inflation and relative price variability in the euro area evidence from a panel threshold model the impact of inflation on relative price variability rpv generates an important channel for real effects of inflation this article provides first evidence on the empirical relation between inflation and rpv in the euro area stirred by the widespread use of inflation caps or target bands in monetary policy practice we are particularly interested in threshold effects of inflation in line with the predictions of monetary search models our results indicate that expected inflation significantly increases rpv only if inflation is either very low below 0 95 per annum p a or very high above 4 96 p a

structural breaks in the international dynamics of inflation abstract this paper proposes an iterative procedure to discriminate between structural breaks in the coefficients and the disturbance covariance matrix of a system of equations with recursive proc

accounting for a shift in term structure behavior with no arbitrage and macro finance models this paper examines a shift in the dynamics of the term structure of interest rates in the u s during the mid 1980s we document this shift using standard interest rate regressions and using dynamic a ne no arbitrage models estimated for the pre and post shift subsamples the term structure shift largely appears to be the result of changes in the pricing of risk associated with a level factor using a macro nance model we suggest a link between this shift in term structure behavior and changes in the dynamics and risk pricing of the federal reserve s in ation target as perceived by investors

emissions cap or emissions tax a multi sector business cycle analysis abstract we develop a multi sector business cycle model to analyze stochastic implications of reducing co 2 emissions with carbon permits or with carbon taxes in the presence of multiple sources of macroeconomic uncertainty the model is calibrated to reflect the u s experience as in previous studies using a single sector version of our model we find that the cap regime generates lower volatility of real variables than the tax regime but the latter may be preferable from the welfare perspective still our multi sector analysis points to the importance of the origin of the shocks in the ranking of the two instruments and to the desirability of going beyond a single sector analysis in evaluating their merits we find no significant difference between the cap and the tax regimes when shocks come from non energy sectors in contrast the cap has lower volatility but higher welfare costs than the tax for the shocks to energy production

monetary policy shifts and the stability of monetary policy models since the publication 1976 of the classic lucas critique researchers in empirical macroeconomics have endeavored to specify models that capture the underlying dynamic decision making behavior of consumers and firms who require forecasts of future events recently a number of researchers have developed simple models that have become the workhorses for monetary policy analysis the models vary considerably with regard to optimizing foundations and explicit treatment of expectations however relatively little effort has been devoted to testing the empirical importance of the lucas critique for these simple models can one find specifications that are policy invariant this paper develops and implements a set of tests for several monetary policy models used extensively in the literature in particular we attempt to test the robustness of optimizing versus nonoptimizing models to changes in the monetary policy regime we present evidence that shows that some forward looking models from the recent literat

reconsidering the relationship between inflation and relative price variability it has long been popularly believed that the relationship between inflation and relative price variability rpv is positive and stable using disaggregated cpi data for the united states and japan however this study finds that the relationship is neither linear nor stable over time the overall relationship is approximately u shaped around a nonzero threshold inflation rate rpv therefore changes not with the inflation rate per se but with the deviation of inflation from the threshold inflation rate more importantly the relationship is by no means stable over time but instead varies significantly in a way that coincides with regime changes of inflation or monetary policy the relationship was positive during the period of high inflation of the 1970s and the early 1980s as has been documented by a number of previous studies whereas it takes a u shape profile during the great moderation the results are robust to the use of core inflation which excludes the traditionally volatile prices of food and energy this paper then presents a modified version of the calvo type sticky price model to describe the observed empirical regularities simulation experiments show that the modified calvo model fits the data well and that the underlying relationship hinges upon the degree of price rigidity which is systematically related to inflation regime for countries and periods with low inflation rates the relationship takes a u shape as price adjustment is more sticky in a high inflation environment when price setting becomes more flexible the u shaped profile vanishes

the asymmetry of the new keynesian phillips curve in the euro area abstract using a two stage quantile regression framework we uncover significant asymmetries across quantiles for all coefficients in an otherwise standard new keynesian phillips curve nkpc for the euro area a pure nkpc specification accurately captures inflation dynamics at high inflation quantiles

