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Articles 841 - 870 of 3476
Full-Text Articles in Economics
Solvency As A Fundamental Constraint On Lolr Policy For Independent Central Banks: Principles, History, Law, Sir Paul M. W. Tucker
Solvency As A Fundamental Constraint On Lolr Policy For Independent Central Banks: Principles, History, Law, Sir Paul M. W. Tucker
Journal of Financial Crises
This paper follows up earlier work advocating a principled modernization of doctrines for central bank lender-of-last-resort policies and operations. It argues for a new Fundamental Constraint on such authorities: namely, “the principle that central banks should not lend to firms that they know (or should know) to be fundamentally bust or broken.” Tucker supports this with commentary from various peers, a review of principles underlying bankruptcy law and resolution schemes, and by deconstructing other common counterarguments. Centrally, he argues that when central banks breach the Fundamental Constraint, they distribute resources to short-term creditors at the expense of longer-term creditors, …
Copula-Based Time Series With Filtered Nonstationarity, Xiaohong Chen, Zhijie Xiao, Bo Wang
Copula-Based Time Series With Filtered Nonstationarity, Xiaohong Chen, Zhijie Xiao, Bo Wang
Cowles Foundation Discussion Papers
Economic and financial time series data can exhibit nonstationary and nonlinear patterns simultaneously. This paper studies copula-based time series models that capture both patterns. We propose a procedure where nonstationarity is removed via a filtration, and then the nonlinear temporal dependence in the filtered data is captured via a flexible Markov copula. We study the asymptotic properties of two estimators of the parametric copula dependence parameters: the parametric (two-step) copula estimator where the marginal distribution of the filtered series is estimated parametrically; and the semiparametric (two-step) copula estimator where the marginal distribution is estimated via a rescaled empirical distribution of …
Measuring Movement And Social Contact With Smartphone Data: A Real-Time Application To Covid-19, Victor Couture, Jonathan L. Dingel, Allison Green, Jessie Handbury, Kevin R. Williams
Measuring Movement And Social Contact With Smartphone Data: A Real-Time Application To Covid-19, Victor Couture, Jonathan L. Dingel, Allison Green, Jessie Handbury, Kevin R. Williams
Cowles Foundation Discussion Papers
Tracking human activity in real time and at fine spatial scale is particularly valuable during episodes such as the COVID-19 pandemic. In this paper, we discuss the suitability of smartphone data for quantifying movement and social contact. We show that these data cover broad sections of the US population and exhibit movement patterns similar to conventional survey data. We develop and make publicly available a location exposure index that summarizes county-to-county movements and a device exposure index that quantifies social contact within venues. We use these indices to document how pandemic-induced reductions in activity vary across people and places.
La “Doña” È Mobile: The Role Of Women In Social Mobility In A Pre-Modern Economy, José-Antonio Espín-Sánchez, Salvador Gil-Guirado, Chris Vickers
La “Doña” È Mobile: The Role Of Women In Social Mobility In A Pre-Modern Economy, José-Antonio Espín-Sánchez, Salvador Gil-Guirado, Chris Vickers
Discussion Papers
We use data from marriage records in Murcia, Spain, in the 18th century to study the role of women in social mobility in the pre-modern era. Our measure of socioeconomic standing is identification as a don or doña, an honorific denoting high, though not neccesarily, noble status. We show that this measure, which is acquired over the lifecycle, shows gendered transmission patters. In particular, same-sex transmission is stronger than opposite-sex, for both sons and daughters. The relative transmission from fathers versus mothers varies over the lifecycle, and grandparents may have an effect on the status of their grandchildren.
