the long run relationship between nominal interest rates and inflation the fisher equation revisited stable url http links jstor org sici sici 0022 2879 28199602 2928 3a1 3c102 3atlrbni 3e2 0 co 3b2 2journal of money credit and banking is currently published by ohio state university press your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals ohio press html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgmon aug 27 13 58 08 2007

the fisher hypothesis and the forecastability and persistence of inflation abstract for the period 1860 to 1939 the simple correlation of the u s commercial paper rate with the contemporaneous inflation rate is 0 17 the corresponding correlation for the period 1950 to 1979 is 0 71 this paper attributes this apparent change in the fisher relation to differences in the stochastic process of inflation rather than a change in any structural relationship between interest rates and expected inflation contrary to recent claims in the literature there is little evidence of inflation non neutrality in data from the pre world war i period

the political economy of gender explaining cross national variation in the gender division of labor and the gender voting gap mainstream political economy has tended to treat the family as a unit when examining the distributional consequences of labor market institutions and of public policy in a world with high divorce rates we argue that this simplification is more likely to obscure than to instruct we find that labor market opportunities for women which vary systematically with the position of countries in the international division of labor and with the structure of the welfare state affect women s bargaining power within the family and as a result can explain much of the cross country variation in the gender division of labor as well as the gender gap in political preferences

the purchasing power of money and nominal interest rates a re examination while it has been known for some time that under uncertainty the original version of the fisher hypothesis is not precisely correct empirical researchers have largely ignored this fact such an omission has possibly resulted in erroneous conclusions concerning other hypotheses most notably the impact of prices on the real economy this paper clarifies some of the previous interpretations of the existing empirical literature and provides a theoretical version of the relation between prices and interest rates empirical tests based on both the livingston survey data and data from time series forecasting models provide support for the fisher effect and the hypothesis that only covariance risk is priced in the treasury bill market one of the basic hypotheses concerning rationality in financial markets is based on statements generally attributed to fisher 18 fisher argued that the nominal or money rate of return on an asset should compensate an investor for his or her required real rate of return and changes in the purchasing power of money for the uncertainty case fisher replaced known purchasing power changes with the expected inflation rate whereas the fisher relationship under certainty is well defined his basic theorem under uncertainty is not precise as fama 15 has argued it is changes in the purchasing power of money not the inflation rate that should concern investors under uncertainty the expected value of one is not by jensen s inequality the inverse of the expected value of the other moreover fama and farber 16 grauer and litzenberger 20 and benninga and protopapadakis 3 have shown that when investors are risk averse the fisher relationship will generally not hold even after adjustment has been made for the distinction between purchasing power changes and the inflation rate in particular these authors show that an adjustment must be made for the fact that the real rate of return on nominal bonds is random while these issues have been discussed in the theoretical literature they have largely been ignored in the empirical work on this topic given the fact that nominal rates do not seem to adjust as rapidly to price changes as fisher hypothesized numerous empirical researchers have expanded the basic fisher model in an attempt to explain this empirical anomaly these extensions include the incorporation of a inflation rate variability and the growth in real output

transmission access and pricing with multiple separate energy forward markets california s congestion management protocols provide comparable access and prices to all users of the transmission system power exchange and bilateral contract parties the users implicitly bid for capacity on major transmission paths between zones the independent system operator iso allocates the available transmission capacity on these paths so that it maximizes the value of this capacity as measured by the users bids everyone scheduling flow on a congested path is charged the marginal cost based price for using the path the iso keeps each party s portfolio of generation and load individually in balance when adjusting schedules to relieve congestion on interzonal paths by keeping the portfolios of the different parties separate the iso clears its transmission market without arranging energy trades between parties parties are responsible for arranging their own trades the iso does not become involved in the energy forward markets

inflation regimes and the sources of inflation uncertainty this paper develops new time series measures of inflation uncertainty in the united states in the postwar period that account for the prospect of changing inflation regimes the measures are constructed from estimates of a markov switching model for inflation importantly we show that rational forecasts derived from the markov model are consistent with survey measures of inflation expectations our markov model allows us to decompose uncertainty about future inflation into two components a certainty equivalent component that ignores uncertainty about future inflation regimes and a regime uncertainty component that reflects this uncertainty survey measures of inflation uncertainty based on the dispersion of forecasts appear more closely associated to the regime uncertainty component than the certainty equivalent component of inflation uncertainty the regime uncertainty component also appears to have significant explanatory power in forecasting unemployment while the certainty equivalent component does not copyright 1993 by ohio state university press

