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Articles 2221 - 2250 of 3476
Full-Text Articles in Economics
Higher-Order Improvements Of A Computationally Attractive K-Step Bootstrap For Extremum Estimators, Donald W.K. Andrews
Higher-Order Improvements Of A Computationally Attractive K-Step Bootstrap For Extremum Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper establishes the higher-order equivalence of the k -step bootstrap, introduced recently by Davidson and MacKinnon (1999a), and the standard bootstrap. The k -step bootstrap is a very attractive alternative computationally to the standard bootstrap for statistics based on nonlinear extremum estimators, such as generalized method of moment and maximum likelihood estimators. The paper also extends results of Hall and Horowitz (1996) to provide new results regarding the higher-order improvements of the standard bootstrap and the k -step bootstrap for extremum estimators (compared to procedures based on first-order asymptotics). The results of the paper apply to Newton-Raphson (NR), default …
Nonstationary Panel Data Analysis: An Overview Of Some Recent Developments, Peter C.B. Phillips, Hyungsik Roger Moon
Nonstationary Panel Data Analysis: An Overview Of Some Recent Developments, Peter C.B. Phillips, Hyungsik Roger Moon
Cowles Foundation Discussion Papers
This paper overviews some recent developments in panel data asymptotics, concentrating on the nonstationary panel case and gives a new result for models with individual effects. Underlying recent theory are asymptotics for multi-indexed processes in which both indexes may pass to infinity. We review some of the new limit theory that has been developed, show how it can be applied and give a new interpretation of individual effects in nonstationary panel data. Fundamental to the interpretation of much of the asymptotics is the concept of a panel regression coefficient which measures the long run average relation across a section of …
Nonstationary Binary Choice, Joon Y. Park, Peter C.B. Phillips
Nonstationary Binary Choice, Joon Y. Park, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper develops an asymptotic theory for time series binary choice models with nonstationary explanatory variables generated as integrated processes. Both logit and probit models are covered. The maximum likelihood (ML) estimator is consistent but a new phenomenon arises in its limit distribution theory. The estimator consists of a mixture of two components, one of which is parallel to and the other orthogonal to the direction of the true parameter vector, with the latter being the principal component. The ML estimator is shown to converge at a rate of n 3 /4 along its principal component but has the slower …
Descriptive Econometrics For Nonstationary Time Series With Empirical Illustrations, Peter C.B. Phillips
Descriptive Econometrics For Nonstationary Time Series With Empirical Illustrations, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Recent work by the author on methods of spatial density analysis for time series data with stochastic trends is reviewed and extended. The methods are illustrated in some empirical applications and simulations. The empirical applications include macroeconomic data on inflation, financial data on exchange rates and political opinion poll data. It is shown how the methods can be used to measure empirical hazard rates for inflation and deflation. Empirical estimates based on historical US data over the last 60 years indicate that the predominant inflation risks are at low levels (2–6%) and low two-digit levels (10–12%), and that there is …
Linear Regression Limit Theory For Nonstationary Panel Data, Peter C.B. Phillips, Hyungsik Roger Moon
Linear Regression Limit Theory For Nonstationary Panel Data, Peter C.B. Phillips, Hyungsik Roger Moon
Cowles Foundation Discussion Papers
This paper develops a regression limit theory for nonstationary panel data with large numbers of cross section ( n ) and time series ( T ) observations. The limit theory allows for both sequential limits, wherein T → ∞ followed by n → ∞, and joint limits where T,n → ∞ simultaneously; and the relationship between these multidimensional limits is explored. The panel structures considered allow for no time series cointegration, heterogeneous cointegration, homogeneous cointegration, and near-homogeneous cointegration. The paper explores the existence of long-run average relations between integrated panel vectors when there is no individual time series cointegration and …
Estimation Of Autoregressive Roots Near Unity Using Panel Data, Hyungsik Roger Moon, Peter C.B. Phillips
