Short-term headline-core inflation dynamics

This article investigates empirically short-term dynamics between headline and core measures of consumer price index and personal consumption expenditure inflation over three sample periods: 1959:1-1979:1, 1979:2-2001:2, and 1985:1-2007:2. Headline and core inflation measures are co-integrated, suggesting long-run co-movement. However, the ways these two variables adjust to each other in the short run and generate co-movement have changed across these sample periods. In the pre-1979 sample period, when a positive gap opens up with headline inflation rising above core inflation, the gap is eliminated mainly as a result of headline inflation not reverting and core inflation moving toward headline inflation. These dynamics suggest headline inflation would be better than core inflation in assessing the permanent component of inflation. In post-1979 sample periods, however, the positive gap is eliminated as a result of headline inflation reverting more strongly toward core inflation than core inflation moving toward headline inflation, suggesting core inflation would be better than headline inflation in assessing the permanent component of inflation. This change in headline-core inflation dynamics may be due to the Federal Reserve having convinced the public it would no longer accommodate shocks to food and energy prices.Inflation (Finance) ; Monetary policy

Changes in monetary policy and the variation in interest rate changes across credit markets

This article uses principal component methods to assess the importance of changes in the federal funds rate in driving interest rate changes across a broad array of credit markets. We find that most of the variability in interest rate changes across these markets is explained by a small number of common components. Furthermore, for many of the interest rate series in our sample, changes that reflect common movements are highly correlated with changes in the federal funds rate. However, in some credit markets associated with longer maturities, such as the mortgage market, common movements are less correlated with changes in the federal funds rate. Therefore, interest rate changes in those markets are i) more likely to reflect aggregate disturbances somewhat unrelated to monetary policy, or ii) related to contemporaneous monetary policy more indirectly through changes in expected future short rates. We also find evidence that movements in the auto loan market are almost entirely driven by idiosyncratic considerations rather than changes in the federal funds rate.Inflation (Finance) ; Monetary policy ; Financial markets

Consumption smoothing and the measured regressivity of consumption taxes

In this article, we address two questions. First, how will a move to pure consumption taxation matter for aggregate outcomes? Second, how regressive are consumption taxes? We find as follows. First, a move to a consumption tax will increase savings taken into retirement but will not alter either labor supply or consumption variability substantially. Second, we show that regressivity is a measure that is quantitatively sensitive to the frequency of income being used. In particular, we show that when measures of tax incidence are based on annual income, successful consumption smoothing leads to the appearance of high regressivity. Our preferred measure, which is based on lifetime earnings, shows that consumption taxes are proportional taxes.Taxation ; Consumption (Economics)

Earned income tax credit recipients: income, marginal tax rates, wealth, and credit constraints

The Earned Income Tax Credit (EITC) has evolved into the largest anti-poverty program in the United States by providing tax credits for low and moderate income working families. In this paper, we describe the characteristics of EITC recipients at various ages using Current Population Survey data. In addition, we discuss the relevance of the EITC in affecting marginal income tax rates in the United States and discuss the effects of the EITC on household labor supply decisions. Lastly, using data from the Survey of Consumer Finances, we estimate wealth distributions for EITC recipients and analyze the extent to which EITC recipients are credit constrained.Credit ; Taxation

Single Mothers and the Earned Income Tax Credit: Insurance Without Disincentives?

The Earned Income Tax Credit (EITC) is the single most important transfer program in place in the United States. An aspect of the EITC that has received little attention thus far is its role as a public insurance program. Yet, the structure of the EITC necessarily protects its primary class of recipients, unskilled single mothers, against major risks they face to both wages and changes in family structure. Our study provides the first quantitative statement about the insurance provided by the EITC. We study a dynamic model of consumption, savings, and labor supply in which households face wage and demographic risk, but have only limited self-insurance capacity. We use the model to compare outcomes under the EITC to the counterfactual in which it is completely eliminated. We find that the EITC provides substantial insurance to unskilled single mothers: The program reduces consumption volatility, as measured by the coefficient of the variation, by 12 percentage points or more, even as it allows these households to save less. Importantly, this insurance provision may not be compromising incentives to work: The model suggests that the EITC increases the labor supply of unskilled single mothers substantially at the extensive margin

Essays in Political Economy

This dissertation consists of two chapters on topics in political economy. In the first chapter, using hand-collected data from collective bargaining agreements for state-level public sector unions, I develop and calibrate a stochastic bargaining model as in Merlo and Wilson (1995) and investigate the effects of political and economic variables on wages, pensions, and delay in reaching agreement. In the model, a governor and a union bargain over a wage and pension outcome. The economic state, as measured by the unemployment rate, evolves stochastically and affects the propensity of the governor and union to reach agreement in any given period. Furthermore, political variables, including party of the governor, partisanship of the district, and incumbency, affect the relative payoffs and therefore the wage, pension, and time to agreement. I find that negotiated wage and pension growth is higher under Democratic governors, while increases in the unemployment rate at the beginning of bargaining have a negative impact on compensation levels, the magnitude of which varies by party and time before the next election. In the second chapter, which is co-authored with Ekim Cem Muyan, I develop a model of campaign strategies, namely the choice to campaign negatively or positively. In particular, I construct a model of political campaigns, based off of Skaperdas and Grofman (1995), in which candidates allocate their budget between positive and negative campaigning. Elections vary according to politician- and district-specific characteristics, as well as the unobservable (to the econometrician) measure of voter types. I calibrate the model to match stylized facts on campaign tone that we document using a wide array of sources, including data on advertising tone from Wisconsin Advertising Project, campaign contributions from the Database on Ideology, Money in Politics, and Elections, and election results. The calibrated model implies that, overall, campaign spending is not particularly effective at increasing votes -- a 10% increase in the average candidate\u27s budget, corresponding to about $240,000, raises his or her expected vote share by about 0.4 percentage points. The model also implies that negativity is marginally more useful for candidates who are trailing than those leading, though not by a wide margin

