the quantitative importance of news shocks in estimated dsge models we estimate a dynamic stochastic general equilibrium dsge model with several frictions and both unanticipated and news shocks using quarterly u s data from 1954 to 2004 and bayesian methods we find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output consumption and investment growth interest rate and the relative price of investment the unanticipated shock to the marginal efficiency of investment is the dominant shock accounting for over 45 of the variance in output growth news shocks account for less than 15 of the variance in output growth within the set of news shocks nontechnology sources of news dominate technology news with wage markup news shocks accounting for about 60 of the variance share of both hours and inflation we find that in the estimated dsge model i the presence of endogenous countercyclical price and wage markups due to nominal frictions substantially diminishes the importance of news shocks relative to a model without these frictions and ii while there is little change in the estimated contributions of technology news when we restrict wealth effects on labor supply the contributions of nontechnology news shocks are relatively more sensitive

a strategic approach to multiple estate division problems abstract the classical bankruptcy problem is extended by assuming that there are multiple estates in the finite estate case the agents have homogeneous preferences per estate which may differ across estates in the more general infinite estate problem players have arbitrary preferences over an interval of real numbers each of which is regarded as an estate a strategic estate game is formulated in which each agent distributes his legal entitlement over the estates resulting in individual claims per estate each estate is then divided according to some allocation rule the paper focuses on existence and on computational aspects of nash equilibria in finite and infinite estate games with some focus on the proportional allocation rule for this rule it also studies pareto optimality and envy freeness of equilibrium allocations

nonlinear adjustment to purchasing power parity in the post bretton woods era abstract this paper models the dynamics of adjustment to long run purchasing power parity ppp over the post bretton woods period in a nonlinear framework consistent with the presence of frictions in international trade we estimate exponential smooth transition autoregressive estar models of deviations from ppp which are obtained using the johansen cointegration method for both consumer price index cpi and wholesale price index wpi based measures and a broad set of us trading partners in several cases we find clear evidence of a mean reverting dynamic process for sizable deviations from ppp with the equilibrium tendency varying nonlinearly with the magnitude of disequilibrium analysis of impulse response functions also supports a nonlinear dynamic structure but convergence to long run ppp in the post bretton woods era is very slow

a pie allocation among sharing groups this paper deals with a pie allocation problem to users who are divided intosharing groups that are not necessarily disjoint the pie is allocated among the groups rather than the users the portion of a sharing group is a public good for its members that is all of them can enjoy it a non cooperative game for allocating the pie and a special equilibrium outcome strongly disappointment free allocation are defined we prove the existence of a unique such allocation and show that it coincides with the nash solution of the related bargaining problem journal of economic literatureclassification numbers c70 c71 c72 and c78

priority rules and other asymmetric rationing methods in a rationing problem each agent demands a quantity of a certain commodity and the available resources fall short of total demand a rationing method solves this problem at every level of resources and individual demands we impose three axioms consistency with respect to variations of the set of agents upper composition and lower composition with respect to variations of the available resources in the model where the commodity comes in indivisible units the three axioms characterize the family of priority rules where individual demands are met lexicographically according to an exogeneous ordering of the agents in the more familiar model where the commodity is divisible these three axioms plus scale invariance independence of the measurement unit characterize a rich family of methods it contains exactly three symmetric methods giving equal shares to equal demands these are the familiar proportional uniform gains and uniform losses methods the asymmetric methods in the family partition the agents into priority classes within each class they use either the proportional method or a weighted version of the uniform gains or uniform losses methods

sustainable allocation of greenhouse gas emission permits for firms with leontief technologies abstract in this paper we deal with production situations where a cap or limit to the amount of greenhouse gas emissions permitted is imposed fixing a tax for each ton of pollutant emitted is also considered we use bankruptcy rules to define cooperative games with externalities associated with these situations and analyze the existence of coalitionally stable allocations of the emission permits we prove that the constrained equal awards cea rule provides stable allocations and as a direct mechanism it is incentive compatible these two facts have interesting managerial implications to control pollution emissions

axiomatic characterizations of the cea solution for rationing problems abstract situations abound in the real world where aggregate demand for a commodity exceeds aggregate supply when such situations of excess demand occur what is required is some kind of rationing the literature on rationing problems has an interesting origin in the babylonian talmud the purpose of this paper is to characterize axiomatically and analyze the constrained equal award solution for rationing problems

