Classroom games in economics : a quantitative assessment of the 'beer game'

Using an experiment, I compare the use of the 'Beer Distribution' classroom game with the more traditional 'chalk and talk' approach to teach students about inventories and the macroeconomy. My empirical results confirm and extend our understanding of the relative strengths and weaknesses of the use of classroom games: the game tends to improve interest and motivation on average, though some students dislike their use; the game is effective at driving home its key messages, but it may wrongly lead students to disregard other important factors; the game is inferior where facts mastery or de nitional learning is required. Rather than an endorsement or a criticism of classroom games, the conclusion is cautionary advice on how to best make use of games within an overall course

Inventories in motion : a new approach to inventories over the business cycle

I propose an inventories-in-motion concept which represents a new approach to inventories over the business cycle. This channel has previously been ignored by macroeconomists. I build a general equilibrium business cycle model in which inventories arise naturally as a result of gaps between production of goods and their consumption as goods are distributed. These inventories are actively managed and adjusted to meet consumption and investment needs in the economy. Although conceptually very simple, I show that such inventory behaviour matches a number of stylised facts of aggregate inventories. Nonetheless, my model does not admit an important role for inventory management improvements in declining macroeconomic volatility in the last 30 years

Estimating bayesian decision problems with heterogeneous priors

In many areas of economics there is a growing interest in how expertise and preferences drive individual and group decision making under uncertainty. Increasingly, we wish to estimate such models to quantify which of these drive decision making. In this paper we propose a new channel through which we can empirically identify expertise and preference parameters by using variation in decisions over heterogeneous priors. Relative to existing estimation approaches, our \PriorBased Identi cation" extends the possible environments which can be estimated, and also substantially improves the accuracy and precision of estimates in those environments which can be estimated using existing methods

Policy Uncertainty and Precautionary Savings

In 1997 Chancellor Kohl proposed a major pension reform: he pushed the law through Parliament explaining that the German PAYG system had become unsustainable. One limitation of the new law - one that is crucial for our identification strategy - is that it left the generous pension entitlements of civil servants intact. The year after, in 1998, Kohl lost the elections and was replaced by Gerhard Shroeder. One of the first decisions of the new Chancellor was to revoke of the 1997 pension reform. We use the quasi-experiment of the adoption and subsequent revocation of the pension reform to study how households reacted to the increase in uncertainty about the future path of income that such an event produced. Our estimates are obtained from a diff-in-diff estimator: this helps us overcome the identification problem that often affects measures of precautionary saving. Departing from the majority of studies on precautionary saving we also analyze households' response in terms of labor market choices: we find evidence of a labor supply response by those workers who can use the margin offered by part-time employment.Pension Reform, Precautionary saving, uncertainty, Germany

Delayed Doves: MPC Voting Behaviour of Externals

The use of independent committees for the setting of interest rates, such as the Monetary Policy Committee (MPC) at the Bank of England, is quickly becoming the norm in developed economies. In this paper we examine the issue of appointing external members (members who are outside the staff of the central bank) to these committees. We construct a model of MPC voting behaviour, and show that members who begin voting for similar interest rates should not systematically diverge from each other at any future point. However, econometric results in fact show that external members initially vote in line with internal members, but after a year, begin voting for substantially lower interest rates. The robustness of this effect to including member fixed effects provides strong evidence that externals behave differently from internals because of institutional differences between the groups, and not some unobserved heterogeneity. We then examine whether career concerns can explain these findings, and conclude that they cannot.Monetary Policy Committee (MPC), Bank of England, Committee Voting,Signalling

The household effects of government spending

This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth effects associated with a shift in spending. We find significant heterogeneity in households’ response to a spending shock; the effects appear vary over time depending, among other factors, on the state of business cycle and, at a lower frequency, on the composition of employment (such as the share of workers in part-time jobs). Shifts in spending could also have important distributional effects that are lost when estimating an aggregate multiplier. Heads of households working relatively few (weekly) hours, for instance, suffer from a spending shock of the type we analyzed: their consumption falls, their hours increase and their real wages fall

First impressions matter : signalling as a source of policy dynamics

We provide the first direct empirical support for the importance of signalling in monetary policy by testing two key predictions from a novel structural model. First, all policymaker types should become less tough on inflation over time and secondly, types that weigh output more should have a more pronounced shift. Voting data from the Bank of England's Monetary Policy Committee strongly support both predictions. Counterfactual results indicate signalling has a substantial impact on interest rates over the business cycle, and improves the committee designer's welfare. Implications for committee design include allowing regular member turnover and transparency regarding publishing individual votes

Estimating bayesian decision problems with heterogeneous expertise

We consider the recent novel two-step estimator of Iaryczower and Shum (American Economic Review 2012; 102: 202–237), who analyze voting decisions of US Supreme Court justices. Motivated by the underlying theoretical voting model, we suggest that where the data under consideration display variation in the common prior, estimates of the structural parameters based on their methodology should generally benefit from including interaction terms between individual and time covariates in the first stage whenever there is individual heterogeneity in expertise. We show numerically, via simulation and re-estimation of the US Supreme Court data, that the first-order interaction effects that appear in the theoretical model can have an important empirical implication. Copyright © 2015 John Wiley & Sons, Ltd

Preferences or private assessments on a monetary policy committee?

Using Bank of England voting data, we show empirically that members’ votes are driven by heterogeneous individual assessments of the economy as well as their individual policy preferences. Estimates indicate that internal committee members form more precise assessments than externals and are also more hawkish. The estimates allow the first quantification of the gain due to information aggregation on monetary policy committees. The marginal gain from additional committee members tapers quickly after five members. There is no evidence of gains through externals’ moderating internals’ preferences. A relatively small committee of highly informed internal members emerges as a desirable committee structure

Perils of quantitative easing

Quantitative easing compromises the control of the central bank over the stochastic path of inflation