regional earnings differences in great britain evidence from the new earnings survey hemmings p j 1991 regional earnings differences in great britain evidence from the new earnings survey reg studies 25 123 133 previous analysis comparing earnings between regions of great britain has concentrated upon the earnings of male employees using a large micro data base this paper takes a broader approach by examining earnings differences for female and part time employees as well as male employees human capital models are used to explain the variation in earnings in terms of characteristic differences and reward effects a restricted model with no regional element is tested against more general models which allow for regional variation in the constant term only and in both the constant and coefficients of the equations the most general model indicates that equations for the earnings of males display greater regional heterogeneity than those for females whilst the south east of england is the most distinctive region in terms of employee characteristics and in the returns to those e

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

a natural rate model of frictional and long term unemployment a simple labor market with spatial separation and markov production shocks is presented in the stationary equilibrium some workers are frictionally unemployed and others are long term unemployed the amounts of frictional and long term unemployment at each location depend on its recent history of productivity shocks producing a local hysteresis effect changes in the parameters affect the equilibrium aggregate amounts of frictional and long term unemployment differently in particular economies with larger moving costs will have more long term and total unemployment but less frictional unemployment this finding is broadly consistent with recently reported stylized facts

forecasting and trading monetary policy effects on the riskless yield curve with regime switching nelson siegel models abstract we use 1982 2014 data on the us riskless yield curve to show that regime switching dynamics in nelson siegel factor models extended to encompass variables that summarize the state of monetary policy lead to superior predictive accuracy such spread in forecasting power turns out to be statistically significant even controlling for parameter uncertainty and sample variation exploiting regimes we obtain evidence that the increase in predictive accuracy is stronger during the great financial crisis when monetary policy underwent a significant sudden shift although more caution applies in comparisons to a naive random walk benchmark over a few sub samples and when transaction costs are accounted for we report that the increase in predictive power owed to the combination of regimes and of variables that capture the stance of unconventional monetary policies is tradeable we devise and test butterfly strategies that exploit the forecasts from the models and obtain evidence of risk adjusted profits both per se and in comparisons to simpler models

local pay determination theoretical models of local pay are reviewed ranging from neoclassical perspectives unemployment wage trade off models and segmented labor market approaches the empirical work on u s north south differentials is discussed for the u k studies of the extent of and trends in geographical pay differentials are considered as well as behavioral explanations focusing on the role of excess demand the issue of adjustment processes is then discussed both in theory and in relation to empirical work for the u s and u k this discussion focuses largely on geographical spillover effects in terms of origins evidence and issues of identification finally the impact of certain impediments in the adjustment process are considered specifically in relation to the u k these concern the role and influence of national wage bargaining as well as factors inhibiting labor migration stemming from the housing market and the climate of the national labor market copyright 1992 by blackwell publishers ltd

fiscal spillovers in the euro area this paper analyses the dynamic effects of fiscal imbalances in a given emu member state on the borrowing costs of other countries in the euro area the estimation of a multivariate multi country time series model specifically a global var or gvar using quarterly data for the emu period suggests that euro denominated government yields are strongly linked with each other however financial markets seem to be able to discriminate among different issuers consequently fiscal imbalances in italy and in other peripheral countries should be closely monitored by their emu partners and the european institutions

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

the impact of oil price shocks on the term structure of interest rates in a structural var framework we study the impact of oil price shocks in the global crude oil market on the dynamics of the entire yield curve in four industrialised countries with different positions on the oil market the us canada norway and south korea responses of the term structure factors to oil market shocks are shown to differ contingent on the underlying sources that drive oil price shocks and the country s dependence on oil oil market specific demand shocks result in increases in the level factor in oil importing countries but have no such effect in oil exporting countries oil supply disruptions have short lived negative responses of the slope factors in the us and canada associated with loosening monetary policy whilst demand side shocks tend to lead to increases the slope in all countries overall oil supply and demand shocks jointly account for a considerable amount of the observed variation in the term structure of interest rates

