How financial markets process money information: A re-examination of evidence using band spectrum regression

This article re-examines the response of financial markets to money supply announcements. It is argued that the previous research in the area may be suffering from an estimation bias. The potential for estimation bias stems from the questionable practice of assuming the same regression model for all frequency bands. A decomposition of the data into low-frequency and high-frequency components raises the possibility that both expected liquidity and expected inflation effects are in operation simultaneously though they affect different expectation horizons. The results also show that the distinct weight of these separate effects depends essentially on the credibility of the Fed in adhering to announced monetary targets and the state of inflationary fears.     

A re-examination of international portfolio diversification based on evidence from leveraged bootstrap methods

This article investigates the issue of international portfolio diversification with respect to the three largest financial markets in the world—namely the US, Japan and the UK. In addition to making use of traditional portfolio analysis, we also suggest a procedure to calculate bootstrap correlation coefficients that can take into account the dynamic structure between the markets as measured by bootstrapped causality tests. Weekly data is used. The results from the first approach are supporting international diversification. The bootstrapped causality tests provide additional empirical support for this conclusion since the size of the causal effects is negligible and the bootstrap correlations are similar as the standard ones.     

The determinants of individual attitudes towards immigration

The paper formulates hypotheses and reports on individual attitudes towards immigration based on data for 24 countries on socioeconomic position, sociodemographic characteristics and political attitudes. The results are consistent with the predictions of factor proportions trade theory, but also suggest that a range of other economic and cultural factors influence attitudes towards immigration.     

A re-examination of the savings displacement hypothesis

This paper re-examines the savings displacement hypothesis. It uses a new dataset that disaggregates aid into project aid, financial programme aid, technical assistance grants and programme food aid. When considering the whole sample of 97 countries, results obtained from estimating a savings function using the GMM-System approach to dynamic panel suggest that project aid flows are the only type of aid exerting a negative effect on domestic savings. The results also show that the effects of the different categories of aid on domestic savings vary across regions, thus highlighting the importance of regional disaggregation in cross-country studies. The author would like to thank Jean-Louis Grolleau at the OECD Credit Reporting System for his helpful advice and his encouragements during the construction of the disaggregated aid database used in this paper.     

Individual discount rates: a meta-analysis of experimental evidence

Experimental Economics - A key parameter estimated by lab and field experiments in economics is the individual discount rate—and the results vary widely. We examine the extent to which this...     

Individual determinants of work attendance: evidence on the role of personality

We investigate the influence of personality as measured by the Big Five personality scale on absenteeism using the 2005 wave of the German Socio-Economic Panel (GSOEP). Estimates of a double hurdle negative binomial regression allow us to test hypotheses on the influence of the Big Five personality traits on work attendance. Our findings augment previous results on the link between personality and absenteeism by analysing representative data and including a large set of control variables typically not available in small scale surveys. We find clear negative correlations between the absence probability and Conscientiousness among women. For male employees a negative correlation with the incidence of absence is observed for the Agreeableness dimension. When looking at the length of absence occurrences Neuroticism is found to significantly influence male absenteeism despite controlling for the subjective health of the individual. Following the reasoning by Bowles et al. (2001) for the provision of effort by employees, employers might pay for incentive-enhancing preferences such as low Neuroticism among male employees because employers can only insufficiently monitor the true level of sickness of their employees and consequently want to avoid voluntary absenteeism.     

Aggregate instability under balanced-budget consumption taxes: A re-examination

We re-examine the destabilizing role of balanced-budget fiscal policy rules based on consumption taxation. Using a one-sector model with infinitely-lived households, we consider a specification of preferences derived from Jaimovich (2008) [14] and Jaimovich and Rebelo (2009) [15] which is flexible enough to encompass varying degrees of income effect. When the income effect is not too large, we show that there exists a Laffer curve, which explains the multiplicity of steady states, and that non-linear consumption taxation may destabilize the economy, promoting expectation-driven fluctuations, if the elasticity of intertemporal substitution in consumption is sufficiently larger than one and the tax rate is counter-cyclical with respect to consumption. Numerical illustrations also show that consumption taxation may be a source of instability for most OECD countries for a wide range of structural parameters? configurations. We finally prove the robustness of our conclusions if we consider a discrete-time setup.     

