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The article discusses the significance of the field-oriented academic conference series in the U.S. According to the author, the publication was a unique inception in 1970 because it has inspired imitation of the editors Arthur Okun and George Perry who were the first to understand the value of field-oriented academic conference series. Its hostility to the real business cycle model is easier to explain and reflects well on the editors. It has been said that the smaller general-equilibrium models was an easy way to better understand the transition from hostility to the big models to the smaller ones.

This paper estimates the value of tax benefits in 76 management buyouts of public companies completed in the period 1980 to 1986. The median value of tax benefits, estimated at the time the buyout company goes private, has a lower bound of 21% and an upper bound of 143 % of the premium paid to pre-buyout shareholders. The estimated value depends on the rate buyout debt is repaid and the tax rate applied to the interest deductions. The paper also presents evidence on the actual taxes paid and debt repayment rates by these companies after the buyout. The results in this paper suggest that tax benefits are an important source of the wealth gains in management buyouts. [ABSTRACT FROM AUTHOR]

There have been a series of empirical investigations of the impact of pollution abatement on the efficient scale of individual polluting plants. From a regression analysis of 30 integrated paper mills in Wisconsin and Michigan, Pittman (1981, 13) observed that abatement "requirements increase the minimum efficient size of plant, thus increasing barriers to entry and exacerbating any lack of competition in the industry." A similar result, based on data for 19,000 manufacturing plants in 319 industries, was reported by Pashigian (1984, 16) who concluded that environmental regulation in the United States during the 1970s "reduced the number of establishments per industry and raised the average plant size." However the findings are not all in agreement. On the basis of communications with manufacturing executives who had been involved in selecting the size and location of 162 new branch plants, Stafford (1985, 235) found that "environmental regulations have had no predictable impact on the sizes of facilities built." Using the same data base as Pashigian but with some different interpretations, Evans (1986, 197n) "failed to find any correlation between changes in relative pollution abatement operating costs and changes in average plant size. [ABSTRACT FROM AUTHOR]

With economic development as a primary aim of city–county consolidations, a theoretical and empirical literature explores the effect of consolidation on economic conditions. However, despite the economic development effects arguably being most relevant during economic crisis, no studies have focused on consolidation's effects during recession. Using county-level data from 13 states across the United States, we consider how consolidation influences economic stability during and after the Great Recession. After controlling for demographic, economic, and geographic factors, including potential spillover effects, the results suggest that consolidation does not promote stability for either employment, the unemployment rate, per capita income, or number of business establishments. These null effects are not influenced by government sector employment or driven by results from any particular state. The paper's findings caution against local governments pursuing city–county consolidation in hopes of greater economic stability. [ABSTRACT FROM AUTHOR]

The primary purpose of this paper is to test a discrete time, consumption-based model of prices of GNMA securities and U. S. Treasury bonds in which the specification of preferences is more general than the logarithmic form and in which minimal structure is imposed on the stochastic processes generating consumption and returns. By focusing on the necessary conditions for intertemporal utility maximization, we are able to estimate the parameters characterizing preferences and test restrictions on the temporal behavior of the prices of GNMAs and U.S. Treasury bonds, without having to solve for the stochastic equilibrium. Our estimates of the preference parameters hopefully will provide guidance for structuring analyses of bond pricing models, which require that preferences be specified a priori. In addition, the issue of whether the relative prices of GNMAs and U.S. Treasury bonds are consistent with the equilibrium model considered can be investigated by testing the cross-sectional restrictions on these prices. This issue is of interest, in part, because it is often suggested that GNMAs are not properly priced relative to Government bonds and other investment alternatives. If this is true, then the GNMA mortgage-backed securities program may not have met its objective of providing individuals with the opportunity to compete for mortgage funds in the capital market on the same terms as the U.S. Government and the corporate sector of the economy. Our analysis provides some evidence on this issue in the absence of auxiliary hypotheses about the production technology or the distributions of variables in the model. [ABSTRACT FROM AUTHOR]

