Two-period cycles in a three-period overlapping generations model

We study the properties of two-period monetary cycles in simple pure exchange overlapping generations economies in which the households live for three periods. We demonstrate that these economies can support cycles under a much broader—and, arguably, more plausible—range of assumptions than the analogous two-period economies. We show that economies that fail the well-known Grandmont (Econometrica 53 (1985) 995) condition can have cycles, and that economies that satisfy the condition can fail to have cycles. In addition, we show that economies can have monetary cycles when they do not have conventional monetary steady states, and when aggregate demand for assets is not decreasing in the real return rate at a gross real rate of unity.     

Growth and Stability in the Indian Economy in Post Reform Era: A Macro Econometric Evaluation

Journal of Quantitative Economics - The reforms initiated in the Indian economy during the nineties have given rise to a lot of debate on the feasibility as well as the stability of high growth...     

CAUSALITY TESTS OF SHORT SALES ON THE NEW YORK STOCK EXCHANGE

Published statistics on short sales of stock are used by investors as a technical indicator of market timing. Research on this topic is mixed. Findings in this article rely on causality tests that use white noise residuals generated from time-series analysis of short sales. Results indicate that specialists' short sales lead short sales of other investors, but these other investors are unable to take advantage of the information because a time lag exists in the published data.     

THE HIDDEN COST OF BARGAINING: EVIDENCE FROM A CHEATING-PRONE MARKETPLACE

It is widely believed that successful bargaining helps consumers increase their surplus. We present evidence from a field experiment showing that bargaining over price reduces buyer surplus in a marketplace where sellers cheat on the weight whose value may more than offset the price discount. Our results show that bargaining entails hidden costs since sellers cheat significantly more when buyers bargain than not and they cheat significantly more when bargaining succeeds than fails. Overall bargaining reduces buyer surplus than not bargaining. Our result is relevant for credence goods markets where bargaining over prices may induce sellers to “undertreat” more.     

Informal sector, income inequality and economic development

This paper addresses - with the help of numerical simulations - some of the issues relating to income distribution in the context of development of an economy with an informal sector and migration of both low- and high-skilled workers from the rural to the urban area. A major aim has been to see under what conditions we do or do not get an inverted U-shaped curve of income distribution. The paper finds that the tendency always is for the Gini coefficient to rise and then decline. However, once it starts declining, it need not continuously decline; it may rise, then decline, then rise again and indeed rise above the previous peak before starting to decline again and may well end at the end of the simulation at a higher value than at the start. Any case for the redistribution of income is seen to be much stronger at the later stages of development that at earlier stages, even though at later stages, Gini coefficient may be lower than at earlier stages. The policy implications of the findings are considered.     

Bond yields compared to amortizing yields

A large amount of theoretical research has been conducted concerning the impact of debt instrument features such as callability, tax treatment, and default risk upon valuation and yield. Almost all this research has been performed on bond-like instruments; this is unfortunate since a large proportion of debt instruments is amortizing. This research develops a model for the spread between bonds and amortizing instruments with otherwise identical features. The shape of the term structure is crucial. Furthermore, the behavior of the spread is systematically related to the level of interest rates, tax rates, degree of default risk, and maturity where the maturity relation changes sign at intermediate maturities.