Estimating Key Economic Variables: The Policy Implications

The current monetary policy debate has focused on current estimates and the future path of the natural rate of unemployment and the equilibrium interest rate. Estimates of the natural rate of unemployment should vary over time with changes in demographics and improvements in human capital. However, these changes should be gradual. This paper shows that the estimates of the natural rate of unemployment by Federal Reserve officials and private-sector economists seem to move pro-cyclically, potentially showing too much weight given to short-term fluctuations in economic variables. As with the natural rate, there are good reasons to expect the equilibrium interest rate to change over time. In fact, the level may actually be more responsive to current economic data, reflecting changes in aggregate savings and investment. Yet, we see that equilibrium interest rate estimates by both Federal Reserve officials and private-sector economists have declined quite dramatically over the past five years. A potential concern raised in this paper is that estimates of these critical economic variables for policy determination appear to be overly sensitive to high frequency economic data.     

On monopolistic competition and optimal product diversity: workers' rents also matter

Abstract .  In the Dixit-Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that workers' rents also contribute to explain excess entry through a general equilibrium mechanism. Larger wages indeed raises the aggregate earnings and firms sales and profits, which entices too many firms to enter. We discuss the possibility of over-provision of varieties by comparing the equilibrium to unconstrained and constrained social optima and to other regulatory frameworks where wages are not controlled.     

Bank liquidity creation: A new global dataset for developing and emerging countries

Review of World Economics - The pre-Global Financial Crisis build-up, followed by the post-crisis collapse, in bank liquidity creation in developed countries is well-documented (Berger and Bowman,...     

Wage Differentials among Ownership Groups and Worker Quality in Vietnamese Manufacturing

Wholly foreign multinational enterprises (WFs), joint-venture multinationals (JVs), state-owned enterprises (SOEs) pay higher wages than domestic private firms in Vietnamese manufacturing. In large samples of medium–large (20+ employees) firms, conditional differentials accounting for worker education and occupation, as well as capital intensity, size, and shares of female workers, were substantially smaller, but positive and significant. Wage levels and differentials varied substantially among industries. Conditional differentials remained positive and significant for WFs and JVs in most of the 11 industries examined, but estimates of SOE-private differentials were insignificant in most industries. Robustness checks using 2007 data yielded similar results.     

Learning, hubris and corporate serial acquisitions

Recent empirical research has shown that, from deal to deal, serial acquirers' cumulative abnormal returns (CAR) are declining. This has been most often attributed to CEOs hubris. We question this interpretation. Our theoretical analysis shows that (i) a declining CAR from deal to deal is not sufficient to reveal the presence of hubris, (ii) if CEOs are learning, economically motivated and rational, a declining CAR from deal to deal should be observed, (iii) predictions can be derived about the impact of learning and hubris on the time between successive deals and, finally, (iv) predictions about the CAR and about the time between successive deal trends lead to testable empirical hypotheses.     

Cow-calf profitability and leptin genotyping

Profitability of cow-calf production is determined largely by market prices, calf weaning weights, and cow productive life. While producers individually have no effect on prices, weaning weights and productive life have genetic influences and hence can be altered by selection programs implemented by producers. We investigate the impact of a mutation in the leptin gene (exon 2; single nucleotide polymorphism [SNP] 305) on cow-calf profitability. Prior research shows that this mutation has effects on performance and traits of fed cattle and milk production in dairy cows. Using data from a teaching-research herd, we find that it is also associated with calf weaning weights and cow productive life. A bio-economic stochastic simulation demonstrates that the mutation has statistically positive impacts on profits, suggesting that producers can profitably make use of this information.