public employment and the business cycle we add a public employment sector to the basic search and matching model in order to study the business cycle impact of public wage and employment policies the government is assumed to follow exogenous rules for public wages and employment calibrated to match some cyclical features of us policies these features include a positive public wage premium and mildly procyclical public wages and employment we find that the presence of the public sector increases the volatility of employment and output

the dynamic relationship between the federal funds rate and the treasury bill rate an empirical investigation this article examines the dynamic relationship between two key us money market interest rates the federal funds rate and the 3 month treasury bill rate using daily data over the period from 1974 99 we find a long run relationship between these two rates that is remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting employing a non linear asymmetric vector equilibrium correction model which is novel in this context we find that most of the adjustment toward the long run equilibrium occurs through the federal funds rate in turn there is strong evidence for the existence of significant asymmetries and non linearities in interest rate dynamics that have implications for the conventional view of interest rate behaviour

micro to macro simulation a primer with a labor market example simulation models now widely used in the physical sciences can also help economists in depicting the actions and interactions of individuals and firms through time such models can be built and run on any personal computer they can illuminate a wide variety of issues that are difficult to analyze with an economist s conventional tool kit and are especially useful in studying dynamic processes microsimulation models allow the analyst to produce simulated aggregate time series that are rigorously consistent with the assumptions made about behavior on the micro level thus simulations provide a means of bridging the micro macro split in economic analysis this article provides an introduction to microsimulation how it works how to do it its potential and its drawbacks it then allows readers even those with no experience in computer programming to work through the details of a simple microsimulation model readers can put this model on their pcs watch it run through its paces and experiment with their own modifications with this model as an example it should be fairly easy to create programs for new models on other subjects for use in theoretical exploration empirical research or classroom demonstrations the demonstration model i present depicts the experience of individual workers during recession and recovery in the labor market as the model runs its internal census bureau performs surveys on the microlevel and sums up to macrolevel variables the model is simple but it has some interesting applications after explaining how to set it up i use it to explore the effect of unemployment insurance on the level of unemployment and to point up a common fallacy in current labor market literature

interest rate deregulation monetary policy efficacy and rate rigidity abstract this paper examines the effects of interest rate regulation and subsequent deregulation on the efficacy of monetary policy and rigidity of retail bank deposit rates in hong kong using an error correction model we find that interest rate deregulation increases the efficacy of monetary policy by improving the correlation between retail bank deposit rates and market interest rates and increasing the degree of long term pass through for retail bank deposit rates our study also shows that the adjustments in retail bank deposit rates are asymmetric and rigid upwards during the regulated period but tend to be rigid downwards during the deregulated period the spreads between retail bank deposit rates and market rates have also tightened sharply after the removal of interest rate controls

when does the prime rate change abstract we study the frequency of prime rate changes we model the prime rate as a time series variable that can be changed only at some cost this yields a logit model in which the probability of a prime rate change is a function of market variables we test this model using data from a micro data set that gives the dating of prime rate changes the results indicate that adjustment costs are important to the prime rate adjustment process and that changes in exogenous variables have a significantly larger effect on the probability of a prime rate increase than decrease

interest rate pass through and monetary transmission evidence from individual financial institutions retail rates official interest rate changes should influence short rates on money market instruments and retail products such as deposit accounts and mortgages but complete pass through is often taken for granted this paper provides a theoretical and econometric framework for assessing the evidence for this assumption using seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by individual uk financial institutions the methodology allows for asymmetries and non linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived gap between retail and base rates is widening or narrowing

asymmetric information and price competition in small business lending abstract this paper examines the relationship between bank lending rates and their cost of funds in new zealand our results show that on average mortgage rates respond more quickly to changes in the cost of funds than base business lending rates we also find an asymmetry in the initial short run response of banks to changes in funding costs in particular our results show banks adjust mortgage rates downwards faster than upwards the speed to which lending rates revert back to their equilibrium relationship with funding costs varies across the lending markets we find the adjustment speed is faster when mortgage rates are below equilibrium whereas it is slower when business lending rates are above long run levels in relation to funding costs our analysis suggests that banks prefer the plain vanilla type of lending such as mortgages in comparison to small business lending consistent with asymmetric information associated with business loans

