bluuebunny/crossref_metadata_2025 huggingface dataset:
Mineralogical and Geochemical Characterization of Jordanian Olivine and Its Ability to Capture CO2 by Mineralization Process
Authors: Dwairi Reyad Al
Published: August 2019

DOI:10.17014/ijog.6.2.175-183Olivine rich rocks outcrop in Kharazeh area (KHO) and Jurf Eldaraweesh (JDO) Basaltic rocks southern Jordan. KHO and JDO have been characterized for their mineralogical and geochemical properties investigated for their potential use in CO2 capture by mineralization process. The effects of particle size, temperature, and contamination time were examined in the mineralization process. Two grain sizes of olivine for each type were used in capture experiments. The first grain size is the separated size fraction between 1 to 0.7 mm (KHO1 and JDO1), while the second grain size is the separated size fraction between 0.7 to 0.3 mm (KHO2 and JDO2). For the mineralization purpose, a chemical reactor was used to determine the olivine CO2 capture capacity. Thin section studies aided by XRD identification for KHO indicated the presence of olivine crystals as the main mineral with percentage reaches 48% plagioclase, augite, and magnetite. While the mineral content for JDO is (35%) olivine, plagioclase, clinopyroxene, and opaque minerals. Olivine chemical composition results show the high MgO percentage for KHO ranges between 47.5 and 50.13%, while the percentage of MgO varies from 43.6% and 44.6% for JDO. The CO2 mineralization process results were interpreted using percentage removal curves. CO2 capture percentage reaches the highest percentage (48%) using KHO2 and 100o C temperature. In summary, it can be concluded that CO2 can be removed from atmosphere using Jordanian olivine rich rocks.
Saving and Financial Planning: Some Findings from a Focus Group
Authors: Kennickell Arthur B. , Starr-McCluer Martha , Sunden Annika E.
Published: August 2019

This paper summarizes the results of a focus group on saving and financial planning. The group consisted of eight individuals with relatively high income and wealth. The savings behavior of such people is of interest partly due to their large contribution to total personal saving. The participants expressed concerns about how their circumstances will change as they age, and about uncertainties in income and health. While these concerns are consistent with theories emphasizing life-cycle and precautionary motives, the idea that saving involves self-control was also mentioned repeatedly.
Learning by Doing and the Value of Experimentation
Authors: Wieland Volker W.
Published: August 2019

Research on learning-by-doing has typically been restricted to cases where estimation and control can be treated separately. Recent work has provided convergence results for more general learning problems where experimentation is an important aspect of optimal control. However the associated optimal policy cannot be derived analytically because Bayesian learning introduces a nonlinearity in the dynamic programming problem. This paper characterizes the optimal policy numerically and shows that it incorporates a substantial degree of experimentation. Dynamic simulations indicate that optimal experimentation dramatically improves the speed of learning, while separating control and estimation frequently induces a long-lasting bias in the control and target variables.
The Effect of Changes in Ownership Structure on Performance: Evidence from the Thrift Industry
Authors: Cole Rebel A. , Mehran Hamid
Published: August 2019

Restrictions on the ownership structure of a public company may harm the company's performance by preventing owners from choosing the best structure. We examine the stock-price performance and ownership structure, before and after the expiration of anti-takeover regulations, of a sample of thrift institutions that converted from mutual to stock ownership. We find that after the anti-takeover provisions expire, firm performance improves significantly, and the portions of the firm owned by managers, noninstitutional outside blockholders, and the firm's employee stock ownership plan increase. Changes in performance are positively associated with changes in ownership by managers and by noninstitutional outside blockholders but negatively associated with changes in ownership by employee stock ownership plans.
Solving an Empirical Puzzle in the Capital Asset Pricing Model
Authors: Leusner John H. , Akhavein Jalal D. , Swamy P. A. V. B.
Published: August 2019

A long standing puzzle in the Capital Asset Pricing Model (CAPM) has been the inability of empirical work to validate it. This paper presents a new approach to estimating the CAPM, taking into account the differences between observable and expected returns for risky assets and for the market portfolio of all traded assets, as well as inherent nonlinearities and the effects of excluded variables. Using this approach, we provide evidence that the relation between the observable returns on stock and market portfolios is nonlinear.
Vehicle Ownership, Vehicle Acquisitions, and the Growth of Auto Leasing: Evidence from Consumer Surveys
Authors: Aizcorbe Ana M. , Starr-McCluer Martha
Published: August 2019

