Abstract:
The forecasting power of consumer confidence indexes for
consumption spending runs counter to the predictions of the permanent
income hypothesis (PIH). This paper resolves this discrepancy by
developing a "confidence augmented'' permanent income hypothesis
(CAPIH). While it does not radically alter the estimated extent of
permanent income consumption, the CAPIH model predicts a significantly
smaller intertemporal elasticity of substitution than a standard PIH
model. In addition, the results are largely invariant to the measure of
consumer confidence used and the choice of instrumental variables.
JEL Classification: E21,
D12, D91
Keywords: Permanent income
consumption, consumer confidence, consumer sentiment.
Can Non-Traded Goods Solve the "Comovement Problem?" (Journal
of Macroeconomics 25(2), June
2003.)
Abstract:
The
inability to replicate positive international comovement of investment
spending and employment remains one of the most vexing issues facing
the international real business cycle (IRBC) research program. To
attack this so-called "comovement problem,'' I develop a multisector
IRBC model highlighting the role of non-traded goods and international
capital mobility. In addition to broadly replicating prior IRBC
sucesses, the model more importantly delivers positive international
investment and employment correlations. The model is also able to
internally generate the observed result that variables associated with
traded goods sectors exhibit higher volatility than those in non-traded
sectors.
JEL Classification: C68, E32, F41
Keywords: Comovement,
Open-economy Business Cycles, Non-traded Goods
Journal of Macroeconomics download site
Technical
AppendixEstimates and Determinants of Firm Efficiency in Eastern
Europe: Evidence from Romanian Microdata (with C. Martin)
Abstract:
Romania's transition to a market economy since 1989 has been
particularly slow and painful, and Romanian enterprise is widely
considered to be inefficient relative to that found in more successful
post-Communist nations in Central and Eastern Europe. This paper places
the relative (in)efficiency of Romanian firms in context by estimating
stochastic frontier production functions using Romanian microdata. We
find that, on average, Romanian firms are 10% less efficient than firms
in Poland, Hungary, and the Czech Republic. Evidence suggests that the
measurable industrial drivers of technical efficiency tend to be
consistent across countries, suggesting that the relative inefficiency
of Romanian enterprise is due to institutional factors.
JEL classification: D21,
O14, P27
Neoclassical Macroeconomics and Monetary Non-neutrality
(in review,
The
American Economist)
Abstract: Although it is enjoying an expanded presence in the undergraduate macroeconomic canon, the influence and importance of the classical/neoclass-ical model as a teaching tool remains severly restricted by its emphasis on monetary neutrality. This paper presents an intermediate-level presentation of a neoclassical model augmented with a generic pricing friction. Monetary policy will be effective in this framework, and all of the model's top-line results are consistent with those obtained from a typical Keynesian model. The model presented here is general enough to be used in conjunction with virtually all of the textbook presentations of the classical/neoclassical model.
JEL Classification: A22, E50
Abstract:
The two largest criticisms of the RBC modeling paradigm are a
dependence on shocks deemed overly large to create business cycles and
the inability to subjectively identify said shocks. This paper
addresses these issues by developing an industry level model that can
amplify smaller shocks and where it is less problematic conceptually to
``put names to faces'' on business cycle disturbances. The model is
successful in generating realistic volatilities using small shocks and
in replicating most of the salient business cycle moments for aggregate
and industry level variables. Experiments suggest that industry level
models featuring variable capacity utilization can dramatically reduce
the shock size necessary to create realistic business cycles relative
to the standard one-sector RBC model.
JEL Classification: C68, E13, E32
Keywords: business cycles, small
shocks, production pipeline
FiguresJEL Classification: L83,
J31
Business Cycles Under the Gold Standard
Abstract:
This study is a quantitative analysis of the pre- and
interwar periods,
with emphasis placed on the role of the gold standard and other
international
linkages in the transmission of business cycle distrubances. Using
interpolated
prewar quarterly data estimates, I calculate a series of international
business cycle "sylized facts'' and conduct a structural VAR analysis.
A monetized Real Business Cycle (RBC) model incorporating a gold
standard
and sticky wages is developed and simulated. I find that this model can
accurately reproduce the dynamic properties found in the prewar data in
addition to generating a filtered output series bearing a strong
resemblance
to the Great Depression.
Keywords: Business Cycle, Gold Standard, Macroeconomics
Foreign Direct Investment and the Real Exchange Rate: the
Business
Cycle Link (with Jane Ihrig)
Abstract:
Using a Band Pass filter we examine the relationship
between the real
exchange rate and foreign direct investment (FDI) into the United
States.
By isolating the irregular (high frequency), business cycle (medium
frequency),
and trend (low frequency) components of the data and studying the
correlations
by frequency band, we find the two series are linked at the business
cycle
frequencies. This relationship holds whether or not relative wealth and
relative labor cost variables are included in the analysis. Tests show
that, unlike what is found in raw data studies, the business cycle
relationship
is statistically significant and stable across periods of analysis.
Further
analysis shows a significant relationship between FDI and lagged values
of its determinants.
Keywords: Foreign Direct Investment, Real Exchange Rate,
Filtering,
Stability
JEL Classification: F21