optimal incentive contracts under inequity aversion we analyze the classic moral hazard problem with the additional assumption that agents are inequity averse the presence of inequity aversion alters the structure of optimal contracts when the concern for equity becomes more important there is convergence towards linear sharing rules the sufficient statistics result is violated depending on the environment contracts may be either overdetermined i e include non informative performance measures or incomplete i e neglect informative performance measures finally our model delivers a simple rationale for team based incentives implying wage compression 2010 elsevier inc

long run estimates of money demand new evidence from east asian countries and the presence of structural breaks conventionally the money demand function is estimated using a linear regression of the logarithm of money demand on a number of variables in this article we aim to estimate the long run properties of money demand specification for a number of east asian economies and within a panel framework with the presence of structural breaks various country specific coefficients are allowed to capture inter country heterogeneities consistent with theoretical postulates it is found that a the demand for money in the long run positively responds to real income and inversely to the interest rate spread inflation the real effective exchange rate and the us real interest rate b the long run income elasticity is greater than unity and c both the currency substitution and capital mobility hypotheses hold the empirical findings in this article can provide useful policy guidelines to the east asian countries central banks in their quest for price stability if one of the primary objectives of these countries

partial gift exchange in an experimental labor market impact of subject population differences productivity differences and effort requests on behavior we report a gift exchange experiment firms make wage offers workers respond by determining an effort level higher effort is more costly to workers and firms have no mechanism for punishing or rewarding workers consistent with the gift exchange hypothesis workers provide more effort at higher wages but undergraduates provide substantially less effort than mbas evidence suggests this results from differences in prior work experience firms nonbinding effort requests are at least partially honored resulting in increased overall effort for undergraduates although higher wages are relatively more costly for lower productivity firms workers do not provide them with more effort

is there a hold up problem most literature on the hold up problem starts from the assumption that ex post bargaining outcomes are insensitive to prior investment costs we argue that this approach is unsatisfactory if the bargaining procedure is relatively symmetric it typically admits multiple perfect equilibria some of which give the investor a high enough payofi to sustain e cient investment even if the bargaining procedure is asymmetric and rigged against the investor there may be investment if agents are driven by moral concerns or if communication creates commitment laboratory experiments indicate that communication is necessary and su cient for agents to coordinate on e cient outcomes when the bargaining game is symmetric when the bargaining game is rigged against the investor the hold up problem is mitigated but not eliminated by moral behavior communication is quite credible and we flnd that promises are more believable than threats

labor market policy evaluation with ace abstract i develop an agent based computational economics ace model with which i evaluate the aggregate impact of labor market policies the findings are that government financed training measures increase the outflow rate from unemployment to employment although the overall effect is positive this effect is achieved by reducing the outflow rate for those who do not receive subsidies furthermore the outflow rate would have been downward biased had one supposed a matching function that is exogenous to policies

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

market structure and the nature of price rigidity evidence from the market for consumer deposits panel data on consumer bank deposit interest rates reveal asymmetric impacts of market concentration on the dynamic adjustment of prices to shocks banks in concentrated markets are slower to raise interest rates on deposits in response to rising market interest rates but are faster to reduce them in response to declining market interest rates thus banks with market power skim off surplus on movements in both directions since deposit interest rates are inversely related to the price charged by banks for deposits the results suggest that downward price rigidity and upward price flexibility are a consequence of market concentration

the consequences of rigid wages in search models the standard theory of equilibrium unemployment the mortensen pissarides search and matching model cannot explain the magnitude of the business cycle fluctuations in two of its central elements unemployment and vacancies modifying the model to make the present value of wages unresponsive to current labor market conditions amplifies fluctuations in unemployment and vacancies by an order of magnitude significantly improving the performance of the model despite this the welfare consequences of such rigid wages is negligible jel e24 e32 j30 j41 j63 j64

do high stakes and competition undermine fair behaviour evidence from russia abstract this paper reports the results of a series of competitive labour market experiments in which subjects have the possibility to reciprocate favours in the high stake condition subjects earned between two and three times their monthly income during the experiment in the normal stake condition the stake level was reduced by a factor of ten we observe that both in the high and the normal stake condition fairness concerns are strong enough to outweigh competitive forces and give rise to non competitive wages there is also no evidence that effort behaviour becomes generally more selfish at higher stake levels therefore our results suggest that fairness concerns may play an important role even at relatively high stake levels