This paper documents the basic features of data on motor vehicles from the Federal Reserve Board's Survey of Consumer Finances and the Bureau of Labor Statistics' Consumer Expenditure Survey. Despite some methodological differences between the two surveys, we find that they yield strikingly similar pictures of households' vehicle holdings. The survey data are also quite consistent with population estimates of vehicle stocks obtained from other sources. Finally, we document the growth of auto leasing by consumers, and find little evidence for the commonly-held view that liquidity constraints are an important motivation for leasing.
What's Good for GM...? Using Auto Industry Stock Returns to Forecast Business Cycles and Test the Q-Theory of Investment
Authors: Duffee Gregory R. , Prowse Stephen D.
Published: August 2019

We examine the ability of auto industry stock returns to forecast quarterly changes in the growth rates of real GDP, consumption, and investment. We find that auto stock returns are superior to aggregate stock market returns in predicting growth rates of GDP and various forms of consumption. The superior predictive power of auto returns holds for both in-sample and out-of-sample forecasts and has not declined over time. We then apply a finding in this paper---that market returns have no explanatory power for future output or consumption growth when auto returns are included in the regression---to analyze the causal relation between the stock market and investment. We use auto returns to proxy for forecasts of future fundamentals, allowing market returns to capture the effect of the stock market on investment. We find that aggregate returns forecast equipment investment in the presence of auto returns, providing empirical support for q-theory. Results for structures investment are less convincing.
Recent Developments in Bootstrapping Time Series
Authors: Berkowitz Jeremy , Kilian Lutz
Published: August 2019

In recent years, several new parametric and nonparametric bootstrap methods have been proposed for time series data. Which of these methods should applied researchers use? We provide evidence that for many applications in time series econometrics parametric methods are more accurate, and we identify directions for future research on improving nonparametric methods. We explicitly address the important, but often neglected issue of model selection in bootstrapping. In particular, we emphasize the advantages of the AIC over other lag order selection criteria and the need to account for lag order uncertainty in resampling. We also show that the block size plays an important role in determining the success of the block bootstrap, and we propose a data-based block size selection procedure.
Information Sharing and Competition in the Motor Vehicle Industry
Authors: Doyle Maura P. , Snyder Christopher M.
Published: August 2019

Up to six months ahead of actual production, U.S. automakers announce plans for their monthly domestic production of cars. A leading industry trade journal publishes the initial plan and then a series of revisions leading up to the month in question. We analyze a panel data set spanning the years 1965--1995, matching the production forecasts with data for actual monthly production. We show that a firm's plan announcement affects competitors' later revisions of their own plans and eventual production. The interaction appears to be complementary---large plans or upward revisions cause competitors to revise plans upward and increase production. The results are consistent with models in which firms share information about common demand parameters.
Computationally Convenient Distributional Assumptions for Common Value Auctions
Authors: Gordy Michael B.
Published: August 2019

Although the mathematical foundations of common value auctions have been well understood since Milgrom & Weber (1982), equilibrium bidding strategies are computationally complex. Very few calculated examples can be found in the literature, and only for highly specialized cases. This paper introduces two sets of distributional assumptions that are flexible enough for theoretical and empirical applications and yet permit straightforward calculation of equilibrium bidding strategies.
Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?
Authors: Berger Allen N. , Mester Loretta Jean
Published: August 2019

Over the past several years, substantial research effort has gone into measuring the efficiency of financial institutions. Many studies have found that inefficiencies are quite large, on the order of 20 percent or more of total banking industry costs and about half of the industry's potential profits. There is no consensus on the sources of the differences in measured efficiency. This paper examines several possible sources, including differences in efficiency concept, measurement method, and a number of bank, market, and regulatory characteristics. We review the extant literature and provide new evidence using data on U.S. banks over the period 1990-95.
Efficiency of Financial Institutions: International Survey and Directions for Future Research
Authors: Berger Allen N. , Humphrey David B.
Published: August 2019

This paper surveys 130 studies that apply frontier efficiency analysis to financial institutions in 21 countries. The primary goals are to summarize and critically review empirical estimates of financial institution efficiency and to attempt to arrive at a consensus view. We find that the various efficiency methods do not necessarily yield consistent results, and we suggest some ways that these methods might be improved to bring about findings that are more consistent, accurate, and useful. Secondary goals are to address the implications of efficiency results for financial institutions in the areas of government policy, research, and managerial performance. Areas needing additional research are also outlined.
Declining Required Reserves and the Volatility of the Federal Funds Rate
Authors: Clouse James A. , Elmendorf Douglas W.
Published: August 2019

Low required reserve balances in 1991 led to a sharp increase in the volatility of the federal funds rate, but similarly low balances in 1996 did not. This paper develops and simulates a microeconomic model of the funds market that explains these facts. We show that reductions in reserve balances increase the volatility of the federal funds rate, but that this relationship changes over time in response to observable changes in bank behavior. The model predicts that a continued decline in required reserves could increase funds-rate volatility significantly.
Risk, Entrepreneurship, and Human Capital Accumulation
Authors: Iyigun Murat , Owen Ann L.
Published: August 2019

