commodity price responses to monetary policy surprises commodity prices are important both as a source of shocks and for the propagation of shocks originating elsewhere in the economy many vector autoregression var studies estimate a gradual response of commodity prices to monetary policy shocks exploiting information in high frequency financial market data and using the methods of rigobon and sack 2004 i find that a 10 basis point surprise change in interest rates causes commodity prices to fall immediately by about 0 5 this is about two thirds of the estimated response of the s p500 and about five times larger than the response in a var 12 months after the shock metals prices tend to respond more than agricultural commodities the point estimate for oil prices is similar to other commodities but is estimated imprecisely

capital utilization and capital accumulation theory and evidence a firm may acquire additional capital input by purchasing new capital or by increasing the utilization of its current capital the margin between capital accumulation and capital utilization is studied in a model of dynamic factor demand where the firm chooses capital labour and their rates of utilization a direct measure of capital utilization the work week of capital is incorporated into the theory and estimates the estimates imply that capital stock is costly to adjust while the work week of capital is essentially costless to adjust the estimated response of the capital stock to changes in its price and in the required rate of return is more rapid than found in other estimates

effects of speculation and interest rates in a carry trade model of commodity prices abstract the paper presents and estimates a model of the prices of oil and other storable commodities a model that can be characterized as reflecting the carry trade it focuses on speculative factors here defined as the trade off between interest rates on the one hand and market participants expectations of future price changes on the other hand it goes beyond past research by bringing to bear new data sources survey data to measure expectations of future changes in commodity prices and options data to measure perceptions of risk some evidence is found of a negative effect of interest rates on the demand for inventories and thereby on commodity prices and positive effects of expected future price gains on inventory demand and thereby on today s commodity prices

the role of the trade channel in the propagation of oil supply shocks abstract this paper analyzes when and why idiosyncratic oil supply shocks produce large macroeconomic effects in an analytically tractable two country general equilibrium model we focus on a demand driven mechanism the trade channel which transmits oil shocks across economies through changes in the non oil goods terms of trade when the trade channel is operative we have three main consequences on the transmission of oil shocks first the macroeconomic impact of oil shocks may be large and asymmetric across countries second the magnitude of the effects is nonlinear in the size of the oil shock third terms of trade movements never ensure international risk sharing after an idiosyncratic oil supply shock

capital utilization and the foundations of club convergence abstract multiple steady states may arise in standard neoclassical growth models if the savings rate of wage income exceeds that of capital income this paper shows that endogenous capital utilization may produce such savings behavior in an otherwise standard solow model

balanced budget rules and aggregate instability the role of endogenous capital utilization schmitt grohe and uribe 1997 demonstrate that a balanced budget fiscal policy can induce aggregate instability unrelated to economic fundamentals the empirical relevance of this result has been challenged by subsequent studies in this paper we show both analytically and numerically that such extrinsic instability is an empirically robust plausibility associated with a balanced budget rule once endogenous capital utilization is taken into consideration this suggests that the design or operation of a balanced budget fiscal policy must recognize that it may constitute a practical source of self fulfilling prophecies and belief driven fluctuations

optimal population size and endogenous growth abstract we compare the population and output growth rates implied by the welfare functions of bentham and mill contrary to previous findings we show that under conditions that ensure an optimum the benthamite criterion leads to a smaller population size and higher economic growth

investor flows and the 2008 boom bust in oil prices this paper explores the impact of investor flows and financial market conditions on returns in crude oil futures markets i argue that informational frictions and the associated speculative activity may induce prices to drift away from fundamental values and may result in price booms and busts particular attention is given to the interplay between imperfect information about real economic activity including supply demand and inventory accumulation and speculative activity in oil markets furthermore i present new evidence that there were economically and statistically significant effects of investor flows on futures prices after controlling for returns in the united states and emerging economy stock markets a measure of the balance sheet flexibility of large financial institutions open interest the futures spot basis and lagged returns on oil futures the largest impacts on futures prices were from intermediate term growth rates of index positions and managed money spread positions moreover my findings suggest that these effects were through risk or informational channels distinct from changes in convenience yield finally the evidence suggests that hedge fund trading in spread positions in futures impacted the shape of term structure of oil futures prices this paper was accepted by wei xiong finance

