Template-Type: ReDIF-Paper 1.0 Author-Name: Hrishikesh D. Vinod Author-X-Name-First: Hrishikesh D. Author-X-Name-Last: Vinod Author-Workplace-Name: Fordham University, Department of Economics Title: A New Solution to Time Series Inference in Spurious Regression Problems Abstract: Phillips (1986) provides asymptotic theory for regressions that relate nonstationary time series including those integrated of order 1, I(1). A practical implication of the literature on spurious regression is that one cannot trust the usual confidence intervals. In the absence of prior knowledge that two series are cointegrated, it is therefore recommended that after carrying out unit root tests we work with differenced or detrended series instead of original data in levels. We propose a new alternative for obtaining confidence intervals based on the Maximum Entropy bootstrap explained in Vinod and Lopez-de-Lacalle (2009). An extensive Monte Carlo simulation shows that our proposal can provide more reliable conservative confidence intervals than traditional, differencing and block bootstrap (BB) intervals. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_01_vinod.pdf File-Format: Application/pdf Classification-JEL: C12, C15, C22, C51 Keywords: Bootstrap, simulation, confidence intervals Handle: RePEc:FRD:wpaper:DP2010-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Hrishikesh D. Vinod Author-X-Name-First: Hrishikesh D. Author-X-Name-Last: Vinod Author-Workplace-Name: Fordham University, Department of Economics Title: GMM and OLS Estimation and Inference for New Keynesian Phillips Curve Abstract: This paper considers estimation situations where identification, endogeneity and non-spherical regression error problems are present. Instead of always using GMM despite weak instruments to solve the endogeneity, it is possible to first check whether endogeneity is serious enough to cause inconsistency in the particular problem at hand. We show how to use Maximum Entropy bootstrap (meboot) for nonstationary time series data and check `convergence in probability' and `almost sure convergence' by evaluating the proportion of sample paths straying outside error bounds as the sample size increases. The new Keynesian Phillips curve (NKPC) ordinary least squares (OLS) estimation for US data finds little endogeneity-induced inconsistency and that GMM seems to worsen it. The potential `lack of identification' problem is solved by replacing the traditional pivot which divides an estimate by its standard error by the Godambe pivot, as explained in Vinod (2008) and Vinod (2010), leading to superior confidence intervals for deep parameters of the NKPC model. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_02_vinod.pdf File-Format: Application/pdf Classification-JEL: Keywords: Bootstrap, simulation, convergence, inflation inertia, sticky prices Handle: RePEc:FRD:wpaper:DP2010-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Baybars Karacaovali Author-X-Name-First: Baybars Author-X-Name-Last: Karacaovali Author-Workplace-Name: Fordham University, Department of Economics Title: Free Trade Agreements and External Tariffs Abstract: There has been a proliferation of preferential trade agreements within the last two decades. In this paper I analyze the effects of free trade agreements (FTAs) on external tariffs under a political economy setup. I extend the Grossman and Helpman (1995) model by determining tariff rates endogenously instead of assuming they are fixed during or after the formation of FTAs. I show that for an exogenously established FTA, the tariff rates that apply to non-members essentially decline once the FTA is formed. More importantly, I investigate the interaction between endogenous tariff determination and the feasibility of an FTA. I find that the expectation of tariff reductions under endogenous tariffs makes an otherwise feasible FTA under fixed tariffs become infeasible. However, if domestic import-competing sectors are relatively smaller, an FTA is more likely to be feasible as compared to fixed tariffs. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_03_karacaovali.pdf File-Format: Application/pdf Classification-JEL: F13, F15 Keywords: Free trade agreements, political economy of trade policy, trade liberalization, feasibility Handle: RePEc:FRD:wpaper:DP2010-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Ralf Hepp Author-X-Name-First: Ralf Author-X-Name-Last: Hepp Author-Workplace-Name: Fordham University, Department of Economics Author-Name: Jürgen von Hagen Author-X-Name-First: Jürgen Author-X-Name-Last: von Hagen Author-Workplace-Name: University of Bonn, Indiana University, and CEPR Title: Interstate Risk Sharing in Germany: 1970-2006 Abstract: We study the channels of interstate risk sharing in Germany for the time period 1970 to 2006 following the methodology of Asdrubali et al. (1996). Their framework allows us to estimate the degree of smoothing of a shock to a state's gross domestic product by factor markets, the government sector, and credit markets, respectively. For the time period from 1970 to 1994 – pre-unification Germany – we find that about 19 percent of shocks to a state's gross domestic product (GDP) are smoothed by private factor markets, 50 percent are smoothed by the German government sector, and a further 17 percent are smoothed through credit markets. For the post-reunification period, 1995 to 2006, the relative importance of the smoothing channels changes. In the complete sample, factor markets contribute around 50.5 percent to income smoothing, and credit markets contribute another 17.5 percent. The government sector's role is diminished: it smoothes around 10 percent of a shock. For this period, we also split our sample between West and East German states. In West Germany, 63 percent of idiosyncratic income shocks are smoothed out by factor markets; and another 15 percent by the government sector. In East Germany, factor markets smooth about 34.5 percent of the volatility in state GDP, the government sector about 19 percent, and another 18 percent are smoothed by credit markets. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_04_hepp_vonhagen.pdf File-Format: Application/pdf Classification-JEL: H77, E63, F42 Keywords: Regional Risk-sharing, Factor Markets, Consumption Smoothing, Fiscal Federalism Handle: RePEc:FRD:wpaper:DP2010-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Workplace-Name: University of Connecticut, Department of Economics Author-Name: Ralf Hepp Author-X-Name-First: Ralf Author-X-Name-Last: Hepp Author-Workplace-Name: Fordham University, Department of Economics Title: Securitization and the Balance Sheet Channel of Monetary Transmission Abstract: This paper shows that the balance sheet channel of monetary transmission works mainly through U.S. bank holding companies that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending channel of monetary transmission. Focusing on the balance sheet channel, and using bank-level observations, we find that securitized banks are more sensitive to borrowers' balance sheets and that monetary policy has a greater impact on this sensitivity for securitizing bank holding companies. The optimality conditions from a simple partial equilibrium framework suggest that the positive effects of securitization on policy effectiveness could be due to the high sensitivity of security prices to policy rates. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_05_aysun_hepp.pdf File-Format: Application/pdf Classification-JEL: E44; F31; F41; O16 Keywords: balance sheet channel, banks, bank holding companies, securitization. Handle: RePEc:FRD:wpaper:DP2010-05 Template-Type: ReDIF-Paper 1.0 Author-Name: Subha Mani Author-X-Name-First: Subha Author-X-Name-Last: Mani Author-Workplace-Name: Fordham University, Department of Economics Author-Name: Utteeyo Dasgupta Author-X-Name-First: Utteeyo Author-X-Name-Last: Dasgupta Author-Workplace-Name: Franklin and Marshall College, Department of Economics Title: Explaining Randomized Evaluation Techniques Using Classroom Games Abstract: Over the last decade, randomized evaluations have taken the field of development economics by storm. Despite the availability of strong review pieces in the topic, there is no pedagogical paper on randomized evaluation. This paper bridges the gap by introducing three interactive classroom games to communicate the concepts of Average Treatment Effect (ATE), Intent–to-Treat Effect (ITT), Sub-group Average Treatment Effect (SATE), and Externality Effect (EE). The classroom games are easy to implement and provide students an opportunity to participate in a simple randomized trial of their own. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_06_mani_dasgupta.pdf File-Format: Application/pdf Classification-JEL: A22, C70 Keywords: program evaluation, classroom experiment, pedagogy, economic development Handle: RePEc:FRD:wpaper:DP2010-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Ali M. Kutan Author-X-Name-First: Ali M. Author-X-Name-Last: Kutan Author-Workplace-Name: Southern Illinois University, Department of Economics and Finance Author-Name: Erick W. Rengifo Author-X-Name-First: Erick W. Author-X-Name-Last: Rengifo Author-Workplace-Name: Fordham University, Department of Economics and Center for International Policy Studies (CIPS) Author-Name: Emre Ozsoz Author-X-Name-First: Emre Author-X-Name-Last: Ozsoz Author-Workplace-Name: Fashion Institute of