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  • In Old Chicago: Simons, Friedman and the Development of Monetary-Policy Rules | Becker-Friedman Institute Research Respository
    password Log in In Old Chicago Simons Friedman and the Development of Monetary Policy Rules This paper examines the different policy rules proposed by Henry Simons who beginning in the mid 1930s advocated a price level stabilization rule and by Milton Friedman who beginning in the late 1950s advocated a rule that targeted a constant growth rate of the money supply Although both rules shared the objective of eliminating the

    Original URL path: http://econresearch.uchicago.edu/content/old-chicago-simons-friedman-and-development-monetary-policy-rules (2015-06-03)
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  • Scale and Skill in Active Management | Becker-Friedman Institute Research Respository
    using a secure protocol such as HTTPS You can switch to HTTPS by trying to view this page again after changing the URL in your browser s location bar to begin with https instead of http Please contact site admin for help if this error continues User login CNetID or Username Password Request new password Log in Scale and Skill in Active Management We empirically analyze the nature of returns to scale in active mutual fund management We find strong evidence of decreasing returns at the industry level As the size of the active mutual fund industry increases a fund s ability to out perform passive benchmarks declines At the fund level all methods considered indicate decreasing returns but estimates that avoid econometric biases are in significant We also find that the active management industry has become more skilled over time This upward trend in skill coincides with industry growth which precludes the skill improvement from boosting fund performance Finally we find that performance deteriorates over a typical fund s lifetime This result can also be explained by industry level decreasing returns to scale Authors Lubos Pastor University of Chicago Booth School of Business Robert F Stambaugh The Wharton School

    Original URL path: http://econresearch.uchicago.edu/content/scale-and-skill-active-management (2015-06-03)
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  • Does Female Empowerment Promote Economic Development? | Becker-Friedman Institute Research Respository
    in your browser s location bar to begin with https instead of http Please contact site admin for help if this error continues User login CNetID or Username Password Request new password Log in Does Female Empowerment Promote Economic Development Empirical evidence suggests that money in the hands of mothers as opposed to fathers increases expenditures on children From this should we infer that targeting transfers to women is good economic policy In this paper we develop a non cooperative model of household decision making to answer this question We show that when women have lower wages than men they may spend more on children even when they have exactly the same preferences as their husbands However this does not necessarily mean that giving money to women is a good development policy We show that depending on the nature of the production function targeting transfers to women may be beneficial or harmful to growth In particular such transfers are more likely to be beneficial when human capital rather than physical capital or land is the most important factor of production Authors Matthias Doepke Northwestern University Michéle Tertilt Universität Mannheim Publication Date January 2014 BFI Initiative Human Capital and Economic Opportunity

    Original URL path: http://econresearch.uchicago.edu/content/does-female-empowerment-promote-economic-development (2015-06-03)
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  • Default and Repayment among Baccalaureate Degree Earners | Becker-Friedman Institute Research Respository
    https instead of http Please contact site admin for help if this error continues User login CNetID or Username Password Request new password Log in Default and Repayment among Baccalaureate Degree Earners More than low default rates lenders are interested in the expected return on their loans In this paper we consider a number of other measures of repayment and nonpayment that are likely to be of direct interest to lenders Using data from the Baccalaureate and Beyond Longitudinal Study we document repayment and nonpayment outcomes 10 years after graduation for American students receiving BA BS degrees in 1993 We estimate differences in these outcomes across individual family background characteristics college major type of institution the amount borrowed and post graduation income A key contribution is our analysis of the following outcomes in addition to student loan default rates the fraction of the original undergraduate loan amount repaid as of 2003 nonpayment rates including deferment and forbearance as well as default and the fraction of original undergraduate loan amounts on which borrowers defaulted or are currently not repaying Authors Lance Lochner University of Western Ontario Alexander Monge Naranjo Federal Reserve Bank of St Louis Publication Date January 2014 BFI Initiative

