forecasting recessions the puzzle of the enduring power of the yield curve for over two decades researchers have provided evidence that the yield curve specifically the spread between long and short term interest rates contains useful information for signaling future recessions despite these findings forecasters appear to have generally placed too little weight on the yield spread when projecting declines in the aggregate economy indeed we show that professional forecasters are worse at predicting recessions a few quarters ahead than a simple real time forecasting model that is based on the yield spread this relative forecast power of the yield curve remains a puzzle the appendix is included online as supplementary material

finnish consumer perceptions of carbon footprints and carbon labelling of food products abstract the aim of this study was to explore how finnish consumers perceive the communication of carbon footprints for food products the study comprised five semi structured focus groups and an online survey of 1010 respondents the study showed that the term product carbon footprint is familiar to many but there is substantial misunderstanding of its meaning only 7 of the respondents linked product carbon footprint spontaneously to greenhouse gas emissions associated with the product and an additional 5 of the respondents linked it to climate change there are positive attitudes towards carbon labels 90 stated that a carbon footprint would have at least a little impact on their buying decision but the information became meaningful only when many other purchasing criteria such as price and taste were satisfied furthermore 86 preferred carbon labels that allow comparisons of carbon footprints to be made among food products but there is divergence on perceived needs for carbon label content

design for the environment a quality based model for green product development green product development which addresses environmental issues through product design and innovation as opposed to the traditional end of pipe control approach is receiving significant attention from customers industries and governments around the world in this paper we develop a quality based model for analyzing the strategic and policy issues concerning the development of products with conflicting traditional and environmental attributes on the demand side of the problem we use the framework of conjoint analysis to structure the preferences of the ordinary and green customers on the supply side we apply the theories in optimal product design and market segmentation to analyze the producer s strategic decisions regarding the number of products introduced and their prices and qualities on the policy side we evaluate the effects of environmental standards on the economic and environmental consequences of green product development by jointly considering the interactions among the customers preferences the producer s product strategies and the environmental standards imposed by governments we present some interesting findings that can be used to manage and regulate the development of green products two major findings show that green product development and stricter environmental standards might not necessarily benefit the environment

daily monetary policy shocks and new home sales abstract the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified the primary news for market participants is not what the fed just did but is instead new information about the fed s future intentions revisions in these anticipations show up instantaneously in long term mortgage rates home sales do not respond until much later this paper attributes this delay and hence much of the hump shaped response of economic activity to monetary policy to cross sectional heterogeneity in search times this framework allows one in principle to measure policy impacts at the daily frequency

testing for asymmetric pricing in the canadian retail gasoline market abstract this paper applies a threshold regression model to test for asymmetric pricing in the retail gasoline market in canada using weekly data for the period january 1990 to december 1996 we present results for 13 canadian cities for both premium and regular gasoline within the context of an error correction model we test for the presence of asymmetric price behaviour using average changes in crude prices as well as various lags for the change in crude as possible thresholds we are unable to find any evidence to support this view

yield spreads currency movements and recession predictability for southern border economies in the united states abstractprior research establishes that the spread between long and short term bond yields often provides valuable information for predicting business cycle downturns this study examines the predictive capacity of the yield spread for the united states metropolitan economies situated along the border with mexico because of the location of these urban economies and various economic ties linking them with twin cities across the border the mexico yield spread and the real dollar peso exchange rate are also employed as potential recession predictors results suggest that a flattening of the yield curve for either country tends to increase the probability of recessions in border economies furthermore declines in the real value of the peso which are typically associated with greater cross border manufacturing activity are found to reduce recession likelihoods in the metropolitan economies examined on the north side of the international boundary

do rockets rise faster and feathers fall slower in an atmosphere of local market power evidence from the retail gasoline market this study explores the possibility that local market power influences the observed asymmetric relationship between changes in wholesale gasoline costs and changes in retail gasoline prices i exploit an original data set of weekly gas station prices in southern california from september 2002 to may 2003 and take advantage of detailed station and local market level characteristics to determine the extent to which geographic and product differentiation influence price response asymmetry i find that brand identity proximity to rival stations and local market features and demographics each influence a station s predicted price response asymmetry

