Keynesian Economics Without the Phillips Curve
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Charles I Plosser: Shocks, Gaps, and Monetary Policy
Charles I Plosser: Shocks, gaps, and monetary policy Speech by Mr Charles I Plosser, President and Chief Executive Officer of the Federal Reserve Bank of Philadelphia, at the KAEA-Maekyung Forum, Korea-America Economic Association, Philadelphia, Pennsylvania, 4 January 2014. * * * The views expressed are my own and not necessarily those of the Federal Reserve System or the FOMC. I want to thank Bang Jeon, president of the Korea-America Economic Association (KAEA), who is on the faculty here at Drexel University, and Yongsung Chang, vice president of the KAEA, who is on the faculty at the University of Rochester, for inviting me to speak to this forum. The KAEA has hosted a number of prominent speakers in recent years at its annual meetings, and so it is a pleasure and an honor to speak to you this evening. Much has happened in the field of macroeconomics and monetary policy in the past seven years since I left Rochester to join the Federal Reserve Bank of Philadelphia. Today I want to highlight some key features of the recent recession and the recovery and to discuss how they have influenced my views on monetary policymaking. Before I begin, though, I would like to point out that my views are not necessarily those of the Federal Reserve System or my colleagues on the Federal Open Market Committee (FOMC). The challenges presented by the recession and recovery have illustrated why policymakers must have a framework that provides a basis for their policy judgments. We say that our policymaking is data dependent, but without a lens through which we view economic data, it is impossible to interpret those data in any sort of useful way, particularly as they pertain to policy. -
Can News About the Future Drive the Business Cycle?
American Economic Review 2009, 99:4, 1097–1118 http://www.aeaweb.org/articles.php?doi 10.1257/aer.99.4.1097 = Can News about the Future Drive the Business Cycle? By Nir Jaimovich and Sergio Rebelo* Aggregate and sectoral comovement are central features of business cycles, so the ability to generate comovement is a natural litmus test for macroeconomic models. But it is a test that most models fail. We propose a unified model that generates aggregate and sectoral comovement in response to contemporaneous and news shocks about fundamentals. The fundamentals that we consider are aggregate and sectoral total factor productivity shocks as well as investment- specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that allow us to parameterize the strength of short-run wealth effects on the labor supply. JEL E13, E20, E32 ( ) Business cycle data feature two important forms of comovement. The first is aggregate comovement: major macroeconomic aggregates, such as output, consumption, investment, hours worked, and the real wage tend to rise and fall together. The second is sectoral comovement: output, employment, and investment tend to rise and fall together in different sectors of the economy. Robert Lucas 1977 argues that these comovement properties reflect the central role that aggre- ( ) gate shocks play in driving business fluctuations. However, it is surprisingly difficult to generate both aggregate and sectoral comovement, even in models driven by aggregate shocks. Robert J. Barro and Robert G. King 1984 show that the one-sector growth model generates aggregate ( ) comovement only in the presence of contemporaneous shocks to total factor productivity TFP . -
A Search-Theoretic Approach to Monetary Economics Author(S): Nobuhiro Kiyotaki and Randall Wright Source: the American Economic Review, Vol
American Economic Association A Search-Theoretic Approach to Monetary Economics Author(s): Nobuhiro Kiyotaki and Randall Wright Source: The American Economic Review, Vol. 83, No. 1 (Mar., 1993), pp. 63-77 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/2117496 . Accessed: 14/09/2011 06:08 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review. http://www.jstor.org A Search-TheoreticApproach to MonetaryEconomics By NOBUHIRO KIYOTAKI AND RANDALL WRIGHT * The essentialfunction of money is its role as a medium of exchange. We formalizethis idea using a search-theoreticequilibrium model of the exchange process that capturesthe "doublecoincidence of wants problem"with pure barter. One advantage of the frameworkdescribed here is that it is very tractable.We also show that the modelcan be used to addresssome substantive issuesin monetaryeconomics, including the potentialwelfare-enhancing role of money,the interactionbetween specialization and monetaryexchange, and the possibilityof equilibriawith multiplefiat currencies.(JEL EOO,D83) Since the earliest writings of the classical theoretic equilibrium model of the exchange economists it has been understood that the process that seems to capture the "double essential function of money is its role as a coincidence of wants problem" with pure medium of exchange. -
