efficiency and equalization payments in a federal system of government a synthesis and extensions of recent results this paper investigates the rationale for a system of equalization transfers in a federal system of government the existing sources of inefficiency of resource allocation in economies with more than one level of government are synthesized in the framework of a simple decentralized multiprovince model with mobile factors of production the sources of inefficiency arise first because migrants respond at the margin to incorrect signals owing to the phenomena of rent sharing and fiscal exterality and second because of global rather than local inefficiencies the model is then extended to consider the role of the federal government in providing intergovernmental transfers in the face of such inefficiencies in addition to synthesizing the sources of inefficiency in federal models the equity arguments for equalization are briefly recounted efficacite et paiements de perequation dans un systeme federal de gouvernement synthese et extensions de certains resultats recents ce memoire examine la logique qui soustend un systeme de paiements de perequation dans un systeme fdderal de gouverement les auteurs utilisent un modele simple d un systeme multi provincial decentralise avec des facteurs de production mobiles pour definir les sources d inefficacite dans l allocation des ressources dans les dconomies qui possedent plus d un niveau de gouvernement ces inefficacites proviennent de ce que d abord ceux qui se deplacent le font en reponse a la marge a des signaux incorrects engendres par le partage de la rente sur la base de la residence et par les phenomenes d exteralites fiscales elles sont aussi le resultat d inefficacites globales plutot que locales dans le cadre de ce modele les auteurs analysent le role du gouvernement federal effectuant des transferts inter gouverementaux pour corriger ces inefficacites en plus de presenter une synthese des sources d inefficacite dans les regimes federaux les auteurs font un bref rappel en passant a l ensemble des arguments fondes sur l equite qu on utilise pour rationaliser les paiements de perequation this paper is a linear combination of two papers presented at the may 1982 meetings of the canadian economics association in halifax entitled the case for equalization payments by the authors and recent developments in the theory of regional economic policy in canada by boadway the authors are grateful for comments by the discussants jim johnson and baxter macdonald and by jack mintz brian scarfe gerard belanger david sewell tom courchene and the referees we are especially heavily indebted to dan usher for many stimulating comments and suggestions while the work was in progress some of the above persons will undoubtedly disagree with the emphasis we have chosen to put on various aspects of the analysis for policy purposes support for some of this work has been provided by the economic council of canada and is gratefully acknowledged canadian journal of economics revue canadienne d economique xv no 4 november novembre 1982 printed in canada imprimd au canada 0008 4085 82 0000 0613 01 50 1982 canadian economics association this content downloaded from 207 46 13 127 on wed 12 oct 2016 04 27 47 utc all use subject to http about jstor org terms 614 robin boadway and frank flatters

models of inflation expectations formation a comparison of household and economist forecasts the recent appreciation of the critical role played by expectations of inflation in the behavior of macromodels has stimulated empirical studies of the formation of expectations by different groups time series survey data on expectations of inflation exist now for economists households and businesses these data have been used as independent variables in explaining wage behavior gordon 16 turnovsky and wachter 34 and de menil and bhatta 5 prices turnovsky and wachter 34 and wachtel 36 interest rates gibson 14 hendershott and van horne 19 pearce 30 and mishkin 27 and consumption wachtel 36 generally with a significant improvement in explanatory power they have also been used as dependent variables in attempts to determine how expectations are formed by gordon 15 mullineaux 28 jacobs and jones 20 and figlewski and wachtel 9 for the economist survey van duyne 35 for the household survey and leonard 23 and de leeuw and mckelvey 4 for businesses given their different levels of knowlege of economics and perspectives one might expect that the models used by the different groups to forecast inflation would

on data a case study of the evolution of income inequality across time and across countries this paper takes income distribution as a case study of the role of data in economics after describing the transformation which has taken place with regard to the availability of data on income inequality it discusses how the comparability of these estimates is brought into question by differences in methodology that cannot be eliminated by simple adjustments recent analyses of the relationships between income inequality and growth or globalisation are shown to be based on time series plagued by discontinuities which can seriously affect regression results the paper concludes by calling for greater attention to data quality in applied economics

