University of Notre Dame                                                                  
Mendoza College of Business
 
 

Research 

Technology, Investment, and Economic Fluctuations  

Submitted: Journal of Macroeconomics

Abstract:  Since 1854, The United States has Experienced 32 business cycles.  While the average length of these cycles (trough-to- trough) has been 51 months, there has been significant variation across different subperiods.  This paper attempts to explore the relationship between capital accumulation, technology accumulation, and the business cycle.

Embodied Technology and Monetary Shocks; Lumps, Bumps, and Humps (PowerPoint Presentation)

Submitted: Journal of Macroeconomics

Abstract:  VAR analysis of monetary shocks suggest that an unanticipated, positive money shocks cause a drop in nominal interest rates, and increases in output, consumption, prices, and wages.  Further, impulse responses indicate a "hump shaped" pattern with the maximum effect felt 1-2 years after the initial shock.  Limited participation models can replicate the contemporaneous correlations of money shocks, but have difficulty with the longer run dynamics.  This paper integrates a limited participation framework in a vintage capital model in an attempt to strengthen the monetary transmission mechanism.

Expectations, and Credibility in a Model of Monetary Policy

Submitted: Macroeconomic Dynamics

Abstract:   Recent monetary history has been characterized by monetary authorities which have been, alternatively hard and soft on inflation. In a vintage capital framework, investment decisions are not easily reversed. Therefore, expectations of policy as well as current 
policy are important to the investment decision. Here, a vintage capital model is used to assess the value of central bank credibility for a policy change. Policy in this model is assumed to be private information of the central banker. Agents learn about that policy which to study the ensuing transitional dynamics following a change in monetary policy regime.

Technology Creation, Diffusion, and Growth Cycles 

Submitted: Review of Economic Dynamics

Abstract:  Standard macroeconomic models that assume an exogenous stochastic process for multifactor   productivity offer the interpretation that recessions are the result of ''bad news'' (technological regress) and expansions are the result of ''good news'' (technological advancement). The view taken here is that both expansions and recessions are the result of ''good news'' in the sense that in both cases, aggregate production possibilities have increased. Recessions can be thought of as the transition from one technological frontier to the next.

Endogenous Financing and the Long Run Impact of Money Growth on Output and Prices

Submitted: Journal of Money, Credit, and Banking

Abstract:  Most monetary models make use of the quantity theory of money along with a Phillips curve.  This implies a strong correlation between money growth and output in the short run (with little or no correlation between money and prices) and a strong long run correlation between money growth and inflation and inflation (with little or no correlation between money growth and output).  The empirical evidence between money and inflation is very robust, but the long run money/output relationship is ambiguous at best.  This paper attempts to explain this by looking at the impact of money growth on firm financing.

On Modeling and Controlling the Effects of Variable Labor Effort: A Theoretical Explanation of the Truck System ( with William Alpert)

Manuscript

Abstract:  In most Industrial and Industrializing Countries, labor markets are characterized by employers offering packages of wage, non-wage, and working conditions to prospective workers. In return, workers offer to apply effort to tasks determined by employers. This paper attempts to examine these employer-employee contracts using a stock out avoidance model with employees providing variable labor effort.

Product Innovations, Technology Adoption, and Monetary Policy

Work in Progress

Abstract: Many industries, particularly the computer industry have experienced large increases in total factor productivity since the early seventies. Simultaneously, average firm size has decreased in these high growth sectors. This paper investigates the relationship between the adoption of new technologies, firm level employment, and how these relationships might interact with the conduct of monetary policy.

IT, Inventory Control and Business Cycles

Work in Progress

Abstract: Recent years have witnessed an explosion in the power of computer processing. The primary gain to computerization is the ability to manipulate large volumes of digital information very rapidly. This paper focuses on the increased ability of manufacturing firms to track production and sales data through computerization. A two sector dynamic general equilibrium model is constructed with firms using inventories to buffer differences in sales and production to avoid stock outs. The model will then be used to examine the changes in aggregate dynamics when firms lower their inventories due to better tracking of sales/production data through computerization

Moral Hazard in Financial Markets and the Impact of Profit Restatements (W/ Kathryn Yeaton)

Work in Progress

Abstract: On October 16th, 2001, Enron shocked Wall Street with a restatement of its profits - revealing an extraordinary loss of $544 Million.  Enron, however, was not alone.  During 2001-2002, there were over 500 profit restatements by such names as WorldCom, Tyco, Xerox, Sunbeam, and Sun Microsystems.  Due to the presence of asymmetric information and moral hazard, profit restatements can influence not just the companies directly involved, but honest companies as well by creating an environment of distrust between corporation and investors.  This paper attempts top take a look at major financial restatements to find out how widespread the effects of restatements are.

Efficiency versus Accuracy; Can Alternative Methods Improve on Monte Carlo Simulation for Pricing Mortgage Backed Securities? (w/ Russ Bagtzoglou)

Work in Progress

Abstract: Mortgage backed securities - fixed income assets backed by pools of home mortgage payments have become a major force in financial markets.  Since 1981, the MBS market has exploded from $25 Billion outstanding to over $4 Trillion.  Money managers, thrift institutions, commercial banks, trust departments, insurance companies, pension funds, and securities dealers are all players in this market.  However, due to embedded options, mortgage backed securities are difficult to price.  Traditional methods involving Monte Carlo simulation can be quite accurate, but are computationally intensive and can be very time consuming.  This paper looks at alternative methods to see if computing time can be lessened without losing accuracy.

 

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Updated: 9/10/03