some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

the dynamic behavior of the real exchange rate in sticky price models comment in an article published in the american economic review j n steinsson 2008 argues that two sticky price models driven by real shocks can explain the observed persistence volatility and hump shaped impulse response function of the real exchange rate this comment shows first that correcting an error in one of steinsson s models leads to substantially lower persistence and volatility of the real exchange rate second that steinsson s models cannot match real exchange rate volatility relative to output and third that reasonable variations of the model calibration or specification all lead to lower real exchange rate persistence and volatility or both

real rigidities and the non neutrality of money rigidities in real prices are not sufficient to create rigidities in nominal prices and real effects of nominal shocks and by themselves small frictions in nominal adjustment such as costs of changing prices create only small non neutralities but this paper shows that substantial nominal rigidity can arise from a combination of real rigidities and small nominal frictions the paper shows the connection between real and nominal rigidity given the presence of nominal frictions both in general and for two specific sources of real rigidity one arising from goods market imperfections and the other from labour market imperfections

the labor market for new ph d economists presents results from a survey of 450 new 1996 97 ph d economists providing information about employment underemployment employers work activities salaries and job satisfaction comparisons are made across ranks of the graduates ph d programs sectors of employment and subfields of economics as well as over time labor market outcomes for economists also are compared with those of seven other disciplines results indicate that a growing proportion of new economics ph d s start their careers in business or industry that an international market for new economics ph d s is evolving and that job outcomes for economists compare favorably with new ph d s in many other disciplines

exchange rate puzzles and distorted beliefs abstract we propose a new explanation for the foreign exchange forward premium and delayed overshooting puzzles we show that both puzzles arise from a systematic distortion in investors beliefs about the interest rate process accordingly the forward premium is always a biased predictor of future depreciation the bias can be so severe as to lead to negative coefficients in the fama regression delayed overshooting may or may not occur depending upon the persistence of interest rate innovations and the degree of misperception we document empirically the extent of this distortion using survey data for g 7 countries against the u s and find that it is strong enough to account for these irregularities

how do firms form their expectations new survey evidence author s coibion o gorodnichenko y kumar s abstract 2018 american economic association all rights reserved we survey new zealand firms and document novel facts about their macroeconomic beliefs there is widespread dispersion in beliefs about past and future macroeconomic conditions especially inflation this dispersion in beliefs is consistent with firms incentives to collect and process information using experimental methods we find that firms update their beliefs in a bayesian manner when presented with new information about the economy and that changes in their beliefs affect their decisions inflation is not generally perceived as being important to business decisions so firms devote few resources to collecting and processing information about inflation

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

the changing distributions of new ph d economists and their employment implications for the future this essay addressed the changing demographic composition of new ph d s in economics and the changing distribution of the jobs that they are obtaining it discusses how future trends may interact to influence the types of training that economists may provide their graduate students and the types of faculty positions that academic institutions may provide for new ph d economists in the future

information frictions and real exchange rate dynamics abstract real exchange rates are highly volatile and persistent i provide a novel structural explanation for these facts using a model with dispersed information among firms when producers face strategic complementarities in price setting uncertainty about competitors beliefs results in sluggish price adjustment that can generate large and long lived real exchange rate movements i estimate the model using data from the us and euro area and show that it successfully explains the unconditional volatility and persistence of the real exchange rate the model also accounts for the persistent and hump shaped real exchange rate behavior conditional on nominal disturbances documented by a structural var about 50 of this persistence is due to the inertial dynamics of higher order beliefs

