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    <title>EconStor Collection: Working Paper Series, Federal Reserve Bank of Chicago</title>
    <link>http://hdl.handle.net/10419/64621</link>
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      <title>Introduction to the macroeconomic dynamics: Special issues on money, credit, and liquidity</title>
      <link>http://hdl.handle.net/10419/70602</link>
      <description>Title: Introduction to the macroeconomic dynamics: Special issues on money, credit, and liquidity
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&lt;br/&gt;Authors: Nosal, Ed; Waller, Christopher; Wright, Randall
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&lt;br/&gt;Abstract: We motivate and provide an overview to New Monetarist Economics. We then briefly describe the individual contributions to the Macroeconomics Dynamics special issues on money, credit and liquidity.</description>
      <pubDate>Thu, 29 Oct 2009 22:58:59 GMT</pubDate>
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      <title>Nonparametric analysis of intergenerational income mobility with application to the United States</title>
      <link>http://hdl.handle.net/10419/70601</link>
      <description>Title: Nonparametric analysis of intergenerational income mobility with application to the United States
&lt;br/&gt;
&lt;br/&gt;Authors: Bhattacharya, Debopam; Mazumder, Bhashkar
&lt;br/&gt;
&lt;br/&gt;Abstract: This paper concerns the problem of inferring the effects of covariates on intergenerational income mobility, i.e. on the relationship between the incomes of parents and future earnings of their children. We focus on two different measures of mobility- (i) traditional transition probability of movement across income quantiles over generations and (ii) a new direct measure of upward mobility, viz. the probability that an adult child's relative position exceeds that of the parents. We estimate the effect of possibly continuously distributed covariates from data using nonparametric regression and average derivatives and derive the distribution theory for these measures. The analytical novelty in the derivation is that the dependent variables involve nonsmooth functions of estimated components- marginal quantiles for transition probabilities and relative ranks for upward mobility- thus necessitating nontrivial modifications of standard nonparametric regression theory. We use these methods on US data from the National Longitudinal Survey of Youth to study black-white differences in intergenerational mobility, a topic which has received scant attention in the literature. We document that whites experience greater intergenerational mobility than blacks. Estimates of conditional mobility using nonparametric regression reveal that most of the interracial mobility gap can be accounted for by differences in cognitive skills during adolescence. The methods developed here have wider applicability to estimation of nonparametric regression and average derivatives where the dependent variable either involves a preliminary finite-dimensional estimate in a nonsmooth way or is a nonsmooth functional of ranks of one or more random variables.</description>
      <pubDate>Thu, 29 Oct 2009 22:58:59 GMT</pubDate>
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    <item>
      <title>Cognitive abilities and household financial decision making</title>
      <link>http://hdl.handle.net/10419/70600</link>
      <description>Title: Cognitive abilities and household financial decision making
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&lt;br/&gt;Authors: Agarwal, Sumit; Mazumder, Bhash
&lt;br/&gt;
&lt;br/&gt;Abstract: We analyze the effects of cognitive abilities on two examples of consumer financial decisions where suboptimal behavior is well defined. The first example refers to consumers who transfer the entire balance from an existing credit card account to a new account, but use the new card for convenience transactions, resulting in higher interest charges. The second example refers to consumers who face higher APRs because they inaccurately estimate their property value on a home equity loan or line of credit application. We match individuals from the US military for whom we have detailed test scores from the Armed Services Vocational Aptitude Battery test (ASVAB), to administrative datasets of retail credit from a large financial institution. We show that our matched samples are reasonably representative of the universes from which they are drawn. We find that consumers with higher overall composite test scores, and specifically those with higher math scores, are substantially less likely to make a financial mistake later in life. These mistakes are generally not associated with the non-mathematical component scores. We also conduct some complementary analyses using two other data sources. We use the National Longitudinal Survey of Youth (NLSY) to show that higher ASVAB math scores are associated with lower subjective discount rates. Finally, we use the Health and Retirement Survey (HRS) to demonstrate that particular forms of cognitive ability matter for specific types of suboptimal behavior. We find that the mathematical component of the test is what matters most for financial decision making and financial wealth. In contrast, non-mathematical aptitudes appear to matter for non-financial forms of suboptimal behavior (e.g. failure to take medicine). The HRS results also demonstrate the large ramifications of low math ability on long-term economic success.</description>
      <pubDate>Thu, 29 Oct 2009 22:58:59 GMT</pubDate>
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      <title>Robustness and macroeconomic policy</title>
      <link>http://hdl.handle.net/10419/70599</link>
      <description>Title: Robustness and macroeconomic policy
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&lt;br/&gt;Authors: Barlevy, Gadi
&lt;br/&gt;
&lt;br/&gt;Abstract: This paper considers the design of macroeconomic policies in the face of uncertainty. In recent years, several economists have advocated that when policymakers are uncertain about the environment they face and find it difficult to assign precise probabilities to the alternative scenarios that may characterize this environment, they should design policies to be robust in the sense that they minimize the worst-case loss these policies could ever impose. I review and evaluate the objections cited by critics of this approach. I further argue that, contrary to what some have inferred, concern about worst-case scenarios does not always lead to policies that respond more aggressively to incoming news than the optimal policy would respond absent any uncertainty.</description>
      <pubDate>Thu, 29 Oct 2009 22:58:59 GMT</pubDate>
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