This paper presents the results of simulation experiments of an econometric model specifically designed to evaluate the short-run impact of these agencies. The model incorporates, in particular, four features that we feel are critical for evaluating the short-run stabilization activities of these agencies: (i) The model is monthly. To our knowledge, all previous econometric studies in this area have used quarterly or annual models. Since the relevant time span is less than a year, the timing patterns observed on a monthly basis are key. (ii) The model distinguishes carefully between the commitment and mortgage purchase activity of the agencies. We presume that the commitment activity of the agencies provides an initial and powerful stimulant to the housing market, whereas their mortgage purchase activity may substantially offset this initial stimulus. Since the time lag between commitment and purchase can be over a year, this distinction may explain why the agencies can stabilize short-run activity, but without any continuing long-run effect. (iii) The structure of the model differentiates between periods of equilibrium and disequilibrium in the mortgage market. Previous studies have observed that the mortgage interest rate may not at times adjust to clear the market, leading to credit rationing. Our model is specified to include credit rationing effects in both the mortgage and housing markets. This is important because agency interventions may be much more powerful when undertaken during disequilibrium episodes. (iv) The model allows for capital market feedback effects whereby debt issues of the agencies (to finance mortgage purchases) impact capital market interest rates. As a result, rising capital market interest rates will offset a portion of the initial positive impact of agency commitments. The agenda for the paper is as follows. Section II reviews the theoretical foundations of the model, with special emphasis on the features just listed. Section ... [ABSTRACT FROM AUTHOR]

The financial behavior of households is analyzed in the present paper. This behavior includes purchasing money, savings accounts, short-term and long-term securities and issuing consumer credit, home mortgages and policy loans. The regression equations are carefully constructed and estimated so as to enforce the household balance sheet constraint. The empirical results are quite consistent with common knowledge of the workings of financial markets. Housing and consumer durable purchases, respectively, are largely financed by issuing home mortgages and consumer credit; borrowing against life insurance reserves is closely related to market interest rates and the level of reserves; and savings is primarily channeled into financial assets. The division of financial assets depends largely on income and relative interest rates. Capital gains on equities are partially used both to repay liabilities and to build up other financial assets. The flow of funds data are a valuable, and largely untapped, source of information regarding macro financial behavior. The data are extremely detailed, complete, and apparently of reasonably high quality. Further work with these data is in order. [ABSTRACT FROM AUTHOR]

The paper models the domino effect and defines a measurement for the necessity of banking supervision. The effect of several factors, such as the desired stability of the banking system, its size, the amount of negative externalities that are considered by banks, and supervisory costs, on the necessity of supervision are studied. For instance, it was found that, under certain circumstances, supervision becomes less essential if the number of banks increases. The paper has also emphasized that objective difficulties in the supervision of banks, by simply imposing restrictions on their activities, are intrinsic to the operation of the banks themselves. The paper provides some insight into the current debate as to the necessity or redundancy of supervision and regulation. [ABSTRACT FROM AUTHOR]

The housing and mortgage markets have long been considered to be markets that may not always be in equilibrium, and many econometric models of the housing and mortgage markets have tried in one way or another to account for disequilibrium effects. In this paper a critique of previous models of the housing and mortgage markets is made. The main argument of the paper is that disequilibrium effects have not been accounted for in an adequate way in most models. A related argument of the paper is that many models have not captured in an adequate way the interaction between the housing and mortgage markets. [ABSTRACT FROM AUTHOR]

The article discusses the issues related to proliferation of American academic economic theories that are not supported by empirical data. Wassily Leontief, a Nobel Laureate, and a president of the American Economic Association, anticipated that, as academic economics "lags intellectually," people in adjoining fields will eventually be vocal in their dismay at the stable, stationary equilibrium and the splendid isolation of academic economics. Approximately thirteen years have gone by since Leontief published his original paper. The article also presents tables showing twenty years of data collected by the journal "American Economic Review." A recent study by David Figlio generalizes on the proportions of empirical articles published from 1960 to 1992 in "the top ten" economics journals. He ranked them by the joint result of three "quality" measures--peer evaluation, citation frequency, and institutional affiliation. His study was offset by the judgment that, although there has been a boom in empirical analysis of economic issues in the past two decades, "relatively little" of the results have been published in major economic journals--a consequence of better computer technology and better research methodology.

