98 IAER: FEBRUARY 1998, VOL. 4, NO. 1

achieved a 10 percent return and a mean variance of 2.25. No individual equity trading for the period analyzed outperformed the Index. Abnormal positive gains were highly correlated concerning stock prices and share offerings or changes in stock capital structures. This reflects the underdeveloped capital markets typical of emerging nations where ownership is concentrated, not disbursed.

Factors Influencing the Polish Money Market

MARIA PIOTROWSKA Worclaw University--Poland

The purpose of this paper is to investigate the influence of different factors on the money market in Poland. Two traditional hypotheses on the yield curve were tested: the expectations hypothesis and the market segmentation argument. The list of considered factors also covered intervention carried out by the central bank. One of the paper's objectives was to evaluate the efficiency of an open market operation. The impact of exchange rate on the money market was also the purpose of the research. The cointegration method and error-correction models were used in the research.

The empirical results did not fully confirm the traditional hypotheses on the yield curve in the T- bill market. There were stationary, long-term relationships only between shorter rates. The Ministry of Finance policy had an impact on the T-bill interest rates mainly in the short run and the results gave interesting information on demand for bills. In the long run, the demand was adjusting to the interest rate of bills and to the exchange rate. It would suggest that investors in the T-bill market were able to apply available information for making decisions.

The obtained results let me evaluate efficiency of the interest rate strategy which depended on existence of the stable relationships between open market operations, short-term interest rates, and long-term interest rates. The results of cointegration analysis showed that there had been many of the relationships mentioned here but despite that, the National Bank of Poland decided to give up the interest rate strategy and accept the monetary base strategy. Lack of structural relationships could not be the cause of this decision. In the short run, the interest rates in the interbank money market had to be destabilized by the shocks occurring outside of this market. The estimation results of the WlBOR dynamics model concluded that the policy of managing the public debt and the situation in the currency market disturbed performance of the interest rate strategy.

America's Disappearing Link Between Economic Growth and Middle Class Prosperity

D. N. STEINNES University of Minnesota--U.S.A.

The postwar economic paradise in America was lost in 1973. Since then, economic growth has slowed and real median incomes have been unchanged. Both economists and politicians have recognized these trends and some have suggested that greater economic growth is necessary to restore middle class prosperity. However, reaching this conclusion, statistically, requires that there be a positive relationship between economic growth and real median incomes. This paper explores this relationship first using national data and then considers the relationship for a cross-section of states. Based on changes in elasticity, it will show that the strong positive national relationship between economic growth and middle class incomes which existed up until 1973 has since all but disappeared. However, the disappearance, or breakdown, varies between states. Thus, a regress model will be developed and estimated with the state breakdowns, or changes in elasticity, as the dependent variable. Explanatory variables are measures characterized as conservative and liberal policy positions on various economic issues delineated in the paper. The estimation results suggest that conservative policies-- including higher economic growth, freer immigration, more small businesses, and fewer unions--offer the best hope, statistically, for restoring the lost relationship between economic growth and real median incomes.