electricity planning and implementation in sub saharan africa a systematic review abstract universal electricity access is an important development objective and the focus of a number of key global un initiatives while robust electricity planning is widely believed to be a prerequisite for effective electrification to date no comprehensive overview of electricity planning research has been undertaken on sub saharan africa the world region with the lowest access rates this paper reviews quantitative and qualitative electricity planning and related implementation research considering each of the 49 sub saharan african countries the four regional power pools and the sub continent as a whole applying a broad understanding of electricity planning and a practical limit of 20 reviewed articles per country and region 306 relevant peer reviewed journal articles are included in this review a general classification scheme is introduced that classifies the planning literature along the addressed value chain depth number of different analysed criteria and number of evaluated decision alternatives the literature is found to be strongly clustered in a few countries with less than 5 identified relevant articles in 36 of the 49 countries the total amount of articles per year is clearly increasing over time addressing technology choice operation distribution and implementation analyses although including different high level criteria in analysing electricity systems is common the literature is only starting to use formalised multi criteria decision making mcdm tools the review indicates that 63 of relevant articles favour renewable energy technologies for their given problems frequently mentioned success factors for electrification in sub saharan africa include adequate policy design sufficient finance and favourable political conditions while considerable regional and methodological literature gaps are apparent the literature in this review identifies a rich and fruitful ground for future research to fill these gaps

cross border asset holdings and comovements in sovereign bond markets we analyze the importance of different asset holdings for the interdependence of the yield curves in the euro area using a spatial var model we find that the cross border holdings of long term deb

economic determinants of the nominal treasury yield curve abstract macroeconomic shocks account for most of the variability of nominal treasury yields inducing parallel shifts in the level of the yield curve we develop a new approach to identifying macroeconomic shocks that exploits model based empirical shock measures technology shocks shift yields through their effect on expected inflation and the term premium shocks to preferences for current consumption affect yields through their impact on real rates and expected inflation for both shocks the systematic reaction of monetary policy is an important transmission pathway we find little evidence that fiscal policy shocks are an important source of interest rate variability

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

seasonal solow residuals and christmas a case for labor hoarding and increasing returns in aggregate unadjusted data measured solow residuals exhibit large seasonal variations total factor productivity grows rapidly in the fourth quarter at an annual rate of 16 percent and regresses sharply in the first quarter at an annual rate of 24 percent how much of the total seasonal variation in the measured solow residual can be explained by christmas the answer to this question is surprising with increasing returns and time varying labor effort christmas is sufficient to explain the seasonal variation in the solow residual consumption average productivity and output in all four quarters our analysis of seasonally unadjusted data uncovers important roles for labor hoarding and increasing returns that are difficult to identify in adjusted data prescott 1986 has argued that the variability of solow s residual is a reasonable estimate of the variability of exogenous technology shocks when solow s residual is measured using seasonally unadjusted data for the postwar u s economy it exhibits large seasonal variations growing rapidly in the fourth quarter at an annual rate of 16 percent and falling sharply in the first quarter at an annual rate of 24 percent this paper starts from the premise that it is implausible to attribute seasonal variation of this magnitude to changes in the state of technology we present a model in which all seasonal fluctuations arise from a single demand shift christmas this demand shift together with misspecification of the traditional production function leads to large seasonal variation in the solow residual we consider two candidates for misspecification labor hoarding and external increasing returns to scale even when technological growth is aseasonal either candidate in isolation can induce spurious seasonality in the solow residual our general equilibrium analysis indicates that 1 the economy s seasonal patterns in all four quarters may be a response simply to a fourth quarter consumption demand shift and 2 a combination of labor hoarding and external increasing returns is important for replicating these patterns in aggregate quantity variables for the postwar u s economy since our analysis identifies important roles for labor hoarding and increasing returns these results have implications for nonseasonal macroeconomic models indeed our analysis im

tax disturbances and real economic activity in the postwar united states abstract this paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates it finds that systematically including tax variables in a standard real business cycle model substantially improves the model s ability to reproduce basic facts about postwar u s business cycle fluctuations in particular modeling fluctuations in personal and corporate income tax rates increases the model s predicted relative variability of hours and decreases its predicted correlation between hours and average productivity fluctuations in tax rates produce large substitution effects that alter the leisure labor supply decision

