American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Front Matter i v http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.i 10.1257/mac.3.4.i American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Taxes, Social Subsidies, and the Allocation of Work Time L. RachelNgaiCentre for Economic Performance, London School of Economics Christopher A.PissaridesCentre for Economic Performance, London School of Economics 1 26 We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but are treated differently by welfare policy. We attribute the disparities to the countries' tax and subsidy policies. High taxation substantially reduces hours in sectors that have close home substitutes but less so in other sectors. Subsidies increase hours in the subsidized sectors that have home substitutes. We compute these policy effects for 19 OECD countries. (JEL H24, H31, J22) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.1 10.1257/mac.3.4.1 http://www.aeaweb.org/aej/mac/data/2010-0205_data.zip http://www.aeaweb.org/aej/mac/app/2010-0205_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Forces Shaping Hours Worked in the OECD, 1960-2004 CaraMcDanielAZ State U 27 52 The goal of this paper is to examine the role of taxes and productivity growth as forces influencing market hours. To achieve this goal, the paper considers a calibrated growth model extended to include home production and subsistence consumption, both of which are found to be key features influencing market hours. The model is simulated for 15 OECD countries. The primary force driving changes in market hours is found to be changing labor income tax rates. Productivity catch-up relative to the United States is found to be an important secondary force. (JEL E24, H24, H31, J22, J24) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.27 10.1257/mac.3.4.27 http://www.aeaweb.org/aej/mac/data/2009-0078_data.zip http://www.aeaweb.org/aej/mac/app/2009-0078_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Exchange Rates and Wages in an Integrated World PrachiMishraIMF AntonioSpilimbergoIMF and CReAm, U College London 53 84 We analyze how the pass-through from exchange rate to domestic wages depends on the degree of integration between domestic and foreign labor markets. Using data from 66 countries over the period 1981-2005, we find that the elasticity of domestic wages to real exchange rate is 0.15 after a year for countries with high barriers to external labor mobility, but about 0.40 in countries with low barriers to mobility. The result is robust to the inclusion of various controls, different measures of exchange rates, and definitions of labor market integration. These findings call for including labor mobility in macro models of external adjustment. (JEL F16, F31, J31) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.53 10.1257/mac.3.4.53 http://www.aeaweb.org/aej/mac/data/2010-0079_data.zip http://www.aeaweb.org/aej/mac/app/2010-0079_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Emerging Market Currency Excess Returns StephenGilmoreFuture Fund, Melbourne FumioHayashiHitotsubashi U 85 111 We consider the excess return from 20 internationally tradable emerging market (EM) currencies against the US dollar. It has two contributions. First, we document stylized facts about EM currencies. EM currencies have provided significant equity-like excess returns against major currencies, but with low volatility. Picking EM currencies with a relatively high forward premium raises the portfolio return substantially. Second, our calculation incorporates institutional features of the foreign exchange market, such as lags in settling spot contracts, FX swaps, and bid/offer spreads. Transaction costs arising from bid/offer spreads are less than one-fifth of what is typically presumed in the literature. (JEL C58, F31, G15) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.85 10.1257/mac.3.4.85 http://www.aeaweb.org/aej/mac/data/2010-0059_data.zip http://www.aeaweb.org/aej/mac/app/2010-0059_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Monetary Policy and the Financing of Firms FiorellaDe FioreEuropean Central Bank PedroTelesBank of Portugal and Portuguese Catholic U OresteTristaniEuropean Central Bank 112 42 How should monetary policy respond to changes in financial conditions? We consider a simple model where firms are subject to shocks which may force them to default on their debt. Firms' assets and liabilities are nominal and predetermined. Monetary policy can therefore affect the real value of funds used to finance production. In this model, allowing for inflation volatility in response to aggregate shocks can be optimal; the optimal response to adverse financial shocks is to lower interest rates and to engineer some inflation; and the Taylor rule may implement allocations that have opposite cyclical properties to the optimal ones. (JEL G32, E31, E43, E44, E52) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.112 10.1257/mac.3.4.112 http://www.aeaweb.org/aej/mac/data/2009-0075_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Contrasting Trends in Firm Volatility DavidThesmarHEC Paris MathiasThoenigU Lausanne and HEC Lausanne 143 80 Over the past decades, the real and financial volatility of listed firms has increased, while the volatility of private firms has decreased. We first provide panel data evidence that, at the firm level, sales and employment volatility are impacted by changes in the degree of ownership concentration. We then construct a model with private and listed firms where risk-taking is a choice variable at the firm-level. Due to general equilibrium feedback, we find that both an increase in stock market participation and integration in international capital markets generate opposite trends in volatility for private and listed firms. (JEL G15, G32, L25) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.143 10.1257/mac.3.4.143 http://www.aeaweb.org/aej/mac/data/2009-0206_data.zip http://www.aeaweb.org/aej/mac/app/2009-0206_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 4 October 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=4 Journal Article Input and Output Inventory Dynamics YiWenFederal Reserve Bank of St Louis and Tsinghua U 181 212 This paper develops an analytically tractable general equilibrium model of inventory dynamics based on a precautionary stockout-avoidance motive. The model's predictions are broadly consistent with the US business cycle and key features of inventory behavior. It is also shown that technological improvement of inventory management can increase, rather than decrease, the volatility of aggregate output. Key to this seemingly counterintuitive result is that a stockout-avoidance motive leads to a procyclical shadow value of inventories, which acts as an automatic stabilizer that discourages sales in booms and encourages demand in recessions, thereby reducing the variability of GDP. (JEL D92, E22, E23, E32, G31) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.181 10.1257/mac.3.4.181 http://www.aeaweb.org/aej/mac/data/2010-0095_data.zip http://www.aeaweb.org/aej/mac/app/2010-0095_app.pdf