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American households have received a triple dose of bad news since the beginning of the current recession: The greatest collapse in asset values since the Great Depression, a sharp tightening in credit availability, and a large increase in unemployment risk. We present measures of the size of these shocks and discuss what a benchmark theory says about their immediate and ultimate consequences. We then provide a forecast based on a simple empirical model that captures the effects of wealth shocks and unemployment fears. Our short-term forecast calls for somewhat weaker spending, and somewhat higher saving rates, than the Consensus survey of macroeconomic forecasters. Over the longer term, our best guess is that the personal saving rate will eventually approach the levels that preceded period of financial liberalization that began in the late 1970s. Classification: C61, D11, E24
Inhalt: Vorbemerkung Multikulturalismus und der amerikanische consensus Hans-Jürgen Puhle Probleme der Institutionalisierung des Multikulturalismus Diskussionsbeitrag von Kurt L. Shell Anmerkungen zum Verhältnis von »Multiculturalism« und »Liberalism« in den USA Diskussionsbeitrag von Söhnke Schreyer Probleme der Institutionalisierung von Multikulturalismus im Politikfeld der Erziehung Diskussionsbeitrag von Ulrike Fischer Multikulturalismus im Bildungsbereich: Afrozentrismus Diskussionsbeitrag von Rüdiger Wersich Die in der vorliegenden Ausgabe der ZENAF Arbeits- und Forschungsberichte zusammengestellten Beiträge von Hans-Jürgen Puhle, Kurt L. Shell, Söhnke Schreyer, Ulrike Fischer und Rüdiger Wersich dokumentieren Aspekte einer in den zurückliegenden Semestern am ZENAF geführten Diskussion zur Problematik des Multikulturalismus in den USA. Die Diskussion begann anlässlich der Tagung der Sektion Politikwissenschaft der DGfA ("Die USA als multikulturelle Gesellschaft") in Frankfurt im November 1991. Im Sommersemester 1993 und im Wintersemester 1993/94 folgten zwei Diskussionsrunden im Rahmen des Jour Fixe des ZENAF unter dem Leitthema "Probleme der Institutionalisierung des Multikulturalismusll• Eine gemeinsame Diskussionsgrundlage bildete zunächst der in dieser ZAF-Ausgabe abgedruckte Aufsatz von Hans-Jürgen Puhle: "Multikulturalismus in den USA", der bereits (in englischer Fassung) als Vortrag auf der Jahrestagung der DGfA ("Multikulturalismus: Politische, soziale und kulturelle Konsequenzen am Beispiel der USA") in Berlin im Juni 1992 gehalten wurde. Die Publikation des Aufsatzes in einem von Berndt Ostendorf herausgegebenen Sammelband (''Multikulturelle Gesellschaft: Modell Amerika?", München) ist für 1994 vorgesehen. Die übrigen Beiträge dieser ZAF-Ausgabe sind überarbeitete Versionen von Kurz-Statements, die von den Autoren für die beiden Diskussions-Veranstaltungen am ZENAF vorbereitet wurden. Die angeregte und intensive Diskussion, an der sich eine erfreulich große Zahl von Teilnehmern aus verschiedenen Fachbereichen der Kultur- und Sozialwissenschaften beteiligten, kann diese Zusammenstellung allerdings nicht in ihrer vollen Breite repräsentieren. Für das Sommersemester 1994 ist eine Fortsetzung der Veranstaltungen am ZENAF geplant, die weitere Fragen der Problematik der Institutionalisierung des Multikulturalismus aufgreifen soll.
