patterns of co authorship among economics departments in the usa given the steady increase in co authored papers in economics journals this paper reports a study of the patterns of co authorship between us universities and colleges a majority of institutions produce more co authored than single authored papers contacts with researchers from the same institution are still an important source of co authored papers even though slightly decreasing in frequency the determinants of co authorship outside the own institution are tested in a gravity model and it is found that distance and other geographical variables do not matter however the quality of co authors institutions measured by rankings of institutions has a significant impact on the number of co authored papers in top economics journals

nominal income targeting in an open economy optimizing model abstract this paper presents simulation results regarding the performance of nominal income targeting a monetary policy rule that sets interest rates in response to deviations of nominal gdp growth from a target path the macroeconomic model is one in which agents solve dynamic optimization problems with rational expectations but in an environment with slow price adjustments in the present version consumption choices reflect habit formation and the economy is open to international flows of goods and securities when calibrated to quarterly us data the model s results suggest that nominal income targeting performs well in relation to inflation targeting and taylor rules

optimal interest rate rules and inflation stabilization versus price level stabilization abstract this paper compares the properties of interest rate rules such as simple taylor rules and rules that respond to price level fluctuations called wicksellian rules in a basic forward looking model by introducing appropriate history dependence in policy wicksellian rules perform better than optimal taylor rules in terms of welfare robustness to alternative shock processes and are less prone to equilibrium indeterminacy a simple wicksellian rule augmented with a high degree of interest rate inertia resembles a robustly optimal rule i e a monetary policy rule that implements the optimal plan and that is also completely robust to the specification of exogenous shock processes

monetary policy rules macroeconomic stability and inflation a view from the trenches i estimate a forward looking monetary policy reaction function for the federal reserve for the periods before and after paul volcker s appointment as chairman in 1979 using information that was available to the fomc in real time from 1966 to 1995 the results suggest broad similarities in policy and point to a forward looking approach to policy consistent with a strong reaction to inflation forecasts during both periods this contradicts the hypothesis based on analysis with ex post constructed data that the instability of the great inflation was the result of weak fomc policy responses to expected inflation a difference is that prior to volcker s appointment policy was too activist in reacting to perceived output gaps that retrospectively proved overambitious drawing on contemporaneous accounts of fomc policy i discuss the implications of the findings for alternative explanations of the great inflation and the improvement in macroeconomic stability since then

even up maintaining relationships abstract when are economic interactions mediated by prices and transfers and when are they mediated by variations in the continuation payoffs within a relationship to address this question we examine a relationship between two players who periodically face opportunities to undertake randomly generated projects that impose a cost on one player and a benefit on the other as well as opportunities to make voluntary transfers to one another we characterize the set of equilibria with particular emphasis on the efficient frontier in the absence of transfers incentives are often created by adjusting the continuation values of the relationship sometimes increasing player 1 s continuation payoff to induce player 1 to accept a particularly costly current project and sometimes increasing player 2 s continuation payoff in contrast once transfers enter the picture continuation payoffs maximize the sum of the two players payoffs no matter how asymmetric the point on the pareto frontier under consideration however transfers can also be relatively rare and in particular can occur less often than the adjustments in continuation values that occur without transfers players thus rely on transfers to create incentives but manage to do so while rarely making transfers

an economics journals ranking that takes into account the number of pages and co authors in this article i examine whether the academics reward policy must correlate positively with the published number of articles per co author number of pages and journals reputation this is accomplished by estimating a nonlinear model with a panel data from 168 economics journals covered in the isi web of knowledge database 58 825 articles the data reinforces the conjecture that published article value is slightly increasing with the number of co authors and is proportional to the number of pages the data also suggests that there are four distinct groups related to journal quality that i name a b b and b

repeated games with frequent signals we study repeated games with frequent actions and frequent imperfect public signals where the signals are the aggregate of many discrete events such as sales or tasks the high frequency limit of the equilibrium set depends on both the probability law governing the discrete events and on how many events are aggregated into a single signal when the underlying events have a binomial distribution the limit equilibria correspond to the equilibria of the associated continuous time game with diffusion signals but other event processes that aggregate to a diffusion limit can have a different set of limit equilibria thus the continuous time game need not be a good approximation of the high frequency limit whenever the underlying events have three or more possible values