evaluating predictions of change this article applies a technique developed by robert c merton 1981 and roy d henriksson and robert c merton 1981 for evaluating the market timing of financial managers to macroeconomic predictions of change this methodology may be used to determine whether the predictions may be of value to the user as an illustration the methodology is applied to a set of real gross national product forecasts copyright 1990 by the university of chicago

hedonic methods for baskets of goods a b s t r a c t existing hedonic methods cannot be easily adapted to estimate willingness to pay for product character istics when willingness to pay depends on a very large basket of goods we show how to marry these methods with revealed preference arguments to estimate bounds on willingness to pay using data on purchases of seemingly impossibly high dimensional baskets of goods this allows us to use observed purchase prices and quantities on a large basket of products to learn about individual household s will ingness to pay for characteristics while maintaining a high degree of flexibility and also avoiding the biases that arise from inappropriate aggregation we illustrate the approach using scanner data on food purchases to estimate bounds on willingness to pay for the organic characteristic

do financial indicators have directional predictability for us home sales abstractthis study investigates the directional predictability of financial indicators for home sales across tranquil 1984 2005 and volatile 1972 1983 and 2006 2013 periods we find that the mortgage rate has directional predictability for both existing and newly built home sales for up to 2005 the federal funds rate generally has directional predictability for existing newly built home sales in 1984 2005 1972 1983 the term spread has directional predictability for home sales in 1972 1983 but generally not in the tranquil period of 1984 2005 further unlike mortgage and federal funds rates the term spread has directional predictability for home sales in 2006 2013 and thus can help the fed with useful information assuming that this trend continues

does local labeling complement or compete with other sustainable labels a conjoint analysis of direct and joint values for fresh produce claim as a way to explore the increasing use of sustainability labels in the marketplace this study analyzes the differential values and interactive effects of sustainable production claims organic fair trade and carbon footprint and location claims through a conjoint choice experiment included in a 2008 u s survey locally grown is the highest valued claim and its value is further enhanced with fair trade certification but carbon intensive local products are discounted more severely than those sourced from other locations some negatively valued claims imports and carbon footprint can be mitigated by combining them with other claims organic and fair trade copyright 2011 oxford university press

predicting severe simultaneous recessions using yield spreads as leading indicators abstract severe simultaneous recessions are defined to occur when at least half of the countries under investigation australia canada germany japan united kingdom and united states are in recession simultaneously i pose two new research questions that extend upon stylized facts for us recessions one are the occurrences of simultaneous recessions predictable two does the yield spread predict future occurrences of simultaneous recessions i use the indicator for severe simultaneous recessions as the explained variable in probit models the lagged yield spread is an important explanatory variable where decreasing yield spreads are a leading indicator for severe simultaneous recessions both us and german yield spreads act as leading indicator for severe simultaneous recessions

predicting u s recessions financial variables as leading indicators this paper examines the out of sample performance of various financial variables as predictors of u s recessions series such as interest rates and spreads stock prices and monetary aggregates are evaluated individually and in comparison with other financial and nonfinancial indicators the analysis focuses on out of sample performance from one to eight quarters ahead results show that stock prices are useful with one to three quarter horizons as are some well known macroeconomic indicators beyond one quarter however the slope of the yield curve emerges as the clear individual choice and typically performs better by itself out of sample than in conjunction with other variables

which hedonic models can we trust to recover the marginal willingness to pay for environmental amenities abstract the hedonic property value model is among our foremost tools for evaluating the economic consequences of policies that target the supply of local public goods environmental services and urban amenities we design a theoretically consistent and empirically realistic monte carlo study of whether omitted variables seriously undermine the method s ability to accurately identify economic values our results suggest that large gains in accuracy can be realized by moving from the standard linear specifications for the price function to a more flexible framework that uses a combination of spatial fixed effects quasi experimental identification and temporal controls for housing market adjustment