Significance Redux
The Journal of Socio-Economics 33 (2004) 665–675 Significance redux Stephen T. Ziliaka,∗, Deirdre N. McCloskeyb,1 a School of Policy Studies, College of Arts and Sciences, Roosevelt University, Chicago, 430 S. Michigan Avenue, Chicago, IL 60605, USA b College of Arts and Science (m/c 198), University of Illinois at Chicago, 601 South Morgan, Chicago, IL 60607-7104, USA Abstract Leading theorists and econometricians agree with our two main points: first, that economic sig- nificance usually has nothing to do with statistical significance and, second, that a supermajority of economists do not explore economic significance in their research. The agreement from Arrow to Zellner on the two main points should by itself change research practice. This paper replies to our critics, showing again that economic significance is what science and citizens want and need. © 2004 Elsevier Inc. All rights reserved. JEL CODES: C12; C10; B23; A20 Keywords: Hypothesis testing; Statistical significance; Economic significance Science depends on entrepreneurship, and we thank Morris Altman for his. The sympo- sium he has sparked can be important for the future of economics, in showing that the best economists and econometricians seek, after all, economic significance. Kenneth Arrow as early as 1959 dismissed mechanical tests of statistical significance in his search for eco- nomic significance. It took courage: Arrow’s teacher, the amazing Harold Hotelling, had been one of Fisher’s sharpest disciples. Now Arrow is joined by Clive Granger, Graham ∗ Corresponding author. E-mail addresses: [email protected] (S.T. Ziliak), [email protected] (D.N. McCloskey). 1 For comments early and late we thank Ted Anderson, Danny Boston, Robert Chirinko, Ronald Coase, Stephen Cullenberg, Marc Gaudry, John Harvey, David Hendry, Stefan Hersh, Robert Higgs, Jack Hirshleifer, Daniel Klein, June Lapidus, David Ruccio, Jeff Simonoff, Gary Solon, John Smutniak, Diana Strassman, Andrew Trigg, and Jim Ziliak. -
Stolper-Samuelson Time Series: Long Term US Wage Adjustment
Stolper-Samuelson Time Series: Long Term US Wage Adjustment Henry Thompson Auburn University Review of Development Economics, 2011 Factor prices adjust to product prices in the Stolper-Samuelson theorem of the factor proportions model. The present paper estimates adjustment in the average US wage to changes in prices of manufactures and services with yearly data from 1949 to 2006. Difference equation analysis is based directly on the comparative static factor proportions model. Factors of production are fixed capital assets and the labor force. Results have implications for theory and policy. Thanks for comments and suggestions go to Farhad Rassekh, Charles Sawyer, Roy Ruffin, Ron Jones, Manoj Atolia, Santanu Chaterjee, and Svetlana Demidova. Contact: Henry Thompson, Economics, Auburn University, AL 36849, 334-844-2910, fax 5999, [email protected] 1 Stolper-Samuelson Time Series: Long Term US Wage Adjustment The Stolper-Samuelson (SS, 1941) theorem concerns the effects of changing product prices on factor prices along the contract curve in the general equilibrium model of production with two factors and two products. The result is fundamental to neoclassical economics as relative product prices evolve with economic growth. The theoretical literature finding exception to the SS theorem is vast as summarized by Thompson (2003) and expanded by Beladi and Batra (2004). Davis and Mishra (2007) believe the theorem is dead due unrealistic assumptions. The scientific status of the theorem, however, depends on the empirical evidence. The empirical literature generally examines indirect evidence including trade volumes, trade openness, input ratios, relative production wages, and per capita incomes as summarized by Deardorff (1984), Leamer (1994), and Baldwin (2008). -
User Pays Applied to Pro-Life Advocates
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Pope, Robin Working Paper The Big Picture of Lives Saved by Abortion on Demand: User Pays Applied to Pro-Life Advocates Bonn Econ Discussion Papers, No. 14/2009 Provided in Cooperation with: Bonn Graduate School of Economics (BGSE), University of Bonn Suggested Citation: Pope, Robin (2009) : The Big Picture of Lives Saved by Abortion on Demand: User Pays Applied to Pro-Life Advocates, Bonn Econ Discussion Papers, No. 14/2009, University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn This Version is available at: http://hdl.handle.net/10419/37046 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen -
The Causal Direction Between Money and Prices
