financial firm production of monetary services a generalized symmetric baroett variable profit function approach an alternative monetary production model of financial firms is employed to investigate supply side monetary aggregation financial firms are conceived to produce monetary services as outputs through financial intermediation a new method for testing the existence of consistent monetary output aggregates in financial firms production technology is developed in terms of a multiproduct firm s variable profit function and the method does not require homotheticity of the aggregator function we use a generalized symmetric barnett flexible functional form that specification satisfies global curvature conditions and retains its flexibility under the null hypothesis of weak separability neither of those properties is possessed by other flexible functional forms

the empirical relationship between money prices and income revisited this article investigates the relationship between sum divisia and monetary velocity money prices and income using the notion of granger 1969 causality this is achieved by evaluating empirically using dickey fuller unit root tests whether the macroeconomic time series under consideration are trend stationary or difference stationary and by conducting tests using three different ad hoc lag lengths 8 6 and 4 quarters as well as a statistically determined using akaike s 1969a b final prediction error criterion lag structure

an admissible monetary aggregate for the united kingdom this paper evaluates the performance of a monetary aggregate that is constructed from principles of economic and index number theory results from tests for weak separability indicate that wholesale deposits should not be aggregated with other u k financial assets they currently are included however in broad monetary aggregates published by the bank of england financial asset groupings passing the weak separability tests then were aggregated using both simple sum and divisia weights in each case the divisia aggregates were more closely related to the growth of nominal gdp and had stable demand for money functions copyright 1991 by mit press

the origins and dynamics of production networks in silicon valley abstract computer systems firms in silicon valley are responding to rising costs of product development shorter product cycles and rapid technological change by focusing and building partnerships with suppliers both within and outside of the region well known firms like hewlett packard and apple computers and lesser known ones like silicon graphics and pyramid technology are organized to combine the components and sub systems made by specialist suppliers into new computer systems as these firms collaborate to both define and manufacture new systems they are institutionalizing their capacity to learn from one another three cases a contract manufacturer a silicon foundry and the joint development of a microprocessor illustrate how inter firm networks help account for the sustained technological dynamism of the regional economy

a semi nonparametric approach to the demand for uk monetary assets we estimate an asymptotically ideal model of the demand for uk personal sector monetary assets we use data that are consistent with utility maximizing behaviour and find that uk monetary assets are generally substitutes in use the estimated elasticities of substitution during the 1980s and the early 1990s indicate that a relatively broad monetary aggregate should be used in economic studies the results also suggest that any policy based on interest or user cost elasticities of substitution between financial assets should be based on the morishima elasticities as the allen uzawa calculation can give misleading results

the demand for m1 in the u s a 1960 1988 estimated u s m1 demand functions appear unstable regularly breaking down over 1960 1988 e g missing money great velocity decline m1 explosion we propose a money demand function whose arguments include inflation real income long term bond yield and risk t bill interest rates and learning curve weighted yields on newly introduced instruments in m1 and non transactions m2 the model is estimated in dynamic error correction form it is constant and with an equation standard error of 0 4 variance dominates most previous models estimating alternative specifications explains earlier breakdowns showing the model s distinctive features to be important in accounting for the data

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

australasian money demand stability application of structural break tests estimates of the demand for money provide important foundations for monetary policy setting but if the estimation technique does not explicitly account for structural changes then such estimates will be biased this paper presents an investigation into the level and stability of money demand m1 for australia and new zealand over the 1960 2009 period and demonstrates that both countries experienced regime shifts australia also experienced an intercept shift application of four time series methods provide consistent results with 1984 and 1998 break dates cusum and cusumsq stability tests reveal that m1 demand functions were unstable over the 1984 to 1998 period for both countries although tests for stability are not rejected thereafter

a systemic approach to modelling and estimating demand for money ies this article uses a consumer theory based systemic approach to model the demand for monetary liquid asset holdings in chile we implement the suggestions and caveats of aggregation theory for the estimation of a demand system for liquid assets monies in static dynamic and time varying parameters setups our results are robust and theoretically consistent with consumer theory restrictions as a system derived from a utility maximizing framework and a quasi concave utility function in our estimations we find stability of interest rate elasticities in contrast to previous related literature we also document evidence that long short maturity rates are associated to less more liquid assets

financial innovation new assets and the behavior of money demand abstract two fundamental changes in us banking regulations have affected the behavior of money demand m1 the first authorized checkable deposit accounts paying explicit interest rates the second allowed these rates to be market determined the theoretical literature does not directly address the impact of these events suggesting that they are primarily an empirical issue however the empirical literature has yet to agree on the impact of financial innovation on money demand for example several studies report an increase in the elasticity of money demand several others report a decline this paper uses a lancaster type choice model to analyze formally the expected impact of these two changes on the demand for money the model derives specific conditions under which i the demand for money increases as new assets are introduced and ii the impact of either the introduction of new assets or the elimination of interest rate restrictions on the elasticity of money demand

measuring substitution in monetary asset demand systems the allen elasticity of substitution aes is widely used to study monetary asset substitution and structural demand stability blackorby and russell showed that the aes is uninformative and that the morishima elasticity of substitution mes is the appropriate measure a point overlooked in the monetary literature use of improper measures can lead to incorrect inferences this article considers five alternative measures of substitution the aes the mes the hicksian and marshallian elasticities of demand and mundlak s unencountered but appealing constant cost elasticity of substitution selection of the substitution measure appropriate to respective research questions is addressed

testing the validity of the feldstein horioka puzzle for australia this article presents the details of an investigation into the relationship between investment and savings in australia over the period 1960 to 2007 using five time series techniques our results reveal that the feldstein horioka puzzle exists in a weak form with a lower saving retention coefficient granger causality tests illustrate that savings granger causes investment both in the short and long runs our results suggest australia could effectively adopt policies that focus on increasing investment through increasing domestic savings

the stability of long run money demand in five industrial countries abstract this study provides strong evidence for the stability of long run demand functions for narrowly defined money m1 in five industrial countries u s japan canada u k and west germany using post war quarterly data evidence of stability is examined using two different estimation techniques and through a formal test of parameter constancy designed specifically for cointegrating vectors in the majority of these countries the key to stability is the imposition of a unitary long run income elasticity that is rarely rejected by the data

a divisia system approach to modelling monetary aggregates abstract a complete system of divisia partial adjustment asset equations based on the augmented price expectations baumol tobin inventory and transactions postulates is used to study the dynamic behaviour of monetary aggregates and their components in australia during 1969 iii to 1983 iv the system provides a new and useful approach to modelling demand for money functions for effective monetary policy controls and targetting

the demand for m3 in the euro area in this paper an empirically stable money demand model for m3 in the euro area is constructed starting with a multivariate system three cointegrating relationships with economic content are found i the spread between the long term and the short term nominal interest rates ii the long term real interest rate and iii a long run demand for broad money m3 there is evidence that the determinants of m3 money demand are weakly exogenous with respect to the long run parameters hence following a general to specific modelling approach a parsimonious conditional error correction model for m3 money demand is derived which can be interpreted economically for the conditional model long run and short run parameter stability is extensively tested and not rejected copyright 2001 john wiley sons ltd

