of observations and secondly on a moving average of estimated coefficients in single period equations the statistical tests applied support the proposed methodologies on empirical grounds two conclusions can be emphasized firstly our study concludes that taking quality changes into account car prices in spain deflated by consumer price index cpi declined by 40 between 1981 and 2005 this result is robust to the alternative estimation procedures employed in the study secondly an analysis of convergence shows that for quality adjusted prices a clear trend in convergence emerges between 1986 and 1992 whereas such a trend does n

a theory of self enforcing monetary constitutions with reference to the suffolk system 1825 1858 abstract we develop a theory of self enforcing monetary constitutions a monetary constitution is the framework of rules within which money providing and money using agents interact a self enforcing monetary constitutions is upheld by the agents acting within the system it thus does not require external enforcement we describe how the institutional technology of polycentric sovereignty applies to monetary constitutions and show how the 19th century suffolk banking system was characterized by polycentric sovereignty rendering its de facto monetary constitution self enforcing we conclude by briefly discussing the implications of our analysis for the role of the state in maintaining healthy money and banking systems

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

service boom in the indian economy an analysis of causal influences the article decomposes the influence behind the growth of service activities in the indian economy over the last three decades into three components the final demand effect input structure effect and reallocation effect and makes empirical assessments thereof in terms of the influences the behaviour of the group of services used basically as intermediate inputs designated as category i services was distinct from the rest of heterogeneous services combined as community social and personal services the study finds that apart from the final demand effect the other two influences too played very important but different roles in different phases of growth

employment risk and job seeker performance using detailed labor recruitment data in combination with randomized variation in individuals outside job opportunities i show that providing job certainty during recruitment leads to substantial job seeker performance gains job seeker performance is highest and effort lowest among those assigned to receive a guaranteed outside job offer where employment risk is eliminated while performance is lowest and effort highest among those receiving no chance of an outside job offer performance among those assigned uncertain outside job offers consistently lies between the two extremes i conjecture that the pattern of results is most consistent with stress induced performance reductions attributable to job uncertainty i rule out several other competing theories

building sectoral job search indices for the united states abstract this study investigates job search activity in the united states by constructing a set of sectoral job search activity indices based on internet search volumes the indices are positively associated with countercyclical labour market measures including unemployment and layoff rates but are negatively associated with procyclical measures overall our evidence supports previous empirical findings job search intensity is countercyclical which contradicts the theoretical model s prediction

applications and interviews firms recruiting decisions in a frictional labour market i develop a directed search model to study the recruitment decisions of firms competing for workers who ex post differ in two dimensions 1 their match productivity and 2 their probability of accepting a job offer endogenously determined by their choice of application portfolio to attract these workers firms post a recruiting intensity and a hiring standard in addition to terms of trade a higher recruiting intensity is costly but allows the firm to select more applicants for an interview which reveals their productivity the hiring standard solves the tradeoff between immediate hiring and waiting for a potentially better match in the future i characterize equilibrium and find that various outcomes including uniqueness of equilibrium and the cyclicality of recruiting intensity crucially depend on firms recruiting cost and workers search cost calibration of the model to the u s labour market indicates a continuum of equilibria given selection of a particular equilibrium hiring standards are countercyclical while recruiting intensity is procyclical the calibrated model creates more amplification than a standard model without intensive margins and gives rise to procyclical match efficiency when viewed through the lens of a cobb douglas matching function

is it socially efficient to impose job search requirements on unemployed benefit claimants with hyperbolic preferences dellavigna and paserman 2005 and paserman 2008 have shown that imposing job search requirements on sophisticated unemployed benefit claimants with hyperbolic time preferences is pareto improving in that it raises welfare for the unemployed by limiting harmful procrastination and for employees since the enhanced search boosts the job finding rate thereby reducing the contributions required for the funding of benefits this paper demonstrates that the range of pareto improvements is much reduced if the analysis takes into account the fact that benefit claimants may not comply with the requirements especially if the monitoring technology displays imperfections induced by caseworker discretion or measurement error

dynamics cycles and sunspot equilibria in genuinely dynamic fundamentally disaggregative models of money abstract this paper pursues a line of cass and shell who advocate monetary models that are genuinely dynamic and fundamentally disaggregative and incorporate diversity among households and variety among commodities recent search theoretic models fit this description we show that like overlapping generations models search models generate interesting dynamic equilibria including cycles chaos and sunspot equilibria this helps us understand how alternative models are related and lends support to the notion that endogenous dynamics and uncertainty matter perhaps especially in monetary economies we also suggest such equilibria in search models may be more empirically relevant than in some other models