Journal of Monetary Economics 27 (1991) 381-423. North-Holland The causal direction between money and prices An alternative approach* Kevin D. Hoover University of California, Davis, Davis, CA 94916, USA Received December 1988, final version received March 1991 Causality is viewed as a matter of control. Controllability is captured in Simon’s analysis of causality as an asymmetrical relation of recursion between variables in the unobservable data-generating process. Tests of the stability of marginal and conditional distributions for these variables can provide evidence of causal ordering. The causal direction between prices and money in the United States 1950-1985 is assessed. The balance of evidence supports the view that money does not cause prices, and that prices do cause money. 1. Introduction The debate in economics over the causal direction between money and prices is an old one. Although in modern times it had seemed largely settled in favor of the view that money causes prices, the recent interest in real *This paper is a revision of part of my earlier working paper, ‘The Logic of Causal Inference: With an Application to Money and Prices’, No. 55 of the series of working papers in the Research Program in Applied Macroeconomics and Macro Policy, Institute of Governmental Affairs, University of California. Davis. I am grateful to Peter Oownheimer. Peter Sinclair, Charles Goodhart, Thomas Mayer, Edward Garner, Thomas C&iey, Stephen LeRoy, Leon Wegge, Nancy Wulwick, Diran Bodenhom, Clive Granger, Paul Holland, the editors of this journal, an anonymous referee, and the participants in macroeconomics seminars at the Univer- sity of California, Berkeley, Fall 1986, the University of California, Davis, Fall 1988, and the University of California, Irvine, Spring 1989, for comments on this paper in its various previous incamatio;ts. -
Professor Robert F. Engle," Econometric Theory, 19, 1159-1193
Diebold, F.X. (2003), "The ET Interview: Professor Robert F. Engle," Econometric Theory, 19, 1159-1193. The ET Interview: Professor Robert F. Engle Francis X. Diebold1 University of Pennsylvania and NBER January 2003 In the past thirty-five years, time-series econometrics developed from infancy to relative maturity. A large part of that development is due to Robert F. Engle, whose work is distinguished by exceptional creativity in the empirical modeling of dynamic economic and financial phenomena. Engle’s footsteps range widely, from early work on band-spectral regression, testing, and exogeneity, through more recent work on cointegration, ARCH models, and ultra-high-frequency financial asset return dynamics. The booming field of financial econometrics, which did not exist twenty-five years ago, is built in large part on the volatility models pioneered by Engle, and their many variations and extensions, which have found widespread application in financial risk management, asset pricing and asset allocation. (We began in fall 1998 at Spruce in Chicago, the night before the annual NBER/NSF Time Series Seminar, continued in fall 2000 at Tabla in New York, continued again in summer 2001 at the Conference on Market Microstructure and High-Frequency Data in Finance, Sandbjerg Estate, Denmark, and wrapped up by telephone in January 2003.) I. Cornell: From Physics to Economics FXD: Let’s go back to your graduate student days. I recall that you were a student at Cornell. Could you tell us a bit about that? RFE: It depends on how far back you want to go. When I went to Cornell I went as a physicist. -
Raise the Minimum Wage He Minimum Wage Has Been an Important Part of Our Tnation’S Economy for 68 Years
Hundreds of Economists Say: Raise the Minimum Wage he minimum wage has been an important part of our Tnation’s economy for 68 years. It is based on the principle Hard work of valuing work by establishing an hourly wage floor beneath which employers cannot pay their workers. In so doing, the minimum wage helps to equalize the imbalance in bargaining deserves power that low-wage workers face in the labor market. The minimum wage is also an important tool in fighting poverty. fair pay The value of the 1997 increase in the federal minimum wage has been fully eroded. The real value of today’s federal minimum wage is less than it has been since 1951. Moreover, the ratio of the minimum wage to the average hourly wage of non-supervisory workers is 31%, its lowest level since World War II. This decline is causing hardship for low-wage workers and their families. We believe that a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed. In particular, we share the view the Council of Economic Advisors expressed in the 1999 Economic Report of the President that "the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment." While controversy about the precise employment effects of the minimum wage continues, research has shown that most of the beneficiaries are adults, most are female, and the vast majority are members of low-income working families. -
Economics, History, and Causation
