relaxing intertemporal separability a rational habits model of labor supply estimated from panel data this article relaxes the assumption of separability of preferences over time that although implausible is usually maintained in life cycle labor supply models an empirically tractable rational habits model is specified and estimated on the basis of a 10 year sample of men from the michigan panel of income dynamics the effect of past hours of work in determining current hours decisions is found to be very important and well determined having allowed for permanent individual differences and for time effects

how important are wealth effects on consumption in canada we estimate the marginal propensity to consume from financial and housing wealth in canada the modelling framework of carroll et al 2011 that builds on the observed stickiness in consumption data is used estimations and inferences are conducted using identification robust methods the results provide support for the overall modelling strategy but there are also important differences in the identification status of the econometric equations considered based on the most informative specification we find that both types of wealthfinancial and housinghave significant effects in canada and that the former has a greater effect than the latter a simple extension of the model that also accounts for non price credit conditions shows that housing wealth may be relevant only during periods of easier access to credit finally we find support for relatively high stickiness in consumption growth in canada

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

weak instruments diagnosis and cures in empirical econometrics what is the weak instruments wi problem and what causes it universal agreement does not exist on these questions we define weak instruments by two features i two stage least squares 2sls analysis is badly biased toward the ordinary least squares ols estimate and alternative unbiased estimators such as limited information maximum likelihood liml may not solve the problem and ii the standard first order asymptotic distribution does not give an accurate framework for inference thus a researcher may estimate bad results and not be aware of the outcome the cause of wi is often stated to be a low r or f statistic of the reduced form equation in the most commonly occurring situation of one right handside endogenous variable we find the situation is more complex with an additional factor the correlation between the stochastic disturbances of the structural equation and the reduced form that needs to be taken into account we discuss in this paper a specification test hahn and hausman 2002a for wi a caution against using no moments estimators such as liml in the wi situation and suggestions for different estimators an approach to inference of frank kleibergen 2002 for wi we end with a caution of how small biases can become large biases in the wi situation we begin with the limited information structural model under the assumptions of hausman 1983

flexible inflation forecast targeting evidence from canada we test whether the bank of canada pursues a flexible inflation forecast target one that weights output growth as well as inflation for the period 1996 2007 we find evidence that the bank did effectively pursue such a target over the forecast horizon of 12 to 18 months we find the relative weight that the bank gives to output growth in its target to be positive and statistically significant within the range of 0 2 to 0 4 resume la poursuite de cibles de prevision d inflation flexibles resultats pour le canada on met au test la proposition a savoir si la banque du canada poursuit une cible flexible de prevision d inflation une cible qui tient compte de la croissance du produit tout autant que l inflation pour la periode 1996 2007 les resultats montrent que la banque a poursuivi une cible sur un horizon de prevision de 12 a 18 mois on montre que la ponderation relative que la banque donne a la croissance du produit dans son ciblage est positive et statistiquement significative dans l eventail entre 0 2 et 0 4

an identification robust test for time varying parameters in the dynamics of energy prices summary we test for the presence of time varying parameters tvp in the long run dynamics of energy prices for oil natural gas and coal within a standard class of mean reverting models we also propose residual based diagnostic tests and examine out of sample forecasts in sample lr tests support the tvp model for coal and gas but not for oil though companion diagnostics suggest that the model is too restrictive to conclusively fit the data out of sample analysis suggests a random walk specification for oil price and tvp models for both real time forecasting in the case of gas and long run forecasting in the case of coal copyright 2010 john wiley sons ltd

split sample instrumental variables estimates of the return to schooling this article reevaluates recent instrumental variables iv estimates of the returns to schooling in light of the fact that two stage least squares is biased in the same direction as ordinary least squares ols even in very large samples we propose a split sample instrumental variables ssiv estimator that is not biased toward ols ssiv uses one half of a sample to estimate parameters of the first stage equation estimated first stage parameters are then used to construct fitted values and second stage parameter estimates in the other half sample ssiv is biased toward 0 but this bias can be corrected the splt sample estimators confirm and reinforce some previous findings on the returns to schooling but fail to confirm others

