Capital adjustment costs,time-to-build effects,and inflation nonneutrality

The paper examines how the presence of capital adjustment costs and time-to-build constraints weaken the Fisher effect and inflation neutrality, and hence attenuate the arbitrage opportunities implicit in intertemporal substitution and the investment decision. It is demonstrated that large and permanent changes in inflation affect nominal interest rates, intertemporal substitution, and investment choices differently than small or temporary changes. Small, transitory inflationary innovations will lower real interest rates, yet create no arbitrage opportunities since the benefits from these low rates will be insufficient relative to the adjustment costs implicit in altering investment. Large, permanent inflationary innovations will possess no real effects. The paper then presents empirical work to support the prediction that the expected inflation effect on nominal interest rates depends on the perceived size and permanence of the innovation.     

Asymmetric effects of inflation shocks on inflation uncertainty

The empirically documented regularity that dis-inflationary shocks are associated with larger output changes than are positive shocks presents an interesting puzzle to macroeconomists. This paper presents, and empirically supports, a new explanation for this asymmetry. The authors show, using a TARCH model, that negative inflationary shocks result in greater inflation uncertainty than positive shocks. As Friedman [1977] argues, and a body of empirical evidence demonstrates, inflation uncertainty leads to lower output growth. Drawing on this explanation, this essay points to an avenue by which the output asymmetry of inflationary shocks can be explained.     

On sustained economic growth with wealth effects

In a discounted one-sector convex model of optimal economic growth where utility may depend on both consumption and capital stock, I derive necessary and sufficient conditions for sustained growth (unbounded expansion of capital and consumption). Conditions for bounded growth and extinction are also outlined. Optimal paths may be non-monotone. Sustained growth may occur even though the asymptotic marginal productivity is less than the discount rate and may require the initial capital stock to be above a critical level. The behavior of the marginal rate of substitution between consumption and capital plays a crucial role in the conditions.     

Income and wealth transfer effects of discrimination in sentencing

Conclusion There is substantial evidence that African—Americans have been subjected to disparate treatment in the sentencing phase of the criminal justice process. ²⁴ the type, method, and extent of the disparity has varied over time and in different locations. To assess the extent of income and wealth transfers resulting from this disparate treatment will require an extensive examination of detailed data by offense type. The appropriate methodology requires: 1) identification of the offenses where recially discriminatory treatment has occurred; 2) estimates of the numbers of individuals sentenced in a discriminatory fashion; 3) identification of the types and amounts of differential sentencing; 4) valuation of the effect of differential treatment; 5) aggregation of the amounts across offenses and over time (including projections into the future where appropriate); and 6) discounting to present value using an appropriate social discount rate. Although data may not be available that would allow us to conduct a detailed analysis for many jurisdictions prior to the 1960s, adequate data exist to allow preliminary estimates to be made of the magnitude of income and wealth transfers that the African—American community has experienced as a result of racial discrimination in sentencing.²⁵     

Geographies of wealth: real estate and personal property ownership in England and Wales, 1870–1902

This article explores the composition and geographies of individual wealth holding in England and Wales in the late nineteenth century. It draws on various forms of death duty records to determine the individual ownership of wealth including both personal property and real estate. By combining information on these different kinds of property, it is possible to explore how different strata of wealth holders accumulated specific forms of wealth at the time of their death. The article then examines how the composition of that wealth varied according to the wealth holder's location in the urban hierarchy and distance from London. It points out important geographical differences in both the scale and nature of wealth holding and raises questions about the implications of these findings.     

University education,homeownership and housing wealth

We utilise the implementation of the 1999 higher education expansion in China as a natural experiment to examine the relationship between university educational attainment, homeownership and housing wealth. Using data from the 2018 China Family Panel Studies, results from our preferred models, which correct for endogeneity, suggest that having a university qualification generates a 3.5–6.3 percentage points increase in the probability of homeownership and a 24.3–51.1 percentage points increase in total housing wealth. We also find that holding a university qualification increases the number of houses one owns and housing wealth for those whose housing wealth is above the median. We find that self-reported social status and entitlement to superannuation are channels through which higher education affects homeownership and housing wealth and that financial literacy is a channel through which higher education affects housing wealth. We find considerable heterogeneity in the impact of higher education on housing outcomes across gender, family income levels, parent education and between urban and rural areas.     