an empirical investigation of u s firms in reorganization the purpose of this paper is to understand the institutional features of chapter 11 from an empirical examination of thirty firms that have emerged from reorganization we find the recontracting framework of chapter 11 to be complex lengthy and costly violations of absolute priority in favor of stockholders are frequently encountered these deviations may result from the bargaining process of chapter 11 or from a recontracting process between creditors and stockholders which recognizes the ability of stockholder oriented management to preserve firm value an example of such recontracting addresses myers underinvestment problem an investigation of the effects of chapter 11 on the pricing of risky debt is also provided the purpose of this paper is to understand the institutional features of chapter

coalition formation and bargaining protocols a review of the literature this paper offers a review of the vast literature regarding bargaining and coalition formation this topic has been generally described as the attempt to provide strategic foundations to cooperative solution concepts it can therefore be seen as the linking ring between the non cooperative and the cooperative game theoretic approach to coalition formation its central role in economic theory and its relatively long history that goes back to the nash program have fostered a large academic production including surveys nonetheless this paper will focus on an aspect that is often neglected in the dedicated surveys the specificities of the bargaining protocols leading to different outcomes although generally downgraded to the rank of details the differences in bargaining protocols even when minor can cause significant changes in fundamental aspects such as the possibility to reach full cooperation the distribution of final pay offs and the time taken to reach an agreement focused on externalities free games therefore on bargaining protocols sustaining solution concepts for cooperative games in characteristic function form the paper aims at providing a brief but exhaustive review of the topic that could result in a very useful tool for any researcher approaching the subject of coalitional bargaining

an experimental study of the investment implications of bankruptcy laws in bankruptcy laws proportionality is the universal norm when allocating the liquidation value of a bankrupt firm among creditors the theoretical literature on bankruptcy proposes two prominent alternatives to proportionality the equal awards and the equal losses principles we use an experiment to analyze and compare actual creditor behavior under these three principles more specifically we test the following hypotheses replacing proportionality with equal losses increases total investment while replacing proportionality with equal awards decreases total investment under all three principles individual investment choices decrease in response to an increase in the probability of bankruptcy or an increase in risk aversion total investment difference between proportionality and either of the other two principles is independent of the probability of bankruptcy as long as both induce an interior equilibrium the results of the nonparametric tests and random effects tobit regression analyses we conduct on our experimental data offer support for all hypotheses

exchange rate pass through and inflation a nonlinear time series analysis abstract this paper investigates the relationship between the exchange rate pass through erpt and inflation by estimating a nonlinear time series model based on a simple theoretical model of erpt determination we show that the dynamics of erpt can be well approximated by a class of smooth transition autoregressive star models using the past inflation rate as a transition variable we employ several u shaped transition functions in the estimation of the time varying erpt to us domestic prices the estimation result suggests that declines in the erpt during the 1980s and 1990s are associated with lowered inflation

allocation problems among sharing groups abstract we deal with allocation problems among sharing groups there are n agents the agents are divided into several sharing groups a homogeneous good is allocated among sharing groups rather than among the agents the good is a private good for sharing groups and a public good for the members of each sharing group that is all of them in the same sharing group can consume it without rivalry we introduce some allocation rules and axioms the utilitarian allocation rule and the egalitarian allocation rule are characterized by some axioms

the contractionary effect of bad economic news is bad economic news a self fulfilling prophecy this paper examines the local employment effects of exposure to pessimistic economic news by combining detailed data on newspaper subscriptions with a tabulation of negative newspaper stories the flow of such news across the united states during the 2008 recession is reconstructed at county and quarterly levels the resulting data set is used to estimate the causal impact of such news on unemployment hiring and separation rates exposure to pessimistic news is found to suppress hiring and total employment during the early stages of the recession by up to 40 compared to prerecession levels such news can account for some 7 of the total reduction in employment between 2007 and 2010 content analysis of the articles in question rules out the possibility that this relationship is driven by reverse causation that is newspapers merely reporting poor economic performance further analysis of google search data suggests that the effect is mediated by changes in public attitude caused by exposure to negative news these findings imply that labor market outcomes can differ due to arbitrary differences in the dispersal of economic information bearings on economic theory including the notions of sunspots and animal spirits are discussed

game theoretic analysis of a bankruptcy problem from the talmud abstract for three different bankruptcy problems the 2000 year old babylonian talmud prescribes solutions that equal precisely the nucleoli of the corresponding coalitional games a rationale for these solutions that is independent of game theory is given in terms of the talmudic principle of equal division of the contested amount this rationale leads to a unique solution for all bankruptcy problems which always coincides with the nucleolus two other rationales for the same rule are suggested in terms of other talmudic principles needless to say the rule in question is not proportional division