on the utilisation controversy a theoretical and empirical discussion of the kaleckian model of growth and distribution this paper examines the utilisation controversy around the kaleckian model of growth and distribution we show that the federal reserve data on capacity utilisation which have been used by both sides of this debate are the wrong kind of data for the issue under examination instead a more appropriate measurement can be derived from the data on the average workweek of capital we argue that the long run dynamic adjustment proposed by kaleckian scholars lacks a coherent economic rationale we provide an alternative path towards the endogeneity of the desired utilisation at the micro and macro levels finally we examine the proposed adjustment mechanism econometrically our results verify the endogeneity of the normal utilisation rate

a techno economic and environmental assessment of long term energy policies and climate variability impact on the energy system abstract this paper examines the impact of climate variability and change cv c and energy policies on the future energy system in australia scenarios were developed to represent cv c impacts and policy options which were analysed with the long range energy alternative and planning system for the period 2010 2050 the results indicate that although energy demand is likely to increase threefold in the business as usual scenario cv c further increases demand to 150 petajoule a combined policy option involving modal shift and penetration of electric and hydrogen fuel cell vehicles results in a 49 53 decrease in transport fuel demand and emissions the economic analysis reveals a substantial decline in sales revenue and increase in generation costs due to cv c impacts higher renewable energy integration results in lower wholesale electricity prices across independent electricity markets cumulative cost benefit analysis indicates that economic benefits increase to us 4 9 trillion in an advanced renewable energy scenario emissions and energy consumed increased under climatic conditions but decreased after policy intervention ignoring the influence of cv c may result in underestimation of future energy demand and installed capacity in australia therefore energy and climate policies should consider long term economic benefits over short term system costs

the growing financialisation of commodity markets divergences between index investors and money managers abstract commodities are key for developing countries economic integration this article distinguishes two types of financial investors in commodities and emphasises differences in position taking motivation and price impacts index trader positions are positively correlated with roll returns while money managers emphasise spot returns during 2006 2009 index trader positions had a price impact for some agricultural commodities as well as oil during 2007 2008 money managers impacted prices for non agricultural commodities especially copper and oil the financialisation of commodity markets may make it more difficult for developing countries to manage their resource sectors for sustained economic development

considering macroeconomic indicators in the food before fuel nexus abstract a structural vector autoregression svar model along with a direct acyclic graph is employed to decompose how supply demand structural shocks affect food and fuel markets the results support the hypothesis that fundamental market forces of demand and supply are the main drivers of food price volatility increased biofuel production may cause short run food price increases but not long run price shifts decentralized freely operating markets will mitigate the persistence of any price shocks and restore prices to their long run trends the main policy implications are that oil gasoline and ethanol market shocks do not spillover into grain prices which indicates no long run food before fuel issue in the short run grain prices can spike due to market shocks so programs designed to blunt these price spikes may be warranted

working time reduction and employment experiences in europe and economic policy recommendations the paper seeks to evaluate the evidence on the employment effects of the collective working time reductions in europe over the past 20 years while theoretical analyses produce contradictory assessments most empirical studies show positive employment effects but take insufficient account of the conditions under which the reductions in working time were implemented these conditions for the success of collective working time reductions include an active training policy designed to minimise skill shortages in the labour market the modernisation of work organisation wage increases in conjunction with productivity gains and a more equal income distribution

why do energy prices matter the role of interindustry linkages in u s manufacturing there is considerable empirical evidence that energy prices had a large effect on the u s economy between world war ii and the 1980s this paper argues that linkages between manufacturing industries amplify the effect of an energy price shock and help explain the large effect in particular energy intensive industries are important input suppliers to other industries when the price of energy increases energy intensive industries contract raising materials prices for other industries because of the reduction in materials supply the downstream industries also contract which i refer to as the supply effect using data from the census of manufactures i find that the supply effect accounted for about one half of the sensitivity of value added to the price of energy i use plant level census data to show that the supply effect caused similar changes in value added per plant as in value added per industry a price increase caused a small although statistically significant decrease in entry and had no effect on exit finally the supply effect reduced plant level labor demand jel e32 q43

index investment and the financialization of commodities the authors found that concurrent with the rapidly growing index investment in commodity markets since the early 2000s prices of non energy commodity futures in the united states have become increasingly correlated with oil prices this trend has been significantly more pronounced for commodities in two popular commodity indices this finding reflects the financialization of the commodity markets and helps explain the large increase in the price volatility of non energy commodities around 2008