Entrepreneurial human capital plays a relatively more important role in intermediate income countries, but professional human capital is relatively more abundant in richer economies. Because the return to entrepreneurship is risky, individuals devote less time to the accumulation of entrepreneurial skills and more to the accumulation of professional skills as per capita income grows. Countries that initially have too little of either entrepreneurial or professional skills may end up in a development trap. The steady state may be characterized by either too much or too little education.
Analyzing Alternative Intraday Credit Policies in Real-Time Gross Settlement Systems
Authors: Furfine Craig H. , Stehm Jeff
Published: August 2019

This paper examines a central bank's choice of intraday credit policy for Real-Time Gross Settlement (RTGS) systems. Formal analysis of central bank objectives and commercial bank payment activity provides insight into both the choice and effects of several possible intraday credit policies. Observed intraday credit policies are interpreted within the context of the model. Among G-10 central banks, different combinations of prices, collateral, and quantity limits have been chosen to manage the supply of intraday credit. Conditions that rationalize these choices are shown to rely on a) central bank preferences regarding credit risk and systemic risk, b) liquidity management technologies, and c) the cost of collateral.
The Effects of Two-Year College on the Labor Market and Schooling Experiences of Young Men
Authors: Surette Brian J.
Published: August 2019

This paper uses the NLSY to examine (1) the returns to two-year college, (2) whether attendance at a two-year college helps students to transfer to four-year college, and (3) whether reducing tuition would alter attendance enough to affect labor outcomes. I find that the returns to a year of two-year college are large (7 to 10 percent). Completing an associate's degree raises wages further. One year of two-year credits has the same effect on subsequent four-year attendance as one year of four-year credits. Finally, simulations show that reducing tuition could raise income modestly by increasing college attendance.
The Sources of Worker Anxiety: Evidence from the Michigan Survey
Authors: Otoo Maria Ward
Published: August 2019

This paper uses individual responses from the Michigan SRC survey of consumer attitudes to examine worker anxiety. It identifies "anxious" households (those that express some concern about job security) and analyzes some factors that might be driving this angst. It found that a little more than a quarter of households revealed concerns about job security. Also, the results suggest that less-educated households (those lacking a high-school diploma) were significantly more likely to be concerned about job loss than were black or Asian households.
Inflation, Taxes, and the Durability of Capital
Authors: Cohen Darrel , Hassett Kevin A.
Published: August 2019

Auerbach (1979, 1981) has demonstrated that inflation can lead to large inter-asset distortions, with the negative effects of higher inflation unambiguously declining with asset life. We show that this is true only if depreciation is treated as geometric for tax purposes. When depreciation is straightline, higher inflation can have the opposite effect, discouraging investment in long-lived assets. Since our current system can be thought of as a mixture of straightline and geometric, the sign of the inter-asset distortion is indeterminate. We show that under current U.S. tax rules, the "straightline" and "geometric" effects approximately cancel for equipment, causing almost no inter-asset distortions. For structures, inflation clearly causes substitution into long-lived assets.
The Wage Curve and the Phillips Curve
Authors: Roberts John M.
Published: August 2019

Blanchflower and Oswald (1994) have argued that, in regional data, the level of unemployment is related to the level of wages. This result is at variance with the implications of the original Phillips curve for regional data, which would predict that the change in wages ought to be related to the unemployment rate. On the other hand, there is considerable empirical support for the expectations-augmented Phillips curve using macroeconomic data. I resolve this tension by showing that a standard macroeconomic expectations-augmented Phillips curve can be derived from microfoundations that begin with the wage curve.
Interest Rates and M2 in an Error-Correction Macro Model
Authors: Whitesell William C.
Published: August 2019

With annual data, real M2 is shown to have a surprisingly strong contemporaneous and leading relationship to GDP, that is robust to the inclusion of other explanatory variables. When combined and tested with parsimonious error correction equations for money demand, price determination, and a monetary policy reaction function, an overall macroeconometric model is revealed with an unusually good fit aside from a velocity shift adjustment needed for the early 1990s and better inflation performance than expected of late. A regime shift is evident in the stronger response of the Federal Reserve to inflation in the 1980s than in the previous two decades.
Monetary Policy in a Stochastic Equilibrium Model with Real and Nominal Rigidities
Authors: Kim Jinill
Published: August 2019

