Confident expectations, rational expectations and the optimal conduct of monetary policy

Under what conditions central banks can afford to deviate from announced targets without losing their reputation is analyzed. For this, the public must have something like ‘confident expectations' vis-a-vis monetary policy and central banks have to behave accordingly. The paper shows that it can be rational for the public and welfare-increasing for the society to retain ‘confident expectations' instead of switching to rational expectations, when central banks have gained long-run reputation. At the end of the paper, alternative optimal money supply rules are compared in a dynamic optimization framework. © 1998 Elsevier Science B.V. All rights reserved.     

Arenas of expectations for hydrogen technologies

Technological development is often described as an evolutionary process of variation, selection and retention. Different technologies are seen as variations, while the market and other institutions operate as a selection environment. It is less understood, however, how variation and selection relate in the case of emerging technologies. In this paper we introduce the concept of arenas of expectations to examine the relationship between variation and selection processes. Expectations are of particular interest in a pre-market phase of innovation, when performance, cost and other market criteria are less articulated and not stable. In arenas of expectations ‘enactors’ of particular technological variations voice and maintain expectations, while ‘selectors’ will compare and assess the competing claims. We analyse the expectations work of both parties in a case study on metal hydrides for the on-board storage of hydrogen for automotive applications. The paper concludes with a framework of ‘arenas of expectations’ as the linchpin between the processes of variation and selection of emerging technologies.     

Regime shifts in the Danish term structure of interest rates

Within a bivariate VAR model allowing for two-state Markov regime switching we test and evaluate the Expectations Theory (ET) of the term structure using Danish 1- and 3-months interest rates covering the period 1976–1997. A regime-shift approach is used in order to account for the change in monetary policy and the 1992–93 exchange rate crises that occured during this period. The basic findings are that these episodes did change the term structure, and, although we do find departures from the ET, several of the implications of the theory are consistent with the data, especially in the later part of the sample. First version received: June 1997/Final version received: March 1998     

Intertemporal consumption with directly measured welfare functions and subjective expectations

Euler equation estimation of intertemporal consumption models requires many, often unverifiable assumptions. These include assumptions on expectations and preferences. We aim at reducing some of these requirements by using direct subjective information on respondents’ preferences and expectations. The results suggest that individually measured welfare functions and expectations have predictive power for the variation in consumption across households. Furthermore, estimates of the intertemporal elasticity of substitution based on the estimated welfare functions are plausible and of a similar order of magnitude as other estimates found in the literature. The model favored by the data only requires cross-section data for estimation.     

Shaping long-run expectations in problems of coordination

When far-sighted agents may adjust their behavior only gradually, the issue of equilibrium selection becomes one of tension between history and expectations. This paper analyzes whether, in this context, a government policy maker may intervene successfully and redirect expectations away from the inertia of undesired history. The possibilities and limitations of such an approach to `expectation management' are studied within a game-theoretic framework which involves both the government and the population.     

On multiple equilibria and the rational expectations hypothesis

Summary This paper analyzes through a simple two-period model the fact that, if some agents hold inside money intertemporally, the second-period normalization matters. Thus, there are several equilibria of the second-period economy, indexed by the level of inflation. A concept of equilibrium acknowledging this fact, and requiring that agents put some weight on any of the possible second-period equilibrium price vectors is developed. Such an equilibrium is shown to exist, and is illustrated by an example.This a revised version of chapter three of my Ph.D. dissertation. I would like to thank David Cass, Atsushi Kajii, George Mailath and Shinichi Suda for helpful discussions and comments. Thanks are also due to Jean-Michel Grandmont who pointed out mistakes in a previous version. All remaining mistakes are of course my own. Financial support from a CARESS scholarship at the University of Pennsylvania is gratefully acknowledged.     

On multiple equilibria and the rational expectations hypothesis?

Summary. This paper analyzes through a simple two-period model the fact that, if some agents hold inside money intertemporally, the second-period “normalization” matters. Thus, there are several equilibria of the second-period economy, indexed by the level of inflation. A concept of equilibrium acknowledging this fact, and requiring that agents put some weight on any of the possible second-period equilibrium price vectors is developed. Such an equilibrium is shown to exist, and is illustrated by an example.     

The trade-induced degradation hypothesis

This paper develops a simple two-sector dynamic model to examine the effects of international trade when government policy regarding the environment is short sighted, but still responsive to changes in income levels and in the quality of the environment. We show that free trade can usher in a negatively reinforcing cycle of increased pollution, lower environmental quality, and lower real incomes. Such cycles are not possible in autarky. We link the potential for trade to cause ‘large’ environmental consequences to the structure of tastes and technologies and the attributes of industrial pollution.     

Exchange rate volatility and the mixture of distribution hypothesis

This study sheds new light on the mixture of distribution hypothesis by means of a study of the weekly exchange rate volatility of the Norwegian krone. In line with other studies we find that the impact of information arrival on exchange rate volatility is positive and statistically significant, and that the hypothesis that an increase in the number of traders reduces exchange rate volatility is not supported. The novelties of our study consist in documenting that the positive impact of information arrival on volatility is relatively stable across three different exchange rate regimes, and in that the impact is relatively similar for both weekly volatility and weekly realised volatility. It is not given that the former should be the case since exchange rate stabilisation was actively pursued by the central bank in parts of the study period. We also report a case in which undesirable residual properties attained within traditional frameworks are easily removed by applying the log-transformation on volatilities.

