robust tests for unit roots in the foreign exchange market abstract empirical studies that have tested for unit roots in foreign exchange rate data have assumed independent and identically distributed errors in order to apply dickey fuller test procedures this assumption ignores the temporal dependence of the error sequence present in many simple efficient market tests as discussed in hansen and hodrick 1980 as well as krasker 1980 in this paper we apply unit root test statistics that allow for heterogeneously distributed and mildly dependent error processes and thus provide superior tests of the unit root hypothesis in the case of foreign exchange rates

sunspots currency substitution and inflationary finance abstract this paper explores some issues surrounding inflationary finance of government deficits in a two country world with currency substitution each country s monetary policy is assumed to be subordinate to fiscal policy private agents knowing that the monetary authorities cannot commit themselves to fixed policy rules substitute among the two monies each monetary authority is then forced to accomodate the actions of the fiscal authorities and private agents by setting monetary growth rates consistent with their decisions this framework offers some interesting insights into the behavior of nominal exchange rates and their co movements with relative money supplies and government deficits

unit roots and the real exchange rate before world war i the case of britain and the usa abstract unit root and cointegration tests indicate that the dollar pound real exchange rate was stationary during the us greenback and gold standard periods purchasing powwer parity ppp performed about equally well in the two periods and better than in recent years deviations from ppp were corrected by changes in british prices and us gold dollar prices greenback prices did not adjust the similarity of the adjustment parameters in the two periods suggests that expectations of a return to gold were embedded in the greenback price of gold

purchasing power parity and unit root tests using panel data abstract this paper reports the results of unit root tests for real exchange rates using a panel framework this panel approach provides greatly improved power compared to conventional univariate time series unit root tests we obtain evidence supporting ppp over the recent flexible exchange rate period for g 6 and oecd countries we show explicitly that failure to find such evidence in previous research was due to the low power of the tests

are real exchanges rate series really persistent evidence from three commonwealth of independent states countries this article sets out to examine the degree of persistence in the real exchange rates of kazakhstan kyrgyzstan and russia and tests the validity of purchasing power parity ppp using monthly data covering 1995 01 2013 12 period the sum of autoregressive ar coefficients is used in order to examine persistence of the real exchange rate series and grid bootstrap method is employed for the confidence intervals the tests performed suggest two results 1 covering the full sample and sub sample periods excluding kyrgyzstan in 1995 01 1998 07 and russia in 2008 09 2013 12 periods disregarding the structural breaks in the data generating process there is high persistency in real exchange rates 2 there is evidence in support of ppp covering the full sample for every country except for kyrgyzstan in 1995 01 1998 07 and russia in 2008 09 2013 12 periods

the role of business in sustainable consumption abstract this paper explores the role of the business community in promoting sustainable consumption while businesses play an important role in shaping social trends including the growth of material consumption allegations that individual corporations wield excessive power may have been overstated most of the time corporations are simply playing by the rules and culture of the market businesses have mostly assumed that their contribution to sustainability lies in improving eco efficiency staying within the current business framework but sustainable consumption will require wider change including shifts in the incentives that shape the actions of businesses and others and a change in the culture that underlies market expectations firms governments the media and civil society may need to enter a dialogue together to develop a new story about the nature of prosperity and the role of the business community in promoting it the initiative is most likely to come from civil society

mean reversion in g 10 nominal exchange rates according to conventional wisdom industrial country floating exchange rates contain unit roots sur tests on panels of monthly group of ten g 10 log nominal rates reject the null of unit roots for various samples over the current float with significance levels from 0 5 to 15 on average in out of sample forecasts mean reversion models beat random walks significantly in some forecast periods for monthly data the range of expected usd dem appreciation rates exceeds 15 per year in the mean reversion model mean reversion places strong restrictions on international models over the sample period the g 10 had to run monetary policies consistent with stable long run nominal rates

multiple cointegrating vectors and structural economic models an application to the french franc u s dollar exchange rate structural models of the exchange rate have performed very poorly for the industrialized nations during the post bretton woods period the time series behavior of exchange rates seems to conform to other asset prices in that volatility is large and short term changes seem to respond primarily to the news using the engle and granger 16 technique studies by baillie and selover 4 baillie and mcmahon 5 and kim and enders 21 among others provided evidence that there are no long run relationships between bilateral nominal exchange rates and the so called fundamentals more recently papers by baillie and pecchenino 6 and adams and chadha 1 used the maximum likelihood johansen 18 and johansen and juselius 19 method to provide evidence of cointegration between exchange rates and some of the fundamentals however none of these papers is able to validate any of the standard models of exchange rate determination our departure from the previous literature is that we develop a simple modelling strategy that is useful in the presence of multiple cointegrating vectors in our view a well specified economic model indicates the number of cointegrating vectors that exist among a set of variables moreover the presence of multiple cointegrating vectors conveys valuable information that should not be wasted we extend the suggestion of bagliano favero and muscatelli 3 and smith and hagan 26 and interpret each cointegrating vector as a behavioral or as a reduced form equation from a structural model the technique is illustrated using u s french exchange rate and money market data in doing so it is shown that it is not possible to reject a popular structural exchange rate determination model we demonstrate that in the presence of multiple cointegrating vectors the theory can guide us in identifying the behavioral equations the exactly identified long run relationships can be properly considered to be behavioral equations resulting from a structural model of exchange rate determination given that these equations represent long run properties