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

perfect public equilibrium when players are patient we provide a characterization of the limit set of perfect public equilibrium payoffs of repeated games with imperfect public monitoring as the discount factor goes to one our result covers general stage games including those that fail a full dimensionality condition that had been imposed in past work it also provides a characterization of the limit set when the strategies are restricted in a way that endogenously makes the full dimensionality condition fail as in the strongly symmetric equilibrium studied by abreu abreu d 1986 extremal equilibria of oligopolistic supergames j econ theory 39 191 228 and abreu et al abreu d pearce d stacchetti e 1986 optimal cartel equilibria with imperfect monitoring j econ theory 39 251 269 finally we use our characterization to give a sufficient condition for the exact achievability of first best outcomes equilibria of this type for which all continuation payoffs lie on the pareto frontier have a strong renegotiation proofness property regardless of the history players can never unanimously prefer another equilibrium

real wage rigidities and the new keynesian model most central banks perceive a trade off between stabilizing inflation and stabilizing the gap between output and desired output however the standard new keynesian framework implies no such trade off in that framework stabilizing inflation is equivalent to stabilizing the welfare relevant output gap in this paper we argue that this property of the new keynesian framework which we call the divine coincidence is due to a special feature of the model the absence of nontrivial real imperfections we focus on one such real imperfection namely real wage rigidities when the baseline new keynesian model is extended to allow for real wage rigidities the divine coincidence disappears and central banks indeed face a trade off between stabilizing inflation and stabilizing the welfare relevant output gap we show that not only does the extended model have more realistic normative implications but it also has appealing positive properties in particular it provides a natural interpretation for the dynamic inflation unemployment relation found in the data

on the desirability of nominal gdp targeting this paper evaluates the welfare properties of nominal gdp targeting in the context of a new keynesian model with both price and wage rigidity in particular we compare nominal gdp targeting to ination and output gap targeting as well as to a conventional

incomplete credit markets and monetary policy abstract we study monetary policy when private credit markets are incomplete the macroeconomy we study has a large private credit market in which participant households use non state contingent nominal contracts nscnc a second small group of households only uses cash supplied by the monetary authority and cannot participate in the credit market there is an aggregate shock we find that despite the substantial heterogeneity the monetary authority can provide for optimal risk sharing in the private credit market and thus overcome the nscnc friction via a counter cyclical price level rule the counter cyclical price level rule is not unique to pin down a unique monetary policy rule we consider two secondary goals for the monetary authority i expected inflation targeting and ii nominal gdp targeting we examine the impact of each of these approaches on the price level rule and other nominal variables in the economy

truthful equilibria in dynamic bayesian games this paper characterizes an equilibrium payoff subset for markovian games with private information as discounting vanishes monitoring might be imperfect transitions depend on actions types correlated or not values private or interdependent it focuses on equilibria in which players report their information truthfully this characterization generalizes those for repeated games and reduces to a collection of one shot bayesian games with transfers with independent private values the restriction to truthful equilibria is shown to be without loss except for individual rationality in the case of correlated types results from static mechanism design can be applied resulting in a folk theorem

individual learning and cooperation in noisy repeated games we investigate whether two players in a long run relationship can maintain cooperation when the details of the underlying game are unknown specifically we consider a new class of repeated games with private monitoring where an unobservable state of the world influences the payoff functions and or the monitoring structure each player privately learns the state over time but cannot observe what the opponent learned we show that there are robust equilibria in which players eventually obtain payoffs as if the true state were common knowledge and players played a belief free equilibrium we also provide explicit equilibrium constructions in various economic examples copyright 2014 oxford university press

should monetary policy respond strongly to output gaps much recent monetary policy analysis has featured stochastic simulations with small structural macroeconomic models that include a spending vs saving is sector a price adjustment sector and an interest rate policy rule the first two are frequently specified so as to reflect optimizing behavior policy may or may not be specified as optimizing depending on the study s objectives some leading issues concern modifications to simple quantitative optimizing models that are needed to generate realistic degrees of persistence in inflation and output gap variables a major policy issue is whether it is desirable for monetary policy to respond strongly to the output gap the paper argues that the latter is unobservable and considers the implications of using a trend type measure while the true concept is of a type more in keeping with basic theory in such circumstances highly undesirable consequences are likely to ensue if policy responds strongly to the measured gap this abstract was borrowed from another version of this item