was there a peso problem in the u s term structure of interest rates 1979 1982 during the period following october 1979 through 1982 the u s federal reserve allowed interest rates to fluctuate widely in contrast to its previous policy of targeting these rates in the 1970s the policy was abandoned in 1982 in favor of an operating procedure that reduced the variation in interest rates this paper implements an estimation method to identify from the term structure of eurodollar returns the market s beliefs that the federal reserve may revert to interest rate targeting the model is not rejected and gives plausible estimates of the probability of a switch in monetary regimes copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a note on nonstationarity structural breaks and the fisher effect abstract we find empirical evidence that inflation nominal and real interest rates in the us are trend stationary with a structural break in both the unconditional mean and the drift rate of a deterministic trend which occurs shortly after the change in operating procedures of the fed in september 1979 this finding casts some doubts on cointegration tests of the long run fisher effect conducted in recent studies since the results of these tests can be affected by the existence of common structural breaks in the series we propose an alternative test of the fisher effect based on a var representation in appropriately detrended variables we find strong support for the fisher effect both in the medium term and in the long term

inflation and asset returns in a monetary economy postwar u s data are characterized by negative correlations between real equity returns and inflation and by positive correlations between real equity returns and money growth these patterns are closely matched quantitatively by an equilibrium monetary asset pricing model the model also implies negative correlations between expected asset returns and expected inflation and it predicts that the inflationasset return correlation will be more strongly negative when inflation is generated by fluctuations in real economic activity than when it is generated by monetary fluctuations the co movements of real asset returns inflation and money growth have been studied extensively over the past fifteen years table i displays some of the statistical properties of these series using quarterly u s data from 1959 to 1990 note first the significantly negative correlation between real equity returns and inflation note also the negative correlation between inflation and the ex post real return to nominally riskless bonds while this fact is not particularly surprising numerous studies conclude that the correlations between ex ante real asset returns and expected inflation are also negative 2 in contrast to these patterns the correlation between money growth and real equity returns is weakly positive in the data while the correlation between money growth and the real bond return is virtually zero initially these empirical patterns were viewed as anomalies negative correlations between inflation and ex post real stock returns contradict the traditional view that equities ought to act as an inflation hedge 3 negative correlations between expected inflation and ex ante real returns violate the

a model of the term structure of interest rates in an open economy with regime shifts abstract this paper presents a term structure model driven by three factors the foreign real interest rate the domestic inflation rate and the real exchange rate the model is designed to capture effects originating from exchange rate fluctuations and actions by central banks special attention is paid to regime shifts such as changes in the target inflation rate and devaluations an interesting result is that imperfect credibility of a target zone for the exchange rate mainly affects short term interest rates whereas a loss in an inflation target s credibility is likely to increase long term interest rates jel e43 f3 1997 elsevier science ltd

a long view of real rates in light of the large and sustained rise in real interest rates in the late 1970s and early 1980s this paper reviews i the theoretical discussion on the determination of nominal and real interest rates ii the factors determining real interest rates and iii problems of defining and measuring the real rate we go on to examine the historical record of real interest rates in france germany the uk and the usa since 1875 we find that high real rates since 1980 seem to be a return to a long run norm and it is the period from the second world war to 1979 that represents a more natural period in which to investigate an abrupt change of behaviour for real interest rates copyright 1999 by oxford university press

an examination of the fisher hypothesis the case of turkey this study examines the famous fisher hypothesis fh for turkey fh asserts that nominal interest rates adjust on a one to one basis to expected changes in inflation rates using the johansen cointegration method for the turkish monthly interest rate and inflation rate data we find that it is possible to determine the long run relationship but not the one to one basis between nominal interest rates and inflation our findings suggest that full fh does not hold but there is a very powerfull fisher effect in the case of turkey from 1990 to 2003

political agency government responsiveness and the role of the media abstract the role of mass media in making governments responsive to the needs of citizens is a relatively neglected area in economics we sketch a theoretical example with a role for media in enhancing government responsiveness based on asymmetric information between citizens and government we then use data for the period 1958 1992 on the extent to which indian state governments responded to food shortages via the public distribution of food correlating these with proxies of media political and economic development we find that states that are more responsive tend to also be those with high levels of newspaper circulation electoral turnout and literacy in contrast richer states do not tend to be more responsive than poorer states

