AN EMPIRICAL ANALYSIS OF OIL PRICE SHOCKS IN THE INTERWAR PERIOD

This paper presents results that indicate that oil price shocks were economically important in explaining movements in industrial production, and, to a lesser degree, movements in wholesale prices in the period between World Wars I and II. The framework for analysis is a vector autoregressive model estimated using monthly data over 1924:2–38:6 that employs a financial intermediation variable, a measure of relative oil prices, and other variables typically found in small macroeconomic models. The impact of oil price shocks is evaluated through computation of variance decompositions and an historical decomposition over the 1929:9–38:6 period.     

IDENTIFYING THE ROLE OF RISK SHOCKS IN THE BUSINESS CYCLE USING STOCK PRICE DATA

I analyze the sources of U.S. business cycle fluctuations in an estimated Dynamic Stochastic General Equilibrium model with a rich set of nominal and real rigidities and various exogenous disturbances. The model includes a shock to the expected risk‐premium, which introduces a time‐varying wedge between the policy rate set by the central bank and the cost‐of‐capital of firms. In the aggregate data, most U.S. corporations finance their investment using internal funds, and stock prices reveal the opportunity cost of this type of financing. I therefore use corporate market value and dividend data in the Bayesian estimation of the model to identify risk shocks. Variance decomposition exercises show that these shocks account for a substantial part of the variation in the stock market, as well as the variation in output and investment, especially at short forecast horizons. The variation of these variables at longer forecast horizons are mainly captured by shocks to investment‐specific technological change. Historical decomposition points to the important role played by risk shocks in the run up of stock prices and output in the late 90s, and in the reversal of these variables in the early 2000s and during the recent recession. (JEL E32, E44)     

STOCK PRICE EFFECTS OF PERMANENT AND TRANSITORY SHOCKS

This paper exploits the long-run equilibrium relationship between stock prices and dividends, implied by the present value model, to structurally identify a dynamic model that governs the behavior of stock prices. The innovations to the data are dichotomized into those that leave a permanent imprint on both series and those that have only transitory effects. Unlike previous studies, however, we do not impose arbitrary identifying restrictions to decompose the joint process, restrictions that may not be consistent the data. ( JEL C12, C32, E24)     

REGIONAL HOUSE PRICE DYNAMICS AND VOTING BEHAVIOR IN THE FOMC

This paper examines the impact of house price gaps in Federal Reserve districts on the voting behavior in the Federal Open Market Committee (FOMC) from 1978 to 2010. Applying a random effects ordered probit model, we find that a higher regional house price gap significantly increases (decreases) the probability that this district's representative in the FOMC casts interest rate votes in favor of tighter (easier) monetary policy. In addition, our results suggest that Bank presidents react more sensitively to regional house price developments than Board members do. (JEL E31, E58, R31)     

THE OPTIMAL MONETARY RESPONSE TO TECHNOLOGY SHOCKS

This paper develops a model in which both technology and monetary shocks are important sources of variation in aggregate output and employment. The model rationalizes a policy under which money responds actively to technology shocks. The welfare cost of adopting the constant money growth rule advocated by Milton Friedman rather than the optimal activist policy is small, however. (JEL E52, E32)     

UNDERSTANDING THE MACROECONOMIC IMPACT OF ILLIQUIDITY SHOCKS IN THE UNITED STATES

In this paper, we empirically investigate the role of stock market illiquidity shocks, stemming from Amihud's illiquidity measure, in explaining U.S. macroeconomic fluctuations from 1973 to 2018. We find that the impact of illiquidity shocks on economic activity is substantial, and historical decomposition analysis shows that cumulative illiquidity shocks were an essential contributor to the prolonged economic slump of the Great Recession. Moreover, our identified illiquidity shocks represent a distinct source of macroeconomic instability. This suggests that illiquidity shocks, measured by the stock price impacts, may contain more information than other types of shocks in recent studies, such as financial shocks and uncertainty shocks. (JEL C32, E32)     

A GUIDE TO THE PITFALLS OF IDENTIFYING PRICE DISCRIMINATION

This paper demonstrates that plausible cost-based explanations exist for what are commonly perceived to be cases of price discrimination. We explain such commonly discussed problems as the price spreads of retail gasoline products, the "high" price of dinners at restaurants, the "high" price of popcorn at movie theaters, and the fact that airline ticket prices vary with how long the ticket is purchased before the flight's departure. Our explanations benefit from not relying on consumer ignorance or implicit collusion among numerous sellers.     

THE IMPORTANCE OF SECTORAL AND AGGREGATE SHOCKS IN BUSINESS CYCLES

The theoretical literature on business cycles proposes numerous causes for their occurrence. This paper attempts to measure the relative importance of aggregate, whether real or nominal, and sectoral factors in generating real economic fluctuations, as well as to identify economic variables that are correlated with the various factors. Empirical results indicate that both aggregate and industry-level factors are statistically significant in explaining variations in output with the aggregate factor being the most important. Some evidence is presented that links the aggregate factor with monetary variables.     

FACTOR SUBSTITUTION, RATIONAL EXPECTATIONS, AND THE EFFECTS OF COMMODITY PRICE SHOCKS ON EMPLOYMENT AND INVESTMENT

Within an aggregate model with three inputs to production, the paper studies the effects of an increase in the price of one of the inputs, called commodities. No restrictions are placed on the production possibility constraint, and expectations are assumed to be formed rationally. After considering the effects on the demand for the two remaining inputs, labor and capital, the paper analyzes the effects on employment under a wage rigidity constraint. A dynamic formulation is used to analyze the effects on investment, which are found to depend weakly and sometimes perversely on partial substitution parameters.     