The paper examines the co-movements between the agricultural markets of China and the US. First, the empirical findings indicate that long-term equilibrium exists between the China and US soybean futures markets but not in the wheat futures markets. Second, there exists a significant spillover effect from the US to China in the wheat futures market, but the opposite effect is not strong; furthermore, for soybean futures, the spillover effect is bi-directional. Th ird, there is a unidirectional leading effect by the US agricultural futures markets on the Chinese market, particularly for agricultural products weakly controlled by the Chinese government. [ABSTRACT FROM AUTHOR]

Using a quantitative heterogeneous agents macro-housing model and detailed microdata, this paper studies the drivers of the 2006–2011 housing bust, its spillovers to consumption and the credit market, and the ability of mortgage rate interventions to accelerate the recovery. The model features tenure choice between owning and renting, rich portfolio choice, long-term defaultable mortgages, and endogenously illiquid housing from search frictions. The equilibrium analysis and empirical evidence suggest that the deterioration in house prices and liquidity, transmitted to consumption via balance sheets that vary in composition and depth, is central to explaining the observed aggregate and cross-sectional patterns. (JEL E23, E32, E44, G21, R31) [ABSTRACT FROM AUTHOR]

We attempt to translate Neo-Austrian ideas about the workings of financial markets, as originally advanced by F. A. Hayek, into the standard probabilistic language of modern finance. We focus on an apparent paradox, namely the insistence of Neo-Austrians on order (i.e., stationarity) together with ever-reemerging inefficiencies. The paper's findings have implications beyond Neo-Austrian theory: They demonstrate how easy it is to reject market efficiency, but how much more difficult it is to discern the nature of the inefficiency. We illustrate our findings with price data from the U.S. Treasury bill market over the period 1962 to 1999. There is ample evidence that the price of a three-month Treasury bill is not a random walk, yet the sign of the average price change is erratic, so that inference about the nature of the inefficiency is unreliable. [ABSTRACT FROM AUTHOR]

This paper structurally investigates the changes in the Fed’s communication strategy since the mid-1990s through the lens of anticipated and unanticipated disturbances to a Taylor rule. The anticipated disturbances are identified using Treasury bond yield data in estimating a dynamic stochastic general equilibrium (DSGE) model with a term structure of interest rates. Our estimation results show that the Fed’s decisions were unanticipated for market participants until 1999, but thereafter a larger portion of its future policy actions tended to be communicated in advance. We also find that the relative contribution of the anticipated monetary policy disturbances to macroeconomic fluctuations became larger after 1999. The bond yield data is indispensable to these results, since it contains crucial information on an expected future path of the federal funds rate. [ABSTRACT FROM AUTHOR]

Using an intertemporal equilibrium model, this paper analyzes how lower source-based taxes on capital income impact trade performance and international competitiveness. It shows that, depending on import shares and intertemporal and intratemporal substitution elasticities, capital accumulation may induce changes in real interest rates and the terms of trade that stimulate domestic saving -- even if financial capital is perfectly mobile internationally. Import shares appear important determinants of exchange rate effects. Numerical simulations illustrate these results. [ABSTRACT FROM AUTHOR]

This paper shows that bank runs can be modeled as an equilibrium phenomenon. We demonstrate that some aspects of the intuitive "story" that bank runs start with fears of insolvency of banks can be rigorously modeled. If individuals observe long "lines" at the bank, they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run. However, bank runs occur even when no one has any adverse information. Extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations. [ABSTRACT FROM AUTHOR]

This paper develops and analyzes a general-equilibrium model with sticky information. The only rigidity in goods, labor, and financial markets is that agents are inattentive, sporadically updating their information sets, when setting prices, wages, and consumption. After presenting the ingredients of such a model, the paper develops an algorithm to solve this class of models and uses it to study the model's dynamic properties. It then estimates the parameters of the model using U.S. data on five key macroeconomic time series. It finds that information stickiness is present in all markets, and is especially pronounced for consumers and workers. Variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation, output, and hours. (JEL: E30, E10) [ABSTRACT FROM AUTHOR]