非政府组织——公民政治参与的“领导者”

非政府组织（Non—Government Organizations,缩写为NGO）,出现于50年代,兴起于70年代,在过去20年有了飞跃性的发展。如今非政府组织已经渗透到社会生活的方方面面,并且发挥着越来越大的作用。随着世界民主化浪潮波及全球,公民的政治参与成为当代政治生活的重要内容。但是由于种种原因,中国公民的政治参与无论是广度,还是深度都是比较低的,谁能“领导”公民参与政治,非政府组织无疑是最好的领导者!     

Market evidence of misperceived mortality risk

We construct and implement a test of rational consumer behavior in a high-stakes financial market. In particular, we test whether consumers make systematic mistakes in perceiving their mortality risks. We implement this test using data from secondary life insurance markets where consumers with a life-threatening illness sell their life insurance policies to firms in return for an up-front payment. We compare predictions from two models: one with consumers who correctly perceive their mortality risk, and one with consumers who are misguided about their life expectancy, and find that our data are most consistent with the predictions made by the second model.     

论马克思关于人性假设的三个维度

人性假设是经济学的基本假设之一,有什么样的人性假设,就有什么样的适合这种人性假设的经济理论和政策意蕴。马克思经济学的人性假设有三个维度：哲学层面上人是社会关系的总和,经济层面上人是经济范畴的人格化,资本主义经济层面上人是阶级人。从方法论上看,阶级人假设与经济人假设的不同导致了马克思经济学与西方经济学根本观点的不同.     

Political institutions and economic volatility

We examine the effect of political ‘institutions’ on economic growth volatility, using data from more than 100 countries over the period 1960 to 2005, taking into account various control variables as suggested in previous studies. Our indicator of volatility is the relative standard deviation of the growth rate of GDP per capita. The results of a dynamic panel model indicate that democracy reduces economic volatility. We also find that some dimensions of political instability and policy uncertainty increase economic volatility.     

企业国际化经营的政治风险及其对策分析

随着经济的发展,越来越多的企业开始涉足到国际市场中来,国际化成了企业发展的必然趋势。开展国际化经营不仅给企业的发展带来了更多的机遇,而且也使企业冒了非常大的政治风险。因此,需要分析企业国际化的政治风险,从进入投资前和进入投资后两个阶段提出我国企业国际化经营中政治风险的防范和控制对策。     

Interest expectations and exchange rates news

Using a new survey data set ofmatched exchange rate and interest rate expectations for eight currencies relative to the German mark, we examine empirically the relationship between exchange rate returns, news and risk premia. News on interest differentials enters significantly in equations for the difference between the spot rate and the lagged forward rate for the British pound, Japanese yen, Spanish peseta and the US dollar. An unexpected rise in the interest rate differential tends to strengthen the domestic exchange rate. For each of these currencies, we also find significant effects of our ex-ante measure of the risk premium. In addition, we investigate the effect of lagged interest rate differentials as proxy for the risk premium and find that they do not capture time-varying risk premia as is widely suggested in the literature, but probably capture a peso-problem, learning about a policy change, a market-inefficiency or a combination of these factors.     

Interactive expectations

In modeling expectation formation, economic agents are usually viewed as forming expectations adaptively or in accordance with some rationality postulate. We offer an alternative nonlinear model where agents exchange their opinions and information with each other. Such a model yields multiple equilibria, or attracting distributions, that are persistent but subject to sudden large jumps. Using German Federal Statistical Office economic indicators and German IFO Poll expectational data, we show that this kind of model performs well in simulation experiments. Focusing upon producers' expectations in the consumption goods sector, we also discover evidence that structural change in the interactive process occurred over the period of investigation (1970–1998). Specifically, interactions in expectation formation seem to have become less important over time. RID="*" ID="*"We would like to thank Ulrich Witt, Director of the Evolutionary Economics Unit, The Max Planck Institute for Research into Economic Systems, Jena, Germany, for providing the intellectual stimulus for this project and arranging the necessary financial support from the Max Planck Society to facilitate our collaboration. Thanks are also due to the IFO Institute for providing the data for this study. However, the usual caveat applies.     

The Chenery hypothesis and structural change in Eastern Europe

The Newly Liberalizing Countries (NLCs) in Eastern Europe have to undergo a fundamental structural change. In this paper the Chenery Hypothesis (CH) is employed to make a quantitative assessment of this change. The CH, roughly speaking, relates an economy's sectoral structure to its stage of development, its size, and its endowment with natural resources. The paper tests this hypothesis for a sample of 31 developed and developing economies and finds it still valid. Then it uses the results obtained to measure distortions in the NLCs' existing economic structure and to give a projection of future structural change. The calculations make it evident that the industrial sector in the NLCs will experience a marked downsizing whilst the service sector turns out to be too small. But sectoral patterns are not too uniform for all groups of countries. Thus, all projections depend highly on the reference group used to evaluate a ‘master pattern’.