Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes?

When the central banker’s loss function is asymmetric, changes in the volatility of inflation and/or unemployment affect equilibrium inflation. This suggests that changing macroeconomic volatilities may be an important driving force behind trends in observed inflation. Previous evidence, which has offered support for this idea, suffers from a spurious regression problem. Once this problem is controlled for, the evidence suggests that the volatility of unemployment does not help explain inflation outcomes. There is some evidence of a relationship between inflation and its volatility, but overall the data does not support the view that changing economic volatility, as filtered through asymmetric central bank preferences, is an important driver of inflation trends.Inflation, Monetary Policy, Asymmetric Loss Function.

Efficiency Tradeoffs in Estimating the Linear Trend Plus Noise Model

This paper presents the results of a Monte Carlo comparison of feasible GLS estimators of the trend parameter in the linear trend plus noise model, where the noise component may or may not be a unit root process. We include an FGLS estimator that estimates the noise component using a median-unbiased estimator.

Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes?

Recent theoretical work shows that changes in the volatility of inflation and/or unemployment affect equilibrium inflation outcomes when the central banker's loss function is asymmetric. We show that previous evidence offered in support of the proposition that the volatility of unemployment helps explain inflation outcomes suffers from a spurious regression problem. Once this problem is controlled for, the evidence suggests that the volatility of unemployment does not help explain inflation outcomes. There is some evidence of a relationship between inflation and its volatility, but the data is not strongly supportive of the view that asymmetric central bank preferences are an important driver of inflation.inflation; monetary policy; asymmetric loss

Testing Commitment Models of Monetary Policy: Evidence from OECD Economies

Inflation rates in a number of OECD follow a common trend over the past four decades: inflation starts out low in the 1960s, rises for a time before peaking in the 1970s or early 1980s, and then falls back to initial levels. This similarity in the behavior of trend inflation suggests that any explanation of long run inflation trends ought to apply across OECD countries. Ireland (1999) shows that a simple time inconsistency model of monetary policy, modified to allow for a time-varying NAIRU, can explain long run trends in U.S. inflation. In this paper we show that this result cannot serve as an explanation of the common trend in OECD inflation, as it fits the data only in the U.S.. We investigate two important variants of the hypothesis: i) that time inconsistency was an important component of central bank behavior in earlier decades, but has become less significant in recent years, and ii) that time inconsistency problems drive U.S. inflation, which affects inflation rates in other countries as a result of central bankers' attempts to manage nominal exchange rate movements vis a vis the U.S. dollar. We find that the first hypothesis fits the data no better than the baseline model. We find some support for the international spillovers version of the model, but the behavior of non-U.S. central bankers with respect to domestic unemployment rates is not well described by the time inconsistency mechanism.monetary policy; inflation; time incosistency

FADS VERSUS FUNDAMENTALS IN FARMLAND PRICES

This paper develops an approach to decompose farmland price time series into three components: permanent fundamental component, temporary fundamental component, and nonfundamental component. This decomposition is useful for studying the importance of fundamental versus nonfundamental factors in explaining farmland price behavior and the dynamic response of farmland price to shocks to each of these components, among other issues. The approach is applied to annual Iowa farmland prices over the 1992-1994 sample period.

Building Honors Community through Honors Housing

A strong sense of honors community is a fundamentally important characteristic of a vibrant honors program or college. In fact, I am fond of saying that “community, community, community” are the three most important characteristics of a strong honors program. The idea of community does not appear, however, in the National Collegiate Honors Council’s “Basic Characteristics of a Fully Developed Honors College” or the “Basic Characteristics of a Fully Developed Honors Program.” Perhaps that absence is because this characteristic, regardless of how it is expressed, would be difficult to verify

Unanticipated Money Supply Growth and Single-Family Housing Starts in the U.S.: 1964-1977

The role of the Federal Reserve\u27s monetary policy in the propagation of cycles in residential construction has long been a subject of interest to economists. This paper considers the hypothesis that it is only the uniahticipated component of money supply growth that affects built-for-sale, single-family housing starts in the United States\u27. Using quarterly data for the 1964-1977 period, tests similar to those performed by Barro [1977] and others on broader macroeconomic variables are shown to support this hypothesis

Time Varying Discount Rates and Rent-Price Ratios In Farmland Markets

This paper constructs a version of Campbell and Shiller\u27s dividend-price ratio model in order to study the consistency of farmland price behavior with the implications of a present value formulation that accounts for time-varying discount rates. The model imposes testable restrictions on the joint behavior of rent-price ratios and a linear combination of the ex-post required rate of return and rent growth rates. The restrictions are found to be inconsistent with annual Iowa farmland price and rent movements for the 1926-1986 sample period

Building Honors Community through Honors Housing

A strong sense of honors community is a fundamentally important characteristic of a vibrant honors program or college. In fact, I am fond of saying that “community, community, community” are the three most important characteristics of a strong honors program. The idea of community does not appear, however, in the National Collegiate Honors Council’s “Basic Characteristics of a Fully Developed Honors College” or the “Basic Characteristics of a Fully Developed Honors Program.” Perhaps that absence is because this characteristic, regardless of how it is expressed, would be difficult to verify

A Cross-Country Study of the Symmetry of Business Cycles

Recently developed testing procedures have led to renewed interest in the empirical evaluation of the hypothesis that business cycle contractions tend to be sharper and shorter than expansions. Evidence presented by Neftci (1984) and Falk (1984) suggests that, in the United States, cycles in unemployment and real GNP behave in ways that are consistent with the asymmetry hypothesis. This paper looks at time series pertaining to aggregate production in Canada and four West European countries. It does not find additional support for the asymmetry hypothesis