Estimation Of Autoregressive Roots Near Unity Using Panel Data, Hyungsik Roger Moon, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Time series data are often well modelled by using the device of an autoregressive root that is local to unity. Unfortunately, the localizing parameter (c) is not consistently estimable using existing time series econometric techniques and the lack of a consistent estimator complicates inference. This paper develops procedures for the estimation of a common localizing parameter using panel data. Pooling information across individuals in a panel aids the identification and estimation of the localising parameter and leads to consistent estimation in simple panel models. However, in the important case of models with concomitant deterministic trends, it is shown that pooled …
Entry And Innovation In Vertically Differentiated Markets, Dirk Bergemann, Juuso Välimäki
Entry And Innovation In Vertically Differentiated Markets, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
This paper analyzes the optimal entry into experience goods markets with vertically differentiated buyers. We consider the case where the value of the new product is imperfectly known, but common to all buyers (common values) as well as the case where the quality is different across buyers (private values). We distinguish between new products that are improvements to existing products and new products that are substitutes. Different types of products have qualitatively distinct diffusion paths. Improvements are introduced slowly relative to the full information case, while substitutes are introduced more aggressively. The slow entry strategy is associated with increasing supply …
Toward A Theory Of Reinsurance And Retrocession, Michael R. Powers, Martin Shubik
Toward A Theory Of Reinsurance And Retrocession, Michael R. Powers, Martin Shubik
Cowles Foundation Discussion Papers
There is a natural tradeoff between the benefits of increasing the number of competitors in an insurance market and the drawback to the weakening of the law of large numbers due to the diminishing of average reserves. In this investigation we consider the possibility for optimal layers of reinsurance and retrocession in the design of the insurance industry. A general question which may be asked of all financial institutions is what factors limit the number of layers of paper which can be constructed?
An Empirical Model Of Inventory Investment By Durable Commodity Intermediaries, George J. Hall, John Rust
An Empirical Model Of Inventory Investment By Durable Commodity Intermediaries, George J. Hall, John Rust
Cowles Foundation Discussion Papers
This paper introduces a new detailed data set of high-frequency observations on inventory investment by a U.S. steel wholesaler. Our analysis of these data leads to six main conclusions: orders and sales are made infrequently; orders are more volatile than sales; order sizes vary considerably; there is substantial high-frequency variation in the firm’s sales prices; inventory/sales ratios are unstable; and there are occasional stockouts. We model the firm generically as a durable commodity intermediary that engages in commodity price speculation. We demonstrate that the firm’s inventory investment behavior at the product level is well approximated by an optimal trading strategy …
Starting Small And Commitment, Joel Watson
Starting Small And Commitment, Joel Watson
Cowles Foundation Discussion Papers
I study a model of a long-term partnership with two-sided incomplete information. The partners jointly determine the stakes of their relationship and individually decide whether to cooperate with or betray each other over time. I characterize the extremal — interim incentive efficient — equilibria. In these equilibria, the partners generally “start small,” with the level of interaction growing over time. The types of players separate quickly. Further, cooperation between “good” types is viable regardless of how pessimistic the players are about each other initially. The quick nature of separation in an extremal equilibrium contrasts with the outcome selected by a …
Conditioning Institutions And Renegotiation, Garey Ramey, Joel Watson
Conditioning Institutions And Renegotiation, Garey Ramey, Joel Watson
Cowles Foundation Discussion Papers
We propose a theory of contracting in long-term relationships, emphasizing the role of social institutions in conditioning players’ joint selection of Equilibria. Players adopt a social conditioning system in order to place boundaries on their recurrent negotiation and thereby sustain a desirable joint selection of equilibrium. Social conventions have value because players cannot freely reinterpret the labels attached to histories, in contrast to labels that the players might assign internally. We present examples of social conventions that are useful for sustaining cooperative interaction. Our model combines an explicit bargaining technology with a renegotiation concept, coherent equilibrium , that builds on …