Objective Rationality Foundations For (Dynamic) Alpha-Meu, Mira Frick, Ryota Iijima, Yves Le Yaouanq
Objective Rationality Foundations For (Dynamic) Alpha-Meu, Mira Frick, Ryota Iijima, Yves Le Yaouanq
Cowles Foundation Discussion Papers
We show how incorporating Gilboa, Maccheroni, Marinacci, and Schmeidler’s (2010) notion of objective rationality into the α-MEU model of choice under ambiguity can overcome several challenges faced by the baseline model without objective rationality. The decision-maker (DM) has a subjectively rational preference ≿^, which captures the complete ranking overacts the DM expresses when forced to make a choice; in addition, we endow the DM with a (possibly incomplete) objectively rational preference ≿*, which captures the rankings the DM deems uncontroversial. Under the objectively founded α-MEU model, ≿^ has an α-MEU representation and ≿*has a unanimity representation à la Bewley (2002), …
Work In The Time Of Covid: Results From The Yale Labor Survey, Christopher Foote, William D. Nordhaus, Douglas Rivers
Work In The Time Of Covid: Results From The Yale Labor Survey, Christopher Foote, William D. Nordhaus, Douglas Rivers
Cowles Foundation Discussion Papers
The Yale Labor Survey (YLS) uses online panels to estimate the state of the US labor market in real time. It is designed to parallel the US government’s monthly labor force survey and present weekly information rapidly and inexpensively. Using an experimental design, the YLS estimates that the US unemployment rate peaked in late April and improved substantially by mid-June. The YLS unemployment rate in mid-June is estimated to be 15%, down about 2 percentage points from mid-May.
Rationing The Commons, Nicholas Ryan, Anant Sudarshan
Rationing The Commons, Nicholas Ryan, Anant Sudarshan
Cowles Foundation Discussion Papers
Common resources may be managed with inefficient policies for the sake of equity. We study how rationing the commons shapes the efficiency and equity of resource use, in the context of agricultural groundwater use in Rajasthan, India. We find that rationing binds on input use, such that farmers, despite trivial prices for water extraction, use roughly the socially optimal amount of water on average. The rationing regime is still grossly inefficient, because it misallocates water across farmers, lowering productivity. Pigouvian reform would increase agricultural surplus by 12% of household income, yet fall well short of a Pareto improvement over rationing.
Adaptive, Rate-Optimal Hypothesis Testing In Nonparametric Iv Models, Christoph Breunig, Xiaohong Chen
Adaptive, Rate-Optimal Hypothesis Testing In Nonparametric Iv Models, Christoph Breunig, Xiaohong Chen
Cowles Foundation Discussion Papers
We propose a new adaptive hypothesis test for polyhedral cone (e.g., monotonicity, convexity) and equality (e.g., parametric, semiparametric) restrictions on a structural function in a nonparametric instrumental variables (NPIV) model. Our test statistic is based on a modified leave-one-out sample analog of a quadratic distance between the restricted and unrestricted sieve NPIV estimators. We provide computationally simple, data-driven choices of sieve tuning parameters and adjusted chi-squared critical values. Our test adapts to the unknown smoothness of alternative functions in the presence of unknown degree of endogeneity and unknown strength of the instruments. It attains the adaptive minimax rate of testing …
Adaptive, Rate-Optimal Testing In Instrumental Variables Models, Christoph Breunig, Xiaohong Chen
Adaptive, Rate-Optimal Testing In Instrumental Variables Models, Christoph Breunig, Xiaohong Chen
Cowles Foundation Discussion Papers
This paper proposes simple, data-driven, optimal rate-adaptive inferences on a structural function in semi-nonparametric conditional moment restrictions. We consider two types of hypothesis tests based on leave-one-out sieve estimators. A structure- space test (ST) uses a quadratic distance between the structural functions of endogenous variables; while an image-space test (IT) uses a quadratic distance of the conditional moment from zero. For both tests, we analyze their respective classes of nonparametric alternative models that are separated from the null hypothesis by the minimax rate of testing. That is, the sum of the type I and the type II errors of the …
From Imitation To Innovation: Where Is All That Chinese R&D Going?, König D. König, Kjetil Storesletten, Zheng Song, Fabrizio Zilibotti
From Imitation To Innovation: Where Is All That Chinese R&D Going?, König D. König, Kjetil Storesletten, Zheng Song, Fabrizio Zilibotti
Cowles Foundation Discussion Papers
We construct a model of rm dynamics with heterogenous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007-2012. The estimated model ts the Chinese data well. We compare the estimates with those obtained using data for Taiwan …
Multiproduct Intermediaries, Andrew Rhodes, Makoto Watanabe, Jidong Zhou
Multiproduct Intermediaries, Andrew Rhodes, Makoto Watanabe, Jidong Zhou
Cowles Foundation Discussion Papers
This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is profitable even when it does not improve consumer search efficiency. In its optimal product selection, it stocks high-value products exclusively to attract consumers to visit, then profits by selling non-exclusive products which are relatively cheap to buy from upstream suppliers. However, relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. As applications we use the framework to study the optimal design of a shopping mall, …
Robust Identification Of Investor Beliefs, Xiaohong Chen, Lars P. Hansen, Peter G. Hansen
Robust Identification Of Investor Beliefs, Xiaohong Chen, Lars P. Hansen, Peter G. Hansen
