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Working Paper
Magazine prices revisited
This paper examines price adjustment behavior in the magazine industry. In a frequently cited study, Cecchetti (1986) constructs a reduced-form (S,s) model for firms. Cecchetti assumes that a firm's pricing rules are fixed for non-overlapping three-year intervals and estimates the model using a conditional logit specification from Chamberlain (1980). The estimates are inconsistent, however, due to the state-dependent specification of the model. I illustrate the econometric problems in Cecchetti's results through a Monte Carlo exercise and then suggest a method for producing consistent ...
Journal Article
Coordination of expectations in the recent crisis: private actions and policy responses
Some of the events of the recent financial crisis have made clear the importance of expectations in an economy. The economic choices individuals make are often based on their expectations of what other people will do?in what economists call a ?coordination game.? In such situations, changes in the beliefs of what others may do can affect the actions of individuals. A key element in such situations is that, as the collective beliefs change and individuals respond to these altered expectations, the outcome in the marketplace can change. In the recent crisis, the coordination of expectations ...
Journal Article
What Accounts for the Growing Divergence between Employment Measures?
Our analysis reveals a significant and persistent divergence between employment measures from the Current Employment Statistics (CES) and Current Population Survey (CPS). Adjusting for the net birth-death contribution of businesses only partially explains this gap. The remaining large discrepancy is likely due to an underestimation of population growth in the CPS, potentially linked to recent immigration fluctuations. This finding has substantial implications for understanding the current labor market: adjusted CPS data reveals a more robust labor market with healthy demand and rapid supply ...
Working Paper
The cost of labor adjustment : inferences from the gap
We study labor adjustment costs. We specify a dynamic optimization problem at the plant-level, allowing for both convex and non-convex adjustment costs. We estimate the parameters of the adjustment process using an indirect inference procedure in which simulated moments are matched with data moments. For this study we use estimates of reduced form adjustment functions obtained by the "gap methodology" reported in Caballero and Engel (1993). Contrary to evidence at the micro level in support of non-convex adjustment costs, our preliminary findings indicate that piecewise quadratic adjustment ...
Working Paper
New exporter dynamics
Models in which heterogeneous plants face sunk export entry costs are standard tools in the international trade literature. How well do these models account for the observed dynamics of new exporters? We document that new exporters initially export small amounts and ? conditional on continuing in the export market ? grow gradually over several years. New exporters are most likely to exit the export market in their first few years. We construct a dynamic discrete choice model of exporting and find that the standard model cannot replicate the behavior of new exporters: New exporters grow too ...
Journal Article
Opportunity knocks: improved matching of jobs and workers
Tzemen and Willis illustrate that over the past year, workers found jobs more closely matched to their educational attainment.
Journal Article
Implications of structural changes in the U.S. economy for pricing behavior and inflation dynamics
Some key features of the behavior of inflation in the United States appear to have changed in the past 20 years, with potentially important implications for forecasters and policymakers. Recent studies have provided evidence of a decline in both the variability and persistence of inflation. ; Such shifts in the behavior or dynamics of inflation would necessitate changes in the economic relationships used by policymakers and economists to assess current conditions, forecast key economic indicators, and determine the implications of policy changes for future economic activity. ; Willis examines ...
Journal Article
What happened to the gains from strong productivity growth?
Over the past decade, the United States economy has experienced strong economic growth due in large part to a resurgence in productivity growth. Little attention has been paid, however, to examining how the gains from this growth have been distributed. In the past few years, observers have noted that the share of income paid to labor has been falling while corporate profits have surged. Also, observers have pointed out that income inequality appears to have widened, with little increase in real wages for low-income workers while executive pay has skyrocketed. Consequently, there has been a ...
Working Paper
Targeting inflation in the 1990s: recent challenges
This paper provides an evaluation of the effectiveness of inflation targeting in four industrial countries --New Zealand, Canada, the United Kingdom, and Sweden --focussing on the recent period of economic recovery. Evidence drawn from fmancial market data suggests that credibility of their inflation targeting regimes on balance has deteriorated during the past year and a half, as reflected mainly in sizeable increases in medium-and long-term interest rates. Even after accounting for spillovers from increases in real rates globally (which appear to have been important) and cyclical effects, ...
Journal Article
Kansas City Fed's Labor Market Conditions Indicators (LMCI)