Douglas Wills

Stationarity Condition for AR Index Process

The stationarity conditions for an autoregressive (AR) process in general are reduced to a remarkably simple inequality if the lag coefficients are restricted to be identical. The condition is not only analytically elegant but also applicable in checking the validity of the stationarity conditions for such a restricted AR process of any order.We are deeply indebted to Professor Paolo Paruolo, NP co-editor of Econometric Theory, and anonymous referees for constructive comments and suggestions that led to significant improvements. Errors, if any, are solely ours.

On the Dual Nature of Weak Property Rights

In the natural-resource literature, conventional wisdom holds that weak property rights will cause a resource to be over-exploited. This is because weak property rights are typically perceived as a problem of input exclusion – or theft of un-extracted resources. We present evidence to the effect that weak property rights often take the form of contestable outputs – or output theft – and that this has an impact on resource use. We propose a model of resource use under generally weak property rights – or weak state presence – when resource users face the dual problem of input exclusion and output appropriation. We show that introducing the possibility that outputs be contested acts as an output tax, with the added twist that resource users effectively determine the tax level. This tax has a depressive effect on input use. Whether the resource is under- or over-exploited depends on the relative severity of output appropriation and input exclusion problems. Increasing enforcement measures against theft may lead to severe resource overuse. Efficiency considerations require to account not only for direct resource input use, but also for thieves’ efforts and gains as well as the costs of enforcement against theft and trespass.

Thomas Edison's Monetary Option

In 1922, Thomas Edison publicly introduced his latest invention—a new type of money, a commodity-backed currency that he believed was the long-term solution to Americas monetary woes. “I want to cast the variable out of money. This gold money is not good enough. Its a fiction†he boldly proclaimed (New York Times 1922).

Deriving the Dividend Discount Model in the Intermediate Microeconomics Class.

In this article, the authors show that the dividend discount model can be derived using the basic intertemporal consumption model that is introduced in a typical intermediate microeconomics course. This result will be of use to instructors who teach microeconomics to finance students in that it demonstrates the value of utility maximization in obtaining one of the first stock valuation models used in basic finance.

Thomas Edison's “except one”: The monetary views of Arthur Kitson revisited

Purpose – This paper examines the monetary thought of Arthur Kitson (1861-1937) as expressed in his published works and in recently discovered answers he submitted in 1922 to a questionnaire from Thomas Edison, the US inventor. Design/methodology/approach – Both original source material from the Edison Archive and published sources are used to examine the subject. Findings – It is found that Kitsons monetary thought is more orthodox than has previously been claimed by, among others, John Maynard Keynes, and more recently in the economics literature. It is also found that Kitson was the only person to support, without qualification, Edisons plan to reform the US monetary system. Originality/value – This paper casts a new light on Kitsons monetary thought, showing the influence of Irving Fisher on Kitson. The paper also presents Edisons questionnaire and Kitsons contributory thoughts on a fiat monetary standard that the questionnaire stimulated.

Nonlinear integration of London and Amsterdam stock markets in the 1700s

The financial markets in London and Amsterdam were some of the first to develop. Using threshold autoregressive models, we use data on two commonly traded stocks in these cities to show that the joint behaviour of the prices is consistent with the theory of arbitrage in the presence of transportation costs. The results suggest that prices converged more quickly as the price difference between the two markets increased. We also show that the threshold estimates are consistent between assets and across time. These results provide some of the earliest evidence of nonlinear mean reversion in asset prices in geographically separate financial markets.

Determinants of homestead claims and the expansion of Western settlement

This article examines the impact economic variables had on the rate of settlement, measured by original homestead claims, in the Western United States. Our results from the estimated panel regressions indicate that the underlying rationale for the Homestead Act, namely that economic factors were important for settlement, was justified. The two most important economic variables, output prices, measured by real wheat prices, and the cost of capital, measured by real interest rates, were statistically significant in explaining the change in the original homestead claims. Furthermore, contrary to previous studies, railroad mileage was not found to be significant. This study also reveals that the location of a homestead relative to the 100th meridian, the traditional boundary of humid and sub-humid areas, had little effect on the response of homesteaders to economic variables.