new keynesian macroeconomics and the term structure this article complements the structural new keynesian macro framework with a no arbitrage affine term structure model whereas our methodology is general we focus on an extended macro model with an unobservable time varying inflation target and the natural rate of output which are filtered from macro and term structure data we obtain large and significant estimates of the phillips curve and real interest rate response parameters our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks the inflation target dominates the variation in the level factor whereas the monetary policy shocks dominate the variation in the slope and curvature factors

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

analyzing interest rate risk stochastic volatility in the term structure of government bond yields abstract we propose a nelson siegel type interest rate term structure model where the underlying yield factors follow autoregressive processes with stochastic volatility the factor volatilities parsimoniously capture risk inherent to the term structure and are associated with the time varying uncertainty of the yield curve s level slope and curvature estimating the model based on us government bond yields applying markov chain monte carlo techniques we find that the factor volatilities follow highly persistent processes we show that yield factors and factor volatilities are closely related to macroeconomic state variables as well as the conditional variances thereof

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

news shocks and the slope of the term structure of interest rates abstract we adopt a statistical approach to identify the shocks that explain most of the fluctuations of the slope of the term structure of interest rates we find that one shock can explain the majority of unpredictable movements in the slope impulse response functions lead us to interpret this shock as news about future total factor productivity tfp by showing that slope shocks are essentially tfp news shocks we provide a new explanation for the relationship between the slope and macroeconomic fundamentals our results also provide a new empirical benchmark for structural models at the intersection of macroeconomics and finance jel e23 e43 e52 g12 g14

cyclical variation in the interindustry wage structure this paper presents an analysis of cyclical variation in the interindustry wage structure the study is therefore concerned with changes in relative wages among industries and not directly with the determination of the absolute wage level or changes in the absolute wage level the theory of the wage structure presented here is based on two hypotheses tihe first introduced initially as a maintained hypothesis is that differences among industries in the competitive structure of their product and labor markets result in wage inequalities for given skill levels the second hypothesis and the major finding of the paper is that the size of the wage differentials is a function not only of the extent and nature of the noncompetitive elements but also of the excess demand conditions in the labor market this result is derived from the proposition that under competitive supply conditions labor allocation is based on relative wages to support the theory a wage structure equation is estimated with the coefficient of variation of straight time average hourly earnings in the two digit manufacturing industries as the dependent variable the implications of the study for aggregate and industry wage equations are then discussed

capital skill complementarity and the interregional distribution of human capital in us manufacturing 1989 capital skill complementarity and the interregional distribution of human capital in us manufacturing applied economics vol 21 no 8 pp 1087 1098

power sector reforms in zimbabwe will reforms increase electrification and strengthen local participation abstract zimbabwe is a developing country currently in the grips of an economic crisis the power sector has been starved of investments and there is an inadequate revenue flow into the country to finance new investment internal resources are inadequate to maintain the current system and to finance new investment financial and operational performance has deteriorated rural electrification is very low with only 18 of the population having access to electricity the government and the utility zimbabwe electricity supply authority have recognised their inability to meet these challenges and have initiated a reform program in order to open up the power sector to private investors this article analyses the current technical and operational problems faced by the utility and their impact on its financial performance in addition the article reviews the status of electrification in zimbabwe and the participation of local private investors in the power sector policy recommendations on how the technical and financial performance of the utility can be enhanced and on how the rate of electrification especially in rural areas can be improved are presented the increased participation of local private sector players into the power industry is a key issue and recommendations are made on how the government can provide incentives to facilitate their effective participation

interest rate co movements global factors and the long end of the term spread the decoupling of us short and long interest rates has been a distinctive feature of the 2000s we employ recent advances in panel econometrics to document this disconnect for industrial countries and link it to a global latent factor in long term rates we investigate whether international forces such as global inflation global output or the global savings glut may be behind this global latent factor the savings glut is the most likely contender suggesting that reserve accumulation and a search for yield from emerging markets has lowered long rates internationally driving a wedge between domestic short and long rates