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

labor market dynamics when un employment is a social norm this paper proposes a new keynesian model with search and matching frictions in the labor market that can account for the cyclicality and persistence of vacancies unemployment job creation inflation and the real wage after a monetary shock motivated by evidence from psychology unemployment is modeled as a social norm the norm is defined here as the belief that individuals in society prioritize or should prioritize the search for gainful employment whereas those who do not are perceived as outside the norm and consequently stigmatized households pressure the unemployed to find jobs the fewer unemployed workers there are the more supporters the norm has and therefore the greater the pressure and psychological cost experienced by each jobseeker as this psychological cost is procyclical it hinders the wage from absorbing most of the effect of the shock thus the model is able to capture the high volatility of vacancies and unemployment observed in the data accounting for the shimer puzzle the paper also departs from the literature by introducing price rigidity in the labor market inducing additional inertia and persistence in inflation and the real wage after a monetary shock the model s responses after a monetary shock are in line with the responses obtained from a var on us data

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

asymmetric adjustment of commercial bank interest rates evidence from malaysia and singapore abstract this paper examines the rigidity of commercial bank interest rates using evidence from singapore and malaysia an asymmetric error correction technique is used to test whether mean adjustment lags are different when retail rates are above or below their equilibrium levels it is concluded in both countries that the mean adjustment lag is shorter when the deposit rate is above its equilibrium than when it is below its equilibrium using the framework of hannan and berger 1991 this finding implies that the hypothesis of collusion cannot be rejected

evaluating the performance of the search and matching model abstract does the search and matching model fit aggregate u s labor market data while the model has become an important tool of macroeconomic analysis recent literature pointed to some significant failures in accounting for the data this paper aims to answer two questions i does the model fit the data and if so on what dimensions ii does the data fit the model i e what are the data which are relevant to be explained by the model the analysis shows that the model fits certain specifications of the data on many dimensions though not on all this includes capturing the high persistence and high volatility of most of the key variables the negative co variation of unemployment and vacancies and the behavior of the worker job finding rate a key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate the latter is a major component of the rate discounting the future value of the job worker match the paper offers a workable empirically grounded version of the model for the analysis of aggregate u s labor market dynamics

does stake size matter for cooperation and punishment the effects of stake size on cooperation and punishment are investigated using a public goods experiment we find that an increase in stake size does neither significantly affect cooperation nor the level of punishment

announcements and the effectiveness of monetary policy a view from the us prime rate abstract until 1994 the us prime rate was said to be sticky because of its irresponsiveness to short term interest rates after the fed started the practice of announcing its intended funds rate in 1994 however the prime rate has come to react immediately to shifts in the target rate this paper attempts to explain how the fed s policy announcements changed the behavior of the prime rate by using a simple menu cost model it shows that an increase in the expected duration of funds rate targets was essential to the improvement in the target rate pass through

structure behavior and market power in an evolutionary labor market with adaptive search abstract this study uses an agent based computational labor market framework to experimentally study the relationship between job capacity job concentration and market power job capacity is measured by the ratio of potential job openings to potential work offers and job concentration is measured by the ratio of work suppliers to employers for each experimental treatment work suppliers and employers repeatedly seek preferred worksite partners based on continually updated expected utility engage in efficiency wage worksite interactions modelled as prisoner s dilemma games and evolve their worksite behaviors over time the main finding is that job capacity consistently trumps job concentration when it comes to predicting the relative ability of work suppliers and employers to exercise market power

managing transportation externalities in the pyrenees region measuring the willingness to pay for road freight noise reduction using an experimental auction mechanism abstract the estimation of the noise impact caused by road freight transportation is critical to have acknowledgment of the ambiance pollution caused by road traffic crossing geographical areas containing important natural resources thus our work proposes a within subject survey where a contingent valuation method cvm is combined with a laboratory economic experimental auction our study objective is to measure the willingness to pay wtp for reducing traffic noise nuisances due to freight transportation in the region of navarre spain a special focus is made regarding the measurement of the hypothetical bias when a comparison is done between hypothetical wtp coming from the cvm study with real incentivized one as the outcome of the economic experiment additionally statistical analyses are conducted in order to find explanation factors for these outcomes results suggest a strong evidence for an upward hypothetical bias from 50 to 160 indicating the income the educational level the gender and the age as the main factors which explain that bias

