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The Fintech Opportunity
The FinTech Opportunity Thomas Philippon∗ March 2018 Abstract This paper assesses the potential impact of FinTech on the finance industry, focusing on financial stability and access to services. I document first that financial services remain surprisingly expensive, which explains the emergence of new entrants. I then argue that the current regulatory approach is subject to significant political economy and coordination costs, and therefore unlikely to deliver much structural change. FinTech, on the other hand, can bring deep changes but is likely to create significant regulatory challenges. JEL: E2, G2, N2 ∗Stern School of Business, New York University; NBER and CEPR. This paper was prepared for the 2016 Annual Conference of the BIS. I am grateful to my discussants Martin Hellwig and Ross Levine, and to Kim Schoenholtz, Anat Admati, Stephen Cecchetti, François Véron, Nathalie Beaudemoulin, Stefan Ingves, Raghu Rajan, Viral Acharya, Philipp Schnabl, Bruce Tuckman, and Sabrina Howell for stimulating discussions and/or comments on early drafts. 1 This paper studies the FinTech movement in the context of the long run evolution of the finance industry and its regulations. The 2007/2009 financial crisis has triggered new regulatory initiatives and has accelerated existing ones. I argue that the current framework has been useful but that it has run its course and is unlikely to deliver significant structural changes in the future. If regulators want to go further, they will need to consider alternative approaches that are likely to involve FinTech. FinTech covers digital innovations and technology-enabled business model innovations in the financial sector. Such innovations can disrupt existing industry structures and blur industry boundaries, facilitate strategic disin- termediation, revolutionize how existing firms create and deliver products and services, provide new gateways for entrepreneurship, democratize access to financial services, but also create significant privacy, regulatory and law- enforcement challenges. -
SED Program A4.Indd
THE SED 2007 ANNUAL MEETING IS ORGANIZED BY CERGE-EI together with THE CZECH NATIONAL BANK and THE CZECH ECONOMIC SOCIETY THE SED GRATEFULLY ACKNOWLEDGES THE SPONSORSHIP OF CSOB CEZ METROSTAV The Conference is held under the auspices of Mr. Pavel Bem, Mayor of Prague. PROGRAM CHAIRS Ricardo Lagos (New York University) Noah Williams (Princeton University) SCIENTIFIC COMMITTEE George Alessandria (Federal Reserve Bank of Philadelphia) Michelle Alexopoulos (University of Toronto) Manuel Amador (Stanford University) George-Marios Angeletos (MIT) Cristina Arellano (University of Minnesota) Francisco Buera (Northwestern University) Ariel Burstein (UCLA) Ricardo de O. Cavalcanti (EPGE) James Costain (Bank of Spain) Carlos Eugenio da Costa (EPGE) Chris Edmond (New York University) Jan Eeckhout (University of Pennsylvania) Liran Einav (Stanford University) Jesus Fernandez-Villaverde (University of Pennsylvania) Mikhail Golosov (MIT) Gita Gopinath (Harvard University) Nezih Guner (Universidad Carlos III de Madrid) Christian Hellwig (UCLA) Johannes Horner (Northwestern University) Nir Jaimovich (Stanford University) Dirk Krueger (University of Pennsylvania) Rasmus Lentz (University of Wisconsin-Madison) Igor Livshits (University of Western Ontario) Maurizio Mazzocco (UCLA) Guido Menzio (University of Pennsylvania) Eva Nagypal (Northwestern University) Tomoyuki Nakajima (Kyoto University) Monika Piazzesi (University of Chicago) Luigi Pistaferri (Stanford University) Ronny Razin (LSE) Stephen Redding (LSE) Diego Restuccia (University of Toronto) Yuliy -
Street Prostitution Zones and Crime