Cowles Foundation Discussion Papers
This paper develops a new method informed by data and models to recover information about investor beliefs. Our approach uses information embedded in forward-looking asset prices in conjunction with asset pricing models. We step back from presuming rational expectations and entertain potential belief distortions bounded by a statistical measure of discrepancy. Additionally, our method allows for the direct use of sparse survey evidence to make these bounds more informative. Within our framework, market-implied beliefs may differ from those implied by rational expectations due to behavioral/psychological biases of investors, ambiguity aversion, or omitted permanent components to valuation. Formally, we represent evidence …
Financing Firms In Hibernation During The Covid-19 Pandemic, Tatiana Didier, Federico Huneeus, Mauricio Larrain, Sergio L. Schmukler
Financing Firms In Hibernation During The Covid-19 Pandemic, Tatiana Didier, Federico Huneeus, Mauricio Larrain, Sergio L. Schmukler
Cowles Foundation Discussion Papers
The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms’ relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from “hibernating,” using the minimum bare cash necessary …
Stability And Robustness In Misspecified Learning Models, Mira Frick, Ryota Iijima, Yuhta Ishii
Stability And Robustness In Misspecified Learning Models, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We present an approach to analyze learning outcomes in a broad class of misspecified environments, spanning both single-agent and social learning. Our main results provide general criteria to determine—without the need to explicitly analyze learning dynamics—when beliefs in a given environment converge to some long-run belief either locally or globally (i.e., from some or all initial beliefs). The key ingredient underlying these criteria is a novel “prediction accuracy” ordering over subjective models that refines existing comparisons based on Kullback-Leibler divergence. We show that these criteria can be applied, first, to unify and generalize various convergence results in previously studied settings. …
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We present an approach to analyze learning outcomes in a broad class of misspecified environments, spanning both single-agent and social learning. We introduce a novel “prediction accuracy” order over subjective models, and observe that this makes it possible to partially restore standard martingale convergence arguments that apply under correctly specified learning. Based on this, we derive general conditions to determine when beliefs in a given environment converge to some long-run belief either locally or globally (i.e., from some or all initial beliefs). We show that these conditions can be applied, first, to unify and generalize various convergence results in previously …
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Cowles Foundation Discussion Papers
We analyze lifecycle saving strategies using a recursive utility model calibrated to match empirical estimates for the value of a statistical life. We show that, with a positive value of life, risk aversion reduces savings and annuity purchase. Risk averse agents are willing to make an early death a not-so-adverse outcome by enjoying greater consumption when young and bequeathing wealth in case of death. We also find that greater risk aversion lowers stock market participation. We show that this model can rationalize low annuity demand while also matching empirically documented levels of wealth and private investments in stocks. Our findings …
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Cowles Foundation Discussion Papers
We analyze lifecycle saving strategies using a recursive utility model calibrated to match empirical estimates of the value of a statistical life. The novelty of our approach is that we require preferences to be monotone with respect to first order stochastic dominance. The framework we use can disentangle risk aversion and the intertemporal elasticity and can feature a positive value of life without placing constraints on the value of the risk aversion parameter or the intertemporal elasticity of substitution. We show that, with a positive value of life, risk aversion reduces savings, decreases stock market participation and decreases annuity purchase. …
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We present an approach to analyze learning outcomes in a broad class of misspecified environments, spanning both single-agent and social learning. We introduce a novel “prediction accuracy” order over subjective models, and observe that this makes it possible to partially restore standard martingale convergence arguments that apply under correctly specified learning. Based on this, we derive general conditions to determine when beliefs in a given environment converge to some long-run belief either locally or globally (i.e., from some or all initial beliefs). We show that these conditions can be applied, first, to unify and generalize various convergence results in previously …
Competition And Public Information: A Note, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Competition And Public Information: A Note, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We study price discrimination in a market in which two firms engage in Bertrand competition. Some consumers are contested by both firms, and other consumers are “captive” to one of the firms. The market can be divided into segments, which have different relative shares of captive and contested consumers. It is shown that the revenue-maximizing segmentation involves dividing the market into “nested” markets, where exactly one firm may have captive consumers.
