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Template-Type: ReDIF-Paper 1.0
Title: The Delivery of Market Timing Services: Newsletters Versus Market Timing Funds
Author-Name: Alex Kane
Author-Person: pka501
Note: ME
Number: 0075
Creation-Date: 1991-08
Order-URL: http://www.nber.org/papers/t0075
File-URL: http://www.nber.org/papers/t0075.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Intermediation, Vol. 1, No. 1, pp. 150-166, (1990).
Abstract: This paper examines the dissemination of market timing information (signals on the overall performance of risky assets relative to the risk free rate). We consider two delivery systems. Under the newsletter delivery system market timing information is disseminated solely through newsletter. Under the fund delivery system, timers set up timing funds in which investors can invest. In the absence of market imperfections we find that both systems produce the same result. With restrictions on borrowing or with other nonlinearities we find the newsletter system to be superior. This is one possible explanation for the plethora of market timing newsletters and the paucity of market timing funds.
Handle: RePEc:nbr:nberte:0075
Template-Type: ReDIF-Paper 1.0
Title: Full Information Estimation and Stochastic Simulation of Models with Rational Expectations
Author-Name: Ray C. Fair
Author-Person: pfa24
Author-Name: John B. Taylor
Author-Person: pta174
Note: EFG
Number: 0078
Creation-Date: 1991-10
Order-URL: http://www.nber.org/papers/t0078
File-URL: http://www.nber.org/papers/t0078.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Applied Econometrics, Vol. 5, pp. 381-392, (1990).
Abstract: A computationally feasible method for the full information maximum likelihood estimation of models with rational expectations is described in this paper. The stochastic simulation of such models is also described. The methods discussed in this paper should open the way for many more tests of the rational expectations hypothesis within macroeconometric models.
Handle: RePEc:nbr:nberte:0078
Template-Type: ReDIF-Paper 1.0
Title: Does Correcting for Heteroskedasticity Help?
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME
Number: 0088
Creation-Date: 1991-08
Order-URL: http://www.nber.org/papers/t0088
File-URL: http://www.nber.org/papers/t0088.pdf
File-Format: application/pdf
Publication-Status: published as Economics Letters, Vol. 34, pp. 351-356, (1990).
Handle: RePEc:nbr:nberte:0088
Template-Type: ReDIF-Paper 1.0
Title: Heteroscedasticity Diagnostics Based on "Corrected" Standard Errors
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: PE
Number: 0094
Creation-Date: 1991-01
Order-URL: http://www.nber.org/papers/t0094
File-URL: http://www.nber.org/papers/t0094.pdf
File-Format: application/pdf
Publication-Status: published as Sturdy Econometrics, Hants, England: Edward Elgar Publishers 1994.
Abstract: Weights are found for weighted least squares estimates such that a selected coefficient (a) changes by one standard deviation or (b) changes in sign. The length of the vector of weight changes is equal to the usual OLS standard error divided by the White-corrected standard errors. Thus the White-corrected standard errors can help decide if it is necessary to adjust the location of the confidence sets to correct for heteroscedasticity. The vector of weight changes is similar to the effect of omitting observations, one at a time. The sensitivity diagnostics of Belsley, Kuh and Welsch are therefore linked with heteroscedasticity issues.
Handle: RePEc:nbr:nberte:0094
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Insider Trading on Insiders' Reaction to Opportunities to "Waste" Corporate Value
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Chaim Fershtman
Author-Person: pfe232
Note: ME
Number: 0095
Creation-Date: 1991-02
Order-URL: http://www.nber.org/papers/t0095
File-URL: http://www.nber.org/papers/t0095.pdf
File-Format: application/pdf
Abstract: This paper analyzes certain effects of insider trading on the principal-agent problem in corporations. Specifically, we focus on those managerial choices that confront managers with the need to decide between options that produce different corporate value but do not differ in the managerial effort involved. In the absence of insider trading, and as long as managers' salaries are positively correlated with their firms results, managers will make such choices efficiently, and consequently such choices have previously received little attention, we show that, in the presence of insider trading, managers may make such choices inefficiently. With such trading, managers night elect to have a lower corporate value -- that is, they may 'waste' corporate value -- because having such a value might enable them to make greeter trading profits. We analyze the conditions under which the problem we identify is likely to arise and the factors that determine its severity. We also identify those restrictions en insider trading that can eliminate this problem.