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

climate change weather shocks and violent conflict a critical look at the evidence we use cross country data to explore whether temperature and rainfall shocks trigger violent conflict or not we include a wide range of country and time samples and explore whether the impact of weather shocks is conditional on income or political regimes our overall conclusion is sobering notwithstanding the attention this topic has attracted from the media and policy makers we find little robust evidence linking weather shocks to the onset of conflict

firm incentives to promote technological change in pollution control reply abstract the process of technological change in pollution control is broken into three basic steps innovation diffusion and optimal agency response firm incentives to promote these steps are then examined under five regulatory regimes direct controls emission subsidies emission taxes free marketable permits and auctioned marketable permits on a relative basis emission taxes and auctioned permits provide the highest firm incentives to promote technological change at times free permits generate lower incentives direct controls which are common regulatory tools usually provide the lowest relative firm incentives to promote technological change

distributive shares in the us economy 1964 2001 specifying the labour theory of value in a way that distinguishes both productive from unproductive labour and production workers from supervisory workers this paper considers distributive shares in the us economy between 1964 and 2001 trends in productive and unproductive labour are explored in full time equivalents hours and money after 1979 there was a large shift of money value not matched by a shift in either hours or employment from the wages paid to productive labour to those paid to supervisory labour since the wage share in money value added of non supervisory labour in unproductive sectors was approximately constant the 1980s and 1990s also saw the profits share squeezed by the rising wage share of supervisory workers some implications of this are explored in the construction of a class rather than a factor approach to distributive shares

does labor s share drive inflation a number of researchers have recently argued that the new keynesian phillips curve matches the empirical behavior of inflation well when the labor income share is used as a driving variable but fits poorly when deterministically detrended output is used the theoretical motivation for these results rests on the idea that the output gap the deviation between actual and potential output is better captured by the labor income share in turn implying that central banks should raise interest rates in response to increases in this variable we show that the empirical evidence generally suggests that the labor share version of the new keynesian phillips curve is a very poor model of price inflation we conclude that there is little reason to view the labor income share as a good measure of the output gap or as an appropriate variable for incorporation in a monetary policy rule

environmental policy incentives to adopt advanced abatement technology abstract we investigate incentives through environmental policy instruments to adopt advanced abatement technology first we study the case where the regulator makes long term commitments to policy levels and does not anticipate arrival of new technology we show that taxes provide stronger incentives than permits auctioned and free permits offer identical incentives and standards may give stronger incentives than permits second we investigate scenarios where the regulator anticipates new technologies we show that with taxes and permits the regulator can induce first best outcomes if he moves after firms have invested whereas this does not always hold if he moves first

instrument choice for environmental protection when technological innovation is endogenous this paper compares qualitatively and quantitatively the welfare effects of emissions taxes auctioned emissions permits and free grandfathered permits when technological innovation is endogenous we find that there is no unambiguous case for preferring any of these policy instruments the relative welfare ranking of instruments depends on the costs of innovation the extent to which innovations can be imitated the slope and level of the marginal environmental benefit function and the number of polluting firms we illustrate the types of situations when there can be significant welfare discrepancies between the policies and when there are not

a time series approach to test a change in inflation persistence the mexican experience when a central bank commits credibly to a nonaccommodative monetary policy observed inflation should be a stationary process in countries where for a variety of reasons the determinants of inflation could lead it to follow a nonstationary process the adoption of a credible disinflationary programme should therefore induce a fundamental change in the stochastic process governing inflation and in particular should diminish its persistence this article studies the time series properties of both inflation and core inflation during the 1995 2006 period for the mexican economy using recently developed techniques to detect a change in the persistence of economic time series consistently with the adoption of an inflation targeting framework the results suggest that inflation in mexico seems to have indeed switched from a nonstationary to a stationary process around the end of year 2000 or the beginning of 2001

technology distribution and the rate of profit in the us economy understanding the current crisis this paper offers a synoptic account of the state of the debate among marxist scholars regarding the current structural crisis of capitalism identifies two broad streams within the literature dealing in turn with aggregate demand and profitability problems and proceeds to concentrate on an analysis of issues surrounding the profitability problem in two steps first evidence on profitability trends for the non farm non financial corporate business the non financial corporate business and the corporate business sectors in post war usa are summarised a broad range of profit rate measures are covered and data from both the us bureau of economic analysis nipa and fixed assets tables and the federal reserve flow of funds account are used second the underlying drivers of profitability in terms of technology and distribution are investigated the profitability analysis is used to offer some hypotheses about the current structural crisis copyright oxford university press