time use emotional well being and unemployment evidence from longitudinal data how do unemployed individuals allocate and experience their time how does their time use and emotional experience change once they find a job this article provides new evidence on the time use and emotional well being of unemployed and employed individuals in the united states using longitudinal data from a survey of unemployed workers in new jersey we find evidence that the time spent on home production activities drops sharply at the time of reemployment with the magnitude of the shift in line with previous research using cross sectional time use surveys burda and hamermesh 2010 krueger and mueller forthcoming 1 leisure activities also decrease at the time of reemployment though somewhat less than in cross sectional time use data partly because those finding a job were spending more time on job search activities in the weeks prior to reemployment we also investigate the relationship between unemployment and emotional well being in connection with time use despite the fact that the unemployed spend relatively more time in leisure related activities we find that the unemployed enjoy these activities to a lesser degree

the option clause in scottish banking a key question raised by the modern literature on laissez faire money and banking is whether unregulated fractional reserve banks could protect themselves from bank runs by purely contractual means if so banking stability would not require government to provide deposit insurance or to act as a lender of last resort one possible run proofing device discussed in the literature is an option clause or notice of withdrawal clause allowing a bank temporarily to suspend the redeemability of some or all of its liabilities notes or demand deposits provided the bank pays a prespecified penalty rate of interest on the suspended liabilities before the practice was outlawed in 1765 many scottish banks issued notes bearing option clauses in an informative reappraisal of the option clause in scottish banking james a gherity 1995 suggests that his findings contradict other recent discussions in particular gherity disputes three propositions that he attributes to us and others 1 that option clauses were vital to preventing runs in scotland 2 that run proofing was the purpose that motivated scottish banks to employ option clauses and 3 that option clause notes were accepted by the public without prejudice to set the record straight we note here that we and several other authors gherity cites have in fact avoided making claims 1 and 2 the conflict between gherity s view and ours is thus much smaller than he suggests we would defend claim 3 however and argue that the evidence gherity offers against it does not suffice to refute that claim 1 the potential and historical roles of the option clause an option clause can keep a solvent bank from being run upon by providing a contractual circuit breaker by allowing an illiquid bank to suspend for enough time to liquidate assets without fire sale losses it prevents a run from forcing a sol

on the private provision of fiat currency this paper considers whether fiat money can be provided by a revenue maximizing monopolist in an environment where money is essential two questions arise concerning the private supply of money is it feasible and is it optimal concerning the feasibility question i show that the revenue maximizing policy is time consistent if the trading history of the issuer is public information and if money demanders respond to the revelation of defection by playing autarky concerning the optimality question the model suggests that any private organization of the market for fiat currency is suboptimal

causality between financial development and economic growth an application of vector error correction and variance decomposition methods to saudi arabia this article makes an attempt to test the possible directions of causality between financial development and economic growth which were labelled by patrick 1966 as the supply leading and demand following hypothesis saudi arabia is taken as a case study the methods applied are the error correction and variance decompositions techniques including the most recently developed long run structural modelling lrsm pesaran and shin 2002 which by imposing exactly identifying and overidentifying restrictions on the cointegrating vector has taken care of a major limitation of the conventional cointegrating estimates in that they were atheoretical in nature to the best of our knowledge there has not been any study on this issue with the application of the techniques that incorporate lrsm the stability of the functions has also been tested by cumulative sum cusum cumulative sum of squares cusumsq and chow test chow tests our findings based on the above mentioned rigorous techniques tend to s

optimal life cycle unemployment insurance we argue that us welfare would rise if unemployment insurance were to be increased for young workers and decreased for old this is because young workers have little means to smooth consumption during unemployment and want jobs to accumulate high return human capital so unemployment insurance is highly valuable to them while the induced moral hazard problem is mild we consider a life cycle model with unemployment risk and endogenous search eort that we calibrate to match us labor market institutions we nd that allowing unemployment replacement rates and other government transfers to decline with age yields sizeable welfare gains which amount to around two thirds of the gains attained under the constrained optimal scheme for unemployment insurance over the life cycle

skill accumulation in the market and at home abstract an evolving outside option is introduced into a stochastic directed search model with skill loss during non employment using multi spell data from the sipp i show that average reemployment wages are only mildly sensitive to unemployment duration while the job finding probability is highly sensitive to duration with evidence of true duration dependence in both variables though untargeted the model produces a quantitatively accurate decline in the job finding probability and starting wage improving over a model with a fixed outside option the addition of aggregate shocks leads to an nonlinear response of the unemployment and participation rates during and after recessions with more severe recessions resulting in stronger hysteresis

private money and banking regulation we show that the regulation of lending practices is desirable for the optimal provision of private money in an environment in which bankers cannot commit to repay their creditors neither an unregulated banking system nor a form of narrow banking in which banks hold 100 in reserves can provide the socially efficient amount of money if bankers provided such an amount then they would prefer to default on their liabilities we show that a regulation that increases the value of the banking sector s assets e g by limiting competition in credit markets will mitigate the commitment problem if the return on the banking sector s assets is made sufficiently large then it is possible to implement an efficient allocation

