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Jel Classification:D83 

Working Paper
Production and Inventory Dynamics under Ambiguity Aversion

We propose a production-cost smoothing model with Knightian uncertainty due to ambiguity aversion to study the joint behavior of production, inventories, and sales. Our model can explain four facts that previous studies find difficult to account for simultaneously: (i) the high volatility of production relative to sales, (ii) the low ratio of inventory-investment volatility to sales volatility, (iii) the positive correlation between sales and inventories, and (iv) the negative correlation between the inventory-to-sales ratio and sales. We find that the stock-out avoidance motive (Kahn 1987) ...
Research Working Paper , Paper RWP 21-05

Working Paper
More on Middlemen: Equilibrium Entry and Efficiency in Intermediated Markets

This paper generalizes Rubinstein and Wolinsky?s model of middlemen (intermediation) by incorporating production and search costs, plus more general matching and bargaining. This allows us to study many new issues, including entry, efficiency and dynamics. In the benchmark model, equilibrium exists uniquely, and involves production and intermediation for some parameters but not others. Sometimes intermediation is essential: the market operates iff middlemen are active. If bargaining powers are set correctly equilibrium is efficient; if not there can be too much or too little economic ...
Working Paper Series , Paper WP-2014-18

Working Paper
Investor Sentiment and the (Discretionary) Accrual-return Relation

Discretionary accruals are positively associated with stock returns at the aggregate level but negatively so in the cross section. Using Baker-Wurgler investor sentiment index, we find that a significant presence of sentiment-driven investors is important in accounting for both patterns. We document that the aggregate relation is only prominent during periods of high investor sentiment. Similarly, the cross-section relation is considerably stronger in high-sentiment periods in both economic magnitude and statistical significance. We then embed investor sentiment into a stylized model of ...
International Finance Discussion Papers , Paper 1300

Working Paper
When Do Informational Interventions Work? Experimental Evidence from New York City High School Choice

This paper reports the results of a large, school-level randomized controlled trial evaluating a set of three informational interventions for young people choosing high schools in 473 middle schools, serving over 115,000 8th graders. The interventions differed in their level of customization to the student and their mode of delivery (paper or online); all treated schools received identical materials to scaffold the decision-making process. Every intervention reduced likelihood of application to and enrollment in schools with graduation rates below the city median (75 percent). An important ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 057

What Consumer Surveys Say about the Design of a U.S. CBDC for Retail Payments

Although researchers continue to discuss the possibility of a central bank digital currency (CBDC) for retail payments in the United States, the success of a CBDC will depend on consumer adoption. To understand how a CBDC could provide a good user experience, recent surveys in the United States and in other countries have asked consumers about their wants and needs for a potential CBDC. In the United States, a majority of respondents to these surveys seek dependability, convenience, and security.
Payments System Research Briefing

Working Paper
Modeling the Consumption Response to the CARES Act

To predict the effects of the 2020 U.S. CARES act on consumption, we extend a model that matches responses of households to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during the lockdown, many types of spending are undesirable or impossible. Second, some of the jobs that disappear during the lockdown will not reappear when it is lifted. We estimate that, if the lockdown is short-lived, the combination of expanded unemployment insurance benefits and stimulus payments should be sufficient to allow a swift ...
Finance and Economics Discussion Series , Paper 2020-077

Working Paper
Online Job Posts Contain Very Little Wage Information

We characterize the little wage information contained in online job posts. Wage information is rare: only 14% of posts contain any information. Of these, wage ranges are more common than point wages, and are wide on average, spanning 28% of the midpoint (e.g. $32,000-$42,000/yr). Posted wages are highly selected in low income occupations: 40% higher than wages of employed workers. High wage firms are more opaque, with more and wider ranges. We find zero correlation between wage information and local labor market tightness. We provide an example of bias in econometric inference that worsens as ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 083

Working Paper
The Social Cost of Near-Rational Investment

We show that the stock market may fail to aggregate information even if it appears to be efficient, and that the resulting decrease in the information content of prices may drastically reduce welfare. We solve a macroeconomic model in which information about fundamentals is dispersed and households make small, correlated errors when forming expectations about future productivity. As information aggregates in the market, these errors amplify and crowd out the information content of stock prices. When prices reflect less information, the conditional variance of stock returns rises, causing an ...
Working Paper Series , Paper 2016-16

Working Paper
In Search of a Risk-free Asset

To attract retail time deposits, over 7,000 FDIC insured U.S. commercial banks publicly post their yield offers. I document an economically sizable and highly pro-cyclical cross-sectional dispersion in these yield offers during the period 1997 - 2011. Banks adjusted their yields rigidly and asymmetrically with median duration of 7 weeks in response to increasing or constant Fed Funds rate target regimes and 3 weeks during regimes of decreasing Fed Fund rate target. I investigate to what extent information (search) costs on the part of the investors in this market can explain the observed ...
Finance and Economics Discussion Series , Paper 2014-108

Working Paper
Is the Intrinsic Value of Macroeconomic News Announcements Related to their Asset Price Impact?

The literature documents a heterogeneous asset price response to macroeconomic news announcements. We explain this variation with a novel measure of the intrinsic value of an announcement - the announcement's ability to nowcast GDP growth, inflation, and the Federal Funds Target Rate-and decompose it into the announcement's relation to fundamentals, a timeliness premium, and a revision premium. We find that differences in intrinsic value can explain a significant fraction of the variation in the announcements' price impact on Treasury bond yields. The announcements' timeliness and relation to ...
Finance and Economics Discussion Series , Paper 2015-46


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