Knowledge that Transforms

In the past decade, microfinance programs have demonstrated that it is possible to lend to low-income households while maintaining high repayment rates—even without requiring collateral. The programs promise a revolution in approaches to alleviating poverty and spreading financial services, and millions of poor households are served globally. A growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success—particularly the use of group-lending contracts with joint liability. For the most part, however, high repayment rates have not translated into profits, and studies of impacts on poverty yield a mixed picture. In describing emerging tensions, the paper highlights the diversity of innovative mechanisms beyond group-lending contracts, the measurement of financial sustainability, the estimation of economic and social impacts, the costs and benefits of subsidization, and the potential to reduce poverty through savings programs rather than just credit. The promise of microfinance has pushed far ahead of the evidence, and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion.

This paper is a selective survey of fiscal federalism. It begins with a brief review and some reflections on the traditional theory of fiscal federalism: the assignment of functions to levels of government, the welfare gains from fiscal decentralization, and the use of fiscal instruments. It then explores a series of important topics that are the subject of current research: laboratory federalism, interjurisdictional competition and environmental federalism, the political economy of fiscal federalism, market-preserving federalism, and fiscal decentralization in the developing and transitional economies.

This paper provides an overview of the existing theoretical and empirical work on the provision of incentives. It reviews the costs and benefits of many types of pay-for-performance, such as piece rates, promotions, and long-term incentives. The main conclusions are (i) while there is considerable evidence that individuals respond to pay-for-performance, there is less evidence that contracts are designed as predicted by the theory, (ii) there has been little progress made in distinguishing amongst plausible theories, and (iii) we still know little about how incentives are provided to workers whose output is difficult to measure.

The paper reviews the recent literature on monetary policy rules. We exposit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even if the central bank is not trying to inadvisedly push output above its natural level. We also consider the implications of frictions such as imperfect information.

May 01 1999 Rejoinder Michael F. Bryan, Michael F. Bryan Search for other works by this author on: This Site Google Scholar Stephen G. Cecchetti Stephen G. Cecchetti Search for other works by this author on: This Site Google Scholar Author and Article Information Michael F. Bryan Stephen G. Cecchetti Received: December 16 1998 Accepted: December 18 1998 Online ISSN: 1530-9142 Print ISSN: 0034-6535 © 1999 President and Fellows of Harvard College and the Massachusetts Institute of Technology1999 The Review of Economics and Statistics (1999) 81 (2): 203–204. https://doi.org/10.1162/003465399558175 Article history Received: December 16 1998 Accepted: December 18 1998 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn Email Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Michael F. Bryan, Stephen G. Cecchetti; Rejoinder. The Review of Economics and Statistics 1999; 81 (2): 203–204. doi: https://doi.org/10.1162/003465399558175 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsThe Review of Economics and Statistics Search Advanced Search This content is only available as a PDF. © 1999 President and Fellows of Harvard College and the Massachusetts Institute of Technology1999 Article PDF first page preview Close Modal You do not currently have access to this content.

This paper examines the mobility of individuals through the wage and earnings distributions, using 1979-1991 data from the National Longitudinal Survey of Youth. Lifetime wages will be more equally distributed than wages from any single year if individuals change position in the wage distribution over time. The results suggest that mobility is predominantly within group mobility, reducing wage inequality by 12%-26% over a four-year horizon. A detailed examination of within-group mobility, using year-to-year estimates of transition probabilities among quintiles of the distribution, reveals similar general patterns across all skill groups: mobility declined significantly over the years, especially at the lower end of the wage and earnings distributions.

This paper reconsiders the empirical evidence connecting inflation to its higher-order moments. In particular, we examine the statistical properties of the observed positive correlation between the sample mean and the sample cross-sectional skewness of price changes. This correlation has attracted substantial attention over the years and has recently been the focal point of a debate among macroeconomists. We show that the sample mean-skewness correlation suffers from a small-sample bias that accounts for the entirety of the observed correlation. In other words, we establish that one of the stylized facts in the literature on aggregate price behavior need not be a fact at all.

Nonlinear modeling has become popular in applied macroeconomics. Successful attempts include Beaudry and Koop's CDR (current depth of the recession) model of real GNP, and various STAR (smooth transition autoregression) models of industrial production. However, these models have not been directly compared. We compare CDR and STAR models of U.S. real GNP and industrial production. We find (i) within sample, the CDR model fits slightly better than the STAR model; (ii) out of sample, the CDR model forecasts better than the STAR model; and (iii) the CDR model generates very different dynamics than the STAR model.

This paper reexamines the evidence relating core inflation to cross-sectional inflation asymmetry using statistical measures that are robust to the criticism of Bryan and Cecchetti. The results here suggest that there does exist significant positive correlation between core inflation and cross-sectional inflation asymmetry, but only at the monthly frequency. Furthermore, a sampling problem is highlighted which underscores the importance of careful Monte Carlo analysis when exact small-sample distributions are unknown.

This study investigates the dispersion of price levels within highly disaggregated markets by examining plant-level product records from the U.S. Census of Manufactures. The paper estimates the effects of inflation on price dispersion through cross-sectional variation in the drift rate of average input costs within a market, arguing that, in several models that relate inflation to price dispersion, the effects of cost increases on dispersion is similar to the effects of general inflation. We also disentangle the effects of aggregate and idiosyncratic shocks on price dispersion. In general, we find that the higher the drift rate of input costs of a given commodity, the larger the amount of price dispersion. The standard deviation of idiosyncratic shocks also is positively correlated with the degree of price dispersion.