Christopher F. Baum

Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era

This paper models the dynamics of adjustment to long-run purchasing power parity (PPP) over the post-Bretton Woods period in a nonlinear framework consistent with the presence of frictions in international trade. We estimate exponential smooth transition autoregressive (ESTAR) models of deviations from PPP using both CPI- and WPI-based measures for a broad set of U.S. trading partners. We find clear evidence of a mean-reverting dynamic process for sizable deviations from PPP, with an equilibrium tendency varying nonlinearly with the magnitude of disequilibrium.

Persistence in International Inflation Rates

We test for fractional dynamics in inflation rates based on the consumer price index (CPI) for 27 countries and inflation rates based on the wholesale price index (WPI) for 22 countries. The fractional differencing parameter is estimated using semiparametric and approximate maximum likelihood methods. Significant evidence of fractional dynamics with long-memory features is found in both CPI- and WPI-based inflation rates for industrial as well as developing countries. Implications of the findings are considered, and sources of long memory are hypothesized.

Long memory or structural breaks: can either explain nonstationary real exchange rates under the current float?

This paper considers two potential rationales for the apparent absence of mean reversion in real exchange rates in the post-Bretton Woods era. We allow for (i) fractional integration and (ii) a double mean shift in the real exchange rate process. These methods, applied to CPI-based rates for 17 countries and WPI-based rates for 12 countries, demonstrate that the unit-root hypothesis is robust against both fractional alternatives and structural breaks. This evidence suggests rejection of the doctrine of absolute long-run purchasing power parity during the post-Bretton Woods era.

The contextual effects of social capital on health: a cross-national instrumental variable analysis

Past research on the associations between area-level/contextual social capital and health has produced conflicting evidence. However, interpreting this rapidly growing literature is difficult because estimates using conventional regression are prone to major sources of bias including residual confounding and reverse causation. Instrumental variable (IV) analysis can reduce such bias. Using data on up to 167,344 adults in 64 nations in the European and World Values Surveys and applying IV and ordinary least squares (OLS) regression, we estimated the contextual effects of country-level social trust on individual self-rated health. We further explored whether these associations varied by gender and individual levels of trust. Using OLS regression, we found higher average country-level trust to be associated with better self-rated health in both women and men. Instrumental variable analysis yielded qualitatively similar results, although the estimates were more than double in size in both sexes when country population density and corruption were used as instruments. The estimated health effects of raising the percentage of a countrys population that trusts others by 10 percentage points were at least as large as the estimated health effects of an individual developing trust in others. These findings were robust to alternative model specifications and instruments. Conventional regression and to a lesser extent IV analysis suggested that these associations are more salient in women and in women reporting social trust. In a large cross-national study, our findings, including those using instrumental variables, support the presence of beneficial effects of higher country-level trust on self-rated health. Previous findings for contextual social capital using traditional regression may have underestimated the true associations. Given the close linkages between self-rated health and all-cause mortality, the public health gains from raising social capital within and across countries may be large.

Evidence on Structural Change in the Demand for Aggregate U.S. Imports and Exports

Earlier work on U.S. import demand suggest that structural change may have occurred sometime in the mid-1960s. Since this evidence was based upon a somewhat arbitrary splitting of the sample period, the dating of change is uncertain. In this paper we investigate the question of structural change for both U.S. imports and exports, using a procedure that lets the data determine if and when structural change may have occurred. We find weak evidence of structural change for imports in the mid- to late 1960s and much stronger evidence in 1972:1 and thereafter. There is no evidence of structural change for exports.

Evaluating the Impact of the Baby-Friendly Hospital Initiative on Breast-feeding Rates: A Multi-state Analysis