nonparametric tests of utility maximization and weak separability for consumption leisure and money some of the most fundamental assumptions of economics are utility maximization and weak separability of the arguments in the represen tative consumer s utility function this paper contains results from nonparametric tests of these assumptions about consumer behavior the authors find that quarterly per capita data on consumption goods le isure and monetary assets are consistent with utility maximization further consumption goods and leisure meet necessary and sufficient conditions for weak separability additionally one grouping of relat ively liquid monetary assets meets the necessary conditions for weak separability they also test and find no evidence of homothetic prefe rences copyright 1987 by mit press

the application of neural networks to the divisia index debate evidence from three countries if monetary policy is to be effective in controlling the macroeconomy accurate measurement of the money supply is essential the conventional way of measuring the level of the money supply is to simply sum the constituent liquid liabilities of banks however a more sophisticated weighted monetary index has been proposed to take account of the varying degrees of liquidity of the short term instruments included in money inferences about the effects of money on economic activity may depend importantly on the choice of monetary index because simple sum aggregates cannot internalize pure substitution effects this hypothesis is investigated in the current paper a divisia index measure of money is constructed for the usa uk and italian economies and its inflation forecasting potential is compared with that of its simple sum counterpart in each of the three countries the powerful artificial intelligence technique of neural networks is used to allow a completely flexible mapping of the variables and a grea

one divisia money for europe in 1992 the eu monetary authorities adopted a harmonized broad money aggregate the emi was subsequently established to promote monetary policy coordination this paper considers how broad money aggregates might be used to guide eu monetary policy and whether a euro divisia monetary index might provide a better guide than a euro simple sum aggregate our findings are based on data from the uk france and germany they indicate that euromoney granger causes europrices and that the eurodivisia monetary index is a better leading indicator of euroinflation than the euro simple sum monetary aggregate

foreign aid and the question of fungibility this paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them contrary to the wishes of donors it also considers whether aid reduces the tax effort of recipient governments econometric results are presented for the dominican republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors an attempt is made to account for the observed differences in behavior of individual countries in altering expenditures copyright 1993 by mit press

the fungibility of u s military and non military assistance and the impacts on expenditures of major aid recipients abstract this paper examines the impact of u s military and non military assistance on the allocation of public and private sector spending for eight major recipients over the 1972 1987 period the model assumes that an aid recipient s effective post assistance budget constraint is a priori unknown and must be estimated two versions of the model are tested in version a the data is converted into real u s dollars using official exchange rates in version b the data is converted using purchasing power parity exchange rates provided by summers and heston 1991 major findings are the same for both versions u s aid is highly fungible with a significant portion channeled to the private sector where it finances current consumption relatively more than investment

does money matter in the euro area evidence from a new divisia index we create a euro area divisia money dataset and estimate theoretically correct responses to money user cost and interest rate shocks using structural vector autoregressions our findings suggest that money matters for output prices and interest rates while the european central bank can influence monetary developments

the changing empirical definition of money some estimates from a model of the demand for money substitutes interest bearing checkable deposits are examined to test whether they should be included in measures of the u s money stock both divisia and traditional simple sum aggregates are constructed on the basis of tests for weak separability in a model of the demand for financial assets using nonparametric demand analysis we find that several groups of assets are compatible with aggregation theory we find empirical support for a narrow measure consisting of the components of current mia in tests based on a st louis equation and in terms of controllability a divisia aggregate performs better than the simple sum mia measure

a brain gain with a brain drain abstract we study human capital depletion and formation in an economy open to out migration as opposed to an economy which is closed under the assumption of asymmetric information the enlarged opportunities and the associated different structure of incentives can give rise to a brain gain in conjunction with a brain drain migration by high skill members of its workforce notwithstanding the home country can end up with a higher average level of human capital per worker

locational patterns and dynamics of industrial activity in the modern metropolis this paper attempts to review and re structure a mass of published ideas on the geography of industrial activity in the modern metropolis the argument proceeds in a series of stages first some basic locational factors in the city are examined second a critical discussion of the literature on economies of agglomeration and scale in cities is undertaken third a brief description of manufacturing activity in nineteenth century cities is provided by way of motivating and orientating the succeeding discussion fourth the phenomenon of industrial decentralisation in twentieth century cities is described fifth an attempt is made to construct a composite theory of intra metropolitan industrial location on the basis of the historical process of the substitution of capital for labour in capitalist commodity production sixth a schematic re statement of the theory is presented and its implications for the spatial cum organisational evolution of modern industry are elucidated seventh some of the main po

structural changes and the us money demand function previous literature on the stability of the us money demand function suggests mixed results in this article we study the stability of the money demand function from the standpoint of structural changes in the function we first investigate if a stable money demand function can be found for the us for the period from the first quarter of 1959 to the fourth quarter of 2000 the results show that a stable long run money demand function does not exist for the sample period under consideration we then estimate unknown structural break points in the variables of the money demand function using bai and perron s 1998 method and test if there is a stable relationship in each sub sample period of the break points the results show that a stable relationship exists for each sub sample period the estimated income elasticity and interest rate semi elasticity are relatively smaller than ball s 2001 estimates but consistent with his argument

rethinking the economics of location and agglomeration fundamental problems exist with the classical characterisation of agglomeration economies since such definitions do not reflect the various cost issues on which firms may wish to economise a lack of understanding of the relationship between the notions of market hierarchies and locational behaviour leads to confusion not only in applied economic interpretation but more fundamentally in the construction of theoretical location models in particular neo classical location theory can be shown to be crucially flawed as a basis for spatial analysis this paper therefore attempts to provide an alternative definition of the various types of agglomeration economies such that the various strands of economic theory might be used in a more rigorous manner in the discussion of spatial increasing returns

the short run demand for transactions balances in australia a characteristic of much research in monetary economics in the last few years has been a preoccupation with the stability of the demand for money function as failure of stability undermines some of the central features of monetarism a recent summing up of this research has been that authors in various countries report that money demand equations estimated in the conventional way have broken down in recent times jonson 1978 p 29 with the evidence cited being adams and porter 1976 for australia artis and lewis 1979 for the united kingdom and goldfeld 1976 and enzler et al 1976 for the united states doubt must now exist about the validity of such a conclusion for the united kingdom as a result of studies by hendry 1980 and hendry and mizon 1978 and the proposition for the united states still seems an open question see laidler 1980 for a survey for australia however the above quotation seems to be the conventional wisdom with laidler citing australian experience as an example of instability in conventionally estimated demand functions and davis and lewis 1978 in their survey of australian monetary economics stating

semi non parametric estimates of substitution for canadian monetary assets we estimate the dynamic fourier expenditure system to obtain consistent estimates of short run and long run morishima elasticities of substitution for canadian liquid assets we argue that the variability of the estimated elasticities and evidence of less than perfect substitution between monetary assets interferes with the successful use of simple sum aggre gates and traditional log linear money demand functions