has the economy become more predictable changes in greenbook forecast accuracy several researchers have recently documented large reductions in economic volatility but a more important question may be whether the economy has become more predictable using forecasts from the federal reserve greenbooks i find that inflation and output have become more predictable though the results for output are somewhat mixed the reductions in unpredictability if any are significantly smaller than reductions in volatility associated with this the predictable component of fluctuations in output and inflation has virtually disappeared

sectoral and aggregate inflation dynamics in the euro area this paper synthesises the implications of recent statistical evidence regarding inflation persistence in the euro area for aggregate data the degree of inflation persistence appears to be very high for sample periods spanning multiple decades but falls dramatically once we allow for time variation in the mean level of inflation furthermore the timing of these breaks in mean generally coincides with observed shifts in the monetary policy regime finally sectoral inflation series exhibit much less persistence than aggregate inflation mainly because of the influence of transitory sector specific shocks jel e31 c22 c43

does more stringent environmental regulation induce or reduce technology adoption when the rate of technology adoption is inverted u shaped abstract we show that for a broad class of technologies the relationship between policy stringency and the rate of technology adoption is inverted u shaped this happens when the marginal abatement cost mac curves of conventional and new technologies intersect which invariably occurs when emissions are proportional to output and technological progress reduces emissions per output this outcome does not result from policy failure on the contrary in social optimum the relationship between the slope of the marginal damage curve and the rate of technology adoption is also inverted u shaped under more general conditions these curves can look even more complicated e g such as inverted w shaped

the dynamics of inflation a study of a large number of countries over the last twenty years the statistical properties of inflation persistence has been the subject of intense investigation and debate without reaching a unanimous conclusion yet in this article we attempt to shed further light to this debate using a battery of econometric techniques in order to provide robust evidence on the degree of inflation persistence and whether this has changed during the period in which several countries have followed inflation targeting regimes or new monetary regimes we consider the inflation rates of thirty developed and emerging economies using quarterly data for the period 1958 to 2007 which include alternative monetary policy regimes the coefficient of the inflation parameter is estimated by ordinary least squares ols autoregressive moving average arma and autoregressive fractionally integrated moving average arfima models furthermore the grid bootstrap median unbiased mub estimator approach developed by hansen 1999 is used to estimate the finite sample ols

environmental policy and the economic downturn this paper considers how environmental policies should respond to macroeconomic downturns it first explores the implications of the global economic downturn of 2008 09 for environmental policies focusing in particular on the example of action against climate change the arguments for and against activist fiscal policies in general are then reviewed and the case made that a demand induced downturn provides a very good opportunity to undertake a necessary step change in the public spending component of environmental policies and to start working through a backlog of public investment to improve the environment fiscal policy should be used to improve the allocation of resources across time and space recent fiscal stimuli are considered in the light of this discussion it is also argued that there is little cause to delay the introduction of price signals to internalise environmental externalities but the levels at which such signals should be set requires careful analysis changes over the business cycle may be warranted depending on the nature of the environmental externality and the cause s of the business cycle in question

turnover time and the organic composition of capital this article argues that marx s key concepts of the organic and value compositions of capital depend on his concept of the turnover time of variable capital methods are given for measuring these three indicators which are applied to the us national accounts from 1947 onwards the results show unambiguous tendencies for the organic and value compositions of capital to rise and for the turnover time of variable capital to fall this is consistent with marx s predictions in capital and his explanation for the tendency of the rate of profit to fall

the persistence of inflation in the united states abstract has the persistence of inflation in the united states changed since 1965 we estimate the persistence of inflation over time using different measures and estimation procedures and we produce confidence intervals for our estimates as well as formal tests of unchanged persistence we find that inflation persistence has been high and approximately unchanged in the u s over our sample period we reconcile our results with other studies that reached different conclusions

modeling inflation dynamics a critical review of recent research in recent years a broad academic consensus has arisen around the use of rational expectations sticky price models to capture inflation dynamics these models are seen as providing an empirically reasonable characterization of observed inflation behavior once suitable measures of the output gap are chosen and moreover are perceived to be robust to the lucas critique in a way that earlier econometric models of inflation are not we review the principal conclusions of this literature concerning 1 the ability of these models to fit the data 2 the importance of rational forward looking expectations in price setting and 3 the appropriate measure of inflationary pressures we argue that existing rational expectations sticky price models fail to provide a useful empirical description of the inflation process especially relative to traditional econometric phillips curves of the sort commonly employed for policy analysis