monetary policy rules and macroeconomic stability some new evidence in a seminal paper richard clarida jordi gall and mark gertler 2000 studied the implica tions of monetary policy for macroeconomic fluctuations using a prototypical forward looking sticky price model of the monetary transmission mechanism they proposed simple forward looking equations for the reaction function of monetary policy to deviations of inflation and output from their implicit targets they estimated these equations over sample periods before and after paul volcker became chairman of the fed they found that the policy rate did not react sufficiently strongly to expected deviations of inflation from target prior to volcker thus violat ing the taylor principle and opening up the possibility of sunspot fluctuations induced by self fulfilling expectations in contrast policy over the volcker greenspan era was found to satisfy the taylor principle and this was seen as an important factor contributing to the conquest of us inflation 1

identification robust analysis of dsge and structural macroeconomic models abstract full and limited information identification robust methods are proposed for structural systems notably dsge models which are valid whether identification is weak or strong theory intrinsic or data specific the proposed methods are applied to a standard new keynesian system for the u s single and multi equation estimation and fit are also compared when a unique rational expectation stable equilibrium is imposed the model is rejected in contrast limited information inference produces informative results regarding forward looking behavior in the nkpc and precise conclusions on feedback coefficients in the reaction function which cannot be reached via single equation methods

weak instrument robust tests in gmm and the new keynesian phillips curve we discuss weak instrument robust statistics in gmm for testing hypotheses on the full parameter vector or on subsets of the parameters we use these test procedures to reexamine the evidence on the new keynesian phillips curve model we find that u s postwar data are consistent with the view that inflation dynamics are predominantly forward looking but we cannot rule out the presence of considerable backward looking dynamics moreover the phillips curve has become flatter recently and this is an important factor contributing to its weak identification

investment adjustment costs an empirical assessment we evaluate empirical evidence for costs that penalize changes in investment using us industry data in aggregate models such investment adjustment costs have been introduced to help account for a variety of business cycle and asset market phenomena so far no attempt has been made to estimate these costs directly at a disaggregated level we consider an industry model with investment adjustment costs and estimate its parameters using generalized methods of moments the ndings indicate small costs associated with changing the ow of investment at the industry level the weighted average of the industry elasticities with respect to the shadow price of capital which depends inversely on the adjustment cost parameter is more than seven times larger than the largest estimate based on aggregate data we examine potential sources which may account for the large industry aggregate dierence overall our results suggest

inflation dynamics in a small open economy this is the peer reviewed version of the following article boug p cappelen a swensen a r 2017 inflation dynamics in a small open economy scandinavian journal of economics 119 4 1010 1039 which has been published in final form at https doi org 10 1111 sjoe 12194 this article may be used for non commercial purposes in accordance with wiley terms and conditions for use of self archived versions

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

bootstrap inference in econometrics the astonishing increase in computer performance over the past two decades has made it possible for economists to base many statistical inferences on simulated or bootstrap distributions rather than on distributions obtained from asymptotic theory in this paper i review some of the basic ideas of bootstrap inference the paper discusses monte carlo tests several types of bootstrap test and bootstrap confidence intervals although bootstrapping often works well it does not do so in every case

identification weak instruments and statistical inference in econometrics we discuss statistical inference problems associated with identification and testability in econometrics we consider inference in non parametric models and weakly identified structural models weak instruments we point out that many ill defined statistical problems such as non testable hypotheses occur in these areas and are typically associated with asymptotic approximations in non parametric models such problems include testing moments and inference under heteroscedasticity or serial dependence of unknown form for weakly identified structural models difficulties are typically associated with improper pivots and we review recent developments aimed at proposing more reliable procedures including alternative proposed statistics bounds projection split sampling conditioning monte carlo tests jel classification c1 c12 c14 c15 c3 c5 identification instruments faibles et inference statistique en econometrie nous analysons les problemes d inference associes a l identification et a la testabilite en econometrie nous considerons l inference dans les modeles non parametriques et les modeles structurels faiblement identifies instruments faibles nous remarquons que beaucoup de problemes mal poses tels que des hypotheses non testables apparaissent dans ces domaines et que ceux ci sont typiquement associes a l emploi d approximations asymptotiques dans les modeles non parametriques de tels problemes incluent les tests sur les moments et l inference sous heteroscedasticite ou dependance serielle de forme non specifiee dans les modeles structurels faiblement identifies ces difficultes sont habituellement associees a l emploi de fonctions pivotales impropres et nous presentons un survol des methodes recentes ayant pour objectif d obtenir des procedures plus fiables ce qui comprend les differentes statistiques proposees l emploi de bornes la subdivision d echantillon les techniques de projection le conditionnement et les tests de monte carlo