Modern macroeconomic theories are customarily classified as either neoclassical or Keynesian. Neoclassical theories are those that assume that most markets are in equilibrium most of the time; in particular, they generally assume that the labor market is always in equilibrium. Keynesian theories are those that assume that many markets are in disequilibrium much of the time; in addition to the labor market, they generally assume that financial markets and markets for capital goods are often in disequilibrium, in this paper, we will be interested in the extent to which a theory assumes that markets are in equilibrium, rather than in the intellectual tradition of the theory, so we will classify theories as "equilibrium theories" or "disequilibrium theories." We will be interested in dynamic theories, which describe the development of prices, stocks, and flows of goods and services over time, rather than in static theories, which describe the impact of events such as a one-time change in tastes, technology, or government policy. One of the purposes of this paper is to develop an aggregate model of the development over time of an economy that includes money and that is in continual equilibrium in the sense described above. Such a model would help in the analysis of the properties of a competitive monetary economy, and would be a logical starting point for the analysis of such phenomena as unemployment and changes in the rate of inflation. Since most Keynesian models of the economy do not pretend to be equilibrium models, let us turn to the neoclassical models of economic growth. [ABSTRACT FROM AUTHOR]

The U.S. coronavirus recession began in late February of 2020 and was over in two months. The rapid recovery was due to the Coronavirus Aid, Relief, and Economic Stability Act (CARES Act), a large fiscal stimulus program initiated in late March 2020, that was accompanied by a strong expansionary monetary policy. This paper advances the notion that although the Corona-Recession was historically short it had two more permanent—longer-run—impacts that have largely been ignored. First, it accelerated two emerging trends—expansion of remote work, and more rapid adoption of digital technologies—and each will have a profound effect on work, society, and well-being in the U.S. Second, the pandemic-fuelled downturn fostered a new pathway—loneliness and social isolation—that exacerbated the emotional health concern that is part of all recessions, especially for younger persons. This occurrence is also likely to have an enduring footprint on economic and social life. [ABSTRACT FROM AUTHOR]

This paper studies the impact of advertising as a channel for risk selection in Medicare Advantage. We provide evidence that insurer advertising is responsive to the gains from risk selection. Then we develop and estimate an equilibrium model of Medicare Advantage with advertising, allowing rich individual heterogeneity. Our estimates show that advertising is effective in attracting healthy individuals who are newly eligible for Medicare, contributing to advantageous selection into Medicare Advantage. Moreover, risk selection through advertising substantially lowers premiums by improving insurers' risk pools. The distributional implication is that unhealthy consumers may be better off through cross-subsidization from healthy individuals. (JEL D81, G22, I13, I18, M37) [ABSTRACT FROM AUTHOR]

This article examines the effects of government policies on the U.S. economy as of May 1979. There is strong theoretical justification from microeconomics for the proposition that even anticipated government actions affect real variables. On a macro-economic level this proposition has received some support in my work in the sense that a number of micro-economic explanatory variables are significant in my estimated equations. The possible existence of disequilibrium in the economy provides another justification for the effectiveness of government policies. The proposition that disequilibrium at times exists in the economy has received some support in my work through the significance of my disequilibrium variable. Policy effects in my model are sensitive to assumptions about federal behavior and about expectations in the bond and stock markets. They are not sensitive to whether or not government debt is treated as wealth by households. It may be possible in the future, as outlined in my forthcoming paper, to test the assumption of rational expectations in the bond and stock markets, but it is unlikely that the macro data can be used to decide how government debt is treated by households. The equation that has been estimated to explain federal behavior, an equation in which the federal government is estimated to lean against the wind, appears to be good when judged by conventional statistical standards. A method that was proposed for estimating the expected predictive accuracy of econometric models indicates that the present model is more accurate than other models. These results thus provide some tentative support for the proposition that even anticipated government actions can affect real variables. To conclude, it is interesting to speculate what the status of the debate about the effectiveness of government policies will be forty-three years from now in 2021.

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper reports on recent research showing that the severe recession of 2007-2009 and the weak recovery have been due to poor economic policies and the failure to implement good policies during the past decade. Monetary policy, fiscal policy, and regulatory policy became more discretionary, more interventionist, and less predictable in comparison with the previous two decades of better economic performance. At best these policies led to growth spurts, but were followed by retrenchments, averaging to poor performance. The paper also considers alternative views-that the equilibrium interest rate declined during the decade and that the seriousness of financial crisis caused the slow recovery. [ABSTRACT FROM AUTHOR]