Handle: RePEc:nbr:nberte:0095
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Insider Trading on Insiders' Choice Among Risky Investment Projects
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Chaim Fershtman
Author-Person: pfe232
Note: ME
Number: 0096
Creation-Date: 1991-02
Order-URL: http://www.nber.org/papers/t0096
File-URL: http://www.nber.org/papers/t0096.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial and Quantitative Analysis, vol. 29, no. 1, pp. 1-4 (1994)
Abstract: This paper studies certain effects of insider trading on the principal-agent problem in corporations. Specifically, we focus on insiders' choice among investment projects. Other things equal, insider trading leads insiders to choose riskier investment projects, because increased volatility of results enables insiders to make greater trading profits if they learn these results in advance of the market. This effect might or might not be beneficial, however, because insiders' risk-aversion pulls them toward a conservative investment policy. We identify and compare insiders' choices of projects with insider trading and those without such trading. We also study the optimal contract design with insider trading and without such trading, thus identifying the effects that allowing such trading has on other elements of insiders' compensation. Using these results, we identify the conditions under which insider trading increases or decreases corporate value by affecting the choice of projects with uncertain returns .
Handle: RePEc:nbr:nberte:0096
Template-Type: ReDIF-Paper 1.0
Title: Bargaining and the Division of Value in Corporate Reorganization
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Howard F. Chang
Note: ME
Number: 0097
Creation-Date: 1991-02
Order-URL: http://www.nber.org/papers/t0097
File-URL: http://www.nber.org/papers/t0097.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law, Economics and Organization, vol. 8, no. 2, pp 253-179 (1992)
Abstract: This paper develops a sequential bargaining model of the negotiations in corporate reorganizations under Chapter 11. We identify the expected outcome of the bargaining process and examine the effects of the legal rules that shape the bargaining. We determine how much value equity holders and debt holders receive under the Chapter 11 process, and compare the value obtained by each class with the 'contractual right' of that class. We identify and analyze three reasons that the equity holders can expect to obtain some value even when the debt holders are not paid in full. Finally, we show how the features of the reorganization process and of the company filing under Chapter 11 affect the division of value, and in this way we provide several testable predictions.
Handle: RePEc:nbr:nberte:0097
Template-Type: ReDIF-Paper 1.0
Title: Standard Risk Aversion
Author-Name: Miles S. Kimball
Author-Person: pki97
Note: ME
Number: 0099
Creation-Date: 1991-03
Order-URL: http://www.nber.org/papers/t0099
File-URL: http://www.nber.org/papers/t0099.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, May 1993, 61 (3), pp. 589-611
Abstract: This paper introduces the concept of standard risk aversion. A von Neumann-Morgenstern utility function has standard risk aversion if any risk makes a small reduction in wealth more painful (in the sense of an increased reduction in expected utility) also makes any undesirable, independent risk more painful. It is shown that, given monotonicity and concavity, the combination of decreasing absolute risk aversion and decreasing absolute prudence is necessary and sufficient for standard risk aversion. Standard risk aversion is shown to imply not only Pratt and Zeckhauser's 'proper risk aversion" (individually undesirable, independent risks always being jointly undesirable) , but also that being forced to face an undesirable risk reduces the optimal investment in a risky security with and independent return. Similar results are established for the effect of broad class of increases in one risk on the desirability of (or optimal investment in) a second, independent risk.
Handle: RePEc:nbr:nberte:0099
Template-Type: ReDIF-Paper 1.0
Title: Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Pierre Perron
Author-Person: ppe32
Note: EFG ME
Number: 0100
Creation-Date: 1991-04
Order-URL: http://www.nber.org/papers/t0100
File-URL: http://www.nber.org/papers/t0100.pdf
File-Format: application/pdf
Publication-Status: published as NBER Macroeconomics Annual 1991, Vol. 6, eds. O.J. Blanchard and S. Fischer , Cambridge: MIT Press, January 1992.