inflation dynamics in the u s global but not local mean reversion a stylized fact of u s inflation dynamics is one of extreme persistence and possible unit root behavior if so the implications for macroeconomics and monetary policy are somewhat unpalatable our econometric analysis proposes a parsimonious univariate representation of the inflation process for the last 60 years the nonlinear exponential smooth autoregressive the empirical results confirm a number of the key features such as global stationarity local unit root behavior and lower persistence in the post 1983 period than in the pre 1983 period we compare the forecasting ability of our model with that of competing univariate models and find that the nonlinear model outperforms the linear autoregressive model in the pre 1983 period and the random walk in the post 1983 period at short horizons

consistent climate policies what are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies we show that with time declining discounting the delay and persistence of climate impacts provide a commitment device to policy makers we quantify the commitment value in a climate economy model by solving time consistent markov equilibrium capital and emission taxes explicitly the returns on capital and climate investments are no longer equal leading to a large increase in the emission tax compared to a benchmark with equalized returns the commitment value increases the tax by a factor of 20 in our quantitative assessment

price stickiness and sectoral inflation persistence additional evidence in this paper using u s as well as french sectoral data and indicators of price rigidity we reexamine the lack of relation between price stickiness and inflation persistence this has recently been put forward by bils and klenow 2004 as evidence against time dependent price setting models we obtain that when filtering out sector specific shocks along the lines of boivin giannoni and mihov 2009 and allowing for an alternative assumption on the marginal cost process the case against the time dependent calvo model is substantially weakened

new keynesian economics and the phillips curve models with sticky prices are an important part of new keynesian economics the author shows that several of the new keynesian models imply a formulation that is similar to the expectations augmented phillips curve of milton friedman and edmund phelps he then presents new estimates of the new keynesian phillips curve the author uses two proxies for price expectations survey based measures and an econometric based measure originally developed by bennett mccallum 1976 overall the results are consistent with the model but the survey based results are more precise suggesting that the surveys may be better measures of actual expectations copyright 1995 by ohio state university press

optimal taxes on fossil fuel in general equilibrium we analyze a dynamic stochastic general equilibrium dsge model with an externality through climate change from using fossil energy our central result is a simple formula for the marginal externality damage of emissions or equivalently for the optimal carbon tax this formula which holds under quite plausible assumptions reveals that the damage is proportional to current gdp with the proportion depending only on three factors i discounting ii the expected damage elasticity how many percent of the output flow is lost from an extra unit of carbon in the atmosphere and iii the structure of carbon depreciation in the atmosphere thus the stochastic values of future output consumption and the atmospheric co2 concentration as well as the paths of technology whether endogenous or exogenous and population and so on all disappear from the formula we find that the optimal tax should be a bit higher than the median or most well known estimates in the literature we also formulate a parsimonious yet comprehensive and easily solved model allowing us to compute the optimal and market paths for the use of different sources of energy and the corresponding climate change we find coal rather than oil to be the main threat to economic welfare largely due to its abundance we also find that the costs of inaction are particularly sensitive to the assumptions regarding the substitutability of different energy sources and technological progress

a paler shade of green environmental policy under induced technical change conventional wisdom argues that environmental policy is less costly if it induces the development of cleaner technologies in contrast to this argument we show that once the second best nature of actual economies is taken into account the cost of environmental policy may well be larger with induced technical change itc than without thus itc may lower both the emissions reductions and the welfare gains associated with environmental policy in an endogenous policy framework itc may reduce the desired stringency of the policy

taking time for the environment on timing and the role of delays in environmental and resource economics ecosystem transformation and climate change evolve over long time scales the effects of the economic decisions on the natural environment are also of a long run character because they relate to investment decisions and capital stocks at the same time the economy is short sighted and subject to different kinds of market failures the time it takes to notice the changes and adequately address the associated problems affects the dynamics and inertia of the process we discuss some recent contributions and new research questions that deal with time and timing in environmental and resource economics