variance properties of solow s productivity residual and their cyclical implications abstract for the united states economy 1960 1989 the correlation between the growth rates of the solow residual and the real price of energy government spending is 0 55 0 09 this study develops a model to see if it quantitatively captures the endogenous transmission mechanism underlying the observed solow residual correlations it does the transmission mechanism depends on endogenous capital utilization incorporating shocks to true technology energy prices and government spending the model economy accounts for 76 or 89 percent of u s output volatility and is generally consistent with features of u s business cycles

intertemporal and intratemporal substitution and the speed of convergence in the neoclassical growth model abstract this paper re examines the speed of convergence in a one sector growth model under fairly general conditions with respect to both production and preferences we investigate the response of the rate of convergence to the intratemporal elasticity of substitution in production and to the intertemporal and intratemporal elasticities of substitution in consumption the speed of convergence is highly sensitive to the first two elasticities but not to the third which is reflected primarily in the agent s labor leisure choice small deviations in the elasticities from standard benchmark parameters can lead to significant variations in the rate of convergence encompassing the range of typical empirical estimates

volatility growth and welfare this paper constructs an endogenous growth model driven by self ful lling expectation shocks to explain the stylized fact that the average growth rate of gdp is related negatively to volatility and positively to capacity utilization the implied welfare gain from further stabilizing the u s economy is about a quarter of annual consumption which is consistent in order of magnitude with estimates based on the empirical studies of ramey and ramey 1995 and alvarez and jermann 2004 hence policies designed to reduce uctuations can generate large welfare gains because smaller uctuations are associated with permanently higher rates of growth

commodity storage and the market effects of biofuel policies the author 2016 legislation passed in 2007 by the u s congress increased by about 1 3 billion bushels the net amount of corn required to be processed annually into ethanol for motor fuel use we estimate that corn prices were about 30 higher from 2006 to 2014 than they would have been without this demand increase we develop a partially identified structural vector autoregression model our identification strategy is unique in the literature because it enables us to estimate the effects of transitory shocks such as weather separately from the effects of persistent shocks such as the increased ethanol mandate moreover by only partially identifying our model we show how to generate robust conclusions without strong identifying assumptions

drought ethanol and livestock abstract the 2012 drought in the u s midwest resulted in volatile crop prices with field crops constituting a major input in livestock production livestock producers sought a waiver to renewable fuel standard biofuel mandates they believed such a waiver would mitigate crop price volatility given crops are major inputs in biofuel production the u s environmental protection agency epa denied the waiver under the belief that the waiver would have minimal if any impact on mitigating price volatility employing a vecm the objective is to investigate if it was prudent for the epa to reject the waiver results generally support epa s conclusion that the waiver relaxing the biofuel mandate would have minimal impact

technology growth and the business cycle using a partial equilibrium model that allows for factor hoarding i construct series on input utilization rates for ten oecd countries these series are used in growth accounting computations of total factor productivity which filter out cyclical variations in input utilization rates the main findings are as follows i adjusted solow residuals grow consistently faster than standard measures ii the variability of the adjusted solow residual is in some cases smaller than the standard residual s iii adjusted solow residuals are less procyclical than standard residuals and fare better at usual exogeneity tests iv supply shocks are no more synchronized between european countries than elsewhere and v observed increased output synchronization in europe is due to demand factors

on the comovement of commodity prices we present strong evidence against the excess comovement hypothesis that the prices of commodities move together beyond what can be explained by fundamentals prior studies employ broad macroeconomic indicators to explain common price movements and potentially correlated fundamentals are not controlled for we use inventory and harvest data to fit a partial equilibrium model that more effectively captures the variation in individual prices the model explains the majority of the comovements among commodities with high price correlation and all of the comovements among those with marginal price correlation common movements in supply factors appear to play an important role in the observed comovements in commodity prices

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

how misleading is linearization evaluating the dynamics of the neoclassical growth model this paper investigates the reliability of employing linearization to evaluate the dynamic adjustments to changes in productive government spending in a ramsey growth model if government expenditure is introduced as a flow and the dynamic adjustment is fast linearization may yield a reasonably good approximation to the true dynamics even for fairly large policy shocks if government expenditure assumes the form of a stock leading to more sluggish adjustment linearization may yield misleading predictions these errors occur at the beginning of the transition and weigh heavily in welfare calculations the implications for temporary shocks and the speed of convergence are also considered