imperfect monitoring and impermanent reputations we study the long run sustainability of reputations in games with imperfect public monitoring it is impossible to maintain a permanent reputation for playing a strategy that does not play an equilibrium of the game without uncertainty about types thus a player cannot indefinitely sustain a reputation for noncredible behavior in the presence of imperfect monitoring

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

communication in repeated games with imperfect private monitoring this paper examines repeated games in which each player observes a private and imperfect signal on the actions played and in which players are allowed to communicate using public messages providing incentives for players to reveal their observations generates revelation constraints that combined with signal imperfections may be a source of inefficiencies however by delaying the revelation of their observations players may economize on the cost of deterring deviations and thereby avoid these inefficiencies because a player would not want to trigger a sanction that would penalize him too revelation constraints also tend to make sanctions difficult to enforce however with at least three players detecting deviations may not require that all the players reveal their observations in that case we obtain a nash threat version of the folk theorem with two players we do not obtain a similar result nevertheless we show that an efficient outcome can almost always be approximated

desirability of nominal gdp targeting under adaptive learning nominal gdp targeting has been advocated by a number of authors since it produces relative stability of inflation and output however all of the papers assume rational expectations on the part of private agents in this paper i provide an analysis of this assumption i use stability under recursive learning as a criterion for evaluating nominal gdp targeting in the context of a model with explicit micro foundations which is currently the workhorse for the analysis of monetary policy

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

hysteresis in a new keynesian model this paper examines hysteresis in which persistent unemployment takes on structural characteristics over time hysteresis is modeled as deterioration in labor market matching efficiency as the average duration of unemployment increases this is embedded in a simple new keynesian macro model a decline in labor market matching efficiency would be consistent with the observed rightward shift of the beveridge curve since the 2007 09 recession hysteresis is shown to lead to larger and more persistent responses of the unemployment rate and unemployment duration to productivity intertemporal preference and monetary shocks hysteresis also generates an increase in the natural rate of unemployment

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

disappearance of reputations in two sided incomplete information games abstract this paper examines the sustainability of reputations in a class of games with imperfect public monitoring and two long lived players both of whom have private information about their own type and uncertainty over the types of the other player this class namely reputation games with one sided moral hazard can capture economic interactions that may involve hidden information or hidden action extending the techniques of cripps et al 2004 it is found that neither player can sustain a reputation permanently for playing a noncredible behavior in these games and the reputations disappear uniformly across all nash equilibria

myopic perception in repeated games abstract in obtaining the celebrated folk theorem not only everyone must value his future sufficiently high but also everyone must be perceived so by the others this common perception of players time preferences must be maintained even after someone deviates this paper explores the implications of myopic perception in repeated games with perfect monitoring under myopic perception a deviator will not be perceived as a long run player in the continuation game which in turn affects the equilibria in the repeated game before deviation we develop an algorithm to compute a set that characterizes almost all equilibrium payoffs when the discount factor is sufficiently high when the stage game has a unique nash equilibrium and it strictly dominates all other stage game payoffs then under myopic perception the corresponding repeated game has a unique subgame perfect equilibrium

overcoming incentive constraints by linking decisions consider a bayesian collective decision problem in which the preferences of agents are private information we provide a general demonstration that the utility costs associated with incentive constraints become negligible when the decision problem is linked with a large number of independent copies of itself this is established by defining a mechanism in which agents must budget their representations of preferences so that the frequency of preferences across problems mirrors the underlying distribution of preferences and then arguing that agents incentives are to satisfy their budget by being as truthful as possible we also show that all equilibria of the linking mechanisms converge to the target utility levels the mechanisms do not require transferable utility or interpersonal comparisons of utility and are immune to manipulations by coalitions