volatility and growth credit constraints and the composition of investment abstract how does uncertainty and credit constraints affect the cyclical composition of investment and thereby volatility and growth this paper addresses this question within a model where firms engage in two types of investment a short term one and a long term one which contributes more to productivity growth because it takes longer to complete long term investment has a relatively less cyclical return but it also has a higher liquidity risk the first effect ensures that the share of long term investment to total investment is countercyclical when financial markets are perfect the second implies that this share may turn procyclical when firms face tight credit constraints a novel propagation mechanism thus emerges through its effect on the cyclical composition of investment tighter credit can lead to both higher volatility and lower mean growth evidence from a panel of countries provides support for the model s key predictions

firm incentives to promote technological change in pollution control comment following on from an analysis by milliman and prince this article considers further the relative incentives for technical change provided by different pollution control instruments the comments involve the recognition that emission targets are typically chosen fairly arbitrarily because of regulators lack of knowledge of abatement cost schedules there is also a more detailed discussion of the practicability of auctioning emissions permits as these have been less thoroughly covered in the literature than the other instruments

dynamic persistence of primary commodity prices this article examines the persistence of shocks to international commodity prices from 1900 to 2008 using the updated grilli yang index the main innovation of this study is that it determines whether commodity prices are characterized by multiple changes in persistence specifically bootstrap methods are used to estimate persistence and the associated half life shocks are calculated we find that the persistence of shocks can vary widely depending on the individual commodity and the time period the results suggest that policy makers need to exercise caution when introducing measures to cushion the effect of shocks to world commodity prices

staggered price contracts and inflation persistence some general results despite their popularity as theoretical tools for illustrating the effects of nominal rigidities some have questioned whether models based on staggered price contracts with rational expectations can match the persistence of the empirical inflation process this article presents some general results about this class of models it is shown that these models do not have a problem matching high autocorrelations for inflation however they fail to explain a key feature of reducedform phillips curve regressions the positive dependence of inflation on its own lags it is shown that staggered price contracting models instead predict that the coefficients on these lag terms should be negative

emissions targets and the real business cycle intensity targets versus caps or taxes for reducing greenhouse gas emissions intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps for the same expected emissions however the economic responses to unexpected productivity shocks differ using a real business cycle model we find that a cap dampens the effects of productivity shocks in the economy on all variables except for the shadow value of the emissions constraint an emissions tax leads to the same expected outcomes as a cap but with greater volatility certainty equivalent intensity targets maintain higher levels of labor capital and output than other policies with lower expected costs and no more volatility than with no policy

pollution permits and compliance strategies abstract this paper analyzes the impact of spot and futures markets for tradeable pollution permits on the potential polluters compliance decisions polluters can buy permits invest in pollution abatement or else stop production or source out we show that stand alone spot markets induce excessive investment the introduction of a futures market reduces this incentive to invest but is not the optimal way to control pollution a menu of options on pollution rights possibly coupled with intertemporally bundled sales yields higher welfare because of its focus on long run demand elasticities and rent extraction this paper can be applied to a variety of situations such as demand side management public transportation bypass in telecommunications or forward sales by a private monopolist

optimal monetary policy under learning and structural uncertainty in a new keynesian model with a cost channel and inflation inertia abstract we investigate whether expectations based optimal monetary policy rules under discretion and under commitment can enforce a determinate and least squares learnable rational expectations equilibrium ree in a new keynesian model with inflation inertia and a cost channel of monetary policy transmission our numerical results show that commitment rules can enforce a determinate and learnable ree for all parameter constellations considered whereas discretionary rules are not always able to enforce the same desirable outcome in the economy we also examine different types of misapprehensions in policy making and find that an incorrect assessment of the economy s true structure by the central bank greatly affects its capability to enforce a determinate and learnable although suboptimal ree thus our numerical results highlight the relevance of this type of analysis for the design and conduct of monetary policy

does a recession call for less stringent environmental policy a partial equilibrium second best analysis this paper analyses second best optimal environmental policy responses to real and financial shocks in a two period partial equilibrium model with heterogeneous firms an environmental externality and credit constraints we show that to alleviate credit constraints and encourage investment the second best optimal emission tax falls short of marginal emission damages the optimal response to shocks depends on how the shock affects the size of the environmental and credit market failures and the effectiveness of the tax in alleviating these market failures under mildly restrictive assumptions on functional forms the optimal response to a persistent negative productivity shock or a tightening of credit is to reduce the emission tax our results are informative for how climate change policy should optimally change with the business cycle