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

crowdfunding and innovation entrepreneurs have started relying on crowdfunding to fund their investments this paper surveys the literature linking crowdfunding with innovation in entrepreneurial firms two distinct areas are discussed first crowdfunding has the potential to foster innovation by offering new sources of capital to innovation driven firms and thereby reduce the funding gap for innovative startups second crowdfunding offers a way for the crowd to participate in the innovation process by providing feedback to the entrepreneur this feedback can take various forms including providing ideas on the development of the product during and after the campaign in the spirit of crowdsourcing and providing valuable information on the future demand for the new product

transboundary pollution and household mobility are they equivalent abstract recent research has shown that perfect household mobility can serve as a disciplinary mechanism inducing national policy makers to internalize interregional externalities caused by transboundary pollution this paper develops a differential game to illustrate that the result is not necessarily robust when migration costs and explicit dynamics are introduced the paper shows that if governments constantly reoptimize imperfect household mobility leads to a tragedy of the commons and individual countries overemit even when pollution is purely local moreover these dynamic externalities get worse as the degree of household mobility increases and there is a qualitative difference between almost perfect and perfect mobilty that is a discontinuity at zero migration costs

financial market efficiency the decomposition of anticipated versus unanticipated money growth and further tests of the relation between money and real output note probably the most controversial empirical findings in macroeconomics in the last decade stem from robert barro s investigations into the relative effects of unanticipated versus anticipated money growth on unemployment and real output these studies generally proceed by decomposing observed money growth into what is defined to be its anticipated and unanticipated components and then test the restriction that only the unanticipated money measure has important effects for unemployment and real output in black box reduced form real side equations that include determinants of the natural rates of unemployment and real output as additional explanatory variables l the results of these tests for the annual postwar u s data generally cannot reject the hypothesis that only unanticipated money growth is important for the determination of aggregate real activity 2 anticipated money growth is found to be neutral for unemployment and real output these results are important because they give empirical support to the assertion that the apparent nonneutrality of observed money growth does not provide any firm basis for the efficacy of a systematic countercyclical monetary policy it should be clear that a crucial problem in testing for the neutrality nonneutrality of anticipated unanticipated money growth lies in developing an appropriate decomposition of observed money growth into its anticipated and unanticipated parts small 13 mishkin 8 and weintraub 14 among others have

the response of short term interest rates to weekly money announcements each friday at 4 10 p m est the federal reserve announces its estimate of the narrowly defined money stock for the statement week ending nine days previously these money announcements have become one of the main events in financial markcts if for no other reason than the fact that significant movements in interest rates have been associated with large unanticipated changes in the money stock moreover since the late 1970s interest rate fluctuations in response to money stock announcements have dramatically increased over the 1l 2 hour intervals spanning the weekly announcements for example the variance of the change in the threemonth treasury bill yield in the three years since october 1979 is more than thirty times larger than that of the previous two year period l two factors may account for a large portion of the increased volatility of shortterm interest rates first on october 6 1979 the federal reserve adopted a reserve aggregate approach to monetary control replacing a procedure that emphasized stability of short term yields second despite the greater emphasis placed on monetary control the variance of weekly announced changes in the money stock has risen by about 70 percent since late 1979 in turn if greater volatility of announced changes makes future changes more difficult to predict the volatility of unanticipated weekly changes in money would have also increased 2 thus if financial markets are efficient and if weekly money announcements contain relevant information larger unanticipated changes in money may have caused larger fluctuations in interest rates

crowdfunding and innovation crowdfunding and innovation entrepreneurs have started relying on crowdfunding to fund their investments this paper surveys the literature linking crowdfunding with innovation in entrepreneurial firms two distinct areas are discussed first crowdfunding has the potential to foster innovation by offering new sources of capital to innovation driven firms and thereby reduce the funding gap for innovative startups second crowdfunding offers a way for the crowd to participate in the innovation process by providing feedback to the entrepreneur this feedback can take various forms including providing ideas on the development of the product during and after the campaign in the spirit of crowdsourcing and providing valuable information on the future demand for the new product

