Permanent Income, Liquidity, and Expenditure on Automobiles: Evidence from Panel Data

Several recent papers have tested the permanent income-cum- rational expectations hypothesis using data on nondurable or semi-durable consumption. We show how this approach can be extended to the case of durables. An application to panel data on automobile expenditures reveals no evidence against the permanent income hypothesis. This result is unchanged in subsamples segregated by family holdings of liquid assets.

The sensitivity of empirical studies to alternative measures of the monetary base and reserves - commentary

Money supply ; Bank reserves

Adjustment Costs, Durables, and Aggregate Consumption

Previous tests of the permanent income hypothesis (PIH) have focused on either nondurables or durables expenditures in isolation. This paper studies consumer purchases of nondurables and durables as the outcome of a single optimization problem.It is shown that the presence of adjustment costs of changing durables stocks may substantially affect the time series properties of both components of expenditure under the PIH.However, econometric tests based on this model do not contradict earlier rejections of the PIH in aggregate quarterly data.

Irreversibility, Uncertainty, and Cyclical Investment

The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of information gained by waiting. Uncertainty, because it increases the value of waiting for new information, retards the current rate of investment. The nature of investor's optimal reactions to events whose implications are resolved over time is a possible explanation of the instability of aggregate investment over the business cycle.

By the numbers: Data and measurement in community economic development

In a speech to the Greenlining Institute, Federal Reserve Board Chairman Ben S. Bernanke speaks to the need for developing and analyzing social and economic data at the local level to do the following: uncover new investment opportunities; provide transparency and promote good governance and sound public policies; and promote independent policy research.

Housing, housing finance, and monetary policy: a symposium sponsored by the Federal Reserve Bank of Kansas City: opening remarks

Housing ; Housing - Prices ; Business cycles ; Monetary policy

By the numbers: data and measurement in community economic development

Highlights of a speech by Federal Reserve Chairman Ben S. Bernanke at the Greenlining Institute’s 13th Annual Economic Development Summit in Los Angeles, April 20, 2006.Community development

The Macroeconomics of the Great Depression: A Comparative Approach

Recently, research on the causes of the Great Depression has shifted from a heavy emphasis on events in the United States to a broader, more comparative approach that examines the interwar experiences of many countries simultaneously. In this lecture I survey the current state of our knowledge about the Depression from a comparative perspective. On the aggregate demand side of the economy, comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the Depression; an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one Nash equilibrium to another. On the aggregate supply side, comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects. Still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment.

What Does the Bundesbank Target?

Although its primary ultimate objective is price stability, the Bundesbank has drawn a distinction between its money-focus strategy and the inflation targeting approach recently adopted by a number of central banks. We show that, holding constant the current forecast of inflation, German monetary policy responds very little to changes in forecasted money growth; we conclude that the Bundesbank is much better described as an inflation targeter than as a money targeter. An additional contribution of the paper is to apply the structural VAR methods of Bernanke and Mihov (1995) to determine the optimal indicator of German monetary policy: We find that the Lombard rate has historically been a good policy indicator, although the use of the call rate as an indicator cannot be statistically rejected.