Quantitative Aggregate Theory

Nobel Prize Lecture, December 8, 2004Business Cycles; Time Consistency

The role of money in a business cycle model

Two mechanisms are considered through which money can play a role in a real business cycle model. One is in the form of aggregate price surprises when there is heterogeneity across individuals or groups of individuals (“islands”). These shocks affect the accuracy of information about real compensation that can be extracted from observed wage rates. Another, perhaps complementary, mechanism is that the amount of desired liquidity services varies over the cycle due to a trade-off between real money and leisure. This mechanism leads to price fluctuations even when the nominal money stock does not fluctuate. As is the case for the U.S. economy over the postwar period, the price level is then countercyclical. A key finding is that with neither mechanism do nominal shocks account for more than a small amount of variability in real output and in hours worked. Indeed, output variability may very well be lower the larger the variance of price surprises is.Business cycles ; Money

On the econometrics of world business cycles

A description of the method used in dynamic general equilibrium business-cycle research as applied in some recent work on open economies.Business cycles

Theories of action for effecting education reform

While it is a considerable over-simplification, I have found it useful to think in terms of four theories of action that I believe dominate the education-reform arena today. I think that two of these theories have some promise. Two of them do not, but we will nevertheless surely continue to use them. In the real world, we commonly find more than one of these theories operating at the same time in a given place. It gets very complicated when you start mixing and matching and coming up with hybrids. On the other hand, that is the real world, and I think we are probably going to discover at the end of the day that a hybrid will work better than any one of these strategies taken alone.Education

Spectral Methods for Numerical Relativity. The Initial Data Problem

Numerical relativity has traditionally been pursued via finite differencing. Here we explore pseudospectral collocation (PSC) as an alternative to finite differencing, focusing particularly on the solution of the Hamiltonian constraint (an elliptic partial differential equation) for a black hole spacetime with angular momentum and for a black hole spacetime superposed with gravitational radiation. In PSC, an approximate solution, generally expressed as a sum over a set of orthogonal basis functions (e.g., Chebyshev polynomials), is substituted into the exact system of equations and the residual minimized. For systems with analytic solutions the approximate solutions converge upon the exact solution exponentially as the number of basis functions is increased. Consequently, PSC has a high computational efficiency: for solutions of even modest accuracy we find that PSC is substantially more efficient, as measured by either execution time or memory required, than finite differencing; furthermore, these savings increase rapidly with increasing accuracy. The solution provided by PSC is an analytic function given everywhere; consequently, no interpolation operators need to be defined to determine the function values at intermediate points and no special arrangements need to be made to evaluate the solution or its derivatives on the boundaries. Since the practice of numerical relativity by finite differencing has been, and continues to be, hampered by both high computational resource demands and the difficulty of formulating acceptable finite difference alternatives to the analytic boundary conditions, PSC should be further pursued as an alternative way of formulating the computational problem of finding numerical solutions to the field equations of general relativity.Comment: 15 pages, 5 figures, revtex, submitted to PR

Faculty Perceptions of Teacher Professionalism in Christian Schools

Able school administrators understand that teachers are their most valuable asset. If Christian schools are to effectively serve the families who entrust their children to their care, teachers must demonstrate both professional competency and godly character. This study was an investigation of faculty perceptions of teacher professionalism at ten Christian schools in the mid-Atlantic region of the United States. An online survey of 24 items was completed by 230 teachers (males=30; females=200). The survey instrument was a modified version of Tichenor and Tichenor’s (2009) four dimensions of teacher professionalism. Data were analyzed using a multivariate analysis-of-variance (MANOVA) with gender as the independent variable. Results demonstrated statistically significant variance in totals on 18 of 24 individual items, three of the four dimensions, and on the total score

Monetary aggregates and output

This paper offers a general equilibrium model that explains how the observed correlations of money and output fluctuations may come about through endogenously determined fluctuations in the money multiplier. The model is calibrated to meet long run features of the U.S. economy (including monetary features) and then subjected to shocks to the Solow residual following a random process like that observed in U.S. data. The model's predicted business-cycle frequency correlations, of both real and nominal variables, share the following features with U.S. data: i) M1 is positively correlated with real output; ii) the money multiplier and deposit-to-currency ratio are positively correlated with real output; iii) the price level is negatively correlated with output [in spite of (i) and (ii)]; iv) the correlation of M1 with contemporaneous prices is substantially weaker than the correlation of M1 with real output; v) correlations among real variables are essentially unchanged under different monetary policy regimes; and vi) real money balances are smoother than money demand equations would predict. Although features (i) and (iv) may have been considered support for a causal influence of money on output, the paper demonstrates that they are consistent with an economy in which money has no such causal influence.Money supply

On recurrence and ergodicity for geodesic flows on noncompact periodic polygonal surfaces

We study the recurrence and ergodicity for the billiard on noncompact polygonal surfaces with a free, cocompact action of $\Z$ or $\Z^2$. In the $\Z$-periodic case, we establish criteria for recurrence. In the more difficult $\Z^2$-periodic case, we establish some general results. For a particular family of $\Z^2$-periodic polygonal surfaces, known in the physics literature as the wind-tree model, assuming certain restrictions of geometric nature, we obtain the ergodic decomposition of directional billiard dynamics for a dense, countable set of directions. This is a consequence of our results on the ergodicity of \ZZ-valued cocycles over irrational rotations.Comment: 48 pages, 12 figure

Does being different matter?

Changes in the demographic structure of the U.S. population will affect many aspects of the US economy as we move into the next century. Concerns about the impact of an aging population on savings and interest rates, the financing of government spending programs for the elderly, and the possibility of higher taxes for future generations to pay for them have become hot topics, both in the press and among economists. Another concern is whether rising immigration will place an even greater burden on the government. In this article, Finn Kydland and D'Ann Petersen present a framework economists can use to shed ight quantitatively on such issues where individual differences matter. They also discuss why, for a certain class of questions, being different does not matter. In the final section, the authors present findings from current research that deals with the issues mentioned above.Emigration and immigration ; Social security ; Saving and investment

The gold standard as a rule

In this paper, we show that the monetary rule followed by a number of key countries before 1914 represented a commitment technology preventing the monetary authorities from changing planned future policy. The experiences of these major countries suggest that the gold standard was intended as a contingent rule. By that, we mean that the authorities could temporarily abandon the fixed price of gold during a wartime emergency on the understanding that convertibility at the original price of gold would be restored when the emergency passed.Gold standard ; Economic history ; Monetary policy