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Articles 1831 - 1860 of 2930
Full-Text Articles in Social and Behavioral Sciences
Do Real Output And Real Wage Measures Capture Reality? The History Of Lighting Suggests Not, William D. Nordhaus
Do Real Output And Real Wage Measures Capture Reality? The History Of Lighting Suggests Not, William D. Nordhaus
Cowles Foundation Discussion Papers
Historical studies of the growth in real wages and output depend upon the accurate measure of the price trends of goods and services. Over long periods of time, the consumption bundle has changed profoundly, and most of today’s consumption includes items that were not produced, and in some cases not even conceived, at the beginning of the nineteenth century. This paper tackles the issue of the quantitative significance of the qualitative change in consumption by choosing a single service — lighting — for which the service characteristic — illumination — is invariant. We estimate changes in lighting efficiency and construct …
Local Nonlinear Least Squares Estimation: Using Parametric Information Nonparametrically, Pedro Gozalo, Oliver B. Linton
Local Nonlinear Least Squares Estimation: Using Parametric Information Nonparametrically, Pedro Gozalo, Oliver B. Linton
Cowles Foundation Discussion Papers
We introduce a new kernel smoother for nonparametric regression that uses prior information on regression shape in the form of a parametric model. In effect, we nonparametrically encompass the parametric model. We derive pointwise and uniform consistency and the asymptotic distribution of our procedure. It has superior performance to the usual kernel estimators at or near the parametric model. It is particularly well motivated for binary data using the probit or logit parametric model as a base. We include an application to the Horowitz (1993) transport choice dataset.
Insurance Market Games: Scale Effects And Public Policy, Michael R. Powers, Martin Shubik, Shuntian Yao
Insurance Market Games: Scale Effects And Public Policy, Michael R. Powers, Martin Shubik, Shuntian Yao
Cowles Foundation Discussion Papers
We propose a game-theoretic model to study various effects of scale in an insurance market. After reviewing a simple static model, we present a one-period game in which both the buyers and sellers of insurance make strategic bids, and show that, under reasonably broad conditions, market equilibrium exists. For a special case, we then consider how both the price and quantity of insurance, as well as other quantities of interest to public policy decision makers, are affected by the number of insurance firms, the number of customers, and the total amount of capital provided by investors.
Home Equity Insurance, Robert J. Shiller, Allan N. Weiss
Home Equity Insurance, Robert J. Shiller, Allan N. Weiss
Cowles Foundation Discussion Papers
Home equity insurance policies, policies insuring homeowners against declines in the price of their homes, would bear some resemblance both to ordinary insurance and to financial hedging vehicles. A menu of choices for the design of such policies is presented here, and conceptual issues are discussed. Choices include pass-through futures and options, in which the insurance company in effect serves as a retailer to homeowners of short positions in real estate futures markets or of put options on real estate. Another choice is a life-event-triggered insurance policy, in which the homeowner pays regular fixed insurance premia and is entitled to …
Financing Trade And The Price Level: Problems With The Description Of Markets, Expectations, Money And Credit, Martin Shubik
Financing Trade And The Price Level: Problems With The Description Of Markets, Expectations, Money And Credit, Martin Shubik
Cowles Foundation Discussion Papers
No abstract provided.
Health Care Reform As Seen By A General Economist, James Tobin
Health Care Reform As Seen By A General Economist, James Tobin
Cowles Foundation Discussion Papers
Universal coverage, it is argued, implies universally required insurance, to avoid adverse selection into last-resort care implicitly guaranteed. It also entails community rating, such that insurers cannot choose among risks. Individual mandate makes more sense than employer mandate. A system is proposed in which individual can choose among a government Medicare-like plan and private insurance offering equivalent services. Means-tested assistance would help individuals pay premiums.
Is Monetary Policy Becoming Less Effective?, Ray C. Fair
Is Monetary Policy Becoming Less Effective?, Ray C. Fair
Cowles Foundation Discussion Papers
This paper estimates the amount by which the effectiveness of monetary policy in changing real output has declined due to the increased size of the federal government debt.
