Sticky-price models and the natural rate hypothesis

A major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state. In this paper we estimate a dynamic optimizing business cycle model whose price-setting behavior satisfies the natural rate hypothesis. The price-adjustment specifications we consider are the sticky-information specification of Mankiw and Reis (Sticky information versus sticky prices: a proposal to replace the new Keynesian Phillips curve. Quarterly Journal of Economics 117, 1295-1328) and the indexed contracts of Christiano et al. (Nominal rigidities and the dynamic effects of a shock to monetary policy. Journal of Political Economy 113, 1-45). Our empirical estimates of the real side of the economy are similar whichever price adjustment specification is chosen. Consequently, the alternative model specifications deliver similar estimates of the U.S. output gap series, but the empirical behavior of the gap series differs substantially from standard gap estimates.     

Share prices and pension funding: An empirical test of the joint effect of pension insurance and the pension tax shield

This article examines the joint significance of the tax benefits of pension funding and the value of government sponsored pension insurance in determining the efficacy of corporate pension funding. When the pension tax shield benefits are dominant, additional funding may enhance shareholder wealth. However, additional funding is observed to have negative effects on equity prices when the value of pension insurance is dominant relative to the value of the pension tax shield. When neither the tax or insurance effects are dominant, marginal adjustments in pension funding apparently will not alter corporate share prices.     

Segmentation analysis of domestic airline passenger markets

The authors focus on market and behavioral factors involved in the choice of type of airline. Specifically, the paper addresses the extent to which price, income, occupation, sex, education, and several behavioral attitudes affect this choice. The data were analyzed using linear discriminant analysis. The results support the view that both economic as well as behavioral factors work to segment the airline travel market into several sets.     

Long-term contracts,expectations and wage inertia

This paper develops a macro model of contractual wage setting that is used to test the importance that increased contract length has in generating wage inertia. Using an errors-in-variables format to isolate the effect of price and productivity shocks, it is shown that the sensitivity of union wages to unanticipated disturbances would increase by only a small amount in the absence of long-term, three-year, labor contracts. Our results suggest that formal contracts are not a major source of nominal wage rigidity and the price surprises play a relatively small role in generating business cycles.     

Unions and new technology in Australia

The Australian trade union movement has identified new technology as a major issue for the 1980s and beyond. This article examines ACTU policy on technological change in the light of the experience of two large Australian unions.     

Sources of professional staff turnover in public accounting firms revealed by the exit interview

Employee and employer stated reasons for leaving public accounting were studied together with the conditions surrounding departure and the best and least liked qualities of CPA firm work. Data collected after employee terminations on selected aspects of the work was shown to be a good predictor of whether employees left of their own volition or at the request of the firm and revealed several areas suitable for improving personnel relationship and reducing professional staff turnover.     

The Value of Household Services

A bstract . A family, in appraising the value of a housewife's services , does not necessarily consider the services of the housewife to be free even though there is no explicit money payment for her services. When the housewife devotes time to housekeeping , either she sacrifices leisure or the family sacrifices labor market income which the wife could earn. Empirical evidence supports the notion that families do not consider the supply price of housekeeping services to be zero. Traditional methods of assessing the aggregate value of household services load to underestimates. The actual market wage rate is a good measure of the value of the marginal housekeeping services of a housewife who also spends time in the labor market. But the potential market wage rate of a full-time housewife understates the value of her marginal product in the home.     

Acknowledgement

On the basis of estimates of four input translog production and cost functions using data for Irish manufacturing, different inferences are obtained about price elasticities and the elasticities of substitution between inputs, indicating sensitivity to the primal or dual representation of the technology. the results strongly reinforce the findings of Burgees (1975) and Appelbaum (1978) from U.S. data.     

Price level determinacy and the choice of policy targets under rational expectations

We show that in a conventional macro model with rational expectations, the government can use monetary policy to peg real interest rates, and still attain a determinate price level provided it also pegs some nominal policy variable, e.g., nominal expenditures.