towards sustainable consumption and production competitive pricing of modular products for green consumers abstract concern for unsustainable development has peaked and promoting and devising sustainable production and consumption is vital therefore via an analytical model we examine the impact of modularity and consumer sensitivity to sustainability on the pricing decisions of two competing firms consider an environmentally conscious green consumer who will buy one of two available horizontally differentiated products a modular product m manufactured by firm m or a standard product s manufactured by firm s firm m can take advantage of its modular production technology and product return policy for such a consumer driven demand setting we develop a model and solve to optimality a single stage non cooperative game where both firms simultaneously set their competitive prices in addition to analytical expressions for the optimal prices and the profits for both firms we provide structural results and numerical examples to render practical insights the refund rate has a strong impact on profits sensitivity of product greenness can be increased by conscientious advertising and the reusability of modular parts encourages lower pricing and higher market share we assert that modularity is a strong concept and practice in developing sustainable products and thereby in production which in turn may enhance sustainable consumption this study s findings have direct implications for reverse supply chain management and firms should take these findings into account early in the product design phase

variance estimation for price indexes from a two stage sample with rotating panels estimation of price indexes in the united states is generally based on complex rotating panel surveys the sample for the consumer price index for example is selected in three stages geographic areas establishments and individual items with 20 of the sample being replaced by rotation each year at each period a time series of data is available for use in estimation this article examines how to best combine data for estimation of long term and short term changes and how to estimate the variances of the index estimators in the context of two stage sampling i extend the class of estimators introduced by valliant and miller of laspeyres indexes formed using sample data collected from the current period back to a previous base period linearization estimators of variance for indexes of long term and short term change are derived the theory is supported by an empirical simulation study using two stage sampling of establishments and items from a population derived from u s bureau of labor statistics

accounting for real and nominal exchange rate movements in the post bretton woods period abstract using the technique developed by blanchard and quah we decompose real and nominal exchange rate movements into the components induced by real and nominal factors nominal shocks have had a minor effect on the real and nominal bilateral exchange rates between the us and canada japan and germany there is little evidence of exchange rate overshooting real demand rather than supply shocks have been responsible for volatile exchange rate movements structural models of exchange rate determination need to consider such shocks as an important fundamental determinant

consumption sustainable welfare and human needs with reference to uk expenditure patterns between 1954 and 1994 abstract this paper explores the complex relationship between economic consumption and human welfare or well being conventional economics suggests that increasing levels of economic consumption lead to increasing levels of well being however this view has been criticised on both environmental and social grounds on the one hand the material impacts of increasing consumption are environmentally unsustainable on the other hand material consumption can conflict with crucial social and psychological components of human welfare this paper develops a perspective on human welfare which is based on max neef s characterisation of human needs it discusses the implications of this alternative perspective for the conventional viewpoint and illustrates the importance of it with reference to patterns of consumer expenditure in the uk over the last 40 years the authors suggest that from this perspective modern societies may be seriously adrift in their pursuit of human well being however they also point out that addressing this situation provides far more opportunity for ecologically sustainable development than is generally recognised

policy convergence the exchange rate mechanism and the misalignment of exchange rates some tests of purchasing power parity and generalized purchasing power parity the paper focuses on the convergence issues and the long run credibility of the european monetary system ems and more specifically on the evaluation of the effectiveness of the exchange rate mechanism erm in generating a stabilizing effect on real exchange rates across member countries for this purpose we execute some tests of long run purchasing power parity ppp for an erm group and a non erm group of countries using both the engle and granger procedure and the more powerful johansen cointegration technique we also execute a test of generalized ppp exploiting an idea developed by enders and hurn testing for ppp in a multicountry setting may be a useful methodology to identify the optimal currency area suggested by the data generation process on the basis of the reported homogeneity of real exchange rate behaviour of the countries considered

can nominal exchange rates be differenced to stationarity abstract the objective of this paper is to examine the well known assumption of difference stationarity of nominal exchange rates with the method of leybourne et al 1996 we conclude that the assumption of difference stationarity is innocuous for quarterly exchange rates but not for monthly exchange rates in fact a randomized unit root process is appropriate for monthly exchange rates these findings are important for exchange rates modeling