Lessons Learned: David Wessel, Ben Henken, Rosalind Z. Wiggins
Lessons Learned: David Wessel, Ben Henken, Rosalind Z. Wiggins
Journal of Financial Crises
Wessel, an award-winning journalist for The Wall Street Journal, talks about some of the issues faced by the media in covering the crisis, discusses the many challenges policymakers faced when trying to communicate the government’s crisis-fighting strategy, and shares suggestions for improvement.
Lessons Learned: James (Jim) Millstein, Alec Buchholtz, Rosalind Z. Wiggins
Lessons Learned: James (Jim) Millstein, Alec Buchholtz, Rosalind Z. Wiggins
Journal of Financial Crises
Millstein, who was the Chief Restructuring Officer, U.S. Department of the Treasury, during the Global Financial Crisis and instrumental in the rescue of American International Group, gives us his take on how best to prepare for future crises
Restructuring And Forgiveness In Financial Crises D: The Japanese Financial Crisis Of The 1990s, Christian M. Mcnamara, Andrew Metrick
Restructuring And Forgiveness In Financial Crises D: The Japanese Financial Crisis Of The 1990s, Christian M. Mcnamara, Andrew Metrick
Journal of Financial Crises
In November 1997 the Japanese government confronted a problem of enormous proportions when the turmoil that had been roiling the financial markets since the collapse of a real estate and stock market asset bubble in 1990 reached a crescendo with the failure of four major financial institutions in quick succession in the space of a month. Prior to these failures, the damage done by the collapsing bubble had seemed to be limited to certain segments of the financial landscape, and the government’s response consisted largely of targeted intervention when necessary for clearly insolvent financial institutions, with a more comprehensive approach …
Restructuring And Forgiveness In Financial Crises C: The Swedish Banking Crisis Of 1990-94, Christian M. Mcnamara, Dr. Lars Thunell, Andrew Metrick
Restructuring And Forgiveness In Financial Crises C: The Swedish Banking Crisis Of 1990-94, Christian M. Mcnamara, Dr. Lars Thunell, Andrew Metrick
Journal of Financial Crises
In the Spring of 1992, the Swedish government faced a dilemma. The country was in the midst of an economic downturn stemming from the collapse of asset prices (especially in real estate) that had spiked as a result of a credit boom that followed the deregulation of the Swedish banking system in the mid-1980s. Initially the impact of the downturn on the country’s banks had seemed to be limited to a small number of specific firms that the government moved to assist on an ad hoc basis in 1991. However, evidence was mounting that the banking crisis was reaching a …
Restructuring And Forgiveness In Financial Crises B: The Asian Crisis Of 1997, June Rhee, Andrew Metrick
Restructuring And Forgiveness In Financial Crises B: The Asian Crisis Of 1997, June Rhee, Andrew Metrick
Journal of Financial Crises
Asia’s economy, Thailand in particular, was booming when the financial crises hit in the 1990s. However, troubles were brewing underneath the seemingly buoyant economy. With a fragile financial system and ineffective domestic government responses to these troubles, an exchange rate crisis took over Thailand, and this crisis started a financial contagion in the neighboring countries. This case reviews the background and domestic government responses to contain the crisis, and the international intervention provided by the International Monetary Fund including the assistance and the required reforms accompanying the support.