A dynamic stochastic general-equilibrium (DSGE) model with real and nominal rigidities succeeds in capturing some key nominal features of U.S. business cycles. Additive technology shocks, as well as multiplicative shocks, are introduced. Monetary policy is specified following the developments in the structural vector autoregression (VAR) literature. Interaction between real and nominal rigidities is essential to reproduce the liquidity effect of monetary policy. The model is estimated by maximum likelihood on U.S. data, and its fit is comparable to that of an unrestricted first-order VAR. Besides producing reasonable impulse responses and second moments, this model replicates a feature of U.S. business cycles, never captured by previous research with DSGE models, that an increase in interest rates predicts a decrease in output two to six quarters in the future. Finally, some policy implications are discussed.
Monetary Policy and Uncertainty about the Natural Unemployment Rate
Authors: Wieland Volker W.
Published: August 2019

This paper studies the optimal monetary policy in the presence of uncertainty about the natural rate and the short-run inflation-unemployment tradeoff. Two conflicting motives drive policy. In the static version of the model, uncertainty provides a motive for the policymaker to move cautiously. In the dynamic version, uncertainty motivates an element of experimentation. I find that the optimal policy that balances these motives typically still exhibits gradualism, i.e., is less aggressive than a policy that disregards parameter uncertainty. Exceptions occur when uncertainty is very high and inflation close to target.
Monetary Policy and Multiple Equilibria
Authors: Benhabib Jess , Schmitt-Grohe Stephanie , Uribe Martin
Published: August 2019

In this paper, we characterize conditions under which interest rate feedback rules whereby the nominal interest rate is set as an increasing function of the inflation rate generate multiple equilibria. We show that these conditions depend not only on the fiscal regime (as emphasized in the fiscal theory of the price level) but also on the way in which money is assumed to enter preferences and technology. We analyze this issue in flexible and sticky price environments. We provide a number of examples in which, contrary to what is commonly believed, active monetary policy in combination with a fiscal policy that preserves government solvency gives rise to multiple equilibria and passive monetary policy renders the equilibrium unique.
Interbank Payments and the Daily Federal Funds Rate
Authors: Furfine Craig H.
Published: August 2019

This paper develops a model of bank reserve management and federal funds rate determination that incorporates the role of interbank payments. In the model, uncertainty in the receipt of payments generates a precautionary demand for bank reserves as banks face both reserve requirements and penalties for overnight overdrafts. Days with higher payment volume are assumed to create more uncertainty in a bank's reserve account that accentuates this precautionary motive. As a result, upward pressure is placed on the equilibrium funds rate. Implications of the model are then estimated using a panel of large banking institutions. Using the parameter estimates, simulations of the model suggest that patterns in payment activity explain many intra-maintenance period movements in both the level and volatility of the federal funds rate.
Price Stability and Monetary Policy Effectiveness when Nominal Interest Rates are Bounded at Zero
Authors: Orphanides Athanasios , Wieland Volker W.
Published: August 2019

This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound constraint on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S. over the 1980s and 1990s, the consequences of the zero bound are negligible for target inflation rates as low as 2 percent. However, the effects of the constraint are very non-linear with respect to the inflation target and produce a quantitatively significant deterioration of the performance of the economy with targets between 0 and 1 percent. The variability of output increases significantly and that of inflation also rises somewhat. The stationary distribution of output is distorted, with recessions becoming somewhat more frequent and longer lasting. Our model also uncovers the fact the asymmetry of the policy ineffectiveness induced by the zero bound constraint generates a non-vertical long run Phillips curve. Output falls increasingly short of potential, with lower inflation targets. At zero average inflation, the output loss is on the order of 0.1 percentage points. We also investigate the consequences of the constraint on the analysis of optimal policy based on the inflation-output variability frontier. We demonstrate that in the presence of the zero bound, the variability frontier is distorted as the inflation target approaches zero. As a result, comparisons of alternative policy rules that ignore the zero bound can be seriously misleading.
Adjustment Costs of Investment in General Equilibrium: Analytic Results
Authors: Kim Jinill
Published: August 2019

This paper formulates and compares various specifications of investment adjustment costs in a simple dynamic general-equilibrium model and studies their implications by showing some analytic results. One way to introduce adjustment costs is to incorporate them as a constant elasticity of substitution between investment and capital in the capital accumulation equation. Another way is as a nonlinear transformation between consumption and investment in the national income identity. We observe that there is a problem in identifying the two types of adjustment costs and show how to solve the problem. The properties of persistence and volatility are analytically discussed with an emphasis on the size of adjustment costs.
Partial Adjustment and Staggered Price Setting
Authors: Kiley Michael T.
Published: August 2019