Randall Morck and Bernard Yeung Economics, History, and Causation Economics and history both strive to understand causation: economics by using instrumental variables econometrics, and history by weighing the plausibility of alternative narratives. Instrumental variables can lose value with repeated use be- cause of an econometric tragedy of the commons: each suc- cessful use of an instrument creates an additional latent vari- able problem for all other uses of that instrument. Economists should therefore consider historians’ approach to inferring causality from detailed context, the plausibility of alternative narratives, external consistency, and recognition that free will makes human decisions intrinsically exogenous. conomics and history have not always got on. Edward Lazear’s ad- E vice that all social scientists adopt economists’ toolkit evoked a certain skepticism, for mainstream economics repeatedly misses major events, notably stock market crashes, and rhetoric can be mathemati- cal as easily as verbal.1 Written by winners, biased by implicit assump- tions, and innately subjective, history can also be debunked.2 Fortunately, each is learning to appreciate the other. Business historians increas- ingly use tools from mainstream economic theory, and economists dis- play increasing respect for the methods of mainstream historians.3 Each Partial funding from the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged by Randall Morck. 1 Edward Lazear, “Economic Imperialism,” Quarterly Journal of Economics 116, no. 1 (Feb. 2000): 99–146; Irving Fischer, “Statistics in the Service of Economics,” Journal of the American Statistical Association 28, no. 181 (Mar. 1933): 1–13; Deirdre N. McCloskey, The Rhetoric of Economics (Madison, Wisc., 1985). -
An Economy in Conflict Page 6 Sam Perlo-Freeman
The Economics of Vol. 3, No. 2 (2008) Peace and Security Symposium: Palestine — an economy in Journal conflict Sam Perlo-Freeman: introduction to the symposium © www.epsjournal.org.uk Aamer S. Abu-Qarn on economic aspects of sixty years of the Arab- ISSN 1749-852X Israeli conflict Atif Kubursi and Fadle Naqib on Israeli economicide of the West A publication of Bank and Gaza Strip Economists for Peace Osama Hamed on the de-development of the Palestinian economy and Security (UK) Jennifer C. Olmsted on Post-Oslo Palestinian un/employment by gender, class, and age cohort Numan Kanafani and Samia Al-Botmeh on food aid to Palestine Basel Saleh on economic causes of the fragility of the Palestinian Authority Articles Siddharta Mitra on poverty and terrorism Raul Caruso and Andrea Locatelli on al Qaeda and contest theory Pavel A. Yakovlev on saving lives in armed conflicts Nadège Sheehan on U.N. peacekeeping Editors Jurgen Brauer, Augusta State University, Augusta, GA, U.S.A. J. Paul Dunne, University of the West of England, Bristol, U.K. The Economics of Peace and Security Journal © www.epsjournal.org.uk, ISSN 1749-852X A publication of Economists for Peace and Security (UK) Editors Associate editors Aims and scope Jurgen Brauer Michael Brzoska, Germany Keith Hartley, UK This journal raises and debates all issues related to Augusta State University, Augusta, GA, USA Neil Cooper, UK Christos Kollias, Greece the political economy of personal, communal, J. Paul Dunne Lloyd J. Dumas, USA Stefan Markowski, Australia University of the West of England, Bristol, UK Manuel Ferreira, Portugal Sam Perlo-Freeman, Sweden national, international, and global peace and David Gold, USA Thomas Scheetz, Argentina security. -
UC San Diego Recent Work
UC San Diego Recent Work Title Revisiting Okun's Law: An Hysteretic Perspective Permalink https://escholarship.org/uc/item/2fb7n2wd Author Schorderet, Yann Publication Date 2001-08-01 eScholarship.org Powered by the California Digital Library University of California 2001-13 UNIVERSITY OF CALIFORNIA, SAN DIEGO DEPARTMENT OF ECONOMICS REVISITING OKUN’S LAW: AN HYSTERETIC PERSPECTIVE BY YANN SCHORDERET DISCUSSION PAPER 2001-13 AUGUST 2001 Revisiting Okun’s Law: An Hysteretic Perspective By Yann Schorderet ∗ August 2001 Abstract Many developed countries have suffered from high unemployment rates during the last few decades. Beyond the economic and social consequences of this painful experience, the understanding of the mech- anisms underlying unemployment still constitutes an important chal- lenge. Focusing on one of its relevant determinants, we reexamine the link between output and unemployment. We show that the difficulty of detecting the close relationship between the two is due to a phenomenon of non-linearity. The asymmetric feature characterizing the data refers to a theory known as hysteresis. (JEL C22, J64) Keywords : Hysteresis, unemployment, non-linearity, cointegration. ∗Department of Econometrics, University of Geneva, Uni Mail, Bd du Pont-d’Arve 40, CH-1211 Geneva 4, Switzerland. I would like to thank Pietro Balestra and Jaya Krishnaku- mar for useful discussions on an earlier version of this paper. This research was supported in part by the Swiss National Science Foundation and was written while I was visiting the University of California, San Diego. I am extremely grateful to Clive W.J. Granger for helpful comments. All remaining errors are my own responsibility. 1 Many developed countries have suffered from high unemployment rates during the last few decades.