trend stationary of inflation rates evidence from lm unit root testing with a long span of historical data the article applies the lm univariate unit root test recently developed by lee and strazicich 2003 2004 to re examine the validity of trend stationary in the inflation rates of 11 oecd and asian countries using a longer span of historical data our empirical findings are favourable to the trend stationary of the inflation rates when we control the structural breaks in series and therefore they point to the absence of hyperinflation in the majority of the countries the results indicate that shocks to inflation rates are temporary and soon converge with the inflation rates being trend stationary hence most structural breaks in the inflation rate occur around the great depression world war i world war ii and energy shock periods for the convergence effect we repeat the unit root tests utilized above for smaller sub samples so as to provide a robust analysis the outcomes show that by selecting a longer data span we can catch more powerful convergent evidence overall some policy implications a

nominal interest rates as indicators of inflation expectations forward interest rates have become popular indicators of inflation expectations theusefulness of this indicator depends on the relative volatilty and the correlation of inflation expectations and expected real interest rates this paper studies u s and u k data using a range of different tools and data sets the forward rate rule perfoms reasonably well in spite of significant movements in the expected real interest rate the reason is that the noise that movements in the expected real interest rate add to the inflation expectations is balanced by a tendency for expected real interest rates and inflation expectations to move in opposite directions

a congestion management aflocation mechanism for multiple transaction networks in this paper we present a physical flow based congestion management allocation mechanism for multiple transaction networks we use the multiple transaction network framework constructed to characterize transmission congestion and then determine the contribution to congestion attributable to each transaction on a physical flow basis this allocation scheme explicitly addresses the issue of counter flows the allocation results are used in the congestion relief of the independent grid operator igo so as to allow it to acquire relief services to remove the overload congestion attributed to each transaction from the network in the most economic manner the congestion charges attributable to each transaction for its usage of the network are also determined we tested the proposed scheme on several systems and we illustrate its capabilities on a network based on the ieee 57 bus system we discuss the policy implications of the congestion relief allocation solution the proposed scheme provides physically reasonable results and is applicable to large scale networks

religion and female educational attainment the paper reviews the literature on the education gender and religion nexuses and identifies plausible hypotheses that religion adversely affects female education the link between major religions and female educational attainment is examined using the barro lee data set for a sample of 97 countries the estimates include control variables for colonial heritage urbanization labor force participation and young adult mortality the estimates show powerful negative links between female educational attainment and the proportion of ethnoreligions hindu and muslim adherents in a country with similar results for the gender gap the paper offers some interpretative thoughts and research agendas

is there a unit root in the inflation rate new evidence from panel data models with multiple structural breaks in this article we examine whether or not the inflation rate for 17 oecd countries can be modelled as a stationary process we find that 1 conventional univariate unit root tests without any structural breaks generally reveal that the inflation rate contains a unit root 2 the kpss univariate test with multiple structural breaks reveals that for 10 out of 17 countries inflation is stationary and 3 the kpss panel unit root test reveals strong evidence for stationarity of the inflation rate for panels consisting of countries which were declared nonstationary by univariate tests

on the superneutrality of money in a stochastic dynamic macroeconomic model abstract this paper explores the robustness of the superneutrality of money result to the introduction of uncertainty while qualitatively superneutrality fails to obtain in our model quantitatively the observed tobin effect is insignificant the equilibrium time paths of real variables are nearly unaffected by changes in the money growth rule we argue that our conclusions reinforce the theoretical case for superneutrality

transmission congestion management in competitive electricity markets this paper studies the management of costs associated with transmission constraints i e transmission congestion costs in a competitive electricity market the paper examines two approaches for dealing with these costs the first approach is based on a nodal pricing framework and forms the basis of the so called pool model the paper also provides an analysis of financial instruments proposed to complement nodal pricing and includes illustrative test results on a large scale system the second approach is based on cost allocation procedures proposed for the so called bilateral model the paper explains the basis for this model including a game theoretic evaluation of some of its aspects both the pool and bilateral models have been at the center of the electric utility restructuring debate in california

on real interest rate dynamics and regime switching abstract we find evidence of regime switching dynamics in the usa and the uk real interest rates over the period 1881 2003 for the uk there is a regime in which the real interest rate displays a relatively stronger mean reversion and a regime in which it displays a relatively weaker mean reversion the former regime is characterized by a relatively larger error in the estimation of the reversion parameter and higher volatility for the usa the two regimes differ in volatility the probability of transition from one regime to another is found to be significantly related to the inflation rate regime and to the political regime the results highlight the importance of regime switching in the dynamics of the real interest rate as well as the role of inflation and political regimes in explaining this switching

do stationary risk premia explain it all evidence from the term structure abstract predictable variations in excess returns have often been attributed to the presence of time varying risk premia in this paper we use an insight based upon new techniques from time series analysis to test whether stationary risk premia can alone explain the behavior of excess returns to long bonds relative to rolling over short rates surprisingly we reject this hypothesis using u s t bill returns we then show that either permanent shocks to the risk premia and or rationally anticipated shifts in the interest rate process could produce anomalous results

