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The recent housing bust has reignited interest in psychological theories of speculative excess (Shiller, 2007). I investigate this issue by identifying a segment of the U.S. population-evangelical protestants-that may be less prone to speculative motives, and uncover a significant negative relationship between their population share and house price volatility. Evangelicals' focus on Biblical prophecy could account for this difference, since it may enable them to interpret otherwise negative events as containing positive news, dampening the response of house prices to shocks. I provide evidence for this channel using a popular internet measure of "prophetic activity" and a 9/11 event study. I also analyze survey data covering religious beliefs and asset holding, and find that 'end times' beliefs are associated with a one-third decline in net worth, consistent with these beliefs providing a form of psychic insurance (Scheve and Stasavage, 2006a and 2006b) that reduces asset demand.
Business & Economics --- Real Estate, Housing & Land Use --- Housing --- Evangelicalism. --- Economics --- Prices --- Religious aspects --- Christianity. --- Christianity and economics --- Evangelical religion --- Protestantism, Evangelical --- Evangelical Revival --- Fundamentalism --- Pietism --- Protestantism --- Financial Risk Management --- Infrastructure --- Insurance --- Real Estate --- Demography --- Macroeconomics: Consumption --- Saving --- Wealth --- Urban, Rural, and Regional Economics: Housing Demand --- Cultural Economics: Religion --- Housing Supply and Markets --- Demographic Economics: General --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Financial Crises --- Insurance Companies --- Actuarial Studies --- Property & real estate --- Population & demography --- Macroeconomics --- Economic & financial crises & disasters --- Insurance & actuarial studies --- Housing prices --- Population and demographics --- Asset bubbles --- National accounts --- Financial crises --- Financial institutions --- Population --- Saving and investment --- United States
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A motivation for central bank independence (CBI) is that policy delegation helps politicians manage diverse coalitions. This paper develops a model of coalition formation that predicts when delegation will occur. An analysis of policy preferences survey data and CBI indicators supports the predictions. Case studies, drawn from several countries' recent past and the nineteenth-century United States, provide further support. Finally, the model explains why the expected negative relationship between CBI and inflation is not empirically robust: endogenous selection biases the estimated effect towards zero. The data confirm this.
Banks and banking, Central. --- Electronic books. -- local. --- Monetary policy. --- Finance --- Business & Economics --- Banking --- Monetary management --- Banker's banks --- Banks, Central --- Central banking --- Central banks --- Economic policy --- Currency boards --- Money supply --- Banks and banking --- Banks and Banking --- Inflation --- Macroeconomics --- Multiple or Simultaneous Equation Models: Cross-Sectional Models --- Spatial Models --- Treatment Effect Models --- Noncooperative Games --- Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior --- Price Level --- Deflation --- Central Banks and Their Policies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Personal Income, Wealth, and Their Distributions --- Central bank autonomy --- Personal income --- Prices --- National accounts --- Income --- South Africa
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This paper presents and then tests a political economy model to analyze the observed positive relationship between income inequality and inflation. The model's key features are unequal access to both inflation-hedging opportunities and the political process. The model predicts that inequality and 'elite bias' in the political system interact to create incentives for inflation. The paper's empirical section focuses on this predicted interaction effect. The identification strategy involves using the end of the Cold War as a source of exogenous variation in the political environment. It finds robust evidence in support of the model.
Electronic books. -- local. --- Income distribution -- Econometric models. --- Inflation (Finance) -- Social aspects. --- Finance --- Business & Economics --- Money --- Income distribution --- Inflation (Finance) --- Econometric models. --- Social aspects. --- Natural rate of unemployment --- Inflation --- Macroeconomics --- Political Economy --- Aggregate Factor Income Distribution --- Price Level --- Deflation --- Personal Income, Wealth, and Their Distributions --- Political economy --- Income inequality --- Personal income --- Prices --- Income --- Economics --- United States
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I test whether inflation targeting (IT) enhances transparency using inflation forecast data for 11 IT adoption countries. IT adoption promotes convergence in forecast errors, suggesting that it enhances transparency. This effect is robust to dropping observations, is strengthened by using instrumental variable estimation to eliminate mean-reversion, and is absent in placebo regressions (where IT adoption is shifted by a year). This result supports Morris and Shin's (2002) contention that better public information is most beneficial for forecasters with bad private information. However, it does not support their hypothesis that better public information could make private forecasts less accurate.