I have spent close to 20 years cataloging transactions between households in Thai villages, along with a research team. Just this past summer, we documented a number of ways in which even relatively poor villages have money markets not dissimilar in some ways from New York financial markets, with borrowing and repayment passing along links in credit chains. In another project, we have been looking at month-by-month school attendance, grade level completion, and graduation for children in these villages, following them from birth to graduation. The Townsend Thai project is a theory-based data collection endeavor, measuring and mapping village and larger economies into general equilibrium frameworks. This paper reviews a number of findings, implications, applications, and lessons learned, and considers next steps. [ABSTRACT FROM AUTHOR]

This paper studies a general equilibrium model that is consistent with recent empirical evidence showing that the U.S. price level and inflation are much more responsive to aggregate technology shocks than to monetary policy shocks. Specifically, we show that the fact that aggregate technology shocks are more volatile than monetary policy shocks induces firms to pay more attention to the former than to the latter. However, most important, this work adds to the literature by analytically showing how monetary policy feedback rules affect the incentives faced by firms in allocating attention. A policy rule responding more actively to inflation fluctuations induces firms to pay relatively more attention to more volatile shocks, helping to rationalize the observed behavior of prices in response to technology and monetary policy shocks. [ABSTRACT FROM AUTHOR]

This paper uses a dynamic stochastic general equilibrium (DSGE) model to explore additional information that can be extracted from the yield curve about the Federal Reserve's implicit inflation target. In the model, monetary policy follows a nominal interest rate rule with a drifting inflation target, and agents have imperfect information about the persistent component of the inflation target. When the yield curve information is included, the DSGE model generates inflation expectations that are highly correlated with survey data evidence. In the DSGE model, agents quickly learn the inflation target and the gap between the perceived target and the actual target is quantitatively small. This is in contrast to some existing studies that suggest a persistent role of imperfect information even as long-run inflation expectations have declined and stabilized at a low level since the mid 1980s. [ABSTRACT FROM AUTHOR]

Many observers have argued that the regulatory framework in place prior to the global financial crisis was deficient because it was largely ''microprudential'' in nature. A microprudential approach is one in which regulation is partial equilibrium in its conception and aimed at preventing the costly failure of individual financial institutions. By contrast, a ''macroprudential'' approach recognizes the importance of general equilibrium effects, and seeks to safeguard the financial system as a whole. In the aftermath of the crisis, there seems to be agreement among both academics and policymakers that financial regulation needs to move in a macroprudential direction. In this paper, we offer a detailed vision for how a macroprudential regime might be designed. Our prescriptions follow from a specific theory of how modern financial crises unfold and why both an unregulated financial system, as well as one based on capital rules that only apply to traditional banks, is likely to be fragile. We begin by identifying the key market failures at work: why individual financial firms, acting in their own interests, deviate from what a social planner would have them do. Next, we discuss a number of concrete steps to remedy these market failures. We conclude the paper by comparing our proposals to recent regulatory reforms in the United States and to proposed global banking reforms. [ABSTRACT FROM AUTHOR]

What are the effects of blocking patents on R&D and consumption? This paper develops a quality-ladder growth model with overlapping intellectual property rights and capital accumulation to quantitatively evaluate the effects of blocking patents. The analysis focuses on two policy variables (a) patent breadth that determines the amount of profits created by an invention and (b) the profit-sharing rule that determines the distribution of profits between current and former inventors along the quality ladder. The model is calibrated to aggregate data of the US economy. Under parameter values that match key features of the US economy and show equilibrium R&D underinvestment, I find that optimizing the profit-sharing rule of blocking patents would lead to a significant increase in R&D, consumption and welfare. Also, the paper derives and quantifies a dynamic distortionary effect of patent policy on capital accumulation. [ABSTRACT FROM AUTHOR]

To mitigate the movement of non-native organisms with trade, phytosanitary systems have been implemented within and between countries. In some countries such as Cuba, little is known about the within-state plant health system. To facilitate the development of future trade partnership between Cuba and the United States, agencies need to understand the organizational structure and diagnostic capacity of the Cuban Plant Protection System, identify potential synergies between the United States and Cuban systems, and identify steps towards cooperation. This paper fills this critical void by presenting a descriptive analysis of the plant health system in Cuba. Information was integrated from available literature, informal interviews with Cuban experts, and workshops focused on Cuban policies, risk, and potential collaboration attended by Cuban and American experts. We identify the next practical steps in improving cooperation, including building trust and capacity. Mutual understanding of phytosanitary systems will be crucial for the regional economic and environmental stability of a post-embargo United States-Cuban relationship. [ABSTRACT FROM AUTHOR]

