Technology Shocks and the Labor-Input Response: Evidence from Firm-Level Data

We study the relationship between technology shocks and labor input on Swedish firm-level data using a production function approach to identify technology shocks. Taking standard steps yields a contractionary contemporaneous labor-input response in line with previous studies. This finding may, however, be driven by measurement errors in the labor-input variable. Relying on a unique feature of our data set, which contains two independently measured firm-specific labor input measures, we can evaluate the potential bias. We do not find that this bias conceals any true positive contemporaneous effect. The results thus point away from standard flexible-price models and toward models emphasizing firm-level rigidities.     

The effect of GNP announcements on fluctuations of GNP growth

This paper is an empirical study of the degree in which perceptions affect the evolution of the economy. We study the effects of the announcements that the government makes on GNP growth. These announcements are subject to a substantial degree of noise and its accuracy improves with time. A revised number is published several years after the first announcement was made public. We consider that the final revision is the “true” value of GNP growth. We show that once announcements are taken into account, the true value of GNP growth at time t has no predictive power in determining growth at any future time. All the predictive power lies in the announcements, and not in the true level of growth. Actually, we show that the variable that determines future growth is the unexpected part of the announcements. We also show that announcements affect growth via aggregate investment.     

Aggregate price shocks and financial stability: the United Kingdom 1796-1999

This paper investigates aggregate price shocks on financial stability in the United Kingdom. We construct an annual index of UK financial conditions for 1790-1999 and use a dynamic probit model to estimate the effect of shocks on the index. We find evidence that price level shocks contributed significantly to financial instability during 1820-1931 and that inflation rate shocks contributed to instability during 1931-1999. While affecting the stability of the financial system, both the nature of aggregate price shocks and their impact depend on the existing monetary and financial regime.     

Disclosure Regulation in the Commercial Banking Industry: Lessons from the National Banking Era

I exploit variation in the adoption of disclosure and supervisory regulation across U.S. states to examine their impact on the development and stability of commercial banks. The empirical results suggest that the adoption of state‐level requirements to report financial statements in local newspapers is associated with greater stability and development of commercial banks. I also examine which political constituencies influence the adoption of disclosure and supervisory regulation. I find that powerful landowners and small private banks are associated with late adoption of these regulations. These findings suggest that incumbent groups oppose disclosure rules because the passage of such rules threatens their private interests.     

The Real‐Time Properties of the Bank of Canada's Staff Output Gap Estimates

We study the revision properties of the Bank of Canada's staff output gap estimates since the mid‐1980s and show that the average revision has been significantly smaller since the early 2000s. Alternatively, revisions from econometric output gap estimates have not experienced a similar improvement. We show that the overestimation of potential output in real time following the 1991–92 recession explains the large revisions in the first half of the sample. Although Phillips‐curve inflation forecasts slightly worsen when conditioned on real time instead of final gaps, their relative poor performance reflects the general lack of inflation predictability rather than real‐time gap measurement issues.     

Effects of Monetary and Macroprudential Policies—Evidence from Four Inflation Targeting Economies

We examine the effects of monetary and macroprudential policies in the Asia‐Pacific region, where many inflation targeting economies have adopted macroprudential policies in order to safeguard financial stability. Using structural panel vector autoregressions that identify both monetary and macroprudential policy actions, we show that tighter macroprudential policies used to contain credit growth also have a significant negative impact on macroeconomic aggregates such as real GDP and the price level. The similar effects of monetary and macroprudential policies may suggest a complementary use of the two policies at normal times. However, they could also create challenges for policymakers, especially during times when low inflation coincides with buoyant credit growth.     

Complete monotonicity of the representative consumer’s discount factor

A univariate real-valued function is said to be completely monotone if it takes positive values and alternate the signs of its higher order derivatives, starting from everywhere negative first derivatives. We prove that the representative consumer’s discount factor of a continuous-time economy under uncertainty is a power function of some completely monotone function of time satisfying certain boundary conditions if and only if it may be derived from a group of consumers having constant and equal relative risk aversion, and constant and yet possibly unequal discount rates.     

Credit Card Debt and Default over the Life Cycle

This paper solves an empirically parameterized model of life cycle consumption, which allows for uncollaterized borrowing and the possibility of default. The simulation results show that: (i) "social stigma " and credit limit have a very large impact on default rates; (ii) education level also has a significant effect on the probability of default, namely, through differences in the shape of lifetime labor income profiles; and (iii) the response of simulated default rates to labor income shocks is determined by the nature of labor income uncertainty (temporary versus permanent). Additionally, the model generates simultaneous consumer holdings of credit card debt and liquid assets.     

The Effect of Bank Credit on Asset Prices: Evidence from the Japanese Real Estate Boom during the 1980s

This paper studies whether bank credit fuels asset prices. Financial deregulation during the 1980s allowed keiretsus to obtain finance publicly and reduce their dependence on banks. Banks that lost these blue-chip customers increased their property lending, and serve as an instrument for the supply of real estate loans. Using this instrument, I find that a 0.01 increase in a prefecture's real estate loans as a share of total loans causes 14–20% higher land inflation compared with other prefectures over the 1981–91 period. The timing of losses of keiretsu customers also coincides with subsequent land inflation in a prefecture.     

Can Interest‐Bearing Money Circulate? A Small‐Denomination Arkansan Experiment, 1861–63

Legal restrictions theory suggests that dominance of non-interest-bearing currency is possible only because legal impediments prevent financial institutions from offering interest-bearing alternatives. A viable interest-bearing medium must be issued in denominations low enough for day-to-day use, however, and without historical examples of small-denomination interest-bearing issues we cannot properly test whether interest-bearing currency will circulate as legal restrictions theory predicts. Civil War Arkansas offers a rare instance where large quantities of small-denomination interest-bearing money were actually issued, mostly below $5. The results of this Arkansan experiment show that small-denomination interest-bearing issues can indeed function as the primary medium of exchange.