contemporary topics in finance a collection of literature surveys finance plays a critical function in economies and continues to evolve in practice complemented by research policy and regulation the articles in this special issue provide up to date reviews of contemporary topics in finance unconventional monetary policy implicit bank guarantees and financial fraud are in various ways associated with rethinks stimulated by the global financial crisis the topics of inflation risk premia finance and productivity angel investing venture capital relationship lending and microfinance have benefitted from increased research associated with more data and use in practice the final two topics of crowdfunding and crypto currencies are the products of recent technological developments

venture capital internationalization synthesis and future research directions research on venture capital internationalization vc has expanded rapidly over the last decade this paper reviews the extant literature on vc internationalization and highlights gaps in our knowledge we identify three major research streams within this literature which revolve around the following questions 1 which vc firms invest across borders and what countries do they target with a macro economic or a micro economic focus 2 how do vc firms address the liabilities of non domestic investing and 3 what are the real effects of international vc investments we provide an overview of the contributions in these research streams discuss the role of public policy and suggest avenues for future research specifically we call for a deeper understanding of 1 the functioning and impact of vc firms modes of internationalization 2 micro level processes such as the functioning and decision making of international investment committees the interaction between headquarters and local offices or the development of international human and social capital 3 the role of country institutions in vc internationalization and its real effects and 4 the interplay of international vc with alternative financing sources

verifying the solution from a nonlinear solver a case study we are pleased to confirm that any doubt our article mccullough and vinod 2003 hereafter mv03 may have cast on ron shachar and barry nalebuff 1999 hereafter sn99 must be removed we are especially pleased because we thought it quite unfair that other researchers were able to exempt themselves from such detailed scrutiny it appears that such researchers no longer will have the luxury of reneging on their agreement to honor the replication policy as this journal now requires authors of accepted empirical papers to provide all programs and data files for posting on the aer web site as a precondition of publication the primary aim of our article mv03 was to provide a four part methodology for verifying the solution from a nonlinear solver check the gradient examine the trace analyze the hessian and profile the likelihood we adduced copious evidence mv03 p 873 that solvers used by economists can produce inaccurate answers gave examples of different packages giving different answers to the same nonlinear problems mv03 p 874 and showed mv03 pp 873 74 at least in this journal that researchers make no effort to verify the solutions from the solvers that they use we believe this uncritical acceptance of solutions from nonlinear solvers to be a systemic problem in economic research that is why we wrote the article certainly econometrics texts do not show how to verify the solution from a nonlinear solver in passing we also showed how a problem can be too large for conventional pc methods and indicated the failure of replication policies in this journal and other journals we used the data and likelihood function from sn99 to illustrate the methodology in the course of this illustration we noted that the hessian was ill conditioned suggested that there might exist multiple optima and that inference based on the wald statistic was not appropriate we concluded that the solution we found was at best a tentative solution however as shown in shachar and nalebuff 2004 hereafter sn04 when the problem is rescaled the hessian is not ill conditioned they have correctly identified the difference between the condition number of the badly scaled version of the problem that we analyzed in mv03 and the well scaled problem that they have analyzed when the problem is correctly scaled the hessian is well conditioned the model is locally identifiable the problem can be solved on a pc a solution to the problem exists and sn present it in their table 1 though we were aware that rescaling could ameliorate ill conditioning mv03 p 882 we were unaware of the distinction between artificial ill conditioning and inherent ill conditioning so the method we suggested for analyzing the hessian contained an error of omission this error caused us to reach an incorrect conclusion concerning the existence of a solution to the problem we apologize to professors shachar and nalebuff and we thank them for their gracious understanding in this regard accordingly we have amended our prescription for analyzing the hessian see our nearby exchange with david m drukker and vince wiggins 2004 hereafter dw for complete details our

optimality free mobility and the regional authority in a federation abstract this paper examines the efficiency properties of a federation characterized by strategically competing regions and freely mobile homogeneous individuals analyses of this economy have concluded that achieving a pareto optimal will require intervention by a national authority this paper makes one basic point the nash equilibrium of regional authority behavior is pareto optimal the implication is that there is no role for a national authority in either providing interregional transfers or correcting for decentralized provision of public goods the nash equilibrium involves samuelson public goods provision and regions purchasing preferred population distributions with optimal interregional transfers

