E-Government as an anti-corruption strategy

This paper estimates the impact of e-government on the “control of corruption” indicator using a panel of 149 countries with two time observations (). The first differenced estimator yields a positive and economically interesting effect. By the most conservative estimate, moving from the 10th percentile to the 90th percentile in the e-government distribution implies a reduction in corruption equivalent to moving from the 10th percentile to the 23rd percentile in the control of corruption distribution. Invoking external instruments, IV results are (statistically) similar.     

A unified beta pricing theory

This paper derives Ross's mutual fund separation theory and a new, equilibrium version of Ross's arbitrage pricing theory as special cases of a general theory. The paper also reveals that the two theories are identical in their predictions of asset prices and portfolio returns. The capital asset pricing model (a restricted case of the mutual fund separation theory) receives special treatment.     

A comparative engineering-economic analysis of the evolution of the Soviet mainline freight locomotive

While there has been a much larger increase in the work output of the Soviet mainline locomotive fleet than in that of the United States (from the late 1920s to the mid-1970s), the United States-Soviet difference in the mainline freight-locomotive unit's ability to do work has increased rather than decreased. This paper summarizes the findings of the author's (Boncher, 1976) investigation that documents and examines the causes of this development. An attempt is made to identify the essential differences in the controlling United States and Soviet technological decision-making processes.     

Nash equilibrium search for the best alternative

In a recent paper, Weitzman (Econometrica47 (1979) 641–654) described a policy of “optimal search for the best alternative.” The present paper is concerned with the development and characterization of a policy of “Nash equilibrium search for the best alternative.” Specifically, it is shown that, under certain monotonicity assumptions, and under the assumption that firms have incomplete information regarding the results of rivals' search behavior, a Nash equilibrium search policy exists and has the same form as Weitzman's optimal search policy.     

A simultaneous equations model of the educational process

This paper models the educational process as a system of six simultaneous equations. The endogenous variables include a student's achievement, motivation, expectations, efficacy, and perceived parents' and teachers' expectations. The model also includes forty-eight individual, home, peer, teacher, and school exogenous variables. Using a sample of over sixteen thousand twelfth grade students from the Equality of Educational Opportunity survey, we estimate the model by two-stage least squares and present the reduced form and structural form equations. We find that many educational outputs jointly determine one another. Also, the results suggest that school and teacher variables have important effects on educational outcomes.     

IS-LM stability and economic policy effectiveness: A note

Accepting the findings of Weber (1970) and Yarrow (1975), Cebula finds that conventional fiscal policy has its usual positive effect on the level of income while monetary policy has a negative impact. This paper shows that if a budget constraint of the specific, simplified form G ? T = ΔM is added to the model, the results differ from Cebula's.     

Forecasting money demand with Jorgenson's Lag and Tobin's q

The poor forecasting record of time-series money-demand equations is generally attributable to shifts in public behavior, to the omission of important arguments, and to the inadequate specification of the functional form of the relationship. This paper explores the latter two problems by deriving the demand function from Tobin's model of asset markets, by incorporating Tobin's “q” as an argument, and by basing the adjustment process on Jorgenson's rational distributed-lag model. These modifications produce reasonably stable equations that forecast well throughout the 1970s.     

Nowcasting Chinese GDP: information content of economic and financial data

This article applies the factor model proposed by Giannone, Reichlin, and Small (2005 Giannone, D., Reichlin, L. and Small, D. 2005. “Nowcasting GDP and inflation: The real time information content of macroeconomic data release”. In Finance and Economic Discussion Series 2005–42, Washington, DC: Board of Governors of the Federal Reserve System.  [Google Scholar]) on a large data set to nowcast (i.e. current-quarter forecast) the annual growth rate of China's quarterly GDP. The data set contains 189 indicator series of several categories, such as prices, industrial production, fixed asset investment, external sector, money market, and financial market. This article also applies Bai and Ng's criteria (2002) to determine the number of common factors in the factor model. The identified model generates out-of-sample nowcasts for China's GDP with smaller mean-squared forecast errors than those of the random walk benchmark. Moreover, using the factor model, we find that interest rate data is the single most important block of information to improve estimates of current-quarter GDP in China. Other important blocks are consumer and retail prices data and fixed asset investment indicators.     

Testing the shift adjustment in the federal reserve's new shift adjusted M1-B

The Federal Reserve's estimates of the shift into M1-B from savings and other non-demand deposit sources following the legalization of NOW accounts nationwide in January, 1981 are tested formally. The results indicate that the Fed's estimates cannot be rejected on formal statistical grounds. However, there is some evidence that the Fed may have overestimated the shift.     

Incentives,regulations, and sustainable land use in Costa Rica

Deforestation in Costa Rica has proceeded at a rapid pace. Of the remaining 2,700 km² of virgin forests on privately-owned land, over 300 km² are being deforested each year. Pressure on National Parks, which cover about 27 percent of Costa Rica is likely to increase in the future. Preliminary information indicates that, contrary to our expectations, most of the deforestation at present is not being done by squatters, but driven by profit and asset maximization motives of the timber industry, banana companies, and large cattle ranchers. Setting aside 27 percent of the country's land as parks and reserves was a major policy decision. Aside from the removal of some perverse incentives operating inside park areas, the main issue there is one of sound management, including protection from intruders, strengthening enforcement, and controlled tourism. On the remaining primary and secondary forest areas on privately-owned land outside the parks, a key question is whether public interests connected with external costs of deforestation warrant public intervention. The paper suggests that a differentiated approach to this and other questions is needed, depending on the costs and benefits involved, and it discusses incentives and regulations which influence land use, and makes proposals for reforms.     