incentives for advanced pollution abatement technology at the industry level an evaluation of policy alternatives abstract in this research we evaluate the incentive effects of five environmental policy instruments to promote the development and adoption of advanced pollution abatement technology in a heterogenous industry from most to least incentive the policy instruments can be rank ordered as follows i auctioned permits ii emissions taxes and subsidies iii issued marketable permits iv performance standards including performance standards in this list necessitates the assumption that they are differentiated between heterogeneous firms before the technology adoption in a way which replicates the initial emissions control distribution of the efficient incentive based instruments with the starting point normalized in this fashion the instrument rankings are invariant with respect to the size of firms the size of the industry or the industry s abatement cost structure

optimal pollution standards and non compliance in a dynamic framework in this paper we present a stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime at each time the firm settles emissions taking into account the fine for non compliance with the pollution limit and balances current costs of investments in a capital stock which allows for future emission reductions we derive two main results first we show that the optimal pollution limit decreases as the capital stock increases while both emissions and the level of non compliance decrease second we find that offering fine discounts in exchange for firm s capital investment is socially desirable we numerically obtain the optimal value of such discount which crucially depends on the severity of the fine in the limiting scenario with a very large severity of the fine the optimal discount implies that no penalties are levied since the firm shows adequate adaptation progress through capital investment

has euro area inflation persistence changed over time this paper analyzes the stability over time of the econometric process for euro area inflation since 1970 focusing in particular on the behavior of the so called persistence parameter the sum of the coefficients on the lagged dependent variables perhaps surprisingly in light of the lucas critique our principal finding is that there appears to be relatively little instability in the parameters of the euro area inflation process full sample estimates of the persistence parameter are generally close to 1 and we fail to reject the hypothesis that this parameter has been stable over time we discuss how these results provide some indirect evidence against rational expectations models with strong forward looking elements such as the new keynesian phillips curve

markets and regulatory hold up problems abstract many regulatory programs such as environmental regulation are effective only if firms make irreversible investments that reduce the cost of compliance a firm potentially subject to regulation may therefore behave strategically by not investing thereby forcing the regulator to void the proposed regulation we show that such incentives which resemble a hold up problem may not be overcome when government s only tool is the imposition of an emissions tax the hold up problem can be overcome by the issuance of tradeable permits a time consistent equilibrium exists with all firms investing and the government imposing regulations even if no permits are traded and their market price is low indeed an observation of no trade may indicate that pollution abatement is great

innovation in pollution control comparisons of the various institutional arrangements for controlling pollutant emissions from individual sources effluent fees effluent control subsidies marketable permits and direct command and control regulation have usually focused on their static efficiency properties and institutional feasibility e g dales 1968 zerbe 1970 baumol and oates 1975 kneese and schultze 1975 marin 1978 mills and white 1978 spence and weitzman 1978 russell 1979 a relatively neglected area has been the study of how each arrangement influences innovation in pollution control a few studies e g kneese and schultze 1975 marin 1978 mills and white 1978 russell 1979 have casually claimed that the control methods that rely on economic incentives provide superior incentives for innovation but there have been few systematic studies of the question this paper provides a simple model of pollution control innovation by a profitmaximizing polluter who is subject to the various control methods the consequences of the methods will be explored in three major contexts first we assume that the polluter and the innovation is a small enough part of the overall pollution problem so that none of the important marginal conditions are changed by the innovation second we assume that the polluter and the innovation are important enough so that marginal conditions are changed by the innovations but that the governmental authority determining pollution control incentives or levels fails to make the appropriate adjustments third we again assume that the innovation causes marginal conditions to change but in this case the governmental authority makes the appropriate adjustments we use the term ratcheting to describe this last phenomenon in all cases we assume that the innovating polluter correctly predicts the reactions of the governmental authority and bases his innovation decisions on that prediction a profit maximizing entrepreneur would normally be expected to adopt any innovation that promised gains present discounted value to him in excess of initial

does host market regulation induce cross border environmental innovation this paper evaluates the effect of host country environmental policy stringency on the offshoring of environmental patents for 2000 top world r d performers it is shown that a more stringent environmental regulation triggers both the extensive and intensive margin of patent offshoring in the field of environmental technologies results are robust to various different specifications alternative definitions of innovation offshoring and of regulation restrictions and to the consideration of possible endogeneity of regulation it is suggested inter alia that r d subsidies and non market based regulatory measures are more important than market based instruments as drivers of cross border environmental innovation length 26 pages

