Knowledge that Transforms

This paper examines the demand for money under conditions of very high inflation in Argentina, Bolivia, Brazil, Chi le, and Peru during the 1970s and 1980s. The authors test whether the monetary and inflationary experiences of these countries can be adequately characterized by the Cagan (1956) model, using an econometric procedure that is not reliant on any particular assumpti on concerning expectations formation except that forecasting errors are stationary. The authors also examine the importance of foreign asset substitution in domestic portfolios and the hypothesis that monetary policy was tantamount to maximization of the inflation tax revenue before testing the rational expectations hypothesis.

Maureen L. Cropper, Leland Deck, Nalin Kishor, Kenneth E. McConnell, Valuing Product Attributes Using Single Market Data: A Comparison of Hedonic and Discrete Choice Approaches, The Review of Economics and Statistics, Vol. 75, No. 2 (May, 1993), pp. 225-232

Inequality in U.S. consumption expenditures is examined using the Lerman and Yitzhaki covariance method for decomposing the Gini coefficient by factors. From the decomposition, nonparametric estimates of elasticities with respect to total expenditures are derived. Using data from the 1987 U.S. Consumer Expenditure Interview Survey, the overall Gini based on total annual consumption expenditures is 0.33. Consistent with parametric expenditure elasticities, the Gini expenditure elasticities for household operations, apparel and services, and entertainment are relatively high. An implication of this result is that taxing such goods and services will increase the progressivity or reduce the regressivity of the tax system.

This paper uses a two-step methodology to examine the relationship between firm inefficiency and the regulatory closure of savings and loans (S&Ls). In the first step, using multiproduct, translog stochastic cost frontiers, the authors estimate inefficiency scores separately for mutual and stock S&Ls operating in the Southwest in 1988. They use the inefficiency scores in second step logit models to identify determinants of regulatory closure. For both mutual and stock S&Ls, the authors find a significant positive relationship between firm inefficiency and regulatory closure. They also find a greater probability of closure for S&Ls in economically depressed states.

Revenue-equivalence of competitive and discriminatory formats is a major result for private-value multiunit auctions with risk-neutral bidders. Among the factors that may cause this result to break down, the most notorious ones are risk-aversion, value-affiliation, and endogenous bidder participation. Using data from competitive and discriminatory auctions undertaken in the Zambian foreign exchange market, the author analyzes revenue-equivalence and other bidding phenomena. The results indicate that (1) competitive auctions were revenue-superior due to higher participation; (2) high bidders adjusted with delay to an auction format change; and (3) a reservation bid was used as a policy instrument.

The last decade has seen widespread deregulation of domestic financial markets in the United Kingdom. This paper uses regional data to investigate the connection between consumption and financial deregulation. It is concluded that deregulation has led to a significant increase in the forward-looking nature of aggregate consumption.

Largest debtholders in keiretsu member companies hold more stock if the companies have high debt-to-equity ratios or have weaker collateral, greater prospects of growth, or unique aspects. All are factors associated with the agency problems of debt that stockholding by a debtholder can help to resolve. The stockholding also induces greater borrowing by these same companies, ceteris paribus.

This paper tests the long-run validity of PPP using Johansen's multivariate cointegration methodology on exchange rates and domestic and foreign price levels. Monthly data covering the recent flexible exchange rate period of the DM vis a vis 15 currencies le ad to the following conclusion: PPP seems to hold in the long run for s ix European currencies: the Pound, Lira, Norwegian Krone, Schilling, Escudo, and Peseta. However, PPP has to be rejected.for the United States and the Canadian Dollar as well as for the Belgian Franc and the Danish Krone. Nevertheless, the authors' analysis is more favorable to PPP as a long-run property of exchange rates than the recent work applying the Engle/Granger regression methodology.

This paper presents a modified frontier approach to estimate hedonic regressions for data on rent-controlled and uncontrolled apartments. This new approach allows the author to estimate the size of the subsidy from landlords to tenants of rent-controlled apartments. In addition, this method provides the first estimates of the amount by which controls increase rents for uncontrolled apartments. The study shows that, in New York City in 1968, rents in the controlled sector would rise 22 to 26 percent upon decontrol, while rents in the uncontrolled sector would fall about 22 to 25 percent upon removal of rent controls.

Fidel Jaramillo, Fabio Schiantarelli, Alessandro Sembenelli, Are Adjustment Costs for Labor Asymmetric? An Econometric Test on Panel Data for Italy, The Review of Economics and Statistics, Vol. 75, No. 4 (Nov., 1993), pp. 640-648