inflation targeting a new framework for monetary policy he world s central bankers and their staffs meet regularly in venues from basle to washington to share ideas and discuss common problems perhaps these frequent meetings help explain why changes in the tactics and strategy of monetary policymaking such as the adoption of money growth targets in the 1970s the intensification of efforts to reduce inflation in the 1980s and the recent push for increased institutional independence for central banks tend to occur in many countries more or less simultaneously whatever their source major changes in the theory and practice of central banking are of great importance for both individual countries and the international economy in this article we discuss a new strategy for monetary policy known as inflation targeting which has sparked much interest and debate among central bankers and monetary economists in recent years this approach is characterized as the name suggests by the announcement of official target ranges for the inflation rate at one or more horizons and by explicit acknowledgment that low and stable inflation is the overriding goal of monetary policy other important features of inflation targeting include increased communication with the public about the plans and objectives of the monetary policymakers and in many cases increased accountability of the central bank

perfect communication equilibria in repeated games with imperfect monitoring this paper introduces an equilibrium concept called perfect communication equilibrium for repeated games with imperfect private monitoring this concept is a refinement of myerson s myerson r b 1982 optimal coordination mechanisms in generalized principal agent problems j math econ 10 67 81 communication equilibrium a communication equilibrium is perfect if it induces a communication equilibrium of the continuation game after every history of messages of the mediator we provide a characterization of the set of corresponding equilibrium payoffs and derive a folk theorem for discounted repeated games with imperfect private monitoring

is more information always better a case in credit markets this paper studies the impact of behavioral and non behavioral information contained in consumer credit reports on the credit market a repeated game of incomplete information between a borrower and a sequence of lenders is considered lenders beliefs regarding the borrower s type depend on the borrower s historical loan performance and other informative signals it is established that for low beliefs strategic defaults occur in equilibrium as the borrower defaults on his loans despite having the ability to repay them further as the ancillary signals become increasingly informative of the borrower s type the range of beliefs over which strategic defaults occur expands this increase in strategic defaults highlights an unintended negative effect of allowing informative signals to influence beliefs on the upside the informative signals allow lenders to learn the borrower s type more quickly

robust collusion with private information the game theoretic literature on collusion has been hard pressed to explain why a cartel should engage in price wars without resorting to either impatience symmetry restrictions inability to communicate or failure to optimize this paper introduces a new explanation that relies on none of these assumptions if the cartel s member firms have private information about their costs price wars can be optimal in the face of complexity specifically equilibria that are robust to pay off irrelevant disruptions of the information environment generically cannot attain or approximate efficiency an optimal robust equilibrium must allocate market shares inefficiently and may call for price wars under certain conditions for a two firm cartel cost interdependence is a sufficient condition for price wars to arise in an optimal robust equilibrium that optimal equilibria are inefficient generically applies not only to collusion games but also to the entire separable pay off environment a class that includes most typical economic models copyright 2012 oxford university press

measuring the nairu evidence from seven economies several specifications of state space models are used to obtain estimates of the nairu for the g7 except japan plus australia over the past 28 years a phillips curve type regression is shown to deliver estimates that do not mimic low frequency movements in unemployment rates even when a drift is included in the specification of the nairu standard errors around the estimates are extremely large using information about the behavior of unemployment in addition to inflation alleviates both these shortcomings

nominal gdp targeting and the taylor rule on an even playing field some economists advocate nominal gdp targeting as an alternative to the taylor rule these arguments are largely based on the idea that nominal gdp targeting would require less knowledge on the part of policymakers than a traditional taylor rule in particular a nominal gdp targeting rule would not require real time knowledge of the output gap we examine the importance of this claim by amending a standard new keynesian model to assume that the central bank has imperfect information about the output gap and therefore must forecast the output gap based on previous information forecast errors by the central bank can then potentially induce unanticipated changes in the short term nominal interest rate distinct from a standard monetary policy shock we show that forecast errors of the output gap by the federal reserve can account for up to 13 of the fluctuations in the output gap in addition our simulations imply that a nominal gdp targeting rule would produce lower volatility in both inflation and the output gap in comparison with the taylor rule under imperfect information