We analyze a national sample of Americans with respect to their debt literacy, financial experiences, and their judgments about the extent of their indebtedness. Debt literacy is measured by questions testing knowledge of fundamental concepts related to debt and by selfassessed financial knowledge. Financial experiences are the participants’ reported experiences with traditional borrowing, alternative borrowing, and investing activities. Overindebtedness is a self-reported measure. Overall, we find that debt literacy is low: only about one-third of the population seems to comprehend interest compounding or the workings of credit cards. Even after controlling for demographics, we find a strong relationship between debt literacy and both financial experiences and debt loads. Specifically, individuals with lower levels of debt literacy tend to transact in high-cost manners, incurring higher fees and using high-cost borrowing. In applying our results to credit cards, we estimate that as much as one-third of the charges and fees paid by less knowledgeable individuals can be attributed to ignorance. The less knowledgeable also report that their debt loads are excessive or that they are unable to judge their debt position. JEL Classification: D14, D91
This paper provides a joint analysis of household stockholding participation, stock location among stockholding modes, and participation spillovers, using data from the US Survey of Consumer Finances. Our multivariate choice model matches observed participation rates, conditional and unconditional, and asset location patterns. Financial education and sophistication strongly affect direct stockholding and mutual fund participation, while social interactions affect stockholding through retirement accounts only. Household characteristics influence stockholding through retirement accounts conditional on owning retirement accounts, unlike what happens with stockholding through mutual funds. Although stockholding is more common among retirement account owners, this fact is mainly due to their characteristics that led them to buy retirement accounts in the first place rather than to any informational advantages gained through retirement account ownership itself. Finally, our results suggest that, taking stockholding as given, stock location is not arbitrary but crucially depends on investor characteristics. JEL Classification: G11, E21, D14, C35
We investigate, using the 2002 US Health and Retirement Study, the factors influencing individuals’ insecurity and expectations about terrorism, and study the effects these last have on households’ portfolio choices and spending patterns. We find that females, the religiously devout, those equipped with a better memory, the less educated, and those living close to where the events of September 2001 took place worry a lot about their safety. In addition, fear of terrorism discourages households from investing in stocks, mostly through the high levels of insecurity felt by females. Insecurity due to terrorism also makes single men less likely to own a business. Finally, we find evidence of expenditure shifting away from recreational activities that can potentially leave one exposed to a terrorist attack and towards goods that might help one cope with the consequences of terrorism materially (increased use of car and spending on the house) or psychologically (spending on personal care products by females in couples).
This paper addresses and resolves the issue of microstructure noise when measuring the relative importance of home and U.S. market in the price discovery process of Canadian interlisted stocks. In order to avoid large bounds for information shares, previous studies applying the Cholesky decomposition within the Hasbrouck (1995) framework had to rely on high frequency data. However, due to the considerable amount of microstructure noise inherent in return data at very high frequencies, these estimators are distorted. We offer a modified approach that identifies unique information shares based on distributional assumptions and thereby enables us to control for microstructure noise. Our results indicate that the role of the U.S. market in the price discovery process of Canadian interlisted stocks has been underestimated so far. Moreover, we suggest that rather than stock specific factors, market characteristics determine information shares.
This paper explores the role of trade integration—or openness—for monetary policy transmission in a medium-scale New Keynesian model. Allowing for strategic complementarities in price-setting, we highlight a new dimension of the exchange rate channel by which monetary policy directly impacts domestic inflation. Although the strength of this effect increases with economic openness, it also requires that import prices respond to exchange rate changes. In this case domestic producers find it optimal to adjust their prices to exchange rate changes which alter the domestic currency price of their foreign competitors. We pin down key parameters of the model by matching impulse responses obtained from a vector autoregression on U.S. time series relative to an aggregate of industrialized countries. While we find evidence for strong complementarities, exchange rate pass-through is limited. Openness has therefore little bearing on monetary transmission in the estimated model.
Increasingly, individuals are in charge of their own financial security and are confronted with ever more complex financial instruments. However, there is evidence that many individuals are not well-equipped to make sound saving decisions. This paper demonstrates widespread financial illiteracy among the U.S. population, particularly among specific demographic groups. Those with low education, women, African-Americans, and Hispanics display particularly low levels of literacy. Financial literacy impacts financial decision-making. Failure to plan for retirement, lack of participation in the stock market, and poor borrowing behavior can all be linked to ignorance of basic financial concepts. While financial education programs can result in improved saving behavior and financial decision-making, much can be done to improve these programs’ effectiveness.
How do fiscal and technology shocks affect real exchange rates? : New evidence for the United States
(2008)
Using vector autoregressions on U.S. time series relative to an aggregate of industrialized countries, this paper provides new evidence on the dynamic effects of government spending and technology shocks on the real exchange rate and the terms of trade. To achieve identification, we derive robust restrictions on the sign of several impulse responses from a two-country general equilibrium model. We find that both the real exchange rate and the terms of trade – whose responses are left unrestricted – depreciate in response to expansionary government spending shocks and appreciate in response to positive technology shocks.