A re-examination of the impacts of macroeconomic and financial shocks on real exchange rate fluctuation: evidence from G7 and Asian countries

ABSTRACT

This paper aims to investigate the sources of real exchange rate fluctuation by utilizing sign restrictions in structural vector autoregressive (SVAR) method. Under an agnostic identification scheme, the empirical results show that the delayed overshooting puzzle still exists in response to monetary shock even if price puzzle is ruled out by construction. In contrast, all countries experience a significant initial real depreciation, and then gradually appreciate in response to currency risk premium (CRP) shock. This finding is consistent with Dornbusch’s overshooting model. In addition, I examine the importance of investors’ expectations in determining the short-term variations in the real exchange rate. The results indicate that the CRP and expectation shocks obviously outperformed the demand, supply and monetary shocks in terms of explaining the real exchange rate fluctuation.     

Dynamics and stability in IS-LM models: A re-examination

This paper shows that when inventory adjustments are introduced in production decisions, there is no longer such thing as a “stable” or “unstable” system of ISLM curves, even when the inventory policy is completely specified. For one such system and one inventory policy, the trajectories of output and interest rate can either be stable or unstable. The fact that the IS-LM diagram can no longer be regarded as a phase diagram leads to problems in the definition of the aggregate demand curve.     

The foundations of Chinese attitudes towards advocating luxury spending

Abstract

In China, some scholars have argued that luxury spending is socially beneficial to equalise wealth, under the assumption that the total endowment of resources is a fixed amount. This argument is not only consistent with Confucianism but also might point to another lesser known side of Confucianism that the luxury spending of the rich can be regarded as a wealth-transferring mechanism. Furthermore, luxury spending was encouraged for purposes of enjoyment; it did not involve the consideration of power and protection. This is in sharp contrast to the extravagance of the European nobility; their intention was to maintain a hierarchical structure.     

Attitudes to risk and attitudes to uncertainty: experimental evidence

In a series of experiments the interactions among individual attitudes towards risk and uncertainty, the sign of the outcome domain, and the way uncertainty is represented are tested. This is done in a unified framework, eliciting individual values by means of a second price auction. Results confirm the presence of the well-known fourfold pattern of risk attitude (risk aversion for gains and risk seeking for losses at high probability, and risk seeking for gains and risk aversion for losses at low probability) and show that this pattern can also be extended to uncertainty. In the valuation of losses the modal pattern is decreasing risk and uncertainty aversion as the probability of loss increases, while increasing risk and uncertainty aversion is observed for gains. Moreover, it is found that the size of reaction to uncertainty does not depend on the outcome domain, and that it persists in the face of an incentive-compatible mechanism to elicit preferences.     

Equilibrium migration with invested remittances: The EECA evidence

This paper analyzes international migration when migrants invest part of their income in their country of origin. We show that a non-total migratory equilibrium exists. Exogenous shocks, such as an increase in migrant income, lead to an increase in optimal invested remittances per migrant, and a higher wage in the country of origin. Yet the net effect on the equilibrium number of migrants is positive. Hence, in equilibrium, emigrants' optimal invested remittances and number of migrants are positively related. We use data from twenty five countries in Eastern Europe and Central Asia in 2000 to test for this implication of our model. OLS and bootstrap estimates reveal a positive elasticity of the number of migrants with respect to estimated invested remittances per migrant in the range of [0.3; 0.7].     

The influence of taxes on migration: evidence from Switzerland

Empirical studies on the impact of taxation on migration havebeen limited by a lack of comparable data in an internationalcontext and a lack of variation in tax burdens within countries.A notable exception to the latter is Switzerland. Prior empiricalstudies on tax competition in Switzerland have had to rely onaggregated data. In general, these studies have been supportiveof the notion of tax competition, i.e., high earners tend torelocate to low-tax regions. The authors use an alternativepanel approach based on micro-data from the first three wavesof the newly established Swiss Household Panel. Despite activecommunity tax policies aimed at attracting new residents anda significant increase in tax-burden dispersion among communitiesin the past decade, no tax-induced migration is observed. Migrationdecisions are found to be strongly influenced by accommodation-relatedfactors that point to important housing-market effects.     

Relative standing and temporary migration: Empirical evidence from the South Caucasus

This paper empirically investigates the relationship between households’ relative deprivation and the intentions of their members to temporarily migrate abroad in three transition economies of the South Caucasus: Armenia, Azerbaijan and Georgia. To capture respondents’ relative deprivation, we use self‐reported information on respondents’ perception of the relative standing of their household in comparison to those of their neighbors. Controlling for households’ absolute income and other relevant subjective dimensions, we illustrate that households’ relative position vis‐à‐vis their reference groups plays an important role in determining the intentions of their members to migrate abroad. In particular, individuals are more willing to engage in temporary emigration if they perceive themselves to be poorer than the reference group. Our results may have important policy implications. A conjectural suggestion of our empirical exercise is that if migration has to be curbed, reducing absolute poverty alone may not be sufficient. In addition, policy‐makers may need to decrease relative income differentials within the country.     

