Mode choice,transport structure and urban land use

A theoretical model of the urban land market is solved to examine the impact of bimodal passenger transportation on equilibrium residential land use. In this model travel to the central business district occurs on a dense system of radial roads or bus routes and a competing system or radial expressways or mass transit lines fed by a subsidiary system of densely spread access streets. Under rational behavior assumptions for households, it is shown that various basic urban forms can result depending on the relative generalized cost characteristics of the competing dense and sparse radial networks. The basic urban forms yield fundamental shapes, differing as to the relative geometry and position of the market areas for the two modes. The standard Alonso-Muth model of unimodal travel and circular urban form is found to result as a special case in several of these cases. American urbanized areas of various sizes and modal mix provide plausible examples for each of the basic forms. The paper concludes with a discussion of the model's implications as a framework for examining optimum urban transport structure and the proliferation of transport routes as a function of urban size.     

The Dynamics of Optimal Gradual Stabilizations

Inflation inertia may be quite tenacious because of the simultaneousinteraction between policy actions and inflationary expectationsunder imperfect credibility. This result is particularly relevantfor understanding some of the failed efforts to stabilize inflationin South America. This article deals with the issue of inertiain the framework of imperfect information about the type ofthe policymaker and extends the existing models to an infinitehorizon. Because policymakers do not have perfect control ofinflation, a "frivolous stabilizer" may deviate from the policiesof a "serious stabilizer" without necessarily being unmaskedimmediately. When the difference in the ability of "strong"and "weak" policymakers to control inflation is large, unexpectedinflation may be persistently negative for quite a while, thuscausing reduced economic activity and giving the indicationthat credibility is low. If the policymaker persists with thestabilization, this pattern gradually disappears as his reputationrises. But before this final stage the serious policymaker hasto compromise his inflation objective in view of adverse expectationsabout his type and pay the cost of imperfect credibility.     

Short Sales Are Almost Instantaneously Bad News: Evidence from the Australian Stock Exchange

This paper investigates the market reaction to short sales on an intraday basis in a market setting where short sales are transparent immediately following execution. We find a mean reassessment of stock value following short sales of up to −0.20 percent with adverse information impounded within fifteen minutes or twenty trades. Short sales executed near the end of the financial year and those related to arbitrage and hedging activities are associated with a smaller price reaction; trades near information events precipitate larger price reactions. The evidence is generally weaker for short sales executed using limit orders relative to market orders.     

The liquidity of automated exchanges: new evidence from German Bund futures

Previous literature has suggested that automated exchanges such as the Deutsche Terminborse (DTB) may be less liquid than their open-outcry counterparts such as the London International Financial Futures Exchange (LIFFE), although evidence provided on this issue has been mixed. This paper provides new evidence on the relative magnitudes of bid-ask spreads in the Bund contract traded on the DTB and LIFFE using intraday data from a period in which each exchanges share of total Bund trading was closer than previous research. The findings suggest that quoted bid-ask spreads are wider on the LIFFE than the DTB, even after controlling for their determinants. Furthermore, bid-ask spreads on the DTB increase more rapidly as price volatility increases relative to the LIFFE. Overall, this evidence implies that while automated exchanges are capable of providing more liquidity than floor traded exchanges, the relative performance of automated exchanges deteriorates during periods of higher volatility.     

Comment on: “Macroeconomic consequences of terror: theory and the case of Israel”

This paper is a pioneering attempt to take a systematic look at the effects of terror in Israel. It presents a theoretical analysis of the macroeconomic consequences of terror followed by empirical evidence for Israel. The theory part utilizes a steady state version of Blanchard (1985) finite lives model in which each individual faces a constant probability of death at every moment. The empirical part is, for the most part, based on level and first difference VAR's between GNP, non durable consumption, investment and exports (all in per capita terms) augmented by a proxy for the intensity of terror and a measure of the real rate of interest. The theory is used as a broad guiding device to qualitatively guide the empirical work rather than for providing a precise structure to be estimated.The main implications of the theory are that, by raising the probability of death, an increase in terror reduces investment, production and consumption. Essentially, by increasing the probability of death d, an increase in terror activity reduces the incentive to save and with it the steady state level of capital, production and consumption. In parallel the increase in d raises the interest rate and reduces total wealth. The paper augments Blanchard's model with a welfare maximizing government that responds to the increase in terror activity by raising government expenditures designed to partially offset its impact on the probability of death.The main results of the empirical part are that, in Israel, the terror variable exerts a negative and significant impact on the macroeconomic variables mentioned above. A counterfactual experiment implies that if terror continues at the level it had been at (between the last quarter of 2002 and the third quarter of 2003) up to the third quarter of 2005 then, in comparison to a no terror benchmark, annual GDP per capita is lower by roughly 2 percent per year, non durable consumption per capita is lower by 1 percent per year and the level of investment per capita is lower by 10 percent annually. The paper also contains an empirical analysis of the differential impact of terror on domestic versus foreign tourists.My discussion focusses on possible broader interpretations of the main empirical results of the paper in light of its theoretical model and of the Israeli political and economic scene since the inception of the Oslo peace process in the mid nineties.     

The Impact of Publication of Analysts' Recommendations on Returns and Trading Volume

Publication of security analysts' recommendations in the column “Inside Wall Street,” which is published in Business Week, induces abnormal returns on the publication day and the following day. The abnormal returns are robust to the use of alternative samples and methodologies. The publication increases trading volumes for the securities that are recommended to be purchased, but not for securities that are recommended to be sold. The abnormal returns and trading volumes support the view that stock prices do not adjust instantaneously when new information arrives, and that the time pattern of price adjustment depends on the time pattern of the accessibility of the information. The authors find no statistically significant difference between the average abnormal returns that are induced by recommendations that appear at the beginnings of “Inside Wall Street” columns (and are covered more extensively than others) and the average abnormal returns induced by other recommendations.     

Measuring the Independence of Central Banks and Its Effect on Policy Outcomes

Making the central bank an agency with the mandate and reputationfor maintaining price stability is a means by which a governmentcan choose the strength of its commitment to price stability.This article develops four measures of central bank independenceand explores their relation with inflation outcomes. An aggregatelegal index is developed for four decades in 72 countries. Threeindicators of actual independence are developed: the rate ofturnover of central bank governors, an index based on a questionnaireanswered by specialists in 23 countries, and an aggregationof the legal index and the rate of turnover. Legal independence is inversely related to inflation in industrial,but not in developing, countries. In developing countries theactual frequency of change of the chief executive officer ofthe bank is a better proxy for central bank independence. Aninflation-based index of overall central bank independence contributessignificantly to explaining cross-country variations in therate of inflation.     

Political Influence on the Central Bank: International Evidence

Political influence on the central bank is measured here bylooking at the probability that a central bank governor willbe replaced shortly after a political change of government.The governor changes about half the time within six months ofa nonconstitutional or other radical change of government—amilitary coup or a restoration of democracy. The governor ismuch less likely to change within six months following a routinechange in the head of government—about one-fourth of thetime in developing countries and one-tenth in industrial countries.These indicators vary across countries and correlate statisticallywith inflation and its variability and with real growth andreal interest rates. Differences in the vulnerability of thecentral bank to political instability, in political instabilityitself, and in central bank turnover in nonpolitical periodsseem to be a major part of the explanation for why developingcountries have, on average, higher and more variable inflationthan industrial countries do.