embodied technical change and the fluctuations of unemployment and wages a matching model where technological change is partially embodied in the job match is shown to be successful in explaining the variability of unemployment and vacancies if we incorporate long term wage contracts into the model it also explains a number of stylized facts on the dynamics of real wages which have been found in the empirical labor literature

monetary policy transparency and pass through of retail interest rates abstract this paper examines the degree of pass through and adjustment speed of retail interest rates in response to changes in benchmark market rates in new zealand during the period 1994 2004 we consider the effects of policy transparency and financial structure of the monetary transmission mechanism new zealand is the first oecd country to adopt a full fledged inflation targeting regime with specific accountability and transparency provisions policy transparency was further enhanced by a shift from quantity settlement cash to price interest rate operating targets in 1999 using phillips loretan estimates of cointegrating regressions we find complete long term pass through for some but not all retail rates our results also show that the introduction of the official cash rate ocr increased the pass through of floating and deposit rates but not fixed mortgage rates in line with previous studies we find the immediate pass through of market interest rates to bank retail rates to be incomplete although we find no statistical evidence for asymmetric response of retail rates to changes in market rates other than for business lending rates in the pre ocr period differences in the magnitude of mean adjustment lags indicate that banks appear to pass on decreases to fixed mortgage rates faster overall our results confirm that monetary policy rate has more influence on short term interest rates and that increased transparency has lowered instrument volatility and enhanced the efficacy of policy

regional interest rate pass through in italy this paper estimates the pass through and speed of adjustment of italian regional interest rates to changes in the money market rate for the period 1998q1 2009q4 our main findings suggest that the markup for the lending rates that banks charge are generally higher in the south than in the north moreover our results indicate that the pass through tends to be longer in southern regions we find little evidence supporting the hypothesis of asymmetric adjustment in the lending rates but detect some evidence supporting upward rigidity in the regional deposit rates

prime rate changes is there an advantage in being first this article analyzes the impact of prime rate changes on stock prices of prime rate change initiating banks relative to noninitiating banks the prime rate as a sticky price is analyzed and the potential directions and sizes of information effects are discussed and empirically examined it is found that prime rate increases generally convey bad news about the initiating banks prime rate decreases in contrast have weakly positive effects on the initiating banks prime rate change announcements are also found to have some effect on banks other than the initiating bank implying that contagion effects exist copyright 1993 by university of chicago press

discount window borrowing after 2003 the explicit reduction in implicit costs abstract in 2003 the federal reserve introduced primary credit as its main discount window lending program this program replaced the adjustment credit program which subject to a number of restrictions had generated a stigma associated with borrowing from the federal reserve lessening the stigma of borrowing was viewed as essential for reducing the reluctance to borrow from the federal reserve we develop a structural model of daily borrowing using this model we estimate the implicit cost associated with borrowing our results suggest that the stigma of borrowing is significantly reduced

social network structure segregation and equality in a labor market with referral hiring abstract we examine the effects of social network structure on inequality in a model of referral hiring that focuses on groups rather than individuals more random social networks yield higher employment rates than less random ones if the population is integrated or job vacancy information flows are random however less random social networks allow for better containment of job information inside a group in a segregated population with non random job information flows resulting in higher employment rates we report on the robustness of these findings with respect to the size of minority and majority groups and the amount of social segregation

labour market policies and unemployment in the oecd unemployment policies richard jackman christopher pissarides and sawas savouri the massive increase in unemployment throughout the oecd since the early 1970s has led governments in many countries to introduce or to expand labour market policies such as training schemes employment subsidies public works or schemes of counselling or assistance in job search such programmes have the objective of reducing unemployment by improving the workings of the labour market after a description of these programmes this article proposes a framework based on the relationship between unemployment and vacancies or beveridge curve within which the rise in unemployment can be analysed and the effects of policies and of institutions examined this framework helps to identify the main factors which have affected the unemployment and vacancy rates in 14 of the main oecd countries over the period 1970 88 the main results are that while corporatism remains the institutional feature with the biggest single impact in sustaining low unemployment rates labour market policies also have had a significant and well defined effect on unemployment which appears large relative to the budgetary costs of the programmes

on the relation between asset ownership and specific investments experimental results are presented for a simplified version of hart s 1995 theory of the firm theory predicts that investment levels remain constant when investors no trade pay offs increase if these pay offs are threat points while they may decrease when no trade pay offs are outside options our results support these predictions in a relative sense average investment levels exceed the predicted level actual investment behaviour is consistent with the outcomes of the bargaining stage the play of the game is supported by a reciprocity mechanism in which non investors consider higher investment levels as fair behaviour which deserves a reward investors anticipate this