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

rising food prices food price volatility and social unrest can food prices cause social unrest throughout history riots have frequently broken out ostensibly as a consequence of high food prices using monthly data at the international level this article studies the impact of food prices food price levels as well as food price volatility on social unrest because food prices and social unrest are jointly determined data on natural disasters are used to identify the causal relationship flowing from food price levels to social unrest results indicate that for the period 1990 2011 food price increases have led to increases in social unrest whereas food price volatility has not been associated with increases in social unrest these results are robust to alternative definitions of social unrest to using real or nominal prices to using commodity specific price indices instead of aggregated price indices to alternative definitions of the instrumental variable to alternative definitions of volatility and to controlling for non food related social unrest

capacity utilization under increasing returns to scale abstract this paper overcomes an important objection against the empirical relevance of the benhabib farmer model as a potential account of actual business cycle fluctuations this is attributable to an elasticity effect and a returns to scale effect of capacity utilization these effects are closely related to the empirical puzzles that capital appears to play an insignificant role in explaining cyclical movements in output and that the estimated labor elasticity appears to be larger than labor s share due to these effects multiple equilibria and persistent fluctuations can easily occur in a growth model for externalities mild enough so that the aggregate labor demand curve is downward sloping analyses show that the propagation mechanism generated by capacity utilization under mild increasing returns is capable of explaining the periodic patterns of u s business cycles documented by watson journal of economic literature classification numbers e32 e22 c52

output fluctuations at the plant level this paper examines the short run dynamics of manufacturing costs by detailing how plants in the u s automobile industry change output weekly data show a variety of margins on which firms adjust production these margins which are distinct from the usual factor demand choices differ in their lumpiness their adjustment costs and their variable costs the existence of these margins explains several empirical puzzles of output fluctuations using a theory of the short run dynamic cost function we are able to infer some of the characteristics of the underlying cost function from the dynamic behavior of the different margins

peak oil profiles through the lens of a general equilibrium assessment abstract this paper disentangles the interactions between oil production profiles the dynamics of oil prices and growth trends we do so through a general equilibrium model in which peak oil endogenously emerges from the interplay between the geological technical macroeconomic and geopolitical determinants of supply and demand under non perfect expectations we analyze the macroeconomic effects of oil production profiles and demonstrate that peak oil dates that differ only slightly may lead to very different time profiles of oil prices exportation flows and economic activity we investigate middle east s trade off between different pricing trajectories in function of two alternative objectives maximisation of oil revenues or households welfare and assess its impact on oecd growth trajectories a sensitivity analysis highlights the respective roles of the amount of resources inertia on the deployment of non conventional oil and short term oil price dynamics on peak oil dates and long term oil prices it also examines the effects of these assumptions on oecd growth and middle east strategic tradeoffs

oil price uncertainty and the u s stock market analysis based on a garch in mean var model abstract this paper uses a bivariate garch in mean var model to examine the effect of oil price uncertainty on the u s real stock returns at the aggregate and sectoral levels estimation results suggest that there is no statistically significant effect of oil price volatility on the u s stock returns the absence of an uncertainty effect might be explained by the fact that companies are likely to hedge against fluctuations in oil prices it could also stem from the ability of most companies to transfer the higher cost of oil to customers moreover the impulse responses indicate that accounting for oil price uncertainty oil price increases and decreases have symmetric effects on the u s aggregate stock returns in that energy price increases and decreases are estimated to have equal and opposite effects on the u s financial market however this symmetric effect doesn t hold across all the sectors studied in this paper

estimation of the depreciation rate of physical and r d capital in the u s total manufacturing sector i introduction numerous studies on production and cost the sources of productivity and endogenous growth have recognized the pivotal role of the physical capital stock studies at various levels of aggregation over assets and industries have emphasized the crucial role of investment in plant and equipment in the growth of demand and productive capacity it is clearly recognized by economists and policymakers that knowledge capital approximated by rd 1986 to measure the depreciation rates of the stock of rd 1980 in the literature on dynamic demand models such an approach was first adopted by epstein and denny 1980 and more recently by kollintzas and choi 1985 for a single capital good and on a theoretical level in bernstein and nadiri 1987a 1987b the paper is organized as follows the specification of the model is presented in section ii section iii is devoted to a discussion of the data and to the presentation of the parameter estimates of the model in section iv we present the empirical results for the depreciation rates for physical and r d capital and compare them with those reported in the literature we compare the physical capital stock estimates generated by our model with the official capital stock estimates produced by u s department of commerce bureau of economic analysis in this section we also present our estimates of the decomposition of gross investment into replacement and expansion investment for both physical and r d capital these decompositions are important from the vantage point of public policy analysis