UvA-DARE (Digital Academic Repository) Street prostitution zones and crime Bisschop, P.; Kastoryano, S.; van der Klaauw, B. DOI 10.1257/pol.20150299 Publication date 2017 Document Version Final published version Published in American Economic Journal. Economic Policy License Other Link to publication Citation for published version (APA): Bisschop, P., Kastoryano, S., & van der Klaauw, B. (2017). Street prostitution zones and crime. American Economic Journal. Economic Policy, 9(4), 28-63. https://doi.org/10.1257/pol.20150299 General rights It is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s) and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an open content license (like Creative Commons). Disclaimer/Complaints regulations If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library: https://uba.uva.nl/en/contact, or a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible. UvA-DARE is a service provided by the library of the University of Amsterdam (https://dare.uva.nl) Download date:02 Oct 2021 American Economic Journal SUMIT AGARWAL, NATHAN MARWELL, AND LESLIE MCGRANAHAN Consumption Responses to Temporary Tax Incentives: Evidence from State Sales Tax Holidays PAUL BISSCHOP, STEPHEN KASTORYANO, AND BAS VAN DER KLAAUW Economic Policy Economic Policy Street Prostitution Zones and Crime CHAD P. -
Mismeasurement of the Elasticity of Intertemporal Substitution: the Role
Mismeasurement of the Elasticity of Intertemporal Substitution: The Role of Limited Stock Market Participation∗ Muhammet Fatih Guvenen† First version: June 2000 This version: May 2001 Abstract In this paper, we reconcile two opposing views about the elasticity of intertempo- ral substitution (EIS), a parameter that plays a key role in macroeconomic analysis. On the one hand, empirical studies using aggregate consumption data typically find that the EIS is close to zero (Hall 1988). On the other hand, calibrated macroeco- nomic models designed to match growth and business cycle facts typically require that the EIS be close to one. We show that this apparent contradiction arises from ignoring two kinds of heterogeneity across individuals. First, a large fraction of households in the U.S. do not participate in stock markets. Second, a variety of microeconomic studies using individual-level data conclude that an individual’s EIS increases with his wealth. We analyze a dynamic economy which incorporates both kinds of heterogeneity. We find that limited participation creates substantial wealth inequality matching that in U.S. data. Consequently, the dynamic behav- ior of output and investment is almost entirely determined by the preferences of the wealthy minority of households. At the same time, since consumption is much more evenly distributed across households than is wealth, estimation using aggregate consumption uncovers the low EIS of the majority of households (i.e., the poor). Our model also matches a number of cross-sectional features of the U.S. data that are otherwise difficult to explain. Finally, using simulated data generated by our heterogeneous-agent model, we show that the econometric methods used by Hall and others produce biased estimates of the average EIS across individuals. -
Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory*
MONETARY POLICY RULES AND MACROECONOMIC STABILITY: EVIDENCE AND SOME THEORY* RICHARD CLARIDA JORDI GALI´ MARK GERTLER We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker’s appointment as Fed Chairman in 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much more sensitive to changes in expected ination than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of ination and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing. I. INTRODUCTION From the late 1960s through the early 1980s, the United States economy experienced high and volatile ination along with several severe recessions. Since the early 1980s, however, ina- tion has remained steadily low, while output growth has been relatively stable. Many economists cite supply shocks—and oil price shocks, in particular—as the main force underlying the instability of the earlier period. It is unlikely, however, that supply shocks alone could account for the observed differences between the two eras. For example, while jumps in the price of oil might help explain transitory periods of sharp increases in the general price level, it is not clear how they alone could explain persistent high ination in the absence of an accommodating monetary policy.1 Furthermore, as De Long {1997} argues, the onset of sustained high ination occurred prior to the oil crisis episodes. * We thank seminar participants at Universitat Pompeu Fabra, New York University, the Board of Governors of the Federal Reserve System, University of Maryland, NBER Summer Institute, Universite´ de Toulouse, Bank of Spain, Harvard University, Bank of Mexico, Universitat de Girona, and the Federal Reserve Banks of Atlanta, New York, Richmond, Dallas, and Philadelphia, as well as two anonymous referees and two editors for useful comments. -