OBJECTIVE To evaluate the impact of the Baby-Friendly Hospital Initiative (BFHI) on breast-feeding initiation and duration overall and according to maternal education. DESIGN Quasi-experimental study using data from five states (Alaska, Maine, Nebraska, Ohio, Washington) that participated in the Pregnancy Risk Assessment Monitoring System from 1999 to 2009. Using differences-in-differences models that included year and hospital fixed effects, we compared rates of breast-feeding initiation and duration (any and exclusive breast-feeding for ≥4 weeks) before and after BFHI accreditation between mothers who gave birth in hospitals that were accredited or became accredited and mothers from matched non-BFHI facilities. We stratified analyses into lower and higher education groups. SETTING Thirteen BFHI hospitals and nineteen matched non-BFHI facilities across five states in the USA. SUBJECTS Mothers (n 11 723) who gave birth in BFHI hospitals and mothers (n 13 604) from nineteen matched non-BFHI facilities. RESULTS Although we did not find overall differences in breast-feeding initiation between birth facilities that received BFHI accreditation compared with non-Baby-Friendly facilities (adjusted coefficient = 0·024; 95 % CI -0·00, 0·51), breast-feeding initiation increased by 3·8 percentage points among mothers with lower education who delivered in Baby-Friendly facilities (P = 0·05), but not among mothers with higher education (adjusted coefficient = 0·002; 95 % CI -0·04, 0·05). BFHI accreditation also increased exclusive breast-feeding for ≥4 weeks by 4·5 percentage points (P = 0·02) among mothers with lower education who delivered in BFHI facilities. CONCLUSIONS By increasing breast-feeding initiation and duration among mothers with lower education, the BFHI may reduce socio-economic disparities in breast-feeding.

Compliance with the Baby-Friendly Hospital Initiative and impact on breastfeeding rates

Objectives To examine compliance with the Baby-Friendly Hospital Initiative (BFHI) as well as evaluate the BFHI and its components on breastfeeding initiation and duration overall and according to maternal education level. Design Quasi-experimental study using data from the Pregnancy Risk Assessment Monitoring System (PRAMS) from 2004 to 2008. Setting Birth facilities in Maine. Participants 915 mothers who gave birth in four hospitals that were BFHI-accredited or became accredited and 1099 mothers from six matched non-BFHI facilities. Mothers reported on seven (of 10) BFHI practices (breastfeeding practice score 0–7) and receipt of a gift pack with formula (yes/no). Main outcome measures Self-report of breastfeeding initiation, any breast feeding for ≥4 weeks, exclusive breast feeding for ≥4 weeks. Results 34.6% of mothers from BFHI-accredited facilities reported experiencing all seven BFHI breastfeeding practices, while 28.4% reported being given a gift pack with formula. Among mothers with lower education, the BFHI increased breastfeeding initiation by 8.6 percentage points (adjusted coefficient, 0.086 [95% CI, 0.01 to 0.16]) and, independently, each additional breastfeeding practice was associated with an average increase in breastfeeding initiation of 16.2 percentage points (adjusted coefficient, 0.162 [95% CI, 0.15 to 0.18]). Among all mothers and mothers with higher education, there was no effect of the BFHI on breastfeeding rates. Conclusions Compliance with BFHI practices among BFHI-accredited facilities is not optimal and needs to be monitored, as greater compliance may have an even larger impact on breastfeeding rates and potentially reduce socio-economic disparities in breast feeding.

A re-examination of the fragility of evidence from cointegration-based tests of foreign exchange market efficiency

We re-examine Sephton and Larsens (1991) conclusion that cointegration-based tests for market efficiency suffer from temporal instability. We improve upon their research by i) including a drift term in the vector error correction model (VECM) in the Johansen procedure, ii) correcting the likelihood ratio test statistic for finite-sample bias, and iii) fitting the model over longer data sets. We show that instability of the Johansen cointegration tests mostly disappears after accounting for these two factors. The evidence is even more stable in favour of no cointegration when we apply our analysis to longer data sets

Fractional dynamics in Japanese financial time series

Using the spectral regression and Gaussian semiparametric methods of estimating the long-memory parameter, we test for fractional dynamic behavior in a number of important Japanese financial time series: spot exchange rates, forward exchange rates, stock prices, currency forward premia, Euroyen deposit rates, and the Euroyen term premium. Stochastic long memory is established as a feature of the currency forward premia, Euroyen deposit rates, and Euroyen term premium series. The martingale model cannot be rejected for the spot, forward, and stock price series.

Modelling Federal Reserve Discount Policy

We employ threshold cointegration methodology to model the policy problem solved by the Federal Reserve System in their manipulation of the discount rate under a reserves target operating procedure utilized since October 1979. The infrequent and discrete adjustments that characterize movements in the discount rate instrument vis-a-vis the Federal Funds rate do not lend themselves to a linear cointegration framework. The inherently nonlinear relationship arising from the Feds self-imposed constraints on discontinuously changing the discount rate is satisfactorily modelled as an instance of threshold cointegration between the discount rate and the Federal Funds rate.