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

comment the state of british economics i read the three articles in this symposium with great interest having been quite involved in at least some of these topics as an economist on the other side of the atlantic i will both comment on how the world is similar or different in us academic economics and will also feel freer than did the authors to speculate on underlying causal factors behind the data having chaired the american economic association s committee on the status of women in the economics profession cswep for three years i first read booth and burton s article i was struck by how similar the numbers appeared in the united kingdom and the united states table 1 presents the results reported from cswep s annual departmental questionnaire which is sent to all phd granting institutions in the united states as the table shows women constitute about 6 of full professors 15 of tenured associate professors and 28 of untenured assistant professors even recognising differences in the definition of academic positions between the united states and the united kingdom these numbers are remarkably similar to those shown in table 1 of booth and burton for full time staff furthermore as in the united kingdom the proportion of women is somewhat lower in the topranked departments in recent years between 25 and 34 of those receiving phds in economics have been female in the united states also similar to the uk numbers in table 4 of booth and burton in the united states the share of women in academic positions decreases at every level in economics the share of female assistant professors is lower than the share of women graduating with a phd the share of women promoted to associate professor is lower than their share among assistant professors and the share of female full professors is lower than among associates while this is partly due to the pipeline problem in which a disproportionate share of female phds are younger it is not entirely due to this i recently tried to model the expected flow of women up through the academic ranks from 1980 forward given information in each year on the share of women receiving a phd and assuming that women should enter academic work and move upward at the same rate as men my evidence showed that women are not advancing as rapidly as men and that the smaller shares in associate and full professor tenured jobs is not just a pipeline issue but also due to women dropping out of academic economics at a higher rates at each point of course the key question is why do women drop out of or fail to be promoted in academic economics at a higher rate at least three issues are frequently raised first women disproportionately choose to specialise in more applied fields in economics not only is this work less valued in academic

male female supply to state government jobs and comparable worth the proportion of women in state government jobs and applicant pools is well explained by a model emphasizing supply side factors relative to men women s supply is least sensitive to wages in predominantly male jobs and most sensitive to wages in predominantly female jobs these results suggest that comparable worth policies that shift relative pay toward traditionally female jobs and away from traditionally male jobs will increase the proportion of females in male dominated female dominated and total state government jobs the implication is that supply side responses need not prevent comparable worth pay adjustments from raising total female compensation

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

persistent real exchange rates abstract three well known facts that characterize exchange rate data are a the high correlation between bilateral nominal and real exchange rates b the high degree of persistence in real exchange rate movements and c the high volatility of real exchange rates this paper attempts a joint albeit partial rationalization of these facts in an environment with no staggered contracts and where prices are preset for only one quarter there are two key innovations in the paper first we augment a standard two country open economy model with learning by doing in production at the firm level this induces monopolistically competitive firms to endogeneize the productivity effect of their price setting behavior specifically firms endogenously choose not to adjust prices by the full proportion of a positive monetary shock in order to take advantage of the productivity benefits of higher production second we introduce habits in leisure this makes the labor supply decision dynamic and adds an additional source of propagation we show that the calibrated model can quantitatively reproduce significant fractions of the aforementioned facts moreover as in the data the model also produces a positive correlation between the terms of trade and the nominal exchange rate

intermediate goods and business cycles implications for productivity and welfare this paper presents an aggregate demand driven model of business cycles that provides a new explanation for the procyclicality of productivity and simultaneously predicts large welfare losses from monetary nonneutrality the key features of the model are an input output production structure imperfect competition countercyclical markups and for some results state dependent price rigidity true technical efficiency is procyclical even though production takes place with constant returns without technology shocks or technological externalities the paper has observable implications that distinguish it empirically from related work these implications are generally supported by data from u s manufacturing industries copyright 1995 by american economic association

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

bayesian methods for dynamic multivariate models if dynamic multivariate models are to be used to guide decisionmaking it is important that probability assessments of forecasts or policy projections be provided when identified bayesian vector autoregression var models are presented with error bands in the existing literature both conceptual and numerical problems have not been dealt with in an internally consistent way in this paper the authors develop methods to introduce prior information in both reduced form and structural var models without introducing substantial new computational burdens their approach makes it feasible to use a single large dynamic framework for example twenty variable models for tasks of policy projections copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

dynamic pricing and imperfect common knowledge abstract introducing private information into the dynamic pricing decision of firms by adding an idiosyncratic component to marginal cost can help explain two stylised facts about price changes aggregate inflation responds gradually and with inertia to shocks at the same time as individual price changes can be large the inertial behaviour of inflation is driven by privately informed firms strategically herding on the public information contained in the observations of lagged aggregate variables the model also matches the average duration between price changes found in the data and it nests the standard new keynesian phillips curve as a special case to solve the model the paper derives an algorithm for solving a class of dynamic models with higher order expectations

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting