Comment on: “Inflation dynamics with search frictions: A structural econometric analysis” by Krause, Lopez-Salido and Lubik

The implications of search frictions on the inflation dynamics are shown here for the case with wage adjustments typically belonging to the New Keynesian model, not to the Mortensen–Pissarides framework. In that model variant, I identify the role of search frictions by an additional term entering the slope coefficient of the inflation equation. After a numerical exercise, I find results that are in line with those obtained by Krause et al. [2008. Inflation dynamics with search frictions: a structural econometric analysis. Journal of Monetary Economics 55, doi:10.1016/j.jmoneco.2008.05.003.].     

Labor tax reform, unemployment, and search

A key obstacle to reducing payroll taxes in many industrialized and transition countries is the direct revenue loss to the government that it implies. This paper studies a simple and practical labor tax reform of reducing a payroll tax and increasing a progressive wage tax that keeps the marginal tax wedge unchanged. Such a strategy increases employment, reduces the equilibrium unemployment rate, and increases public revenue as long as workers do not have all the bargaining power in wage negotiations. Moreover, welfare rises if workers’ bargaining power is sufficiently large to exceed a critical value determined by the second-best Hosios condition.      

Search and matching frictions and optimal monetary policy

A recent literature has merged the New Keynesian and the search and matching frameworks, which has allowed the former to analyze the joint dynamics of unemployment and inflation. This paper analyzes optimal monetary policy in this kind of hybrid framework. I show that zero inflation is optimal when all wages are Nash bargained in every period and the economy's steady state is efficient. In the more realistic case in which nominal wage bargaining is staggered, a case against price stability arises: in response to real shocks, the central bank should use price inflation so as to avoid excessive unemployment volatility and excessive dispersion in hiring rates. For a plausible calibration, the welfare loss under the zero inflation policy is about three times as large as under the optimal policy.     

Transitions in the German labor market: Structure and crisis

Since the so-called Hartz IV reforms around 2005 and during the global crisis of 2008/2009, the German labor market featured mainly declining unemployment rates. We develop a search and matching model with heterogeneous skills to explore the role of structural and cyclical policies for this performance. Calibrating unemployment benefits to approximate legislation before and after the reforms, we find a large reduction in unemployment and its duration, with the transition concluding after about three years. During the crisis, the extended use of short-time labor subsidies that prevent jobs from being destroyed is likely to have prevented strong increases in unemployment.     

我国城市化进程与城乡收入差距的内在关系研究——基于托达罗模型的分析

本文以托达罗模型为框架,在“双二元”假设下,构造了劳动力转移的数理模型,分析中国城市化进程与城市劳动力市场的关系.结果显示,城乡收入差距是影响城市化进程的主要因素.随着城乡收入差距的扩大,城市化以单纯的人口迁移和农民工进城的方式展开,表现为粗放式的城市化.只有提高现代工业部门生产效率,同时引导金融资源进入农村,加快产业...     

Prices and returns on paintings: An exercise on how to price the priceless

Art is priceless, but paintings, and other objects, have been sold on markets since the time of the Roman Empire. In this paper, we describe a method for constructing a price index for paintings and compare this index to the indices of various financial markets. In particular, we discuss whether the price of art is related to financial markets, whether the art market is weakly efficient, and whether it is more or less risky than financial markets.     

Futures and forward price differential and the effect of marking‐to‐market: Australian evidence

The objective of this paper is to examine the effects of marking‐to‐market of futures contracts on the price differential between futures and forward contracts based on the predictions of the Cox, Ingersoll and Ross (1981) (CIR) model. Cox et al ., (1981) derive a series of propositions with respect to the relationship between futures and forward prices and a set of testable implications. These are tested empirically in this paper using Australian data from November 1991 to June 1997. The results provide evidence of the presence of significant futures and forward price differences, where the futures price is consistently below the forward price. Only partial support is found for the Cox et al ., (1981) propositions, implying that the effect of marking‐to‐market is not able to fully account for the price differential. Therefore, it is not possible to rule out the influence of other institutional factors on the futures‐forward price difference.     

