Online Appendix to Efficient Timing of Retirement

Post-retirement, the model in the main text (published in the Review of Economic Dynamics) reduces to the Merton (1969) problem, which has of course an exact solution. Pre-retirement, however, the agent holds an American option, namely, retire now or keep working. Problems involving American options are generally difficult to solve exactly. This appendix describes an approximate solution to the agent's pre-retirement problem.retirement, life cycle model, optimal stopping problem

Currency preferences and the Australian dollar

We investigate the theory and empirics of currency substitution and currency complementarity. Analytical tractability is facilitated by focussing on a small currency. Data spanning 1985 to the turn of the century contain evidence of the Australian dollar’s substitution for the mark and complementarity with the yen, consistent with our theory that international variables will in general affect the demand for domestic money. Our theory also predicts third-currency effects, and the data reveal several of these. For example, rises in the US Federal Funds rate were associated with depreciations of the Australian dollar against the yen, controlling for the spread between interest rates in Australia and Japan.Atemporally non-separable preferences; Money demand; Cash in advance; Third-currency effects; Uncovered Interest Parity

Life cycle insurance, bequest motives and annuity loads

We investigate insurance purchases when bequest motives are age-varying and life insurance and life annuities both carry loads. The existing life cycle literature assumes bequests are normal goods without being either necessities or luxuries. Much of the literature also assumes implicitly that life annuity loads are negative. A key finding of the literature is that the demand for life insurance and the demand for life annuities are symmetrical. It is optimal to buy life-contingent insurance throughout life, even under loads. A life annuity phase backs directly onto a life insurance phase. We find that realistic examples with positive loads on both products reveal up to two distinct periods of non-participation, one in midlife and the other adjoining the maximum age. We highlight examples with necessity bequests during child-rearing years and luxury bequests thereafter. This set of assumptions explains why a substantial demand for life insurance during child-rearing years can co-exist with negligible demand for life annuities later on. A realistic 18% load on both products generates this outcome.Comment: To appear in Journal of Economic Dynamics and Contro

On the theory of inflation in open economies

The theoretical literature provides straightforward answers to questions of the general form: what are the long-run effects on inflation at home and abroad of a sustained increase in monetary growth at home? It is less informative, however, about questions of the kind: what are the long-run effects on monetary growth and inflation at home and abroad of a sustained increase in the gap between public purchases of home output and net explicit taxes on home incomes? Building on the work of Cagan (1956), Christ (1968), Turnovsky (1977) and others, this dissertation addresses the latter type of question. Various other short-run and long-run effects of expansionary public policy are also considered. Finally, stability, and (less frequently) existence and uniqueness properties are investigated. For these purposes, a static Keynes-Phillips model is embedded in a dynamic model of the creation of public debt, the formation of CPI and exchange-rate expectations, and movements in the terms of trade; the main analytical novelty being full accounting for the effects of inflation, interest and growth on the budget constraints of the public and private sectors. Note, however, that the foregoing static and dynamic elements are invoked selectively, depending on considerations of simplicity, the particular problem at hand, and the relevant time horizon (cf. Henderson (1977)). The notion of a hierarchy of successively longer time spans is the central organizing principle of the analysis. Four different time horizons are considered. In the shortest run, investigated in Chapters III and IV, real intensive output is predetermined. Results in this setting include a variable-inflation analogue of the Dornbusch (1976c) result on exchangerate overshoot. Over the next horizon, output is demand-determined and inflation expectations are predetermined. One exercise suggested by this framework is a synthesis of repercussion-multiplier and Phillips-Curve notions; see Chapter IV. In the longer-run analyses, output is fixed at capacity and expectations are realized. An "inter-run" variant assumes further that national public sectors are able to hold down nominal rates of interest, and/or that external accounts are in a state of "quasi equilibrium" (cf. Mundell (1968)). It is then shown, for example, that the effect on a small country's disposable income of an increase In public spending on the home good is glven by the inverse of the standard Marshall-Lerner expression; see Chapters II and III. In the longest run, nominal rates of interest fully reflect the Fisher effect, and external accounts are in full equilibrium. It is shown that over such a time span, the implementation of a constant monetary growth rule would have to be accompanied by an "accommodating" fiscal policy; see Chapter IV. On the other hand, suppose that monetary growth is endogenous In every country, and reconsider the problem posed at the outset. Then: (1) the domestic and foreign inflationary effects of an increased budget deficit at home are independent of relative economic size; (2) either in a "reserve-currency" country, or in any country under flexible rates, the disturbance in question will induce a more than proportional increase in domestic monetary growth; (3) rates of monetary growth abroad will rise pari passu or remain unchanged according as whether the domestic economy is a reserve-currency country or under flexible rates; (4) higher budget deficits in "peripheraV' countries will not affect monetary growth anywhere. These and other fiscal analogues of more-familiar propositions concerning the international transmission of monetary disturbances are established in Chapter IV

Older adults and “scams”: Evidence from the Mass Observation Archive

Purpose The issue of financial abuse is highlighted the Care Act (2014). One category of financial abuse is consumer fraud or “scams”. Evidence suggests that scams are becoming increasingly ubiquitous, yet how scams impact older adults remains under-researched. This paper reports the data from 80 older adults’ written response to a Mass Observation Archive Directive, commissioned in autumn 2015, focusing on scams. Study design/methodology/approach A qualitative approach was utilised with data captured via written responses to a set of questions. There was no limit on the length of written accounts and respondents remained anonymous. Data were analysed thematically, resulting in 4 key themes. Findings The data indicated scams impact individuals in terms of health and wellbeing, irrespective of whether they have experienced financial loss, and trigger implementation of strategies intended to avoid being defrauded. There was also evidence of scam related stigma with individuals who are defrauded being subject to derision and censure. Originality/value This paper adopts an original approach to collecting rich, candid data about an under-researched topic. The authors highlight that anti-scam interventions should equip individuals to identify and avoid scams without inciting fear or anxiety; proposing this may be facilitated by drawing on health and safety risk assessment protocol when designing anti-scam interventions. Social implications Individuals who have been victimised by fraudsters may need access to practical and emotional support. This requires the design of appropriate interventions and the stigma associated with being scammed to be addressed