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.

An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output

Abstract: This paper characterizes the dynamic effects of shocks in government spending and taxes on U. S. activity in the postwar period. It does so by using a mixed structural VAR/event study approach. Identiecation is achieved by using institutional information about the tax and transfer systems to identify the automatic response of taxes and spending to activity, and, by implication, to infer escal shocks. The results consistently show positive government spending shocks as having a positive effect on output, and positive tax shocks as having a negative effect. One result has a distinctly nonstandard eavor: both increases in taxes and increases in government spending have a strong negative effect on investment spending. The predominant, Keynesian, view of the effects of escal policy that was embedded in the large-scale macroeconometric models of the seventies and eighties has come under attack. Theoretically, in the neoclassical approach that has developed in the last twenty years, government spending can have drastically different effects than in Keynesian models, particularly on private consumption. Empirically, the response of the economy to several episodes of escal retrenchment in the last efteen years has been at odds with conventional Keynesian wisdom: on several occasions, private consumption and GDP increased signiecantly while government spending was severely cut. Finally, the evidence from large-scale econometric models has been largely dismissed on the grounds that, because of their Keynesian structure, these models assume rather than document a positive effect of escal expansions on output.

Stock Returns and the Term Structure

Abstract: It is well known that in the postwar period stockreturns have tended to be low when the short term nominal interest rate is high. In this paper I show that more generally the state of the term structure of interest rates predicts stock returns. Risk premia on stocks appear to move closely together with those on 20-year Treasury bonds, while risk premia on Treasury bills move somewhat independently. Average returns on 20-year bonds have been very low relative to average returns on stocks. I use these observations to test some simple asset pricing models. First I consider latent variable models in which betas are constant and risk premia vary with expected returns on a small number of unobservable hedge portfolios. The data strongly reject a single-latent-variable model.The last part of the paper examines the relationship between conditional means and variances of returns on bills, bonds and stocks. Bill returns tend to be high when their conditional variance is high, but there is a perverse negative relationship between stock returns and their conditional variance. A model is estimated which assumes that asset returns are determined by their time-varying betas with a fixed-weight "benchmark" portfolio of bills, bonds and stocks, whose return is proportional to its conditional variance. This portfolio is estimated to place almost all its weight on bills, indicating that uncertainty about nominal interest rates is important in pricing both short- and long-term assets.

Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve

Abstract: This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared to the commonly used sticky-price model, this sticky-information model displays three, related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although announced disinflations are less contractionary than surprise ones). Second, monetary policy shocks have their maximum impact on inflation with a substantial delay. Third, the change in inflation is positively correlated with the level of economic activity.

Natural and Quasi- Experiments in Economics

Abstract: Using research designs patterned after randomized experiments, many recent economic studies examine outcome measures for treatment groups and comparison groups that are not randomly assigned. By using variation in explanatory variables generated by changes in state laws, government draft mechanisms, or other means, these studies obtain variation that is readily examined and is plausibly exogenous. This paper describes the advantages of these studies and suggests how they can be improved. It also provides aids in judging the validity of inferences they draw. Design complications such as multiple treatment and comparison groups and multiple pre- or post-intervention observations are advocated.

The Role of Social Capital in Financial Development

Abstract: To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.