This paper compares staggered price setting to partial adjustment of prices in a small optimizing IS/LM model. In contrast to the overwhelming perception in the literature, the models are not similar for most parameterizations. These results clarify some confusion in recent work regarding the persistence of output responses to monetary shocks, reveal important quantitative differences between the stabilizing properties of different monetary policies across sticky price specifications, and highlight the role for more research on new-Keynesian "real rigidities" in DGE models.
Workers' Knowledge of their Pension Coverage: A Reevaluation
Authors: Starr-McCluer Martha , Sunden Annika E.
Published: August 2019

Because employer-provided pensions represent an important source of income during retirement, accurate information on pension coverage would seem to be crucial for making sound decisions on retirement timing, saving, and portfolio allocation. However, previous research suggests that workers' knowledge of their pension provisions is often incomplete or incorrect. This paper reexamines workers' knowledge of their pension coverage, using matched employer-employee data from the Federal Reserve Board's Survey of Consumer Finances. We find that, while most workers in our sample accurately reported the general features of their pension coverage, their knowledge of the detailed features was often fairly limited.
Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets
Authors: Dynan Karen E. , Krane Spencer D. , Carroll Chris
Published: August 2019

Recent empirical work on the strength of precautionary saving has yielded widely varying conclusions. The mixed findings may reflect a number of difficulties in proxying uncertainty, executing instrumental variables estimation, and incorporating theoretical restrictions into empirical models. For each of these problems, this paper uses existing best-practice techniques and some new strategies to relate unemployment probabilities from the Current Population Survey to net worth data from the Survey of Consumer Finances. We find that increases in unemployment risk do not boost saving by households with relatively low permanent income, but that a statistically significant precautionary effect emerges for households at a moderate level of income. This finding is robust to certain restrictions on the sample, but not robust across measures of wealth: We generally find a significant precautionary motive in broad measures of wealth that include home equity, but not in narrower subaggregates comprised only of financial assets and liabilities.
Demographics and Medical Care Spending: Standard and Non-Standard Effects
Authors: Cutler David M. , Sheiner Louise
Published: August 2019

In this paper, we examine the effects of likely demographic changes on medical spending for the elderly. Standard forecasts highlight the potential for greater life expectancy to increase costs: medical costs generally increase with age, and greater life expectancy means that more of the elderly will be in the older age groups. Two factors work in the other direction, however. First, increases in life expectancy mean that a smaller share of the elderly will be in the last year of life, when medical costs generally are very high. Furthermore, more of the elderly will be dying at older ages, and end-of-life costs typically decline with age at death. Second, disability rates among the surviving population have been declining in recent years by 0.5 to 1.5 percent annually. Reductions in disability, if sustained, will also reduce medical spending. Thus, changes in disability and mortality should, on net, reduce average medical spending on the elderly. However, these effects are not as large as the projected increase in medical spending stemming from increases in overall medical costs. Technological change in medicine at anywhere near its historic rate would still result in a substantial public sector burden for medical costs.
Tax Incentives, Material Inputs, and the Supply Curve for Capital Equipment
Authors: Whelan Karl
Published: August 2019

The slope of the supply curve for capital equipment has important implications for the macroeconomics of investment and the effects of tax reform on capital accumulation. Goolsbee (1998) has used changes in investment tax incentives to identify whether this supply curve is significantly upward-sloping and has concluded that it is. This paper shows that investment tax incentives are a poor instrument for identifying this supply curve because they are spuriously correlated with supply shocks for equipment producers. Once input costs for equipment producers are controlled for, there is no evidence of a relationship between tax incentives and equipment prices. In fact, the evidence favors the interpretation that the supply curve is flat.
Intra-Household Allocation and the Mental Health of Children: Structural Estimation Analysis
Authors: Davis Morris A. , Foster E. Michael
Published: August 2019

This paper estimates the structural parameters of a dynamic model where parents with one child periodically decide whether or not their child uses various mental health services. In this model, mental health services improve a child's mental health (which parents care about), however, mental health services may be costly to the parents both in terms of utility and household consumption. Using a panel data set collected as part of the Fort Bragg Mental Health Demonstration, we estimate the model with a maximum likelihood procedure that accounts for unobservable differences in mental health endowments of children and population heterogeneity in parental preferences and in the effectiveness of mental health services. We estimate that parents experience relatively high disutility when a child uses mental health services, implying parents enroll their children in mental health services only if these services have multi-period effects on their child's mental health. Correspondingly, we find that outpatient and inpatient mental health services have permanent effects on a child's mental health. We conclude that the improvement over time of the mental health of the children in our data is, in a large part, the outcome of forward looking parents choosing to increase their child's mental health.
Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index
Authors: Lebow David E. , Molloy Raven Saks , Wilson Beth Anne
Published: August 2019