the empirical failure of the expectations hypothesis of the term structure of bond yields this paper tests the expectations hypothesis eh using us monthly data for bond yields spanning the 1952 2003 sample period and ranging in maturity from 1 month to 10 years we apply the lagrange multiplier test developed by bekaert and hodrick 2001 and extend it to increase the test power a by introducing economic variables as conditioning information and b by using more than two bond yields in the model and testing the eh jointly on more than one pair of yields while the conventional bivariate procedure provides mixed results the more powerful testing procedures suggest rejection of the eh throughout the maturity spectrum examined

alternative models of earnings determination and labor market structures there are three distinct research traditions in the analysis of individual earnings determination human capital or earnings function analyses aggregate wage analyses and labor demand analyses an important and incongruous aspect of each is the treatment of geographical differences in labor markets this paper first investigates the magnitude and character of geographical wage differentials the sizable differences discovered there are then related to the existing and highly simplified models of labor market differences while the two major classes of models compensating differentials and labor demand differ significantly in assumptions and implications it is impossible to distinguish adequately between them there appears to be a clear need for more structural analyses of labor market operations

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

wage differentials across labor markets and workers does cost of living matter wage differentials studies rarely account for interarea differences in cost of living owing both to data limitations and theoretical ambiguity this study develops a price index for 185 metropolitan areas comprising about 70 of the u s labor force current population survey data for 1985 95 and data on sitespecific amenities are used to estimate earnings differentials based on nominal wages wages fully adjusted for measured cost of living and a simple approximation of real wages with partial adjustment for pricelevel differences dispersion in approximate real wages across 185 labor markets and differentials by region and city size are substantially lower than dispersion in nominal or full adjustment wages estimates of racial and ethnic differentials display moderate sensitivity to choice of a wage measure whereas other standard differentials do not both nominal wages and wages fully adjusted for cost of living may provide misleading estimates of real wage differentials absent data on interarea prices and amenities researchers should include detailed controls for region and city size in nominal wage equations jel j31 r23

why do term structures in different currencies co move abstract yield curve fluctuations across different currencies are highly correlated this paper investigates this phenomenon by exploring the channels through which macroeconomic shocks are transmitted across borders macroeconomic shocks affect current and expected future short term rates as central banks react to changing economic environments investors could also respond to these shocks by altering their required compensation for risk macroeconomic shocks thus influence bond yields both through a policy channel and through a risk compensation channel using data from the us the uk and germany we find that world inflation and us yield level together explain over two thirds of the covariance of yields at all maturities further these effects operate largely through the risk compensation channel for long term bonds

the determinants of uk business cycles this paper considers the causes of post war uk business cycles using an extended stochastic growth model we construct estimates of productivity and preference shocks both of which are highly persistent volatile and potentially capable of explaining uk business cycles we find the productivity term is the dominant explanation of uk output fluctuations but our estimated preference shift is crucial in understanding employment movements a variety of granger causality tests establish whether these productivity and preference terms are unpredictable and so can be potentially considered as the cause of uk business cycles or whether they are themselves granger caused by other variables the aim of business cycle theory is to identify the causes of business cycles and outline the various propagation mechanisms through which these produce cyclical fluctuations the purpose of this paper is to study the former using uk data we investigate the main sources of uk post war business cycles our aim in doing so is to discriminate between competing theories of the business cycle as well as to increase our understanding of particular episodes of uk post war economic history to achieve this aim we focus on two fundamental sources of business cycle fluctuations productivity shocks and a preference shift or more generally a supply and demand shock we choose these because i they can be easily calculated using only published data avoiding the need for any econometric identification assumptions ii they represent the simplest extension to the neoclassical stochastic growth model which can explain observed uk business cycle patterns they therefore form a natural benchmark with which to assess prescott s 1986 claim that this model can account for both growth and business cycles however while our main focus is on these two shocks our methodology is broad enough to allow for a wide range of potential causes of uk business cycles in section 1 of the paper we outline some stylised facts of the uk business cycle and motivate more rigorously our focus on productivity and preference shocks in section 2 we provide estimates of these shocks discuss their univariate properties and examine their correlation with key business cycle variables we find both shocks to be very volatile and persistent with the productivity variable accounting for a large proportion of output fluctuations and preference shifts more important in explaining employment movements simulations show that in combination with a neoclassical growth model these shocks are capable of matching uk business cycles however if