Empirical size and power of some diagnostic tests applied to a distributed lag model

We produce Monte Carlo evidence on the size and power of the RESET, a heteroscedasticity test, and a test for autocorrelation applied to realistic distributed-lag models. We find that the autocorrelation test has the correct size and high power to detect not only autocorrelation (given a correct model), but also the erroneous omission of several lags of an explanatory variable, whereas the RESET and heteroscedasticity tests are oversized in the presence of positive disturbance autocorrelation, especially when the regressors are also positively autocorrelated, and have no power to detect such misspecification errors. In large samples, size distortion may be avoided by using autocorrelation-robust methods.

Dynamic stability in a model of dual exchange rates

The dynamic stability of a small open economy operating under a regime of dual exchange rates is shown to depend on residents' net foreign asset position. This result is in contrast to the economy's dynamic behavior under unified fixed-rate and flexible-rate regimes where stability is unrelated to net foreign asset position.     

Development and distribution: A critique of the cross-country U-hypothesis

This paper questions the validity of a modern paradigm, viz., the U-Hypothesis. It argues that notwithstanding contrary claims, the recent cross-country econometric studies by Ahluwalia and others have little in common from a methodological point of view with Kuznets' earlier intertemporal national studies. Ahluwalia's cross-country U-Curve is found to be based on defective statistics and questionable methodological premises. In specific, the estimation of one U-Curve from observations on both LDCs and DCs is criticised. A sample restricted to the LDC group considerably weakens support for the U-Hypothesis. Further, even marginal variations in the data set lead to the virtual disappearance of Ahluwalia's empirical relationship. The paper concludes that the cross-country U-Hypothesis is more of a hindrance than an aid to our comprehension of the relationship between economic growth and income distribution.     

The Andersen-Jordan equation revisited

This paper deals with two common econometric criticisms of the Andersen and Jordan (1968)equation—the endogeneity of the right-hand-side variables and the ad hoc implementation of Almon's polynomial distributed lag estimation technique. Using the original Andersen-Jordan data, we found no support for either criticism. While we note that the PDL specification of their equation is highly unusual, we found that their policy conclusions do not depend their particular choice of lag length or polynomial degree or their imposition of the endpoint constraints. Furthermore, the right-hand-side variables were found to satisfy necessary conditions for statistical exogeneity.     

Taxation and the stock market valuation of capital gains and dividends: Theory and emphirical results

Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect.In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholderspay a heavier tax on dividends.We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment.     

A system approach for measuring the euro area NAIRU

This paper addresses the issue of measuring the NAIRU for the euro area and assessing the robustness and precision of the obtained estimates. The empirical framework adopted is based on systems combining an Okun-type relationship between cyclical unemployment and the output gap with a Phillips curve and stochastic laws of motion for the NAIRU and potential output. Such systems have been estimated using Kalman-filter techniques. The results obtained point to an estimate of the area-wide NAIRU that is robust to changes in the underlying models. This robustness is shown to hold both in terms of the mean – i.e., the shape of the resulting NAIRU – and the variance of the process. The latter is derived through bootstrap exercises using the models alone or pooled together. The evidence found suggests that the increase in the aggregate NAIRU that took place in the early part of the sample period has come to a halt and may be about to be reversed.Jel classification: C11, C15, E31, E32The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the Institutions they belong to. The authors are grateful to Per Jansson for providing parts of the econometric RATS code and to Gonzalo Camba-Mendez and Frank Smets of the ECB for useful comments. Comments and recommendations by two anonimous referees are also gratefully acnowledged. All the remaining errors are the authors responsibility. All correspondence to Ricardo Mestre.First version received: January 2002/Final version received December 2002     

Are Soviet industrial-production statistics significantly distorted by hidden inflation?

In recent years speculation has increased regarding the existence and magnitude of hidden inflation in the Soviet economy. This speculation has unintentionally, but necessarily, called into question a great deal of econometric research predicated on the assumption that Soviet statistics are workably reliable. This paper attempts to evaluate these issues by examining the CIA's unofficial estimates of hidden inflation in the industrial sector calculated by James Steiner. A careful reconstruction of Steiner's arithmetic procedures reveals that the high levels of hidden inflation he estimates are invalid.     

A comparison of variance ratio tests of random walk: A case of Asian emerging stock markets

This study re-examines the random walk hypothesis for eight emerging equity markets in Asia: Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand. The hypothesis is tested with two new variance ratio tests–Wright's rank and sign and Whang–Kim subsampling tests–as well as the conventional Lo–MacKinlay and Chow–Denning tests. We found that (i) the stock prices of the eight Asian countries do not follow random walk with the possible exceptions of Taiwan and Korea and (ii) the accelerated opening of the eight stock markets to foreign investors following the Asian financial crisis in 1997 has not significantly altered the mean-reversion patterns of stock price vis-à-vis relative market efficiency. Our study affirms that Wright's and Whang–Kim's tests yield far less ambiguous results as compared to Lo–MacKinlay and Chow–Denning tests.     

IS-LM stability and economic policy effectiveness: Further observations

Professor Wang (1980) has usefully extended my original model by introducing an explicit government budget constraint. However, the form of that budget constraint is very restrictive and limited. In this note, an alternative budget constraint to Wang's is developed. This permits the model and policy analysis to be significantly extended and generalized.