Treasury Bills, Bonds And Sector Inflation Indices: A Spectral Analysis

This paper uses spectral and correlation techniques to analyze the relationship between several inflation indicators and nominal interest rates. Empirical definitions of real interest rates reduce to stating real rates are equal to nominal interest rates minus expected inflation. To represent a number for inflation, economy-wide measures such as the GDP deflator or the Consumer Price Index are employed. This uncritical usage results more often than not in implausible values for real interest rates. In particular, volatile negative real rates are encountered for prolonged periods ranging from six months to up to three years. Such long time intervals for negative real rates amounts to accepting the unrealistic proposition that profit maximizing lenders, such as commercial bank officers, pay hefty fees to borrowers to have them use their institution's loanable funds. This paper questions the effectiveness of GDP or CPI inflation measures in surrogating for expected inflation. We find instead that narrower sector (industry) inflation indices such as fuels or raw materials prices appear to be improved measures. The issue matters since accurate real interest rate estimates are necessary for policy (Taylor rules), financial model evaluation, and discounting

Forecasting Real Inventories and the Anomaly of Money Illusion

While the transmission mechanism of inventory behavior in the business cycle has been studied, less effort has been devoted to applied forecasting of inventory change. Inventory fluctuations have accounted for a sizable portion of the changes in U.S. GDP during recessions over the past fifty years. In this paper, we report on out-of-sample forecasts of manufacturing and trade inventories generated by regression and neural network methodology. Our forecasting model is Metzlerian in approach, in that the divergence between actual and targeted sales is hypothesized as the primary cause of inventory imbalance. Our forecasts also rely on the slow adjustment of inventory investment to sales surprises. However, the likely presence of money illusion is a caveat to users, and we address several distortions it introduces to inventory management measures.Business Economics (2008) 43, 19–30; doi:10.2145/20080102

Contested Cornerstones of Nonviolent National Self-Perception in Costa Rica: A Historical Approach

Huhn S. Contested Cornerstones of Nonviolent National Self-Perception in Costa Rica: A Historical Approach. GIGA Working Papers. Vol 101. Hamburg: GIGA; 2009.Crime, violence, and insecurity are perceived as society’s biggest problems in contemporary Costa Rica. This degree of priority is especially remarkable because the country has always been considered the peaceful exception in the violent Central American region. In this paper I analyze four cornerstones of the nonviolent national self-perception in the 1940s and 1980s as the fundamental basis for the current talk of crime: the civil war, the abolition of the military, the proclamation of neutrality, and the peace plan for Central America and the subsequent granting of the Nobel Peace Prize. The result of the analysis is the determination that these historical cornerstones were not publicly discussed as expressions of the nonviolent identity for which they are today cited as evidence