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John J.
Seater's Published Papers
The following list contains links to .pdf (Adobe Acrobat) files of almost all my published
articles. Click on the title to
view
or download the paper. Most of the
files
are for the published version, but in a few cases they are for earlier
typescripts. My
vita
also contains a list of my publications. The list there is
concise but lacks abstacts and links.
"The Demand
for Currency Substitution." John
J. Seater. Economics 2,
2008-35. Online journal:
http://www.economics-ejournal.org/economics/journalarticles/2008-35
Abstract:
A transactions model of the demand for multiple
media of exchange is developed and applied to the study of currency
substitution. The analysis provides a theoretical foundation for
results reported in the empirical literature. It also predicts
that variables not previously considered in the literature will affect
currency substitution in complex and unexpected ways. Independent
empirical work supports the theory.
“Government
Debt and Deficits.” John
J. Seater. The
Concise Encyclopedia of
Economics, David R. Henderson, ed., The Library of Economics and
Liberty, Online version
http://www.econlib.org/library/CEE.html. Print version Liberty
Fund, Indianapolis, 2008, pp. 224-227.
Abstract:
A brief review of the meaning, measurement, and
economices of government debt and deficits is presented.
“Debt, Deficits, and the Economy.”
John J. Seater.
Battleground: Economics and
Business, Michael Walden, ed. Greenwood Press, Westport
CT, 2007, pp. 87-95.
“Testing
the Cross-Section Implications of Friedman’s Permanent Income
Hypothesis.” Joseph DeJuan and
John J. Seater. Journal of Monetary
Economics 54, April 2007, pp.
820-849.
Abstract
We use modern household data and
econometric methods to conduct some of the original tests of the
Permanent Income Hypothesis (PIH) suggested and used by Friedman
(1957). The data and methods are superior to those available to
Friedman, allowing us to refine Friedman’s tests and perform tests he
could not do. The results provide overall but not universal
support for PIH.
“Testing the
Permanent-Income Hypothesis: New Evidence from West-German States
(Länder).” Joseph
DeJuan, John J. Seater, and Tony Wirjanto. Empirical Economics 31, September 2006, pp. 613-629.
Abstract
This paper investigates
whether time-series data from eleven West-German states
(Länder) provide evidence in accord with the implication of the
permanent-income hypothesis (PIH) for the stochastic relationship
between consumption and income innovations. The empirical results do
not support this hypothesis. In particular, the response of consumption
to income innovations is found to be much weaker than is predicted by
the PIH. Moreover, the response was found to be asymmetric, being
stronger for negative than positive income innovations. This evidence
of asymmetry is qualitatively consistent with models in which consumers
are liquidity constrained.
“A Simple Test of
Friedman’s Permanent Income Hypothesis.” Joseph DeJuan and
John J. Seater. Economica
73, February 2006, pp. 27-46.
Abstract:
Friedman’s Permanent Income Hypothesis (PIH)
predicts that the income elasticity of consumption should be higher for
households for whom a large fraction of the variation of their income
is permanent than for households experiencing more transitory
variations in income. We test this prediction using modern
household data from the U.S. Consumer Expenditure Survey. The
results offer some support for the PIH.
Keywords: Consumption; Permanent income; Consumer Expenditure
Survey
JEL Code: E21
"Share-Altering
Technical
Progress." John J.
Seater. In Economic Growth
and Productivity, L. A. Finley,
ed., Nova Science
Publishers, Hauppage, NY 2005, pp. 59-84.
Abstract:
The implications
of technical change that
directly alters factor shares are examined. Such change can lower
the income of some factors of production even when it raises total
output, thus offering a possible explanation for episodes of social
conflict such as the Luddite uprisings in 19th century England and the
recent divergence in the U. S.
between wages for skilled and unskilled labor. An explanation
also
why underdeveloped countries do not adopt the latest technology but
continue
to use outmoded production methods. Total factor productivity is
shown
to be a misleading measure of technical progress. Share-altering
technical
change brings into question the plausibility of a wide class of
endogenous
growth models.
“A Direct Test
of the Permanent Income Hypothesis.” Joseph DeJuan,
John J.
Seater, and Tony Wirjanto. Journal of Money,
Credit, and
Banking 36, December 2004, pp. 1091-1103.
Abstract:
This paper tests the prediction of the Permanent
Income Hypothesis (PIH) that news about future income induce a revision
in consumption equal to the revision in permanent income. We use
time-series data from
48 contiguous US states to perform the test. The empirical
results
provide some support for the PIH across states.