Macroeconomic policy-induced wealth effects on Chinese foreign housing investments

The unpegging of China's currency in 2005 creates positive wealth effects that trigger Chinese foreign buyers' responses to pay 3.42% more in housing prices relative to other foreign buyers. We find evidence of a higher propensity to purchase housing units with more visible features among Chinese foreign buyers after the policy shock relative to other foreign buyers. Chinese foreign buyers pay 11.0% premiums for high-floor units, 7.25% premiums for large units and 4.61% for luxury (more expensive) units after experiencing positive incomrtde shocks. We find that conspicuous consumption motives are augmented in high-income neighborhoods and neighborhoods with strong enclaves and social networks comprising residents from China. We show that conspicuous consumption motives are more significant for Chinese foreign buyers who are owner occupiers than for those who are investors. The results survive a slew of robustness and falsification tests, and we cannot reject the finding of wealth-induced conspicuous consumption by Chinese foreign buyers in Singapore's private housing market.     

Income and wealth

Barclay, Sir P. 1995: Income and Wealth, Volume 1, Joseph Rowntree Inquiry. York: Joseph Rowntree Foundation, £9 paper.

Hills, J. 1995: Income and Wealth. Volume 2, Joseph Rowntree Inquiry. York: Joseph Rowntree Foundation, £9 paper; £15 if both volumes ordered together.     

Race and wealth

One of the most heated scholarly controversies in the area of racial equality and social justice in the 1980s has been the dispute over the nature, cause, and meaning of economic changes occurring within the black community. Although this debate has important public policy consequences, most of the research on which the debate is based is concerned with income. We argue that a broader interpretation of life chances should include an examination of wealth as well as income. Using the 1984 Survey of Income and Program Participation (SIPP), we examine black and white patterns of wealth inequality. Our analysis uncovers a depth of inequality beyond that which is found when income alone is considered. Furthermore, we find that both race and class are important in determining patterns of racial inequalities in wealth.     

Investment financing, inflation, risks, and stabilization

This paper discusses financial problems of stepping up the investment process in Russia, approaches to intensifying financial redistribution, opportunities for using government savings to boost and upgrade economic growth, and suggests financial support measures for the modernization of the Russian economy.     

政府间财政支出竞争的地区经济差距效应研究

不同的地方政府财政支出行为经常被其他同级地方政府之间攀比和效仿,势必演化为政府间财政支出的公开竞争行为。该行为借助经济资源市场化配置机制的传导势必导致地区经济发展差距。本文将通过地方政府这种财政支出竞争对地区经济差距的影响,从一个新的视角揭示了区域经济差距演变规律。     

Coffee, money and inflation in Colombia

The purpose of this paper is to analyse the relationship between coffee, money, inflation and international competitiveness in Colombia. The basic hypothesis being investigated is that higher (lower) prices of coffee will tend to result, through the accumulation of international reserves, in higher (lower) inflation. In turn, this higher inflation will generate, for a given rate of devaluation of the nominal exchange rate, a reduction of the real exchange rate, with the consequent loss of competitiveness in the non-coffee tradable goods sector. A ‘Dutch-disease’ type of model is developed to discuss analytically the relationship between coffee prices, money creation and competitiveness in the short and long run. Empirical results for 1952–1980 are presented. These results support the hypothesis that there has been a positive relationship between the price of coffee, money creation and inflation in Colombia.     

Depreciation,inflation and capital replacement*

Abstract. This paper examines the effects of depreciation, taxes and inflation on the optimal timing of asset replacement in accordance with the Canadian tax laws. The main findings are that an increase in the capital cost allowance rate will delay (accelerate) replacement of fixed assets at low (high) levels of capital cost allowance rates, and that an increase in the annual inflation rate will delay (accelerate) replacement of fixed assets at low (high) levels of inflation. The applications of the replacement model are illustrated with numerical examples.     

