The Collateral Channel under Imperfect Debt Enforcement

Does a country’s ability to enforce debt contracts affect the sensitivity of economic activity to collateral values? To answer this question, we introduce a novel industry-specific measure of real asset redeployability - the ease with which real assets are transfered to alternative uses - as a proxy for collateral liquidation values. Our measure exploits the heterogeneity of expenditures in new and used capital and the heterogeneity in the composition of real asset holdings across U.S. industries. Using a cross-industry cross-country approach, we find that industry size and growth are more sensitive to collateral values in countries with weaker debt enforcement. Our estimates indicate that the differential effect is sizeable. The sensitivity of economic activity to collateral values is not affected by a country’s financial development once the quality of debt enforcement is accounted for. We then rationalize our empirical findings based on a model of credit under imperfect enforcement and discuss an important implication of our empirical result: macroeconomic volatility generated by fluctuations in collateral values is higher in countries with weaker debt enforcement institutions.

Economic Impacts of Post-CRP Policy Options in South Dakota

Agricultural and Food Policy,

HCMM energy budget data as a model input for assessing regions of high potential groundwater pollution

The author has identified the following significant results. In early April 1978, heavy spring runoff from snowmelt caused significant flooding along a portion of the Big Sioux River Basin in southeastern South Dakota. The flooded area was visible from surrounding areas on a May 15 HCMM IR test image. On May 15, the flood waters had receded but an area of anomalous residual high soil moisture remained. The high soil moisture area was not visible on a HCMM day visible test image of the same scene, or on LANDSAT imagery. To evaluate the effect of water table depth on surface temperatures, thermal scanner data collected on September 5 and 6, 1978 at approximate HCMM overpass times at an altitude of 3650 m were analyzed. Apparent surface temperatures measured by the scanner included emittance contributions from soil surface and the land cover. Results indicated that the shallow water tables produced a damping of the amplitude of the diurnal surface temperature wave

Can Parameter Instability Explain the Meese-Rogoff Puzzle?

The empirical literature on nominal exchange rates shows that the current exchange rate is often a better predictor of future exchange rates than a linear combination of macroeconomic fundamentals. This result is behind the famous Meese-Rogoff puzzle. In this paper we evaluate whether parameter instability can account for this puzzle. We consider a theoretical reduced-form relationship between the exchange rate and fundamentals in which parameters are either constant or time varying. We calibrate the model to data for exchange rates and fundamentals and conduct the exact same Meese-Rogoff exercise with data generated by the model. Our main finding is that the impact of time-varying parameters on the prediction performance is either very small or goes in the wrong direction. To help interpret the findings, we derive theoretical results on the impact of time-varying parameters on the out-of-sample forecasting performance of the model. We conclude that it is not time-varying parameters, but rather small sample estimation bias, that explains the Meese-Rogoff puzzle.exchange rate forecasting; time-varying coefficients