Technology, State University of New York (SUNY), Social Sciences Department, and Fordham University, Center for International Policy Studies (CIPS) Title: Evaluating the Effects of Deposit Dollarization in Bank Profitability Abstract: Dollar-denominated deposits constitute a large proportion of deposits in many developing economies. This may result in currency mismatches on banks' balance sheets as is suggested by recent literature. In general, having dollar-denominated deposit and loans could increase financial fragility, create balance sheet problems and affect bank profitability. In particular, this currency mismatch does not only increase banks' currency risk when the proportion of dollar-denominated loans with respect to local-denominated loans increases but also it increases their clients' default risk if depreciation occurs. This paper investigates the profitability of 36 dollarized banking systems. Our results suggest that after controlling for some macroeconomic and institutional variables, dollarization, as currency mismatch hypothesis suggests, depresses bank performance and lowers bank profitability. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_07_kutan_rengifo_ozsoz.pdf File-Format: Application/pdf Classification-JEL: F31, G21 Keywords: Dollarization, bank performance, bank profitability Handle: RePEc:FRD:wpaper:DP2010-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Eduardo Court Author-X-Name-First: Eduardo Author-X-Name-Last: Court Author-Workplace-Name: Pontificia Universidad Catolica Del Peru, Centrum Catolica Author-Name: Emre Ozsoz Author-X-Name-First: Emre Author-X-Name-Last: Ozsoz Author-Workplace-Name: Fashion Institute of Technology, State University of New York (SUNY), Social Sciences Department, and Fordham University, Center for International Policy Studies (CIPS) Author-Name: Erick W. Rengifo Author-X-Name-First: Erick W. Author-X-Name-Last: Rengifo Author-Workplace-Name: Fordham University, Department of Economics and Center for International Policy Studies (CIPS) Title: Deposit Dollarization and Its Impact on Financial Deepening in the Developing World Abstract: One of the main reasons for dollarization is the erosion of money's function as a store of value as the Currency Substitution view suggests. It has not been uncommon for countries with high inflationary processes to have high dollarization ratios and banking system that faces important challenges and risks that significantly affect their ability to provide capital to the overall economy (financial intermediation). In these economies, dollarization played a dual role: in one hand, the role of a hedging instrument protecting the value of money and, in the other hand, contributing to generate the so-called currency mismatch and default risks. This paper investigates the role of dollarization on the development of financial intermediation in developing economies. Our empirical findings suggest that dollarization has a negative impact on financial deepening, except on high-inflation economies. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_08_court_ozsoz_rengifo.pdf File-Format: Application/pdf Classification-JEL: F31, G21 Keywords: Dollarization, Financial Development, Financial Deepening Handle: RePEc:FRD:wpaper:DP2010-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Jason Barr Author-X-Name-First: Jason Author-X-Name-Last: Barr Author-Workplace-Name: Rutgers University, Newark, Department of Economics Author-Name: Troy Tassier Author-X-Name-First: Troy Author-X-Name-Last: Tassier Author-Workplace-Name: Fordham University, Department of Economics Author-Name: Rossen Trendafilov Author-X-Name-First: Rossen Author-X-Name-Last: Trendafilov Author-Workplace-Name: Fordham University, Department of Economics Title: Bedrock Depth and the Formation of the Manhattan Skyline, 1890-1915 Abstract: Skyscrapers in Manhattan must be anchored to bedrock to prevent (possibly uneven) settling; this can potentially increase construction costs if the bedrock lies deep below the surface. The conventional wisdom holds that Manhattan developed two business centers—downtown and midtown—because bedrock is close to the surface in these locations, with a bedrock "valley" deep below the surface in between. We measure the effects of building costs associated with bedrock depths, relative to other important economic variables in the location of early Manhattan skyscrapers. We find that bedrock depths had very little influence on the creation of separate business districts; rather its poly-centric development was due to residential and manufacturing patterns, and public transportation hubs. We do find evidence, however, that bedrock depths influenced the placement of skyscrapers within business districts. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_09_barr_tassier_trendafilov.pdf File-Format: Application/pdf Classification-JEL: D24, N62, R14, R33 Keywords: Skyscrapers, geology, bedrock, urban agglomeration Handle: RePEc:FRD:wpaper:DP2010-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Silvio Contessi Author-X-Name-First: Silvio Author-X-Name-Last: Contessi Author-Workplace-Name: Federal Reserve Bank of St. Louis, Reseach Division Author-Name: Pierangelo De Pace Author-X-Name-First: Pierangelo Author-X-Name-Last: De Pace Author-Workplace-Name: Pomona College, Department of Economics Author-Name: Johanna Francis Author-X-Name-First: Johanna Author-X-Name-Last: Francis Author-Workplace-Name: Fordham University, Department of Economics Title: Changes in the Second-Moment Properties of Disaggregated Capital Flows Abstract: Using formal statistical tests, we detect (i) significant volatility increases for various types of capital flows for a period of changes in business cycle comovement among the G7 countries, and (ii) mixed evidence of changes in covariances and correlations with a set of macroeconomic variables. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_10_contessi_depace_francis.pdf File-Format: Application/pdf Classification-JEL: E32, F21, F32, F36 Keywords: Capital Flows, International Business Cycles. Handle: RePEc:FRD:wpaper:DP2010-10 Template-Type: ReDIF-Paper 1.0 Author-Name: Brandon Vick Author-X-Name-First: Brandon Author-X-Name-Last: Vick Author-Workplace-Name: Fordham University, Department of Economics Author-Name: Kristine Jones Author-X-Name-First: Kristine Author-X-Name-Last: Jones Author-Workplace-Name: Nathan Kline Institute, Statistical and Social Sciences Research Division Author-Name: Sophie Mitra Author-X-Name-First: Sophie Author-X-Name-Last: Mitra Author-Workplace-Name: Fordham University, Department of Economics Title: Poverty and Psychiatric Diagnosis in the U.S.: Evidence from the Medical Expenditure Panel Survey Abstract: Background: A number of social programs are targeted at persons with psychiatric diagnosis with the intention of reducing poverty. Previous studies have shown that persons with psychiatric conditions are more likely to be poor and face disparities in education and employment outcomes. A better understanding of the severity of poverty faced by persons and families with diagnosis is necessary for better policy targeting and monitoring. Aims of the Study: This paper seeks to measure the prevalence, depth and severity of poverty for families with persons with psychiatric diagnoses in the United States using data from the 2007 Medical Expenditure Panel Survey (MEPS). We compare poverty profiles of families with diagnosis to those without. Methods: First, we calculate poverty rate, gap and severity using MEPS data for families with and without diagnosis. Second, we present results of multivariate analysis of the association between psychiatric diagnosis and poverty after controlling for a number of characteristics. Results: This paper finds that the poverty rate, depth, and severity are significantly greater for families with a working-age member who has been diagnosed. Median and mean total incomes are lower while health expenditures are higher for families with psychiatric diagnosis. In a multivariate regression, the odds that a family is poor is 1.76 times higher for a family with a diagnosis compared to a family without a diagnosis. We also identify groups who are the most disadvantaged according to severity of income poverty among families with diagnoses. These include families whose head of family has no high school education, whose head has been unemployed for the entire year, or whose head is Black or Hispanic. Families with non-married heads face greater severity of poverty, as do single persons. Families with more severe psychiatric diagnoses, including mood and psychotic disorders, are also found to face more severe poverty. Discussion: There is a statistically significant association between poverty and psychiatric diagnosis, in particular for mood and psychotic diagnoses. This result suggests that existing poverty reduction programs have not adequately reached this population. The analysis has several limitations. The MEPS is not representative of the entire working age population with psychiatric diagnoses, likely leading to underestimates of their poverty. Our study also does not attempt to answer the question of what are the causes of poverty, but has limited the analysis to highlight family and individual characteristics that are statistically related to poverty. Additionally, this study does not account for the multi-dimensional nature of poverty but uses