We examine the extent of downward nominal wage rigidity using the microdata underlying the BLS employment cost index--an extensive, establishment-based dataset with detailed information on wage and benefit costs. We find stronger evidence of downward nominal wage rigidity than did previous studies using panel data on individuals. Firms appear able to circumvent part, but not all, of this rigidity by varying benefits: Total compensation displays modestly less rigidity than do wages alone. Given our estimated amount of rigidity, a simple model predicts that the disinflation over the 1980s would have raised equilibrium unemployment notably. This prediction stands in contrast to the actual behavior of unemployment over this period: The addition of a term capturing the cost of rigidity (that rises as inflation falls) has no additional explanatory power in a standard Phillips Curve equation.
Recent Trends in Compensation Practices
Authors: Lebow David E. , Sheiner Louise , Slifman Lawrence , Starr-McCluer Martha
Published: August 2019

According to some accounts, compensation practices have recently been undergoing marked changes, with an increasing number of firms said to be substituting lump-sum payments for regular pay increases, allowing for greater variability of remuneration across individuals or groups, and making greater use of profit sharing or stock options. Many of these practices are outside the scope of the typical measures of economywide compensation growth. Moreover, intensified use of these schemes ought to heighten the responsiveness of overall compensation costs to business conditions and could also, in theory, boost productivity. We find that the spreading use of these practices could be leading to an understatement of the annual growth rate of actual employment costs (relative to the published employment cost index) that is not insignificant--perhaps on the order of three-tenths of a percentage point currently. Moreover, the changes have apparently helped to increase the flexibility of pay both across time and across workers. In addition, by linking pay more closely to performance, the firms we contacted seemed to think that their employees were working more efficiently and with an eye to enhancing the &quot;bottom line&quot; of the company.
Finance and Growth: Theory and New Evidence
Authors: Harrison Paul , Sussman Oren , Zeira Joseph
Published: August 2019

This paper describes a feedback effect between real and financial development. The paper presents a new variable, which we call the cost of financial intermediation, through which the feedback between finance and growth operates. The theoretical part of the paper describes how specialization of financial intermediaries leads to such a feedback effect. The main result of this feedback is that differences in productivity across countries are amplified by financial intermediation. The empirical part of the paper uses U.S. cross-state data from banks' income statements to measure the cost of financial intermediation and to provide evidence for the feedback effect between finance and growth.
Monitoring, Moral Hazard, and Market Power: A Model of Bank Lending
Authors: Covitz Daniel M. , Heitfield Erik
Published: August 2019

We model the relationship between market power and both loan interest rates and bank risk without placing strong restrictions on the moral hazard problems between borrowers and banks and between banks and a government guarantor. Our results suggest that these relationships hinge on intuitive parameterizations of the overlapping moral hazard problems. Surprisingly, for lending markets with a high degree of borrower moral hazard but limited bank moral hazard, we find that banks with market power charge lower interest rates than competitive banks. We also find that competition makes banking industry risk highly sensitive to macroeconomic fluctuations by making banks more vulnerable to borrower moral hazard. This finding offers an explanation for the dramatic rise and subsequent decline in bank failure rates during the 1980s and 1990s.
What's Happened to the Phillips Curve?
Authors: Brayton Flint , Roberts John M. , Williams John C.
Published: August 2019

The simultaneous occurrence in the second half of the 1990s of low and falling price inflation and low unemployment appears to be at odds with the properties of a standard Phillips curve. We find this result in a model in which inflation depends on the unemployment rate, past inflation, and conventional measures of price supply shocks. We show that, in such a model, long lags of past inflation are preferred to short lags, and that with long lags, the NAIRU is estimated precisely but is unstable in the 1990s. Two alternative modifications to the standard Phillips curve restore stability. One replaces the unemployment rate with capacity utilization. Although this change leads to more accurate inflation predictions in the recent period, the predictive ability of the utilization rate is not superior to that of the unemployment rate for the 1955 to 1998 sample as a whole. The second, and preferred, modification augments the standard Phillips curve to include an "error-correction" mechanism involving the markup of prices over trend unit labor costs. With the markup relatively high through much of the 1990s, this channel is estimated to have held down inflation over this period, and thus provides an explanation of the recent low inflation.
Measurement Error in General Equilibrium: The Aggregate Effects of Noisy Economic Indicators
Authors: Bomfim Antulio N.
Published: August 2019

