Associate Professor of Economics
Department
of Economics
Bentley University
175 Forest St.
Waltham, MA 02452
Ph: 781.891.3483
Fx: 781.891.2896
Office: Adamian
Academic Center 173
Email: ajackson@bentley.edu
Published Papers:
Title: "Policy Futures Markets with Multiple Goals".
Forthcoming, Journal of Macroeconomics.
Description: Previous work in policy futures markets
under a single policy goal have shown this approach to be effective at
eliminating the circularity problem inherent with private-sector targeting
strategies. We extend this monetary policy setting framework to a typical
multiple goal policy objective: inflation and output stabilization. In
addition, we show that private-sector traders can resolve ideologically driven
debates over policy effectiveness.
Title:
"Fixed Exchange Rates and Disinflation in Emerging
Markets: How Large is the Effect?" Review of World Economics
[Weltwirtschaftliches Archiv] v144, n3 October 2008, pp. 538 - 557.
Co-author: William Miles (Wichita State University)
Description: Exchange rate policy in emerging markets
has received new attention in the wake of balance of payments crises over the
last decade. Many papers report findings suggesting that a fixed exchange
rate will substantially decrease inflation. Unfortunately, such studies
suffer from endogeneity and other specification troubles. This is a
potentially very serious problem. If an emerging market country adopts a
peg, expecting a disinflationary effect which does not subsequently
materialize, substantial real exchange rate appreciation, with its attendant
stagnation or crisis will result. Our approach is to add a measure of
institutional quality to empirical models of inflation and exchange
rates. We find that for most specifications, this addition greatly
reduces or eliminates the impact of pegs on inflation. These results
suggest that disinflation must occur before the adoption of a peg if a fixed
currency is to be viable. This finding is thus quite relevant for the
debates over adoption of the Euro by transition economies and dollarization in
Title:
"Quantitative Goals for Monetary Policy: A Quantile
Regression Approach". Special Issue: The Applied
Economics of Monetary Policy, in Applied
Economics, v41 n16, July 2009, pp. 2065 – 71.
Co-author: William Miles (Wichita State University)
Description: A recent paper by Fatas, Mihov and Rose
(2006) indicates that formal monetary policy targets-exchange rate, money
supply, or inflation targets-palpably decrease inflation in a sample of forty
countries. The authors employ various least squares estimations, which
pick up the conditional average effect. However, there is wide
inflation variability in the authors’ sample. Thus formal targets could
have very different effects in high and low inflation countries.
Accordingly we refine the FMR results by utilizing the technique of quantile
regression, a method frequently used in labor economics. We find, in a
sample of low and moderate inflation countries, that formal targets exert very
little impact on low inflation nations. This result is important for
debates over formal targets, such as whether the
Title:
"Velocity Futures Targeting: Does the Fed Need a
Structural Model?" Economic Inquiry v44, n4, October
2006; pp. 716 - 728.
Co-author: Scott Sumner (Bentley University)
Description: Previous proposals suggesting monetary
policymakers target private-sector forecasts have been shown to be problematic.
Essentially, as the policy becomes more effective, the private-sector's forecasts
become less informative, and hence, would provide less guidance to monetary
policymakers about economic shocks. Under perfect stabilization
private-sector forecasts would be of no use to policymakers. We illustrate a
way around this `circularity problem' by creating a policy futures market
linked to the ratio of the (realization of the) policy goal for next period and
the current policy instrument setting. The implication is that extensive
information gathering is not necessary to conduct policy, and in particular, it
weakens the argument that the central bank needs a structural model to conduct
policy.
Title: "Disinflationary Boom Reversion" Macroeconomic Dynamics, v9, n4, September 2005; pp. 489 - 515.
Description: Recent emphasis has been placed on
exploring behavioral aspects of individual agents in explaining macroeconomic phenomena.