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

the dynamic impacts of monetary policy an exercise in tentative identification it is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate these assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses this paper tentatively identifies supply and demand shocks in the markets for reserves and m2 for the 1980s and contrasts them with results for the 1970s in the later period identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses

factor hoarding and the propagation of business cycles shocks this paper analyzes the role of variable capital utilization rates in propagating shocks over the business cycle to this end we formulate and estimate an equilibrium business cycle model in which cyclical capital utilization rates are viewed as a form of factor hoarding we find that variable capital utilization rates substantially magnify and propagate the impact of shocks to agents environments the strength of these propagation effects is evident in the dynamic response functions of various economy wide aggregates to shocks in agents environments in the statistics that we construct to summarize the strength of the propagation mechanisms in the model and in the volatility of exogenous technology shocks needed to explain the observed variability in aggregate u s output other authors have argued that standard real business cycle rbc models fail to account for certain features of the data because they do not embody quantitatively important propagation mechanisms these features include the observed positive serial correlation in the growth rate of output the shape of the spectrum of the growth rate of real output and the correlation between the forecastable component of real output and various other economic aggregates allowing for variable capital utilization rates substantially improves the ability of the model to account for these features of the data

identifying productivity and amenity effects in interurban wage differentials this study focuses on the relative importance of amenity and productivity differences in determining wage differentials across urban areas the approach developed takes advantage of the connection between land and labor market clearing conditions required for locational equilibrium of households and firms data on recent movers are used to estimate equilibrium wages and rents for a sample of metropolitan areas this information is then used to identify amenity and productivity components of wages for each city in the sample using national estimates of the relative share of land in consumption and production differences in productivity and amenities are found to be roughly equal sources of wage variation across the sample

macroeconomic models and the yield curve an assessment of the fit abstract many have questioned the empirical relevance of the calvo yun model this paper adds a term structure to three widely studied macroeconomic models calvo yun hybrid and svensson we back out from observations on the yield curve the underlying macroeconomic model that most closely matches the level slope and curvature of the yield curve with each model we trace the response of the yield curve to macroeconomic shocks we assess the fit of each model against the observed behaviour of interest rates and find limited support for the calvo yun model in terms of fit with the observed yield curve we find some support for the hybrid model but the svensson model performs best

sticky price models and the natural rate hypothesis abstract a major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state in this paper we estimate a dynamic optimizing business cycle model whose price setting behavior satisfies the natural rate hypothesis the price adjustment specifications we consider are the sticky information specification of mankiw and reis sticky information versus sticky prices a proposal to replace the new keynesian phillips curve quarterly journal of economics 117 1295 1328 and the indexed contracts of christiano et al nominal rigidities and the dynamic effects of a shock to monetary policy journal of political economy 113 1 45 our empirical estimates of the real side of the economy are similar whichever price adjustment specification is chosen consequently the alternative model specifications deliver similar estimates of the u s output gap series but the empirical behavior of the gap series differs substantially from standard gap estimates

yield curve in an estimated nonlinear macro model this paper estimates a sticky price macro model with us macro and term structure data using bayesian methods the model is solved by a nonlinear method the posterior distribution of the parameters in the model is found to be bi modal the degree of nominal rigidity is high at one mode sticky price mode but is low at the other mode flexible price mode i find that the degree of nominal rigidity is important for identifying macro shocks that affect the yield curve when prices are more flexible a slowly varying inflation target of the central bank is the main driver of the overall level of the yield curve by changing long run inflation expectations in contrast when prices are more sticky a highly persistent markup shock is the main driver the posterior probability of each mode is sensitive to the use of observed proxies for inflation expectations ignoring additional information from survey data on inflation expectations significantly reduces the posterior probability of the flexible price mode incorporating this additional information suggests that yield curve fluctuations can be better understood by focusing on the flexible price mode considering nonlinearities of the model solution also increases the posterior probability of the flexible price mode although to a lesser degree than using survey data information