A central statement of the theory of natural trading partners is that preferential trading with regional trading partners is less likely to be trade diverting and therefore geographically proximate partners are to be considered “natural” partners for preferential arrangements. This paper examines this question empirically. The analytical framework involves a general equilibrium model of preferential trade and an econometric model with tight links to this theory. This framework is used to implement tests of the natural trading partners hypothesis using U.S. trade data for the years 1964–95: Welfare changes that would result from preferential tariff reductions by the United States against various trading partners are first estimated, and correlations with bilateral “distance” measures (with and without controls for income levels) are then examined. Since the argument for “natural” trading partners is based on the greater likelihood of geographically proximate countries to be more significant trading partners, correlations between the welfare change estimates and bilateral trade volume are examined as well. Both geographic proximity and trade volume are found to have no effect. Thus this paper is unable to find any support for the natural trading partners theory in U.S. data. [ABSTRACT FROM AUTHOR]

This paper is concerned with macroeconomic policy interaction in a two-country flexible exchange rate model with no exchange market intervention. The three key ingredients are (1) a short-run non-vertical Phillips curve in each country; (2) positive transmission of economic expansion through the terms of trade; and (3) zero or constant capital movements, so that the flexible exchange rate keeps the trade balance unchanged. [ABSTRACT FROM AUTHOR]

It has often been argued that prices are sticky in the United States. However, the empirical papers that have claimed to support this view have not reflected any formal behavioral theory. This paper presents a theory that justifies price stickiness, namely, that firms, fearing to upset their customers, attribute a cost to price changes. The rational expectations equilibrium of an economy with many such firms is presented, estimated with postwar U.S. data, and tested against alternative hypotheses. The results largely support the model. Furthermore, the hypothesis that prices are not sticky is rejected by U.S. data. It is often argued that prices are sticky in the United States. In particular, various empirical papers have claimed to provide evidence that supports this view. However, these empirical papers have suffered from one major common flaw. None of them estimated equations that represented a formal theory. Therefore their results are very hard to interpret.[1] In general these studies have assumed that prices adjust at a constant rate to their desired value. This paper presents evidence related to a specific model of sticky prices. In this model, prices are sticky because firms face a subjective cost to changing their prices. They are sticky in the sense that they are closer to those prices which prevailed the period before than they would be if no agent's decisions at t depended on prices at t - 1. The model incorporates a number of specific assumptions about the functional forms of the demand functions, production functions, etc. It therefore significantly reduces the set of outcomes that do not contradict it. [ABSTRACT FROM AUTHOR]

The article presents discussions by economists on various papers published in the May 1, 1970 issue of the journal "American Economic Review." It discusses effects of tax policy measures when consumers behave rationally and markets function, as they should, in a model embodying conditions of a full and general equilibrium. It states that in the analysis of tax policy, the most important effects to consider are long-term effects. They are what the economy has to live with indefinitely. "Announcement effects" are instantaneous and for that reason evanescent, the transition between announcement and the longer-term equilibrium is by definition transitory. The long run is precisely what economist Lauritis R. Christensen focused on in his paper. Christensen noted that saving is likely to be insensitive to the rate of return and produced two cases, one in which the counterpart of the reduction in revenue caused by the tax incentives was added borrowing from the household sector and the other in which the counterpart was reduced government investment, which resulted in opposite directions of movement of private investment.

Stability tests are performed for the conventional U.S. money demand equation using switch regression techniques. This methodology provides for the identification of the shift point and the type of shift (abrupt or drift), and is conducive to hypothesis testing to determine the sources of the shift for the regression equation. Our findings do not support the contention that the 1974 change in money demand equation is a downward shift in the constant term, as suggested by many recent empirical money demand studies. [ABSTRACT FROM AUTHOR]

This paper discusses the impact of marketability of U.S. Government National Mortgage Association (GNMA) pass-throughs during the 1970s on the yield on U.S. Federal Housing Administration (FHA) mortgages. The authors are interested in examining if the increased marketability of these pass-throughs has reduced the yield on FHA mortgages. Their findings suggest that the GNMA program has resulted in lower costs of credit on FHA mortgages. They present an equilibrium model to examine this relationship.

