The Impact of Environmental Contamination on Condo Prices: A Hybrid Repeat-Sale/Hedonic Approach

We extend the literature on the impact of externalities using an approach based on a hybrid of hedonic and repeat-sales methods. The externality in question is groundwater contamination in Scottsdale, Arizona. The use of condominium sales allows us to assume that major physical characteristics remain unchanged, but location parameters may be altered by urban growth and development as well as contamination. We find an economically significant discount for properties located in the contaminated area. Interestingly, it does not appear until several years after the contamination becomes publicly known, and it seems to have disappeared before the end of the study period.     

Testing the effectiveness of regulatory interest rate risk measurement

A depository institution's interest rate risk (IRR) exposure is the sensitivity of its earnings or market value of equity to changes in interest rates. Since the mid-1980's, bank regulators have developed broadly applied, centralized IRR models which are used to help assess individual institutions' capital adequacy. This paper tests the effectiveness of the earliest of these regulatory IRR models: the incomegap estimates calculated by the Federal Home Loan Bank Board (FHLBB) during the latter 1980's. Despite the many problems caused by the broad application of generic assumptions and the presence of embedded options, we find that the FHLBB gap estimates provided a significant measure of IRR exposure. We believe that these results bode well for the success of ongoing, more sophisticated regulatory modeling efforts.     

A MODEL OF NEW ZEALAND APPLE SUPPLY RESPONSE TO TECHNOLOGICAL CHANGE*

A supply response model for New Zealand apples is specified and equations for new plantings, removals, yields and adoption of an innovation are estimated. The model expands on perennial crop models previously estimated by incorporating the time pattern of adoption of a planting innovation and formulation of a measure of yield expectations given technological change.     

Money and economic activity,inventories and business cycles

Incomplete information is a necessary condition for any real effects produced by monetary impulses. An alternative to the local-global inference problem is explored in this paper. Agents are confronted with permanent and transitory shocks. Even with full knowledge about the stochastic structure their best perception at any particular time will usually be erroneous. Prices for each period are set at the beginning of the period on the basis of market conditions. The realization of the shock process thus creates a short-run ‘disequilibrium’ absorbed by inventory adjustments. This adjustment translates perceived transitory monetary shocks into serially correlated output movements. The analysis proceeds within the context of rational expectations It offers a generalization of equilibrium analysis in two respects. Prices are always in equilibrium relative to perceived conditions, but they do not reflect all ongoing shocks. Quantity adjustments reflect the perceived transitory shocks. The framework used involves moreover a stock-flow interaction operated by inventory adjustments. The stock-flow interaction imposes at any time a future expected adjustment path (for price-level and quantities) to the system's unique stock equilibrium. A major implication of the analysis resolves a puzzle experienced in a recent paper by Robert Hall. It reconciles intertemporal substitution with lagged effects of monetary impulses. It also reconciles small and inconclusive cyclic movements in real wages with the occurrence of production function and large variations in unemployment. Lastly, the nature of the inference problem determined by the pattern of incomplete information produces serially correlated movements conditioned on large permanent shocks.     

CAPITAL BUDGETING,INTERTEMPORAL PROGRAMMING MODELS,WITH PARTICULAR REFERENCE TO AGRICULTURE

Investment decision processes typically involve the selection of projects, the timing of their initiation and the determination of the amount to be invested in each time period. A linear programming model considered appropriate for solving such models is described, in which the multi-dimensional criterion function is expressed as a linear combination of the appropriately-weighted objectives. An empirical application is then discussed, the objectives of the firm being the maximization of tax-free cash and assets on hand at the end of the planning period. Finally, the appropriate length of the planning horizon, and some approaches to capital budgeting under non-certainty, are discussed.