The Importance of Exit via Acquisition to Venture Capital, Entrepreneurship, and Innovation

Antitrust regulators around the world, including in the UK, have proposed changes to merger review policies that impact how acquisitions of start-ups would be investigated and evaluated. Such changes will likely lead to heightened scrutiny—and increased costs and longer reviews—for many acquisitions, including both horizontal and non-horizontal mergers. In evaluating the merits of such changes, it is critical to take into account the important role that exit via acquisition plays in providing incentives for venture capital (VC) investment and entrepreneurship. This article seeks to provide context for evaluating the effects of such proposed changes. First, it documents the links among VC, entrepreneurship, and innovation, and how exit via acquisition can foster dynamic innovation, one of the stated goals of the CMA. Second, it identifies additional consumer benefits derived from acquisitions of small companies by larger companies. Third, it describes VC investment in the UK, including the favourable, yet fragile, position that the UK holds as a VC hub for continental Europe. Finally, it documents the recent increased diversity in VC investment and entrepreneurship in the UK, which could be curbed by the proposed changes

Comparing labor markets across recessions: a focus on the age composition of the population

Simply looking at unadjusted versions of traditional statistics may not be the best way to compare the state of the current economy to previous periods. When comparing recessions, it is important to account for demographic changes.Labor market ; Demography

New genetic loci link adipose and insulin biology to body fat distribution.

Body fat distribution is a heritable trait and a well-established predictor of adverse metabolic outcomes, independent of overall adiposity. To increase our understanding of the genetic basis of body fat distribution and its molecular links to cardiometabolic traits, here we conduct genome-wide association meta-analyses of traits related to waist and hip circumferences in up to 224,459 individuals. We identify 49 loci (33 new) associated with waist-to-hip ratio adjusted for body mass index (BMI), and an additional 19 loci newly associated with related waist and hip circumference measures (P < 5 × 10(-8)). In total, 20 of the 49 waist-to-hip ratio adjusted for BMI loci show significant sexual dimorphism, 19 of which display a stronger effect in women. The identified loci were enriched for genes expressed in adipose tissue and for putative regulatory elements in adipocytes. Pathway analyses implicated adipogenesis, angiogenesis, transcriptional regulation and insulin resistance as processes affecting fat distribution, providing insight into potential pathophysiological mechanisms

RANTES/CCL5 and risk for coronary events:Results from the MONICA/KORA Augsburg case-cohort, Athero-express and CARDIoGRAM studies

Background: The chemokine RANTES (regulated on activation, normal T-cell expressed and secreted)/CCL5 is involved in the pathogenesis of cardiovascular disease in mice, whereas less is known in humans. We hypothesised that its relevance for atherosclerosis should be reflected by associations between CCL5 gene variants, RANTES serum concentrations and protein levels in atherosclerotic plaques and risk for coronary events. Methods and Findings: We conducted a case-cohort study within the population-based MONICA/KORA Augsburg studies. Baseline RANTES serum levels were measured in 363 individuals with incident coronary events and 1,908 non-cases (mean follow-up: 10.2±4.8 years). Cox proportional hazard models adjusting for age, sex, body mass index, metabolic factors and lifestyle factors revealed no significant association between RANTES and incident coronary events (HR [95% CI] for increasing RANTES tertiles 1.0, 1.03 [0.75-1.42] and 1.11 [0.81-1.54]). None of six CCL5 single nucleotide polymorphisms and no common haplotype showed significant associations with coronary events. Also in the CARDIoGRAM study (&gt;22,000 cases, &gt;60,000 controls), none of these CCL5 SNPs was significantly associated with coronary artery disease. In the prospective Athero-Express biobank study, RANTES plaque levels were measured in 606 atherosclerotic lesions from patients who underwent carotid endarterectomy. RANTES content in atherosclerotic plaques was positively associated with macrophage infiltration and inversely associated with plaque calcification. However, there was no significant association between RANTES content in plaques and risk for coronary events (mean follow-up 2.8±0.8 years). Conclusions: High RANTES plaque levels were associated with an unstable plaque phenotype. However, the absence of associations between (i) RANTES serum levels, (ii) CCL5 genotypes and (iii) RANTES content in carotid plaques and either coronary artery disease or incident coronary events in our cohorts suggests that RANTES may not be a novel coronary risk biomarker. However, the potential relevance of RANTES levels in platelet-poor plasma needs to be investigated in further studies.</p