wagner s law revisited cointegration and causality tests for new zealand wagner s law states that the share of government expenditure in gross national product gnp will increase with economic development many associated empirical studies substitute gnp with gross domestic product gdp this article presents an empirical investigation into the validity of wagner s law for new zealand over the period 1960 to 2007 and compares the results obtained using these two measures of output application of the autoregressive distributed lag ardl bounds test suggests a cointegrating relationship between either output measure and the share of government spending and further application of general to specific gets engle and granger eg phillip hansen s fully modified ordinary least squares fmols and johansen s time series techniques illustrate statistical robustness and an income elasticity between 0 56 and 0 84 the results suggest that output measures granger cause the share of government expenditure in the long run thereby providing support for wagner s law and these resul

long run income and interest elasticities of money demand in the united states econometric techniques designed to accommodate nonstationary data are used to reexamine the stability of interest and income elasticities of money demand in the united states estimates based on postwar monthly data reveal a stable relationship between m1 velocity and various measures of interest rates that proxy the opportunity cost of holding money balances tests for the existence of cointegration and methods used to estimate the income and interest elasticities are based on procedures prescribed by soren johansen 1988 corresponding error correction estimates offer insight as to the dynamics of the process that maintains the equilibrium relation between velocity and interest rates copyright 1991 by mit press

are consumption and government expenditures substitutes or complements morishima elasticity estimates from the fourier flexible form 1 introduction macroeconomists paid relatively little attention to the economic effects of government expenditures and to alternative methods of financing those expenditures until barro 1974 1979 1981 challenged conventional views on the economic impact of government activity much of the literature stimulated by these studies addressed the effects of alternative financing methods for a given path of government expenditures but barro 1981 also stressed the fact that government expenditures can provide direct welfare to economic agents and that variations in the level of government expenditures may have an impact on the consumption decisions of households as a result many studies estimate the extent to which economic agents treat government expenditures as substitutes to or complements with private consumption expenditures e g kormendi 1983 aschauer 1985 graham and himarios 1991 ni 1995 the degree of substitution or complementarity between private consumption and government expenditures is of crucial importance in assessing the impact of fiscal policies on economic welfare thus it is important to establish the extent to which federal expenditures and private consumption are substitutes or complements as a guide to the design of fiscal policies there is much disagreement about the extent to which consumption and government expenditures are substitutes or complements in use for economic agents 1 studies differ in their details so it is difficult to know what might account for such diverse results but it seems fair to say that the relationship between government expenditures and consumption is largely an open question the diversity of the results however may be a consequence of a number of restrictive assumptions that have been used in various studies many of these assumptions appear hard to justify a priori studies typically estimate the parameters of an equation containing private consumption and government expenditures often assuming that the relevant choice variable for the representative household is an aggregate consumption measure given by the sum of nondurables and services consumption e g aschauer 1985 reid 1985 bean 1986 campbell and mankiw 1990 or the sum of nondurables services and the service flow from durable goods e g kormendi 1983 graham and himarios 1991 this implies that each component of private consumption expenditures is a perfect substitute for the household an assumption for which there is no compelling theoretical basis similarly government expenditures defense nondefense and state and local are typically aggregated e g feldstein 1982 aschauer 1985 reid 1985 graham 1993 with various studies excluding either federal or state and local expenditures just as for private consumption expenditures these aggregation assumptions should be tested rather t han simply imposed in applied work in addition although substitution elasticities are generally not constant in an optimizing framework they are often assumed to be constant in applications by using a single aggregate of consumption or a utility function that imposes a constant elasticity of substitution e g aschauer 1985 and ni 1995 finally none of the above mentioned studies computes elasticities of substitution in a manner consistent with microeconomic utility maximization principles 2 in this article we provide estimates of elasticities of substitution between consumption and government expenditures based on the demand systems approach that has been widely used in testing the neoclassical theory of household behavior see eg deaton and muellbauer 1980 and the survey of barnett et al 1992 this approach has a number of attractive features making it a substantial improvement over the applied studies available in the macroeconomics literature the estimates in this article are based on an optimizing framework where both government and consumption expenditures are treated as choice variables by the representative household

accounting for selectivity and duration dependent heterogeneity when estimating the impact of emigration on incomes and poverty in sending areas the impacts of international emigration and remittances on incomes and poverty in sending areas are increasingly studied with household survey data but comparing households with and without emigrants is complicated by a triple selectivity problem first households self select into emigration second in some emigrant households everyone moves while others leave members behind and third some emigrants choose to return to the origin country allowing for duration dependent heterogeneity introduces a fourth form of selectivity one must now worry not just about whether households migrate but also when they do so this paper clearly sets out these selectivity issues and their implications for existing migration studies and then addresses them by using survey data designed specifically to take advantage of a randomized lottery that determines which applicants to the over subscribed samoan quota may immigrate to new zealand the analysis compares incomes and poverty rates among left behind members in households in samoa that sent samoan quota emigrants with those for members of similar households that were unsuccessful in the lottery policy rules control who can accompany the principal migrant providing an instrument to address the second selectivity problem while differences among migrants in which year their ballot was selected allow for estimation of duration effects the authors find that migration reduced poverty among former household members but they also find suggestive evidence that this effect may be short lived as both remittances and agricultural income are negatively related to the duration that the migrant has been abroad

evaluating changes in the distribution of capital wealth i introduction over the last several years increasing concern has been expressed about wealth and income inequality 1 while most of the concern centers on the deteriorating economic condition of the poor some of it is directed against the very wealthy 2 proposals are being put forward from direct taxation of wealth to taxation of inheritances whose purpose is to foster greater equality in the distribution of wealth and particularly in the distribution of capital wealth 3 serious study of the potential economic consequences of greater capital wealth equality has been limited many economic models utilized to examine policy issues either ignore capital wealth distribution or take it as a given as a result opinions on the matter tend to be influenced largely by ideological preconceptions some tend to view very large capital fortunes mainly as desirable incentives to vigorous entrepreneurial effort and or high saving while others tend to view them mainly as a dysfunctional outgrowth of the institution of inheritance together with a high degree of randomness in the determination of capital asset values it is widely accepted that there are at least two principal justifications for capital property income as a return to the active process of entrepreneurship and or investment analysis and as a return to the passive process of saving 4 in a strict logical sense these justifications for capital property income even if legitimate do not necessarily justify a high level of inequality in capital wealth if a small number of very wealthy capitalists were replaced by a much larger number of less wealthy capitalists the amount of entrepreneurship investment analysis and saving provided to the economy would not necessarily be reduced the purpose of this research is to throw some objective light on the potential economic consequences of greater capital wealth equality by specifying implementing and computing a small scale general equilibrium model in which the distribution of capital wealth is a key parameter the model is designed to address directly various concepts and issues which at the present time lie mostly within the province of ideological preconception rather than scientific analysis the model includes saving as a primary factor of production provided by the household but many other general equilibrium models include saving and hence are able to some extent at least to evaluate the saving justification for capital property income and by extension for capital wealth inequality the innovative feature of the present model is its inclusion as a primary factor of production provided by the household of capital management effort capital management effort is defined as any and all active behavior by the household designed to increase the rate of return on its capital wealth such behavior might include corporate supervision such as provided by a member of a board of directors corporate supervision is distinguished from corporate management provided by salaried executives investment analysis such as provided by a private investor or entrepreneurship such as provided by the founder owner of a new business firm households allocate their available time resources to labor capital management effort and leisure standard household theory encompasses only labor and saving as primary factors adding the capital management effort concept enables a direct assessment of the role of such critical factors as entrepreneurship in the economy and thereby enables a more thorough and reliable evaluation of the potential economic consequences of increasing equality in capital wealth distribution 5 on the whole the results described below support the conclusion that greater equality in capital wealth would be economically beneficial the results are strong in the sense that every performance indicator examined in the research aggregate income consumption equality social welfare in the sum of utilities sense and aggregate saving is improved by greater capital wealth equality