robustness tests of the augmented solow model this paper demonstrates some techniques for testing the robustness of cross section and panel data regressions and applies them to the influential augmented solow growth model the paper focuses on robust estimation and analysis of sensitivity to measurement error in particular it is shown that estimated technology parameters and convergence rates are highly sensitive to measurement error 1998 john wiley sons ltd

on the job learning and news driven business cycles this paper proposes a new channel of on the job learning to explain the positive comovement between consumption and employment following good news about future productivity the new recruits can generate an additional stream of output production in all future periods and the firm s labor demand is thus characterized by the forward looking property therefore the firm is motivated to hire more new recruits in advance in response to good news about future productivity once the increase in labor demand is greater than the decrease in labor supply caused by the income effect the coincident rise in consumption and employment can be driven by the news shock when such a channel is paired with investment adjustment costs and the endogenous capacity utilization rate this paper provides a plausible explanation for simultaneous booms in current consumption investment output and employment to match the empirical evidence under the news shock

factor hoarding and the propagation of business cycles shocks this paper analyzes the role of variable capital utilization rates in propagating shocks over the business cycle to this end we formulate and estimate an equilibrium business cycle model in which cyclical capital utilization rates are viewed as a form of factor hoarding we find that variable capital utilization rates substantially magnify and propagate the impact of shocks to agents environments the strength of these propagation effects is evident in the dynamic response functions of various economy wide aggregates to shocks in agents environments in the statistics that we construct to summarize the strength of the propagation mechanisms in the model and in the volatility of exogenous technology shocks needed to explain the observed variability in aggregate u s output other authors have argued that standard real business cycle rbc models fail to account for certain features of the data because they do not embody quantitatively important propagation mechanisms these features include the observed positive serial correlation in the growth rate of output the shape of the spectrum of the growth rate of real output and the correlation between the forecastable component of real output and various other economic aggregates allowing for variable capital utilization rates substantially improves the ability of the model to account for these features of the data

the effects of oil price shocks on job reallocation we investigate the effect of oil price innovations on u s manufacturing job flows using a simultaneous equation model that nests symmetric and asymmetric responses we find no evidence of asymmetry in the response of job flows to positive and negative oil price innovations we then inquire whether firms when facing positive shocks shed jobs faster than they create jobs we show that positive innovations lead to a decline in net employment and an increase in job reallocation possibly due to search and matching issues yet the latter effect becomes statistically insignificant when we control for data mining we demonstrate that the cumulative one year effect of oil price shocks on job creation and destruction was smaller during the great moderation but it was larger for gross job reallocation these variations were caused by a change in the transmission channel and not by smaller oil price shocks

the importance of transnational impacts of climate change in a power market abstract we contribute to the discussion on transnational impacts of climate change by analysing the potential cross border impacts climate change driven changes in the hydropower potential we analyse this in the context of the nordic countries where norway and sweden are likely to gain hydropower potential and finland is likely to experience transnational impacts we use an economic simulation model and a dynamic optimization model to study the impact of climate change to the production mix the price of electricity consumption of electricity and emissions from electricity production we show that climate change might reduce prices through increased renewables supply which decreases the profitability of power production the changes in the inflow profile affect the hydropower profiles over the hydrological year such that the reduced inflow peak in the spring shifts the hydropower production from spring to autumn and winter in addition the larger inflow increases the share of hydropower in production mix over the year the emissions per consumed energy unit is going to be decreased because of the decreasing share of the thermal production in the system however increased hydropower production reduces prices which in turn increases the quantity demanded this rebound effect somewhat dampens the emission reduction

stochastic depreciation and the business cycle the authors study a version of the neoclassical growth model in which shocks to both aggregate productivity and the depreciation of capital generate fluctuations around the steady state growth path depreciation shocks induce an inverse comovement between average labor productivity and hours worked when the model is calibrated to u s data it generates a correlation between productivity and hours which is significantly closer to the observed value than that of standard real business cycle models furthermore the addition of depreciation shocks does not cause a deterioration of the predictions of the model concerning other comovements copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

