Do forecast errors or term premia really make the difference between long and short rates?

Forward rates in the term structure of interest contain predictions of future spot rates plus (possibly) term premia. Realized spot rates contain predicted spot rates plus forecast errors. Under rational expectations forecast errors are not predictable. By forecasting spot rates using publicly available information, bounds on the variation of forecast errors, and term premia are obtained. For one-month treasury bill rates, one to two thirds of the variation in the difference between forward rates and realized spot rates is due to variation in term premia.     

Money-income causality: Results for six countries

In this paper we attempt to ascertain multivariate money-income causality. Previous studies using a bivariate framework likely suffer from bias as a result of omitted variables. A framework is developed where both U.S. money and domestic money in an open, nonreserve currency country may influence that country's income. Reverse causation from income to domestic money is also possible. We use data from six countries to test the model. Our results suggest that both U.S. and domestic money stocks are important determinants of income. Thus, bias exists in previous studies. However, our results vary by country and are sensitive to the measure of money included which suggests that important variables may still be omitted.     

Determinants of systematic volatility of corporate bonds

This paper examines the association between betas of corporate bonds and their duration, coupon, maturity, agency rating, and other attributes. The data consist of monthly returns of 386 bonds, from January 1973 to June 1976. Betas are generated with the S&P 500 Index, a corporate bond index, and a U.S. bond index. The chief conclusions are the following: 1) Systematic volatility and its determinants differ according to the index; 2) betas formed with an equity or corporate bond index are negatively related to rating; and 3) duration is superior to coupon and term in explaining beta.     

Resource exploitation theory and the behavior of the oil cartel

This paper examines the implications of the partial equilibrium theory of optimal exploitation of a non-renewable resource for the behavior of the OPEC cartel. A relatively general extraction cost structure is assumed, and several new theoretical results are derived. The influence of oil-exporting countries' ultimate objectives on cartel behavior is examined under alternative assumptions about trading and investment opportunities. Some implications for the policies of oil importing nations are discussed.     

Sectoral elasticities of substitution between labour and capital in venezuelan manufacturing: A cross-sectional micro analysis

This paper presents estimates of the elasticities of substitution between capital and labour for 19 Venezuelan manufacturing industries. The elasticities are estimated using micro data collected from the 1970 Venezuelan Census of Manufacturing. Estimates of these elasticities are generally not significantly different from unity. This suggests that the traditional view of limited substitution possibilities in manufacturing sectors of less developed countries does not apply in the Venezuelan case. Moreover, the Cobb-Douglas functional specification may be appropriate for estimating industrial production functions. In addition, the ‘market’ position in the current ‘structuralist versus market’ controversy concerning the labour absorption problem plaguing LDCs is supported.     

The supply of consumption goods in centrally planned economies

Estimates are given, based on annual time series from the mid-1950s to 1975, of planner's supply functions for consumption goods in Czechoslovakia, the GDR, Hungary, and Poland. The supply function is specified in the form of a behavioral rule describing the planners' short-run adjustment of consumption away from its long-run trend. The fits are good, and the estimates support the a priori specification and the maintained hypothesis of stable resource-allocation behavior. These supply functions, together with household demand functions estimated in a separate paper, will provide a starting point for disequilibrium estimation of the consumption-goods market for these economies.