migration intentions in the u k which households want to migrate and which succeed the authors extend their earlier study of the impact of the council housing system on migration in the united kingdom in particular they examine the hypothesis that individuals differ in various unobserved ways and that personal characteristics that result in individuals becoming tenants may also discourage migration data are from the general household survey for 1973 and 1974 and pertain to both migration intentions and past migration the extent to which house tenure and other household characteristics affect the probability that a household embarking on a housing search will be successful in realizing its migration intentions is explored in addition the importance of both individual and aggregate local unemployment in determining migration intentions is discussed

the demand for ethanol as a gasoline substitute abstract this paper estimates household preferences for ethanol e85 as a gasoline e10 substitute i develop a theoretical model linking the shape of the ethanol demand curve to the underlying distribution among households of willingness to pay for ethanol i estimate the model using instrumental variables techniques and data from many retail fueling stations i find that a 0 10 per gallon increase in ethanol s price relative to gasoline leads to a 12 16 decrease in the quantity of ethanol demanded my findings imply that preferences for ethanol are heterogeneous and that a substantial fraction of households are willing to pay a premium for the fuel this reduces substantially the simulated efficiency cost of an ethanol content standard since some households choose ethanol without large subsidies mitigating deadweight losses

estimating the liquidity of m2 components in the post didmca era i introduction the depository institutions deregulation and monetary control act of 1980 didmca together with the garn st germain act and related federal reserve actions resulted in a thorough redefinition of the money stock measures as discussed in anderson and kavajecz 1994 and related writings the current components of m1 and m2 recognize the significant changes among existing assets that occurred throughout the 1970s examples include the rapid growth of money market mutual funds mmmfs and the breakdown of distinctions between deposits of commercial banks and thrift institutions the measures of money include assets introduced by legislation such as now accounts and money market deposit accounts mmdas the didmca also deregulated interest rates on bank deposits with january 1986 completing the phase out of regulation q this paper examines the liquidity of the assets within the restructured definitions of m1 and m2 we offer empirical evidence regarding the cost of decreasing these asset holdings as well as for other bank deposits such as individual retirement accounts iras the results can be used to assess how easily they can be converted into a medium of exchange section ii features the model formulation based upon a representative household s intertemporal optimization problem with liquidity costs our study provides estimates of both relative and absolute liquidity as lippman and mccall 1986 discuss liquidity represents a fundamental characteristic of assets yet remains elusive in its measurement to this extent research seeking to measure or estimate liquidity is sparse lippman and mccall s 1986 criterion consists of the optimal expected amount of time to transform an asset into money hooker and kohn 1994 define liquidity as the difference between the asset price at its optimal sale relative to its immediate sale adjustment cost serves as our measure for liquidity this criterion conforms to commonly used definitions found in economics textbooks particularly those that emphasize asset withdrawal for transactions mishkin 1995 55 for example defines liquidity as the relative ease and speed with which an asset can be converted into a medium of exchange the adjustment cost approach measures withdrawal costs in dollar units it regards liquidity as an inherent characteristic of the asset and captures the total cost involved with changing asset holdings the implicit inclusion of time costs within the formulation is consistent with lippman and mccall 1986 asymmetry in adjustment cost arises because liquidity explicitly involves the cost of reducing asset holdings while economic units incur costs due to increasing financial assets larger costs result from withdrawal we use a minor modification of pfann and verspagen s 1989 asymmetric adjustment cost function proposed by dutkowsky 1995 the function offers several attractive properties for estimating liquidity cost it allows for asymmetry in the direction of either increases or decreases within portfolio reallocation further the commonly used linear quadratic function is nested within this equation enabling straightforward testing for greater withdrawal cost the asymmetric adjustment cost specification has been utilized previously by pfann and palm 1993 within labor demand section iii reports empirical findings we estimate the structural parameters using generalized method of moments gmm and monthly data for the december 1983 march 1993 period the results reveal significant evidence of asymmetry in the direction of decreasing asset holdings for all components except demand deposits this finding supports the existence of greater cost for withdrawing as opposed to increasing holdings among interest bearing accounts further the evidence points to a definite ordering of liquidity among several assets within this group savings deposits rank as the most liquid followed by small time deposits mmmfs and individual retirement accounts

on the markov switching welfare cost of inflation abstract this paper uses the markov switching approach to account for instabilities in the long run money demand function and compute the welfare cost of inflation in the united states in doing so it circumvents the problem of data mining of some earlier seminal contributions on these issues allowing for complicated nonlinear dynamics and sudden changes in the parameters of the money demand function moreover it extends the sample period and investigates the robustness of results to alternative money demand specifications monetary aggregation procedures and assumptions regarding dynamics aspects of the money demand specification

firm innovation the influence of r d cooperation and the geography of human capital inputs abstract this paper investigates the role played by the geography of labor inputs in the promotion of innovation knowledge can be transferred between firms by inter firm interactions and inter firm cooperation in addition knowledge can also be transferred between firms by human capital mobility in order to examine these issues we employ a unique innovation dataset from finland this dataset provides information about a firm s innovation performance along with information regarding the origins of a firm s recent labor acquisitions the origins of the labor are defined according to both the industry and the region analyzing these data allows us to identify the different roles which the geography of knowledge exchanges and the geography of labor markets play in the innovation process

sterilization of short term capital inflows through lower interest rates reductions in international interest rates are a major cause of capital flows to emerging economies increases in domestic interest rates are a frequent policy response to the resulting price increases this is often unsuccessful the paper suggests a theoretical explanation based on distinctive features of emerging financial markets including imperfect asset substitutability and imperfect capital mobility for some sectors of the economy it concludes that the appropriate policy response to capital inflows may be lower interest rates

money is what money does monetary aggregation and the equation of exchange this paper develops a method for distilling the transactions role of the array of monetary assets available to the public into a single aggregate measure of effective transactions balances the result is a monetary quantity index number designated mq which corresponds closely with the monetary aggregate contemplated in the equation of exchange mv pq in general mq and the conventional aggregate m 1 exhibit strikingly similar behavior however during episodes when the behavior of m1 is abnormal relative to income and interest rates mq behaves differently from m 1 during these periods anomalies in the behavior of mq are not detectable

relative prices in the uk personal sector money demand function nonparametric demand analysis is used in order to establish admissible monetary aggregates and also to establish a potential role for relative prices in the money demand function a conventional money demand specification is then contrasted with a money demand function which contains the relative prices of durables nondurables and services as additional regressors evidence from long run cointegration analysis short run error correction models and nonnested testing all confirm a role for relative prices in the u k personal sector s money demand function copyright 1996 by royal economic society