amenities and regional differences in returns to worker characteristics average wages in regions in the united states vary considerably in trying to explain these differences in the average wage across regions a number of studies have found that differences in the returns to characteristics of workers such as years of schooling are as important as differences in the skill composition of the labor force 4 6 10 141 these differences in returns are generally interpreted as reflecting regional differences in demand for worker characteristics coupled with barriers to factor mobility this interpretation is based on the argument that the presence of at least one perfectly mobile factor with perfect information will cause spatial convergence in characteristic prices as that particular factor exploits any spatial price differential 4 p 2161 this paper suggests an alternative to this demand based explanation for regional differences in the structure of wages one based on regional differences in the supply of worker characteristics this explanation does not rely on impediments to the movement of workers or firms and is consistent with an equilibrium view of wages in which regional wage differentials are viewed as compensation for local amenities the theoretical model presented in the following section assumes capital and labor are perfectly mobile with perfect information implying that in equilibrium the utility of workers with similar characteristics is the same in all locations this convergence of utility however does not necessarily imply convergence of characteristic prices equilibrium differences in the returns to a specific worker characteristic can exist if worker characteristics affect an individual s valuation of an area s amenities relative to the individual s demand for land

a traditional interpretation of macroeconomic fluctuations under the traditional interpretation of macroeconomic fluctuations aggregate demand shocks move output and prices in the same direction while aggregate supply shocks move output and prices in opposite directions this paper examines the joint behavior of u s output unemployment prices wages and nominal money and asks whether it is consistent with this interpretation the answer is a qualified yes

how well does the is lm model fit postwar u s data postwar u s time series for money interest rates prices and gnp are characterized by a multivariate process driven by four exogenous disturbances those disturbances are identified so that they can be interpreted as the four main sources of fluctuations found in the is lm phillips curve model money supply money demand is and aggregate supply shocks the dynamic properties of the estimated model are analyzed and shown to match most of the stylized predictions of the model the estimated decomposition is also used to measure the relative importance of each shock to interpret some macroeconomic episodes and to study sources of permanent shocks to nominal variables

core and crust consumer prices and the term structure of interest rates we propose a model for nominal and real term structures of interest rates that includes dynamics for the three main components of total inflation core food and energy these dynamics combine together to produce a measure of expected total inflation that investors use to price nominal treasuries this framework captures different frequencies in inflation fluctuations shocks to core are more persistent and less volatile than shocks to food and especially energy the crust we find that a common structure of latent factors determines and predicts the term structure of yields and inflation our model outperforms popular benchmarks e g arma var and random walk specifications and it is at par with the survey of professional forecasters in forecasting inflation moreover we estimate real rates that agree with inflationindexed bond yields after adjusting for the liquidity premium in these bonds finally inflation and real rate risk premia show a declining pattern consistent with the changing nature of inflation and real rate risks

how does government spending news affect interest rates evidence from the united states abstract this study analyzes the effects of news shocks to u s government spending on interest rates especially long term interest rates and investigates the role of agents expectations in the propagation of government spending to interest rates using large bayesian vector autoregressive models with sufficient information we find that news about increases in government spending induce significant increases in both short and long term interest rates while the effects of government spending surprise shocks on interest rates are mixed and ambiguous government spending news shocks in the baseline model account for around 10 of the variance in forecast errors in long term interest rates which is much more important than government spending itself using empirical dynamic term structural models we further decompose increases in long term interest rates into changes in expectations of future monetary policy and changes in term premiums we find that an increase in the long term interest rate after a positive government spending news shock mainly reflects higher expected future short term interest rates which demonstrates the importance of the coordination between fiscal and monetary policy communication