the environmental consequences of trade evidence from subnational trade flows abstract the debate over the environmental consequences of free trade is not only quite heated but also entails significant policy ramifications recently cross sectional analysis at the country level has made use of exogenous determinants of trade to identify the causal effect of trade on the environment finding moderate evidence of a beneficial impact of expanded trade on environmental quality given the stakes involved we revisit this finding using subnational data on trade flows across us states and several measures of pollution not only does the analysis shed further light on the debate at the international level but also addresses a heretofore unexamined question does greater inter regional commerce at the subnational level harm the environment our findings are striking providing further evidence against a negative environmental impact of trade for the majority of measures analyzed however several sources of heterogeneity arise that are noteworthy

corruption and growth under weak identification i introduction the purpose of this paper is to revisit mauro 1995 and re examine his results as a consequence of recent research that cautions against making traditional types of inference in the presence of weak instruments early work done by nelson and startz 1990a 1990b demonstrates that the distribution of the two stage least squares 2sls estimator and the t statistic is poorly approximated by the asymptotic representation when instruments are weak more formally staiger and stock 1997 model the coefficients on the instruments in the first stage equation in the n sup 1 2 neighborhood of zero in which they show that the 2sls estimator loses consistency resulting in a nonstandard distribution for the t statistic in fact they show that under the local to zero framework the distribution of the t statistic depends on the level of endogeneity strength and the number of instruments thus the true size of the t statistic can differ substantially from its perceived size when instruments are weak therefore 95 confidence intervals based on asymptotic approximations such as or 1 96se are no longer reliable as a rough rule of thumb staiger and stock 1997 suggest a first stage f stat of 10 on the excluded instruments as an indication of acceptable instruments in terms of point estimation bound jaeger and baker 1995 show that the 2sls estimator is biased in the same direction as the ordinary least squares ols when using irrelevant instruments hahn and hausman 2002 illustrate a detailed expression for the 2sls bias showing that it is monotonically decreasing in the instrument strength while monotonically increasing in the degree of endogeneity cruz and moreira 2005 verify these results through monte carlo simulations also showing that the classic bias corrected 2sls estimator of nagar 1959 provides a poor correction when instruments are very weak given that the theory and techniques mentioned above were discovered and developed after mauro wrote his qje paper we attempt to reproduce his results and analyze them in light of these recent findings from the early work of left 1964 and huntington 1968 corruption in government has been of great interest to economists these studies argue that corruption could be positively correlated with economic performance in the presence of a thick and cumbersome bureaucracy corruption in this view greases the wheels of bureaucracy thus increasing the efficiency in which transactions occur leading to a positive effect on the economic performance of a country on the other hand rose ackerman 1978 murphy shleifer and vishny 1991 1993 and shleifer and vishny 1993 provide theoretical arguments that corruption deteriorates economic growth through the misallocation of talent and other resources mauro 1995 being the first to introduce instrumental variables ivs in the cross country growth literature contributes to this debate by examining empirically the relationship between two measures of corruption and investment and economic growth his results suggest that corruption has a negative impact on investment and economic growth the significance of his results varies with model specifications but the results appear to be robust when correcting for the endogeneity of corruption using the ethnolinguistic fractionalization elf index as an iv he employs 2sls estimation to correct for endogeneity created by the two measures of corruption mauro 1995 s work has been of great value in the corruption literature and has had profound influence on the direction of policy making the paper is one of the most cited papers not just in the literature on corruption but in economics in general 1 given the impact that the paper has undoubtedly had on the direction of research we find it necessary and relevant to revisit the paper in light of the recent developments in the field of econometrics