population mobility and transboundary environmental problems abstract a standard result in the literature on environmental economics is that efficient environmental policies regulating transboundary pollution will be adopted only if there is interjurisdictional coordination efficient policies can be adopted as a result of interregional treaties or mandated by a central authority the present paper demonstrates that if there is perfect population mobility between the regions affected by the transboundary pollution the efficient outcome is a nash equilibrium of the policy game between regional authorities this is true independently of what policies are available to the regional authorities however there may be more than one nash equilibrium so that policy coordination may be necessary in order to achieve the best equilibrium

decentralized and efficient control of transboundary pollution in federal systems abstract decentralized control of transboundary pollution in federal systems can be efficient when population crowding is socially costly in this paper an upstream region abates pollution or makes an interregional income transfer to the downstream region with the sole intent of deterring immigration because either instrument abatement expenditure or interregional income transfer alone implements an efficient population distribution between the regions interregional income transfers are unnecessary for efficiency without explicit income transfers each region provides the efficient portion of the aggregate level of pollution abatement in the nash equilibrium

financial fraud a literature review financial fraud a literature review this paper describes the empirical universe of financial fraud as it has been documented in the academic literature specifically it describes the different forms of fraudulent behaviour in the context of financial market activities the prevalence and consequences of such behaviour as identified by previous research and the economic and market structures that scholars believe facilitate it to structure the discussion a conceptual distinction is made between three types of financial fraud false financial disclosures financial scams and financial mis selling the findings of the literature review highlight a number of recent developments that scholars think have facilitated the occurrence of financial fraud including 1 the development of new fundamental conflicts of interest and perverse incentive structures in the financial industry 2 an influx of unsophisticated gullible participants in the financial marketplace 3 the increasing complexity involved in financial market transactions as a result of rapid technological legal and financial innovation and an ever widening menu of financial products 4 an increase in the use of justified secrecy in the form of a mystification of trading models adopted by fund managers

assessing the rate of replication in economics we assess the rate of replication for empirical papers in the 2010 american economic review across 70 empirical papers we find that 29 percent have 1 or more citation that partially replicates the original result while only a minority of papers has a published replication a majority 60 percent have either a replication robustness test or an extension surveying authors within the literature we find substantial uncertainty over the number of extant replications

do women shy away from competition do men compete too much we examine whether men and women of the same ability differ in their selection into a competitive environment participants in a laboratory experiment solve a real task first under a noncompetitive piece rate and then a competitive tournament incentive scheme although there are no gender differences in performance men select the tournament twice as much as women when choosing their compensation scheme for the next performance while 73 percent of the men select the tournament only 35 percent of the women make this choice this gender gap in tournament entry is not explained by performance and factors such as risk and feedback aversion only playa negligible role instead the tournament entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition the result is that women shy away from competition and men embrace it

social security and private saving new time series evidence in an important article in the journal of political economy martin feldstein 1974 estimated that the introduction of the social security system had reduced personal saving by 50 percent with serious consequences for capital formation and output his conclusion was based on a consumer expenditure function estimated with u s time series data and incorporating a social security wealth variable of his construction this paper presents new evidence that casts considerable doubt on feldstein s conclusion first the social security wealth variable used by feldstein was seriously flawed as a result of a computer programming error simply correcting this error substantially changes the estimated effect of social security on saving second the statistical evidence depends upon assumptions which are embedded in the construction of the social security wealth variable assumptions that are not demonstrably preferable and are in some cases inferior to alternative assumptions these assumptions relate first to how individuals form their expectations about the social security benefits they expect to receive and the social security taxes they expect to pay and second to estimates of the number of workers dependent wives and surviving

the meaning of failed replications a review and proposal the welcome rise of replication tests in economics has not been accompanied by a consensus standard for determining what constitutes a replication a discrepant replication in current usage of the term can signal anything from an unremarkable disagreement over methods to scientific incompetence or misconduct this paper proposes a standard for classifying one study as a replication of some other study it is a standard that places the burden of proof on a study to demonstrate that it should have obtained identical results to the original a conservative standard that is already used implicitly by many researchers it contrasts this standard with decades of unsuccessful attempts to harmonize terminology and argues that many prominent results described as replication tests should not be described as such adopting a conservative standard like this one can improve incentives for researchers encouraging more and better replication tests