JEL Classification: E21
Keywords: Permanent income, Consumption, US states
"Invention and Business Cycles." John J. Seater. Revista Basileira de Economia de Empresas
4, January-April, 2004, pp. 7-42.
Abstract:
Invention of new final goods can lead to interesting business cycle
behavior if the new good somehow involves durability. Either the
good itself can be durable (a consumer durable, productive capital), or
it can be produced in a new sector by a technology that requires
capital as an input. Many kinds of invention have one of these
characteristics. The economy’s dynamic response to invention of such a
good is shown to be consistent with several business cycle facts that
the standard real business cycle model has difficulty explaining.
“Optimal Bank Regulation and Monetary
Policy.” John J.
Seater. ICFAI Journal of Bank
Management 2, February 2003, pp.
7-28.
Abstract:
A unified model of monetary policy and bank regulation is
presented. In accordance with modern banking theory, banks not
only intermediate loans and deposits but also provide a financial
service affecting aggregate output. Optimal parameter settings
for monetary and regulatory policy are derived. New results are
that monetary policy affects the expected level as well as the variance
of output, bank regulation should change continually in response to the
state of the economy, and bank regulation and monetary policy should be
tightly coordinated. This last result has important implications
for the institutional arrangements for conducting regulatory and
monetary policy.
"Monies
and Banking." John J. Seater. Research in
Banking and Finance, Volume 2 , I. Hasan & W. C. Hunter, eds.
Elsevier,
Amsterdam & New York, 2002
Abstract:
Household demand for
financial transaction services is investigated. The quantity and
variety of
services demanded depends positively on household income, with
households
at the bottom of the income distribution demanding no financial
services
at all. Demand for financial services also depends on household
allocation
of income among types of consumption goods. These results have
implications
for the organization of the banking market, especially branch bank
location,
and for the availability of banking services across geographical
areas. The results therefore also have implications for the
regulation of banking activities, such as neighborhood siting
requirements for bank branches
or neighborhood lending requirements.
"Economic
Information versus Quality Variation in Cross-Country Data." John
W. Dawson, Joseph P. DeJuan, John J. Seater, and E. Frank Stephenson. Canadian
Journal of Economics 34, November 2001.
Abstract:
Data quality in the Penn World Tables varies
systematically across countries that have different growth rates and
are at different stages of economic development, thus introducing
measurement error correlated with variables of economic interest.
We explore the seriousness of this
problem with three examples from the literature, showing that the
problem appears to be minor in growth convergence regressions but
serious in estimating the effect of growth volatility on the average
growth rate and in a cross-country test of the Permanent Income
Hypothesis. The results suggest, at
the least, a need for performing appropriate sensitivity tests before
drawing conclusions from analyses based on these data.
KEYWORDS: Data quality, cross-country comparisons. JEL
Classification: O57; E21, O47
"GARP,
Separability, Aggregation, and Euler Equation Estimation." Adrian Fleissig, Ronald Gallant, and John
J. Seater. Macroeconomic
Dynamics 4, December 2000.
Abstract:
We
derive a semi-nonparametric utility function containing the constant
relative
risk aversion function (CRRA) as a special case, and we estimate the
associated Euler equations with U.S. consumption data. There is
strong evidence that the CRRA function is misspecified. The
correctly specified function includes lagged effects of durable goods
and perhaps non-durable goods,
is bounded as required by Arrow's Utility Boundedness Theorem, and has
a
positive rate of time preference. Constraining sample periods and
separability structure to be consistent with the generalized axiom of
revealed
preference affects estimation results substantially. Using
Divisia
aggregates instead of the NIPA aggregates also affects results.
"GARP, Separability, and the
Representative Agent." Adrian Fleissig, Alastair Hall, and John J.
Seater. Macroeconomic
Dynamics 4, September 2000.
Abstract:
We examine whether annual, quarterly, and monthly
U.S. aggregate consumption data could have been generated by a utility
maximizing representative agent with intertemporally separable utility.
The model appears inapplicable over the full time periods covered by
the
NIPA data, which are the sample periods often used in the
literature.
The model does appear applicable, however, over long subsamples.
The
data also are inconsistent with separability assumptions routinely made
in the literature. In particular, the main categories of
consumption
(nondurables, services, and durables) are not mutually separable.
We
consider the implications of our results for inference about
consumption
based on the representative agent model.
"Is There an
Optimal Size for the Financial Sector?" Anthony M. Santomero and John J. Seater. Journal of Banking and Finance 24,
June 2000, pp. 945-65.
Abstract:
This paper derives the optimal size of the financial
sector using a general equilibrium framework that is an extension of
Holmstrom and Tirole’s 1997 paper. We show that the financial
sector has a
unique optimal size relative to the size of the economy as a
whole.
