A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the ‘business cycle’

This paper introduces a general procedure for decomposition of non-stationary time series into a permanent and transitory component allowing both components to be stochastic. The permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero. The decomposition methodology, which depends only on past data and therefore is computable in ‘real time’, is applied to the problem of measuring and dating business ‘cycles’ in the portwar U.S. economy. We find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional NBER dating and, to a lesser extent, the ‘growth cycle’ chronology of Zarnowitz and Boschan (1977).     

Monetary and Fiscal Theories of the Price Level: The Irreconcilable Differences

The fiscal theory of the price level (FTPL) has attracted muchattention but disagreement remains concerning its defining characteristics.Some writers have emphasized implications regarding interest-ratepegging and determinacy of rational expectations solutions,whereas others have stressed its capacity to generate equilibriain which price-level trajectories mimic those of bonds and differdrastically from those of money supplies. We argue that theFTPL attained prominence precisely because it appeared to providea theory whose implications differ greatly from conventionalmonetary analysis; accordingly we review monetarist writingsto identify the primary distinctions. In addition, we reviewrecent findings concerning learnability—and thereforeplausibility—of competing rational expectations equilibria.These indicate that when FTPL and monetarist equilibria differ,the latter are more plausible in the vast majority of cases.Under Ricardian assumptions, necessary for clear distinctions,theoretical analysis indicates that fiscal and monetary coordinationis not necessary for macroeconomic stability. Footnotes ¹ E-mail addresses: bmccallum{at}cmu.edu; edward.nelson{at}stls.frb.org     

Rejoinder to Paul Krugman

We provide a brief rejoinder to Krugman [2008, Response to Nelson and Schwartz. Journal of Monetary Economics 55, this issue] on three issues that are central to his original New York Review of Books article and his reply to our setting the record straight: (i) criticisms of Friedman; (ii) criticisms of monetarism; and (iii) interpretations of history.     

Understanding spot and forward exchange rate regressions

Using the Kalman filter, we obtain maximum likelihood estimates of a permanent–transitory components model for log spot and forward dollar prices of the pound, the franc, and the yen. This simple parametric model is useful in understanding why the forward rate may be an unbiased predictor of the future spot rate even though an increase in the forward premium predicts a dollar appreciation. Our estimates of the expected excess return on short-term dollar-denominated assets are persistent and reasonable in magnitude. They also exhibit sign fluctuations and negative covariance with the estimated expected depreciation. © 1997 John Wiley & Sons, Ltd.     

Developing Persuasion Knowledge by Teaching Advertising Literacy in Primary School

As part of a larger project to integrate advertising literacy into school curriculum, this research evaluates the effectiveness of an initial three-hour advertising literacy classroom intervention among eight- and nine-year-olds. The field experiment (a pretest/posttest, control/experimental group design) was implemented in 10 third grade classes in a three-week time period in three high-poverty schools in the United States. Low advertising literacy occurred at baseline. Evaluation results indicated significant increases in intervention students' understanding of the message creator, the selling intent, persuasive strategy, and target audience. Recommendations for curriculum development, refinement, and implementation for a wider audience are discussed.     

Measuring E-Service Quality for Online Travel Agencies

Online travel agencies face intense competition, and thus have a great need to evaluate the e-service quality of their websites to succeed or even just to survive. The present study explores the underlying dimensions used by online customers to evaluate the e-service quality of online travel agencies, as well as the relationship of these dimensions to customer satisfaction and the repurchase intention, using both qualitative and quantitative data collection techniques. Six underlying dimensions of e-service quality are identified from the results of factor analysis; namely, Website Functionality, Information Quality and Content, Fulfillment and Responsiveness, Safety and Security, Appearance and Presentation, and Customer Relationship. Furthermore, four dimensions—Website Functionality, Information Quality and Content, Safety and Security, and Customer Relationship—are found to significantly influence online customers' evaluation of overall satisfaction and their repurchase intention. The results of multiple regression analysis show Website Functionality to be the most powerful factor in predicting customer satisfaction and the repurchase intention. Implications of the study findings are discussed, and important guidelines for the development of online travel agencies are provided.