I analyze the business cycle implications of noisy economic indicators in the context of a dynamic general equilibrium model. Two main results emerge. First, measurement error in preliminary data releases can have a quantitatively important effect on economic fluctuations. For instance, under efficient signal-extraction, the introduction of accurate economic indicators would make aggregate output 10 to 30 percent more volatile than suggested by the post-war experience of the U.S. economy. Second, the sign---but not the magnitude---of the measurement error effect depends crucially on the signal processing capabilities of agents. In particular, if agents take the noisy data at face value, significant improvements in the quality of key economic indicators would lead to considerably less cyclical volatility.
Tests for Non-Linear Dynamics in Systems of Non-Stationary Economic Time Series: The Case of Short-Term U.S. Interest Rates
Authors: Jones Barry E. , Nesmith Travis D.
Published: August 2019

Using Hall and Heyde&#x27;s (1980) representation theorem, we show that the stationary co-integration relations of an integrated system are generally non-linear stochastic processes. We propose a sequential non-parametric procedure to test stationary co-integration relations for non-linear dynamics, and apply this procedure to short term U.S. interest rates as an illustration. We demonstrate that the weekly federal funds rate is co-integrated with Treasury bill and commercial paper rates and that the co-integration relations are non-linear.
Measuring Temporary Labor Outsourcing in U.S. Manufacturing
Authors: Estevao Marcello M. , Lach Saul
Published: August 2019

Several analysts claim that firms have been using more flexible work arrangements in order to contain the costly adjustment of labor to changes in economic conditions. In particular, temporary help supply (THS) employment has increased dramatically in the last ten years. However, there is only scant evidence on the industries that are hiring this type of worker. In particular, some anecdotal evidence points to the fact that manufacturing industries have substantially stepped up their demand for THS workers since the mid-1980s. If this is true, not accounting for this flow of workers from the service sector to manufacturing may lead to misleading conclusions about the cyclical and long-term path of manufacturing employment and hours of work. We close this gap by providing several estimates of the number of individuals employed by temporary help supply (THS) firms who worked in the manufacturing sector from 1972 to 1997. One estimate, in particular, is based on a new methodology that uses minimal assumptions to put bounds on the probability that a manufacturing worker is employed by a THS firm. The bounds rely on readily available data on workers' individual characteristics observable in the CPS. We show that manufacturers have been using THS workers more intensively in the 1990s. In addition, the apparent flatness of manufacturing employment in the 1990s can be explained in part by this type of outsourcing from the service sector. Finally, not accounting for THS hours overstated the increase in average annual manufacturing labor productivity by 1/2 percentage point during the 1991-1997 period.
Is Corporate Governance Ineffective in Emerging Markets?
Authors: Gibson Michael S.
Published: August 2019

I test whether corporate governance is ineffective in emerging markets by estimating the link between CEO turnover and firm performance for over 1,200 firms in eight emerging markets. I find two main results. First, CEOs of emerging market firms are more likely to lose their jobs when their firm&#x27;s performance is poor, suggesting that corporate governance is not ineffective in emerging markets. Second, for the subset of firms with a large domestic shareholder, there is no link between CEO turnover and firm performance. For this subset of emerging market firms, corporate governance appears to be ineffective.
Credit Constraints, Consumer Leasing and the Automobile Replacement Decision
Authors: Johnson Kathleen W.
Published: August 2019

This paper presents a model of consumer automobile replacement in the presence of leasing. The model incorporates credit constraints to distinguish between the leasing and purchasing options. It demonstrates how leasing increases the probability that a household replaces its automobile and how households that lease choose higher quality automobiles. The qualitative choice model of the household's decision to lease provides support for the observation that households that lease face credit constraints. It also shows that although households that lease new automobiles are quite similar to those that purchase, they exhibit differences consistent with the theory. In particular, they prefer newer, more expensive automobiles.
Explaining the Investment Boom of the 1990s
Authors: Tevlin Stacey , Whelan Karl
Published: August 2019

Real equipment investment in the United States has boomed in recent years, led by soaring investment in computers. We find that traditional aggregate econometric models completely fail to capture the magnitude of this recent growth--mainly because these models neglect to address two features that are crucial (and unique) to the current investment boom. First, the pace at which firms replace depreciated capital has increased. Second, investment has been more sensitive to the cost of capital. We document that these two features stem from the special behavior of investment in computers and therefore propose a disaggregated approach. This produces an econometric model that successfully explains the 1990s equipment investment boom.
The Growth of Consumer Credit and the Household Debt Service Burden
Authors: Maki Dean M.
Published: August 2019

Household debt is at a record high relative to disposable income. Some analysts are concerned that this unprecedented level of debt might pose a risk to the financial health of American households and ultimately lead them to curtail their spending. In this paper, I summarize some of the relevant facts concerning the growth of consumer credit and the household debt service burden, outline the results of the research that has been conducted in this area, and look at the questions that might be answered with additional research.
Making News: Financial Market Effects of Federal Reserve Disclosure Practices
Authors: Bomfim Antulio N. , Reinhart Vincent
Published: August 2019