Ponzi Finance, Government Solvency And The Redundancy Or Usefulness Of Public Debt, Willem H. Buiter, Kenneth M. Kletzer
Ponzi Finance, Government Solvency And The Redundancy Or Usefulness Of Public Debt, Willem H. Buiter, Kenneth M. Kletzer
Cowles Foundation Discussion Papers
We study how the government’s ability to borrow depends on its capacity to tax. Using a two-period OLG growth model, we establish the following. When lump-sum taxes are unrestricted, Ponzi finance is possible, regardless of whether the economy is dynamically inefficient and regardless of the relationship between the interest rate and the growth rate. Ponzi finance, and government debt generally, is unessential or redundant: it does not enlarge the set of allocations that can be supported as competitive equilibria. When lump-sum taxes are restricted, Ponzi finance (public debt) may be essential . Central to the paper is our characterization of …
Applied Nonparametric Methods, Wolfgang Härdle, Oliver B. Linton
Applied Nonparametric Methods, Wolfgang Härdle, Oliver B. Linton
Cowles Foundation Discussion Papers
We review different approaches to nonparametric density and regression estimation. Kernel estimators are motivated from local averaging and solving ill-posed problems. Kernel estimators are compared to k -NN estimators, orthogonal series and splines. Pointwise and uniform confidence bands are described, and the choice of smoothing parameter is discussed. Finally, the method is applied to nonparametric prediction of time series and to semiparametric estimation.
A Limit Theorem For A Smooth Class Of Semiparametric Estimators, Ariel Pakes, Steven Olley
A Limit Theorem For A Smooth Class Of Semiparametric Estimators, Ariel Pakes, Steven Olley
Cowles Foundation Discussion Papers
We consider an econometric model based on a set of moment conditions which are indexed by both a finite dimensional parameter vector of interest, θ, and an infinite dimensional parameter, h , which in turn depends upon both θ and another infinite dimensional parameter, τ. The model assumes that the moment conditions equal zero at the true value of all unknown parameters. Estimators of θ are obtained by forming nonparametric estimates of h and τ, substituting them into the sample analog of the moment conditions, and choosing that value of θ that makes the sample moments as “close as possible” …
The Allocation Of Resources In The Presence Of Indivisibilities, Herbert E. Scarf
The Allocation Of Resources In The Presence Of Indivisibilities, Herbert E. Scarf
Cowles Foundation Discussion Papers
The pricing tests for optimality in a convex programming problem are not available when the production possibility set displays economies of scale. The paper argues that indivisibilities in production are one of the major causes of such economies. The constrained optimization problems arising in the presence of indivisibilities are integer programs, and it is proposed that the unique, minimal quantity tests for such problems may shed some light on the internal organization of a large firm.
Marching To Different Drummers: Coordination And Independence In Monetary And Fiscal Policies, William D. Nordhaus
Marching To Different Drummers: Coordination And Independence In Monetary And Fiscal Policies, William D. Nordhaus
Cowles Foundation Discussion Papers
Most countries have recently experienced high fiscal deficits and real interest rates that depressed national saving and slowed economic growth. This study analyzes the reasons that underlie the skewed fiscal-monetary mix. The first section develops a game-theoretic model of fiscal and monetary coordination and shows that the macroeconomic outcomes depend upon the degree of coordination or independence. The second section applies this approach to the Clinton package by using three macroeconomic models to estimate the likely macroeconomic impacts of different degrees of coordination. The paper concludes that an uncoordinated policy may lead to substantial loss of output that will not …
Second Order Approximation In The Partially Linear Regression Model, Oliver B. Linton
Second Order Approximation In The Partially Linear Regression Model, Oliver B. Linton
Cowles Foundation Discussion Papers
We examine the second order properties of various quantities of interest in the partially linear regression model. We obtain a stochastic expansion with remainder o P ( n -2µ ), where µ < 1/2, for the standardized semiparametric least squares estimator, a standard error estimator, and a studentized statistic. We use the second order expansions to correct the standard error estimates for second order effects, and to define a method of bandwidth choice. A Monte Carlo experiment provides favorable evidence on our method of bandwidth choice.
