the tail index of exchange rate returns in the literature on the empirical distribution of foreign exchange rates there is now consensus that exchange rate yields are fat tailed three problems however persist 1 which class of distribution functions is most appropriate 2 are the parameters of the distribution invariant over subperiods 3 what are the effects of aggregation over time on the distribution in this paper we employ extreme value theory to shed new light on these questions we apply the theoretical results to ems data

rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

financial wealth consumption smoothing and income shocks arising from job loss one of the reasons for setting up an unemployment insurance scheme is to allow job losers to smooth consumption we test for the impact of unemployment benefits on changes in household food expenditure of individuals who have recently experienced a job loss we also study the relationship between unemployment benefits and the financial wealth of the unemployed from our empirical analysis we conclude that for households without financial wealth at the time of job loss unemployment benefits help to smooth food consumption for households running debt before job loss there is evidence that lower replacement rates lead to a postponement of debt repayment

labor supply of husbands and wives a simultaneous equations approach labor supply functions for married men and women are formulated as a dynamic simultaneous equations system which is estimated using panel data controlling for fixed individual effects allows marginal labor supply responses to be disentangled from permanent patterns in hours worked due to assortative mating the results suggest that the labor supply of husbands and wives without pre school children is not jointly determined in the short run while families with young children exhibit strong interactions in work hours and negative cross earnings effects neither the joint utility model of family labor supply nor an ad hoc traditional family model is supported by these results the data are for the united states and concern 381 couples from the denver income maintenance experiment excerpt

animal spirits in the foreign exchange market it is traditionally assumed in finance models that the fundamental value of an asset is known with certainty in this paper we depart from that assumption we propose a simple model of the exchange rate in which agents have biased and unbiased beliefs about the fundamental rate we show that such a model produces waves of optimism and pessimism unrelated to the underlying fundamental value in addition the model shows that in a world characterized by the existence of heterogeneous beliefs about the fundamental exchange rate movements can be remarkably complex even if only fundamentalist traders operate in the market

the effect of income taxation on labor supply in the united states the effect of income taxation on the labor supply of prime age married men and women in the united states is examined using econometric methods similar to those used in the influential work of jerry hausman male labor supply is found to be relatively invariant to the net wage and virtual income in all specifications estimated the estimated impact of taxation on the labor supply of married women depends critically on the method used to estimate the labor supply function estimated net wage and virtual income elasticities are considerably larger when data on nonparticipants are included than when the estimation is conducted conditional on hours being greater than zero

the distribution of exchange rate returns and the pricing of currency options an empirical model of the distribution of exchange rate returns based on a combination of the generalized student t distribution and conditional variance specifications is formulated and estimated for four daily bilateral exchange rates over the period 1984 to 1991 the empirical results show that the stylized characteristics of exchange rate returns such as volatility clustering leptokurtosis and skewness are consistently captured by this model in contrast with other model specifications based on more restrictive distributional assumptions implications of the analysis are also investigated for the pricing of currency options including comparisons with black scholes prices

on rational bubbles and fat tails this paper addresses the statistical properties of time series driven by rational bubbles a la blanchard and watson 1982 using insights on the behavior of multiplicative stochastic processes we demonstrate that the tails of the unconditional distribution emerging from such bubble processes follow power laws exhibit hyperbolic decline more precisely we find that rational bubbles predict a fat power tail for both the bubble component and price differences with an exponent smaller than 1 the distribution of returns is dominated by the same power law over an extended range of large returns although power law tails are a pervasive feature of empirical data these numerical predictions are in disagreement with the usual empirical estimates it therefore appears that exogenous rational bubbles are hardly reconcilable with some of the stylized facts of financial data at a very elementary level

intrahousehold inequality and the theory of targeting the two literatures on targeting and on intrahousehold inequality have developed rapidly over the past 15 years but largely independent of each other the literature on targeting concerns itself with the design of tax and transfer programs for poverty alleviation in the presence of limited information on who the poor are the literature on intrahousehold inequality arose out of a dissatisfaction with unitary models of the household especially in explaining inequality in consumption and achievements of different household members even after allowing for relevant differences among them the authors begin to forge the link between the two literatures so they can address issues policymakers face around the world after a brief reprise of the key features of the two literatures they indicate how the presence of intrahousehold inequality and allocation mechanisms could affect the standard analysis of targeting theory they conclude with a list of policy questions for further research this abstract was borrowed from another version of this item