do house prices affect consumption a re assessment of the wealth hypothesis this paper revives the debate in the literature about the relationship between house prices and consumption by exploring conflicting results in the uk campbell and cocco 2007 find that old owners benefit most from a house price increase and young renters least confirming the so called wealth hypothesis in contrast attanasio et al 2009 find that house prices have the same impact on consumption across age groups we rule out several potential explanations related to data construction and provide evidence that the functional form can reconcile the conflicting results in the two papers

can the reserves approach to monetary control really work on october 6 1979 the board of governors bog of the federal reserve system announced that the federal open market committee fomc was abandoning its historical preoccupation with an interest rate approach to monetary control in favor of a reserve aggregate approach 1 underlying this new approach is the fact that at time t any money stock concept m is the product of a money multiplier m and a reserve aggregate r that is

viewpoint replication in economics this examination of the role and potential for replication in economics points out the paucity of both pure replication checking on others published papers using their data and scientific replication using data representing different populations in one s own work or in a comment several controversies in empirical economics are used to illustrate how and how not to behave when replicating others work the incentives for replication are examined and proposals aimed at journal editors and authors are advanced that might stimulate an activity that most economists applaud but few perform

efficient decentralized fiscal and environmental policy a dual purpose henry george tax abstract one consequence of decentralized responsibility to set tax policy and environmental standards is that local governments might try to attract industry and jobs by underproviding local public goods with lower taxes or lax environmental standards or both but if local authorities exploit fixed property site i e land taxation to fund local public goods affect firm migration and internalize potential local emission rents herein we find decentralized efficiency is supported this result reflects a dual form of the classic henry george theorem previously overlooked

replication in labor economics evidence from data and what it suggests examining the most heavily cited publications in labor economics from the early 1990s i show that few of over 3000 articles citing them directly replicates them they are replicated more frequently using data from other time periods and economies so that the validity of their central ideas has typically been verified this pattern of scholarship suggests beyond the currently required depositing of data and code upon publication that there is little need for formal mechanisms for replication the market for scholarship already produces replications of non laboratory applied research

crypto currencies an introduction to not so funny moneys we introduce the distributed ledger blockchain technology of crypto currencies we examine the monetary attributes of crypto currencies and describe some of the reasons they have been adopted the paper discusses the mechanics of bitcoin the original crypto currency to illustrate the fundamental elements of decentralized crypto currencies we then provide a high level summary of the implications of crypto currencies for consumers financial systems and for monetary and regulatory authorities we argue that crypto currencies are unlikely to supplant traditional fiat currencies and we anticipate an enduring role for financial intermediaries in facilitating credit

is relationship lending still a mixed blessing a review of advantages and disadvantages for lenders and borrowers relationship lending is a common lending technology that is assumed to bring several benefits to small medium enterprises smes and to financial institutions that adopt it notably it could reduce information asymmetries permitting banks to offer better credit terms to the borrower however it also entails some costs for both sides the empirical evidence so far has not been conclusive in determining under what conditions relationship lending can be beneficial or harmful most of the studies suggest that smes that engage in relationship lending benefit from more credit availability especially during a financial crisis and lower interest rates this occurs when they are served by small banks are geographically close to the lender when the bank is adequately decentralized and when it is the dominant creditor of the firm however under certain circumstances banks can extract rents from the borrower or be captured by him in addition the consequences and the future of relationship lending will be remarkably affected by the level of competition among banks their ownership structure the regulatory framework and the business model that banks will have to adopt accordingly

federal reserve policy interest rate volatility and the u s capital raising mechanism the object of this paper is to examine in detail on the basis of the experience of the u s financial markets under the federal reserve system s new monetary policy procedures announced on october 6 1979 one potentially important effect on the nonfinancial economy due to the resulting increase in interest rate volatility in particular the possibility that increased volatility has impaired the market mechanism for raising long term business capital interest rate volatility has been a controversial issue in central bank policymaking for a long time the ultimate objectives that central banks pursue almost always refer to nonfinancial aspects of economic activity and well being like price stability and economic growth in carrying out policies designed to further these objectives however central banks typically operate exclusively in the financial markets their actions therefore affect interest rates directly and visibly whether to use this influence on interest rates to smooth out short run fluctuations or alternatively to implement actions focused solely on other objectives and hence leave interest rates to vary freely with the pulse of market pressures is the central question in the united states the evolution of the federal reserve system s monetary policy procedures during the last decade including in particular the changes an