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

screening and labor market flows in a model with heterogeneous workers we construct a monetary model in which workers are heterogeneous and productivity is worker specific resulting in time varying deviations between the average productivity of employed and unemployed workers we assume the worker specific component of productivity which we label as the worker s efficiency level is unobservable ex ante by firms and job search is nondirected by interviewing an unemployed worker firms can observe the worker s efficiency level workers with low overall productivity may be interviewed but not hired as firms screen these workers out during the interview process we show that screening amplifies the volatility of the exit rate from unemployment capturing the idea that firms become more selective in a recession reducing the vacancy yield relative to a model with homogeneous levels of efficiency following a negative productivity shock the

heterogeneity job creation and unemployment volatility in this paper i explore the impact of match specific heterogeneity at the job creation margin on business cycle fluctuations i show that this form of heterogeneity alone does not help to amplify labor market volatility either under full or under asymmetric information first i show analytically that under full information heterogeneity has no first order effect on the response of unemployment and job creation to productivity and actually tends to dampen the response of market tightness then in a series of calibrations i show that with both full and asymmetric information the model delivers labor market volatilities close to the representative agent full information benchmark

u s labor market dynamics revisited the picture of u s labor market dynamics is opaque empirical studies have yielded contradictory findings and debates have emerged regarding their implications this paper aims at clarifying the picture which is important for the understanding of the operation of the labor market for the study of business cycles for the explanation of wage behavior and for the formulation of policy the paper determines what facts can be established what are their implications and what remains to be further investigated the main contributions made here are i listing of data facts that can be agreed upon these indicate that there is considerable cyclicality and volatility of both accessions to employment and separations from it hence both are important for the understanding of the business cycle ii presenting the business cycle facts of key series iii pointing to specific gaps in the data picture disparities in the measurement of the sizeable flows between employment and the pool of workers out of the labor force disagreements about the relative volatility of job finding and separation rates across data sets and the fact that the fit of the gross flows data with net employment growth data differs across studies and is not high the definite characterization of labor market dynamics depends upon the closing of these data gaps

motivation and markets many workers receive pay based on subjectively assessed performance yet the shirking model of efficiency wages excludes it this paper incorporates such pay with the following results performance pay is more efficient than efficiency wages when the costs of having a job vacant are low and qualified workers in short supply more capital intensive industries pay more than less capital intensive industries as observed in studies of interindustry wages differentials sustaining an efficient outcome requires a social convention similar to the notion of a fair wage the model also makes predictions about the relationship between turnover wages growth and unemployment copyright 1998 by american economic association

stratification and growth in agent based matching markets abstract this paper examines the dynamic impact of matching on economic mobility and growth to account for complex interactions over time experimental economies of heterogeneous agents are simulated with the match process acting as a fitness selection mechanism even with perfect information and substantial variety in both offspring and entrants two sided matching inevitably causes the population to evolve into stratified groups corrective measures are possible to improve mobility but by altering the path of market evolution a policy may have unintended impacts on growth and inequality

monetary policy implementation and the federal funds rate this paper investigates how the implementation of monetary policy affects the dynamics and the volatility of the federal funds rate since the early 1980s the most important changes in the fed s conduct of monetary policy refer to the role of the federal funds rate target and the reserve requirement system we show that the improved communication and transparency regarding the federal funds rate target has significantly increased the fed s influence on the federal funds rate since 1994 by contrast the declining role of required reserves in the u s has contributed to higher federal funds rate volatility our results suggest that the planned introduction of remunerated reserves will further enhance the controllability of the federal funds rate