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

robust tests of forward exchange market efficiency with empirical evidence from the 1920s summary this paper provides a robust statistical approach to testing the unbiasedness hypothesis in forward exchange market efficiency studies the methods we use allow us to work explicitly with levels rather than differenced data they are statistically robust to data distributions with heavy tails and they can be applied to data sets where the frequency of observation and the futures maturity do not coincide in addition our methods allow for stochastic trend non stationarity and general forms of serial dependence the methods are applied to daily data of spot exchange rates and forward exchange rates during the 1920s which marked the first episode of a broadly general floating exchange rate system the tail behaviour of the data is analysed using an adaptive data based method for estimating the tail slope of the density the results confirm the need for the use of robust regression methods we find cointegration between the forward rate and spot rate for the four currencies we consider the belgian and french francs the italian lira and the us dollar all measured against the british pound we find support for a stationary risk premium in the case of the belgian franc the italian lira and the us dollar and we find support for the simple market efficiency hypothesis where the forward rate is an unbiased predictor of the future spot rate and there is a zero mean risk premium in the case of the us dollar

recovering individual preferences for non market goods a collective travel cost model traditional recreation demand models do not make a distinction between a household and an individual as the reference decision making unit thus assuming that a family maximizes a single utility function even if the family consists of different individuals such models ignore the possibility of family members divergent preferences for non market goods this study proposes a novel approach the collective travel cost model ctcm to eliciting individual preferences for a non market good such as a recreation site by using revealed preference data this approach accounts for the intra household resource allocation and the role of each household member s preferences we show that the collective travel cost model can be applied to estimating a recreation demand model that yields individual welfare estimates appropriate for policy analysis of non market goods such as the willingness to pay to access a recreation site we find that how resources are distributed within the household reflects significant differences in welfare measures

an analysis of extreme movements of exchange rates of the main currencies traded in the foreign exchange market this article analyses the extreme movements of exchange rates of the seven main currencies traded in the foreign exchange market against the us dollar euro british pound canadian dollar japanese yen swiss franc australian dollar and new zealand dollar by using tail index indicators payaslioglu 2009 considers the case of the turkish exchange rate using the traditional hill 1975 estimator as a tool in this article we employ also an alternative estimator proposed in iglesias and linton 2009 that is shown to have in some cases improved finite sample properties and it provides substantially different results versus the hill estimator we find that for the euro japanese yen swiss franc canadian australian and new zealand dollars the hill estimator provides a better measure to analyse the extreme behaviour while for the british pound the iglesias and linton alternative estimator is superior by using hausman type tests of misspecification measures of value at risk are also provided for th

testing for multiple regimes in the tail behavior of emerging currency returns it is by now generally accepted that foreign exchange returns exhibit heavy tails as measured by the so called tail index however it is unclear whether the tail behavior remains stationary in the presence of recurrent switches in the exchange rate regime we therefore test the null hypothesis of tail index constancy by applying a single breaks test in rounds which enables the detection of multiple breakpoints we are able to identify multiple jumps in the tail index of currency returns moreover some breaks coincide with documented shifts in monetary and exchange rate policies

labour supply household production and intra family welfare distribution abstract this paper demonstrates the importance in conceptual and empirical terms of incorporating household production in models of labour supply to avoid misleading results concerning the intra family distribution of income and behavioural responses to economic policy

how serious is the neglect of intrahousehold inequality in this report the authors develop a framework for assessing the consequences of ignoring intrahousehold inequality in the measurement and analysis of poverty and inequality they apply this framework to data for the philippines and conclude that 1 the result of neglecting intrahousehold inequality will probably be considerable understatement of the levels of poverty and inequality with the philippine data measured levels of inequality and poverty were off 30 percent as a result of ignoring intrahousehold variation and 2 patterns of inequality revealed by household level data are somewhat different from patterns revealed by individual level data but the differences seem not to be dramatic to confirm these results the exercise should be repeated with data from other countries

taxation and the household abstract previous analyses of demand systems and the welfare effects of taxing male and female labour supplies suppress the analysis of household resource allocation by assuming a household utility function to analyse the implications of assuming this is not the case we construct a simple but fairly general model of household resource allocation and use the properties of the equilibrium of this model to characterise the effects of tax policy on individual utilities as determined by the household resource allocation process