inflation taxation and interest rates this paper demonstrates that the response of nominal interest rates to changes in inflationary expectations should lie between that predicted by the fisher and darby effects the exact nature of the response will depend on the relative size of the income and capital gains tax rates and the relative size of the derivatives of investment and savings to their respective after tax real rates the other major conclusion of this paper is that capital gains taxation offsets the negative effect on investment produced by treating depreciation on a historic rather than a replacement cost basis in the 1960s and early 1970s the economics profession and the financial community increasingly accepted irving fisher s analysis of the effect of changes in anticipated inflation on the rate of interest in the last several years darby 4 and feldstein 5 have elaborated fisher s theory and have arrived at the conclusion that in a world with taxes an increase in inflationary expectations should result in a more than proportional increase in the nominal rate of interest since investors base their investing and saving decisions on the after tax and not the pretax expected consequences of their actions darby 4 has argued that if income taxes are proportional at rate t and interest receipts are taxable and interest payments are tax deductible the real after tax interest rate is

the time series properties of norwegian inflation and nominal interest rate this article investigates the time series properties of norwegian inflation and nominal interest rate using annual data from 1850 to 2004 a number of different univariate unit root tests are employed to examine whether the time series are mean reverting or generated by unit root processes results show very strong evidence in favour of mean reversion in inflation but a unit root in the nominal interest rate this implies that there exists no long run relationship between these two variables a conclusion which is further supported by cointegration tests and estimated vector error correction models the cointegration analysis also points to an important potential pitfall when using cointegration techniques on systems where some variables are stationary processes

the long run fisher effect can it be tested empirical support for the long run fisher effect a hypothesis that a permanent change in inflation leads to an equal change in the nominal interest rate has been hard to come by this paper provides a plausible explanation of why past studies have been unable to find support for the long run fisher effect this paper argues that the necessary permanent change to the inflation rate following a monetary shock has not occurred in the industrialized countries of australia austria belgium canada denmark france germany greece ireland italy japan the netherlands norway sweden switzerland the united kingdom and the united states instead this paper shows that inflation in these countries follows a mean reverting fractionally integrated long memory process not the nonstationary inflation process that is integrated of order one or larger found in previous studies of the fisher effect applying a bivariate maximum likelihood estimator to a fractionally integrated model of inflation and the nominal interest rate the inflation rate in all seventeen countries is found to be a highly persistent fractionally integrated process with a positive differencing parameter significantly less than one hence in the long run inflation in these countries will be unaffected by a monetary shock and a test of the long run fisher effect will be invalid and uninformative as to the truthfulness of the long run fisher effect hypothesis

inflation uncertainty and interest rates is the fisher relation universal this paper tests the validity of the fisher hypothesis which establishes a positive relation between interest rates and expected inflation for the g7 countries and 45 developing economies for this purpose we estimate a version of the garch specification of the hypothesis for all countries included in the sample we also test the augmented fisher relation by including the inflation uncertainty in the equation the simple fisher relation holds in all g7 countries but in only 23 developing countries there is a positive and statistically significant relationship between interest rates and inflation uncertainty for six of the g7 and 18 of the developing countries and this relationship is negative for seven developing countries

pattern recognition and procedurally rational expectations abstract this paper introduces a model of pattern recognition for assessing probabilities of future events experimental data from a time series setting indicates that the proposed model gives a better account of subjects expectation formation than the hypothesis of rational expectations parameter estimates suggest that individuals typically modify their behavior only with respect to some patterns while keeping other pattern responses unchanged in the light of new data when the individual data are used to simulate an asset market several features of speculative markets emerge large deviations of the market price from the fundamental price price movements in times without innovation in the fundamentals and large and variable levels of trading activities these regularities are shown to be consistent with pattern induced changes in expectations

changing beliefs and systematic rational forecast errors with evidence from foreign exchange this paper addresses a new interpretation to the appearance in the early 1980s of systematic errors in forecasting the dollar exchange rate following a change in the process of a fundamental variable market participants revise their beliefs about the process using bayes rule since the market does not immediately recognize the change forecast errors are on average wrong during a period when the market is rationally learning for conservative parameter values the learning behavior of the dollar exchange rate in the early 1980s appears consistent with about half of the dollar s underprediction implied by the forward market copyright 1989 by american economic association

