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The purpose of this letter is to estimate the US social discount rate, the appropriate discount rate for public capital budgets. There are two methods. One assumes that public investment displaces private consumption, and the discount rate is labelled the social rate of time preference (SRTP). The other assumes that public investment crowds out private investment, and the underlying social discount rate is market-based. The approach in this letter follows the second method. It relies on wealth maximization with the presence of two assets: one risky and one riskless. The risky security is taken to be a portfolio of common stocks, while the riskless asset is taken to be the T-bill rate. The Euler or first-order condition is independent of initial wealth. Because of that the estimate of the discount rate applies to all unanimously, and can be considered a social rate by essence. The range of the estimated social discount rate is between 5.01% and 6.17%, and the 95% confidence interval for the inferred population mean discount rate is between 5.62% and 5.71%. These results are extremely precise and reasonable, and are at the upper limit of the estimates in the literature that use a completely different approach.

This research looks into the accumulation of foreign exchange reserves and the development of the macro-economy in the Gulf and Cooperation Council countries (GCC countries), namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Using yearly data covering the period from 1996 through 2015, the empirical results show positive and significant relationships between foreign exchange reserves accumulation on one hand, and oil prices, GDP, the ratio of current account to GDP, and the ratio of broad money to GDP on the other hand. Moreover, the results point to negative and significant relationships between foreign exchange reserves accumulation on one hand, and real effective exchange rate, the ratio of debt to GDP, and call money rates on the other hand. However, the results show that the stockpile of foreign exchange reserves in the GCC countries is not sensitive to nominal effective exchange rates, neither to the ratio of imports to GDP, and nor to interest rates on the US Dollar. Furthermore, the study shows a robust and positive link between foreign exchange reserves and oil prices on the one hand and economic growth in these countries on the other hand.

The purpose of this paper is to re-examine the relation between US stock returns, as exemplified by the S&P 500 returns, and the US inflation rate. Recent research finds out no significant relation, whether positive or negative. This paper allows for an endogenous calendar break, in the first instance, and a Markov switching regression with two regimes, in the second instance. The empirical evidence points to the conclusion that the relation between US stock returns and inflation undergoes a shift. In one regime, and in one subsample, the relation is negative and statistically significant, and in the other regime, and in the other subsample, the relation is statistically insignificant. The paper argues that there is no theoretical reason for such a finding. Further scrutiny shows that the results are driven by both conditional heteroscedasticity of the regression residuals, and a non-stationary statistical behavior of the inflation variable. The conclusion therefore remains strong that inflation is irrelevant for stock returns.