arbitrage cointegration and testing the unbiasedness hypothesis in financial markets we use a no arbitrage cost of carry asset pricing model to show that the existence of coin tegration between spot and forward futures prices depends on the time series properties of the cost of carry we argue that the conditions for cointegration are more likely to hold in currency markets than in commodity markets explaining many of the empirical results in the literature we also use this model to demonstrate why the forward rate forecast error the basis and the forward premium are serially correlated and to develop econometric tests ofthe unbiasedness hypothesis sometimes called the simple efficiency hypothesis in various financial markets the unbiasedness hypothesis is so prevalent in the finance liter ature that many tests for it have been developed we examine four of the common tests and and use our cointegration results to demonstrate why each of these tests should reject the null hypothesis of unbiasedness we find strong support for our hypothesis in the existing empirical literature

a superpopulation theory approach to the design of price index estimators with small sampling biases this article uses simple superpopulation models to examine estimators for long and short term laspeyres price relatives based on pps samples

aggregate price indexes cointegration and tests of the purchasing power parity hypothesis abstract in this paper i show that cointegration tests of ppp using aggregate price indexes are not always robust to changes in relative prices i offer a method of gauging the importance of these effects and find them to be unimportant in recent rejections of ppp

propensity of green consumption behaviors in representative cities in china abstract green consumption behaviors are based on consumers attitude however there is a gap between them improving green consumption attitude will to a large extent affect the acceptance of green consumption the study interviewed consumers in four representative cities in china through questionnaires which was to search for a solution that affect consumers willingness to pay for green products by employing a multivariate logistic regression furthermore an empirical analysis was made to study their green consumption behaviors it is shown that chinese consumers have already been aware of green consumption to a certain extent and that green consumption willingness is influenced by age location sources of information and a host of other factors at present nearly half of the consumers are willing to pay an extra of no more than 5 for green products which is lower than the premium price for green products relative to non green ones however the actual premium price of green products in china exceeds this level in general rendering green products a less advantageous position in markets approaches including multiple marketing channels trade in services and green branding can effectively raise consumers reserve price for green products

a class of multiplicative estimators of laspeyres price indexes publication of indexes measuring changes in prices of retail wholesale export and import items is an important part of many governmental statistics programs one form of price index that is often used is the fixed base laspeyres in which a fixed market basket of goods is priced over time this article introduces a new class of multiplicative estimators of laspeyres indexes the optimum within the class is derived for long term price change and compared with two other members of the class when used for estimating both long term and short term change theoretical properties are derived under a model in which long term relative price changes for individual items have common within stratum means and are correlated over time theory for long term and short term change estimators is tested in a simulation study in which a large number of stratified probability samples is selected from a population extracted from items priced for the u s consumer price index

the stochastic implications of rent maximization an application to stumpage rates for timber in british columbia we construct a model of rent maximizing behaviour by a single seller of timber in the absence of a formal market deriving the stochastic implications of rent maximization for timber prices stumpage rates when other input and output lumber prices are random subsequently we examine the model s ability to describe monthly time series stumpage rate data from british columbia canada between january 1979 and october 1999 deviations of stumpage rates from their long run trend are also structured by an error correction model which suggests that between 13 and 20 of period to period changes in stumpage rates can be explained by an equilibrium adjustment term copyright 2004 john wiley sons ltd

estimation of laspeyres price indexes using the prediction approach for finite population sampling estimators of chain and fixed base laspeyres price indexes are studied using the prediction approach to finite population sampling the estimators include some that are based on those used in several u s government index programs and others derived from prediction models biases and variances of the estimators are studied for a case in which the reference period index weights are unknown for nonsample items under a model for a one period price change in which items have common within stratum means unbiased estimators can be constructed but under a more general regression model special sample balance conditions are needed for unbiasedness of those estimators the theory for the estimators of fixed base indexes is illustrated in an empirical study using a population of items priced for the u s consumer price index

threshold cointegration and purchasing power parity in the pacific nations the paper uses a threshold cointegration methodology to explore the properties of long run purchasing power parity ppp in the pacific nations using japan and the usa as base countries it is shown that long run ppp holds for most asian countries but that the adjustment mechanism is asymmetric in contrast to symmetric error correction models it is found that asymmetric adjustments of nominal exchange rates play an important role in eliminating deviations from long run ppp

industrial ecology and eco industrial development a potential paradigm for local and regional development gibbs d deutz p and proctor a 2005 industrial ecology and eco industrial development a potential paradigm for local and regional development regional studies 39 171 183 increasingly concepts such as sustainable development and ecological modernization have entered into local and regional economic policies and strategies however integrating environmental and economic aims has proved difficult despite arguments that sustainability enables win win win solutions eco industrial development is a recent policy initiative that attempts to integrate economic social and environmental aims in a concrete form derived from concepts of industrial ecology eco industrial developments seek to increase business competitiveness reduce waste and pollution create jobs and improve working conditions while these initiatives are said to offer a new basis for local and regional development there has been little critical evaluation of eco industrial development

