David C. Black

New Dogs and Old Tricks: Do Money and Interest Rates Still Provide Information Content for Forecasts of Output and Prices? †

Abstract Out-of-sample forecasting experiments are used as an alternative to looking at F -statistics when examining whether money, interest rates or the commercial paper/T-bill spread provide information content for subsequent movements in output, real and nominal personal income, the CPI and the PPI. Here, a variable provides information if it improves the forecast of the explained variable. Employing this procedure we find that the paper-bill spread but not monetary aggregates provide information content for industrial production or real personal income when using data over the 1980–1997 period. In contrast, we find that monetary aggregates provide information content for the CPI and nominal personal income but not the PPI.

The Inflation/Growth Relationship: Evidence From State Panel Data †

Employing US state data, a positive correlation is found between inflation and growth during the 1980s, accompanied by a downward trend in inflation. During the 1960s and 1970s, a negative correlation was accompanied by an upward trend in inflation.

The changing composition of output and the great moderation

An additional explanation is provided for the decline in output variability that began in the mid-1980s. Using state, regional and aggregate data for the US, we examine the shifting influence from manufacturing to services on this variability. At all levels, we find support for this output composition change contributing to the reduced variability of output growth.

Risk aversion as a technology factor in the production function

We incorporate risk aversion into the technology component of the production function. In a traditional theoretic framework, we show that an increase in risk aversion increases unemployment and reduces potential output. Our out-of-sample forecasting experiments suggest that while interest rates impact the economy through the demand-side. However, an interest rate spread (TED) is used as a measure of risk aversion and is shown to impact output through the economys supply-side.

Measuring real interstate income inequality in the United States

Abstract Using constructed state-level price data we examine real interstate income inequality. Contrary to previous results we find that real income inequality is as much as 53% larger than its nominal counterpart and real inequality has steadily increased since 1981.

Ignorance may be optimal? Some welfare implications of rational versus non-rational expectations

Abstract We compare the lifetime utility of agents in a stationary non-rational expectations equilibrium to that obtained in a stationary rational expectations equilibrium. When government expenditures are financed by an inflationary tax, and agents in the non-rational expectations equilibrium underestimate inflation, it is shown that the non-rational expectations equilibrium is Pareto superior to the rational expectations equilibrium.

Asset Substitution: A Note on the Factors That Influence Both Money Supply and Demand

The money market paradigm typically presented in classrooms is enhanced by making the money multiplier endogenous.

Why real wages do not fall when there is unemployment

Abstract Erroneous anticipations of fiscal policy results in involuntary unemployment. If mutually agreeable, unemployment may be eradicated by recontracting the real wage and employment level. However, if labor demand is inelastic, unit elastic, or within a bounded elastic range, unemployment persists.