tail estimates of east european exchange rates in the literature a consensus exists that distributions of exchange rate returns are fat tailed we use a nonparametric tail index estimator based on extreme value theory to shed light on some of the characteristics of the empirical distribution of black market exchange rate returns for seven east european currencies between 1955 and 1990 focusing on the information in the tails of the distribution we modify an existing tail index estimator to take into account information in both tails the results support the existence of finite second moments in exchange rate returns implicitly the sum stable distribution is rejected

the sensitivity of an empirical model of married women s hours of work to economic and statistical assumptions this study undertakes a systematic analysis of several theoretic and statistical assumption s used in many empirical models of female labor supply using a singl e data set psid 1975 labor supply data the author is able to replic ate most of the range of estimated income and substitution effects fo und in previous studies in this field he undertakes extensive specif ication tests and finds that most of this range should be rejected du e to statistical and model misspecifications the two most important assumptions appear to be the tobit assumption used to control for sel f selection into the labor force and exogeneity assumptions on the wi fe s wage rate and her labor market experience copyright 1987 by the econometric society

extreme us stock market fluctuations in the wake of 9 11 we apply extreme value analysis to us sectoral stock indices in order to assess whether tail risk measures like value at risk and extremal linkages were significantly altered by 9 11 we test whether semi parametric quantile estimates of downside risk and upward potential have increased after 9 11 the same methodology allows one to estimate probabilities of joint booms and busts for pairs of sectoral indices or for a sectoral index and a market portfolio the latter probabilities measure the sectoral response to macro shocks during periods of financial stress so called tail s taking 9 11 as the sample midpoint we find that tail s often increase in a statistically and economically significant way this might be due to perceived risk of new terrorist attacks copyright 2008 john wiley sons ltd

differences between foreign exchange rate regimes the view from the tails abstract in the literature on the empirical unconditional distribution of foreign exchange rate returns there is indication that the type of distribution function is related to the form of exchange rate regime the analysis has been hampered by the nonnestedness of alternative distribution models the paper investigates the issue by means of extremal analysis which allows for a unified treatment in particular we try to sort out whether apparent distributional differences are due to differences in techniques or in regimes jel f31 f33

collective labor supply and welfare the paper develops a general collective model of household labor supply in which agents are characterized by their own possibly altruistic preferences and household decisions are only assumed to be pareto efficient an alternative interpretation is that there are two stages in the internal decision process agents first share nonlabor income according to some given sharing rule then each one optimally chooses his or her own labor supply and consumption this setting is shown to generate testable restrictions on labor supplies moreover the observation of labor supply behavior is sufficient for recovering individual preferences and the sharing rule up to a constant finally the traditional tools of welfare analysis can be adapted to the new setting

the labor supply of married men a switching regressions model according to the family utility function approach the labor supply functions of married men should differ according to whether their wives also work in this paper i explicitly model the switching nature of labor supply while also accounting for the endogeneity of the labor force participation decision of the wife using an endogenous switching regressions model based on the quadratic family utility function the model is estimated from a cross section of 1 210 married couples from the panel study of income dynamics

overnight borrowing interest rates and extreme value theory we examine the dynamics of extreme values of overnight borrowing rates in an inter bank money market before a financial crisis during which overnight borrowing rates rocketed up to simple annual 4000 percent it is shown that the generalized pareto distribution fits well to the extreme values of the interest rate distribution we also provide predictions of extreme overnight borrowing rates before the crisis the examination of tails extreme values provides answers to such issues as what are the extreme movements expected in financial markets have we already seen the largest moves is there a possibility for even larger movements and are there theoretical processes that can model the type of fat tails in the observed data the answers to such questions are essential for proper management of financial exposures and laying ground for regulations

a test of the unitary and collective models of household labour supply this paper tests the unitary and the collective household labour supply models within a structural framework a nonlinear unrestricted household labour supply system is postulated and the set of parametric restrictions imposed by each model is derived our results generally reject the income pooling restrictions embodied in the unitary model also the symmetry of cross wage effects is rejected however the collective model is not rejected for groups with no pre school children

what s your identification strategy innovation in corporate finance research we study the diffusion of techniques designed to identify causal relationships in corporate finance research we estimate that the diffusion started in the mid 1990s lagged 20 years compared to economics and is now used in the majority of corporate finance articles consistent with recent theories of technology diffusion the adoption varies across researchers based on individuals expected net benefits of adoption younger scholars holders of phds in economics and those working at top institutions adopt faster adoption is accelerated through networks of colleagues and alumni and is also facilitated by straddlers who cross over from economics to finance our findings highlight new forces that explain the diffusion of innovation and shape the norms of academic research this paper was accepted by gustavo manso finance