the political and economic origins of consumer confidence economic conditions the story usually goes influence consumer confidence which in turn influences both political evaluations and votes but we have little sense of the origins of consumer confidence itself it is generally assumed that monthly reports of the nation s level of consumer confidence respond to objective economic conditions we argue that politics is important for understanding consumer sentiment beyond what we know from economic conditions specifically we demonstrate a direct effect of political evaluations of the president s management of the economy the party of the president extraordinary political events and monetary policy as well as an indirect effect of media coverage of the economy on consumer sentiment after controlling for economic conditions when news coverage is positive citizens give favorable evaluations leading to more positive sentiment our findings suggest that understanding the political economy requires an emphasis on the causal effect of politics as well as economics

non cooperative solutions for estate division problems in an estate division problem an estate has to be divided among several players whose total entitlement to the estate exceeds its size this paper extends the non cooperative approach through a claim game as initiated by o neill 1982 by allowing players to put multiple claims on the same part of the estate and by considering the case where individual entitlements may exceed the estate a full characterization of the set of nash equilibria of the claim game is obtained both for restricted estate division problems where individual entitlements do not exceed the estate and for the general case variations on the claim game are considered which result in proportional division in equilibrium

perturbed adaptive dynamics in coalition form games abstract players adaptively learn how to bargain a characteristic function describes the available surplus the underlying bargaining game extends the nash demand game by allowing subcoalitions to reach an agreement players demands must be multiples of a money unit we show that stochastically stable allocations ssa i e allocations that are most stable to unlikely errors are a subset of the core uniqueness does not obtain even when the money unit becomes arbitrarily small nonetheless every ssa is related to the allocation that maximizes the product of players utilities over the core i e constrained egalitarian solution for tu games journal of economic literature classification numbers c71 c72 c78

a new cramer von misses cointegration test with application to environmental kuznets curve abstractthis article introduces a new cramer von misses cvm cointegration test robust to nonlinearities we characterize nonlinear cointegration in terms of a nonlinear moving average filter high pass filter of a matrix based on permutation matrices on the discrepancy of empirical distributions a cramer von misses cvm test statistic is proposed for testing the null hypothesis of two independent random walks against a broad range of cointegrating alternatives with monotonic nonlinearities and level shifts in the cointegration relationship we derive the asymptotic distribution of this induced order cramer von misses cvm cointegration test this new non parametric test statistic has two important properties the invariance to monotonic transformations of the series and the robustness for the presence of several parameter shifts or structural changes we analyse the small sample properties of this test by monte carlo simulations and evaluate the power of the test finally this cvm test is applied t

adaptive play in multiplayer bargaining situations we study the dual issues of allocation and coalition formation in a model of social learning for a class of economies which can be expressed in terms of a real valued characteristic function we first show that all self perpetuating allocations realized from a simple bargaining game must be core allocations although players make simultaneous demands for surplus and only on their own behalf following this we provide a sufficient condition under which the society eventually learns to divide the surplus according to some core allocation regardless of the initial history

sharing group allocation problems abstract we deal with allocation problems among sharing groups we introduce some allocation rules and axioms the egalitarian rule is characterized by equal treatment of equal groups solidarity and group consistency

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

network effects and welfare cultures we empirically examine the role of social networks in welfare participation using data on language spoken at home to better infer networks within an area our empirical strategy asks whether being surrounded by others who speak the same language increases welfare use more for those from high welfare using language groups this methodology allows us to include local area and language group fixed effects and to control for the direct effect of being surrounded by one s language group these controls eliminate many of the problems in previous studies the results strongly confirm the importance of networks in welfare participation

u s labor market dynamics revisited the picture of u s labor market dynamics is opaque empirical studies have yielded contradictory findings and debates have emerged regarding their implications this paper aims at clarifying the picture which is important for the understanding of the operation of the labor market for the study of business cycles for the explanation of wage behavior and for the formulation of policy the paper determines what facts can be established what are their implications and what remains to be further investigated the main contributions made here are i listing of data facts that can be agreed upon these indicate that there is considerable cyclicality and volatility of both accessions to employment and separations from it hence both are important for the understanding of the business cycle ii presenting the business cycle facts of key series iii pointing to specific gaps in the data picture disparities in the measurement of the sizeable flows between employment and the pool of workers out of the labor force disagreements about the relative volatility of job finding and separation rates across data sets and the fact that the fit of the gross flows data with net employment growth data differs across studies and is not high the definite characterization of labor market dynamics depends upon the closing of these data gaps

