Frederick H. Wallace

Long-run neutrality of money in the Mexican economy

The long-run neutrality of money on real output is tested for Mexico using a model developed by Fisher and Seater. The empirical evidence supports the neutrality hypothesis. The results are robust for both M1 and M2 and an alternative model specification.

The effects of real and nominal shocks on union-firm contract duration

Abstract The first theoretical works on labor-contract length, Gray (1978) for example, emphasized the existence of a negative relation between contract duration and uncertainty. In estimating a linear version of Grays contract-length model and an alternative model developed by Christofides and Wilton, our empirical results indicate little evidence of a negative relationship between length and uncertainty in the United States. Furthermore, our findings indicate the presence of significant differences across industries (at the two-digit SIC level) in the response of bargain duration to uncertainty.

The Effects of Shock Size and Type on Labor‐Contract Duration

Empirical studies of the relation between uncertainty and the length of union‐firm contracts have focused on the effects of inflation, money‐supply, or industry‐specific uncertainty. This article describes two extensions of previous work. First, real, aggregate uncertainty arising from oil shocks is incorporated into a contract‐duration model. Oil shocks significantly affect contract length in seven of 21 U.S. manufacturing industries. Second, the model is used to test whether the duration of reopenable bargains is positively related to uncertainty associated with large shocks, as has been described in Danziger. The evidence indicates some qualified support for this proposition.

Inflation, money, and real GDP in Mexico: a causality analysis

The relation between inflation, M1 money, and real GDP in Mexico is examined using annual data from 1944 to 1991. When investigating the relation between changes in inflation and real GDP growth it is found that it is important to separate the changes in inflation into predictable and unpredictable components. Predictable increases in differenced inflation are found to have a significant, negative effect on real GDP growth. Unpredictable increases in differenced inflation are found to have a significant, positive effect on real GDP growth. In contrast, changes in M1 growth fail to Granger-cause real GDP growth even when the changes in money growth are divided into predictable and unpredictable components.

Tests of the money-output relation using disaggregated data

Either anticipated or unanticipated money affects output in fourteen of twenty U.S. manufacturing industries. In most of these instances, however, Akaikes final prediction error criterion indicates that money enters an industrys output equation with lags of three months or less. For just two industries, tobacco manufacturing and textile mill products, are there clear indications that money is not neutral at extended lags. Each of these industries is concentrated in one or two states suggesting that monetary policy may affect output through a regional credit channel.

A reexamination of Mishkin's neutrality test

Abstract Mishkins 1982 paper is one of the most widely cited papers in empirical macroeconomics. His finding that anticipated money growth is not neutral in the US casts doubt on the policy ineffectiveness proposition. However, recent advances in econometrics suggest that Mishkins model may be misspecified, thus raising questions concerning his findings. Given the influence of Mishkins paper, we examine his model for specification problems and find several. However, we find that Mishkins conclusions concerning money neutrality are robust for a number of alternative specifications and for an extended time period.