As recently as early 1994, market participants had to infer the stance of U.S. monetary policy according to the type and size of the open market operations conducted by the Federal Reserve's Trading Desk. Thus, investors were exposed to uncertainty about both the timing and the motivation for monetary policy actions. Since then, changes in disclosure practices regarding monetary policy decisions have potentially mitigated both types of uncertainty. We examine the effects of the greater openness and transparency of these new practices on the way a wide array of financial market instruments respond to unanticipated policy decisions. In general, the financial markets' response to policy does not seem to be related to what the Federal Reserve says after a surprise decision is announced or to when it decides to act. The invariance of the response of asset prices to policy across time and announcement regimes suggests that what the Federal Reserve says when it acts is of second-order importance to the act itself.
Understanding Productivity: Lessons from Longitudinal Microdata
Authors: Bartelsman Eric J. , Doms Mark E.
Published: August 2019

This paper reviews research that uses longitudinal microdata to document productivity movements and to examine factors behind productivity growth. The research explores the dispersion of productivity across firms and establishments, the persistence of productivity differentials, the consequences of entry and exit, and the contribution of resource reallocation across firms to aggregate productivity growth. The research also reveals important factors correlated with productivity growth, such as managerial ability, technology use, human capital, and regulation. The more advanced literature in the field has begun to address the more difficult questions of the causality between these factors and productivity growth.
The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?
Authors: Sichel Daniel E. , Oliner Stephen D.
Published: August 2019

The performance of the U.S. economy over the past several years has been remarkable, including a rebound in labor productivity growth after nearly a quarter century of sluggish gains. To assess the role of information technology in the recent rebound, this paper re-examines the growth contribution of computers and related inputs with the same neoclassical framework that we have used in earlier work. Our results indicate that the contribution to productivity growth from the use of information technology -- including computer hardware, software, and communication equipment -- surged in the second half of the 1990s. In addition, technological advance in the production of computers appears to have contributed importantly to the speed-up in productivity growth. All in all, we estimate that the use of information technology and the production of computers accounted for about two-thirds of the 1 percentage point step-up in productivity growth between the first and second halves of the decade. Thus, to answer the question posed in the title of this paper, information technology largely is the story.
Household Portfolios in the United States
Authors: Bertaut Carol C. , Starr-McCluer Martha
Published: August 2019

This paper investigates the composition of households' assets and liabilities in the United States. Using aggregate and survey data, we document major trends in household portfolios in the past 15 years. We show that, despite the broad array of financial products available, the portfolio of the typical household remains fairly simple and safe, consisting of a checking account, savings account, and tax-deferred retirement account; in 1998, less than half of all households owned some form of stock. We use pooled data from the Survey of Consumer Finances to investigate determinants of portfolio choice, finding significant effects of age, wealth, income risk, and entry/information costs.
Efficiency Barriers to the Consolidation of the European Financial Services Industry
Authors: Berger Allen N. , DeYoung Robert , Udell Gregory F.
Published: August 2019

Cross-border consolidation of financial institutions within Europe has been relatively limited, possibly reflecting efficiency barriers to operating across borders, including distance; differences in language, culture, currency, and regulatory/supervisory structures; and explicit or implicit rules against foreign competitors. EU policies such as the Single Market Programme and the European Monetary Union attenuate some but not all of these barriers. The evidence is consistent with the hypothesis that these barriers offset most of any potential efficiency gains from cross-border consolidation. Banks headquartered in other EU nations have slightly lower average measured efficiency than domestic banks and non-EU-based foreign banks.
A Primer on the Economics and Time Series Econometrics of Wealth Effects
Authors: Davis Morris A. , Palumbo Michael G.
Published: August 2019

This paper reviews the statistical approach typically applied by macroeconomists to investigate the empirical links among aggregate data on household consumption, income, and wealth. In particular, we focus on studies determining whether and how much changes in net worth, such as those generated by the stock-market boom in the U.S. over the latter 1990s, are responsible for subsequent swings in the growth rate of consumer spending. We show how simple economic theory is used to motivate an econometric strategy that consists of two stages of analysis. First, regressions are used to identify trend movements shared by consumption, income, and wealth over the long run, then deviations of these series from their commong long- run trends are used to help forecast consumption growth over the short run. Our discussion highlights the various judgments that researchers must make in the course of implementing this empirical approach, and we detail how specific parameter estimates describing the magnitude of the wealth effect on consumption--and even broad conclusions about its existence--are affected by making alternative choices.