potential for solar water heating in zimbabwe this paper discusses the economic social and environmental benefits from using solar water heating swh in zimbabwe by comparing different water heating technology usage in three sectors over a 25 year period the potential of swh is demonstrated in alleviating energy and economic problems that energy importing countries like zimbabwe are facing swh would reduce coincident electricity winter peak demand by 13 and reduce final energy demand by 27 assuming a 50 penetration rate of swh potential demand up to 250 million can be saved and co2 emissions can be reduced by 29 over the 25 year period benefits are also present at individual consumer level for the electricity utility as well as for society at large in the case of zimbabwe policy strategies that can support renewable energy technologies are already in current government policy but this political will need to be translated into enhanced practical activities a multi stakeholder approach appears to be the best approach to promoting widespread dissemination of swh technologies

labor hoarding and the business cycle this paper investigates the sensitivity of solow residual based measures of technology shocks to labor hoarding behavior using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption we estimate the fraction of the variability of the solow residual that is due to technology shocks our results support the view that a significant proportion of movements in the solow residual are artifacts of labor hoarding behavior specifically we estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models in addition our results suggest that existing real business cycle studies substantially overstate the extent to which technology shocks account for the variability of postwar aggregate u s output

determinants of the long term yield in canada an open economy var approach this study analyses the economic determinants of short and long term interest rates in canada using a structural vector autoregressive var model the var takes into consideration that canadian financial markets are small and open relative to those in the usa and that canada is a relatively large exporter of commodities in part the empirical results for canada are similar to those for the usa aggregate demand shocks have relatively large and persistent effects on long term yields while aggregate supply shocks do not have significant effects however monetary policy shocks in canada are found to have larger and more persistent effects on long term yields than those found for the usa the most striking result is that movements in us monetary policy have relatively large significant and persistent effects on canadian long term bond yields furthermore us monetary policy disturbances can account for the overall trend in long term yields in canada

term structure evidence on interest rate smoothing and monetary policy inertia abstract numerous studies have used quarterly data to estimate monetary policy rules or reaction functions that appear to exhibit a very slow partial adjustment of the policy interest rate the conventional wisdom asserts that this gradual adjustment reflects a policy inertia or interest rate smoothing behavior by central banks however such quarterly monetary policy inertia would imply a large amount of forecastable variation in interest rates at horizons of more than 3 months which is contradicted by evidence from the term structure of interest rates the illusion of monetary policy inertia evident in the estimated policy rules likely reflects the persistent shocks that central banks face

productivity shocks and real business cycles abstract productivity shocks play a central role in real business cycles as an exogenous impulse to macroeconomic activity however measured solow prescott residuals do not behave as an exogenous impulse rather econometric evidence provided in this paper indicates that 1 money interest rates and government spending granger cause these impulses and 2 a substantial component of the variance of these impulses between one quarter and one half is attributable to variations in aggregate demand these results are robust to a number of econometric issues including measurement errors specification of the production function and certain forms of omitted real variables

the information content of elections and varieties of the partisan political business cycle this event study uses economic forecasts and opinion polls to measure the response of expectations to election surprise use of forecast data complements older work on partisan cycles by allowing a tighter link between election and response thereby mitigating concerns of endogeneity and omitted variables i find that forecasters respond swiftly and significantly to election surprise i further argue that the response ought to vary across countries with different institutional foundations in support i find that there exist three distinct patterns in forecasters responses to partisan surprise corresponding to hall and soskice s three varieties of capitalism

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

expectations bond yields and monetary policy through explicitly incorporating analysts forecasts as observable factors in a dynamic arbitrage free model of the yield curve this research proposes a framework for studying the impact of shifts in market sentiment on interest rates of all maturities an empirical examination reveals that survey expectations about inflation output growth and the anticipated path of monetary policy actions contain important information for explaining movements in bond yields estimates from a forward looking monetary policy rule suggest that the central bank exhibits a preemptive response to inflationary expectations while accommodating output growth and monetary policy expectations forecasted gdp growth plays a significant role in explaining time variation in the market prices of risk the sensitivity of long yields is linked to the persistence of expected inflation under the risk neutral measure models of this type may provide traders and policymakers with a new set of tools for formally assessing the reaction of bond yields to shifts in market expectations the author 2010 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