media and political persuasion evidence from russia this paper compares electoral outcomes of 1999 parliamentary elections in russia among geographical areas with differential access to the only national tv channel independent from the government it was available to three quarters of russia s population and its signal availability was idiosyncratic conditional on observables independent tv decreased aggregate vote for the government party by 8 9 percentage points increased the combined vote for major opposition parties by 6 3 percentage points and decreased turnout by 3 8 percentage points the probability of voting for opposition parties increased for individuals who watched independent tv even controlling for voting intentions measured one month before elections jel d72 l82 p26

the political economy of government responsiveness theory and evidence from india the determinants of government responsiveness to its citizens is a key issue in political economy here we develop a model based on the solution of political agency problems having a more informed an politically active electorate strengthens incentives for governments to be responsive this suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy the ideas behind the model are tested on panel data from india we show that public food distribution and calamity relief expenditure are greater controlling for shocks where governments face greater electoral accountability and where newspaper circulation is highest

interpreting the movements in short term interest rates this article uses modern asset pricing theory to examine the behavior of short term nominal interest rates over the past twenty five years the analysis investigates whether variation in the stochastic behavior of consumption growth and inflation can explain movements in the rate of interest the model estimated allows for taste shocks to utility the authors results reveal that much of the month to month movement in nominal interest rates reflects changes in the real rate and the risk premia in addition to inflationary expectations copyright 1992 by university of chicago press

nonlinearity and stationarity of inflation rates evidence from the euro zone countries earlier studies hardly reject the hypothesis of a unit root in inflation few studies have examined the possibility of nonlinearity in inflation and tested nonlinear stationarity of the inflation rates this study thus intends to fill the gap this study utilizes the tests for nonlinearity along with the unit root tests that allow for nonlinearity in the variables to examine the stationarity of inflation rates of 12 european countries that formed the euro zone ez later in the sample period the results suggest that the majority of these countries inflation rates can be characterized by mean reversion during the floating exchange rate period many of them appear to be nonlinear stationary this finding is essential in conducting applied economic studies for these countries when constructing models whose validity relies on whether or not inflation is stationary the results of this study also imply that shocks to inflation have a transitory effect on inflation in the euro area therefore it would be le

are tax effects important in the long run fisher relationship evidence from the municipal bond market are nominal bonds appropriately discounted for taxes empirical estimnates of the response of nominal interest rates to changes in inflation the fisher effect have failed to produce a definitive answer four reasons have been put forward as possible explanations i tobin effects ii fiscal illusion iii peso problems and iv different estimators utilizing data on taxable and tax exempt bond interest rates and several different estimators we find that the fisher effect estimates are always larger for the taxable bond relative to the tax exempt bond suggesting that fiscal illusion and different estimators cannot account for the previous results how economic agents respond to the tax burdens of assets with different tax treatment is an important issue at both the level of the individual micro and the aggregate economy macro one clear source of evidence would appear to be the market for high quality debt trading in both taxable and tax exempt debt occurs on a daily basis the response of the rates of return on taxable and tax exempt debt to changes in expected inflation are described by the fisher relationship the fisher relationship is one of the oldest equilibrium relationships in financial economics fisher s original proposition was that if the real rate of interest is relatively constant over time a fully perceived change in the purchasing power of money as proxied by the inverse of the rate of inflation would be accompanied by a proportional increase in the nominal interest rate darby 1975 points out that when nominal interest income is taxed as are interest payments on u s treasury bills the fisher relationship implies a response from nominal interest rates that is greater than the change in expected inflation in order to maintain the constant ex ante real interest rate summers 1983 suggests that given average marginal tax rates in the united states the appropriate value of the fisher effect is 1 3 to 1 5 for tax exempt bonds the original fisher specification should be a good approximation implying a fisher effect close to unity in a seminal paper fama 1975 presents evidence to support the hypothesis that changes in nominal

inflation real returns and capital investment we find evidence for the hypothesis of mundell 1963 and tobin 1965 that the expected real return component of interest rates is negatively related to the expected inflation component in the mundell tobin model the variation in expected real returns is caused by the variation in expected inflation our evidence suggests however that the variation in expected real returns is more fundamentally an outcome of the capital expenditures process equilibrium expected real returns vary directly with capital expenditures in order to induce equilibrium allocations of resources between consumption and investment this positive relation between expected real returns and real activity which comes out of the real sector combines with a negative relation between expected inflation and real activity which is traced to the monetary sector thus inducing the negative relation between expected inflation and expected real returns predicted by mundell and tobin but explained in terms of a model much different from theirs