Anti-inflationary policies --- Inflation (Finance) --- Econometric models. --- Forecasting --- Antiinflationary policies --- Government policy --- Finance --- Natural rate of unemployment --- Economic policy --- Price regulation --- Banks and Banking --- Finance: General --- Inflation --- Money and Monetary Policy --- Price Level --- Deflation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy --- Forecasting and Other Model Applications --- General Financial Markets: General (includes Measurement and Data) --- Macroeconomics --- Banking --- Monetary economics --- Economic Forecasting --- Inflation targeting --- Economic forecasting --- Emerging and frontier financial markets --- Prices --- Banks and banking --- Monetary policy --- Financial services industry --- United Kingdom
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This paper examines the current level of central bank independence (CBI) and transparency in a broad sample of countries using newly constructed measures, and looks at the evolution in both measures from an earlier time period. Increases in CBI have tended to occur in more democratic countries and in countries with high levels of past inflation. More independent central banks in turn tend to be more transparent, while transparency is also positively correlated with measures of national institutional quality. Exploiting the time dimension of our data to eliminate country fixed effects and using instrumental variable estimation to overcome endogeneity concerns, we present evidence that greater CBI is associated with lower inflation. We also find that enhanced transparency practices are associated with the private sector making greater use of information provided by the central bank.
Banks and banking, Central. --- Autonomy. --- Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Independence --- Self-government --- International law --- Political science --- Sovereignty --- Banker's banks --- Banks, Central --- Central banking --- Central banks --- Banks and banking --- Banks and Banking --- Foreign Exchange --- Inflation --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Financial Markets and the Macroeconomy --- Monetary Policy --- Central Banks and Their Policies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Price Level --- Deflation --- Banking --- Macroeconomics --- Currency --- Foreign exchange --- Central bank autonomy --- Exchange rate arrangements --- Central bank transparency --- Prices --- Exchange rate flexibility --- United Kingdom
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Conventional VAR and non-VAR methods of identifying the effects of monetary policy shocks on the economy have found a negative output response to monetary tightening using U.S. data over the 1960s-1990s. However, we show that these methods fail to find this contractionary effect when the sample is restricted to the period since the 1980s, apparently due to changes in the policymaking environment that reduce their effectiveness. Identifying policy shocks using Fed Funds futures data, we recover the contractionary effect of monetary tightening on output and find that almost half of output variation over the period appears due to policy shocks.
Banks and Banking --- Econometrics --- Investments: Futures --- Industries: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Monetary Policy --- Contingent Pricing --- Futures Pricing --- option pricing --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Econometrics & economic statistics --- Finance --- Banking --- Vector autoregression --- Futures --- Central bank policy rate --- Structural vector autoregression --- Industrial production --- Econometric analysis --- Financial institutions --- Financial services --- Production --- Derivative securities --- Interest rates --- Industries --- United States --- Monetary policy. --- Economic policy.
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Consensus forecasts are inefficient, over-weighting older information already in the public domain at the expense of new private information, when individual forecasters have different information sets. Using a cross-country panel of growth forecasts and new methodological insights, this paper finds that: consensus forecasts are inefficient as predicted; this is not due to individual forecaster irrationality; forecasters appear unaware of this inefficiency; and a simple adjustment reduces forecast errors by 5 percent. Similar results are found using US nominal GDP forecasts. The paper also discusses the result’s implications for users of forecaster surveys and for the literature on information aggregation.
At head of title: Research Department. --- Economic forecasting --- Information theory in economics --- Econometrics. --- Econometric models. --- Economics, Mathematical --- Statistics --- Economic cybernetics --- Econometrics --- Forecasting --- Forecasting and Other Model Applications --- Expectations --- Speculations --- General Aggregative Models: Forecasting and Simulation --- Economic Forecasting --- United States
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This paper summarizes a suite of early warning models to assess the probabilities of growth, fiscal, and financial crises in advanced economies and emerging markets. We estimate separate signal-extraction models for each type of crisis and sample of countries, and we use our results to generate “histories of vulnerabilities” for countries, regions, and the world. For the global financial crisis, our models report that vulnerabilities in advanced economies were rooted in the bursting of leveraged bubbles, while vulnerabilities in emerging markets stemmed from lengthy booms in credit and asset prices combined with growing weaknesses in the corporate and external sectors.
