FEDERAL DEFICITS, MACRO-STABILIZATION GOALS, AND FEDERAL RESERVE BEHAVIOR

The effects of federal deficits on Federal Reserve behavior as proxied by changes in the growth rate of the monetary base are analyzed in this study. Multivariate Granger-causality tests are employed in the analysis. The deficit measure that is the focus of the analysis is the change in the real market value of privately held federal debt. The tests indicate that the deficit Granger-causes the monetary base. Additionally, concerns for financial market stability, real output, and exchange rate movements in the period of floating rates also affect Federal Reserve behavior.     

THE REACTION OF INTEREST RATES TO UNANTICIPATED FEDERAL RESERVE ACTIONS AND STATEMENTS: IMPLICATIONS FOR THE MONEY ANNOUNCEMENT CONTROVERSY

This paper examines the reaction of long- and short-term interest rates to monetary policy surprises that influenced market expectations of the future behavior of the federal funds rate in the period after October 1979. We find that the relative reaction of long- and short-term rates to policy surprises is similar to the relative reaction of these rates to money announcements. Consequently, we conclude that the large reaction of long-term interest rates to money announcements in the period after October 1979 is consistent with the "policy anticipations hypothesis" which views this reaction as a movement in real interest rates.     

INFLATION AND WAGE RIGIDITY/FLEXIBILITY IN THE SHORT RUN

A recent literature uses accurate wage data from payroll records and provides compelling evidence against the conventional belief that nominal wages are downward sticky. This paper provides a unique contribution to this literature by conducting a formal analysis of the role of inflation in cyclical wage rigidity/flexibility. Analysis of payroll‐based wage data from the Korean labor market for the period 1971–2014 finds that the degree of downward nominal wage flexibility is countercyclical, and the countercyclicality becomes stronger during a deflationary, relative to inflationary, recession. This serves as a counter‐example to the conventional theory of cyclical wage rigidity. (JEL E24, E32, J30, J64)     

COSTLY PORTFOLIO ADJUSTMENT AND THE SHORT RUN DEMAND FOR MONEY

In many empirical studies the short-run demand for money includes a lagged dependent variable; this is usually attributed to some cost of adjusting money balances toward their desired level. This short-run money-demand equation is sometimes used as a structural equation in models in which market clearing is also assumed (in the sense that money supply equals short–run money demand). In this paper, a theoretical counterexample demonstrates that this use of a short-run money demand equation is not generally valid. This finding challenges the usual interpretation of the lagged dependent variable.     

DEMOGRAPHICS, PRODUCTIVITY GROWTH AND THE MACROECONOMIC EQUILIBRIUM

This paper investigates the economic effects of demographics and productivity growth in an intertemporal optimizing model with age-based heterogeneity and induced retirement. Our analysis reveals that the projected "population aging" is likely to increase the growth rate of output and to improve the welfare of the economy, especially if there are no distortional policies which prevent retirement decisions from adjusting endogenously to the demographic changes. The economy also displays different patterns of dynamic adjustment in the quantity and price variables depending upon whether retirement is endogenous.     

DETERMINING OUTPUT AND INFLATION VARIABILITY: ARE THE PHILLIPS CURVE AND THE MONETARY POLICY REACTION FUNCTION RESPONSIBLE?

This study analyzes the policy parameters in a Taylor monetary policy reaction function and a Phillips curve equation to determine the variability of inflation and output. The theoretical and empirical investigations yield two key results. First, countries with large parameters in the monetary policy reaction function have low and stable inflation. Second, countries with flatter Phillips curves (i.e., those with a higher degree of price stickiness) have larger output variability. This article also examines the determinants of inflation and output variability as well as determinants of the slope of the Phillips curve.(JEL E32 , E52 )     

MIGRATION TRENDS AND EARNINGS OF FREE AGENTS IN MAJOR LEAGUE BASEBALL, 1976–1979

This paper is an empirical investigation of the effect of team characteristics on the migration pattern of free agents in Major League Baseball during the period 1976–1979. The results indicate that high-quality free agents tend to leave winning teams and move to teams in cities with large or rapidly growing populations. The compensation paid to free agents is shown to depend on these team characteristics as well as the players' personal characteristics and market conditions.     

THE LONG RUN BEHAVIOR OF THE INCOME VELOCITY OF MONEY IN FIVE ADVANCED COUNTRIES, 1870–1975: AN INSTITUTIONAL APPROACH

The income velocity of money in Canada, the United States, Great Britain, Norway and Sweden displays a U-shaped pattern over the last one hundred years. This paper presents and tests empirically an explanation for this secular pattern emphasizing the influence on velocity of institutional changes. The inclusion into a simple velocity function of institutional developments such as the process of monetization, the spread of commercial banking, financial development and the growth of economic stability improves the explanation of long-run movements in velocity provided by a regression of velocity on real permanent income per head and the interest rate.     

TAX POLICY AND INCOME INEQUALITY IN THE UNITED STATES, 1979–2007

This paper assesses the effects of U.S. tax policy reforms on inequality over around three decades, from 1979 to 2007. It applies a new method for decomposing changes in government redistribution into (1) a direct policy effect resulting from policy changes and (2) the effects of changing market incomes. Over the period as a whole, the tax policy changes increased income inequality by pushing up the income share of high‐income earners (the top 20%). (JEL H23, H31, H53, P16)     

MONEY, INCOME, AND PRICES IN THE UNITED KINGDOM: 1870–1913

This paper examines certain aspects of the operation of the gold standard and its effects on the United Kingdom in the period before World War I. Reduced-form tests and estimates of output and money-demand equations are presented. The major conclusions are (1) Prices and interest rates in the United Kingdom can be represented as being determined independently of the money stock and output in the United Kingdom; and (2) Evidence concerning Lucas's version of the natural-rate hypothesis indicates various inadequacies.     

SPECULATIVE STORAGE, FUTURES MARKETS, AND THE STABILITY OF COMMODITY PRICES

A theoretical dynamic model is developed that integrates the micro-behavior of commodity and futures speculators into the simultaneous determination of cash and futures prices in a storable commodity market. The model is used to demonstrate the way in which the introduction of a futures market, by affecting the decisions of speculative inventory holders, alters the distribution of spot prices and to elucidate the conditions that render futures trading stabilizing for cash prices.     

CROSS-BORDER ACQUISITIONS AND BOARD GLOBALIZATION IN THE WORLD'S LARGEST TNCS, 1995–2005

Because of their size, power, and undemocratic nature, the cross-border activities of the world's transnational corporations (TNCs) are of particular interest to sociologists. Previous research shows that over the past decade the boards of directors of the world's largest TNCs have become more multinational, in other words are increasingly composed of individuals from different countries. During the same period there was also a dramatic increase in the number of cross-border TNC mergers and acquisitions (M&As). Anecdotal evidence suggests a connection between cross-border acquisitions and the increasingly multinational composition of TNC boards, and this study explores that relationship using data on the 148 largest TNCs and commercial banks. We find that a cross-border acquisition almost always results in a more multinational board of directors, that multinational boards are more likely to do cross-border deals, and that once a board becomes multinational it stays that way. The evidence also shows that multinational boards are concentrated in Europe, suggesting another dynamic between the integrating forces of the European Union and its TNCs. Because the results show increasing cross-national contact between the corporate elites who serve on multinational TNC boards, the results also provide some support for claims about the recent emergence of a "Transnational Business Class" or "Transnational Capitalist Class," at least in Europe, although it is recognized that more study is needed to make the case that such a class is forming.