speculation and corn prices it is commonly asserted that speculative trading activities are largely behind the high and volatile food commodity price behaviour since 2006 in this article we revisit this hypothesis by invest

infrastructure provision and macroeconomic performance this paper studies the differences between private and government provision of infrastructure capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy a subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed the case for private provision is much stronger in economies characterized by high levels of congestion the choice between private and government provision also has a crucial effect on the design of optimal fiscal policy 2011 elsevier b v all rights reserved

monetary compensations in climate policy through the lens of a general equilibrium assessment the case of oil exporting countries this paper investigates the compensations that major oil producers have claimed for since the kyoto protocol in order to alleviate the adverse impacts of climate policy on their economies the amount of these adverse impacts is assessed through a general equilibrium model which endogenizes both the reduction of oil exportation revenues under international climate policy and the macroeconomic effect of carbon pricing on middle east s economy we show that compensating the drop of exportation revenues does not offset gdp and welfare losses because of the time profile of the general equilibrium effects when considering instead compensation based on gdp losses the effectiveness of monetary transfers proves to be drastically limited by general equilibrium effects in opened economies the main channels of this efficiency gap are investigated and its magnitude proves to be conditional upon strategic and policy choices of the middle east this leads us to suggest that other means than direct monetary compensating transfers should be discussed to engage the middle east in climate policies

how sensitive are consumer expenditures to retail energy prices abstract there is growing evidence that the primary effect of energy price shocks on the u s economy involves a reduction in consumer spending we quantify the direct effect on real consumption of unanticipated changes in discretionary income shifts in precautionary savings and changes in the operating cost of energy using durables the possibility of asymmetries in the response of real consumption to energy price shocks is also considered we demonstrate that linear models are consistent with the symmetric behavior of real consumption in 1979 when energy prices increased sharply and in 1986 when they fell sharply it is shown that historically energy price shocks have been an important factor in explaining u s real consumption growth but by no means the dominant factor

what drives commodity prices this paper examines common forces driving the prices of 51 highly tradable commodities we demonstrate that highly persistent movements of these prices are mostly due to the first common component which is closely related to the us nominal exchange rate in particular our simple factor based model outperforms the random walk model in out of sample forecast for the us exchange rate the second common factor and de factored idiosyncratic components are consistent with stationarity implying short lived deviations from the equilibrium price dynamics in concert these results provide an intriguing resolution to the apparent inconsistency arising from stable markets with nonstationary prices

cross sectional regressions and the empirics of economic growth abstract this paper provides a short survey of the recent empirical growth literature based on cross sectional analysis unlike some other analysts i argue that this literature has uncovered interesting findings that should direct theoretical research in the future

capital utilization economic growth and convergence abstract optimal decisions by economic agents regarding the utilization of capital lead to empirically plausible speeds of convergence in one sector models of economic growth the relationship between depreciation and capital utilization plays a crucial role in slowing down convergence to the steady state cross country differences in the extent to which the capital utilization decision is internalized along the transition path may lead to differences in convergence rates even for countries with similar initial and terminal conditions finally by assuming a constant depreciation rate and full capital utilization standard growth models may be overstating the magnitude of the steady state equilibrium

the economic effects of energy price shocks large fluctuations in energy prices have been a distinguishing characteristic of the u s economy since the 1970s turmoil in the middle east rising energy prices in the u s and evidence of global warming recently have reignited interest in the link between energy prices and economic performance this paper addresses a number of the key issues in this debate what are energy price shocks and where do they come from how responsive is energy demand to changes in energy prices how do consumers expenditure patterns evolve in response to energy price shocks how do energy price shocks affect u s real output inflation and stock prices why do energy price increases seem to cause recessions but energy price decreases do not seem to cause expansions why has there been a surge in the price of oil in recent years why has this new energy price shock not caused a recession so far have the effects of energy price shocks waned since the 1980s and if so why as the paper demonstrates it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets when answering these questions

reprint to infrastructure provision and macroeconomic performance abstract this paper studies the differences between private and government provision of infrastructure capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy a subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed the case for private provision is much stronger in economies characterized by high levels of congestion the choice between private and government provision also has a crucial effect on the design of optimal fiscal policy