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

which road leads to stable money demand this paper denies that the demand for money function is any more unstable than other demand functions and maintains that the controversies regarding unstable money demand are produce by poor methodology that is not shared by other areas of the field of economics when investigating demand function properties this abstract was borrowed from another version of this item

skill development and regional mobility lessons from the australia pacific technical college abstractdeveloping countries can lose part of their investment in training skilled workers who later emigrate one innovative response is for migrants destination countries to help finance skilled emigrants training ex ante linking skill creation and skill mobility we describe one such project the australia pacific technical college aptc which has financed vocational training in five pacific island developing countries for employment both at home and abroad including employment in australia the aptc has attained its goal of skill creation but not its goal of skill mobility we offer explanations for this result and lessons for future policy innovation

some evidence of regional variations in the introduction and diffusion of industrial products and processes within british manufacturing industry thwaites a t 1982 some evidence of regional variations in the introduction and diffusion of industrial products and processes within british manufacturing industry reg studies 16 371 81 in the present economic circumstances the traditional instruments of regional aid public expenditure job transfer and mobile industry are greatly constrained which thrusts greater responsibility upon industry indigenous to each area to preserve and to create employment self sustained economic growth any concept of the mobilization of this regional potential must incorporate a technological dimension if any region lags in the production or adoption of new technology within its manufacturing industries then in the longer term it must face industrial decline evidence of regional performance in the production and adoption of new products and processes together with research and development effort is provided from two establishment based surveys of manufacturing industry in great britain the conclusion is reached

microfoundations and the demand for money the reader should note that i write this piece in a style that aims to be accessible to that much neglected representative agent the woman on the eurostar train hence unlike the man on the clapham omnibus i assume my intrepid traveller has reasonable knowledge of monetary economics and econometrics but not of the details of the demand for money space constraints force me to indulge in a certain amount of poetic licence but i hope this results in poetic justice there have been many wars fought on this particular battlefield some with almost religious zeal on the theoretical side of the debate we sometimes have the equivalent of religious fundamentalists be they muslims jews christians etc who would dismiss almost any evidence unless it were associated with a strong microtheoretic basis as laid down in the koran talmud or bible the empirical side encompasses agnostics atheists as well as born again econometricians pure theorists inhabit the sunlit uplands while applied economists and policymakers flounder in the muddy plain below occasionally gaining solace from their copy of zen and the art of motorcycle maintenance in general in economics we do not have the luxury of controlled experiments as is the case in the natural sciences what distinguishes good microfoundations from bad and how to weight priors and statistical evidence is subject to much dispute leamer i983 hendry et al i990 as in religion sometimes there is the occasional miracle proclaimed after a suitable interval a new saint may be declared and disciples flock to the new shrine later doubts may arise as to whether a miracle really did occur human behaviour is difficult to explain let alone predict so the search for the equivalent of the holy grail ark of the covenant etc is bound to be arduous in scholarly journals we generally read of the success of the demand for money like diplomats who are sent abroad to lie for the good of their country publication may require applied economists to be somewhat economical with the actualite lovell i983 leamer i983 in this article i want to be as honest as possible about our success and failures in this area the prior information an armchair economist would consider when thinking about the demand for money over the past 40 years in western industrialised countries which have experienced moderate inflation might

payment transactions instruments and systems a survey the payments literature ranges from theoretical general equilibrium models to practical payment issues related to the day to day operation of various national networks for the transfer of money it is an area where economic theory and institutional structure are often closely intertwined and it is currently undergoing significant change shifting from costly paper based systems to technologically advanced electronic payments the extant literature is surveyed here with the aim of integrating the various strands of payment research which have been largely pursued separately in addition we present newly available data to illustrate and investigate a number of underdeveloped areas in this literature 1998 elsevier science b v all rights reserved

consumer theory and the demand for money the following sections are included introductionthe definition of moneythe microeconomic theory of a monetary economythe aggregation theoretic approach to money demandindex number theorythe links between aggregation theory index number theory and monetary theoryunderstanding the new divisia aggregatesthe optimal level of monetary subaggregationeconometric considerationsapproximating the monetary services subutility functionan exampleempirical dimensionsempirical comparisons of index numbersempirical results for the demand system approachextensionsconclusions this abstract was borrowed from another version of this item

lessons on monetary policy from the 1980s t he half decade running from mid 1982 to mid 1987 was a pretty good era for u s monetary policy as these things go a sharp easing of policy beginning some time around midyear 1982 helped set in motion a recovery from the most severe business downturn the united states had experienced since the 1930s a downturn that tight monetary policy earlier on had deliberately brought about in order to slow the alarming acceleration of prices the recovery that ensued developed into a sustained expansion that continued without interruption through the end of 1987 thereby setting a new record for the longest recorded business expansion in u s peacetime experience a fiscal policy based on unprecedentedly large and continually growing structural budget deficits was a major factor underlying this record length expansion but at least monetary policy did not stand in the way just as importantly the severe 1981 82 recession served its intended purpose of substantially restoring price stability and even after five years of expansion inflation remained modest by recent historical standards at least as judged by these outcomes for the standard objectives of macroeconomic policy u s monetary policy was a distinct success during these years economists hoping to say something useful about monetary policy have had a tougher time the quantitative relationships connecting income and price movements to the growth of familiar monetary aggregates including especially the m1 measure of the money stock that had been the chief focus of monetary policy during 1979 82 utterly fell apart during this period moreover the collapse of these long standing