what fisher knew about his relation we sometimes forget abstract expected consumption growth increases the real interest rate as one tries to smooth consumption over time we demonstrate that placing it in the fisher relation 1 is consistent with the euler equation governing the purchase of nominal bonds 2 explains observed procyclicality of the real interest rate 3 is supported empirically and 4 provides an alternative method for estimating the consumer s degree of relative risk aversion

status caste and the time allocation of women in rural india abstractwe argue that women may be disinclined to participate in market work in the rural areas of india because of family status concerns in a culture that stigmatizes market work by married women we set out a theoretical framework that offers predictions regarding the effects of caste based status concerns on the time allocation of women we then use the all india national sample survey data for the year 2004 5 and the time use survey for six states of india for the year 1998 99 to empirically test these hypotheses after controlling for a host of correlates we find that the ratio of women s market work to men s declines as we move up the caste hierarchy this ratio falls as family wealth rises and the decline is steeper for the higher castes finally the effect on women s market work of higher education is weaker for the higher castes these findings lend support to our theory and to the view that through its emphasis on family status caste plays a pivotal role in undermining the autonomy of wome

short rate nonlinearities and regime switches abstract using non parametric estimation methods various authors have shown distinct non linearities in the drift and volatility function of the us short rate which are inconsistent with standard affine term structure models we document how a regime switching model with state dependent transition probabilities between regimes can replicate the patterns found by the non parametric studies to do so we use data from the uk and germany in addition to us data and include term spreads in some of our models we also examine the drift and volatility function of the term spread

inequality does cause underdevelopment insights from a new instrument consistent with the provocative hypothesis of engerman and sokoloff 1997 2000 this paper confirms with cross country data that agricultural endowments predict inequality and inequality predicts development the use of agricultural endowments specifically the abundance of land suitable for growing wheat relative to that suitable for growing sugarcane as an instrument for inequality is this paper s approach to problems of measurement and endogeneity of inequality the paper finds inequality also affects other development outcomes institutions and schooling which the literature has emphasized as mechanisms by which higher inequality lowers per capita income it tests the inequality hypothesis for development institutional quality and schooling against other recent hypotheses in the literature while finding some evidence consistent with other development fundamentals the paper finds high inequality to independently be a large and statistically significant barrier to prosperity good quality institutions and high schooling

media freedom and gender equality a cross national instrumental variable quantile analysis we investigate the impact of media freedom on gender equality in education for a sample of 63 countries taken over the period 1995 2004 our analysis is motivated by the idea that the impact of media freedom on gender equality may differ over the conditional distribution of the response variable using instrumental variable quantile regression to control for endogeneity in per capita income we find that greater freedom of the media improves gender equality only in the 0 25 and 0 50 quantiles of the conditional distribution countries with the greatest disparities in gender outcomes experience no significant impact of media freedom

the market for news we investigate the market for news under two assumptions that readers hold beliefs which they like to see confirmed and that newspapers can slant stories toward these beliefs we show that on the topics where readers share common beliefs one should not expect accuracy even from competitive media competition results in lower prices but common slanting toward reader biases on topics where reader beliefs diverge such as politically divisive issues however newspapers segment the market and slant toward extreme positions yet in the aggregate a reader with access to all news sources could get an unbiased perspective generally speaking reader heterogeneity is more important for accuracy in media than competition per se

shifting endpoints in the term structure of interest rates abstract this paper links the term structure to perceptions of monetary policy long horizon forecasts of short rates required by no arbitrage term structure models are heavily influenced by the endpoints or limiting conditional forecasts of the short rate process common assumptions that the short rate is mean reverting or contains a unit root are shown to generate unrealistic yield predictions failures occur because these assumptions inadequately account for historical shifts in market perceptions of the policy target for inflation this paper links endpoint shifts to agent learning about shifts in long term policy goals shifting endpoints in short rate processes significantly improve yield predictions

identification long run relations and fundamental innovations in a simple cointegrated system this paper examines the roles played by innovations identified from a simple four variable var characterized by cointegration using knowledge of cointegration rank and textbook relations that link macroeconomic aggregates we identify distinct real and nominal innovations that dictate the long run behavior of the model we also examine the explanatory power of transitory innovations that are orthogonal to these permanent shocks one of the permanent shocks displays all the characteristics of a technology or supply innovation while one of the transitory innovations identified by imposing short run price rigid ity is interpretable as a demand side impulse the permanent nominal shock bears the imprint of an innovation in aggregate inflation expectations historical decomposition and comparison with variables that are external to the model reveals the relative importance of the shocks at various episodes