long run and short run co movements in energy prices and the prices of agricultural feedstocks for biofuel recent expansions in biofuel production have led to concerns about an emerging new relationship between energy prices and the prices of agricultural feedstock for biofuel we provide new econometric evidence on this relationship using common trend common cycle decompositions to estimate long run and short run co movement across various energy and agricultural prices we also test for the presence of regime changes that may alter the relationship between energy and agricultural feedstock prices under certain conditions we find that co movements between energy and agricultural feedstock prices tend to dissipate in the long run which has important implications for biofuel and food policy

real time pricing in the nordic power markets abstract in this paper we study the potential effects of real time pricing rtp of electricity on the need for long run capacities in the nordic power markets a characteristic of the nordic power market is the large variety of production technologies of which hydro and nuclear power are capacity constrained we analyze the impact of rtp on the need for total peak and midmerit capacities total demand prices peak demand hours and economic welfare we have also studied whether the results of rtp are sensitive to the simultaneous implementation of tradable emission permits we find that rtp diminishes the need for total capacity even with inelastic demand our results show that even with modest assumptions related to rtp participation the annual midmerit and peaker capacity efficiency savings amount to 97 million euros which are around 6 of their total annual investment costs the price of the peak demand hour clearly diminishes as the share of the rtp customers increases or demand becomes more price elastic we compare rtp and tradable emission permits as two separate instruments in reaching energy use efficiencies and show how these two instruments must be seen as complementary and not as substitutable instruments we show how rtp and tradable emission permits have a positive correlation in promoting market access of renewable energy sources we find that welfare effects of the implementation of rtp are positive

fund flow versus flow flow in production theory reflections on georgescu roegen s contribution abstract the paper discusses nicholas georgescu roegen s contribution to production theory comparing it with the contributions of john von neumann and piero sraffa and emphasizing the problem of the choice of technique it is shown that georgescu roegen s fund flow approach in which fixed capital is taken to be an immutable agent can be misleading and cannot address issues that are easily handled by the alternative flow flow approach that reduces fixed capital to circulating within a joint products framework and allows adequate treatment of the wear and tear of machines as well as the problem of capital utilization

the transitional dynamics of fiscal policy long run capital accumulation and growth this paper analyzes the effects of fiscal policies in a non scale growing economy with public and private capital the equilibrium dynamics are characterized and we contrast the dynamic effects of government expenditure on investment and expenditure on consumption under four alternative modes of tax financing most of our attention focuses on the numerical simulations of a calibrated economy the results emphasize the lengthy transition periods which implies that policies have sizeable level effects leading to substantial welfare effects even though long run growth rates are unaffected the paper highlights the intertemporal dimensions of fiscal policy and the tradeoffs these involve for economic performance especially growth and welfare

speculation and volatility spillover in the crude oil and agricultural commodity markets a bayesian analysis this paper assesses factors that potentially influence the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets stochastic volatility models are applied to weekly crude oil corn and wheat futures prices from november 1998 to january 2009 model parameters are estimated using bayesian markov chain monte carlo methods speculation scalping and petroleum inventories are found to be important in explaining the volatility of crude oil prices several properties of crude oil price dynamics are established including mean reversion an asymmetry between returns and volatility volatility clustering and infrequent compound jumps we find evidence of volatility spillover among crude oil corn and wheat markets after the fall of 2006 this can be largely explained by tightened interdependence between crude oil and these commodity markets induced by ethanol production

segment shifts and capacity utilization in the u s automobile industry an important school of thought argues that sectoral shifts may account for a substantial portion of aggregate fluctuations e g david lilien 1982 fischer black 1987 steven davis 1987 events such as the oil shocks of the 1970 s exchange rate fluctuations and shifts in government spending have their direct effect on the composition of economic activity the sectoral shift literature argues that they may affect the level and the dynamics of output and employment as well the typical story is of a slowly functioning labor market after a sectoral shock search behavior matching problems and a time cost of switching sectors slow the reallocation of workers across sectors this focus however misses important elements of the reallocation problem as black 1987 has argued not only sector specific human capital but also complementary physical and managerial engineering organization etc capital must be reallocated or recreated in response to sectoral shocks if jobs are linked to capital then the slow adjustment of labor may be attributable in part to the sluggishness in the adjustment of capital this paper presents an empirical study of the impact of oil shock sectoral shifts within the u s automobile industry from an analytical perspective a sectoral shift is any event that raises desired output and employment in some sectors and lowers them in others for our purposes a sector is a size class of automobiles within the automobile industry we will be able to study two distinct questions first did the oil priceinduced shocks to the composition of demand interact with short run rigidities in supply to limit industry wide capacity utilization we will quantify the extent to which the changing composition of demand was reflected in a lower aggregate output level with obvious consequences for the employment of capital and of labor and for the return to firms knowledge capital our second question concerns the pace of the intermediate run adjustment to sectoral shocks how rapidly could capital and labor be reallocated to new demand conditions such considerations determine the impact of sectoral shocks on employment and capacity utilization dynamics