Creating and maintaining this sector requires diversion of some
physical
capital from production of output to monitoring that production.
However,
the efficiency gain in output production brought about by monitoring
warrants
the diversion. It is also found that the optimal size of the
financial
sector is independent of the state of the economy and does not vary
over
the business cycle.
“The Permanent Income
Hypothesis: Evidence from the Consumer Expenditure Survey.”
Joseph
P. DeJuan and
John J. Seater. Journal of Monetary Economics 43, April 1999,
pp.
351-376.
Abstract:
Consumption Euler relations are estimated with data from the 1986–1991
US Consumer Expenditure
Survey without creating a synthetic panel. The stochastic implications
of the permanent
income hypothesis generally are not rejected, and there is little
evidence of
liquidity-constrained or rule-of-thumb behavior. The results are robust
with respect to
consumption
category,
changes in sample, and choice of instruments.
Keywords:
Permanent income hypothesis; consumer expenditure survey. JEL
classification:
D12;
E21
“Testing the
Permanent Income/Life Cycle Hypothesis with Aggregate Data.”
John
J. Seater. Macroeconomic Dynamics 2, September 1998, pp.
401-425.
Abstract:
The aggregate implications of the permanent
income/life cycle hypothesis (PILCH) are derived rigorously.
Virtually all empirical rejections of PILCH based on aggregate
data are shown to result from model misspecifications or from
characteristics of aggregate data that have been overlooked.
Valid aggregate tests are proposed. Those based on a
properly formulated aggregate consumption function may be superior to
those based on Euler-equation methods.
“A Cross-Country
Test of the Permanent Income Hypothesis.” Joseph P. DeJuan
and John
J. Seater. International Review of Applied Economics 11,
September
1997, pp. 451-468.
Abstract:
The Permanent Income Hypothesis (PIH) predicts an
income innovation has the same size effect on consumption as on
permanent income, an implication we examine with a cross-country test
proposed by Kormendi
and LaHaye (1984). The data from industrial countries support PIH
but
data from developing countries do not. Also, however, data from
countries with high-quality national income accounts support PIH
whereas data from
countries with low quality accounts do not. The stage of economic
development and data quality are highly correlated. The evidence
suggests that
the results may be driven by data quality differences rather than
systematically different behavior between industrial and developing
countries.
“An Optimal
Control Solution to the Liquidity Constraint Problem.” John
J.
Seater. Economics Letters 54, February 1997, pp. 127-134.
Abstract:
An analytical solution to the liquidity constraint
problem is derived in an optimal control framework. Some
properties of the solution
are examined. Results in the existing literature, derived there
by
disparate measures, are obtained here by a single approach, thus
providing
a unified theory of consumption under liquidity constraint.
“Ricardian
Equivalence.” John J. Seater. Business Cycles and
Depressions:
An Encyclopedia,
David Glasner, ed. Garland Publishing, Inc., New York and London,
1997,
pp. 577-580.
Abstract:
A brief overview of the nature of Ricardian
Equivalence, its implications, and tests of it is provided.
"Alternative Monies and the
Demand
for Media of Exchange." Anthony M. Santomero and John J.
Seater. Journal of Money, Credit, and Banking 28, November
1996, pp. 942-960
Abstract:
We construct a theoretical model of household demand
for multiple media of exchange. The model is useful in examining
the demand for new payments media, such as smart cards.
“Temporal
Aggregation and Economic Time Series.” Robert J. Rossana and
John
J. Seater. Journal of Business and Economic Statistics 13,
October 1995, pp. 441-451.
Abstract:
We examine the effects of temporal aggregation on
the estimated properties of economic data. Theory predicts that
temporal aggregation loses information about the underlying data
processes. We find those losses to be substantial. Monthly
and quarterly data are governed by complex time series processes with
much low-frequency cyclical variation, whereas annual data are governed
by extremely simple processes with virtually no cyclical variation.
Cycles of much more than a year's duration in the monthly data
disappear when the data are aggregated to annual observations.
Moreover, the aggregated data show more long-run persistence than
the underlying disaggregated data.
“World Temperature
Trend Uncertainties and Their Implications for Economic Policy.”
John J. Seater. Journal of Business and Economic Statistics 11,
July 1993, pp. 265-277
Abstract:
Three data sets on world temperature are studied.
Data on direct temperature measurements of world temperature over
the past century yield trend estimates of 0.45 degrees Celsius per
century with rather wide confidence intervals of (0.15, 0.75).