Robust Nonstationary Regression, Peter C.B. Phillips
Robust Nonstationary Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper provides a robust statistical approach to nonstationary time series regression and inference. Fully modified extensions of traditional robust statistical procedures are developed which allow for endogeneities in the nonstationary regressors and serial dependence in the shocks that drive the regressors and the errors that appear in the equation being estimated. The suggested estimators involve semiparametric corrections to accommodate these possibilities and they belong to the same family as the fully modified least squares (FM-OLS) estimator of Phillips and Hansen (1990). Specific attention is given to fully modified least absolute deviation (FM-LAD) estimation and fully modified M (FM-M)-estimation. The …
The Natural Rate As New Classical Macroeconomics, James Tobin
The Natural Rate As New Classical Macroeconomics, James Tobin
Cowles Foundation Discussion Papers
Friedman identified his “natural rate” as Walrasian equilibrium. Keynes’s “full employment” is also classical equilibrium: labor markets are clearing at existing real wages. Why is equilibrium unemployment not zero? Keynes and Friedman cite, but do not explain, “frictional” unemployment. They differ on what explains cycles. Friedman and Lucas answer: misperceptions of inflation. Markets clear at wrong prices and quantities. Today New Classicals stress variations in the natural rate itself. In Keynesian cycles markets don’t clear. Excess supplies or demands trigger Phillips-curve movements of wages and prices. Unemployment and vacancies coexist in varying proportions because inter-sectoral shocks always occur. Adjustment dynamics, …
Macroeconomic Shocks In An Aggregative Disequilibrium Model, Vassilis A. Hajivassiliou
Macroeconomic Shocks In An Aggregative Disequilibrium Model, Vassilis A. Hajivassiliou
Cowles Foundation Discussion Papers
In this paper, I first show how aggregation over submarkets that exhibit varying degrees of disequilibrium can provide a foundation to the classic “short-side” disequilibrium econometric model of Fair and Jaffee [11]. I then introduce explicit randomness in the aggregative model as arising from economy-wide demand and supply shocks, which are allowed to be serially correlated. I develop suitable simulation estimation methods to circumvent hitherto intractable computational problems resulting from serial correlation in the unobservables in disequilibrium analysis. I show that the introduction of macroeconomic shocks has fundamentally different implications compared to the traditional approach that arbitrarily appends an additive …
A Simulation Estimation Analysis Of The External Debt Crises Of Developing Countries, Vassilis A. Hajivassiliou
A Simulation Estimation Analysis Of The External Debt Crises Of Developing Countries, Vassilis A. Hajivassiliou
Cowles Foundation Discussion Papers
In this paper I develop models of the incidence and extent of external financing crises of developing countries, which lead to multiperiod multinomial discrete choice and discrete/continuous econometric specifications with flexible correlation structures in the unobservables. I show that estimation of these models based on simulation methods has attractive statistical properties and is computationally tractable. Three such simulation estimation methods are exposited, analyzed theoretically, and used in practice: a method of smoothly simulation maximum likelihood (SSML) based on a smooth recursive conditioning simulator (SRC), a method of simulated scores (MSS) based on a Gibbs sampling simulator (GSS), and an MSS …
Empirical Process Methods In Econometrics, Donald W.K. Andrews
Empirical Process Methods In Econometrics, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper provides an introduction to the use of empirical process methods in econometrics. These methods can be used to establish the large sample properties of econometric estimators and test statistics. In the first part of the paper, key terminology and results are introduced and discussed heuristically. Applications in the econometrics literature are briefly reviewed. A select set of three classes of applications is discussed in more detail. The second part of the paper shows how one can verify a key property called stochastic equicontinuity. The paper takes several stochastic equicontinuity results from the probability literature, which rely on entropy …
The Theory Of Money And Financial Institutions, Martin Shubik
The Theory Of Money And Financial Institutions, Martin Shubik
Cowles Foundation Discussion Papers
A sketch of a game theoretic approach to the Theory of Money and Financial Institutions is presented in a nontechnical, nonmathematical manner. The detailed argument and specifics are presented in previous articles and in a forthcoming book.