Of particular interest is augmenting New Keynesian models to produce costly
disinflation, as empirics and consensus suggest. We presume a fraction of
agents using rule-of-thumb behavior in price-setting in an otherwise standard
New Keynesian model. Our findings suggest that relatively small amounts of
rule-of-thumb behavior are required to offset the net effects of Ball's (1994b)
disinflationary boom. Moderate levels of rule-of-thumb behavior can produce
delayed recessions consistent with some VAR evidence. However, high proportions
of rule-of-thumb behavior are needed to produce immediate reductions in output
following implementation.
Selected Working Papers:
Title: "The
Evolution of Forward-Looking Agent Behavior in Inflation Dynamics".
Description: In the wake of the rational expectations
revolution, empirical measures of inflation have increasingly focused on models
incorporating forward-looking behavior. Prior to the 1990's, most empirical
measures of the Phillips curve were decidedly backward-looking. As such, there
has been a clear shift in thought and practice between the backward-looking
inflation dynamic 20-plus years ago, and the more forward-looking inflation
dynamic in practice today. This paper estimates the evolution of the degree of
backward versus forward-looking behavior in the inflation specification over
time. Results for the U.S. indicate a clear but gradual deterioration of
predominantly forward-looking behavior starting in the early 1960's, reversing
course sometime between 1985 and 1989. The timing of this trend seems to
coincide closely with variation in Fed credibility.
Title: "Using Prediction Markets to Guide Global Warming Policy". Revised and Resubmitted, Quarterly Review of Economics and Finance.
Co-author: Scott Sumner (Bentley University)
Description: There
is currently great uncertainty about both the likely severity of global
warming, and the most cost effective policies for dealing with the problem. We
argue that suitably designed prediction markets can reduce some of the
uncertainties surrounding this difficult issue, and thus assist in the
policymaking process. Because future policymakers will be better placed to see
the scale of the problem and feasibility of proposed solutions, policymakers
could benefit from current market forecasts of future global temperatures and
atmospheric greenhouse gas levels. This would better allow policymakers to
direct resources more effectively in the near term and the long term to
address the global warming problem.
Title: "Are
Immigrants Really Attracted to the Welfare State? Evidence from OECD Countries" (older version). Revised and resubmitted, Review
of World Economics [Weltwirtschaftliches Archiv].
Co-authors: Dave Ortmeyer, Mike Quinn (Bentley University)
Description: Developed
countries have been faced with the dual phenomena of rising immigration and
growing budget deficits. There has been a debate as to whether lower
educated immigrants are attracted to countries with high levels of welfare
benefits. This is especially important for Western European countries
that are facing the lifting of East-West immigration restrictions after 2011.
Using data from the World Bank, we examine the impact of unemployment, health,
education, welfare and retirement benefits on both the size and educational
levels of immigration flows. Evidence is found that whether or not a
country’s policies are attracting highly educated immigrants goes beyond the
issue of the “welfare state”. Immigrants are making important
distinctions between the different benefits provided by a receiving country’s
government. Welfare, health and education spending all have a positive
impact on the educational level of the immigration flow while unemployment
benefits are found to be insignificant. Retirement benefits/taxes and
income taxes adversely affect the educational level of immigration flows.
This is consistent with the hypothesis that benefits with the shortest time to
eligibility have the most positive impact on attracting highly educated
immigrants. This implies that governments wanting to attract more highly
educated immigrants (versus low-skilled) should focus on policies such as
health and education and be concerned about overly burdensome tax regimes.
Some Interesting Links:
EC 402: Information for Bentley’s College Fed Challenge team and class here.
Video from speaker Dr. Jeffrey Fuhrer,
Executive Vice President and Director of Research, Federal Reserve Bank of Boston. October 6,
2009, Bentley University. His powerpoint slides here.
Video from panel discussion on Recessions, Depressions, and Business Cycles, October 22, 2008, Bentley University.
St Louis Federal Reserve database.
Scott Sumner's blog on monetary policy.
Greg Mankiw’s blog on decentralizing monetary policy.
Interesting site for current research papers on prediction markets.
Real life prediction markets: intrade.com
My favorite site.
Last Updated: October 8, 2009