The data's behavior raises questions about whether the trend is
genuine and about whether it is due to greenhouse gas emissions.
Data on temperature measurements inferred from tree rings
over the past 1,500 years display no trend. The upward drift over
the
past century could easily be a cyclical upswing of the type that has
occurred
many times in the past.
“Long Run
Neutrality and Superneutrality in an ARIMA Framework.” Mark
Fisher
and John J.
Seater. American Economic Review 83, June 1993, pp. 402-415.
Abstract:
We (i) formalize long-run neutrality (LRN) and
long-run superneutrality (LRSN) in the context of a bivariate ARIMA
model, (ii) show how the restrictions implied by LRN and LRSN depend on
the orders of integration of the variables, (iii) apply our analysis to
previous work, showing how
that work is related to LRN and LRSN, and (iv) provide some new
evidence
on LRN and LRSN.
“Ricardian
Equivalence.” John J. Seater. Journal of Economic
Literature
31, March 1993, pp. 142-190.
Corrections.
Abstract:
The literature on Ricardian Equivalence is reviewed,
providing an extensive discussion of both the relevant theory and
evidence.
“Aggregation,
Unit Roots, and the Time Series Structure of Manufacturing Real Wages.”
Robert J. Rossana and John J. Seater. International Economic Review
33, February 1992, pp. 159-179.
Abstract:
The effects of both temporal and cross-sectional
aggregation on the estimated time series characteristics of
manufacturing real wage
data are examined. The effects, especially of temporal
aggregation,
are found to be quite large and in accord with statistical theory.
The
well-known results of Altonji and Ashenfelter, that real wages are a
random
walk, and of Nelson and Plosser, that real wages are an IMA(1,1)
process,
both seem to be entirely artifacts of temporal aggregation, with the
true
models following processes that are much more comlplex and that display
substantial
cyclical behavior.
“Commentary.” Perspectives on the
Federal Budget Deficit, Larry V. Ellis and Steven W. Millsaps, eds.,
Walker College of Business, Boone, NC, 1988, pp. 69-73.
“Does
Government Debt Matter: A Review.” John J. Seater. Journal of Monetary Economics 16,
July 1985, pp. 121-131.
Apstract:
A review of two books addressing the effects of
government debt: The Economic Consequences of Government DeJicits
(Laurence Meyer, ed., Kluwer-Nijhoff,
Boston, 1983, pp. xiii + 242) and The Economics of Large Government
Deficits (Federal Reserve Bank of Boston, Boston, 1983, pp. 199).
Discussion of several general issues involved in Ricardian Equivalence
and tests of it.
“Testing
Equilibrium Models of the Business Cycle: The Case of the Labor Market.”
John J. Seater. Review of
Economics and Statistics 67, November 1985, pp. 670-675.
Abstract:
I test the extent to which equilibrium models
explain cyclical movements in the aggregate supply of labor.
These models are of four types, three depending on perceptions of wages
or prices and one depending on movements in the real interest
rate. The evidence presented fails to support any of the four
theories; none seems capable of explaining labor market cycles.
However, the real interest rate consistently enters the labor supply
equation with a statistically and economically significant coefficient,
suggesting a role for intertemporal substitution effects in labor
supply.
“New Tests of the Life
Cycle and Tax Discounting Hypotheses.” John J. Seater and
Roberto S. Mariano. Journal of
Monetary Economics 15, March 1985, pp. 195-215. (Roberto S.
Mariano, co-author.)
Abstract:
We first test a version of the permanent income consumption function
recently suggested by Barro. The results support the theory
except that consumption expenditures show sensitivity to transitory
income. Next we use the consumption model to test the tax discounting
hypothesis, which is strongly supported. This support for tax
discounting disagrees with results from some earlier studies using more
traditional specifications of the consumption function. However, we
show that when certain obviously inadequate estimation procedures are
corrected, the traditional models also support tax discounting. This
uniform support for tax discounting suggests that the sensitivity of
consumption to transitory income is not due to liquidity constraints.
“On the
Construction of Marginal Federal Personal Income and Social Security
Tax Rates in the U.S.” John J. Seater. Journal of Monetary Economics 15,
January 1985, pp. 121-135.
Abstract:
In this article, I correct and extend my earlier
series on marginal federal personal income tax rates. I also
construct a measure of the marginal Social Security tax rate and add
this to the income tax rate to obtain a measure of the elective
marginal tax rate on income due to federal taxes. Finally, I compare my
series on marginal income tax rates and its method of construction with
those of Barro and Sahasakul.
“Marginal
Corporate and Personal Income Tax Rates in the U.S., 1913-1975.”
