Econometric policy evaluation and expectations

Recently large-scale econometric models have been criticized as inappropriate tools for policy evaluation. One critical point often mentioned is the way expectations are formed. This paper shows that the way the process of expectations formation is considered does not play a crucial role. Instead, the ability to model agents' reactions to changes in policy is the essence of the critique. As long as government behaviour is sufficiently accessible in the model, applied econometrics may still use large-scale systems for which rational expectations solutions would be troublesome if not impossible to reach.     

Evaluation of Subjectivity in Incentive Pay

The study aims to investigate the determinants of subjective bonus payouts in the UK financial industry. Bonuses are increasingly linked to wider business goals, such as quality and customer service, firm reputation and employee hiring and retention policies, thus replacing the traditional focus on output or profit measures. A new conceptual work on subjectivity is used to evaluate these bonus practices. Results indicate that a variety of contextual factors have influenced the firms to make greater use of subjectivity in bonus payouts. Of these, organizational interdependency appeared to be the most forceful factor, followed by management’s strategic focus, long-term investment in intangibles, economic constraints, performance target difficulty, and competition. The analysis suggests that subjectivity acts as a mechanism that aligns the interests of individual employees with the firm’s performance goals. The study also draws attention to the costs of subjectivity in performance evaluation.     

Forward guidance and expectation formation: A narrative approach

How forward guidance influences expectations is not fully understood. To study this, I construct central bank data that includes forward guidance and its attributes, central bank projections, and quantitative easing, which I combine with survey data. I describe how, when, and where forward guidance has worked. I estimate that forecasters revised their interest rate forecasts in the intended direction by five basis points on average following a forward guidance change. I provide estimates for The Federal Reserve, European Central Bank, Bank of England, Bank of Canada, Reserve Bank of Australia, Reserve Bank of New Zealand, Sveriges Riksbank, and Norges Bank.     

财政支出与拉动农村居民消费

后危机时代我国经济增长要靠消费、投资、出口的协同拉动,农村居民的消费不旺一直是影响消费增长的主要原因.由于农村居民收入增长缓慢、农村社会保障制度不健全、农村消费环境不佳、农村基础设施不完善等因素的限制,农村居民的消费能量难以释放.在中央不断出台的积极的财政政策中,财政支出对农业、农村、农民的倾斜越加增多,有利于解除各种...     

Causes of Inflation in China： Inflation Expectations

This paper argues that the main causes of inflation in China since the early 21st century are changes in the public's inflation expectations. The conventional wisdom, the quantity theory of money, may not be adequate to capture the relationship between price changes and money supply growth, as the economic system evolves and people's income and wealth grow. An examination of China's GDP deflator and broad money supply relative to nominal GDP shows that the relationship between the two series is relatively weak. A further examination of China's monthly CPI series over the period 2001–2010 reveals that the autoregressive models are a better fit than the moving average models, which suggests that the role of CPI expectations has been significant and important. Because of the importance of inflation expectations in CPI movement, we believe the Central Bank's monetary policy that targets CPI inflation should emphasize the use of policy instruments that have direct and strong communication links with the public. Quantitative measures would have their own use, but their effectiveness would be unlikely to match that of interest rate measures, especially from a short‐term perspective.     

At What Age Do You Expect to Retire? Retirement Expectations and Increases in the Statutory Retirement Age

We analyse the extent to which an increase in the statutory retirement age affects individuals' retirement expectations. Understanding how individuals adjust their expectations is crucial to the evaluation of this policy, since retirement expectations directly affect other important decisions such as labour supply, engagement in (further) education and, of course, savings and investments. We consider the 2007 German pension reform that legislated an increase in the statutory retirement age from 65 years to 67. Our analysis is based on a longitudinal study that directly asks respondents at what age they expect to retire. Using a difference‐in‐differences approach, we look at the changes in subjective retirement expectations over time and estimate the extent to which they can be attributed to the 2007 reform. We find that the reform shifted the retirement expectations of the younger cohorts, although there is some heterogeneity in the way individuals adjusted. While there are no significant differences between men and women, lower‐educated individuals failed to revise their expectations. As these individuals usually acquire both lower pension claims and lower private savings, the fact that they have been slower in updating their retirement expectations causes concern regarding their income security after retirement.     

A SIMULATION ANALYSIS OF HERDING AND UNIFRACTAL SCALING BEHAVIOUR

We model the financial market using a class of agent‐based models in which agents’ expectations are driven by heuristic forecasting rules (in contrast to the rational expectations models used in traditional theories of financial markets). We show that, within this framework, we can reproduce unifractal scaling with respect to three well‐known power laws relating (i) moments of the absolute price change to the time‐scale over which they are measured, (ii) magnitude of returns with respect to their probability and (iii) the autocorrelation of absolute returns with respect to lag. In contrast to previous studies, we systematically analyse all three power laws simultaneously using the same underlying model by making observations at different time‐scales and higher moments. We show that the first two scaling laws are remarkably robust to the time‐scale over which observations are made, irrespective of the model configuration. However, in contrast to previous studies, we show that herding may explain why long memory is observed at all frequencies. Copyright © 2013 John Wiley & Sons, Ltd.     

Expectations and Satisfaction in Channel Member Relationships in the Victorian (Australia) Fruit Industry

Abstract

The paper reports findings of research into the dynamics of customer satisfaction formation amongst fruit producers and their distribution channel(s), within the economically important northern Victorian (Australia) fruit industry. The paper suggests reasons why previous approaches to the issue of satisfaction in channel member relationships, which typically utilize constructs of ‘economic’ and ‘non-economic’ satisfaction, may usefully be supplemented by application of the ‘disconfirmation of expectations’ model. The research actually tests a modification of the traditional disconfirmation model that incorporates dimensions of ‘outcome’ and ‘process’ at the levels of expectations, performance and disconfirmation—a ‘dualistic’ model. This had previously been tested only in a radically different business-to business-context, that of advertising creative services. The findings suggest that satisfactory measurement of growers' expectations can be achieved. They also suggest that the disconfirmation model does appear to apply in this previously untested service context, whether unitary measures of expectations and performance, or the dualistic interpretation of expectations/performance, are utilized.     

A new approach to measure tactical voting: evidence from the British elections

Although tactical voting attracts a great deal of attention, it is very hard to measure as it requires knowledge of both individuals’ voting choices as well as their unobserved preferences. In this article, we present a simple empirical strategy to nonparametrically identify tactical voting patterns directly from balloting results. This approach allows us to study the magnitude and direction of strategic voting as well as to verify which information voters and parties take into account to determine marginal constituencies. We show that tactical voting played a significant role in the 2010 election, mainly for Liberal–Democratic voters supporting Labour. Moreover, our results suggest that voters seem to form their expectations based on a national swing in vote shares rather than newspaper guides published in the main media outlets or previous election outcomes. We also present some evidence that suggests that campaign spending is not driving tactical voting.