Accounting --- Exports and Imports --- Financial Risk Management --- Macroeconomics --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Financial Crises --- Public Administration --- Public Sector Accounting and Audits --- Price Level --- Inflation --- Deflation --- International Investment --- Long-term Capital Movements --- Economic & financial crises & disasters --- Financial reporting, financial statements --- International economics --- Financial crises --- Global financial crisis of 2008-2009 --- Financial statements --- Asset prices --- Sudden stops --- Public financial management (PFM) --- Prices --- Balance of payments --- Global Financial Crisis, 2008-2009 --- Finance, Public --- Capital movements --- United States
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DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
Money and Monetary Policy --- Real Estate --- Industries: Financial Services --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Financial Markets and the Macroeconomy --- Central Banks and Their Policies --- Financial Institutions and Services: Government Policy and Regulation --- Housing Supply and Markets --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Real Estate Markets, Spatial Production Analysis, and Firm Location: General --- Property & real estate --- Finance --- Monetary economics --- Prices --- Financial institutions --- Money --- Housing prices --- Credit --- Real estate prices --- Loans --- Housing --- United States
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Macrofinancial linkages have long been at the core of the IMF's mandate to oversee the stability of the global financial system. With the advent of the economic crisis, the Fund has drawn on this research in order to contribute to critical debates on the nature of appropriate policy responses at both the national and multilateral levels. The current juncture offers a good opportunity to take stock of this body of research by IMF staff and to share it with a wider audience, particularly since few collections have been published in this area. This volume brings together some of the best writing by IMF economists on macrofinancial issues, and highlights the issues and approaches that have guided IMF thinking in an area that makes up an increasingly important component of the IMF's overall remit. The chapters in the volume fit into three broad themes: financial crises and boom-bust cycles; financial integration, financial liberalization, and economic performance; and policy issues relating to macroeconomic policy and the corporate and financial sectors-including domestic and external financial liberalization.
Financial crises. --- Credit. --- International finance. --- Monetary policy. --- Crises financières --- Crédit --- Finances internationales --- Politique monétaire --- Financial crises --- Credit --- International finance --- Monetary policy --- Business & Economics --- Economic Theory --- AA / International- internationaal --- 331.01 --- economisch beleid --- crise economique --- 331.31 --- 333.17 --- 333.81 --- 333.846.0 --- 338.8 --- 332.042 --- Monetary management --- Economic policy --- Currency boards --- Money supply --- International monetary system --- International money --- Finance --- International economic relations --- Borrowing --- Money --- Loans --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- Business cycles --- Evolutie van de economische cycli. --- politique economique --- economische crisis --- Economisch beleid. --- Crises, saneringen en hervormingen van het bankwezen. --- Algemene evolutie van de kapitaalmarkt. --- Verband tussen het monetair, bank- en kredietbeleid en de economische ontwikkeling: algemeenheden. --- Economische groei. --- Crises financières --- Crédit --- Politique monétaire --- Evolutie van de economische cycli --- Economisch beleid --- Crises, saneringen en hervormingen van het bankwezen --- Algemene evolutie van de kapitaalmarkt --- Verband tussen het monetair, bank- en kredietbeleid en de economische ontwikkeling: algemeenheden --- Economische groei --- E-books --- Banks and Banking --- Exports and Imports --- Finance: General --- Financial Risk Management --- Money and Monetary Policy --- International Investment --- Long-term Capital Movements --- Financial Crises --- General Financial Markets: General (includes Measurement and Data) --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Globalization: General --- International economics --- Economic & financial crises & disasters --- Banking --- Monetary economics --- Globalization --- Financial integration --- Banking crises --- Bank credit --- Financial markets --- Emerging and frontier financial markets --- Capital movements --- Banks and banking --- Financial services industry --- United States
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