factor substitution and convergence speed in the neoclassical model with elastic labor supply abstract we study the link between factor substitutability and the speed of convergence in the ramsey cass koopmans model with elastic labor supply and normalized ces production if the baseline value of capital per unit of effective labor is below its steady state value an increase in the elasticity of substitution reduces the convergence speed

do oil price increases cause higher food prices us retail food price increases in recent years may seem large in nominal terms but after adjusting for inflation have been quite modest even after the change in us biofuel policies in 2006 in contrast increases in the real prices of corn soybeans wheat and rice received by us farmers have been more substantial and can be linked in part to increases in the real price of oil that link however appears largely driven by common macroeconomic determinants of the prices of oil and of agricultural commodities rather than the pass through from higher oil prices we show that there is no evidence that corn ethanol mandates have created a tight link between oil and agricultural markets moreover increases in agricultural commodity prices have contributed little to us retail food price increases because of the small cost share of agricultural products in food prices in short there is no evidence that oil price shocks have been associated with more than a negligible increase in us retail food prices in recent years nor is there evidence for the prevailing wisdom that oil price driven increases in the cost of food processing packaging transportation and distribution have been responsible for higher retail food prices similar results hold for other industrialized countries there is reason however to expect food commodity prices to be more tightly linked to retail food prices in developing countries christiane baumeister and lutz kilian

hidden regimes and the demand for carbon dioxide from motor gasoline abstract perhaps the most tactile source of anthropogenic carbon dioxide co2 emissions stem from vehicle use because consumers are well aware of their price and quantity decisions it is likely that consumer demand for co2 emissions from motor gasoline are quite responsive to the overall state of the economy using a structurally identified markov switching demand model i find that co2 emissions respond asymmetrically to changes in income and the price of gasoline in expansionary and contracting states of the economy the findings of this paper indicate that flexible policy instruments have the potential to mitigate undue burden on consumers and producers compared to their static counterparts

capital utilization and factor specificity in this study a model of firm behavior that allows the level of capital utilization to be optimally chosen by cost minimizing firms is embedded into the standard specific factors model employed in the international trade literature the resulting generalization of the specific factors model provides several new insights for instance allowing for variable utilization in either or both sectors gives rise to a greater variety of possible trade patterns than forcing utilization to remain constant similarly international differences in the willingness to work during abnormal hours generate a wider variety of trade patterns than are possible in the standard specific factors model finally this model allows a reconciliation of the dual scarcity explanation of the nineteenth century anglo american pattern of trade with the historical evidence on levels of utilization

on the utilisation controversy a rejoinder and some comments the critique by gahn and gonzalez 2019 of the conclusions in nikiforos 2016 regarding what data should be used to evaluate whether capacity utilization is endogenous to demand is weak for the following reasons i the federal reserve board frb measure of utilization is not appropriate for measuring long run variations of utilization because of the method and purpose of its construction even if its difference from the measures of the average workweek of capital aww were trivial this would still be the case if anything it would show that the aww is also an inappropriate measure ii gahn and gonzalez choose to ignore the longest available estimate of the aww produced by foss which has a clear long run trend iii their econometric results are not robust to more suitable specifications of the unit root tests under these specifications the tests overwhelmingly fail to reject the unit root hypothesis iv other estimates of the aww which were not included in nikiforos 2016 confirm these conclusions v for the comparison between the aww series and the frb series they construct variables that are not meaningful because they subtract series in different units when the comparison is done correctly the results confirm that the difference between the aww series and the frb series has a unit root vi a stationary utilization rate is not consistent with any theory of the determination of capacity utilization even if demand did not play a role there is no reason to expect that all the other factors that determine utilization would change in a fashion that would keep utilization constant