National Bureau of Economic Research

About: National Bureau of Economic Research is a nonprofit organization based out in Cambridge, Massachusetts, United States. It is known for research contribution in the topics: Monetary policy & Population. The organization has 2626 authors who have published 34177 publications receiving 2818124 citations. The organization is also known as: NBER & The National Bureau of Economic Research.

Testing Continuous-Time Models of the Spot Interest Rate

Abstract: Different continuous-time models for interest rates coexist in the literature. We test parametric models by comparing their implied parametric density to the same density estimated nonparametrically. We do not replace the continuous-time model by discrete approximations, even though the data are recorded at discrete intervals. The principal source of rejection of existing models is the strong nonlinearity of the drift. Around its mean, where the drift is essentially zero, the spot rate behaves like a random walk. The drift then mean-reverts strongly when far away from the mean. the volatility is higher when away from the mean. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy

Abstract: This paper studies the labor market experiences of white male college graduates as a function of economic conditions at time of college graduation. I use the National Longitudinal Survey of Youth whose respondents graduated college between 1979 and 1988 and are followed for 14 to 23 years after college graduation. I employ both national and state variation in economic conditions at time of college graduation to identify the effect. Because timing and location of college graduation could potentially be affected by economic conditions, I also instrument for the national unemployment rate usinf year of birth and for the state unemployment rate using year of birth and state of residence at age 14. I find large, negative wage effects to graduating in a worse economy which persist for the entire period studied. I find that cohorts who graduate in worse economies are in lower level occupations and have slightly higher educational attainment. Labor supply is unaffected.

Investment-Cash Flow Sensitivities are Useful: A Comment on Kaplan and Zingales

Abstract: Arecent paper in this Journal by Kaplan and Zingales reexamines a subset of erms from work of Fazzari, Hubbard, and Petersen and criticizes the usefulness of investment-cash eow sensitivities for detecting enancing constraints We show that the Kaplan and Zingales theoretical model fails to capture the approach employed in the literature and thus does not provide an effective critique Moreover, we describe why their empirical classiecation system is eawed in identifying both whether erms are constrained and the relative degree of constraints across erm groups We conclude that their results do not support their conclusions about the usefulness of investment-cash eow sensitivities In a recent paper in this Journal Kaplan and Zingales {1997, hereinafter KZ} argue that investment-cash eow sensitivities do not provide useful evidence about the presence of enancing constraints Because KZ use a subset of the same erms and the same regressions as Fazzari, Hubbard, and Petersen {1988, hereinafter FHP} and claim {page 176} that FHP ‘‘can legitimately be considered the parent of all papers in this literature,’’ it is appropriate that we respond Based on a simple theoretical model, KZ reach the provocative conclusion {page 211} that ‘‘the investment-cash eow sensitivity criterion as a measure of enancial constraints is not well-grounded in theory’’ In Section I we show that the KZ model does not capture the theoretical approach employed in FHP and many subsequent studies Most of the KZ paper attempts to show that empirical investment-cash eow sensitivities do not increase monotonically with the degree of enancing constraints within the 49 low-dividend erms from the FHP sample In Section II we explain why the KZ classiecation of the degree of constraints is eawed in identifying both whether or not erms are constrained (absolute constraints) as well as the relative degree of constraints across ermsAs a result, we argue in Section III that there is no expected ex ante pattern for the

Why Do Open Economies Have Bigger Governments

Abstract: This paper demonstrates that there is a robust empirical association between the extent to which an economy is exposed to trade and the size of its government sector. This association holds for a large cross-section of countries, in low- as well as high-income samples, and is robust to the inclusion of a wide range of controls. The explanation appears to be that government consumption plays a risk-reducing role in economies exposed to a significant amount of external risk. When openness is interacted with explicit measures of external risk, such as terms-of-trade uncertainty and product concentration of exports, it is the interaction terms that enter significantly, and the openness term loses its significance (or turns negative). The paper also demonstrates that government consumption is the majority of countries.

Monitoring Corruption: Evidence from a Field Experiment in Indonesia

Abstract: This paper presents a randomized field experiment on reducing corruption in over 600 Indonesian village road projects. I find that increasing government audits from 4 percent of projects to 100 percent reduced missing expenditures, as measured by discrepancies between official project costs and an independent engineers’ estimate of costs, by eight percentage points. By contrast, increasing grassroots participation in monitoring had little average impact, reducing missing expenditures only in situations with limited free-rider problems and limited elite capture. Overall, the results suggest that traditional topdown monitoring can play an important role in reducing corruption, even in a highly corrupt environment.