utility based estimation of labour supply functions in the regular and irregular sectors recent theoretical work on labor supply has shown that the tax and transfer system can induce some individuals to work in the irregular labor market models designed to represent such behavior are unable to sign unambiguously the impact of the marginal tax rate as well as many key exogenous parameters on the hours supplied in the irregular market except under strong restrictions on preferences in this paper the authors estimate a simultaneous labor supply model that allows testing some of the more common assumptions found in the literature using a unique data set on the underground economy of the metropolitan area of quebec city canada estimates of elasticities with respect to predetermined variables are presented moreover they test and empirically reject the assumptions of perfect substitution between regular and irregular work activities as well as additive separability of the utility function copyright 1992 by royal economic society

intra household resource allocation an inferential approach if household income is pooled and then allocated to maximize welfare then income under the control of mothers and fathers should have the same impact on demand with survey data on family health and nutrition in brazil the equality of parental income effects is rejected unearned income in the hands of a mother has a bigger effect on her family s health than income under the control of a father for child survival probabilities the effect is almost twenty times bigger the common preference or neoclassical model of the household is rejected if unearned income is measured with error and income is pooled then the ratio of maternal to paternal income effects should be the same equality of the ratios cannot be rejected there is also evidence for gender preference mothers prefer to devote resources to improving the nutritional status of their daughters fathers to sons

on the empirical implementation of some game theoretic models of household labor supply this paper discusses some issues in the empirical implementation of game theoretic models of household labor supply in particular we focus on the identification problems inherent in many of these models as an illustration we estimate a game theoretic model which uses data on preferred working hours as additional identifying information

testing the neoclassical model of family labor supply and fertility the mcelroy horney nash bargaining model of family demand behavior relaxes the restriction that nonearned income of husband and wife has the identical effect on family labor supply and commodity demands this restriction of the neoclassical model offamily behavior is tested for the determination of husband and wife labor supply andfertility based on the 1981 socioeconomic survey of thailand the neoclassical restriction is rejected for female labor supply andfertility another unexplored limitation offamily demand studies due to the sample self selection of intact marriages is empirically treated through alternative estimation strategies in this case a more sharply focused theory of marital behavior is needed to identify family demand models

the empirical content of nash bargained household behavior in households whose allocation decisions can be represented as nash bargained household decisions extrahousehold environmental parameters eeps serve as pure shifters of the threat points the comparative statics of changes in demands due to changes in these eeps are given these are incorporated into a comprehensive statement of the empirical content of nash bargained household behavior including a nash generalization of barten s 1966 fundamental matrix equation of the theory of consumer demand estimation and data requirements are discussed along with nested testing of the following structure the neoclassical model is nested in the nash bargained model which in turn is nested in an unrestricted model of household demands emphasized throughout is the enriched menu of explanatory variables for demand analysis provided by the nash model as well as the model s ability to jointly analyze i household formation and ii intrahousehold allocation decisions

measuring tail thickness to estimate the stable index α a critique a generalized pareto or simple pareto tail index estimate above 2 has frequently been cited as evidence against infinite variance stable distributions it is demonstrated that this inference is invalid tail index estimates greater than 2 are to be expected for stable distributions with as low as 1 65 the nonregular distribution of the likelihood ratio statistic for a null of normality and an alternative of symmetric stability is tabulated by monte carlo methods and appropriately adjusted for sampling error in repeated tests real stock returns yield a stable of 1 845 and reject iid normality at the 996 level

what s mine is yours the influence of male and female incomes on patterns of household expenditure this paper uses microdata from the 1992 statistics canada family expenditure survey to provide evidence that male and female incomes do not always exert identical influences on household expenditures the novelty of the paper lies in its demonstration that while incomes may be pooled for some categories of consumption e g housing the income pooling hypothesis must be rejected for others we also go beyond simply rejecting the pooling hypothesis to ask how male versus female income is used our results stress the on going importance of traditional gender roles for example we find that expenditures on child care increase only with women s incomes higher male income is not associated with higher expenditure on child care even when both spouses are full time full year paid workers