Futures and forward price differential and the effect of marking‐to‐market: Australian evidence

The objective of this paper is to examine the effects of marking‐to‐market of futures contracts on the price differential between futures and forward contracts based on the predictions of the Cox, Ingersoll and Ross (1981) (CIR) model. Cox et al ., (1981) derive a series of propositions with respect to the relationship between futures and forward prices and a set of testable implications. These are tested empirically in this paper using Australian data from November 1991 to June 1997. The results provide evidence of the presence of significant futures and forward price differences, where the futures price is consistently below the forward price. Only partial support is found for the Cox et al ., (1981) propositions, implying that the effect of marking‐to‐market is not able to fully account for the price differential. Therefore, it is not possible to rule out the influence of other institutional factors on the futures‐forward price difference.     

Tests of the efficiency of the U.S. rights offering market: An option pricing approach

The efficiency of the U.S. market for stock purchase rights is empirically analyzed in an options framework, in which prices of rights, given the prices of underlying stock, are examined with regard to the possibilities of actually earning above-normal profits, considering the risk taken. Two neutral hedging tests for market efficiency, along with a simple buy-and-exercise trading strategy, are applied to daily traded rights data. Results from ex-post hedging tests suggest that the trading strategy based on the rights valuation model is able to differentiate between overpriced and underpriced rights so as to generate substantial book profits. The positive ex-ante hedge return, found to exist empirically, is completely eliminated once transaction costs are introduced, lending support for the efficient U.S. rights offering market on an after-transaction cost basis.     

Modelling illiquidity spillovers with Hawkes processes: an application to the sovereign bond market

Modelling the dynamics of (il)liquidity across assets is an important yet complicated task, especially when considering significant deteriorations of liquidity conditions. Here, we propose a peak-over-threshold method to identify abrupt liquidity drops from limit order book data and we model the time-series of these illiquidity events across multiple assets as a multivariate Hawkes process. This allows us to quantify both the self-excitation of extreme changes of liquidity in the same asset (illiquidity spirals) and the cross-excitation across different assets (illiquidity spillovers). Applying the method to the MTS sovereign bond market, we find significant evidence for both illiquidity spillovers and spirals. The proportion of shocks explained by illiquidity spillovers roughly doubles from 2011 to 2015, suggesting an increased synchronization of extreme illiquidity across assets.     

Monetary policy and financial stability: What role for the futures market?

This paper examines interactions between monetary policy and financial stability. There is a general view that central banks smooth interest rate changes to enhance the stability of financial markets. But might this induce a moral hazard problem, and induce financial institutions to maintain riskier portfolios, the presence of which would further inhibit active monetary policy? Hedging activities of financial institutions, such as the use of interest rate futures and swap markets to reduce risk, should further protect markets against consequences of unforeseen interest rate changes. Thus, smoothing may be both unnecessary and undesirable. The paper shows by a theoretical argument that smoothing interest rates may lead to indeterminacy of the economy's rational expectations equilibrium. Nevertheless, our empirical analysis supports the view that the Federal Reserve smoothes interest rates and reacts to interest rate futures. We add new evidence on the importance for policy of alternative indicators of financial markets stress.     

Measuring Inflation Anchoring and Uncertainty: A U.S. and Euro Area Comparison

We use several U.S. and euro‐area surveys of professional forecasters to estimate a dynamic factor model of inflation featuring time‐varying uncertainty. We obtain survey‐consistent distributions of future inflation at any horizon, both in the U.S. and the euro area. Equipped with this model, we propose a novel measure of the anchoring of inflation expectations that accounts for inflation uncertainty. Our results suggest that following the Great Recession, inflation anchoring improved in the United States, while mild de‐anchoring occurred in the euro area. As of our sample end, both areas appear to be almost equally anchored.     

The empirical relationship between risk and return: evidence from the UK stock market

Previous studies reach no consensus on the relationship between risk and return using data from one market. We argue that the world market factor should not be ignored in assessing the risk-return relationship in a partially integrated market. Applying a bivariate generalized autoregressive conditional heteroscedasticity in mean (GARCH-M) model to the weekly stock index returns from the UK and the world market, we document a significant positive relationship between stock returns and the variance of returns in the UK stock market after controlling for the covariance of the UK and the world market return. In contrast, conventional univariate GARCH-M models typically fail to detect this relationship. Nonnested hypothesis tests supplemented with other commonly used model selection criteria unambiguously demonstrate that our bivariate GARCH-M model is more likely to be the true model for UK stock market returns than univariate GARCH-M models. Our results have implications for empirical assessments of the risk-return relationship, expected return estimation, and international diversification.     