are risky assets substitutes for monetary assets i introduction financial innovation over the past couple of decades has enhanced the liquidity of many financial assets particularly noncapital certain risky assets further financial assets previously not regarded as monetary assets such as mutual funds and particularly money market mutual funds now provide monetary services such as liquidity and transactions services l given the increased liquidity of such funds the question arises as to whether risky assets are substitutes for capital certain monetary assets if noncapital certain assets are indeed substitutes for capital certain assets and are also being used for transactions purposes then agents may be treating risky assets as money although this issue has been addressed in the united states in the context of the addition of bond funds to m2 by for example duca 1995 no such research has yet been conducted in the united kingdom including risky assets in the analysis contradicts the work of ando and shell 1975 spencer 1986 appendix i pp 184 93 and spencer 1994 broadly they argue that since some nonrisky assets provide monetary services and probability also liquidity individuals would not hold risky assets for these purposes 2 in contrast hicks 1935 states that falling transaction costs and rising wealth encourages individuals to increase the proportion of risky assets in portfolio holdings most studies generally assume that risky assets fail to provide significant monetary services and for example have been excluded from the asset demand analysis of barr and cuthbertson 1991a drake fleissig and swofford 1997 and money demand studies such as taylor 1987 belongia and chrystal 1991 drake and chrystal 1994 and drake 1996 alternatively barr and cuthbertson 1991b use only risky assets in their asset demand system analysis the degree of substitution between risky assets and capital certain assets is an empirical issue while noncapital certain risky assets mutual funds and other financial assets may well be becoming closer substitutes for what people are using as money they are in no way perfect substitutes for the highly liquid cash assets to evaluate the role of noncapital certain assets we construct a noncapital certain risky divisia aggregate consisting of equities government bonds and unit trusts the divisia index allows for less than perfect substitution between assets and weights component assets according to their differing degrees of moneyness which may vary over time due to many factors for example financial innovation see barnett 1980 this methodology has been widely applied to monetary aggregation and money demand studies in a number of countries as in belongia 1996 drake 1996 drake and chrystal 1997 and anderson jones and nesmith 1997 to determine whether risky assets are substitutes for capital certain assets we use two other divisia aggregates constructed from traditional measures of money the first of these is an aggregate of highly liquid zero yield cash assets given that the component assets all have zero own rates of return however divisia aggregation is equivalent in this case to simple summation the second aggregate is a divisia aggregate of interest bearing capital certain assets including risky assets complicates the analysis because the degree of risk aversion will affect the estimates of substitution between capital certain and noncapital certain assets thus we also analyze how different degrees of risk aversion affect the results the substitution relationship between assets is estimated from an asymptotically ideal model aim the choice of an aim is in line with the recommendation of barnett fisher and serletis 1992 that flexible systems of demand equations should be used that allow for nonlinear optimizing behavior by economic agents furthermore this paper can be seen as an extension of the recent application of this model to u

financial deregulation and the dynamics of money prices and output in new zealand and australia effects of financial deregulation in the 1980s on the dynamic interactions among money prices and output in new zealand and australia are evaluated prior to deregulation the series appear to be nonstationary and cointegrated based on johansen s maximum likelihood tests with money proportional to prices but less than proportional to output in the long run the series also appear cointegrated in new zealand through the 1980s when the effects of deregulation are accounted for with a deterministic shift parameter the cointegrating coefficients are similar for the pre liberalization and full sample periods and dynamic responses are evaluated for error correction models incorporating the estimated long run relationships copyright 1993 by ohio state university press

a composite leading indicator of the inflation cycle for the euro area we evaluate the performance of composite leading indicators of turning points of inflation in the euro area constructed by combining the techniques of fourier analysis and kalman filters with the national bureau of economic research methodology in addition the study compares the empirical performance of euro simple sum and divisia monetary aggregates and provides a tentative answer to the issue of whether or not the uk should join the euro area our findings suggest that first the cyclical pattern of the different composite leading indicators very closely reflect that of the inflation cycle for the euro area second the empirical performance of the euro divisia is better than its simple sum counterpart and third the uk is better out of the euro area 2005 taylor francis group ltd

estimating short and long run relationships a guide for the applied economist many applied economists face problems in selecting an appropriate technique to estimate short and long run relationships with the time series methods this article reviews three alternative approaches viz general to specific vector autoregressions and the vector error correction models as in other methodological controversies definite answers are difficult it is suggested that if these techniques are seen as tools to summarize data as in smith 2000 often there maybe only minor differences in their estimates therefore a computationally attractive technique is likely to be popular

the demand for money a structural econometric investigation this study empirically investigates dynamic microfoundations for the conventional static money demand equation an intertemporal substitution model with the addilog utility function yields a money demand relationship that closely approximates the double log specification results from previous empirical studies largely support the derived equation estimations with quarterly u s data support cointegration among real per capita m1 and consumption and an after tax long term interest rate for the post 1980 period estimated short run intertemporal interest rate elasticities of consumption vary from 0 26 to 0 93 estimated long run elasticities of substitution between consumption and money range from 0 26 to 0 41

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

how important is selection experimental vs non experimental measures of the income gains from migration measuring the gain in income from migration is complicated by non random selection of migrants from the general population making it difficult to obtain an appropriate comparison group of non migrants this paper uses a migrant lottery to overcome this problem providing an experimental measure of the income gains from migration new zealand allows a quota of tongans to immigrate each year with a lottery to choose among the excess number of applicants a unique survey conducted by the authors in these two countries allows experimental estimates of the income gains from migration by comparing the incomes of migrants to those who applied to migrate but whose names were not drawn in the lottery after allowing for the effect of non compliance among some of those whose names were drawn the authors also conducted a survey of individuals who did not apply for the lottery comparing this non applicant group with the migrants enables assessment of the degree to which non experimental methods can provide an unbiased estimate of the income gains from migration they find evidence of migrants being positively selected in terms of both observed and unobserved skills as a result non experimental methods are found to overstate the gains from migration by 9 to 82 percent a good instrumental variable works best while difference in differences and bias adjusted propensity score matching also perform comparatively well

the short run demand for money a reconsideration the partial adjustment approach to the specification of the short run demand for money has dominated the literature for more than a decade there are three basic problems with this approach first the same lag structure is imposed on all variables and each independent variable enters only as a current value in contrast a rational individual would respond to different variables income interest rates prices with quite different lags second when the general price levelis subject to gradual adjustment hut can move quickly in response to supply shocks the influence of these supply shocks should enter with a negative sign third the estimated equation for real balances may not be a money demand equation at all but rather its coefficients may represent a shifting mixture of demand and supply responses the empirical work examines several alternative dynamic specifications including a generalized partial adjustment framework and the error correction model both of the latter specifications exhibit greater structural stability after 1973 than the standard partial adjustment specification and the generalized partial adjustment model also yields relatively small errors in post sample dynamic simulations shifts in coefficients as the sample period is extended after 1973 are consistent with the interpretation that the real balance equation no longer traces out structural demand parameters hut rather a mixture of demand and supply responses this abstract was borrowed from another version of this item

a money demand system for euro area m3 in order to assess the importance of monetary and financial developments for key macroeconomic variables in the euro area a money demand system for m3 is estimated adopting a structural cointegrating var approach while maintaining a good statistical representation of the data long run relationships are based on economic theory by using generalized response profiles the dynamics of the money demand system is investigated without any further identifying assumptions error bounds of the profiles are derived using bootstrap simulations

industrial districts old wine in new bottles harrison b 1992 industrial districts old wine in new bottles reg studies 26 469 483 according to the theory of industrial districts a new wave of economic growth is being led in a number of regions in europe north america and east asia by spatially concentrated networks of mostly small and medium sized enterprises often using flexible production technology and characterized by extensive local interfirm linkages does this amount to a re emergence of the dominance of what urban and regional economists call agglomeration economies over the well known pressures on business to spatially disperse its operations neoclassical economic theorizing from marshall to perroux provides one perspective on the contemporary industrial district phenomenon another is afforded by granovetter s more recent elaboration of the ideas of embedding under and over socialization confronting each of these theoretical approaches with the other leads me to conclude that the industrial district prototypes involv