a proposal to organize and promote replications we make a two pronged proposal to i strengthen the incentives for replication work and ii better organize and draw attention to the replications that are conducted first we propose that top journals publish short replication reports these reports could summarize novel work replicating an existing high impact paper or they could highlight a replication result embedded in a wider scope published paper second we suggest incentivizing replications with the currency of our profession citations enforcing a norm of citing replication work alongside the original would provide incentives for replications to both authors and journals

interregional spillovers in the presence of perfect and imperfect household mobility abstract when households are immobile across regions the decentralized provision of public goods that generate interregional benefit spillovers is inefficiently low we analyze this problem in an environment of interregional household migration and obtain the following results if households are perfectly mobile across regions then the decentralized provision of public goods generating spillovers is socially efficient there is no need for central government intervention if households are attached to particular regions for cultural or nationalistic reasons however at least one of two regions undersupplies the public good central government intervention can enhance efficiency

ex ante free mobility ex post immobility and time consistency in a federal system abstract this paper examines regional population distribution when there is an interregional transfer policy without commitment we introduce explicitly the following time structure of actions individuals assumed to be identical make decisions on locational choices freely ex ante but are immobile ex post the fiscal policies of the local governments and the central government are implemented after individuals migration decisions the basic result is that locally stable no commitment equilibria are single community equilibria when there is a pure local public good we then illustrate the possibility for the interregional transfer policy to reduce the efficiency of population distribution

efficient tax exporting in a multijurisdiction economy with free mobility of households between communities some portion of any community s tax is incident upon nonresident landowners it is shown that when the objective of a community is taken to be the level of satisfaction of its residents a fully efficient allocation is a nash equilibrium of the decentralized game in general no local tax structure that restricts a community s tax base to residents can attain the optimum thus tax exporting is necessary for independent local government behavior to be consistent with efficiency

a re examination of an irish popularity function this paper focuses on replication in the sense of herrnson 1995 it re examines the only study of an irish popularity function borooah and borooah 1990 in the light of recent developments in econometric methodology and in irish politics using error correction models the analysis provides an alternative account of the relationship between economics and government popularity to that provided by borooah and borooah the findings indicate that the short term impact of the economy is weaker than and different from that suggested by them economic influences at most set the general level of government approval rather than determine the quarter by quarter fluctuations

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

migration with fiscal externalities abstract this paper analyses the distribution of a country s population among regions when migration involves fiscal externalities the main question addressed is whether a decentralized decision making of regional governments can produce an optimal population distribution as recently asserted or a centralized intervention is indispensable as argued before in the literature in analysing this issue it is assumed that migration is costly and accordingly the problem is modelled in a dynamic setup it turns out that while with costless mobility the fiscal externality is fully internalized by voluntary interregional transfers with costly mobility centrally coordinated transfers still remain indispensable for achieving the socially optimal allocation

attachment to home and efficient purchases of population in a fiscal externality economy abstract this paper examines the efficiency properties of an economy characterized by strategically competing regions and individuals with varying degrees of attachment to home in an otherwise standard fiscal externality setting regional authorities may make interregional transfers in purchasing preferred populations however there is a range of distributions of resources over which neither region makes transfers nevertheless all equilibrium allocations resulting from the nash behavior of regional authorities including those that involve no transfers are efficient therefore in contrast to the standard conclusions of the fiscal externality literature there is no efficiency role for a central authority

education and earnings in the netherlands an empirical analysis abstract in this paper three models which describe the relation between earnings and education are estimated using one single data set one model is a simple dummy regression model in which the educational variables are exogenous both other models take account of the fact that individuals choose their optimal amount of education and is therefore endogenous in all three models i try to specify the equations in the same way as others have done with other data sets it turns out that in each model important conclusions reached in earlier research are not supported by the empirical findings reported here