The article focuses on the impact of information interpretation on the disclosure decision of firms in the U.S. The author attempts to determine whether less sophisticated investors prefer the availability of more information useful for trading in a securities market. The analysis represents information gathering as an extraction process, pulling valuable information from firm disclosures. It also attempts to explain how optimal disclosure decisions are effected by changes in the economy. The author asserts the positive relationship between disclosures and investor reactions.

This paper provides evidence that firms signal their private information about future earnings by their choice of split factor. Split factors are increasing in earnings forecast errors, after controlling for differences in pre-split price and firm size. Furthermore, price changes at stock dividend and split announcements are significantly correlated with split factors, holding other factors constant, and with earnings forecast errors. These correlations suggest that management's choice of split factor signals private information about future earnings and that investors revise their beliefs about firm value accordingly. The analysis also suggests, however, that announcement returns are significantly correlated with split factors after controlling for earnings forecast errors. This suggests that earnings forecast errors measure management's private information about future earnings with error, that split factors signal other valuation-relevant attributes, or that a signaling explanation is incomplete. [ABSTRACT FROM AUTHOR]

This paper provides a detailed examination of the cost imposed by thrift institutions resolved during the period 1980-1988. A simple model is presented to explain the cost of resolution. This model is tested empirically with a comprehensive data set that permits us to avoid some of the econometric problems present in earlier studies. The empirical evidence suggests that the model that explains resolution costs in the late 1980s is significantly different from the model for either the middle or early 1980s. This evidence is consistent with the changing nature of the thrift crisis and changes in the regulator's closure rule. Our econometric evidence, moreover, is consistent with the hypothesis that, for troubled institutions, tangible net worth systematically understates market-value net worth. In addition, the importance of including time effects as well as institution effects as determinants of the cost of resolution is revealed. [ABSTRACT FROM AUTHOR]

Finally, Fair argues that the mortgage market has an asymmetrical effect on the housing market, exercising a greater restraining than stimulating influence. This point is often made about monetary policy in general on the ground that "you can lead a horse to water but you can't make him drink." However, one must be very careful when making this argument to distinguish between movements along a curve and movements of the curve. For a given set of builder expectations as to future sales and profit margins, higher mortgage costs or less favourable borrowing terms reduce housing starts by reducing the return on rental dwellings and the saleability of owner-occupancy dwellings, while a subsequent decline in mortgage costs and improvement in borrowing terms stimulate housing starts analogously. However, ordinarily borrowing terms improve and rates decline when there is a reduction in the overall rate of growth of the economy, while borrowing terms become more stringent and rates increase when economic activity increases. Since variations in the rate of growth of economic activity are likely to affect builder expectations, the apparent asymmetrical effect of the mortgage market on housing starts is more likely to come from a coincident shift in expectations than from a pure asymmetry in the mortgage market. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Canadian Public Policy is the property of University of Toronto Press and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the welfare of the representative household. Although the model has Keynesian features, its policy prescriptions differ significantly from those of textbook Keynesian analysis. Moreover, the model suggests that the commonly used "bang for the buck" calculations are potentially misleading guides for the welfare effects of alternative fiscal policies. [ABSTRACT FROM AUTHOR]

In the United States, black workers earn less than their white counterparts and have higher rates of unemployment. Empirical work indicates that most of this wage gap is accounted for by differences in cognitive skills that emerge at an early age. In this paper, we demonstrate that the same is not true for black-white disparity in unemployment. A large unexplained unemployment differential motivates the paper's second contribution--a potential theoretical explanation. This explanation is built around a model that embeds statistical discrimination into the subjective worker evaluation process that lies at the root of the efficiency-wage theory of equilibrium unemployment. [ABSTRACT FROM AUTHOR]

This paper examines the economic impact of the second great immigration wave (1945-2000) on the US economy. Our analysis relies on a computable general equilibrium model combining the major interactions between immigrants and natives (labor market impact, fiscal impact, capital deepening, endogenous education, endogenous inequality). Contrary to recent studies, we show that immigration induced important net gains and small redistributive effects among natives. According to our simulations, the postwar US immigration is beneficial for all natives cohorts and all skill groups. Nevertheless, the gains would have been larger if the US had conducted a more selective immigration policy. [ABSTRACT FROM AUTHOR]

