Search Results
Journal Article
Discrete policy changes and empirical models of the federal funds rate
Empirical models of the federal funds rate almost uniformly use the quarterly or monthly average of the daily rates. One empirical question about the federal funds rate concerns the extent to which monetary policymakers smooth this interest rate. Under the hypothesis of rate smoothing, policymakers set the interest rate this period equal to a weighted average of the rate inherited from the previous quarter and the rate implied by current economic conditions, such as the Taylor rule rate. Perhaps surprisingly, however, little attention has been given to measuring the interest rate inherited ...
Journal Article
Using cyclical regimes of output growth to predict jobless recoveries
Gaps between output and employment growth are often attributed to transitional phases by which the economy adjusts to shifts in the rate of trend productivity growth. Nevertheless, cyclical factors can also drive a wedge between output and employment growth. This article shows that one measure of cyclical dynamics-the expected output loss associated with a recession-helps predict the gap between output and employment growth in the coming four quarters. This measure of the output loss associated with a recession can take unexpected twists and turns as the recovery unfolds. The empirical ...
Journal Article
Why predict past FOMC actions?
Working Paper
Fixing Swiss potholes: the importance of improvements
This note sheds new light on the dynamic properties of maintenance and repair and examines the behavior of an additional form of capital spending-that of improvements. The analysis examines a unique long-run data set on Swiss road spending.
Journal Article
The mechanics of a successful exchange rate peg: lessons for emerging markets
To the surprise of many market watchers, Thailand?s exchange rate peg to the dollar collapsed in July 1997, leading to similar rounds of currency devaluations in other East Asian countries. This study seeks to determine whether there were identifiable contrasts in implementation between Thailand?s peg and a perennially successful peg?Austria?s peg to the Deutsche mark?that would have hinted at problems for Thailand prior to July 1997. The comparison suggests that Thailand was not sufficiently vigilant about keeping its inflation rate low in the early 1990s. By 1995, Thailand faced a situation ...
Journal Article
Measuring monetary policy inertia in target Fed funds rate changes
Recent research has grappled with an apparent paradox: Why would a central bank that is focused primarily on inflation control exhibit signs of inertia when making policy adjustments? In this article, Michael Dueker argues that fully characterizing the policy inertia is a precondition towards resolving the apparent paradox. This article presents empirical estimates of adjustments to the target fed funds rate that take into account two facets of policy inertia: a partial-adjustment mechanism and thresholds for making discrete changes to the target fed funds rate. With a more complete picture ...
Working Paper
Do bank loan rates exhibit a countercyclical mark-up?
Based on a switching-cost model, we examine empirically the hypotheses that bank loan mark-ups are countercyclical and asymmetric in their responsiveness to recessionary and expansionary impulses. The first econometric model treats changes in the mark-up as a continuous variable. The second treats them as an ordered categorical variable due to the discrete nature of prime rate changes. By allowing the variance to switch over time as a Markov process, we present the first conditionally heteroskedastic discrete choice (ordered probit) model for time-series applications. This feature yields a ...
Working Paper
The price puzzle and indeterminacy in an estimated DSGE model
We extend Lubik and Schorfheide's (2004) likelihood-based estimation of dynamic stochastic general equilibrium (DSGE) models under indeterminacy to encompass a sample period including both determinacy and indeterminacy by implementing the change-point methodology (Chib, 1998). The most striking finding about the indeterminacy regime, which is estimated to coincide with the Great Inflation of the 1970s, is that it exhibits the price puzzle, in that the inflation rate rises immediately and in a sustained manner following a positive interest rate shock. Thus, the price puzzle might have been a ...
Journal Article
Political economy of state homeland security grants
Working Paper
The practice boundaries of advanced practice nurses: an economic and legal analysis
The purpose of this study is to examine the causes and effects of State regulation that determines the extent of professional independence of advanced practice nurses (APNs). We analyze determinants of these regulations in panel data across States. We find that in States where APNs have acquired a substantial amount of professional independence, the earnings of APNs are substantially lower, and those of physicians' assistants are substantially higher, than in other States. These results are striking since physicians' assistants are in direct competition with APNs; the only real operational ...