Why Mutual Funds “Underperform”
Why Mutual Funds \Underperform" Vincent Glode¤ Carnegie Mellon University August 28, 2008 Abstract I derive a rational model that reproduces the negative risk-adjusted perfor- mance of actively managed U.S. equity mutual funds, the funds' systematically better performance in bad states of the economy than in good states, and the relatively high fees that poorly performing funds charge. The model focuses on the optimal active management policies of a skilled fund manager facing ratio- nal investors. Since funds perform well in bad states, mutual fund investing can be rationalized despite the measurement of negative unconditional performance. Using data on U.S. funds, I document novel empirical evidence consistent with the model's predictions. JEL classi¯cation: G23; G12; G11. Keywords: Mutual Fund, Performance, Pricing Kernel, Business Cycle. ¤Doctoral Candidate, Carnegie Mellon University, [email protected]. I am particularly indebted to my advisor Rick Green and my dissertation committee members Burton Holli¯eld, Shimon Kogan, and Pierre Liang for their guidance and support. I also thank Marcin Kacperczyk and Amit Seru for assistance with the data as well as Fernando Anjos, Jonathan Berk, Jeremy Bertomeu, Michael Brennan, David Chapman, Susan Christo®ersen, Gene Fama, Jean-Fran»coisGuimond, Jennifer Huang, Richard Lowery, Spencer Mar- tin, Francisco Palomino, Bryan Routledge, Laura Starks, Jason Wei, Stan Zin, and seminar participants at Carnegie Mellon University, Universit¶eLaval, the Bank of Canada/University of Toronto Workshop on Port- folio Management, the 2007 Financial Management Association (FMA) meeting, and the 2008 Econometric Society meeting for helpful comments. I gratefully acknowledge ¯nancial support from the Social Sciences and Humanities Research Council of Canada, the William Larimer Mellon fund, the Center for Financial Markets, and the American Association of Individual Investors through the \Best Paper in Investments" award received at the 2007 FMA meeting. -
Targets and Lags in a Two-Equation Model of US Stabilization Policy
DEPARTMENT OF ECONOMICS WORKING PAPER SERIES Targets and Lags in a Two-Equation Model of US Stabilization Policy David Kiefer Working Paper No: 2011-03 August 2011 (revised November 2011) University of Utah Department of Economics 260 S. Central Campus Dr., Rm. 343 Tel: (801) 581-7481 Fax: (801) 585-5649 http://www.econ.utah.edu Targets and Lags in a Two-Equation Model of US Stabilization Policy David Kiefer * University of Utah November 2011 Abstract Carlin and Soskice (2005) advocate a 3-equation model of stabilization policy, the IS-PC-MR model. One of these is a monetary reaction rule MR derived by assuming that governments have performance objectives, but are constrained by a Phillips curve PC . Central banks attempt to implement these objectives by setting interest rates along an IS curve. We simplify their model to 2 equations ( PC and MR ), developing a state space econometric specification of this solution, and adding a random walk model of unobserved potential growth. This is an appropriate method because it incorporates recursive forecasts of unobservable state variables based on contemporaneous information measured with real-time data. Our results are generally consistent with US economic history. One qualification is that governments are more likely to target growth rates than output gaps. Another inference is that policy affects outcomes after a single lag. This assumption fits the data better than an alternative double-lag timing: one lag for output, plus a second for inflation has been proposed. We also infer that inflation expectations are more likely to be backward than forward looking. JEL codes: E3, E6 Keywords : new Keynesian stabilization, policy targets, real-time data * Department of Economics, 260 S. -
External Habit and the Cyclicality of Expected Returns
Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. External Habit and the Cyclicality of Expected Stock Returns Thomas D. Tallarini, Jr. and Harold H. Zhang 2005-27 NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. References in publications to the Finance and Economics Discussion Series (other than acknowledgement) should be cleared with the author(s) to protect the tentative character of these papers. External Habit and the Cyclicality of Expected Stock Returns∗ Thomas D. Tallarini, Jr.† Harold H. Zhang‡ May 2005 Abstract We estimate an equilibrium asset pricing model in which agents’ preferences have an unobserved external habit using the efficient method of moments (EMM). Given the estimated structural parameters we examine the cyclical behavior of expected stock returns in the model. We find that the estimated structural parameters imply coun- tercyclical expected stock returns as documented in existing empirical studies. The model, however, is still rejected at the one percent level. Detailed examination of the moment conditions in our estimation indicates that the model performs reasonably well in matching the mean of returns, but it fails to capture the higher order moments. JEL Classification: G12 Keywords: external habit, expected returns, asset pricing, Efficient Method of Mo- ments ∗We thank Ronald Gallant and George Tauchen for providing us the EMM code, John Campbell, John Cochrane, Dave DeJong, Wayne Ferson, Rene Garcia, Lars Hansen, Paul Harrison, John Heaton, Ming Liu, Adrian Pagan, Amir Yaron, Stan Zin, and the seminar participants at Carnegie Mellon University, the Chinese University of Hong Kong, and the University of Pittsburgh for helpful comments. -
Download Full Issue
FIRST QUARTER 2018 FEDERALFEDERAL RESERVE RESERVE BANK BANK OF OF RICHMOND RICHMOND Are Markets Too Concentrated? Industries are increasingly concentrated in the hands of fewer firms. But is that a bad thing? Do Entrepreneurs Pay Private Currency Interview with Jesús to be Entrepreneurs? Before Cryptocurrency Fernández-Villaverde VOLUME 23 NUMBER 1 FIRST QUARTER 2018 Econ Focus is the economics magazine of the Federal Reserve Bank of Richmond. It covers economic issues affecting the Fifth Federal Reserve District and the nation and is published on a quarterly basis by the Bank’s Research Department. The Fifth District consists of the District of Columbia, Maryland, North Carolina, COVER STORY South Carolina, Virginia, 10 and most of West Virginia. Are Markets Too Concentrated? DIRECTOR OF RESEARCH Industries are increasingly concentrated in the hands Kartik Athreya of fewer firms. But is that a bad thing? EDITORIAL ADVISER Aaron Steelman EDITOR Renee Haltom FEATURES 14 SENIOR EDITOR David A. Price Paying for Success MANAGING EDITOR/DESIGN LEAD State and local governments are trying a new financing Kathy Constant model for social programs STAFF WRITERS Helen Fessenden Jessie Romero 17 Tim Sablik EDITORIAL ASSOCIATE Do Entrepreneurs Pay to Be Entrepreneurs? Lisa Kenney Some small-business owners are motivated more by CONTRIBUTORS Selena Carr values than financial gain Santiago Pinto Michael Stanley DESIGN Janin/Cliff Design, Inc. DEPARTMENTS 1 President’s Message/Taxes and the Fed Published quarterly by 2 Upfront/Regional News at a Glance -
14.461: Part I: Technological Change
14.461: Part I: Technological Change Daron Acemoglu September 13, 2011 This course will cover selected topics in theoretical and empirical analysis of technological change. The course will draw both on Acemoglu, Introduction to Modern Economic Growth, Princeton University Press, 2008, and research articles. There will be three problem sets, which will count towards 30% of your …nal grade for this part of the course. The remaining 70% will be from a one half hour …nal examination at the end of the course (time to be determined). Topics Review of Basic Models of Endogenous Technological Progress (two lectures) Main reading: Acemoglu, Daron (2008) Introduction to Modern Economic Growth, Chap- ters 13 and 14. Jones, Charles I (1995) “Timeseries Tests of Endogenous Growth Models” Quarterly Journal of Economics, 110. Other references: Aghion, Philippe and Peter Howitt (1992) “A Model of Growth Through Creative Destruction”Econometrica, 60, 323-351 Aghion, Philippe