    Original URL path: http://econresearch.uchicago.edu/content/default-and-repayment-among-baccalaureate-degree-earners-0 (2015-06-03)
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  • Local Transmission of Trade Shocks | Becker-Friedman Institute Research Respository
    Trade Shocks This paper studies theoretically and empirically the geographic transmission of trade shocks over the territory of a country Increases in labor demand in a location raise local wages and draw workers away from employment in neighboring locations those locations experience a reduction in labor supply and an increase in prevailing wages even if not initially affected or not engaged in the production of tradeable goods adjustment in their wages affect in turn other close by locations In addition increases in prevailing wages in a location affect all the industries producing there other locations active in the same industries gain then market shares and experience an increase in labor demand even when they are far apart I develop a model capable of incorporating realistic geographic features and isolate theoretically the different components of this diffusion The model is general enough to also allow the study of transmission of localized immigration and productivity shocks I estimate its main components with data on US commuting patterns and sectoral employment I illustrate the impact of reductions in trade frictions in a sector on locations active and inactive in it and the consequences of productivity growth on nominal wages of workers vs real

    Original URL path: http://econresearch.uchicago.edu/content/local-transmission-trade-shocks (2015-06-03)
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  • Capital Requirements, Risk Choice, and Liquidity Provision in a Business Cycle Model | Becker-Friedman Institute Research Respository
    instead of http Please contact site admin for help if this error continues User login CNetID or Username Password Request new password Log in Capital Requirements Risk Choice and Liquidity Provision in a Business Cycle Model This paper presents a quantitative dynamic general equilibrium model for the purpose of determining the optimal capital requirement for banks Banks play two roles in this model They contribute to the production of a final good and they provide liquidity in the form of bank debt which households value Banks also benefit from an implicit bailout guarantee from the government which motivates them to take on excessive risk I quantify this model using data from the national income and product accounts as well as the Federal Deposit Insurance Corporation and find that the dynamics of the model are consistent with business cycle facts Higher capital requirements lower risk taking and increase consumption but they also reduce the supply of bank debt The reduction in bank debt leads to a lower interest rate on bank debt through a general equilibrium effect This reduces the overall funding costs of banks and allows them to grow larger which increases the capital stock and consequently production as well

    Original URL path: http://econresearch.uchicago.edu/content/capital-requirements-risk-choice-and-liquidity-provision-business-cycle-model (2015-06-03)
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  • Financial Crises and Systemic Bank Runs in a Dynamic Model of Banking | Becker-Friedman Institute Research Respository
    s location bar to begin with https instead of http Please contact site admin for help if this error continues User login CNetID or Username Password Request new password Log in Financial Crises and Systemic Bank Runs in a Dynamic Model of Banking What are the effects of unconventional monetary policies during panic based financial crises To address this question I develop a dynamic general equilibrium model of banking A novel mechanism gives rise to multiple equilibria In the good equilibrium all banks are solvent In the bad equilibrium many banks are insolvent and subject to runs The bad equilibrium is also characterized by deflation and by a flight to liquidity i e depositors are willing to hold more money and less deposits in comparison to the good equilibrium I consider two types of monetary injections loans to banks and asset purchases Both policies counteract deflation and reduce the losses of insolvent banks but two novel implications are salient First for some parameter values a temporary increase of money supply implemented using either loans to banks or asset purchases amplifies the flight to liquidity Second asset purchases preclude a crisis only if the central bank is committed to creating inflation

    Original URL path: http://econresearch.uchicago.edu/content/financial-crises-and-systemic-bank-runs-dynamic-model-banking-0 (2015-06-03)
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  • Optimal Product Variety in Radio Markets | Becker-Friedman Institute Research Respository
    CNetID or Username Password Request new password Log in Optimal Product Variety in Radio Markets A vast theoretical literature shows that inefficient market structures may arise in free entry equilibria The inefficiency may manifest itself in the number variety or quality of offered products Previous empirical work demonstrated that excessive entry may obtain in local Radio markets Our paper extends that literature by relaxing the assumption that stations are symmetric and allowing instead for endogenous station differentiation along both horizontal and vertical dimensions Importantly we allow station quality to be an unobserved station characteristic We compute the optimal market structures in local Radio markets and find that in most broadcasting formats a social planner who takes into account the welfare of market participants stations and advertisers would eliminate 50 60 of the stations observed in equilibrium This finding is robust to whether we consider horizontal differentiation only or both horizontal and vertical differentiation The rate of elimination is similar for high quality and for low quality stations In 80 94 9 of markets that have high quality stations in the observed equilibrium welfare could be unambiguously improved by converting one such station into low quality broadcasting In contrast it is

    Original URL path: http://econresearch.uchicago.edu/content/optimal-product-variety-radio-markets (2015-06-03)
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