Restructuring And Forgiveness In Financial Crises A: The Mexican Peso Crisis Of 1994-95, Christian M. Mcnamara, June Rhee, Andrew Metrick
Restructuring And Forgiveness In Financial Crises A: The Mexican Peso Crisis Of 1994-95, Christian M. Mcnamara, June Rhee, Andrew Metrick
Journal of Financial Crises
Following a year in which repeated political turmoil sapped investor confidence in Mexico, putting pressure on the peso and draining the country’s foreign exchange reserves, on December 22, 1994, the Mexican government sparked a financial crisis by unexpectedly abandoning its policy of anchoring the peso to the US dollar and instead allowing it to float freely. The resulting collapse of the peso left Mexico with $40 billion to $50 billion in external debt (much of it dollar-indexed) coming due in the near term and almost no foreign exchange reserves. Faced with the prospect that Mexico would either default on its …
Guarantees And Capital Infusions In Response To Financial Crises C: U.S. 2009 Stress Test, Chase P. Ross, June Rhee, Andrew Metrick
Guarantees And Capital Infusions In Response To Financial Crises C: U.S. 2009 Stress Test, Chase P. Ross, June Rhee, Andrew Metrick
Journal of Financial Crises
When President Obama took office in 2009, the Treasury focused on restarting bank lending and repairing the ability of the banking system as a whole to perform the role of credit intermediation. In order to do so, the Treasury needed to raise public confidence that banks had sufficient buffers to withstand even a very adverse economic scenario, especially given heightened uncertainty surrounding the outlook of the U.S. economy and potential losses in the banking system. The Supervisory Capital Assessment Program (SCAP)—the so-called “stress tests”—sought to rigorously measure the resilience of the largest bank holding companies. Those found to have insufficient …
Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick
Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick
Journal of Financial Crises
During 2008-09, the federal government extended multiple guarantee programs in an effort to restore the financial market and contain the panic and crisis in the market. For example, the Treasury provided a temporary guarantee program for the money market funds, the FDIC decided to stand behind certain debts and non-interest-bearing transaction accounts, and the Treasury, the FDIC, and the Federal Reserve agreed to share losses in certain assets belonging to Citigroup. This case reviews these guarantee programs implemented during the global financial crisis by the government and explores the different rationale that shaped certain design features of each program.
Adaptive Rationality In Strategic Interaction: Do Emotions Regulate Thinking About Others?, Timo Ehrig, Jaison Manjaly, Aditya Singh, Shyam Sunder
Adaptive Rationality In Strategic Interaction: Do Emotions Regulate Thinking About Others?, Timo Ehrig, Jaison Manjaly, Aditya Singh, Shyam Sunder
Cowles Foundation Discussion Papers
Forming beliefs or expectations about others’ behavior is fundamental to strategy, as it co-determines the outcomes of interactions in and across organizations. In the game theoretic conception of rationality, agents reason iteratively about each other to form expectations about behavior. According to prior scholarship, actual strategists fall short of this ideal, and attempts to understand the underlying cognitive processes of forming expectations about others are in their infancy. We propose that emotions help regulate iterative reasoning, that is, their tendency to not only reflect on what others think, but also on what others think about their thinking. Drawing on a …
Optimal Control Of An Epidemic Through Social Distancing, Thomas Kruse, Philipp Strack
Optimal Control Of An Epidemic Through Social Distancing, Thomas Kruse, Philipp Strack
Cowles Foundation Discussion Papers
We analyze how to optimally engage in social distancing in order to minimize the spread of an infectious disease. We identify conditions under which any optimal policy is single-peaked, i.e., first engages in increasingly more social distancing and subsequently decreases its intensity. We show that an optimal policy might delay measures that decrease the transmission rate substantially to create herd-immunity and that engaging in social distancing sub-optimally early can increase the number of fatalities. Finally, we find that optimal social distancing can be an effective measure and can substantially reduce the death rate of a disease.
The Evolving Impacts Of Covid-19 On Small Businesses Since The Cares Act, John Eric Humphries, Christopher Neilson, Gabriel Ulyssea
The Evolving Impacts Of Covid-19 On Small Businesses Since The Cares Act, John Eric Humphries, Christopher Neilson, Gabriel Ulyssea
Cowles Foundation Discussion Papers
This note provides new evidence on how small business owners have been impacted by COVID-19, and how these effects have evolved since the passage of the CARES Act. As part of a broader and ongoing project, we collected survey data from more than 8,000 small business owners in the U.S. from March 28th, one day after the CARES Act was passed, through April 20th. The data include information on firm size, layoffs, beliefs about the future prospects of their businesses, as well as awareness of existing government relief programs. We provide three main findings. First, by the time the CARES …