suspension of payments bank failures and the nonbank public s losses abstract we present evidence on the effects of suspensions of payments from an episode that is close to a controlled experiment for examining those effects in 1861 about 44 of the banks in wisconsin closed 81 of the banks in illinois closed and noteholders suffered substantial losses the historical record suggests that an effective suspension of payments in wisconsin but not in illinois may explain the difference our statistical evidence indicates that the suspension of payments increased the probability of a bank remaining open by about 21 percentage points and decreased noteholders losses by about 14 cents per dollar

worker search effort as an amplification mechanism abstract it is well known that the diamond mortensen pissarides model exhibits a strong trade off between cyclical unemployment fluctuations and the size of rents to employment introducing endogenous job search effort reduces the strength of the trade off while bringing the model closer to the data ignoring worker search effort leads to a large upward bias in the elasticity of matches with respect to vacancies merging the american time use survey and the current population survey new evidence in support of procyclical search effort is presented average search effort of the unemployed is subject to cyclical composition biases

did hayek and robbins deepen the great depression contrary to some accounts the hayek robbins austrian theory of the business cycle did not prescribe a monetary policy of liquidationism in the sense of passive indifference to sharp deflation during the early years of the great depression there is no evidence that hayek or robbins influenced any liquidationist in the hoover administration or the federal reserve system federal reserve policy during the great depression was instead influenced by the real bills doctrine which despite some apparent similarities was diametrically opposed in key respects to hayek s norms for central bank policy

does unemployment insurance crowd out home production abstract in this paper we study the interaction between self insurance and public insurance in particular we provide evidence on a negative correlation between unemployment insurance benefits and home production using the american time use survey atus and the state level unemployment insurance data of the u s the empirical results suggest that moving to a two times more generous state would decrease time spent on home production about 22 for the unemployed then we pursue a quantitative assessment of this empirical finding using a dynamic competitive equilibrium model in which households do home production as well as market production the model is able to generate the empirical facts regarding the unemployment benefits and home production the fact that unemployment insurance benefits crowd out home production is interpreted as a substitution between the two insurance mechanisms against loss of earnings during unemployment spells

how do financial resources affect the timing of retirement after a job separation this study examines working people between the ages of 50 and 70 years old and the conditions that lead them to decide to retire or not after they experience a job separation based on data from the survey of income and program participation the author finds that among individuals whose jobless spells end in retirement most decide to retire within a year after separation the availability of resources such as social security retirement benefits high net worth and income from defined benefit pensions appear to encourage more rapid labor force exit and retirement rather than supporting job seekers during a long search perhaps surprisingly no correlation between retirement and the unemployment rate occurs but unemployment insurance benefits do delay retirement these results suggest little tolerance for long job searches regardless of labor market prospects and indicate that those who can afford to retire will do so rather quickly

delayed collection of unemployment insurance in recessions contrary to assumptions in the unemployment insurance ui literature this paper argues that unemployed workers do not always lose uncollected ui benefits when they start a new job instead they may postpone the collection of leftover benefits to future unemployment spells further using cross time and cross state variations in ui policies the paper finds empirical evidence that allowing unemployed workers to delay the collection of benefits increases their incentives to find a job during recessions when wages are low job separation rates are high and ui benefits are extended i quantify the effects of the policy of allowing delayed collection of benefits on aggregate unemployment by introducing endogenous search effort benefit eligibility and wage indexed benefits into a standard search and matching framework the model demonstrates how the policy increases the future value of employment even though more generous ui benefits in general reduce the net value of employment using a calibrated model i find that allowing delayed benefit collection raises the proportion of unemployed workers receiving benefits and reduces the unemployment rate during 2009 2012

the lot of the unemployed a time use perspective this paper provides new evidence on time use and subjective well being of employed and unemployed individuals in 14 countries we devote particular attention to characterizing and modeling job search intensity measured by the amount of time devoted to searching for a new job job search intensity varies considerably across countries and is higher in countries that have higher wage dispersion we also examine the relationship between unemployment benefits and job search

the beveridge curve a survey important progress has been made in economists understanding of the beveridge curve from its measurement to its expression in canonical labor market models yet enduring puzzles remain chief among these are the empirical role of vacancies in the recruitment process the amplitude comovement and persistence of cyclical unemployment vacancy dynamics and the sources of lateral shifts in the beveridge curve the synthesis of these themes identifies several priorities for ongoing research including the role of entry costs into vacancy creation in shaping beveridge dynamics the cyclicality of search intensity both off and on the job and its relation to participation and job to job transitions the theory and measurement of mismatch and the sources of hysteresis in unemployment flows