a panel data analysis of the fungibility of foreign aid the donor community has been increasingly concerned that development assistance intended for crucial social and economic sectors might be used directly or indirectly to fund unproductive military and other expenditures the link between foreign aid and public spending is not straightforward because some aid may be fungible this article empirically examines the impact of foreign aid on the recipient s public expenditures using cross country samples of annual observations for 1971 90 for the base sample of 14 developing countries it finds that aid is not fungible at the aggregate level and there is no associated tax relief increasing the number of countries however makes aid fungible moreover results based on the main sample indicate that aid is fungible in three out of five sectors examined developing country governments receiving earmarked concessionary loans for agriculture education and energy reduce their own resources going to these sectors and use them elsewhere only loans to the transport and communication sector are fully spent on the purposes intended by donors because most aid appears to be fungible the rate of return on a specific donor funded project tells little about the impact of that assistance a better approach may be to tie foreign aid to an overall public expenditure program that provides adequate resources to crucial sectors

a dynamic asymptotically ideal model of money demand abstract we estimate a dynamic asymptotically ideal model of a system of money demand equations this specification allows incomplete portfolio adjustment we base our policy conclusions on morishima elasticities because as blackorby and russell 1989 show the allen uzawa elasticities can give misleading results we find that cash assets savings deposits and small time deposits are all substitutes for each other these results imply that monetary authorities should target a relatively broad monetary aggregate that includes these assets if policy is to have predictable effects on the economy

a comparison of linear forecasting models and neural networks an application to euro inflation and euro divisia linear models reach their limitations in applications with nonlinearities in the data in this paper new empirical evidence is provided on the relative euro inflation forecasting performance of linear and non linear models the well established and widely used univariate arima and multivariate var models are used as linear forecasting models whereas neural networks nn are used as non linear forecasting models it is endeavoured to keep the level of subjectivity in the nn building process to a minimum in an attempt to exploit the full potentials of the nn it is also investigated whether the historically poor performance of the theoretically superior measure of the monetary services flow divisia relative to the traditional simple sum measure could be attributed to a certain extent to the evaluation of these indices within a linear framework results obtained suggest that non linear models provide better within sample and out of sample forecasts and linear models are simply a subset of them the divisia index also outperforms the simple sum index when evaluated in a non linear framework 2005 taylor francis group ltd

another look at long run money demand abstract this paper investigates the long run demand for m1 in the postwar united states previous studies based on data ending in the late 1980s are inconclusive about the parameters of postwar money demand this paper obtains precise estimates of these parameters by extending the data through 1996 the income elasticity of money demand is approximately 0 5 and the interest semi elasticity is approximately 0 05 these parameters are significantly smaller in absolute value than the corresponding parameters for the prewar period a caveat is that the analysis assumes there is no trend in money demand resulting from technological change

monetary aggregation and the neutrality of money zisimos koustas this article tests the long run neutrality of money proposition using quarterly u s data over the period from 1960 1 to 1996 2 and the methodology suggested by king and watson 1997 paying particular attention to the integration and cointegration properties of the variables comparisons are made among simple sum divisia and currency equivalent ce monetary aggregates using the anderson et al 1997a 1997b series of divisia and ce monetary aggregates jel e40 e50 c32 i introduction the aim of this article is to investigate a long run question about the role of money in monetary policy whether changes in the conduct of monetary policy influence the growth rate of output as lucas 1996 p 661 puts it so much thought has been devoted to this question and so much evidence is available that one might reasonably assume that it had been solved long ago but this is not the case in fact recently fisher and seater 1993 and king and watson 1997 contribute to the literature on testing quantity theoretic propositions by developing tests using recent advances in the theory of nonstationary regressors and show that meaningful long run neutrality and superneutrality tests can only be constructed if both nominal and real variables satisfy certain nonstationarity conditions and that much of the older literature violates these requirements in this paper in the spirit of serletis and koustas 1998 and koustas and serletis 1999 we test the long run neutrality and superneutrality of money using the king and watson 1997 methodology paying particular attention to the gains that can be achieved by rigorous use of microeconomic and aggregation theoretic foundations in the construction of money measures this is accomplished by making comparisons among simple sum divisia and currency equivalent ce monetary aggregates using the anderson et al 1997a 1997b data see anderson et al 1997a 1997b for more details we also pay attention to the integration and cointegration properties of the variables because meaningful neutrality and superneutrality tests critically depend on such properties the organization of the article is as follows the next section briefly discusses the problem of the definition aggregation of money in section iii we investigate the univariate time series properties of the variables as these properties are relevant for some problems of potential importance in the practical conduct of monetary policy as well as for estimation and hypothesis testing in section iv we test the long run neutrality and superneutrality of money propositions using the king and watson 1997 structural bivariate autoregressive methodology paying particular attention to the integration and cointegration properties of the data the final section concludes ii the many kinds of money the monetary aggregates currently in use by the federal reserve are simple sum indices in which all monetary components are assigned a constant and equal unitary weight this index is m in 1 m sigma sup n sub i 1 x sub i where x sub i is one of the n monetary components of the monetary aggregate m this summation index implies that all monetary components contribute equally to the money total and it views all components as dollar for dollar perfect substitutes there is no question that such an index represents an index of the stock of nominal monetary wealth but cannot in general represent a valid structural economic variable for the services of the quantity of money over the years there has been a steady stream of attempts at properly weighting monetary components within a simple sum aggregate with no theory however any weighting scheme is questionable barnett 1980 derived the theoretical linkage between monetary theory and aggregation and index number theory he applied economic aggregation and index number theory and constructed monetary aggregates based on diewert s 1976 class of superlative quantity index numbers

the search for a stable money demand function a survey of the post 1973 literature phe question of whether the demnand function for money is stable is one of the most important recurring issues in the theory and application of macroeconomic policy what is being sought in a stable demand function is a set of necessary conditions for money to exert a predictable influence on the economy so that the central bank s control of the money supply can be a useful instrument of economic policy as such the notion of a stable demand function appears to involve three key elements e g john t boorman 1976 p 317 and david e w laidler 1977 pp 34 35 first the demand for money relation should be highly predictable in a statistical sense as measured by the usual goodness of fit statistics precision of estimated coefficients and presumably its ability to forecast accurately out of sample second a stable demand function for money has relatively few arguments a relationship that requires knowledge about a large number of variables in order to pin it down is in effect not predictable finally the variables that appear as arguments in the function should represent significant links to spending and economic activity in the real sector in sum a stable demand function for money means that the quantity of money is predictably related to a small set of key variables linking money to the real sector of the economy the importance of a stable money demand function for monetary policy can be illustrated with the standard is lm model in which interest rates and gnp are the endogenous variables in this context a stable demand function for money translates into a well defined relationship between money interest rates and gnp

