Empirical evidence on the recent behavior and usefulness of simple-sum and weighted measures of the money stock (commentary)

Money supply

A Reappraisal of Recent Tests of the Permanent Income Hypothesis

Hall (1978) showed that the permanent income hypothesis implies that consumption (1) follows a random walk, and (2) cannot be predicted by past income. Reexamination of Hall's data results in rejection of the random walk hypothesis in favor of the alternative hypothesis of positively autocorrelated changes. Evidently this is due to Hall's choice of a quadratic utility function. A logrithmic utility function implies a random walk in the log of consumption which is supported by the data. Hall reported that past income had a negative but insignificant relation to consumption. Changes in the log of income, however, do have a positive predictive relation to changes in the log of consumption. The adjustment of consumption to income seems to be spread over two quarters. Flavin's (1981) test of the theory is formally equivalent to Hall's except for assuming stationarity around a time trend. Mankiw and Shapiro (1984) have pointed out that the effect of detrending may be to tend to rejection of the theory when it is in fact correct. For Hall's data the effect of detrending is to reverse the sign of the coefficient on past income. Its magnitude is what the Mankiw-Shapiro analysis predicts under the permanent income hypothesis.

Parsimoneous Modeling of Yield Curves for U.S. Treasury Bills

A new model is proposed for representinq the term to maturity structure of interest rates at a point in time.The model produces humped, monotonic and S-shaped yield curves using four parameters. Conditional on a time decay parameter, estimates of the other three are obtained by least squares. Yield curves for thirty-seven sets of U.S. Treasury bill yields with maturities up to one year are presented. The median standard deviation of fit is just over seven basis points and the corresponding median R-squared is .96. Study of residuals suggests the existence of specific maturity effects not previously identified. Using the models to predict the price of a long term bond provides a diagnostic check and suggests directions for further research.

Business cycle detrending of macroeconomic data via a latent business cycle index

We use Markov Chain Monte Carlo methods to augment a vector autoregressive system with a latent business cycle index that is negative during recessions and positive during expansions. We then sample counterfactual values of the macroeconomic variables in the case where the latent business cycle index is held constant at its median value. These counterfactual values represent posterior beliefs about how the economy would have evolved absent business cycle fluctuations. One advantage is that a VAR framework provides model-consistent counterfactual values in the same way that VARs provide model-consistent forecasts, so data series are not detrended in isolation from each other. We apply these methods to estimate the business cycle components of industrial production growth, consumer price inflation, the federal funds rate and the spread between long-term and short-term interest rates. These decompositions provide an explicitly counterfactual approach to deriving empirical business cycle facts that complements other approaches.Business cycles ; Time-series analysis

Valid Confidence Intervals and Inference in the Presence of Weak Instruments

We investigate confidence intervals and inference for the instrumental variables model with weak instruments. Wald-based confidence intervals perform poorly in that the probability they reject the null is far greater than their nominal size. In the worst case, Wald-based confidence intervals always exclude the true paremeter value. Confidence intervals based on the LM, LR, and Anderson-Rubin statistics perform far better than the Wald. The Anderson-Rubin statistic always has the correct size, but LM and LR statistics have somewhat greater power. Performance of the LM and LR statistics is improved by a degrees-of- freedom correction in the overidentified ccase. We show that the practice of "pre-testing" by looking at the significance of the first - stage regression leads to extremely poor results when the instruments are very weak.confidence intervals, instrumental variables, pre-testing, weak instruments

Diary reports of concerns in mothers of infant siblings of children with autism across the first year of life

We examined the home-based concerns reported by mothers of infant siblings of children with autism across the first year of life. At all three ages measured, mothers of high-risk infants were significantly more likely than mothers of low-risk infants to report language, social communication, and restricted and repetitive behavior concerns but were not more likely to report general, medically based concerns. At 6 and 9 months of age, maternal concerns were poorly related to infant or family variables. At 12 months of age, there were moderate correlations between maternal concerns and infant behavior, and concerns were associated with the proband's autism symptoms and mothers' concurrent depressive symptoms. These findings highlight the need to examine high-risk infants' development in the family context.R21 DC 08637 - NIDCD NIH HHS; R01-DC010290 - NIDCD NIH HHS; AS1323 - Autism Speaks; R21 DC008637 - NIDCD NIH HHS; R01 DC010290 - NIDCD NIH HH

Maternal vocal feedback to 9-month-old infant siblings of children with ASD

Infant siblings of children with autism spectrum disorder display differences in early language and social communication skills beginning as early as the first year of life. While environmental influences on early language development are well documented in other infant populations, they have received relatively little attention inside of the infant sibling context. In this study, we analyzed home video diaries collected prospectively as part of a longitudinal study of infant siblings. Infant vowel and consonant-vowel vocalizations and maternal language-promoting and non-promoting verbal responses were scored for 30 infant siblings and 30 low risk control infants at 9 months of age. Analyses evaluated whether infant siblings or their mothers exhibited differences from low risk dyads in vocalization frequency or distribution, and whether mothers' responses were associated with other features of the high risk context. Analyses were conducted with respect to both initial risk group and preliminary outcome classification. Overall, we found no differences in infants' consonant-vowel vocalizations, the frequency of overall maternal utterances, or the distribution of mothers' response types. Both groups of infants produced more vowel than consonant-vowel vocalizations, and both groups of mothers responded to consonant-vowel vocalizations with more language-promoting than non-promoting responses. These results indicate that as a group, mothers of high risk infants provide equally high quality linguistic input to their infants in the first year of life and suggest that impoverished maternal linguistic input does not contribute to high risk infants' initial language difficulties. Implications for intervention strategies are also discussed.R21 DC 08637 - NIDCD NIH HHS; T32 MH073124 - NIMH NIH HHS; R01-DC010290 - NIDCD NIH HHS; R21 DC008637 - NIDCD NIH HHS; R01 DC010290 - NIDCD NIH HHS; U54 HD090255 - NICHD NIH HH