On The Sources And Significance Of Interindustry Differences In Technological Opportunities, Alvin K. Klevorick, Richard C. Levin, Richard R. Nelson, Sidney G. Winter
On The Sources And Significance Of Interindustry Differences In Technological Opportunities, Alvin K. Klevorick, Richard C. Levin, Richard R. Nelson, Sidney G. Winter
Cowles Foundation Discussion Papers
The set of technological opportunities in a given industry is one of the fundamental determinants of technical advance in that line of business. We examine the concept of technological opportunity and discuss three categories of sources of those opportunities: advances in scientific understanding and technique, technological advances originating in other industries and in other private and governmental institutions, and feedbacks from an industry’s own technological advances. Data from the Yale Survey on Industrial Research and Development are used to measure the strength of various sources of technological opportunity and to discern interindustry differences in the importance of these sources. We …
Nonlinear Econometric Models With Deterministically Trending Variables, Donald W.K. Andrews, John Mcdermott
Nonlinear Econometric Models With Deterministically Trending Variables, Donald W.K. Andrews, John Mcdermott
Cowles Foundation Discussion Papers
This paper considers an alternative asymptotic framework to standard sequential asymptotics for nonlinear models with deterministically trending variables. The asymptotic distributions of generalized method of moments estimators and corresponding test statistics are derived using this framework. The asymptotic distributions are shown to be the same with deterministically trending variables as with non-trending variables. That is, the distributions are normal and chi-squared respectively. The asymptotic covariance matrices of the estimators, however, are found to depend on the form of the trends. These findings provide a justification for the use of standard asymptotic approximations in nonlinear models even when the variables have …
Forward Exchange Market Unbiasedness: The Case Of The Australian Dollar Since 1984, Peter C.B. Phillips, James W. Mcfarland
Forward Exchange Market Unbiasedness: The Case Of The Australian Dollar Since 1984, Peter C.B. Phillips, James W. Mcfarland
Cowles Foundation Discussion Papers
This paper implements a new statistical approach to robust regression with nonstationary time series. The methods are presently under theoretical development in other work, and are briefly exposited here. They allow us to perform regressions in levels with nonstationary time series data, they accommodate data distributions with heavy tails and they permit serial dependence and temporal heterogeneity of unknown form in the equation errors. With these features the methods are well suited to applications with frequently sampled exchange rate data, which generally display all of these empirical characteristics. Our application is to daily data on spot and forward exchange rates …
Common Knowledge, John Geanakoplos
Common Knowledge, John Geanakoplos
Cowles Foundation Discussion Papers
This paper surveys the implications of “common knowledge” in interactive epistemology and game theory, with special emphasis on speculation, betting, agreeing to disagree, and coordination. The implications of approximate common knowledge are also analyzed. Approximate common knowledge is defined three ways: as knowledge of knowledge … of knowledge, iterated N times; as p -common knowledge; and as weak p -common knowledge. Finally the implications of common knowledge are examined when agents are boundedly rational.
