Should Private Expectations Concern Central Bankers? *

Abstract We analyze the standard New Keynesian economy adjusted by a financial intermediation sector, heterogenous, imperfect knowledge, and adaptive learning. We consider two groups of agents (i) private agents (households, firms, private banks) and (ii) the central bank who differ in their knowledge and expectations. The monetary-policy transmission is non-trivial in this environment. The interest rate directly affecting the decisions of households and firms is influenced by the private banks expectations, and the monetary policy may get distorted. The basic finding suggests the higher knowledge heterogeneity, the less active monetary policy should be in order to stabilize the economy. This contrasts the standard literature with homogenous knowledge and expectations. Abstrakt V tomto článku zkoumáme ekonomickou dynamiku v kontextu nového keynesiánského modelu rozšířeného o finanční sektor, heterogenní, nedokonalou informaci a adaptivní učení. Rozlišujeme dvě skupiny ekonomických agentů: (i) soukromé agenty (domácnosti, firmy a soukromé banky) a (ii) centrální banku. U obou skupin předpokládáme odlišné znalosti a očekávání. V tomto prostředí už to není centrální banka, která má přímý vliv na ekonomiku, ale jsou to soukromé banky. Jejich úrokové sazby nyní vstupují do rozhodování domácností a firem. Trasmise monetární politiky se tak stává netriviální. Původní záměr centrální banky, např. cílovat inflaci, může být vychýlen sazbami soukromých bank, které je stanovují na základě vlastní informace a očekávání. V analýze docházíme k závěru, který je v kontrastu s literaturou pracující s homegnní, nedokonalou informací. Čím větší je rozdíl znalostí mezi oběma skupinami agentů, tím méně by měla monetarní politika být aktivní. Snižuje se tak variabilita ekonomických veličin a zrychluje se konvergence do ekonomické rovnováhy při dokonalé informaci

Welfare e¤ects of housing price appreciation in the economy with binding credit constraints

Abstract This paper analyzes the e¤ects of recent housing price appreciation on aggregate welfare. It generalizes previously available results by considering credit constraints together with endogeneity of housing prices. First, housing price appreciation implies improvement in aggregate welfare in a model with exogenous housing price and credit constraints. Then, housing price is endogenized by modeling the supply side of the housing market. In this model, housing price appreciation is caused by supply and demand shocks. The supply shock originates from a change in building permit cost. The demand shifts are generated by changes in household income and interest rates. Both credit-constrained and unconstrained versions of this model are considered. Finally, the combination of observed demand and supply shocks is used to quantify aggregate welfare e¤ects on the US housing market from 1995 to 2004. The results demonstrate that demand shocks dominated during that period and the aggrerate welfare improved as a result of housing price appreciation. KEY WORDS : housing price appreciation, aggregate welfare, binding credit constraints, endogenous housing price, demand and supply side shocks JEL CLASSIFICATION: R2, R20, R21, R3

Housing Services and Volatility Bounds with Real Estate Returns

Abstract We investigate the role of a real estate market in consumption based asset pricing models. A long-standing issue in this context is the inability of these models to match the equity premium observed in the data. Piazzesi, Schneider, and Tuzel (2007) use a model with housing services that comes closer to matching the premium. We look at the performance of this model from a different perspective. Rather than focusing on the model implied returns, we use historical returns to construct the Hansen-Jagannathan volatility bounds for the inter-temporal rate of substitution (a stochastic discount factor). Our returns include real estate returns in addition to the typically included returns on stocks and a risk-free asset. Then we calculate moments of a stochastic discount factor implied by the model fro

The Quiet Revolution and the Family: Gender Composition of Tertiary Education and Early Fertility Patterns

It is well known that highly 'female' fields of study in tertiary education are characterized by higher fertility. However, existing work does not disentangle the selection-causality nexus. We use variation in gender composition of fields of study implied by the recent expansion of tertiary education in 19 European countries and a difference-in-differences research design, to show that the share of women on study peer groups affects early fertility levels only little. Early fertility by endogamous couples, i.e., by tertiary graduates from the same field of study, declines for women and increases for men with the share of women in the group, but non-endogamous fertility almost fully compensates for these effects, consistent with higher early fertility in highly 'female' fields of study being driven by selection of family-oriented students into these fields. We also show that the EU-wide level of gender segregation across fields of study has not changed since 2000

The Importance of Geographic Access for the Impact of Microfinance

The geographic distance between a household and financial institutions may constitute a significant obstacle to achieving the benefits of modern financial institutions. We measure the impact of improved distance-related access to microcredits in Uzbekistan. Residents living closer to microfinance institutions are propensity score matched to those further away using both household and village characteristics. Households located closer to microfinance institutions have larger businesses in terms of income, profits and employees than similar households located further away. Similarly, they spend more on most forms of consumption and have greater savings

Trusting Former Rebels: An Experimental Approach to Understanding Reintegration after Civil War

The stability of many post-conflict societies rests on the successful reintegration of former soldiers. We examine social capital of former soldiers in Northern Uganda, where the Lord's Resistance Army forcibly recruited tens of thousands of youth during a recent brutal conflict. We use a set of interlocked experiments to study behavior of ex-soldiers jointly with the behavior of receiving communities towards this group. Consistent with theories that highlight the importance of cooperation during war, we find that individual cooperativeness robustly increases with the length of time a person was with the LRA, especially among those who were abducted during early age. Furthermore, parents of former-soldiers are aware of the behavioral difference: they trust ex-soldiers more because they expect them to be more trustworthy. Last, we find no evidence of preference-based discrimination, suggesting that anger is attenuated when communities do not attribute responsibility for committed violence to returning soldiers. Together, the results reveal that the impact of child soldiering on social capital, in contrast to human capital, is not necessarily detrimental and, speculatively, may facilitate reintegration