income as the exclusive metric of economic well-being. Implications for Health Care Provision and Use: We find that families with diagnosis have a lower standard of living, largely due to lower incomes and to higher out-of-pocket medical expenditures. This may affect the health of their members through reduced access to health inputs, including access to health care. Implications for Health Policies: This study suggests that there is a strong association between psychiatric diagnosis and poverty, and points to a need to break this association perhaps with mental health policies that specifically address poverty. Implications for Further Research: The results point to the need for additional research in a number of areas: trends in poverty for households with diagnoses over time; mobility and persistence of poverty for this group; and the association of diagnosis to other, non-monetary dimensions of poverty, such as a lack of social integration. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_11_vick_jones_mitra.pdf File-Format: Application/pdf Classification-JEL: Keywords: Handle: RePEc:FRD:wpaper:DP2010-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Caitlin Ann Greatrex Author-X-Name-First: Caitlin Ann Author-X-Name-Last: Greatrex Author-Workplace-Name: Iona College, Department of Economics Author-Name: Erick W. Rengifo Author-X-Name-First: Erick Author-X-Name-Last: Rengifo Author-Workplace-Name: Fordham University, Department of Economics Title: Government Intervention and the CDS Market: A Look at the Market's Response to Policy Announcements During the 2007-2009 Financial Crisis Abstract: This paper adds to the literature on the financial markets' reaction to government interventions during the 2007-2009 financial crisis by analyzing the response of US firms' credit default swap spreads to key government actions. We find that the government measures taken to stabilize both the financial sector and the overall economy were generally well-received by CDS market participants, reducing perceived credit risk across a broad cross-section of firms. Financial firms responded most favorably to financial sector policies and interest rate cuts, with announcement date abnormal CDS spread changes of -5 and -2 percent, respectively. Non-financial firms responded most favorably to conventional fiscal and monetary policy tools with spread reductions of approximately one percent upon announcement of these measures. In a cross-sectional regression analysis, we find that size, recent performance, profitability, and stock returns are key factors in explaining the financial sectors response to government actions. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_12_greatrex_rengifo.pdf File-Format: Application/pdf Classification-JEL: G01, G14, G18, G28 Keywords: Handle: RePEc:FRD:wpaper:DP2010-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Darryl McLeod Author-X-Name-First: Darryl Author-X-Name-Last: McLeod Author-Workplace-Name: Fordham University, Department of Economics Author-Name: Nora Lustig Author-X-Name-First: Nora Author-X-Name-Last: Lustig Author-Workplace-Name: Tulane University, Department of Economics Title: Inequality and Poverty under Latin America's New Left Regimes Abstract: During the last decade, inequality and poverty fell sharply in many Latin American countries; a period in which voters chose left-leaning leaders in ten countries including about half the region's population. Are these two developments related? Using data for 18 Latin American countries and political regime classification of Arnson and Perales (2007), this paper presents some econometric evidence that the social democratic regimes in Brazil, Chile and to a lesser extent Uruguay were more successful at reducing inequality and poverty than the so-called left populist regimes of Argentina, Bolivia and Venezuela. Both groups implemented policies to redistribute income, but the social democratic regimes redistributive efforts were more effective. Argentina and Venezuela started the 1990-2008 sample window with lower levels of inequality, so to some extent recent reductions in inequality are a return to "normal" levels (as estimated by fixed effects). Inequality and poverty in Brazil and Chile, on the other hand, fell to historic lows during this period. Second, overall terms of trade shocks were more favorable for Argentina and Venezuela, so part of the drop in inequality in those countries can be attributed to typically transient commodity price booms. Creation-Date: 2010 File-URL: https://archive.fordham.edu/ECONOMICS_RESEARCH/PAPERS/dp2010_13_mcleod_lustig.pdf File-Format: Application/pdf Classification-JEL: O15, P16, I32 Keywords: Handle: RePEc:FRD:wpaper:DP2010-13