Publication-Status: published as Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots, John Y. Campbell, Pierre Perron. in NBER Macroeconomics Annual 1991, Volume 6, Blanchard and Fischer. 1991
Abstract: This paper is an introduction to unit root econometrics as applied in macroeconomics. The paper first discusses univariate time series analysis, emphasizing the following topics: alternative representations of unit root processes, unit root testing procedures, the power of unit root tests, and the interpretation of unit root econometrics in finite samples. A second part of the paper tackles similar issues in a multivariate context where cointegration is now the central concept. The paper reviews representation, testing, and estimation of multivariate time series models with some unit roots. Two important themes of this paper are first, the importance of correctly specifying deterministic components of the series; and second, the usefulness of unit root tests not as methods to uncover some -true relation" but as practical devices that can be used to impose reasonable restrictions on the data and to suggest what asymptotic distribution theory gives the best approximation to the finite-sample distribution of coefficient estimates and test statistics.
Handle: RePEc:nbr:nberte:0100
Template-Type: ReDIF-Paper 1.0
Title: On the Optimality of Reserve Requirements
Author-Name: Richard D. Cothren
Author-Name: Roger N. Waud
Note: ME
Number: 0101
Creation-Date: 1991-04
Order-URL: http://www.nber.org/papers/t0101
File-URL: http://www.nber.org/papers/t0101.pdf
File-Format: application/pdf
Publication-Status: published as Cothren, Richard D. and Roger N. Waud. "On The Optimality Of Reserve Requirements," Journal of Money, Credit and Banking, 1994, v26(4), 827-838.
Abstract: An implicit rationale for a bank reserve requirement is that a central monetary authority is in a unique position (as "social planner) to impose a "socially superior" outcome to that yielded by a free banking system. We illustrate how this can be true in the context of a simple economy modeled to mimic certain basic characteristics of a monetary economy with banks and agents who trade with one another. Banks exist in our model because by pooling liquidation risks they provide liquidity otherwise unavailable to depositors, which, in turn, provides the incentive - for using deposit claims as the medium of exchange.
Handle: RePEc:nbr:nberte:0101
Template-Type: ReDIF-Paper 1.0
Title: Measures of Fit for Calibrated Models
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: PE
Number: 0102
Creation-Date: 1991-05
Order-URL: http://www.nber.org/papers/t0102
File-URL: http://www.nber.org/papers/t0102.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, vol. 101, no. 6, (December 1993) p. 1011-1041
Abstract: This paper develops a new procedure for assessing how well a given dynamic economic model describes a set of economic time series. To answer the question, the variables in the model are augmented with just enough error so that the model can exactly mimic the second moment properties of the actual data. The properties of this error provide a useful diagnostic for the economic model, since they show the dimensions in which model fits the data relatively well and the dimensions in which it fits the data relatively poorly.
Handle: RePEc:nbr:nberte:0102
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Workouts and the Effects of Reorganization Law
Author-Name: Robert Gertner
Author-Name: David Scharfstein
Author-Person: psc177
Note: ME
Number: 0103
Creation-Date: 1991-05
Order-URL: http://www.nber.org/papers/t0103
File-URL: http://www.nber.org/papers/t0103.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 46, No. 4., pp. 1189-1222 September 1991
Abstract: We present a model of a financially distressed firm with outstanding bank debt and public debt. Coordination problems among public debtholders introduce investment inefficiencies in the workout process. In most cases, these inefficiencies are not mitigated by the ability of firms to buy back their public debt with cash and other securities--the only feasible way that firms can restructure their public debt. We show that Chapter 11 reorganization law increases investment and we characterize the types of corporate financial structures for which this increased investment enhances efficiency.