and Peter Howitt (2008) The Economics of Growth, MIT, Cambridge. Backus, David, Patrick J. Kehoe and Timothy J. Kehoe (1992) “In Search of Scale E¤ects in Trade and Growth.” Journal of Economic Theory, 58, pp. 377-409. Grossman, Gene and Elhanan Helpman (1991) “Quality Ladders in the The- ory of Growth”Review of Economic Studies, 58, 43-61. Moser, Petra (2005) “How Do Patent Laws In‡uence Innovation? Evidence from Nineteenth-Century World Fairs” American Economic Review 95, 1214- 1236. Romer, Paul (1987) “Growth Based on Increasing Returns due to Special- ization”American Economic Review Papers and Proceedings, 77, 56-62 1 Romer, Paul M. (1990) “Endogenous Technological Change,” Journal of Political Economy 98, S71-S102. -
IO Reading List
Economics 257 – MGTECON 630 Fall 2020 Professor José Ignacio Cuesta [email protected] Professor Liran Einav [email protected] Professor Paulo Somaini [email protected] Industrial Organization I: Reading List I. Imperfect Competition: Background Bresnahan, Tim “Empirical Studies with Market Power,” Handbook of Industrial Organization, vol. II, chap. 17. Einav, Liran and Jonathan Levin. “Empirical Industrial Organization: A Progress Report,” Journal of Economic Perspectives, 24(2), 145-162 (2010). Tirole, Jean. The Theory of Industrial Organization, Cambridge, MA: MIT Press, 1988. A. Test of Market Power Ashenfelter, O., and D. Sullivan, “Nonparametric Tests of Market Structure: An Application to the Cigarette Industry,” Journal of Industrial Economics 35, 483-498, (1989). Baker, J., and T. Bresnahan, “Estimating the residual demand curve facing a single firm,” International Journal of Industrial Organization 6(3), 283-300, (1988). Corts, K., “Conduct Parameters and the Measurement of Market Power,” Journal of Econometrics 88, 227-225, (1999). Genesove, D. and W. Mullin, “Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914,” Rand Journal of Economics 29(2), 355-377, (1989). Stigler, G. “A Theory of Oligopoly,” The Journal of Political Economy, 72(1), 44-61, (1964) Sumner, D., “Measurement of Monopoly Behavior: An Application to the Cigarette Industry,” Journal of Political Economy 89, 1010-1019, (1981). Wolfram, C., “Measurement of Monopoly Behavior: An Application to the Cigarette Industry,” American Economic Review 89($), 805-826, (1999). B. Differentiated Products Anderson, S. P., A. de Palma, and J. F. Thisse, Discrete Choice Theory of Product Differentiation, Chapters 1-5, Cambridge: MIT Press, (1992). Caplin, A., and B. -
Structural Methods for Labor Economics Fall 2008 Course
Department of Economics, UC Berkeley Economics 250c: Structural Methods for Labor Economics Fall 2008 Course Outline and Reading List The goal of the course is to provide a selective overview of more “structural” methods in labor economics and empirical micro, including single period models and dynamic choice problems. Students are assumed to be familiar with basic econometrics and consumer demand theory, and with “reduced form” methods such as regression, instrumental variables, etc. Three recommended text books are: J. Angist and S. Pischke, Mostly Harmless Econometrics. Princeton Press, forthcoming 2008. I have managed to get an advanced copy of this text -- paper copies will be available to class members. This is highly recommended for people who want to catch up on classic reduced form methods. K. Train, Discrete Choice Methods with Simulation. Cambridge U. Press, 2003. J. Adda and R. Cooper, Dynamic Programming: Theory and Applications. MIT Press, 2003. These three are all relatively easy reading. I also recommend the “What’s New in Econometrics?” (WNiE) lectures by G. Imbens and J. Wooldridge (especially lectures 6, 11, 9, and 7, in that order) which are available at the NBER website. Preliminary Outline (Incomplete and subject to additions/changes). 1. Introductory Lecture: Structural vs. Alternative Approaches Background reading: Daniel McFadden. “Economics Choices.” AER, June 2001. Edward E. Leamer. “Let's Take the Con Out of Econometrics.” AER March 1983. 2. Simple Static Choice Models Michael Ransom. “An Empirical Model of Discrete and Continuous Choice in Family Labor Supply.” Review of Economics and Statistics 69 (3) (1987): 465-472. (See also: Michael Ransom.