Monetary policy under uncertain planning horizon

This note focuses on the role of the planning horizon in monetary policy games. We analyze the case of an uncertain horizon of the monetary policy game that has not been considered, yet. In addition to that we will - different from the basic Barro-Gordon-model - assume a quadratic loss function for the policy maker. --

ECB Presidency and Inflation Aversion among the Citizens of European Countries: An Empirical Assessment

Geldpolitik; Zentralbank; Inflationsbekämpfung; Inflation; Angst; EU-Staaten

Forecasting inflation via electronic markets: Results from a prototype market

Forecasts of macroeconomic variables as the inflation rate serve as important guidelines for the private as well as the public sector. At least central banks that adopted an inflation targeting regime are in urgent need of high quality inflation forecasts. Accurate inflation forecasts are also needed within private sector wage negotiations. In this paper we present a new method to predict future inflation via conducting electronic markets. We show at the example of a prototype market how the market data of such an experimental market can be used to generate predictions of the future inflation rate. We also show that the market data provide important evidence on the distribution of inflation expectations. --Inflation Forcasting,Inflation Targeting,Electronic Markets

The effect of signalling and beliefs on the voluntary provision of public goods

We report and analyze the results of a series of classroom experiments on the voluntary provision of public goods. Using fixed effect panel regression models we find that cooperation significantly increases when participants are forced to guess the degree of overall cooperation. We also find that the possibility to make announcements during the experiment enhances cooperation significantly although these commitments are not binding and heavily used for cheating purposes. We suggest that this effect is due to attempts at restoring the announcements' reputation in the aftermath of heavy cheating. --Experimental Economics,Public Goods,Cheap Talk,Signalling,Communication,Expectations

Effective monetary policy conservatism: A comparison of 11 OECD countries

Modern monetary economists argue that institutional aspects such as central bank independence and central bank conservatism play an important role for the performance of an economy. In order to be able to compare the effects of different institutions it is necessary to measure both central bank independence and conservatism. In this paper we propose a new methodology of uncovering the degree of effective monetary policy conservatism from observed central bank behavior. Employing a variant of the Barro-Gordon-model we derive an optimal prime rate reaction function and show that more effectively conservative monetary policy tends to react less active to shocks to the real economy. In order to illustrate the proposed methodology we then estimate a common prime rate reaction function for a sample of 11 central banks in a panel setting and allow the reaction to real disturbances to differ between countries. --

Predictive accuracy of political stock markets: Empirical evidence from an European perspective

In a meta study of 25 political stock markets conducted in Germany in the last decade we analyze their predictive success. Although the predictions of political stock markets are highly correlated with the corresponding polls, the markets are able to aggregate additional information. One explanatory variable for variations in predictive success of the German stock markets relative to the polls is market efficiency. Even though the overall predictions of the political stock markets are quite reliable on the aggregate level we find systematic prediction errors on the contract level that can be attributed to the vote share size and to individual trader biases. --political stock markets,forecasting,market efficiency,proportional representation

Forecasting Inflation via Experimental Stock Markets Some Results from Pilot Markets

While there are various techniques of inflation forecasting in use, none of them has proved to deliver consistently more accurate forecasts than the others. That is why most users of inflation forecasts monitor a variety of inflation indicators and forecasts and check them for consistency. This paper aims at contributing to an extension of themethods in use. We propose to conduct experimental inflation forecasting markets in order to uncover market participants' inflation expectations. While the markets directly deliver density forecasts of inflation they also allow to construct mean forecasts and a measure of forecast uncertainty. We also present evidence from a number of pilot markets underlining that the proposed method might enrich the arsenal of existing forecastingtechniques.Inflation forecast, field experiments, experimental stock markets.

Partisan cycles and pre-electoral uncertainty

Rational partisan theory of political business cycles suggests differences in inflation under left-wing and right-wing governments. It also suggests temporary post-electoral booms after election of left-wing governments and temporary recessions after election of right-wing ones. However, the core hypothesis that post-electoral booms and recessions depend upon the degree of pre-electoral uncertainty has rarely been tested. Using pre-electoral polling data, we provide empirical evidence in favor of the hypothesis of the existence of rational partisan cycles. We also show that - in line with most previous empirical studies - there is little evidence for partisan cycles under adaptive expectations. --partisan theory,political business cycles

Hurricane Risk, Happiness and Life Satisfaction. Some Empirical Evidence on the Indirect Effects of Natural Disasters

As a consequence of climate change, certain types of natural disasters become either more likely or more severe. While disasters might have numerous direct (typically negative) e ects, the e ect of an increase of natural disaster risk on individual well-being is often neglected. In this paper we study the e ects of natural disaster risk on self-reported happiness and life satisfaction at the example of tropical storms. Combining several waves of the World Values Survey and appropriate storm data we find that disaster risk tends to have little systematic e ect on self-reported happiness, once we correct for individual characteristics. However, hurricane risk turns out to decrease life satisfaction significantly. We conclude that when individuals evaluate their long-term satisfaction with their life, disaster risk is perceived as threat to individual well-being

Experimentelle Aktienmärkte als Instrumente der Konjunkturprognose

In den späten achtziger Jahren kam eine neue Prognosetechnik zur Anwendung: die Veranstaltung so genannter "experimenteller Aktienmärkte". Diese Technik wurde zunächst vorrangig im Bereich der Wahlprognose eingesetzt, später fand sie auch in anderen Bereichen Anwendung, so z.B. bei der betriebsinternen Projektüberwachung oder der Voraussage des Ausgangs von Referenden. Der vorliegende Beitrag stellt die grundlegende Idee der Veranstaltung experimenteller Prognosemärkte dar und gibt einen Überblick über die bisher vorliegende empirische Evidenz. Die Ergebnisse zeigen, dass experimentelle Prognosemärkte eine sinnvolle Ergänzung zu existierenden Prognosemethoden sein können und sich auch zur Prognose makroökonomischer Eckdaten eignen. Insofern könnten sie in der Zukunft eine Ergänzung des traditionellen Konjunkturprognose-Instrumentariums darstellen