Handle: RePEc:nbr:nberte:0103
Template-Type: ReDIF-Paper 1.0
Title: Financial Intermediation and Monetary Policies in the World Economy
Author-Name: Vittorio Grilli
Author-Name: Nouriel Roubini
Author-Person: pro145
Note: ITI ME IFM
Number: 0104
Creation-Date: 1991-05
Order-URL: http://www.nber.org/papers/t0104
File-URL: http://www.nber.org/papers/t0104.pdf
File-Format: application/pdf
Abstract: In this paper we investigate the role of credit institutions in transmitting monetary shocks to the domestic economy and to the rest of the world output. In modeling the monetary and financial sector of the economy we distinguish between monetary injections via lump-sum transfers to individuals and those via increased credit to the commercial banking sector in the form of discount window operations. Appropriately, we distinguish between the discount rate of the central bank and the lending and borrowing interest rates of commercial banks, which, we assume, are also subject to reserves requirements. We find that a steady state increase in monetary injections via increases in domestic credit leads to an increase in domestic output. On the other hand, we find that an increase in the steady state level of monetary transfers reduces the level of output.
Handle: RePEc:nbr:nberte:0104
Template-Type: ReDIF-Paper 1.0
Title: Confidence Intervals for the Largest Autoresgressive Root in U.S. Macroeconomic Time Series
Author-Name: James H. Stock
Author-Person: pst148
Note: EFG
Number: 0105
Creation-Date: 1991-05
Order-URL: http://www.nber.org/papers/t0105
File-URL: http://www.nber.org/papers/t0105.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, 28 (1991) no. 3, pp. 435-450
Abstract: This paper provides asymptotic confidence intervals for the largest autoregressive root of a time series when this root is close to one. The intervals are readily constructed either graphically or using tables in the Appendix. When applied to the Nelson-Plosser (1982) data set, the main conclusion is that the confidence intervals typically are wide. The conventional emphasis on testing for whether the largest root equals one fails to convey the substantial sampling variability associated with this measure of persistence.
Handle: RePEc:nbr:nberte:0105
Template-Type: ReDIF-Paper 1.0
Title: The Relative Importance of Permanent and Transitory Components: Identi- fication and Some Theoretical Bounds
Author-Name: Danny Quah
Author-Person: pqu9
Note: EFG
Number: 0106
Creation-Date: 1991-06
Order-URL: http://www.nber.org/papers/t0106
File-URL: http://www.nber.org/papers/t0106.pdf
File-Format: application/pdf
Abstract: Much macroeconometric discussion has recently emphasized the economic significance of the size of the permanent component in GNP. Consequently, a large literature has developed that tries to estimate this magnitude measured, essentially, as the spectral density of increments in GNP at frequency zero. This paper shows that unless the permanent component is a random walk this attention has been misplaced: in general, that quantity does not identify the magnitude of the permanent component. Further, by developing bounds on reasonable measures of this magnitude, the paper shows that a random walk specification is biased towards establishing the permanent component as important.
Handle: RePEc:nbr:nberte:0106
Template-Type: ReDIF-Paper 1.0
Title: Randomization and Social Policy Evaluation Revisited
Author-Name: James J. Heckman
Note: LS
Number: 0107
Creation-Date: 1991-07
Order-URL: http://www.nber.org/papers/t0107
File-URL: http://www.nber.org/papers/t0107.pdf
File-Format: application/pdf
Publication-Status: published as in Florent Bédécarrats, Isabelle Guérin and François Roubaud (Eds.), Randomized controlled trials in the field of development: a critical perspective, Oxford University Press.
Abstract: This paper considers the evidence on the effectiveness and limitations of randomized controlled trials in economics. I revisit my previous paper "Randomization and Social Policy Evaluation" and update its message. I present a brief history of randomization in economics and identify two waves of enthusiasm for the method as "Two Awakenings" because of the near-religious zeal associated with both waves. I briefly summarize the lessons of the first wave and forecast the same lessons will be learned in the second wave.
