The retirement wealth of the baby boom generation

The paper compares the well-being of the baby boom generation (ages 40-55) in 2001 with the same age group in 1983. I find little evidence that their relative position deteriorated over the period. By some indicators, this generation has seen an improvement. In terms of income, the 40-55 age group was at about the same relative position in 2001 as in 1983. In terms of conventional wealth, there was some slippage over the period. In terms of mean augmented wealth (net worth plus pension and Social Security wealth), their relative position improved somewhat but in terms of median augmented wealth there was again some slippage.     

A comment on: “The solution to the forward-bias puzzle”

Pippenger (2011) recently proposed a solution to the longstanding forward-bias puzzle. He argues that the puzzling estimates obtained using the standard equation for the efficient markets hypothesis are due to omitted variable bias. He identifies the missing variables as the future change in the forward exchange rate and the future interest differential. When these are added to the standard equation, he finds a one-to-one relationship between the future change in the spot rate and the forward premium. However, we argue that his equation can only test covered interest parity and offers no insight into the forward-bias puzzle.     

The interbank market after the financial turmoil: Squeezing liquidity in a “lemons market” or asking liquidity “on tap”

After August 2007 the plumbing system that supplied banks with wholesale funding, the interbank market, failed because toxic assets obstructed the pipes. Banks were forced to squeeze liquidity in a “lemons market” or to ask for liquidity “on tap” from central banks. This paper disentangles the two components of the 3-month Euribor–Eonia swap spread, credit and liquidity risk and then evaluates the decomposition. The main finding is that credit risk increased before the key events of the crisis, while liquidity risk was mainly responsible for the subsequent increases in the Euribor spread and then reacted to the systemic responses of the central banks, especially in October 2008. Moreover, the level of the spread between May 2009 and February 2010 was influenced mainly by credit risk, suggesting that European banks were still in a “lemons market” and relied on liquidity “on tap” even before sovereign debt crisis unfolded in Europe.     

From “Broad Studies” to Internet-based “Expert Knowledge Aggregation”. Notes on the methodology and technology of knowledge integration

The article takes as a starting point Herman Kahn's concept of a process-based approach to future-oriented knowledge aggregation and integration and discusses the opportunities created by Internet technologies to achieve the goal envisioned by such a model. The article briefly introduces a general framework for analyzing knowledge aggregation, the use of various aggregation mechanisms as well as aggregation systems that rely either on human facilitators (meta-experts) or on computer algorithms. Available online instruments for knowledge aggregation and expert challenge are presented and the possibility of using them for setting up “virtual think tanks” for foresight studies is explored.     

Comment on: “Estimating the expected marginal rate of substitution”

The methodology proposed in Flood and Rose [2005. Estimating the expected marginal rate of substitution: a systematic exploration of idiosyncratic risk. Journal of Monetary Economics 52 (5) 951-969] fails to distinguish between the single unique marginal rate of substitution (MRS) process and the class of valid pricing kernels, of which the MRS is but a particular member. Thus, at best, this methodology explores the properties of some arbitrary pricing kernel, which may differ radically from the true MRS. Furthermore, the estimates of the expected MRS proposed by Flood and Rose [2005. Estimating the expected marginal rate of substitution: a systematic exploration of idiosyncratic risk. Journal of Monetary Economics 52 (5) 951-969] are highly correlated with ex post shocks, implying that these estimates are not conditional expectations at all. The cure for this misspecification introduces additional econometric problems, suggesting that the model may, in practice, be poorly identified.