THE CHANGING RESPONSIVENESS OF WAGES TO PRICE-LEVEL SHOCKS: EXPLICIT AND IMPLICIT INDEXATION

The article provides evidence for the U.S over the period 1961-84 that the responsiveness of nonunion wages to price-level shocks changes through time much as the degree of indexation in union contracts does, suggesting that there exists implicit as well as explicit indexation. When coupled with the result from previous research that indexation responds positively to inflation uncertainty, the findings indicate that greater inflation uncertainty may lead to reduced overall wage rigidity. In the context of a rational expectations model with long-term wage contracts, a decline in the effectiveness of an activist monetary policy could result.     

IMPROVEMENT OF THE QUALITY OF RESPONSES TO FACTUAL SURVEY QUESTIONS BY INTERVIEWER TRAINING

In this study we analyze the effects of interviewer trainingon the quality of responses. Data from a field experiment reveala number of significant differences between trained and untrainedinterviewers in terms of nonresponse and the amount of informationobtained. For some questions, an interaction effect occurredbetween interviewer training, the use of tape recorders, andthe kind of responses. The effects of training appear to bedependent on the structure of the questions. Since such effectsoccur primarily with questions that assume a great deal of intervieweractivity, it is suggested that they are indeed due to the applicationof the techniques acquired by training, namely giving instructions,probing, and feedback. A brief analysis of the interviewer-respondentinteraction supports this interpretation.     

THE PROBLEM OF INSTREAM FLOWS

To obtain a surface water right in the arid American West, private appropriators have been required to undertake actual physical diversion of the water. That requirement largely negates the role of private contacting to preserve or enhance water flows for recreational, wildlife and aesthetic purposes. In this paper a model is developed and used to examine the courts' rationale for denying private claims to instream flows. The ways in which such claims can be made amenable to the prior appropriation system are explored. The paper is motivated by the failure of public agencies to achieve an approximately optimal solution.     

A REEXAMINATION OF RESOURCE ALLOCATION RESPONSES TO THE 65-MPH SPEED LIMIT

In a recent issue of Economic Inquiry (35[3]: 614–20) Lave and Elias (1997) contend that the 1987 increase in speed limits to 65 mph on rural interstate roads caused a reduction in statewide fatality rates. They argue that increased fatality rates on rural interstates were counterbalanced by declines on other roads due to compensatory reallocations of drivers and state police. This article is unable to find any empirical evidence of these reallocations. This removes the empirical basis for their hypothesis and implies that the effect of the 65-mph speed limit can be inferred from an analysis of rural interstates only. On these roads, fatality rates increased dramatically.     

THE PRICE TAG OF RESPONSIBILITY

An opportunity in single-parenthood for women is the enhanced sense of competence. Yet, a well-documented hazard is depressed well-being. Remarriage may reverse these outcomes. This study compared two matched samples of divorced and remarried mothers. Contrary to the research hypothesis, remarried mothers had both a higher sense of competence and well-being than divorced mothers, which was significantly related to feelings of competence and satisfaction in the areas of love, community, and homemaking. There were no differences in other areas, such as work or parenting. Differences in income were significantly related to these outcomes, but did not predict a particular competence and well-being type. Remarried mothers were high on the "Love Competency" and "Achievement" Factors and low on the "Friendships" Factor, while the reverse was true for the divorced; these differences best distinguished the two marital groups. Overall, the sense of competence and well-being were dependent and dynaniically inseparable, both globally and in specific life areas. Risks to the sense of competence and well-being for single-parents were feeling in control of and satisfied with their time, finances, current lives (especially in areas of love, community, homemaking), aspirations, and futures. With proper attention to the legitimization and support of the single-parent, intervention might best focus also on single-parenthood as a training ground for self-empowerment and not remarriage.     

STRATEGIC RESPONSES TO THE POLICE AMONG INNER-CITY YOUTH

Research on police–citizen relations is largely focused on how police officers treat citizens, with much less attention given to how citizens behave toward officers. Several studies report that citizens' demeanor affects the way they are treated by police, but researchers have neglected the larger question of how citizens manage their contacts with officers more generally, outside the parameters of face-to-face encounters. The question is particularly salient for young males living in high-crime, inner-city neighborhoods—many of whom have frequent, negative contacts with or observations of the police. This article examines the contours of the youths' strategic responses to the police, drawing on in-depth interviews conducted in disadvantaged neighborhoods in St. Louis. Our analysis draws on Hirschman's framework of exit, voice, and loyalty as options available to individuals when dealing with problematic organizations.     

THE DOUBLE BIND: AN EMPIRICAL STUDY OF RESPONSES TO INCONSISTENT COMMUNICATIONS*

An empirical study of communications in a mother-child context was conducted. Cognitive, emotional, and metacommunicational responses to “subtle inconsistencies” and consistencies in communication in this context were studied. Subtle inconsistency was found to be more stressful, complex, and evocative of responses showing a lack of metacommunication than consistency, by both clinical and non-clinical adolescents. Finer differences were also found between clinical and non-clinical adolescents' emotional and metacommunicational responses to subtle inconsistency. The findings provide empirical support for the double bind hypothesis.     

THE ROLE OF THE BIDDING PROCESS IN PRICE DETERMINATION: JUMP BIDDING IN SEQUENTIAL ENGLISH AUCTIONS

This paper uses data collected from a series of public auctions of used cars in New Jersey to examine how strategic bidding affects price determination in open‐outcry English auctions. “Jumps” in the bidding, which occur when a new offer exceeds the old offer by more than the minimum bid increment, are highly pervasive and consistently related to the item’s presale estimated price. The size of the jumps is not affected by the selling order, however. This jump bidding pattern suggests that open‐outcry auctions are more appropriately interpreted with models that assume common‐item valuations rather than models assuming private valuations. (JEL D44)