Hysteresis vs. natural rate of US unemployment

This paper investigates the stochastic nature of the unemployment rate allowing for cross-section dependence from a panel of US state-level data. We first employ the PANIC method to identify the common and idiosyncratic components. Powerful recursive mean adjustment (RMA) methods are used to test for unit roots. We find significant evidence of a nonstationary common component when the data from the most recent recession are included. Even when stationarity is empirically supported, the bias-corrected half-life of the common component appears very long, casting doubt on the usefulness of the natural rate hypothesis.     

On the forecasting of the challenging world future scenarios

Logistic and power law methodologies for both retrospective and prospective analyses of extended time series describing evolutionary growth processes, in environments with finite resources, are confronted. While power laws may eventually apply only to the early stages of said growth process, the Allee logistic model seems applicable over the entire span of a long range process. On applying the Allee logistic model to both the world population and the world gross domestic product time series, from 1 to 2008 AD, a projection was obtained that along the next few decades the world should experience a new economic boom phase with the world GDP peaking around the year 2020 and proceeding from then on towards a saturation value of about 142 trillion international dollars, while the world population should reach 8.9 billion people by 2050. These results were then used to forecast the behavior of the supply and consumption of energy and food, two of the main commodities that drive the world system. Our findings suggest that unless the currently prevailing focus on economic growth is changed into that of sustainable prosperity, human society may run into a period of serious economical and social struggles with unpredictable political consequences.     

ADAPTIVE EXPECTATIONS AND STOCK MARKET CRASHES*

A theory is developed that explains how stocks can crash without fundamental news and why crashes are more common than frenzies. A crash occurs via the interaction of rational and naive investors. Naive traders believe that prices follow a random walk with serially correlated volatility. Their expectations of future volatility are formed adaptively. When the market crashes, naive traders sell stock in response to the apparent increase in volatility. Since rational traders are risk averse as well, a lower price is needed to clear the market: The crash is a self‐fulfilling prophecy. Frenzies cannot occur in this model.     

Moving toward zero: the leader's mandate

Converting to a culture that strives for perfection and accepts no less than zero defects is the work of leadership in health care today. Some cultures are made up of people who believe that average is good enough. The challenge of the leader is to break up those beliefs and embed new models of "Yes We Can." The leader must communicate four very effective messages that must go along with the passion for the work: (a) evidence and "best practice" data trump local, opinion-based beliefs; (b) morphing from an internal view of best practice to a national/international view of practices within and outside health care; (c) transparency; and (d) KISS: "Keep It Simple, Stupid.'     

Increasing the usability and accessibility of geodynamic modelling tools to the geoscience community: UnderworldGUI

Geoscientists are faced with a number of complexities that represent obstacles to the development of realistic simulation of deep earth processes. Realistic 4D thermo-mechanical simulation using software packages like Underworld and Gale, when combined appropriately with geoscientific expertise, can lead to novel insights into the deformation of geological structures at a wide range of time and spatial scales. The challenge for end-user geoscientists lies in applying their knowledge within the framework of the software’s input specification, including initial, internal, and boundary conditions and output visualization parameters. We have built a Graphical User Interface (GUI) to remove many of the difficulties related to editing the Extensible Markup Language (XML) encoded input files of Underworld/Gale geomodels and therefore, to greatly broaden the user base of these software packages. By helping Underworld/Gale to meet a large audience, we provide a tool to the geoscience community that helps to move from untested conceptual models to physically valid, properly scaled modelling. Furthermore, the UnderworldGUI offers a mechanism for storing and retrieving experimental models in a centralised database, thus providing the geoscience community with a means to share the outcomes of its experimental research. Further details of the UnderworldGUI are available at the web site http://www.wiki.vislab.usyd.edu.au/moinwiki/UnderworldGUI.     

CAN SOFT DRINK TAXES REDUCE POPULATION WEIGHT?

Soft drink consumption has been hypothesized as one of the major factors in the growing rates of obesity in the United States. Nearly two-thirds of all states currently tax soft drinks using excise taxes, sales taxes, or special exceptions to food exemptions from sales taxes to reduce consumption of this product, raise revenue, and improve public health. In this paper, we evaluate the impact of changes in state soft drink taxes on body mass index (BMI), obesity, and overweight. Our results suggest that soft drink taxes influence BMI, but that the impact is small in magnitude. ( JEL I18, H75)     

ARDL Approach to Test the Productivity Bias Hypothesis

The productivity bias hypothesis states that a relatively more productive country should experience a real appreciation of its currency. Most studies in the literature that have tested the hypothesis have employed cross‐sectional data. Only a few studies have used time‐series data and they have tested the hypothesis for only a small number of countries. In this paper the authors test the hypothesis by using time‐series data over the 1960–90 period for a sample of 44 countries and with a relatively new method of cointegration known as the ARDL approach. For most countries there is strong evidence supporting the hypothesis.     

Differentiating ambiguity: an expository note

Ghirardato et al. J Econ Theory 118:133–173, 2004 propose a method for distinguishing between perceived ambiguity and the decision-maker’s reaction to it. They study a general class of preferences which they refer to as invariant biseparable. This class includes CEU and MEU. This note presents some examples which illustrate their results. Research supported by ESRC grant no. RES-000-22-0650. For comments and discussion we would like to thank Klaus Nehring and a seminar audience at ESEM, Vienna 2006.     

Stylised features of consumer price setting behaviour in Portugal: 1992–2001

This paper identifies the empirical stylized features of consumer price setting behavior in Portugal using two micro-datasets underlying the consumer price index. The main conclusions are: one in every four prices change each month; there is a considerable degree of heterogeneity in price setting practices; prices of goods change more often than prices of services; price reductions are common, as they account to around 40% of total price changes; price changes are, in general, sizeable; finally, the price setting patterns seem to depend on the level of inflation as well as on the type of outlet.

Informative advertising by heterogeneous firms

This paper introduces a model to analyze the role of the cost of information dissemination in large markets where firms have varying degrees of intrinsic efficiency reflected in their marginal costs. Firms enter a market and discover how efficient they are. Those firms with high enough efficiency stay, others exit. Remaining firms then compete to attract consumers by disseminating information about their existence and their prices using a common advertising technology. The properties of the model’s equilibrium are analyzed. The model is then used to study the effect of the cost of information dissemination on the competitiveness of the market and key industry aggregates, such as price distribution and the distribution of firm value.