trends in co authorship in economics since 1985 it has been often noted mcdowell and melvin 1983 barnett et al 1988 piette and ross 1992 sutter and kocher 2004 that the share of co authored papers in economics has been increasing steadily the purpose of this study is to investigate some of the theories as to why co authorship has been increasing in the economics profession using data on the publication records of faculty at 129 us colleges and universities that offer doctoral degrees in economics poisson and logit regression models are estimated to explain co authorship results indicate that the likelihood of co authorship is greater for papers that combine quantitative analysis with another field and for papers published in higher quality journals further co authorship appears to differ in the many subfields of economics with the field of economic history and history of thought journal of economic literature jel categories n and b to be the least likely to co author and the fields of financial economics jel category g and agricu

monetary policy when potential output is uncertain understanding the growth gamble of the 1990s abstract t he fed kept interest rates low and essentially unchanged during the late 1990s despite a booming economy and record low unemployment these interest rates were accommodative by historical standards nonetheless inflation remained low how did the fed succeed in sustaining rapid economic growth without fueling inflation and inflationary expectations in retrospect it is evident that the productive capacity of the economy increased yet as events unfolded there was uncertainty about the expansion of the capacity of the economy and therefore about the sustainability of the fed s policy this paper provides an explanation for the success of the fed in accommodating growth with stable inflation in the late 1990s it shows that if the central bank is committed to reverse policy errors it makes because of unwarranted optimism inflation can remain in check even if the central bank keeps interest rates low because of this optimism in particular a price level target which is a simple way to model a commitment to offset errors can serve to anchor inflation even if the public does not share the central bank s optimism about shifts in potential output the paper shows that price level targeting is superior to inflation targeting in a wide range of situations the paper also provides econometric evidence that in contrast to earlier periods the fed has recently put substantial weight on the price level in setting interest rates moreover it shows that cpi announcement surprises lead to reversion in the price level finally it provides textual evidence that alan greenspan puts relatively more weight on the price level than inflation

targeting nominal income growth or inflation within a simple new keynesian model emphasizing forward looking behavior of private agents i evaluate optimal nominal income growth targeting versus optimal inflation targeting when the economy is mainly subject to shocks that do not involve monetary policy trade offs for society inflation targeting is preferable otherwise nominal income growth targeting may be superior because it induces inertial policy making which improves the inflation output gap trade off somewhat paradoxically inflation targeting may be relatively less favorable the more society dislikes inflation and the more persistent are the effects of inflation generating shocks jel e42 e52 f58

disappearing private reputations in long run relationships for games of public reputation with uncertainty over types and imperfect public monitoring cripps mailath and samuelson 2004 showed that an informed player facing short lived uninformed opponents cannot maintain a permanent reputation for playing a strategy that is not part of an equilibrium of the game without uncertainty over types this paper extends that result to games in which the uninformed player is long lived and has private beliefs so that the informed player s reputation is private journal of economic literature classi cation numbers c70 c78

the folk theorem for repeated games with observation costs abstract the folk theorem literature has been relaxing the assumption on how much players know about each other s past action here we consider a general model where players can buy precise information every period each player decides whether to pay a cost to accurately observe the actions chosen by other players in the previous period when a player does not pay the cost he obtains only imperfect private signals observational decisions are unobservable to others known strategies such as trigger strategies do not work since they fail to motivate players to pay for information this paper shows that the folk theorem holds for any level of observation costs unlike existing folk theorems with private monitoring ours imposes virtually no restriction on the nature of costless imperfect signals the theorem does not use explicit or costless communication thereby having implications on antitrust laws that rely on evidence of explicit communication the main message is that accurate observation alone however costly enables efficient cooperation in general repeated games

efficiency and observability with long run and short run players we present a general algorithm for computing the limit as 1 of the set of payoffs of perfect public equilibria of repeated games with long run and short run players allowing for the possibility that the players actions are not observable by their opponents we illustrate the algorithm with two economic examples in a simple partnership we show how to compute the equilibrium payoffs when the folk theorem fails in an investment game we show that two competing capitalists subject to moral hazard may both become worse off if their firms are merged and they split the profits from the merger finally we show that with short run players each long run player s highest equilibrium payoff is generally greater when their realized actions are observed journal of economic literature classification numbers c72 c73 d21 d82 d92 e22