Work and the accommodation of chronic illness: A re-examination of the health-labour supply relationship

This study uses a data set of over 14000 households from the state of New Jersey in the USA to estimate the impact of specific chronic health conditions on the probability of employment and finds wide variation of employment impacts across chronic conditions. Additionally, the elasticity of the employment response is generally greater for women and lower-skilled workers. Most notable is the role of comorbidity. Individuals with multiple conditions have markedly lower probability of employment, and chronic illness explains virtually all of the large gap in employment probability for those who have multiple conditions. This is shown using a summary index of disease status that correlates closely with employment rates across age groups. In the aggregate, chronic disease striking in adulthood explains about 10% of the total non-employment in the New Jersey among those aged 35–74. Finally, cross-sectional evidence gives little support for health as a primary determinant of the aggregate age-employment profile, though controlling for the age-specific severity of conditions may alter this finding.     

A re-examination of the technological catching-up hypothesis across OECD industries

This study re-examines the catching-up hypothesis at the industry level across the main OECD countries, using panel data econometric models involving technological gap indicators calculated with a nonparametric distance function suggested by Färe et al. [Färe, R.S., Grosskopf, M.N., Norris, M., Xhang, Z., 1994. Productivity growth, technical progress, and efficiency change in industrialized countries. American Economic Review 84, 66–83]. The results show that there is statistical evidence of a catching-up process at the industry level. Moreover, both tradables and nontradables sectors exhibit catching-up effects and technology adoption from abroad. This result complements the findings by Bernard and Jones [Bernard, A.B., Jones, C.I., 1996a. Comparing apples to oranges: productivity convergence and measurement across industries and countries. American Economic Review 86(5), 1216–1238., Bernard, A.B., Jones, C.I., 1996b. Productivity across industries and countries: Time series theory and evidence. Review Of Economics and Statistics 78, 135–146], Gouyette and Perelman [Gouyette, C., Perelman, S., 1997. Productivity convergence in OECD services industries. Structural Change and Economic Dynamics 8, 279–295] and Hansson and Henrekson [Hansson, P., Henrekson, M., 1997. Catching up, social capability, government size and economic growth, in V. Bergström, eds, Government and Growth, Oxford: Clarendon Press, 61–126] that there is no (or even a slow) catching-up effect in the manufacturing sector. Moreover, social capability indicators evaluated for each country show that “Non-European” and “Central European” tradables sectors have a rather similar degree of inefficiency while “North European” countries are less efficient for both tradables and non-tradables. Lastly, both the cross country and the cross sectors dispersions of inefficiency levels are smaller for tradables sectors than for non-tradables.     

Guestworker migration,remittances and the extended family: evidence from Pakistan

"The paper places migration in the context of the extended family. It models informal loans between migrant and extended family for financing the costs of international labor migration. To show repayments to extended family is important; we trace the effects of such loans on migrant savings and remittance to the immediate family. We employ a standard life-cycle approach, which predicts that the demand for extended family financing rises with migration costs and falls with pre-migration wealth. Remittance to the immediate family and savings retained abroad both fall with the pre-migration loan." These hypotheses are tested using data from a survey of return migrants to Pakistan carried out in 1986.     

Distortions in the trade policy for development debate: A re-examination of Friedrich List

This paper re-examines the works of Friedrich List and arguesthat he had a vision of how to promote economic and social developmentfrom the initial state of an advanced agricultural society thathas been distorted in the trade policy for development debate.It shows that his vision is much broader than the orthodox labelof ‘protectionism’ conveys. He thus proposed manymethods of promoting development, cautioned and suggested measuresagainst the drawbacks of protection, and emphasised exports.It is hoped that this paper will contribute to the debate onthe wisdom behind the current push toward trade liberalisation.     

The effect of migration on black incomes: evidence from the 1940 census

"Evidence from the 1940 [U.S.] census reveals that southern-born blacks who left the region prior to 1935 had higher incomes than non-southern born blacks. The income gap between migrants and non-migrants declined with schooling."     

A re-examination of the demand for money in small developing economies

This paper re-examines the money-demand function in three small open economies of Asia: Korea, Pakistan and Singapore. In addition to using the relatively new procedure of error-correction modelling, the roles of variables such as (a) the expected change in the exchange rate, (b) foregin interest rates, and (c) foreign exchange risks on money demand are examined. In testing the importance of these variables in the money-demand function, special attention is paid to testing the assumptions of the classical linear regression model. The sample period for each country spans from 1973:1 through 1990:1. The empirical results suggest that the error-correction specification performs very well. In addition to the traditional variables, the results suggest that at least some measure of foreign monetary developments appear to have some significant effect on money-demand behaviour in these small developing economies.