Volume XXIII, No. 1, 1997
THE CYCLICAL BEHAVIOR OF GOVERNMENT LENDING INSTITUTIONS IN JAPAN
James R. Rhodes
This study focuses on a neglected area of Japan's fiscal policy: the macroeconomic behavior of government lending institutions (GLI). The concept of a reaction function is applied to the lending policies of Japan's fiscal authorities. The policy instrument is the total loans and discounts of individual and aggregate GLI. Using a measure of the real GNP gap as the primary target variable, government lending policy was found to have served a macrostabilizing role in the post-1980 period. In the earlier period (1955-79) of relatively high output volatility, a neutral policy appears to have prevailed. (E44, E62, E32)
INCONGRUENT INCENTIVES IN BANKING SUPERVISION: THE AGENT'S PROBLEM
Danielle Lewis
This paper analyzes the incentives that regulators face when making decisions to take regulatory action. Under the assumption that the regulator is self-interested and taxpayers wish regulators to provide a safe banking environment, three conclusions are reached: 1) the more information that the public has about bank risk-taking, the more consistent regulators follow the rules, 2) regulators will not always follow the principal's written directive due to incentive incongruities between the regulators and taxpayers, and 3) as bank portfolio risk increases in banks, the probability of further regulatory action will actually decrease. (L50, L51)
AN INTERNATIONAL PERSPECTIVE ON THE LONG-RUN RELATIONSHIP BETWEEN MONEY AND INCOME
Nozar Hashemzadeh
The role of money and its impact on nominal and real variables has been the focus of a lively debate for more than two centuries. This paper examines the historical association between the money supply, M1, and real gross national product (GNP), in selected countries. Using the cointegration methodology, the author finds a tenable long-run equilibrium relationship between the narrowest definition of the money supply, M1, and real output in the Federal Republic of Germany but little evidence in favor of a comparable relationship for Austria, France, Italy, Japan, South Korea, Switzerland, and the United States. Overall, the results strongly suggest that innovations in the M1 money supply are insufficient for understanding and predicting the behavior of real output in the short-run or the long-run. (E52, C59)
THE ROLE OF INTERNATIONAL TRADE IN TECHNOLOGICAL CHANGE: THE CASE OF U.S. MANUFACTURERS
Catherine Carey
Empirical data for U.S. manufacturing suggests either an insufficient reallocation of technology to those industries that export or a deterioration in the U.S. technological lead within many of its manufacturing industries. An interesting question is whether domestic policies, as opposed to international trade, are responsible for hurting U.S. competitiveness by suppressing technological advancement. I find that exports significantly promote reallocation of technology between industries and improvements in technology within industries; U.S. tax policies significantly reduce improvements in technology; and the real interest rate significantly promotes movements both between and within industries and is the single most important factor. (F2, L6)
THE TRADE BALANCE AND THE REAL EXCHANGE RATE: EVIDENCE FROM A VAR FOR THE UNITED STATES
Radha Bhattacharya
Although the exchange rate is a traditional theoretical determinant of the trade balance, there is little recent empirical evidence that supports its importance. Recent influential research has dismissed any relationship between these two variables. This paper uses a 101-country index of the dollar in a VAR model and reinstates the role of the exchange rate in explaining the aggregate trade balance of the United States. The major finding is that a broad measure of the exchange rate that accounts for a full set of trading partners of the United States influences the trade balance in the medium term. (F10, F41)
THE TREATMENT OF MEDICAL INDEBTEDNESS IN PERSONAL BANKRUPTCY
Dennis Wilson, William Smith, John Rogers, and Cyril Chang
This paper examines the treatment of medical indebtedness in the personal bankruptcy process. We demonstrate statistically that bankruptcy courts systematically discharge medical claims at a higher rate than competing non-medical claims. We then develop a model of bankruptcy which suggests three hypotheses that we test empirically. First, as medical claims increase relative to the debtor's net wealth, the presiding judge becomes more sympathetic and approves a higher discharge rate. Second, if the court is sympathetic, it will induce a debtor to acquire more non-medical debts. Third, non-medical debts increase with the debtor's initial wealth. (I1, K1)
STUDENT WITHDRAWAL BEHAVIOR IN INTRODUCTORY COLLEGE ECONOMICS COURSES
Gisela Meyer Escoe, Jack D. Julian, and Philip K. Way
Student withdrawals are a common concern in many introductory economics courses because they are wasteful of student, departmental and societal resources. This paper develops a model that explains a student's decision to withdraw from an introductory economics course based upon utility theory. The model is tested using a logistic regression specification. Six factors are found to have a significant influence on the student's decision. The implications are drawn out for teaching strategies and administrative decisions that might reduce withdrawals. (A2)
CALCULATING BETAS WITH DAILY DATA: ESTIMATION PERIOD EFFECTS ON PREDICTION ERROR
Herbert Weinraub and Gary Moore
Minimization of sampling error is critical for studies requiring beta estimation. Previous studies utilizing monthly data found estimation periods ranging from four to nine years to be optimum. However, appropriate estimation periods, using daily data, has received limited attention. This study focused on beta estimation periods from 11 to 330 days, using daily data. Results show a significant reduction in sampling error with 60 to 70 observations. Additional gains were obtained by increasing the sample size but were not statistically significant. Although a minimal estimation period was established, a single optimal estimation period, found in some of the monthly studies, was not determined. (G14, D81)