the yield curve and the macro economy across time and frequencies this paper assesses the relation between the yield curve and the main macroeconomic variables in the u s between early 1960s and 2009 across time and frequencies using wavelet analyses the shape of the yield curve is modelled by latent factors corresponding to its level slope and curvature estimated by maximum likelihood with the kalman filter the macroeconomic variables measure economic activity unemployment inflation and the fed funds rate the cross wavelet tools employed coherency and phase difference the set of variables and the length of the sample allow for a thorough appraisal of the timevariation and structural breaks in the direction intensity synchronization and periodicity of the relation between the yield curve and the macro economy our evidence establishes a number of new stylized facts on the yield curve macro relation and sheds light on several results found in the literature which could not have been achieved with analyses conducted strictly in the time domain as most of the literature or purely in the frequency domain

accounting for the great depression economists have offered many theories for the u s great depression but no consensus has formed on the main forces behind it here we describe and demonstrate a simple methodology for determining which theories are the most promising we show that a large class of models including models with various frictions are equivalent to a prototype growth model with time varying efficiency labor and investment wedges that at least on face value look like timevarying productivity labor taxes and investment taxes we use u s data to measure these wedges feed them back into the prototype growth model and assess the fraction of the fluctuations in 1929 39 that they account for we find that the efficiency and labor wedges account for essentially all of the decline and subsequent recovery investment wedges play at best a minor role this article originally appeared in the american economic review american economic association

general equilibrium real and nominal interest rates we derive the general equilibrium short term real and nominal interest rates in a monetary economy affected by technological and monetary shocks and where the price level dynamics is endogenous assuming fairly general processes for technology and money supply we show that an inherent feature of our equilibrium is that any real variable dynamics in particular that of the short term real interest rate is driven by both monetary and real factors this money non neutrality is generic as it does not stem from any friction such as price stickiness or from a particular utility function non neutrality obtains because the ex ante cost of real money holdings is random due to inflation uncertainty we then analyze in depth a specialized version of this economy in which the state variables follow square root processes and the representative investor has a log separable utility function the short term nominal rate dynamics we obtain encompasses most of the dynamics present in the literature from vasicek and cir to recent quadratic and more generally non linear interest rate models moreover our results pave the way to several new nominal term structures

explorations into factors explaining money market returns in this article we measure and interpret the common factors that describe money market returns results are presented for both three and four factor models we find that the three factor model explains on average 86 percent of the total variation in most money market returns while the four factor model explains on average 90 percent of this variation using mimicking portfolios we provide an interpretation of the systematic risks represented by these factors in this article we attempt to measure and interpret the common factors that describe money market returns the factor approach we employ assumes that the covariance matrix of a set of random variables in this case excess returns can be decomposed into common or systematic components and idiosyncratic or nonsystematic components this decomposition into systematic and nonsystematic components is based on an assumption of a linear relationship between the returns of each security and a set of common factors this is the assumption of linear return generating models which form an integral part of the structure of many asset pricing theories for example arbitrage pricing theory apt as developed by ross 1976 the interpretation is that the common factors represent sources of systematic or nondiversifiable risk and the idiosyncratic component of returns represents diversifiable risks our focus here is not on testing a particular asset pricing model per se but on developing empirical evidence for the existence of stylized facts regarding money market returns the stylized facts take the form of the existence measurement and interpretation of the common factors that are found in money markets our attempt to measure and interpret these sources of systematic risk may eventually lead to the construction of observable eco

what matters when the impact of ecb communication on financial market expectations this article analyses financial markets reaction to european central bank s ecb communication we apply a novel indicator that quantifies the contents of the ecb s introductory statements and allows disentangling ecb statements on prices the real and the monetary sector we provide evidence that it matters what issue the ecb is speaking about especially the ecb s statements on price developments represent important news to financial markets it also matters when the ecb affects markets communication drives maturities above 4 months