It has become customary to estimate the New Keynesian Phillips Curve (NKPC) with GMM using a large instrument set that includes lags of variables that are ad hoc to the model. Researchers have also conventionally used real unit labor cost (RULC) as the proxy for real marginal cost, even though it is difficult to support its significance. This paper introduces a new proxy for the real marginal cost term as well as a new instrument set, both of which are based on the micro foundations of the vertical chain of production. I find that the new proxy, based on input prices as opposed to wages, provides a more robust and significant fit to the model. Instruments that are based on the vertical chain of production appear to be both more valid and relevant towards the model.
{"title":"Estimating the New Keynesian Phillips Curve: A Vertical Production Chain Approach","authors":"A. Shapiro","doi":"10.2139/ssrn.917194","DOIUrl":"https://doi.org/10.2139/ssrn.917194","url":null,"abstract":"It has become customary to estimate the New Keynesian Phillips Curve (NKPC) with GMM using a large instrument set that includes lags of variables that are ad hoc to the model. Researchers have also conventionally used real unit labor cost (RULC) as the proxy for real marginal cost, even though it is difficult to support its significance. This paper introduces a new proxy for the real marginal cost term as well as a new instrument set, both of which are based on the micro foundations of the vertical chain of production. I find that the new proxy, based on input prices as opposed to wages, provides a more robust and significant fit to the model. Instruments that are based on the vertical chain of production appear to be both more valid and relevant towards the model.","PeriodicalId":246231,"journal":{"name":"Federal Reserve Bank of Boston Research Paper Series","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130264595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study a small open economy characterized by two empirically important frictions— incomplete financial markets and an inability of the government to commit to policy. We characterize the best sustainable fiscal policy and show that it can amplify and prolong shocks to output. In particular, even when the government is completely benevolent, the government’s credibility not to expropriate capital varies endogenously with the state of the economy and may be “scarcest” during recessions. This increased threat of expropriation depresses investment, prolonging downturns. It is the incompleteness of financial markets and the lack of commitment that generate investment cycles even in an environment where first-best capital stock is constant.
{"title":"Efficient Expropriation: Sustainable Fiscal Policy in a Small Open Economy","authors":"Mark Aguiar, M. Amador, G. Gopinath","doi":"10.2139/ssrn.917192","DOIUrl":"https://doi.org/10.2139/ssrn.917192","url":null,"abstract":"We study a small open economy characterized by two empirically important frictions— incomplete financial markets and an inability of the government to commit to policy. We characterize the best sustainable fiscal policy and show that it can amplify and prolong shocks to output. In particular, even when the government is completely benevolent, the government’s credibility not to expropriate capital varies endogenously with the state of the economy and may be “scarcest” during recessions. This increased threat of expropriation depresses investment, prolonging downturns. It is the incompleteness of financial markets and the lack of commitment that generate investment cycles even in an environment where first-best capital stock is constant.","PeriodicalId":246231,"journal":{"name":"Federal Reserve Bank of Boston Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-04-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129064855","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In recent years, a large number of economic theories have evolved to explain people’s pro-social behavior and the variation in their respective behavior. This paper surveys economic theories on pro-social behavior and presents evidence — mainly from the field — testing these theories. In addition, the survey emphasizes that institutional environment might significantly interact with pro-social preferences and explain some of the variation in observed pro-social behavior.
{"title":"A Survey of Economic Theories and Field Evidence on Pro-Social Behavior","authors":"Stephan Meier","doi":"10.2139/ssrn.917187","DOIUrl":"https://doi.org/10.2139/ssrn.917187","url":null,"abstract":"In recent years, a large number of economic theories have evolved to explain people’s pro-social behavior and the variation in their respective behavior. This paper surveys economic theories on pro-social behavior and presents evidence — mainly from the field — testing these theories. In addition, the survey emphasizes that institutional environment might significantly interact with pro-social preferences and explain some of the variation in observed pro-social behavior.","PeriodicalId":246231,"journal":{"name":"Federal Reserve Bank of Boston Research Paper Series","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126298546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This public policy brief examines labor force participation rates in this recession and recovery and compares them with the cyclical patterns in earlier business cycles. Measured relative to the business cycle peak in March 2001, labor force participation rates almost four years later have not recovered as much as usual, and the discrepancies are large. ; Among age-by-sex groups, the participation shortfall is especially pronounced at young and prime ages: Only for men and women age 55 and older has participation risen more than is usual four years after the business cycle peak. ; The brief examines explanations and different recovery scenarios for various groups—older workers, women, teens. Depending on the scenario, the current labor force shortfall ranges from 1.6 million to 5.1 million men and women. With 7.9 million people currently unemployed, the addition of these hypothetical participants would raise the unemployment rate by 1 to 3-plus percentage points. Current low rates of labor market participation thus potentially represent considerable slack in the U.S. labor market. ; This brief is based on materials presented in briefings to the President and Academic Advisory Council of the Federal Reserve Bank of Boston in March and April 2005.