news shocks and business cycles abstract this paper proposes and implements a novel structural var approach to the identification of news shocks about future technology the news shock is identified as the shock orthogonal to the innovation in current utilization adjusted tfp that best explains variation in future tfp a favorable news shock leads to an increase in consumption and decreases in output hours and investment on impact more suggestive of standard dsge models than of recent extensions designed to generate news driven business cycles though news shocks account for a significant fraction of output fluctuations at medium frequencies they contribute little to our understanding of recessions

monetary policy in the media just like private companies depend crucially on their ability to reach customers policymakers must communicate with private agents to be successful and much of this communication is channeled through the media this is especially true for central banks which need to build credibility among the general public this paper analyses how favorably the print media report about the european central bank s ecb monetary policy decisions favorableness is inter alia influenced by the amount of information communicated by the ecb there are however also indications of a critical monitoring role of the media which reports more negatively when inflation exceeds the inflation target

transactions costs and nonlinear adjustment in real exchange rates an empirical investigation eolquilibrium models of real exchange rate determination in the presence of transactions costs imply a nonlinear adjustment process toward purchasing power parity ppp conventional cointegration tests which ignore the effect of transactions costs may be biased against the long run ppp hypothesis our results using both monthly data for the interwar period and annual data spanning two centuries clearly reject the linear framework in favor of an exponential smooth transition autoregressive process the systematic pattern in the estimates of the nonlinear models provides strong evidence of mean reverting behavior for ppp deviations and helps explain the mixed results of previous studies

money demand function estimation by nonlinear cointegration conventionally the money demand function is estimated using a regression of the logarithm of money demand on either the interest rate or the logarithm of the interest rate this equation is presumed to be a cointegrating regression in this paper we aim to combine the logarithmic specification which models the liquidity trap better than a linear model with the assumption that the interest rate itself is an integrated process the proposed technique is robust to serial correlation in the errors for the usa our new technique results in larger coefficient estimates than previous research suggested and produces superior out of sample prediction copyright 2007 john wiley sons ltd

the impact of social structure on economic outcomes s ocial structure especially in the form of social networks affects economic outcomes for three main reasons first social networks affect the flow and the quality of information much information is subtle nuanced and difficult to verify so actors do not believe impersonal sources and instead rely on people they know second social networks are an important source of reward and punishment since these are often magnified in their impact when coming from others personally known third trust by which i mean the confidence that others will do the right thing despite a clear balance of incentives to the contrary emerges if it does in the context of a social network economists have recently devoted considerable attention to the impact of social structure and networks on the economy for example see the economists chapters in rauch and casella 2001 and the illuminating review essay of this volume by zuckerman 2003 as well as dutta and jackson 2003 and calvoarmengol 2004 however i focus here on sociologists contributions sociologists have developed core principles about the interactions of social structure information ability to punish or reward and trust that frequently recur in their analyses of political economic and other institutions i begin by reviewing some of these principles building on these i then discuss how social structures and social networks can affect economic outcomes like hiring price productivity and innovation

media influences on social outcomes the impact of mtv s 16 and pregnant on teen childbearing this paper explores the impact of the introduction of the widely viewed mtv reality show 16 and pregnant on teen childbearing our main analysis relates geographic variation in changes in teen childbearing rates to viewership of the show we implement an instrumental variables iv strategy using local area mtv ratings data from a pre period to predict local area 16 and pregnant ratings the results imply that this show led to a 4 3 percent reduction in teen births an examination of google trends and twitter data suggest that the show led to increased interest in contraceptive use and abortion jel d12 j13 j16 l82 z13 it is a longstanding and open question how exposure to media images affects viewers behavior policy advocates and cultural observers worry in particular about the impact of exposure to sexual and violent content on adolescent behaviors in some circles the idea that teenagers respond to media content is a foregone conclusion but determining whether media images themselves cause teens to behave in certain ways is a difficult empirical task 1 this paper examines the impact of the mtv show 16 and pregnant on teen childbearing this show purports to show the difficult reality of becoming a teen mother as we document below 16 and pregnant has drawn large audiences among relevant subpopulations could exposure to these media images of pregnant teens and very young new moms have had an impact on how teens behave leading to changes in the likelihood of becoming teen mothers themselves