directional forecasts of gdp and inflation a joint evaluation with an application to federal reserve predictions many studies have undertaken separate analyses of the fed s forecasts of real gross domestic product gdp growth and inflation this article presents a method for jointly evaluating the direction of change predictions of these variables we conclude that some of the inflation forecasts examined separately were not valuable however the joint pattern of gdp and inflation projections was generally in accord with the economy s movements directional forecasting is now an increasingly popular metric for forecasting performance pesaran and timmermann 2004 414

crisis and responses the federal reserve in the early stages of the financial crisis in summer 2007 u s and global financial markets found themselves facing a potential financial crisis and the u s federal reserve found itself in a difficult situation it was becoming clear that banks and other financial institutions would ultimately lose tens or even hundreds of billions of dollars from their exposure to subprime mortgage market loans bank lending is closely tied to bank capital or net worth specifically bank regulators require that loans not exceed a certain multiple of capital thus the federal reserve faced the danger of a sharp contraction in credit and bank lending in a way that threatened a deep recession or worse when this kind of event happens the job of the central bank is to assure that financial institutions have the necessary funds to conduct their daily business that they have the liquidity they need to make timely payments and transfers modern financial institutions need to replenish their funding every day in the united states alone literally trillions of dollars are transferred between banks each day to support the 50 trillion credit outstanding in the economy as a whole commercial banks require funds to initiate the mortgages auto loans and credit card debt they then sell into financial markets while investment banks finance much of their activity with daily borrowing in the early stages of the crisis the situation often arose in which a wellcapitalized bank was forced to make sudden large loans based on previously committed lines of credit in this circumstance central bank actions can ease

predicting u s recessions with dynamic binary response models abstract we develop dynamic binary probit models and apply them for predicting u s recessions using the interest rate spread as the driving predictor the new models use lags of the binary response a recession dummy to forecast its future values and allow for the potential forecast power of lags of the underlying conditional probability we show how multiperiod ahead forecasts are computed iteratively using the same one period ahead model iterated forecasts that apply specific lags supported by statistical model selection procedures turn out to be more accurate than previously used direct forecasts based on horizon specific model specifications

effects of carbon reduction labels evidence from scanner data we investigate the effects of carbon reduction labels using a detailed scanner data set using a difference in differences estimation strategy we find that having a carbon label has no impact on detergent prices or demand we also investigate possible heterogeneous effects of carbon labels using the synthetic control method we find no evidence to indicate that the prices for the counterfactual detergents without the label would have been any different from the prices of the carbon labeled detergents we investigate the reasons for these results and conclude that the specific design of the carbon label is responsible for its lack of success jel d12 d83 l15 q54

the impact of climate information on milk demand evidence from a field experiment it has been suggested that carbon labelling of food on voluntary or non voluntary basis could reduce emissions of greenhouse gases however there is limited empirical evidence on the influence of such labels on consumer purchases the purpose of this study was to investigate whether voluntary carbon labelling affects the demand for milk a randomized field experiment was conducted in 17 retail stores in sweden where a sign provided consumers with qualitative information about the carbon impact of climate certified milk the results suggest that the sign increased the demand for the climate certified milk by approximately 6 8 and the result is robust to alternative model specifications the effect is entirely driven by large stores such as supermarkets we find no statistically significant impact on total milk sales and the dataset is too small to verify the consequences for other milk brands the effect on the demand for the labelled milk is short lived

on the economics of labels how their introduction affects the functioning of markets and the welfare of all participants are labels good or bad for consumers and firms the answer may seem straightforward since labels improve information yet economic theory reveals situations where their introduction reduces the welfare of at least some market participants this essay reviews the theoretical literature on labels in order to identify and explain the main reasons that may cause labeling to produce undesirable side effects in contrast to earlier reviews that either concentrate on narrow topics or treat the subject in a more or less informal way we bring together the main results from all the relevant topics by presenting and discussing the assumptions and model building techniques that underpin them the advantage of this approach is that it identifies the origin of the differences between results thus allowing the synthesis of results that sometimes appear even to be contradictory we focus on quality labels and examine the impact of labeling on market structure the side effects of costly certification issues related to the label s trustworthiness the rationale for mandatory vs voluntary labeling the level at which the label s standard is set according to the agency that selects it the political economy of labels that is pro or anti label lobbying lobbying to affect the label s standard and lobbying in favor or against the label s mandatory imposition these topics cover a wide range of applications including genetically modified organism gmos organic produce geographic indicators controlled origin eco labels etc we conclude by identifying topics that require further research