{"title":"Additional Slack in the Economy: the Poor Recovery in Labor Force Participation During this Business Cycle","authors":"K. Bradbury","doi":"10.2139/SSRN.887766","DOIUrl":"https://doi.org/10.2139/SSRN.887766","url":null,"abstract":"This public policy brief examines labor force participation rates in this recession and recovery and compares them with the cyclical patterns in earlier business cycles. Measured relative to the business cycle peak in March 2001, labor force participation rates almost four years later have not recovered as much as usual, and the discrepancies are large. ; Among age-by-sex groups, the participation shortfall is especially pronounced at young and prime ages: Only for men and women age 55 and older has participation risen more than is usual four years after the business cycle peak. ; The brief examines explanations and different recovery scenarios for various groups—older workers, women, teens. Depending on the scenario, the current labor force shortfall ranges from 1.6 million to 5.1 million men and women. With 7.9 million people currently unemployed, the addition of these hypothetical participants would raise the unemployment rate by 1 to 3-plus percentage points. Current low rates of labor market participation thus potentially represent considerable slack in the U.S. labor market. ; This brief is based on materials presented in briefings to the President and Academic Advisory Council of the Federal Reserve Bank of Boston in March and April 2005.","PeriodicalId":246231,"journal":{"name":"Federal Reserve Bank of Boston Research Paper Series","volume":"108 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116668581","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
David R. DeRemer, Jeffrey C. Fuhrer, Jane Sneddon-Little, Radoslav Raykov, Scott D. Schuh, Geoffrey M. B. Tootell, Robert. Triest, Kristina Johnson, A. van Grondelle
This Public Policy Brief presents analysis of the labor market by economic research staff at the Federal Reserve Bank of Boston. It is based on materials originally presented to the Board of Directors of the Boston Fed on April 8, 2004, with selective updates incorporating data reported in early June. Contributors to this brief include David DeRemer, Jeffrey C. Fuhrer, Kristina Johnson, Jane Sneddon Little, Radoslav Raykov, Scott Schuh, Geoffrey M.B. Tootell, Robert Triest, and Anne van Grondelle. Views expressed in this brief do not necessarily reflect the views of the Federal Reserve System.
这份公共政策简报介绍了波士顿联邦储备银行经济研究人员对劳动力市场的分析。它基于2004年4月8日最初提交给波士顿联邦储备银行董事会的材料，并结合6月初报告的数据进行了选择性更新。这份简报的撰稿人包括David DeRemer、Jeffrey C. Fuhrer、Kristina Johnson、Jane Sneddon Little、Radoslav Raykov、Scott Schuh、Geoffrey M.B. Tootell、Robert Triest和Anne van Grondelle。本摘要中表达的观点不一定反映联邦储备系统的观点。
{"title":"Understanding the 'Job-Loss Recovery'","authors":"David R. DeRemer, Jeffrey C. Fuhrer, Jane Sneddon-Little, Radoslav Raykov, Scott D. Schuh, Geoffrey M. B. Tootell, Robert. Triest, Kristina Johnson, A. van Grondelle","doi":"10.2139/ssrn.887539","DOIUrl":"https://doi.org/10.2139/ssrn.887539","url":null,"abstract":"This Public Policy Brief presents analysis of the labor market by economic research staff at the Federal Reserve Bank of Boston. It is based on materials originally presented to the Board of Directors of the Boston Fed on April 8, 2004, with selective updates incorporating data reported in early June. Contributors to this brief include David DeRemer, Jeffrey C. Fuhrer, Kristina Johnson, Jane Sneddon Little, Radoslav Raykov, Scott Schuh, Geoffrey M.B. Tootell, Robert Triest, and Anne van Grondelle. Views expressed in this brief do not necessarily reflect the views of the Federal Reserve System.","PeriodicalId":246231,"journal":{"name":"Federal Reserve Bank of Boston Research Paper Series","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133693153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a unified theory of bank operations that integrates theories of financial intermediation, asset pricing, and production. In a simple dynamic model, banks maximize the present value of future profits generated through three categories of qualitatively distinct functions: (1) resolving information asymmetry in order to make loans, (2) providing transaction services, and (3) financing loans with borrowed funds. Risk determines the rate of return on the funds and in turn the discount rate for future profits. But risk affects the quantity of bank services generated in the first two functions only to the extent that assets of different risk require different amounts of information processing. The model thus coherently accounts for portfolio risk in measuring bank service output. It then recognizes that only functions (1) and (2) create bank value added, whereas the borrowed funds are merely an intermediate input in the provision of bank services. Furthermore, the funds and the production function for value added are separable in a bank's optimization solution. This model can resolve some long-standing debates in the literature on bank production, such as distinguishing between the input and output roles of deposits. It also provides a theoretical basis for measuring banking output in the National Income Accounts. This banking model implies a new measure of bank output that imputes the implicitly priced services as the part of net interest income that is free of risk-related returns on loanable funds. The new measure differs significantly from the ones commonly used, suggesting a need to reexamine the conclusions of a large body of empirical literature.
{"title":"Loanable Funds, Risk, and Bank Service Output","authors":"J. C. Wang","doi":"10.2139/ssrn.648222","DOIUrl":"https://doi.org/10.2139/ssrn.648222","url":null,"abstract":"This paper develops a unified theory of bank operations that integrates theories of financial intermediation, asset pricing, and production. In a simple dynamic model, banks maximize the present value of future profits generated through three categories of qualitatively distinct functions: (1) resolving information asymmetry in order to make loans, (2) providing transaction services, and (3) financing loans with borrowed funds. Risk determines the rate of return on the funds and in turn the discount rate for future profits. But risk affects the quantity of bank services generated in the first two functions only to the extent that assets of different risk require different amounts of information processing. The model thus coherently accounts for portfolio risk in measuring bank service output. It then recognizes that only functions (1) and (2) create bank value added, whereas the borrowed funds are merely an intermediate input in the provision of bank services. Furthermore, the funds and the production function for value added are separable in a bank's optimization solution. This model can resolve some long-standing debates in the literature on bank production, such as distinguishing between the input and output roles of deposits. It also provides a theoretical basis for measuring banking output in the National Income Accounts. This banking model implies a new measure of bank output that imputes the implicitly priced services as the part of net interest income that is free of risk-related returns on loanable funds. The new measure differs significantly from the ones commonly used, suggesting a need to reexamine the conclusions of a large body of empirical literature.","PeriodicalId":246231,"journal":{"name":"Federal Reserve Bank of Boston Research Paper Series","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116980746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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