Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks

By Robert J. Shiller | Go to book overview

Notes

Chapter 1
1.
The closest I have been able to find in any published source to the national income markets proposed in this book is an article advocating swaps and options on business cycle variables, particularly indices of consumer confidence, Marshallet al, ( 1992). The Coffee, Sugar and Cocoa Exchange in New York ( 1983), under the tutelage of Todd Petzel, established an Economic Index Market Division to trade an array of index numbers, including the consumer price index, corporate earnings, housing starts, and new car sales. Only the consumer price index futures was actually attempted.
2.
There is the problem that purchasing power may not be transferable on a one-to-one basis. Avinash Dixit has pointed out to me that the macro markets may not function well, for example, to protect people in a country against adverse shocks to their own non- tradable sector.
3.
Less developed countries have some different, informal, means of sharing income risks at the village level, see Rosenzwieg ( 1988) and Townsend ( 1993). But the sharing is only local, and does not allow effective sharing of risks about regional or national aggregates.
4.
The Securities and Exchange Commission, set up to encourage liquid stock markets, did so with a number of policies: such things as 'uptick rules to deter concerted activity by short sellers; 13(d) rules to prevent undisclosed groups from acting in concert; extensive reporting and auditing requirements for corporations; Section 144 and 16(b)5 regulations on stock sales by executives and insiders' ( Bhide, 1991).
5.
The cause of the CPI futures market was taken up by Petzel ( 1985) and Petzel and Fabozzi ( 1986).
6.
The US CPI experiment was also compromised (as will be argued below) by a contract design that was too short-term in maturity, and once the contract failed, there was little willingness to experiment again.

-215-

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Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks
Table of contents

Table of contents

  • Title Page iii
  • Preface v
  • Acknowledgements x
  • Contents xiii
  • 1 - Introduction 1
  • 2 - Psychological Barriers 17
  • 3 - Mechanisms for Hedging Long Streams of Income 31
  • 4 - National Income and Labor Income Markets 52
  • Appendix to Chapter 4: Econometric methods 72
  • 5 - Real Estate and Other Markets 78
  • 6 - The Construction of Index Numbers for Contract Settlement 116
  • 7 - Index Numbers: Issues and Alternatives 152
  • 8 - The Problem of Index Revisions 182
  • 9 - Making It Happen 201
  • Notes 215
  • References 228
  • Author Index 241
  • Subject Index 245
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