Handle: RePEc:nbr:nberte:0107
Template-Type: ReDIF-Paper 1.0
Title: Dividend Yields and Expected Stock Returns: Alternative Procedures for Interference and Measurement
Author-Name: Robert J. Hodrick
Author-Person: pho115
Note: ME
Number: 0108
Creation-Date: 1991-07
Order-URL: http://www.nber.org/papers/t0108
File-URL: http://www.nber.org/papers/t0108.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Studies 5, no. 3, pp. 357-386, 1992
Abstract: Alternative ways of conducting inference and measurement for long-horizon forecasting are explored with an application to dividend yields as predictors of stock returns. Monte Carlo analysis indicates that the Hansen and Hodrick (1980) procedure is biased at long horizons, but the alternatives perform better. These include an estimator derived under the null hypothesis as in Richardson and Smith (1989), a reformulation of the regression as in Jegadeesh (1990), and a vector autoregression (VAR) as in Campbell and Shiller (1988), Kandel and Stambaugh (1988), and Campbell (1991). The statistical properties of long-horizon statistics generated from the VAR indicate interesting patterns in expected stock returns.
Handle: RePEc:nbr:nberte:0108
Template-Type: ReDIF-Paper 1.0
Title: The Independence Axiom and Asset Returns
Author-Name: Larry G. Epstein
Author-Person: pep2
Author-Name: Stanley E. Zin
Author-Person: pzi46
Note: ME
Number: 0109
Creation-Date: 1991-07
Order-URL: http://www.nber.org/papers/t0109
File-URL: http://www.nber.org/papers/t0109.pdf
File-Format: application/pdf
Publication-Status: published as Epstein, Larry G. and Stanley E. Zin. "The Independence Axiom And Asset Returns," Journal of Empirical Finance, 2001, v8(5,Dec), 537-572.
Abstract: This paper integrates models of atemporal risk preference that relax the independence axiom into a recursive intertemporal asset-pricing framework. The resulting models are amenable to empirical analysis using market data and standard Euler equation methods. We are thereby able to provide the first non-laboratory-based evidence regarding the usefulness of several new theories of risk preference for addressing standard problems in dynamic economics. Using both stock and bond returns data, we find that a model incorporating risk preferences that exhibit firstorder risk aversion accounts for significantly more of the mean and autocorrelation properties of the data than models that exhibit only second-order risk aversion. Unlike the latter class of models which require parameter estimates that are outside of the admissible parameter space, e.g., negative rates of time preference, the model with first-order risk aversion generates point estimates that are economically meaningful. We also examine the relationship between first-order risk aversion and models that employ exogenous stochastic switching processes for consumption growth.
Handle: RePEc:nbr:nberte:0109
Template-Type: ReDIF-Paper 1.0
Title: The Optimality of Nominal Contracts
Author-Name: Scott Freeman
Author-Name: Guido Tabellini
Author-Person: pta37
Note: ME
Number: 0110
Creation-Date: 1991-08
Order-URL: http://www.nber.org/papers/t0110
File-URL: http://www.nber.org/papers/t0110.pdf
File-Format: application/pdf
Abstract: Why do we see nominal contracts in the presence of price level risk? To answer this question, this paper studies an overlapping generations model in which the equilibrium contract form is optimal, given the contracts elsewhere in the economy. Nominal contracts turn out to be optimal in the presence of aggregate price level risk under two circumstances. First, if individuals have the same constant degree of relative risk aversion. The reason is that in this case nominal contracts (eventually coupled with equity contracts) lead to optimal risk sharing. Second, nominal contracts can be optimal, even if the first condition is not met, if the repayment of contracts is subject to a binding cash in advance constraint. The reason is that a contingent contract, while reducing purchasing power risk, also increases the cash flow risk. Under a binding cash in advance constraint on the repayment of contracts, this second risk is costly, and it is minimized by a nominal contract. Finally, the paper also identifies some symmetry conditions under which nominal contracts are optimal even in the presence of relative price risk.