John J. Seater. Journal of
Monetary Economics 10, November 1982, pp. 361-381.
Abstract:
In this article, I first report and describe the
construction of two new statistical series on the marginal Federal
income tax rates for corporations and private individuals in the United
States since the inception af those taxes and then analyze the behavior
of these series over time. Several results on the determination of tax
rates are derived; these generally are not consistent with Barro’s
theory of defit finance.
“Are Future
Taxes Discounted?” John J. Seater. Journal of Money, Credit, and Banking
14, August 1982, pp. 376-389.
Abstract:
An empirical examination of Ricardian Equivalence is
conducted. The results generally are inconsistent with
Equivalence.
“On the
Estimation of Permanent Income.” John J. Seater. Journal of Money, Credit, and Banking
14, February 1982, pp. 76-83.
Abstract:
I first show that Darby's (1974) estimates of the
weight on current income in a partial adjustment model are sensitive to
the measure of consumption and also are subject to error arising from
serial correlation and the grid search estimation method he used.
Correcting the grid search method for serial correlation gives very
large current income weights and also renders transitory income
insignificant in explaining demand for durable goods, thus
contradicting Darby's hypotheses on how permanent income evolves and
how it affects consumption demand. I then reestimate the current
income weight using a nonlinear method due to Zellner. The method
has statistical properties much superior to those of the grid search
method. The nonlinear estimates are stable, free of statistical
problems, and similar in magnitude to those reported by Darby, thus
restoring Darby's original conclusions.
“Partial
Adjustment in the Demand for Money: Theory and Empirics.”
Anthony M. Santomero and John J. Seater. American Economic Review 71,
September 1981, pp. 566-578. (Anthony M. Santomero, co-author.)
Abstract:
We construct a model of partial adjustment in money
demand based on optimizing behavior, showing how the speed of
adjustment behaves over time and in response to changes in some
economic variables. We test the model with quarterly U.S. data
and find that partial adjustment is statistically significant but very
small, dying out within two quarters. The results cast doubt on
models, such as that of Barro (1978), that rely on partial adjustment
to explain observed behavior of money or prices.
“The Market Value
of Outstanding Government Debt, 1919-1975.” John J.
Seater. Journal of Monetary
Economics 8, July 1981, pp. 85-101.
Abstract:
Severa1 no seroes on the market value of outstanding government debt
are reported and their methods of construction described. The new
series on Federal debt are compared with other existing estimates and
are shown to be markedly superior to them.
“Publishing Performance: Departmental
and Individual: Additions and Corrections.” John Bell and John J.
Seater. Economic Inquiry
17, October 1979, pp. 609-612. (John Bell, co-author.)
“Job Search and
Vacancy Contacts.” John J. Seater. American Economic Review 69, June
1979, pp. 411-419.
Abstract:
I show the need for and then develop a model in
which the number of vacancies contacted by a job searcher per unit of
time depends on the intensity of search and displays diminishing
intensity to job search. The model is spatial in nature.
“Utility
Maximization, Aggregate Labor Supply, and the Phillips Curve.” John
J. Seater. Journal of Monetary
Economics 4, November 1978, pp. 687-713.
Abstract:
In this paper. 1 examine aspects of the Phillips curve using a
microeconomic model of labor force behavior developed elsewhere [Seater
(1977)]. The
model is a unification of the two major approaches to the
microfoundations of labor force behavior due to Mortensen (1970) and
Lucas and Rapping (1970). Mortensen's model treats leisure
time as fixed; Lucas and Rapping's model ignores job search. The
unified model presented here overcomes the deficiencies of the two
underlying models taken separately.
“Publishing Performance: Departmental
and Individual.” John Bell and John J. Seater. Economic Inquiry 16, October 1978,
pp. 599-615. (John Bell, co-author.)
“The
Inflation-Unemployment Trade-off: A Critique of the Literature.”
Anthony M. Santomero and John J. Seater. Journal of Economic Literature 16,
June 1978, pp. 499-544 (Anthony M. Santomero, co-author.)
Abstract:
A review of the literature on the trade-off between
inflation and unemployment (the Phillips Curve) is presented.
“A Unified Model of Consumption, Labor
Supply, and Job Search.” John J. Seater. Journal of Economic Theory 14,
April 1977, pp.349-372.
“Stability of the Phillips Curve and
the Accelerationist Hypothesis: Comment.” John J. Seater. Quarterly Review of Economics and Business
16, Winter 1976, pp. 98-99.
You also can view and down load .PDF versions of my current Working Papers.
Return to John Seater's Home Page