O. David Gulley

Are saving and investment cointegrated?: Another look at the data

Abstract In his paper ‘Are saving and investment co-integrated’ (Economics Letters 27, pp. 31–34), Miller finds that U.S. saving and investment rates were cointegrated during the post-WWII fixed exchange-rate regime and not cointegrated during the flexible exchange-rate regime. Miller did not take into account the fact that both of these rates have non-zero means. Once this is taken into account, I find that his results no longer hold. I also find that the levels of saving and investment are not cointegrated during either the fixed or flexible exchange-rate regimes. These findings cast doubt on whether or not this technique can shed light on international capital mobility.

Substitution between games in the UK national lottery

Virtually all lottery agencies offer a variety of games to suit the tastes of players in an attempt to maximize revenue to the government. Using the UK National Lottery, which offers a variety of on-line and scratchcard games, the extent to which there is substitution or complementarity between games is evaluated Employing weekly data from the three UKNL lottery games offered over the sample period, it is found that own-game characteristics have, by far, the largest influence on sales. Some evidence is found suggesting that the lotto and scratchcard games are partial substitutes for one another. Thunderball sales appear independent of the other two games. Some evidence is also found that the Wednesday and Saturday drawings of the lotto game are substitutes. The overall conclusion is that Camelot has successfully designed and marketed three games that each appeal to bettors in different ways. Thus, sales from one game do not seem to seriously cannibalize the sales of the other games, with the exceptions noted above. Further, the introduction of another, temporary game (Big Draw 2000) contributed to net sales. These results also suggest that the games do not appear to be complements to each other, indicating that the various arguments as to why the games may be so (transactions costs, brand awareness, and the portfolio effect) do not appear to be very strong.

Testing for rational expectations in the UK National Lottery

The concept of rational expectations has typically been assumed, without testing, in the analysis of consumer demand and market efficiency in betting markets, including betting on lottery games. Lottery games offer an excellent opportunity to test how participants process the information that is available to them. Using the UK National Lottery as our particular case, we find that participants, in general, efficiently process available information. Specifically, they act as if they can, on average, forecast the level of sales for a given drawing.

The link between monetary policy and stock and bond markets: evidence from the federal funds futures contract

This study examines the simultaneous response of both stock and bond market returns to changes in the CBOT 30-day federal funds futures rate. It is found that changes in the federal funds futures rate are negatively related to both stock and bond returns. It is also found that positive and negative changes in the federal funds futures rate have symmetric effects on the bond market, but somewhat asymmetric effects on the stock market.

An empirical test of the effects of government deficits on money demand

There is a great deal of interest in how govenment deficits affect macroeconomic variables. Accordingly, there is a large body of theoretical and empirical work on the topic. This paper examines the relationship between deficits and interest rates. Among the difficulties in exploring this relationship is that when conducting monetary policy, the Federal Reserve often targets interest rates. Such a policy can cloud any relationship between deficits and interest rates. A way to avoid this problem (among others) is to estimate money demand functions that contain a measure of the market value of government debt. No evidence is found to support a positive relationship between government debt and money demand. This finding implies budget deficits do not affect interest rates through money demand.

Risk Premium, Volatility, and Terrorism: New Evidence

Terrorism has important direct and indirect economic costs. Direct costs arise from loss of lives, destruction of property, search, and rescue effects, rebuilding of the infrastructure, restoring the quality of life through government assistance, and improved security systems to prevent terrorist attacks.1 According to the Organization for Economic Co-operation and Development (OE CD), the estimates of the direct costs associated with the 9/11 attack in the United States are as follows:

Participation and level of play in the UK National Lottery and correlation with spending on other modes of gambling

14 billion (private sector),

Forecasting the real interest rate

1.5 billion (state and local government),

New Price, New Hope? An Examination of the Effects of Doubling the Ticket Price in UK Lotto

700 million (Federal government), and

Economics, politics and the federal funds markets: does the Fed play politics?

11 billion (private and public sector costs for search and rescue operations).2 The indirect costs of terrorist attacks are more difficult to measure. According to the IMF, indirect costs of terrorism are psychological, resulting from pessimism among consumers and investors. This has the potential to depress asset prices and promote flight to quality.3