Simulating Normal Rectangle Probabilities And Their Derivatives: The Effects Of Vectorization, Vassilis A. Hajivassiliou
Simulating Normal Rectangle Probabilities And Their Derivatives: The Effects Of Vectorization, Vassilis A. Hajivassiliou
Cowles Foundation Discussion Papers
An extensive literature in econometrics and in numerical analysis has considered the computationally difficult problem of evaluating the multiple integral representing the probability of a multivariate normal random vector constrained to lie in a rectangular region. A leading case of such an integral is the negative orthant probability, implied by the multinomial probit (MNP) model used in econometrics and biometrics. Classical parametric estimation of this model requires, for each trial parameter vector and each observation in a sample, evaluation of a normal orthant probability and its derivatives with respect to the mean vector and the variance-covariance matrix. Several Monte Carlo …
Classical Estimation Methods For Ldv Models Using Simulation, Vassilis A. Hajivassiliou, Paul A. Ruud
Classical Estimation Methods For Ldv Models Using Simulation, Vassilis A. Hajivassiliou, Paul A. Ruud
Cowles Foundation Discussion Papers
This paper discusses estimation methods for limited dependent variable (LDV) models that employ Monte Carlo simulation techniques to overcome computational problems in such models. These difficulties take the form of high dimensional integrals that need to be calculated repeatedly but cannot be easily approximated by series expansions. In the past, investigators were forced to restrict attention to special classes of LDV models that are computationally manageable. The simulation estimation methods we discuss here make it possible to estimate LDV models that are computationally intractable using classical estimation methods. We first review the ways in which LDV models arise, describing the …
Admissibility Of The Likelihood Ratio Test When A Nuisance Parameter Is Present Only Under The Alternative, Donald W.K. Andrews, Werner Ploberger
Admissibility Of The Likelihood Ratio Test When A Nuisance Parameter Is Present Only Under The Alternative, Donald W.K. Andrews, Werner Ploberger
Cowles Foundation Discussion Papers
This paper establishes the asymptotic admissibility of the likelihood ratio (LR) test for a general class of testing problems in which a nuisance parameter is present only under the alternative hypothesis. The paper also establishes the finite sample admissibility of the LR test for testing problems of this sort that arise in Gaussian linear regression models with known variance.
The Money Rate Of Interest And The Influence Of Assets In A Multistage Economy With Gold Or Paper Money: Part I, Martin Shubik, Shuntian Yao
The Money Rate Of Interest And The Influence Of Assets In A Multistage Economy With Gold Or Paper Money: Part I, Martin Shubik, Shuntian Yao
Cowles Foundation Discussion Papers
The role of long lived assets is considered in serving as hostages to extend the domain of trustless trade in an exchange economy. Assuming that individuals have life cycle preferences, we consider the most general set of utility functions consistent with these preferences and a stationary equilibrium for an OLG economy. The influence of the type of asset, durable or storable on the need for money is considered.
Aggregate Income Risks And Hedging Mechanisms, Robert J. Shiller
Aggregate Income Risks And Hedging Mechanisms, Robert J. Shiller
Cowles Foundation Discussion Papers
Estimates are made, from time series data on real gross domestic products, of the standard deviations of returns in markets for perpetual claims on countries’ incomes. The results indicate that the variability of returns is of a magnitude comparable to that of returns in stock markets. Evidence is shown that there may be only minimal possibility of cross hedging these returns in existing capital markets. Methods of establishing markets for perpetual claims on aggregate incomes are examined. Such markets, by allowing hedging of these aggregate income risks, might make for dramatically more effective international macroeconomic risk sharing than is possible …
The Money Rate Of Interest And The Influence Of Assets In A Multistage Economy With Gold Or Paper Money: Part Ii, Martin Shubik, Shuntian Yao
The Money Rate Of Interest And The Influence Of Assets In A Multistage Economy With Gold Or Paper Money: Part Ii, Martin Shubik, Shuntian Yao
Cowles Foundation Discussion Papers
We consider the relationship between the length of life of individuals and the assets they own and their influence on trustless trade. In particular in some structures a role for government or an outside bank may be called for to support an equilibrium. An example of an OLG model with production illustrates the need for expanding the fiat money supply if population growth is greater than zero.
Fully Modified Least Squares And Vector Autoregression, Peter C.B. Phillips
Fully Modified Least Squares And Vector Autoregression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Fully modified least squares (FM-OLS) regression was originally designed in work by Phillips and Hansen (1990) to provide optimal estimates of cointegrating regressions. The method modifies least squares to account for serial correlation effects and for the endogeneity in the regressors that results from the existence of a cointegrating relationship. This paper provides a general framework which makes it possible to study the asymptotic behavior of FM-OLS in models with full rank I(1) regressors, models with I(1) and I(0) regressors, models with unit roots, and models with only stationary regressors. This framework enables us to consider the use of FM …