energy consumption and growth in south america evidence from a panel error correction model abstract this study examines the relationship between energy consumption and economic growth for a panel of nine south american countries over the period 1980 2005 within a multivariate framework given the relatively short span of the time series data a panel cointegration and error correction model is employed to infer the causal relationship pedroni s heterogeneous panel cointegration test reveals a long run equilibrium relationship between real gdp energy consumption the labor force and real gross fixed capital formation with the respective coefficients positive and statistically significant the granger causality results indicate both short run and long run causality from energy consumption to economic growth which supports the growth hypothesis

media freedom political knowledge and participation this paper examines the relationship between media freedom from government control and citizens political knowledge political participation and voter turnout to explore these connections i first examine media freedom and citizens political knowledge in thirteen central and eastern european countries with data from freedom house s freedom of the press report and the european commission s candidate countries eurobarometer survey next i consider media freedom and citizens political participation in 60 countries using data from the world values survey finally i investigate media freedom and voter turnout in these same 60 or so countries with data from the international institute for democracy and electoral assistance i find that where government owns a larger share of media outlets and infrastructure regulates the media industry more and does more to control the content of news citizens are more politically ignorant and apathetic where the media is less regulated and there is greater private ownership in the media industry citizens are more politically knowledgeable and active these results are robust to sample specification and alternative measures of media freedom

an analysis of inflation and interest rates new panel unit root results in the presence of structural breaks abstract this paper investigates the order of integration of inflation and interest rates in a panel of 19 countries the results show that once multiple endogenous breaks are allowed for and appropriate critical values are used the series appear to be i 0

inflation and real interest rates on assets with different risk characteristics given the importance of ex ante real interest rates to economic decision making it is no surprise that much empirical research focuses on them 1 several recent studies find that the ex ante real returns for short term u s treasury securities are not constant and are negatively correlated both with inflation and with nominal interest rates this paper examines the extent to which these findings hold for assets of longer maturity are robust with respect to the choice of price index and are stable over time we expand the set of assets studied to include those of longer maturity both publicly and privately issued for two reasons first their ex ante real returns may differ substantially from that of a short term nominally riskless security second because longer maturity assets have risk characteristics closer to capital their ex ante real returns are potentially more relevant for investment and savings decisions we explore the use of various price indices because the index used in most studies the consumer price index severely overstates inflation during the 1970s as a result of its inappropriate treatment of residential housing costs 2 this overstatement casts doubt on an important finding of previous studies that there are long stretches of time during the 1970s when ex ante real rates are significantly negative given the existence of holding costs for the goods relevant to most price indices and the absence of a riskless real return no arbitrage conditions are violated by a negative ex ante real rate however its persistence is problematical because asset holders are typically assumed to have a positive rate of time preference which ensures a positive ex ante real rate in the long run we find that before 1979 a negative relationship of ex ante real rates both with inflation and with nominal interest rates appears for the longer maturity assets as well as the short term nominally riskless asset indeed the relationship grows

real interest rates and inflation an ex ante empirical analysis we develop a method of measuring ex ante real interest rates using prices of index and nominal bonds employing this method and newly available data we directly test the fisher hypothesis that the real rate of interest is independent of inflation expectations we find a negative correlation between ex ante real interest rates and expected inflation this contradicts the fisher hypothesis but is consistent with the theories of mundell and tobin darby and feldstein and stulz we also find that nominal interest rates include an inflation risk premium that is positively related to a proxy for inflation uncertainty

a long run non linear approach to the fisher effect we argue that the empirical failure of the fisher effect found in the literature may be due to the existence of non linearities in the long run relationship between interest rates and inflation we present evidence that for the u s during the 1960 2004 period the fisher relation presents important non linearities we model the long run non linear relationship and find that an estr model for the pre volcker era and an lstr model for the post volcker era are able to control for non linearities and constitute long run co integration vectors monte carlo evidence produces support for the hypothesis that non linearities may also be responsible for the less than proportional coefficients of inflation usually found in the linear specifications

volatility momentum and time varying skewness in foreign exchange returns this article tests a stochastic volatility model of exchange rates that links both the level of volatility and its instantaneous covariance with returns to pathwise properties of the currency in particular the model implies that the return volatility covariance behaves like a weighted average of recent returns and hence switches signs according to the direction of trends in the data this implies that the skewness of the finite horizon return distribution likewise switches sign leading to time varying implied volatility smiles in options prices the model is fit and assessed using bayesian techniques some previously reported volatility results are accounted for by the fitted models the predicted pattern of skewness dynamics accords well with that found in historical options prices