beyond the purchasing power parity testing for cointegration and causality between exchange rates prices and interest rates abstract this paper reexamines the causality between the dollar and the yen in a multivariate framework with the aid of cointegration and error correcting modeling for the 1951 94 period the phillips perron tests and johansen s tests are performed while causality from interest rates to exchange rates is found in the short run no causality between prices and exchange rates is found in the short run however causality is found running from relative prices to exchange rates along with interest rates between the u s and japan in the long run which supports the long run ppp hypothesis

purchasing power parity and real factors it is acknowledged that purchasing power parity ppp fails in empirical tests the position adopted is that real factors are an omitted variable from the ppp relationship and are the cause of divergences from ppp the real exchange rate as being determined by supply and demand shift factors as in stockman 1987 and neary 1988 is modelled we then empirically estimate a real exchange rate equation and use the fitted value as a generated regressor in tests of ppp it is demonstrated that when changes in the real exchange rate are incorporated into the ppp relationship ppp improves

price behaviour in the us sweetener market a cointegration approach the sweetener market in the united states is complicated because of the substitution possibilities between high fructose corn syrup hfcs and sugar this study focuses on the relationship between raw sugar prices and the prices for high fructose corn syrup sugar and hfcs are imperfect substitutes for several industrial uses sugar can be used for all industrial uses but hfcs has limited uses this study uses cointegration analysis to examine the relationship between sugar and hfcs prices as well as the relationship between raw and refined sugar prices over time the results indicate that sugar and hfcs prices move together for the 1983 1996 period however after this time period hfcs prices no longer follow sugar prices

cointegration and tests of purchasing power parity nonstationarity in the levels of spot exchange rates and domestic and foreign price indices makes the use of conventional tests of the absolute version of purchasing power parity ppp inappropriate if ppp is true inter country commodity arbitrage ensures that deviations from a linear combination of spot exchange rates and domestic and foreign price levels should be stationary under these conditions exchange rates and price levels should form a cointegrated system we find the null hypothesis of no cointegration cannot be rejected for all five countries thus violating the long run absolute version of ppp

real and monetary causes of real exchange rate movements in the pacific rim modem models of exchange rate determination suggest that real shocks can induce changes in the real exchange rate a real shock which is permanent can induce a permanent deviation from purchasing power parity ppp nominal shocks on the other hand can induce temporary but not permanent deviations from ppp even if money is not neutral in the short run long run money neutrality guarantees that monetary shocks of any variety have no permanent effects on the long run value of the real exchange rate for example in the well known dornbusch 4 overshooting model an increase in the money supply initially causes real and nominal exchange rate depreciation over time the real rate converges to its original level and the proportional change in the nominal rate approaches the percentage change in the money supply to date the vast majority of tests concerning ppp have been conducted for the u s european and japanese economies most of these tests are not supportive of the hypothesis for example corbae and ouliaris 1 and enders 5 use unit root and co integration tests to reject ppp for this group of nations however as shown by mussa 9 and enders 6 ppp works quite well for nations experiencing very different rates of inflation these findings are consistent with the theoretical models of the exchange rate if the industrialized nations experience permanent real shocks while the high inflation nations experience substantial monetary growth in this light it is interesting to consider behavior of the real exchange rate for the pacific rim nations these nations particularly japan and korea represent rapidly growing nations with strong trading ties to the united states and europe comparing of the behavior of the real exchange rate between japan and korea two rapidly growing nations might provide an interesting contrast to that of korea versus other pacific rim nations and korea versus the united states

understanding the empirical literature on purchasing power parity the post bretton woods era abstract this paper argues that the empirical failure of statistical tests of ppp in post bretton woods data is largely due to the low power of the tests employed this result is demonstrated using monte carlo experiments on the size and power of different testing procedures a new procedure based on horvath and watson econometric theory 11 pp 984 1014 1995 has greater power than previous approaches using the horvath watson procedure we find moderate evidence in favor of ppp in the post bretton woods era

smooth structural breaks and the stationarity of the yen real exchange rates this article examines and solves an interesting paradox in the literature that the tests for purchasing power parity ppp based on the yen real exchange rates rers refute the ppp hypothesis more often than those with other major currency based rers and the evidence is sensitive to the sample period used using a new empirical methodology accounting for both nonlinearity and multiple smooth temporary breaks in the data we show that the puzzling finding is due to the failure to take into account the long but temporary large rise and fall in the yen rers the results illustrate that the yen rers in the post bretton woods period are likely mean reverting with linear or nonlinear adjustment toward large long swing type of infrequent smooth temporary changes around constant equilibrium values supporting the validity of ppp and resolving the paradox