Starting Small In An Unfamiliar Environment, James Rauch, Joel Watson
Starting Small In An Unfamiliar Environment, James Rauch, Joel Watson
Cowles Foundation Discussion Papers
Motivated by a characteristic way in which firms in developed countries make their decisions regarding cooperation with potential partners from less developed countries, we design a simple model of a DC firm’s search for an LDC partner/supplier and the subsequent relationship between the two parties. Matched firms can “start small” with a trial order or pilot project of variable size in order to gain information about the ability of the LDC firm to successfully carry out a large project. We derive results relating whether and how the parties start small to the characteristics of the large project and to the …
Experimentation In Markets, Dirk Bergemann, Juuso Välimäki
Experimentation In Markets, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We present a model of entry and exit with Bayesian learning and price competition. A new product of initially unknown quality is introduced in the market, and purchases of the product yield information on its true quality. We assume that the performance of the new product is publicly observable. As agents learn from the experiments of others, informational externalities arise. We determine the Markov Perfect Equilibrium prices and allocations. In a single market, the combination of the informational externalities among the buyers and the strategic pricing by the sellers results in excessive experimentation. If the new product is launched in …
Liquidity Flows And Fragility Of Business Enterprises, Wouter J. Den Haan, Garey Ramey, Joel Watson
Liquidity Flows And Fragility Of Business Enterprises, Wouter J. Den Haan, Garey Ramey, Joel Watson
Cowles Foundation Discussion Papers
This paper considers the efficiency of financial intermediation and the propagation of business cycle shocks in a model of long-term relationships between entrepreneurs and lenders, where lenders may be constrained in their short-run access to liquidity. When liquidity is low, relationships are subject to breakups that lead to loss of joint surplus. Liquidity outflows cause damage to financial structure by breaking up relationships, and damage persists due to frictions in the formation of new relationships. Feedbacks between aggregate investment and the structure of intermediation greatly magnify the effects of shocks. For large shocks, financial collapse may become inescapable in the …
Measuring Bubble Expectations And Investor Confidence, Robert J. Shiller
Measuring Bubble Expectations And Investor Confidence, Robert J. Shiller
Cowles Foundation Discussion Papers
This paper presents evidence on attitude changes among investors in the US stock market. Two basic attitudes are explored: bubble expectations and investor confidence. Semiannual time-series indicators of these attitudes are presented for US stock market institutional investors based on questionnaire survey results 1989–1998, from surveys that I have derived in collaboration with Fumiko Kon-Ya and Yoshiro Tsutsui. Five different time-series indicators whether there is among investors an expectation of a speculative bubble, an unstable situation with expectations for increase in the short run only, are produced. Four different time-series indicators whether there is an expectation of a negative speculative …
Empirical Limits For Time Series Econometric Models, Werner Ploberger, Peter C.B. Phillips
Empirical Limits For Time Series Econometric Models, Werner Ploberger, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper seeks to characterize empirically achievable limits for time series econometric modeling. The approach involves the concept of minimal information loss in time series regression and the paper shows how to derive bounds that delimit the proximity of empirical measures to the true probability measure in models that are of econometric interest. The approach utilizes generally valid asymptotic expressions for Bayesian data densities and works from joint measures over the sample space and parameter space. A theorem due to Rissanen is modified so that it applies directly to probabilities about the relative likelihood (rather than averages), a new way …
Rationalizable Trade, Stephen Morris, Costis Skiadas
Rationalizable Trade, Stephen Morris, Costis Skiadas
Cowles Foundation Discussion Papers
We formulate necessary and sufficient conditions for interim rationalizable trade between two players.