monetary and public debt shocks tests and efficient estimates in an article in the jmcb barro 1 defined a form of intertemporal efficiency for the behavior of marginal tax rates and expected tax rates given certain additional conditions on government expenditures barro s definition of efficiency implied that particular relationships and time paths would characterize federal deficits in that paper two of the seven predicted relationships were tested 1 the sign of the relationship between the deficit and the ratio of output to its trend value and 2 the effect of anticipated inflation on the deficit those tests were performed under the joint assumptions of the rational expectations hypothesis reh and predictable policy irrelevance or structural neutrality sn with regard to both monetary and debt policies in this paper barro s tests of the efficiency hypothesis are reexamined within a wider context by means of the statistically efficient full information maximum likelihood fiml method 4 6 1 specifically by allowing the imposition of cross equation and within equation parameter constraints the fiml method makes it possible to a directly test the reh and sn propositions jointly and separately

estimates of the variance of u s inflation based upon the arch model it is generally agreed that the unpredictability of future inflation is a major component of the welfare loss associated with inflation perfectly predicted inflation might induce some costs through institutional rigidities governmental interference and transaction costs but in the long run these should be rather minimal as these institutions adopt various forms of indexing when inflation is unpredictable risk averse economic agents will incur a loss even if prices and quantities are perfectly flexible in all markets inflation is a measure of the relative price of goods today and goods tomorrow thus uncertainty in tomorrow s price impairs the efficiency of today s allocation decisions friedman in his nobel lecture 8 argues convincingly that higher variability of inflation would lead to decreased output ceteris paribus he then conjectures that higher rates of inflation are generally associated with higher variability of inflation and presumably greater uncertainty about future rates if this is true then higher rates of inflation would also be associated with low levels of output which implies a positively sloped phillips curve this paper uses a new statistical technique arch to estimate the conditional mean and variance of inflation from u s time series data the main finding is that the variance of inflation in the seventies was only slightly greater than in the sixties

transboundary environmental problems with mobile but heterogeneous populations most of the literature on transboundaryenvironmental problems treats population ineach country or region as constant ignoringpopulation mobility we showed previously thatif there is perfect population mobility betweenregions and populations are homogeneous asocially efficient outcome can be supported asa nash equilibrium of the game of uncoordinatedpolicy setting even without any internationalenvironmental agreement in the present paperwe introduce heterogeneous population and showthat when people differ a non cooperativeoutcome is generally inefficient we alsodemonstrate that for a particular set ofobjective functions for the regionalgovernments there is an equilibrium of thegame of uncoordinated policy setting that isefficient finally we give an example wherethe decentralized outcome is efficient whenthere is no population mobility butinefficient when there is population mobility

replication in empirical economics the journal of money credit and banking project this paper examines the role of replication in empirical economic research it presents the findings of a two year study that collected programs and data from authors and attempted to replicate their published results the research provides new and important information about the extent and causes of failures to replicate published results in economics the findings suggest that inadvertent errors in published empirical articles are a commonplace rather than a rare occurence copyright 1986 by american economic association

interregional interactions and population mobility the institutional level at which policies should be determined is an important issue that has been extensively treated in the economics literature in particular the literature has discussed to what extent decentralization of policy decisions give an inefficient outcome with a homogeneous population and perfect population mobility as it conventionally is modeled the following result is derived for a very general class of economies with interregional interactions a socially efficient outcome is a nash equilibrium of the game of decentralized and uncoordinated policy setting however if decisions about migration take a longer time to make than decisions of policy changes the general result above no longer holds with this decision sequence decentralization may give an inefficient outcome also in situations where the decentralized outcome is efficient in the absence of population mobility

estimating inflation risk premia using inflation linked bonds a review this paper provides an overview of studies that estimate the inflation risk premium using inflation linked bond ilb yields i categorize existing studies outline their research designs and compare their estimates for the inflation risk premium furthermore the importance of accounting for ilb illiquidity and an overview of existing ilb liquidity proxies are demonstrated a discussion of current literature developments such as the zero lower bound and an outline for future research directions conclude the paper