do expected shifts in inflation affect estimates of the long run fisher relation recent empirical studies suggest that nominal interest rates and expected inflation do not move together one for one in the long run a finding at odds with many theoretical models this article shows that these results can be deceptive when the process followed by inflation shifts infrequently we characterize the shifts in inflation by a markov switching model based upon this model s forecasts we reexamine the long run relationship between nominal interest rates and inflation interestingly we are unable to reject the hypothesis that in the long run nominal interest rates reflect expected inflation one for one

real risk inflation risk and the term structure i present a model for the term structures of nominal and real interest rates in the uk that incorporates markov switching and allows for non neutralities nonlinear dynamics and flexibility in the dynamics of the risk premia the model is used to assess how accurately the term structure reflects changing expectations of future yields and inflation i find that variations in inflation expected over the next two to three years are very accurately reflected by current yields over longer horizons the term structures closely track changing expectations regarding future nominal and real yields but not future inflation

mass media competition political competition and public policy if better informed voters receive favourable policies then mass media will affect policy because mass media provide most of the information people use in voting this paper models the incentives of the media to deliver news to different groups the increasing returns to scale technology and advertising financing of media firms induce them to provide more news to large groups such as taxpayers and dispersed consumer interests and groups that are valuable to advertisers this news bias alters the tradeoff in political competition and therefore introduces a bias in public policy the paper also discusses the effects of broadcast media replacing newspapers as the main information source about politics the model predicts that this change should raise spending on government programmes used by poor and rural voters

a physical flow based approach to allocating transmission losses in a transaction framework a physical flow based approach to allocating transmission losses in a multiple transaction system is presented the allocation scheme is developed using a framework in which the transactions are explicitly represented the proposed scheme is based on expressing losses explicitly in terms of all the transactions in the system an important property of the allocation scheme is its effective capability to deal with counter flows that result in the presence of specific transactions extensive numerical testing indicates that the allocation scheme produces loss allocations that are appropriate and that behave in a physically reasonable manner test results on several systems are presented

who owns the media the authors examine patterns of media ownership in 97 countries around the world they find that almost universally the largest media firms are controlled by the government or by private families government ownership is more pervasive in broadcasting than in the printed media government ownership is generally associated with less press freedom fewer political and economic rights inferior governance and most conspicuously inferior social outcomes in education and health the adverse effects of government ownership on political and economic freedom are stronger for newspapers than for television the adverse effects of government ownership of the media do not appear to be restricted solely to instances of government monopoly the authors present a range of evidence on the adverse consequences of state ownership of the media state ownership of the media is often argued to be justified on behalf of the social needs of the disadvantaged but if their findings are correct increasing private ownership of the media through privatization or by encouraging the entry of privately owned media can advance a variety of political and economic goals especially those of meeting the social needs of the poor

the power of tv cable television and women s status in india cable and satellite television have grown rapidly throughout the developing world the availability of cable and satellite television exposes viewers to new information about the outside world which may affect individual attitudes and behaviors this paper explores the effect of the introduction of cable television on gender attitudes in rural india using a three year individual level panel dataset we find that the introduction of cable television is associated with improvements in womens status we find significant increases in reported autonomy decreases in the reported acceptability of beating and decreases in reported son preference we also find increases in female school enrollment and decreases in fertility primarily via increased birth spacing the effects are large equivalent in some cases to about five years of education in the cross section and move gender attitudes of individuals in rural areas much closer to those in urban areas we argue that the results are not driven by pre existing differential trends these results have important policy implications as india and other countries attempt to decrease bias against women authors

financial integration of east asian economies evidence from real interest parity in this article we investigate the financial linkages between the east asian economies with japan and the united states we test for long run real interest rate parity rip using an array of panel data techniques including recent techniques developed by breuer et al 2002 and carrion i silvestre et al 2005 this study offers two important results first the failure to account for structural breaks in the industrialized countries and asian emerging economies is likely to provide evidence of nonstationary series that are stationary second we found strong evidence that the parity condition holds in all the asian countries the failure of earlier studies to confirm mean reversion of real interest rate differential rid may reflect the choice of estimation testing procedure rather than any inherent deficiency in the rip

term structure views of monetary policy under alternative models of agent expectations abstract term structure models and many descriptions of the transmission of monetary policy rest on the empirical relevance of the expectations hypothesis small differences in the perceived policy reaction function in var models of agent expectations strongly influence the relevance in the transmission mechanism of the expected short rate component of bond yields mean reverting or difference stationary characterizations of interest rates require large and volatile term premiums to match the observable term structure however short rate descriptions that capture shifting perceptions of long horizon inflation evident in survey data support a more substantial term structure role for short rate expectations