Towards an understanding of the real effects and costs of inflation

Zusammenfassung Zum Verst?ndnis der realen Wirkungen und Kosten der Inflation. — Die traditionelle Ansicht, da\ eine Inflation, weil Geld neutral ist, keine nennenswerten realen Wirkungen hervorbringt, erweist sich nur für eine Volkswirtschaft als ann?hernd richtig, deren Regelungen vollst?ndig inflationssicher sind, d. h. für eine vollindexierte Wirtschaft. Die Realwirkungen erweisen sich aber als um so verbreiteter und schwererwiegend, je mehr bei wirtschaftlichen Regelungen Nominalwerte verwendet werden. Der Aufsatz untersucht nacheinander die Folgen von amtlichen Regelungen auf Nominalbasis (Steuersystem, Definition des steuerpflichtigen Einkommens, Buchführungsmethoden), von privaten Einrichtungen und übereinkünften auf Nominalbasis (Hypotheken, Rentenvertr?ge, Einkommensberechnungen), selbst für den Fall, da\ die Inflation vollst?ndig antizipiert wird bzw. wurde. Anschlie\end werden die Wirkungen einer nicht antizipierten Inflation geprüft, die in den bestehenden nominalen langfristigen Vertr?gen nicht berücksichtigt worden ist, und die Wirkungen einer Ungewissen zukünftigen Inflation. Soweit es m?glich ist, wird versucht, die sozialen Kosten von verschiedenen Realwirkungen abzusch?tzen, obwohl es zur Zeit nicht m?glich ist, die allgemeinen sozialen Kosten der Inflation zu ermitteln.

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Résumé Vers une compréhension des effets réels et des co?t d’inflation. — Nous démontrons que la vue traditionelle d’après laquelle l’inflation ne produit pas des effets réels appréciables à cause de la neutralité d’argent est valide pour une économie seulement dont les institutions sont complètement étanche à l’inflation, c’est-à-dire il s’agit d’une économie indexée. Mais nous démontrons que les effets réels deviennent plus et plus diffusés et sérieux comme les institutions de l’économie deviennent presque plus nominales. L’article examine succédamment les conséquences des institutions nominales de gouvernement (le système fiscal, la définition de revenu taxable, la procédure comptable); des institutions privées nominales et des conventions comptables (les contrats de hypothèque et d’annuité, le mesurage de revenu), même si l’inflation est, et a été complètement anticipée. En plus l’article examine les effets de l’inflation pas anticipée et pas incorporée dans les contrats nominaux existants à long terme, et de l’inflation future incertaine. S’il est possible, nous entreprenons l’effort de fixer les co?t sociaux des effets réels différents même bien qu’il ne soit pas possible au moment présent de fixer tous les co?t sociaux de l’inflation.

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Resumen Hacia el entendimiento de los verdaderos efectos y costos de la inflatión. — La visión tradicional que la inflatión no produce efectos reales apreciables debido a que el dinero es neutral, es solamente válida en forma aproximada para una economía cuyas instituciones están completamente a prueba de inflatión, p.ej. una economía completamente indexada. Pero se muestra que los verdaderos efectos se generalizarán más y más y serán más serios en la medida que las instituciones de la economía sean más cercanamente nominales. El artículo examina en forma sucesiva las consecuencias de instituciones gubernamentales nominales (sistema de impuestos, definitión del ingreso imponible, procedimientos contables); de instituciones privadas nominales y convenciones contables (hipotecas y contratos de renta anuales, medición del ingreso), incluso cuando la inflatión es y ha sido totalmente anticipada. Examina en seguida los efectos de inflatión no anticipados, que no han sido incoirporados dentro de los contratos de largo plazo existentes, y de inflatión futura incierta. En los casos que fue posible, se hizo un esfuerzo por determinar el costo social de varios efectos reales, aunque en este momento no es posible apreciar los costos sociales totales de la inflatión.

     

Target zones and wealth effects: Current account implications of alternative policy assignments

This paper evaluates the current-account implications of coordinated disinflationary policy in a two-country framework, when fiscal policy is assigned to control inflation and monetary policy is used to hold down the exchange rate at its target zone level. The performance of an alternative regime, where monetary policy controls inflation and fiscal policy is assigned to control the current account is also assessed.