An equilibrium analysis of information aggregation and fluctuations in markets with discrete decisions

This paper shows how the interaction between decentralized information gathering and discreteness of investment decisions at the individual level can generate random fluctuations in aggregate investment that involve occasionally large allocation errors. This interaction is illustrated in a model in which private information is costly to acquire and prices reveal information. The unique rational expectations equilibrium outcome of the model is shown to always be noisy and characterized by investment levels which may be high simply because uninformed investors are buying under the impression that the high price is a signal of good investment opportunities.     

Evaluating the performance of the search and matching model

Does the search and matching model fit aggregate U.S. labor market data? While the model has become an important tool of macroeconomic analysis, recent literature pointed to some significant failures in accounting for the data. This paper aims to answer two questions: (i) Does the model fit the data, and, if so, on what dimensions? (ii) Does the data “fit” the model, i.e. what are the data which are relevant to be explained by the model?The analysis shows that the model fits certain specifications of the data on many dimensions, though not on all. This includes capturing the high persistence and high volatility of most of the key variables, the negative co-variation of unemployment and vacancies, and the behavior of the worker job finding rate. A key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate. The latter is a major component of the rate discounting the future value of the job-worker match.The paper offers a workable, empirically grounded version of the model for the analysis of aggregate U.S. labor market dynamics.     

Modeling Cyclical Asymmetries in European Imports

This paper applies smooth transition models to capture the nonlinear behavior in the imports data of six major European economies and to assess whether such nonlinearities are related to business cycle asymmetries. Two classes of switch between regimes are considered: endogenously determined transition that assumes nonlinearities are generated by idiosyncratic components specific to foreign trade, and exogenous transition based on GDP growth as a more direct indicator of the cyclical state of the economy. The results support the proposition that the dynamics of imports are nonlinear. In Belgium, France, Spain, and the United Kingdom, regimes change over the business cycle, while in Germany and Italy the switch between regimes is endogenous. National characteristics play a role in defining the position of extreme regimes, the smoothness of the transition, and local dynamics within each state.Previous versions of this article have been presented at the 57th International Atlantic Economic Conference (Lisbon, Portugal, March 10–14, 2004) and at the VII Encuentro de Economía Aplicada (Vigo, Spain, June 3–5, 2004). The authors thank the conference participants and an anonymous referee for their comments.     

Will the (German) NAIRU Please Stand Up?

Abstract. This paper deals with a critical assessment of the ‘non‐accelerating inflation rate of unemployment’ (NAIRU) for Germany. There are quite a few obstacles to perceiving the NAIRU as an easy‐to‐use analytical instrument: the possibility of a non‐vertical Phillips curve, the occurrence of shocks and hysteresis effects, and the (mis‐)measurement of important variables, cointegration issues and a time variability of the NAIRU. A new attempt is made to estimate a NAIRU for Germany using direct measures of inflationary expectations. However, by any method, the NAIRU is very hard to determine and subject to considerable arbitrariness.     

Inflation and Relative Price Variability in a Low Inflation Country: Empirical Evidence for Germany

Abstract. The recent literature on the welfare cost of inflation emphasizes inflation's effect on the variability of relative prices. Expected and unexpected inflation have both been proposed to increase relative price variability (RPV) and, thereby, to distort the information content of nominal prices. This paper presents new evidence on the impact of inflation on RPV in Germany. Our results indicate that the influence of expected inflation disappears if a credible monetary policy stabilizes inflationary expectations on a low level. Yet the significant impact of unexpected inflation suggests that even low inflation rates can lead to welfare losses by raising RPV above its efficient level.     

Delays and equilibria with large and small information in social learning

The general model of social learning with irreversible investment and endogenous timing is analyzed for any distribution of private informations. Strategic complementarities and multiple equilibria appear which are generated solely by information externalities. Different equilibria generate strikingly different amounts of information. The impacts of various assumptions (bounded beliefs, large number of agents, discrete time and short periods) are examined carefully. The properties are robust to the introduction of observation noise with a continuum of agents.     

Concave utility on finite sets

When does a preference relation on a finite set have a concave or a strictly concave utility function? We provide a complete answer. Our proof is an application of the Theorem of the Alternative, and constructs a concave utility if one exists.     

中国股市市盈率分布特征及国际比较研究

本文对市盈率的内涵、计算方法、区间确定等理论问题进行了剖解 ,针对中国股市流通股、非流通股并存等特征 ,对市盈率在中国股市的计算方法进行了分析 ;在此基础上对中国股市市盈率分布特征进行实证分析和国际比较研究 ,认为目前沪深股市泡沫成份已较少 ,市盈率在合理区间之内 ,中国股市具有投资价值     

Stationary solution to the overlapping generations model of fiat money: Experimental evidence

Overlapping generations model of fiat money yields an infinity of competitive equilibrium solutions, only one of which is stationary. Economies reported in this paper involved a sequence of overlapping generations of three or four individuals; each individual lived for two periods. In their young age individuals were endowed with chips that could be traded for fiat money wish the individuals of the old generation. In their old age, individuals could exchange their units o flat money for the consumption good. Results of the experiments exhibit some support for the stationary solution. The results are robust to two designs of exchange institutions (double oral auctior and supply schedule auction) and to two different endogenous ways of converting money into chips at the end of the game (average price prevailing during the last period the game is actually played and the average price forecast made during the last period the game is actually played).A preliminary version of this paper was presented at the meeting of the Economic Science Association and at the Federal Reserve Bank of Minneapolis. The authors are grateful for comments received from various participants at both presentations. Financial support was provided by the McKnight Foundation, the Honeywell Foundation, National Science Foundation (SES 89-12552), and Richard. M. and Margaret Cyert Family Funds.