inflation targeting supported by managed exchange rate we compare on a welfare loss basis possible inflation targeting regimes supported by different exchange rate rules for model parametrization we estimate a forward looking monetary policy rule for trukey when variable inflation targets are taken into consideration as opposed to the fixed targets used in prior research that use data from developed countries forward looking taylor rules provide a reasonable description of central bank behaviour in turkey by applying a calibration based on estimated parameters we compare the loss functions under flexible inflation targeting and strict inflation targeting while taking into consideration the supporting regimes namely a flexible exchange rate and a managed floating exchange rate we find that the welfare loss function caused by four simultaneous shocks namely a foreign interest rate shock a monetary policy shock a foreign output shock and a domestic output shock is minimized under the flexible inflation targeting regime supported by a managed float

the effect of direct democracy on income redistribution evidence for switzerland there is an intensive dispute in political economics about the impact of institutions on income redistribution while the main focus is on comparison between different forms of representative democracy the influence of direct democracy on redistribution has attracted much less attention according to theoretical arguments and previous empirical results government policies of income redistribution are expected to be more in line with median voter preferences in direct than in representative democracies in this paper we find that institutions of direct democracy are associated with lower public spending and revenue particularly lower welfare spending and broad based income and property wealth tax revenue moreover we estimate a model which explains the determinants of redistribution using panel data provided by the swiss federal tax office from 1981 to 1997 and a cross section of representative individual data from 1992 while our results indicate that less public funds are used to redistribute income and actual redistribution is lower inequality is not reduced to a lesser extent in direct than in representative democracies for a given initial income distribution this finding might well indicate the presence of efficiency gains in redistribution policies

identication using stability restrictions this paper studies inference in models that are identified by moment restrictions we show how instability of the moments can be used constructively to improve the identification of structural parameters that are stable over time a leading example is macroeconomic models that are immune to the well known lucas 1976 critique in the face of policy regime shifts this insight is used to develop novel econometric methods that extend the widely used generalized method of moments gmm the proposed methods yield improved inference on the parameters of the new keynesian phillips curve

on the precision of calvo parameter estimates in structural nkpc models abstract we study the extent of empirical information that can be obtained from alternative structural new keynesian inflation equations concerning the average duration of prices in the united states given that such specifications may be hard to identify using four different indexation and real wage rigidity based models in conjunction with identification robust econometric methods we evaluate the precision of calvo parameter estimates while results are sensitive to calibration and instrument selection we find confidence bounds on the average duration of prices that line up with available micro founded studies statistically significant coefficients for the forcing variables and non zero estimates on the coefficient of lagged inflation

effects of credit and debit cards on the currency demand we analyze the effects of credit and debit cards on the currency in circulation by using gmm estimation instead of using the data obtained by surveys we use monthly data obtained by an interbank institution that keeps the statistics of all credit and debit cards usage of a small open economy turkey for the period over 2002m1 2006m10 as expected from the theory we find that an increase in the usage of credit and debit cards leads to a decrease in the currency demand moreover the usage of the debit cards has a bigger effect on the money demand compared to the usage of the credit cards we also find that the effect of credit cards is mostly through purchases and the effect of debit cards is mostly through withdrawals

situational ethics across borders a multicultural examination managers throughout the world regularly face ethical dilemmas that have important and perhaps complex professional and personal implications further societal consequences of decisions made can be far reaching in this study 210 financial services managers from australia chile ecuador and the united states were queried about their ethical beliefs when faced with four diverse dilemmas in addition the situational context was altered so the respondent viewed each dilemma from a top management position and from a position of economic hardship results suggest a complex interaction of situation culture and issue when individuals make ethical judgments specifically chileans were found to have different beliefs about sex discrimination and child labor dilemmas when compared to their colleagues from the other three nations chileans and australians also disagreed on the bribery dilemma anglo managers were more likely than latin american managers to change their ethical responses when the situation was altered for multinational firms interested in maintaining healthy ethical climates the findings suggest that culturally contingent ethical guidelines or policies adapted to the local customs must be considered further managers must remain aware of issues related to specific situations both internal and external that would cause subordinates to alter their moral judgment