environmental policy reconsidered the role of technological innovation abstract this paper discusses recent environmental policy wisdom in the light of technological and organizational innovation starting from empirical evidence it argues that the main econometric models which are used in environmental policy analysis do not consider properly the determinants and effects of innovation and offer unreliable estimates of policy effects some solutions to the latter problem show that the integration between environmental policy and industrial policy can be more efficient than traditional environmental policies in the protection of the environment technological cooperation moreover can be an important instrument to stabilize international environmental agreements

do economic conditions influence environmental policy evidence from the us senate abstract this paper investigates whether economic conditions influence environmental policy by examining how policymakers voting on environmental legislation respond to changes in their state s unemployment rate the outcome of interest is a us senator s league of conservation voters score which reflects how often a senator voted for the environmentally favorable outcome on bills related to the environment in a given year i find evidence that a higher unemployment rate is associated with reduced support for environmentally favorable policies and that the estimated response is largest for republicans counterfactual estimates indicate that if each state had experienced its lowest observed unemployment rate throughout the sample then the proportion of votes taking the environmentally favorable outcome would have increased from 36 to 41

new tests of the new keynesian phillips curve abstract lagged dependent variables typically play an important role in empirical models of inflation do these lags reflect backward looking inflation expectations or do they proxy for rational forward looking expectations as in the new keynesian phillips curve gali and gertler 1999 inflation dynamics a structural econometric analysis journal of monetary economics 44 195 222 attempt to answer this question using gmm to estimate specifications incorporating both lagged and future inflation they report small coefficients on lagged inflation and conclude that the new keynesian model provides a good first approximation to inflation dynamics we show that these tests have low power against alternative backward looking specifications and demonstrate that their results are also consistent with a backward looking phillips curve using an alternative approach we find that the new keynesian pricing model cannot explain the importance of lagged inflation in standard inflation regressions and find that forward looking terms play a very limited role in explaining inflation dynamics

realization and accumulation in a marxian model of the circuit of capital abstract a mathematical model of marx s circuit of capital is presented whose elements the composition of capital the rate of surplus value the rate of capitalization of surplus value and production sales and financial time lags are measurable from the accounts of capitalist firms the model is solved for exponential paths a solution with a positive rate of accumulation generally exists on paths with positive rates of accumulation and positive time lags in the recommital of realized value to production an expansion of credit is required to permit the sale of commodities a model of demand pull inflation is incorporated in the framework

search frictions real rigidities and inflation dynamics the standard new keynesian model suffers from the so called macro micro pricing conflict in order to match the dynamics of inflation implied by macroeconomic data the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data here i show how departing from the standard model s assumption of a perfectly competitive labor market can help resolve the pricing conflict i do so by assuming search frictions in the labor market in this framework labor becomes firm specific and marginal cost curves become upward sloping this mechanism reduces the slope of the new keynesian phillips curve given a frequency of price adjustment conversely given an estimate of this slope my model implies shorter price durations than the standard model for a plausible calibration and for different slope values my model consistently delivers price durations that are roughly half of those implied by the standard model

assessing the lucas critique in monetary policy models empirical estimates of monetary policy rules suggest that the behavior of u s monetary policymakers changed during the past few decades however for that same time period statistical analyses of lagged representations of the economy such as vars often have not rejected the null of structural stability these two sets of empirical results appear to contradict the lucas critique this paper reconciles these results with the lucas critique by showing that the apparent policy invariance of reduced forms is consistent with the magnitude of historical policy shifts and the relative insensitivity of the reduced forms of plausible forward looking macroeconomic specifications to policy shifts

the merits of new pollutants and how to get them when patents are granted the performance of market based environmental regulation is affected by patents and vice versa this interaction is studied for a type of innovation where a new technology reduces emissions of a specific pollutant but at the same time causes a new type of damage if the new pollutant associated with this technology is sufficiently different from existing ones such that marginal damage is increasing in each of them but additive across pollutants a diversification of the pollution portfolio is socially desirable in a situation where the incentives to develop such a technology are created by patents the efficiency of permits is affected by monopoly pricing of the patent holding firm this result carries over to other types of innovation the performance of taxes is limited by either the inability to implement specific pollution mixes or monopoly pricing for constant returns to scale at the industry level the combined use of taxes and permits ensures the first best mix of technologies and provides positive research incentives