new evidence on asymmetric gasoline price responses in a 1997 paper borenstein cameron and gilbert bcg claim that gasoline prices rise quickly following an increase in the price of crude oil but fall slowly following a decrease this note estimates an error correction model with daily spot gasoline and crude oil price data over the period 1985 1998 and finds no evidence of asymmetry in wholesale gasoline prices the sources of the difference in results are twofold first we use the standard engle granger two step estimation procedure whereas bcg used a nonstandard estimation methodology second even using bcg s nonstandard specification the use of daily rather than weekly data yields little evidence of price asymmetry

can information costs affect consumer choice nutritional labels in a supermarket experiment this paper investigates whether information costs under currently regulated nutritional labeling prevent consumers from making healthier food choices we implement five nutritional shelf label treatments in a market level experiment these labels reduce information costs by highlighting and summarizing information available on the nutritional facts panel following a difference in differences and synthetic control method approach we analyze weekly store level scanner data for microwave popcorn purchases from treatment and control stores our results suggest that consumer purchases are affected by information costs implemented low calorie and no trans fat labels increase sales in contrast implemented low fat labels decrease sales suggesting that consumer response is also influenced by consumers taste perceptions a combination of these claims into one label treatment increases information costs and does not affect sales significantly

carbon labelling of grocery products public perceptions and potential emissions reductions abstract public perceptions of a uk carbon labelling trial were assessed via three focus groups the public found it very difficult to make sense of labelled emissions values without additional information there was also little evidence of a willingness to use labels for product selection there is a strong case for using carbon reduction labels to indicate a programme of on going emissions reductions rather than expecting consumers to incentivise emissions reductions by actively choosing the lower carbon variant of two or more products the normalisation issues and emissions reduction potential of carbon labelling are discussed

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

voluntary eco labeling and the price premium international environmental organizations propose voluntary eco labeling as a market incentive to promote industry to operate in an ecologically sustainable and environmentally friendly manner a microeconomic analysis questions whether voluntary eco labeling will cause producer profits in a competitive industry to decline and whether eco labeling will necessarily generate different prices for labeled and unlabeled product using wood product as an example results identify conditions that may exist when firms lose profits even under a voluntary system and where existing production constraints may lead to a single price regardless of labeling

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

green markets eco certification and equilibrium fraud abstract consumers voluntarily pay significant price premiums to acquire unobservable environmental attributes in green markets this paper considers the performance of eco certification policy under circumstances where consumers cannot discern environmental attributes in goods but are able to form rational expectations regarding the extent of illicit activities in the green market the main results are i fraud is less prevalent in green markets when entry barriers limit the number of firms ii conventional environmental policies on polluting techniques increase the incidence of fraud and can even preclude the use of non polluting techniques which would otherwise emerge in green markets iii voluntary eco certification policies can decrease fraud increase output and raise profits per firm and iv in cases where the socially optimal resource allocation can be supported the optimal policy involves negative unit certification fees positive fixed certification fees and is revenue generating for the certifying agent

identification in models of gasoline pricing abstract this paper presents evidence that the price of oil does not respond contemporaneously to shocks to the us gasoline market we find no support for the hypothesis of feedback from the us gasoline market to the price of oil justifying the identification of impulse response functions by applying a cholesky decomposition see e g kilian 2010 our results have implications for tests of asymmetric gasoline price responses and forecasting models of the price of crude oil

do gasoline prices respond asymmetrically to crude oil price changes the authors test and confirm that retail gasoline prices respond more quickly to increases than to decreases in crude oil prices among the possible sources of this asymmetry are production inventory adjustment lags and market power of some sellers by analyzing price transmission at different points in the distribution chain the authors attempt to shed light on these theories spot prices for generic gasoline show asymmetry in responding to crude oil price changes which may reflect inventory adjustment effects asymmetry also appears in the response of retail prices to wholesale price changes possibly indicating short run market power among retailers