why does unemployment persist the main movements of unemployment correspond to fluctuations in the short run nairu around a stable long term nairu these supply side fluctuations have two main origins i variations in the number of insiders involved in wage setting ii variations in the effectiveness of the unemployed outsiders as potential job seekers the evidence of micro studies suggests that ii is more important than i and this also helps to explain the widespread shift outwards in the u v curve to derive these arguments rigorously the paper presents a simple model of efficiency wages another of collective bargaining and finally a fully dynamic model with labour market flows

interpreting the beveridge curve an agent based approach abstract we construct an agent based computational model of the labour market with heterogeneous workers and firms to study the behaviour of the beveridge curve along the business cycle in this framework search frictions arise because filling a vacancy is a costly activity that takes time whereas productivity mismatch comes from firms imperfect information about the value of the workers before the job interview takes place the model offers an interpretation for the outward movement exhibited by the u s beveridge curve since the last months of 2009 sectoral misallocation plays a role moreover when the speed of recovery from a recession is not uniform across sectors unemployed workers are less selective in their application strategy and firms must spend more time in choosing the best match unemployment remains high in spite of an increase in the number of vacancies

the establishment level behavior of vacancies and hiring this paper is the first to study vacancies hires and vacancy yields at the establishment level in the job openings and labor turnover survey a large sample of u s employers to interpret the data we develop a simple model that identifies the flow of new vacancies and the job filling rate for vacant positions the job filling rate moves counter to aggregate employment but rises steeply with employer growth rates in the cross section it falls with employer size rises with worker turnover rates and varies by a factor of four across major industry groups we also develop evidence that the employer level hiring technology exhibits constant returns and that at the employer level and that employers rely heavily on other instruments in addition to vacancies as they vary hires we also develop evidence that effective recruiting intensity per vacancy varies over time accounting for about 41 of movements in aggregate hires in the 2007 to 2009 period our evidence and analysis provide useful inputs for assessing developing and calibrating theoretical models of search matching and hiring in the labor market

monetary transmission via the administered interest rates channel abstract this paper examines the dynamics of administered interest rate changes in response to changes in the benchmark money market rate in singapore our results show that the administered rates adjustment speed differs across both financial institutions and financial products the financial institutions administered lending and deposit rates moreover are more rigid when they are below their equilibrium level than when they are above our finding hence implies that the speed of monetary transmission is not uniform across all sectors of the economy and that a tightening monetary policy takes a longer time to impact the economy than an expansionary monetary policy

an alternative approach to the modelling of interest rate pass through and asymmetric adjustment abstract we propose an alternative approach to examine the nonlinear asymmetric behaviour of interest rates which can be both size and sign dependent compared to other widely used approaches our model performs quite well based on two model selection criteria

testing the expectations hypothesis when interest rates are near integrated nominal interest rates are unlikely to be generated by unit root processes using data on short and long interest rates from eight developed and six emerging economies we test the expectations hypothesis using cointegration methods under the assumption that interest rates are near integrated if the null hypothesis of no cointegration is rejected we then test whether the estimated cointegrating vector is consistent with that suggested by the expectations hypothesis the results show support for cointegration in 10 of the 14 countries we consider and the cointegrating vector is similar across countries however the parameters differ from those suggested by theory we relate our findings to existing literature on the failure of the expectations hypothesis and to the role of term premia

the stock market crash of 2008 caused the great recession theory and evidence abstract this paper argues that the stock market crash of 2008 triggered by a collapse in house prices caused the great recession the paper has three parts first it provides evidence of a high correlation between the value of the stock market and the unemployment rate in u s data since 1929 second it compares a new model of the economy developed in recent papers and books by farmer with a classical model and with a textbook keynesian approach third it provides evidence that fiscal stimulus will not permanently restore full employment in farmer s model as in the keynesian model employment is demand determined but aggregate demand depends on wealth not on income

modelling british interest rate adjustment an error correction approach an error correction model is used to capture the dynamics of british retail deposit and loan rate responses to changes in the central bank s base rate the test is conducted using a monthly series of interest rates for four generic retail banking products over the period 1986 93 the adjustment process is found to vary considerably between and within banks and products the results suggest that this market continues to exhibit many features of imperfect competition and that adjustment differences could affect the speed of the money transmission mechanism

labor market volatility in matching models with endogenous separations the business cycle behavior of a matching model with endogenous separations is studied in this paper we show that whether aggregate productivity shocks have a larger effect on the vacancy unemployment ratio than in a model with exogenous separations depends on whether worker productivity stochastically increases with tenure the difference in the response is quantitatively small however we also show that the cleansing effect introduced by allowing for endogenous separations can help in reconciling the model with observed fluctuations in the unemployment rate but not with those in the vacancy rate

bank funding costs in a rising interest rate environment one key risk to the banking system is how funding costs will change as monetary policy is normalized and interest rates rise after almost a decade of near zero rates our contribution is to develop a model that jointly estimates banks balance sheets and retail interest rates to arrive at a consistent estimate of the change in bank funding costs as market rates change our estimates imply a 100 basis point shock to the federal funds rate would increase overall deposit funding costs by about 40 billion which is roughly equal to 25 of aggregate annual net income for commercial banks and savings institutions we also find that deposit rate responses are largely symmetric in contrast to some previous research showing deposit rates are less responsive to upward movements in reference rates we introduce unique and confidential data on bank deposit betas to anchor our results

open mouth operations abstract this paper explains how central bank statements rather than open market operations can be used to implement monetary policy in the extreme policy instruments can be held constant and yet interest rates will evolve along the path desired by the central bank we show how the recent implementation of monetary policy in new zealand works in this way using announcement data from new zealand we find that open mouth operations lead to large changes in interest rates across all maturities and these changes cannot be explained by open market operations implications are drawn for monetary policy in other jurisdictions

unemployment dynamics and duration dependence a major issue in the analysis of unemployment durations concerns distinguishing genuine duration dependence of the exit rate out of unemployment from unobserved heterogeneity we present a method for the nonparametric estimation of both phenomena designed to be applicable to time series data on aggregate outflows from different duration classes the model explicitly takes into account that individual exit rates are affected by the business cycle and by seasonal effects the method is applied to u s data we find diverging duration effects among black and white individuals however except for white males duration dependence is dominated by unobserved heterogeneity

can interest rates really control house prices effectiveness and implications for macroprudential policy this paper investigates how changes in the central bank policy and retail mortgage rates affected real housing prices in new zealand during the period 1999 2009 we find that real interest rates are significantly and positively related to real housing prices indicating that increases in the policy rate may not be effective in depressing real housing prices by testing interest rates we also find some evidence of housing price bubbles our findings suggest that the central bank could have limited housing price bubbles if it had started to intervene in the housing market prior to 2003 our results set international exemplars for using policy rates or macroprudential tools to cool the housing market where the extent of policy rate adjustments is limited by internal or external economic factors

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

rational choice the contrast between economics and psychology rational choice the published record of a conference on economics and psychology frames the issues as a contest between economic theory and the falsifying evidence from psychology according to a third perspective that of experimental economics most standard theory provides a correct first approximation in predicting motivated behavior in laboratory experimental markets but the theory is incomplete particularly in articulating convergence processes in time and in ignoring decision cost this view has roots in the work of herbert simon and sidney siegel but it is not plainly represented in contemporary research in economic pyschology

matching models under scrutiny an appraisal of the shimer puzzle abstract two papers have recently questioned the quantitative consistency of the search and matching model shimer has argued that a textbook matching model is unable to explain the cyclical variation of unemployment and vacancies in the us economy costain and reiter have found the existence of a trade off in the model s performance any attempt to change the calibrated values to improve the model s ability to predict the business cycle jeopardizes its predictions of the impact of unemployment benefits on unemployment in surveying the literature originating in these findings i distinguish three different avenues that have been followed to correct the model change in wage formation change in the calibration and changes in the model specification the last approach seems to achieve the best results both from a business cycle and from a microeconomic viewpoint

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

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

productivity and the labor market comovement over the business cycle the productivity driven mortensen pissarides model predicts that labor productivity dened as the ratio of output to employment is strongly correlated with employment unemployment vacancies and wages whereas these correlations were argued to be much weaker in the data especially since the mid 1980s we rst document that the size of these discrepancies between the data and the model becomes substantially smaller if employment data from the current population survey is used in measuring productivity instead of the commonly used employment data from the current employment statistics second we show that incorporating time to build and a stochastic value of home production helps reconcile the quantitative performance of the model with the data with stochastic productivity being the key determinant of the business cycle dynamics of the model