The Hierarchical Approach To Modeling Knowledge And Common Knowledge, Ronald Fagin, John Geanakoplos, Joseph Y. Halpern, Moshe Y. Vardi
The Hierarchical Approach To Modeling Knowledge And Common Knowledge, Ronald Fagin, John Geanakoplos, Joseph Y. Halpern, Moshe Y. Vardi
Cowles Foundation Discussion Papers
One approach to representing knowledge or belief of agents, used by economists and computer scientists, involves an infinite hierarchy of beliefs. Such a hierarchy consists of an agent’s beliefs about the state of the world, his beliefs about other agents’ beliefs about the world, his beliefs about other agents’ beliefs about other agents’ beliefs about the world, and so on. (Economists have typically modeled belief in terms of a probability distribution on the uncertainty space. In contrast, computer scientists have modeled belief in terms of a set of worlds, intuitively, the ones the agent considers possible.) We consider the question …
Work Motivation, Truman F. Bewley
Work Motivation, Truman F. Bewley
Cowles Foundation Discussion Papers
No abstract provided.
Pareto Improving Price Regulation When The Asset Market Is Incomplete, Jean-Jacques Herings, Heracles M. Polemarchakis
Pareto Improving Price Regulation When The Asset Market Is Incomplete, Jean-Jacques Herings, Heracles M. Polemarchakis
Cowles Foundation Discussion Papers
When the asset market is incomplete, competitive equilibria are constrained suboptimal, which provides a scope for pareto improving interventions. Price regulation can be such a pareto improving policy, even when the welfare effects of rationing are taken into account. An appealing aspect of price regulation is that it that it operates anonymously on market variables. Fix-price equilibria exist under weak assumptions. Such equilibria permit a competitive analysis of an economy with an incomplete asset market that is out of equilibrium. Arbitrage opportunities may arise: with three or more assets actively traded, an individual may hold an arbitrage portfolio at equilibrium. …
Preference For Information And Dynamic Consistency, Simon Grant, Atsushi Kajii, Ben Polak
Preference For Information And Dynamic Consistency, Simon Grant, Atsushi Kajii, Ben Polak
Cowles Foundation Discussion Papers
We provide necessary and sufficient conditions for a dynamically consistent agent always to prefer more informative signals (in single-agent problems). These conditions do not imply recursivity, reduction or independence. We provide a simple definition of dynamically consistent behavior, and we discuss whether an intrinsic information lover (say, an anxious person) is likely to be dynamically consistent.
Decomposable Choice Under Uncertainty, Simon Grant, Atsushi Kajii, Ben Polak
Decomposable Choice Under Uncertainty, Simon Grant, Atsushi Kajii, Ben Polak
Cowles Foundation Discussion Papers
Savage motivated his Sure Thing Principle by arguing that, whenever an act would be preferred if an event obtains and preferred if that event did not obtain, then it should be preferred overall. The idea that it should be possible to decompose and recompose decision problems in this way has normative appeal. We show, however, that it does not require the full separability across events implicit in Savage’s axiom. We formulate a weaker axiom that suffices for decomposability, and show that this implies an implicit additive representation. Our decomposability property makes local necessary conditions for optimality, globally sufficient. Thus, it …
A Theory Of The Onset Of Currency Attacks, Stephen Morris, Hyun Song Shin
A Theory Of The Onset Of Currency Attacks, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
The swiftness and devastating impact of recent financial crises have taken many market participants by surprise, and pose challenges for economists seeking a theory of the onset of a crisis. We propose such a theory based on two features. The actions of diverse economic actors which undermine the currency are mutually reinforcing, while the fragmented nature of the media create small disparities in their information. In such circumstances, the beliefs of market participants can be tracked in the same way as the economic fundamentals, and an attack is triggered when the economic fundamentals deteriorate sufficiently to fall below the minimum …
Cheap Talk And Co-Ordination With Payoff Uncertainty, Sandeep Baliga, Stephen Morris
Cheap Talk And Co-Ordination With Payoff Uncertainty, Sandeep Baliga, Stephen Morris
Cowles Foundation Discussion Papers
Two players seek to co-ordinate their behavior in an incomplete information setting. We show that if each player’s preferences over his opponent’s action is independent of his own action or type, then cheap talk cannot expand the set of equilibrium outcomes.