For sale by owner: When to use a broker and how to price the house

By using a broker, the owner of a house can speed up his search for buyers but must pay a percentage of the sale price as a commission. Nonstationarities inherent in the housing market may make it optimal to market a house by-owner at the outset and to retain a broker only if the house remains on the market later in the selling season. This article investigates the optimal sequence of asking prices within the by-owner phase, within the broker phase, and at the transition between the two phases. The asking price declines within each phase but may jump up at the transition to cover part of the commission. The model implicity determines the demand for broker services as a function of the commission rate. When estimated, it may be useful in investigations of price fixing among brokers.     

促进中国总需求结构调整的财税政策探析

消费需求、投资需求和出口需求在总需求结构中应保持适当的比例关系,只有消费驱动型的经济增长模式才是有利于中国经济持续、高效、和谐发展的有效选择.目前中国存在消费与投资、内需与外需的矛盾.中国政府应通过建立完善的社会保障体系、政府投资体制以及充分运用出口退税等财税政策,促进中国总需求结构的调整.扩大消费需求并调整投资需求和出口需求的总量与结构,从而实现宏观经济持续、稳定、和谐发展的目标.     

A general framework for the derivation of asset price bounds: an application to stochastic volatility option models

We present a generalization of Cochrane and Saá-Requejo’s good-deal bounds which allows to include in a flexible way the implications of a given stochastic discount factor model. Furthermore, a useful application to stochastic volatility models of option pricing is provided where closed-form solutions for the bounds are obtained. A calibration exercise demonstrates that our benchmark good-deal pricing results in much tighter bounds. Finally, a discussion of methodological and economic issues is also provided.      

An extention of Samuelson's warrant valuation model and its application to Japanese data

It is well known among warrant traders that the Black & Scholes model cannot be directly used for warrant and convertible bond valuation. In this paper, a new warrant valuation model based on both the Samuelson and the Barone-Adesi & Whaley model is proposed, and the model is applied to convertible bond valuation. Our model is an extension of Samuelson's perpertual warrant model, whose parameters depend on stock price, volatility, term to maturity and interest rate.     

Measuring contagion and interdependence with a Bayesian time-varying coefficient model: An application to the Chilean FX market during the Argentine crisis

We use a Bayesian time-varying coefficient model to measurecontagion and interdependence, and we apply it to the ChileanFX market during the 2001 Argentine crisis. The proposed frameworkworks in the joint presence of heteroskedasticity and omittedvariables, without knowledge of the crisis timing prior to theempirical analysis. It can distinguish between contagion andinterdependence, as well as between unusually strong or weakmarket comovements. In a "natural" experiment based on our application,we find that the proposed framework works well in practice.In the application, we find evidence of some contagion fromArgentina and some interdependence with Brazil.     

Audit report lag: the role of auditor type and increased competition in the audit market

This study investigates the effect of auditor type (private vs. state) and increased competition in an audit market on audit report lag (ARL). This is the first study to provide evidence regarding the effect of audit market competition on ARL. Utilising structure–conduct–performance theory, we predict that competition pressures private auditors to be more efficient and to have less reporting lag than state auditors. We also predict that competition among auditors after a liberalisation period forces auditors to be more efficient and to record less ARL than before. We use a unique data set in Iran, whereby the audit market liberalisation (an audit market where services were previously provided primarily by a state entity) has resulted in both state and private auditors simultaneously providing audit services. The findings are consistent with the following hypothesis, that is ARL is shorter for private auditors than it is for state auditors, and ARL decreases as competition increases in the Iranian audit market. Consistent with the structure–conduct–performance theory, the findings suggest that increased competition in the audit market results in higher efficiency, as reflected by a shorter ARL.     

Size and book to market effects and the Fama French three factor asset pricing model: evidence from the Australian stockmarket

The present study adds to the sparse published Australian literature on the size effect, the book to market (BM) effect and the ability of the Fama French three factor model to account for these effects and to improve on the asset pricing ability of the Capital Asset Pricing Model (CAPM). The present study extends the 1981–1991 period examined by Halliwell, Heaney and Sawicki (1999) a further 10 years to 2000 and addresses several limitations and findings of that research. In contrast to Halliwell, Heaney and Sawicki the current study finds the three factor model provides significantly improved explanatory power over the CAPM, and evidence that the BM factor plays a role in asset pricing.