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

structural change tests in tail behaviour and the asian crisis this paper explores tests of the hypothesis that the tail thickness of a distribution is constant over time using hill s conditional maximum likelihood estimator for the tail index of a distribution tests of tail shape constancy are constructed that allow for an unknown breakpoint the recursive test is shown to be inconsistent in one direction and only a one sided test is recommended specifically the test can be used when the alternative hypothesis is that the tail index decreases over time a rolling and sequential version of the test is consistent in both directions the methods are illustrated on recent stock price data for thailand malaysia and indonesia the period covers the recent asian financial crisis and enables us to assess whether breakpoints in domestic asset return distributions are related to known changes in institutional arrangements in the foreign currency markets of these countries

tail risk dynamics in stock returns links to the macroeconomy and global markets connectedness we propose a new time varying peaks over threshold model to study tail risk dynamics in equity markets the laws of motion for the parameters are defined through the score based approach we apply the model to daily returns from u s size sorted decile stock portfolios and show that large firms tail risk increases during recessions more than small firms tail risk our results are consistent with the granular hypothesis of aggregate fluctuations and we quantify the impact of large firms tail risk shocks on the economy a measure of tail connectedness is proposed evidence from international equity markets shows that tail connectedness increases during periods of turmoil this paper was accepted by lauren cohen finance

a tail index tour across foreign exchange rate regimes in turkey this article uses daily foreign exchange data in the usd trl foreign exchange market to test for structural breaks due to exchange rate regime switches the analysis focus on extreme movements of exchange rate returns across different regimes using tail index indicators sequential and rolling tests developed by quintos et al 2001 are used to identify the dates of breaks in the turkish exchange rate for the period 28 january 1980 to 11 october 2004 and for the sub periods which cover the fixed exchange rate regime from 28 january 1980 to 22 february 2001 and the flexible exchange rate regime from 23 february 2001 to 11 october 2004 compelling evidence for breaks in the tail index is found not only across but also within different exchange rate regimes especially within the fixed regime moreover breakpoint dates are clustered right before the crisis in 2001 this makes the tail index indicator a fairly good candidate for a variable to be used in early warning systems for currency crises

statistical distributions and the identification of currency crises abstract we use extreme value theory to identify periods of currency crisis for a broad cross section of asian european and latin american countries we argue that our methodology improves upon the more conventional methodology for defining currency crises because fewer parametric assumptions need to be satisfied we compare the incidence of currency crises using the conventional method with the incidence obtained using our method we conclude that identifying currency crises using extreme value theory is a good alternative to the conventional method

extreme value theory in finance a survey extreme value theory is concerned with the study of the asymptotic distribution of extreme events that is to say events which are rare in frequency and huge in magnitude with respect to the majority of observations statistical methods derived from it have been employed increasingly in finance especially for risk measurement this paper surveys some of those main applications namely for testing different distributional assumptions for the data for value at risk and expected shortfall calculations for asset allocation under safety first type constraints and for the study of contagion and dependence across markets under conditions of stress

long term asset tail risks in developed and emerging markets a power law typically governs the tail decay of financial returns but the constancy of the so called tail index which dictates the tail decay remains relatively unexplored we study the finite sample properties of some recently proposed endogenous tests for structural change in the tail index given that the finite sample critical values strongly depend on the tail parameters of the return distribution we propose a bootstrap based version of the structural change test our empirical application spans developed and emerging financial asset returns somewhat surprisingly emerging stock market tails are not more inclined to structural change than their developed counterparts emerging currency tails on the contrary do exhibit structural shifts in contrast to developed currencies our results suggest that extreme value theory evt applications in hedging tail risks can assume stationary tail behavior over long time spans provided one considers portfolios that solely consist of stocks or bonds

income and outcomes a structural model of intrahousehold allocation there is evidence from several sources that one cannot treat many person households as a single decision maker if this is the case then factors such as the relative incomes of the household members may affect the final allocation decisions made by the household we develop a method of identifying how incomes affect outcomes given conventional family expenditure data the basic assumption we make is that household decision processes lead to efficient outcomes we apply our method to a sample of canadian couples with no children we find that the final allocations of expenditures on each partner depend significantly on their relative incomes and ages and on the level of lifetime wealth

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

robust non parametric measures of exchange rate variability changes in exchange rates are well known to possess non gaussian distributions yet in testing for differences in exchange rate volatility few researches have examined measures that do not assume gaussian data this paper develops a robust non parametric measure for comparing exchange rate variability across time the measures are applied to monthly exchange rate data to test for differences in exchange rate variability across different monetary policy regimes the comparison show inconsistencies between conclusions based on the classical f test and the robust non parametric equivalent using the robust test for changes in exchange rate variability we do not conclude that variability has increased over time increases in variability do occur but usually only in specific percentiles of the data