Handle: RePEc:nbr:nberte:0110
Template-Type: ReDIF-Paper 1.0
Title: Estimating Event Probabilities from Macroeconomic Models Using Stochastic Simulation
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG
Number: 0111
Creation-Date: 1991-08
Order-URL: http://www.nber.org/papers/t0111
File-URL: http://www.nber.org/papers/t0111.pdf
File-Format: application/pdf
Publication-Status: published as Business Cycles,Indicators and Forecasting, edited by James Stock and Mark Watson, Studies in Business Cycles Vol 28, Chicago: University of Chicago Press, 1993
Publication-Status: published as Estimating Event Probabilities from Macroeconometric Models Using Stochastic Simulation, Ray C. Fair. in Business Cycles, Indicators, and Forecasting, Stock and Watson. 1993
Abstract: This paper shows how probability questions can be answered within the context of macroeconometric models by using stochastic simulation. One can estimate, for example, the probability of a recession occurring within some fixed period in the future. Probability estimates are presented for two recessionary events and one inflationary event. An advantage of the present procedure is that the probabilities estimated from the stochastic simulation are objective in the sense that they are based on the use of estimated distributions. They are consistent with the probability structure of the model. This paper also shows that estimated probabilities can be used in the evaluation of a model, and an example of this type of evaluation is presented.
Handle: RePEc:nbr:nberte:0111
Template-Type: ReDIF-Paper 1.0
Title: Rational Frenzies and Crashes
Author-Name: Jeremy Bulow
Author-Name: Paul Klemperer
Author-Person: pkl5
Note: ME
Number: 0112
Creation-Date: 1991-09
Order-URL: http://www.nber.org/papers/t0112
File-URL: http://www.nber.org/papers/t0112.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, vol. 102, no. 1, pp. 1-23, (February 1993)
Abstract: Most markets clear through a sequence of sales rather than through a Walrasian auctioneer. Because buyers can decide between buying now or later, rather than only now or never, buyers' current 'willingness to pay' is much more sensitive to price than is the demand curve. A consequence is that markets will be extremely sensitive to new information, leading to both 'frenzies, " where demand feeds upon itself, and "crashes," where price drops discontinuously. Although no buyer's independent reservation value reveals much about overall demand, a small increase in one such value can cause a large increase or decrease in average price.
Handle: RePEc:nbr:nberte:0112
Template-Type: ReDIF-Paper 1.0
Title: Workings of a City: Location, Education, and Production
Author-Name: Roland Benabou
Author-Person: pbe27
Note: PE
Number: 0113
Creation-Date: 1991-10
Order-URL: http://www.nber.org/papers/t0113
File-URL: http://www.nber.org/papers/t0113.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal of Economics, vol cviii, Issue 3, August 1993, (MIT Press, Cambridge) p. 619 Quarterly Journal of Economics, 108, (1993), p. 619-652
Abstract: We examine the implications of local externalities in human capital investment for the size and composition of the productive labor force. The model links residential choice, skills acquisition, and production in a city composed of several communities. Peer effects induce self-segregation by occupation, whereas efficiency may require identical communities. Even when some asymmetry is optimal, equilibrium segregation can cause entire 'ghettos" to drop out of the labor force. Underemployment is more extensive. the easier it is for high-skill workers to isolate themselves from others. When perfect segregation is feasible, individual incentives to pursue it are self-defeating, and lead instead to a shutdown of the productive sector.
Handle: RePEc:nbr:nberte:0113
Template-Type: ReDIF-Paper 1.0
Title: Eastern Data and Western Attitudes
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI IFM
Number: 0114
Creation-Date: 1991-10
Order-URL: http://www.nber.org/papers/t0114
File-URL: http://www.nber.org/papers/t0114.pdf
File-Format: application/pdf
Publication-Status: published as "Pooling Noisy Data Sets," in Thomas Url and Andreas Worgotter, eds., The Econometrics of Short and Unreliable Time Series, Physica-Verlag, Heidelberg, 1995, pp. 41-60
Abstract: Most studies of the economies of Eastern Europe by Western analysts depend substantially on Western data and Western attitudes. Usually this dependence is implicit and concealed. An explicit and transparent treatment may yield better results, both for the individual analyst and for the profession overall. This article proposes and illustrates an econometric method for pooling Western and Eastern data. The pooled estimates depend on doubt about the Western attitudes, on the degree of experimental contamination in Western and Eastern data and on the similarity of Western and Eastern structures. The method is illustrated by a study of the determinants of the growth rates of developed and developing countries.