Estimating Yield Curves By Kernel Smoothing Methods, Oliver B. Linton, E. Mammen, Jens Perch Nielsen, C. Tanggaard
Estimating Yield Curves By Kernel Smoothing Methods, Oliver B. Linton, E. Mammen, Jens Perch Nielsen, C. Tanggaard
Cowles Foundation Discussion Papers
We introduce a new method for the estimation of discount functions, yield curves and forward curves for coupon bonds. Our approach is nonparametric and does not assume a particular functional form for the discount function although we do show how to impose various important restrictions in the estimation. Our method is based on kernel smoothing and is defined as the minimum of some localized population moment condition. The solution to the sample problem is not explicit and our estimation procedure is iterative, rather like the backfitting method of estimating additive nonparametric models. We establish the asymptotic normality of our methods …
Dynamic Common Agency, Dirk Bergemann, Juuso Välimäki
Dynamic Common Agency, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider a general model of dynamic common agency with symmetric information. We focus on Markov perfect equilibria and characterize the equilibrium set for a refinement of the Markov perfect equilibria. Particular attention is given to the existence of a marginal contribution equilibrium where each principal receives her contribution to the coalition of agent and remaining principals. The structure of the intertemporal payoffs is analyzed in terms of the flow marginal contribution. As a byproduct, new results for the static common agency game are obtained. The general characterization results are then applied to two dynamic bidding games for a common …
Fiat Money And The Efficient Financing Of The Float, Production And Consumption. Part I: The Float, Martin Shubik
Fiat Money And The Efficient Financing Of The Float, Production And Consumption. Part I: The Float, Martin Shubik
Cowles Foundation Discussion Papers
The basic distinction in the optimization conditions between the general equilibrium model of a T period exchange economy and a strategic market game process model is between a set of equations homogeneous of order zero and a set of nonhomogeneous equations. The latter have an amount M of outside or fiat money added to the system. If there is an outside bank willing to lend or accept deposits at an interest rate rho > 0 at the end of time T the initial amount of money M will have been consumed in interest payments to the outside bank. The price level …
Price Competition For An Informed Buyer, Giuseppe Moscarini, Marco Ottaviani
Price Competition For An Informed Buyer, Giuseppe Moscarini, Marco Ottaviani
Cowles Foundation Discussion Papers
We investigate the outcomes of simultaneous price competition in the presence of private information on the demand side. Each of two sellers offers a different variety of a good to a buyer endowed with a private binary signal on their relative quality. We analyze how the unique equilibrium of the game changes as a function of the (common) prior belief on the relative quality of the goods and the precision of the private information of the buyer. Competition is fierce, and the buyer enjoys high rents, when the prior belief is biased in favor of one good and private signals …
The Health Of Nations: Irving Fisher And The Contribution Of Improved Longevity To Living Standard, William D. Nordhaus
The Health Of Nations: Irving Fisher And The Contribution Of Improved Longevity To Living Standard, William D. Nordhaus
Cowles Foundation Discussion Papers
Among Irving Fisher’s many contributions to economics, one that is little noted and barely remembered is his emphasis on the economic importance of health. For the most part, his concern was in promoting healthy life styles. In addition, he made an early (perhaps the earliest) estimate of the impact of mortality and morbidity on national output.
Requiem For Kyoto: An Economic Analysis Of The Kyoto Protocol, William D. Nordhaus, Joseph G. Boyer
Requiem For Kyoto: An Economic Analysis Of The Kyoto Protocol, William D. Nordhaus, Joseph G. Boyer
Cowles Foundation Discussion Papers
This paper uses the newly developed RICE-98 model to analyze the economics of the Kyoto Protocol. It analyzes versions of the Kyoto Protocol that have different approaches to trading emissions rights and compares these with efficient approaches. The major conclusions are: (a) the global cost of the Kyoto Protocol is $716 billion in present value, (b) the United States bears almost two-thirds of the global cost;and (c) the benefit-cost ratio of the Kyoto Protocol is 1/7. Additionally, the emissions strategy is highly cost-ineffective, with the global temperature reduction achieved at a cost almost 8 times the cost of a strategy …