Purpose - This paper's purpose is to investigate the claim that capital taxes imposed by a subnational government reduce the economic competitiveness of the geographic area in which these taxes are imposed. Design/methodology/approach A two-region, four-good, three-factor computational general equilibrium model of the USA is constructed. Simulations are performed to represent US state governments replacing wage taxes with capital taxes. Findings Household utilities rose when wage taxes were replaced by capital taxes, contradicting the conventional wisdom that capital taxes are harmful to a region's residents. Research limitations/implications--As with all computational economic models, there are simplifications in this paper's model that abstract from reality and may limit the applicability of model results to the real world. Practical implications Subnational governments need not shy away from capital taxes when funding government programs. Originality/value This paper contributes to the investigation of subnational tax incidence. [ABSTRACT FROM AUTHOR]

Purpose - The paper seeks to analyse the impact of different public policies on inequality, unemployment, growth and the tax burden. Design/methodology/approach - A dynamic general equilibrium model is built, in which growth is driven by endogenous technical progress, to analyse the impacts of several policies (minimum wage, redistribution and R&D subsidies financed by an income tax). Findings - All policies except pure redistribution are better than non-intervention in terms of growth. The authors distinguish three major policy patterns. The Anglo-Saxon model is characterised by high growth, high inequality, low unemployment and a low tax burden. The Nordic model combines high growth, low inequality and low unemployment, and a high tax burden. The Continental European model puts together medium inequality and a medium tax burden, and higher long-term growth is paid for by high unemployment. Research limitations/implications - The model could be extended by the introduction of educational policy. Originality/value - The paper distinguishes three configurations that capture the main features of the developments in Anglo-Saxon countries, Scandinavian countries, and Continental European countries in the 1990s. It thereby provides a general framework to analyse and compare these experiences. [ABSTRACT FROM AUTHOR]

Practical monetary policy concerns and recent theoretical developments have revived interest in the concept of a "natural" equilibrium real interest rate. The natural real interest rate is potentially an important concept for monetary policy makers and some researchers have suggested that the concept of a "real interest rate gap" can be used to evaluate the stance of monetary policy or even set policy. Obtaining an estimate for the equilibrium real interest rate, however, is not straightforward, and the existence of alternative approaches to this task generates uncertainty about those estimates. In this paper, we discuss some conceptual, policy, and modeling issues pertaining to the U.S. equilibrium interest rate. Such issues include the distinction between "natural" and "neutral" real interest rates, the determination of the natural real interest rate in an open economy context, the different ways that productivity may affect the natural equilibrium real interest rate, and the sensitivity of theoretical measures of the natural equilibrium real interest rates to various parameterizations. [ABSTRACT FROM AUTHOR]

This paper considers a prototypical New Keynesian model, in which the equilibrium is undetermined if monetary policy is "passive. " The likelihood-based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations. We construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks. According to the estimated model, U.S. monetary policy post-1982 is consistent with determinacy, whereas the pre-Volcker policy is not. We find that before 1979 indeterminacy substantially altered the propagation of shocks. [ABSTRACT FROM AUTHOR]

A prominent feature of US data is the lack of cointegration between nominal interest rates and M1 velocity. Yet, most general-equilibrium monetary models that have been used for empirical analysis have imposed cointegration between these two series. This paper presents as an alternative a money-in-the-utility function model which does not imply cointegration even though a well-defined stationary monetary equilibrium exists. [ABSTRACT FROM AUTHOR]

This paper checks whether the coefficient estimates of a famous dynamic stochastic general equilibrium (DSGE) model are robust to macroeconomic data revisions. The effects of revisions are captured by rerunning the estimation on a real-time data set compiled using the latest time series available each quarter from 1997 through 2015. Results show that estimates of the structural parameters are generally robust to changes in the data that have occurred over the past 20 years. By comparison, standard error estimates are more sensitive to revisions. The latter implies that judgments about the statistical significance of certain parameters depend on which data vintage is used for estimation. [ABSTRACT FROM AUTHOR]