Handle: RePEc:nbr:nberte:0114
Template-Type: ReDIF-Paper 1.0
Title: Instrumental Variables Estimation of Average Treatment Effects in Econometrics and Epidemiology
Author-Name: Joshua D. Angrist
Author-Person: pan29
Note: LS
Number: 0115
Creation-Date: 1991-11
Order-URL: http://www.nber.org/papers/t0115
File-URL: http://www.nber.org/papers/t0115.pdf
File-Format: application/pdf
Abstract: The average effect of intervention or treatment is a parameter of interest in both epidemiology and econometrics. A key difference between applications in the two fields is that epidemiologic research is more likely to involve qualitative outcomes and nonlinear models. An example is the recent use of the Vietnam era draft lottery to construct estimates of the effect of Vietnam era military service on civilian mortality. In this paper. I present necessary and sufficient conditions for linear instrumental variables. techniques to consistently estimate average treatment effects in qualitative or other nonlinear models. Most latent index models commonly applied to qualitative outcomes in econometrics fail to satisfy these conditions, and monte carlo evidence on the bias of instrumental estimates of the average treatment effect in a bivariate probit model is presented. The evidence suggests that linear instrumental variables estimators perform nearly as well as the correctly specified maximum likelihood estimator. especially in large samples. Linear instrumental variables and the normal maximum likelihood estimator are also remarkably robust to non-normality.
Handle: RePEc:nbr:nberte:0115
Template-Type: ReDIF-Paper 1.0
Title: A Note on the Time-Elimination Method For Solving Recursive Dynamic Economic Models
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 0116
Creation-Date: 1991-11
Order-URL: http://www.nber.org/papers/t0116
File-URL: http://www.nber.org/papers/t0116.pdf
File-Format: application/pdf
Abstract: The Time-Elimination Method for solving recursive dynamic economic models is described. By defining control-like and state-like variables, one can transform the equations of motion describing the economy's evolution through time into a system of differential equations that are independent of time. Unlike the transversality conditions, the boundary conditions for the system in the state-like variable are not asymptotic boundary conditions. In theory, this reformulation of the problem greatly facilitates numerical analysis. In practice, problems which were impossible to solve with a popular algorithm - shooting - can be solved in short order. The reader of this paper need not have any knowledge of numerical mathematics or dynamic programming or be able to draw high dimensional phase diagrams. only a familiarity with the first order conditions of the 'Hamiltonian' method for solving dynamic optimization problems is required. The most natural application of Time-Elimination is to growth models. The method is applied here to three growth models.: the Ramsey/Cass/Koopmans one sector model, Jones & Manuelli's(1990) variant of the Ramsey model, and a two sector growth model in the spirit of Lucas (1988). A very simple - but complete - computer program for numerically solving the Ramsey model is provided.
Handle: RePEc:nbr:nberte:0116
Template-Type: ReDIF-Paper 1.0
Title: Sources of Identifying Information in Evaluation Models
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Guido W. Imbens
Author-Person: pim4
Note: LS
Number: 0117
Creation-Date: 1991-12
Order-URL: http://www.nber.org/papers/t0117
File-URL: http://www.nber.org/papers/t0117.pdf
File-Format: application/pdf
Abstract: The average effect of social programs on outcomes such as earnings is a parameter of primary interest in econometric evaluations studies. New results on using exclusion restrictions to identify and estimate average treatment effects are presented. Identification is achieved given a minimum of parametric assumptions, initially without reference to a latent index framework. Most econometric analyses of evaluation models motivate identifying assumptions using models of individual behavior. Our technical conditions do not fit easily into a conventional discrete choice framework, rather they fit into a framework where the source of identifying information is institutional knowledge regarding program administration. This framework also suggests an attractive experimental design for research using human subjects, in which eligible participants need not be denied treatment. We present a simple instrumental variables estimator for the average effect of treatment on program participants, and show that the estimator attains Chamberlain's semi-parametric efficiency bound. The bias of estimators that satisfy only exclusion restrictions is also considered.
Handle: RePEc:nbr:nberte:0117