monetary variability united states and japan note many economists have criticized the federal reserve because of the high variability of monetary growth in the united states since the change in operating procedures on october 6 1979 chairman paul volcker has responded to this criticism in congressional testimony november 19 1980 and in a letter to senator garn february 18 1982 by asserting that international comparisons all appear to demonstrate the same point u s monetary aggregates rank at or near the top of the league in terms of low variability and this is true even allowing for the technical difficulties involved in making such international comparisons

can a brain drain be good for growth in the source economy this paper analyzes the interaction between income distribution human capital accumulation and migration it shows that when migration is not a certainty a brain drain may increase average productivity and equality in the source economy even though average productivity is a positive function of past average levels of human capital in an economy it is also shown how the temporary possibility of emigration may permanently increase the average level of productivity of an economy

the equilibrium relationship among money income prices and interest rates evidence from a threshold cointegration test the long run equilibrium relationship among money income prices and interest rates in japan is investigated by the threshold cointegration test which allows for asymmetric adjustment introduced by enders and siklos 2001 the threshold cointegration approach provides clear evidence of the cointegration relationship characterized by asymmetric adjustment by allowing for asymmetric adjustment results are obtained showing the stability of the money demand function similar to lucas 1988 who pointed out that the money demand function is stable if unit income elasticity is imposed in particular the estimated results show that the adjustment process toward equilibrium is highly persistent above an appropriately estimated threshold whereas the adjustment process toward equilibrium quickly converges below it this finding indicates that deviations from equilibrium resulting from increases in money or decreases in income and prices are highly persistent

the reincarnation of keynesian economics this paper discusses the reemergence of keynesian economics during the past decade it highlights the substantial differences between new keynesian economics and the convictions of early keynesians in particular it points out that new keynesians have adopted many views that were once considered monetarist or classical it concludes that the term keynesian may have outlived its usefulness this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

the economic consequences of brain drain of the best and brightest microeconomic evidence from five countries this article presents results of innovative surveys that tracked academic high achievers from five countries to wherever they moved in the world to directly measure at the micro level the channels through which high skilled emigration affects sending countries there are high levels of emigration and of return and the income gains to the best and brightest from migrating are an order of magnitude greater than any other effect most high skilled migrants from poorer countries remit but involvement in trade and foreign direct investment is rare fiscal costs vary widely but are much less than the benefits to the migrants themselves two narratives drive discussions of the development impact of high skilled migration the first is the idea of a brain drain whereby the departure of doctors teachers engineers scientists and other highly skilled workers decimates the human capital and fiscal revenues of sending countries bhagwati and hamada 1974 such fears lead to calls for policies to restrict the flow of highly skilled workers such as demands that developed countries stop recruiting doctors from developing nations and efforts by developing nations to restrict the ease of their highly skilled individuals migrating 1 contrasting with this is the view of a highly educated diaspora as a potent force for developing the local economy through remittances trade foreign direct investment fdi and knowledge transfers with the experience of india and china in setting up technology firms as a result of diaspora working in silicon valley a prominent example saxenian 2002 economists have also emphasised that the possibility of migrating may spur human capital accumulation potentially leading to a net increase in the education levels of those in the home country 2

the own price of money and a new channel of monetary transmission traditionally the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels real business cycle theory by contrast highlights the role of real price changes as a source of revisions in spending and production decisions motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism this paper incorporates a direct measure of the real own price of money into an estimated vector autoregression and a calibrated real business cycle model consistent with the rbc view of the monetary transmission mechanism both approaches reveal that movements in the own price of money are strongly related to movements in output

defining total energy use in economic studies does the aggregation approach matter abstract in economic models the aggregate consumption of energy resources is normally expressed either in terms of its total heating value e g btus or barrels of oil equivalent or in terms of its economic value e g divisia indices or total expenditures for most major oecd countries we find that it matters little whether various energy resources consumed in the industrial sector are aggregated in terms of their heating value or their economic value similar trends emerge regardless of which measure is adopted consequently as a practical matter macroeconomic and energy modeling efforts need not be too concerned about which measure of total energy usage is adopted the prominent exceptions are the united states and mexico where measures of total industrial sector energy use based on heating values and economic values diverge greatly due to some unique trends in electrification and energy prices consequently attention to aggregation issues may be an important consideration in efforts to model the energy consumed in the us or mexico

the growth effects of education in australia in this article we estimate the growth effect of human capital with country specific time series data for australia in doing so we extended the solow 1956 growth model by using educational attainment as a measure of human capital developed by barro and lee 2010 the extended solow 1956 model performs well after allowing for the presence of structural changes our results based on alternative time series methods show that educational attainment has a small and significant permanent effect on the growth rate of per worker output in australia

long run money demand in canada in search of stability the authors search for a long run cointegrating relationship among real money balances real income and interest rates extending the work of steve ambler and algin paquet 1990 who explore this issue in the canadian context employing the methods of robert f engle and clive w granger 1987 first they uncover parameter estimates of the cointegrated relationships using three different methods of estimation second the authors employ the hansen 1992 procedure to search for structural instability in cointegrating relationships with unknown break points they find empirical support for a stable cointegrating relationship among real m1 real income and short term interest rates in canada for the period 1953 1 1990 4 copyright 1996 by mit press

measuring money growth when financial markets are changing abstract this article considers constructing monetary aggregates in the presence of financial market innovations and changes in the relationship between individual assets and output we propose two procedures for constructing a monetary aggregate with the objective of providing a reliable monetary leading indicator of nominal gdp in the first subaggregates discretely switch in and out in the second the aggregate s growth is a time varying weighted average of the growth of the subaggregates where the weights follow a multivariate random walk these procedures are used to examine augmenting m2 with stock and or bond mutual funds the alternative aggregates are broadly similar to m2 but during 1992 1993 they outperform m2

reasons for the development of islands of innovation evidence from hertfordshire this paper analyses why innovations often cluster in a few metropolitan islands of innovation the reason for this interest is that a growing body of neo schumpeterian economic theory argues that economic recovery after periods of economic recession and depression such as we have seen during the 1980s and early 1990s is driven by innovations these do not spring up all over the country but are spatially concentrated in a small number of metropolitan regions it is therefore important to know why this is so in order to evaluate the effectiveness of various uk and eu public policies whose specific objectives are to stimulate local and regional economic development agglomeration theory is used in order to understand the driving forces behind the spatial clustering of new innovations this leads to four explanatory hypotheses these are that innovation is facilitated by agglomeration in order to reduce distance transaction costs between firms in different spaces or by local factor conditions which provide

a structured var for denmark under changing monetary regimes using recently developed statistical tools for analyzing cointegrated 1 2 data this article models money income prices and interest rates in denmark the final model describes the dynamic adjustment to short run changes of the process to deviations from long run steady states and to several political interventions it provides new insights about the effects of the liberalization of trade and capital in a small open european economy

functional monetary aggregates monetary policy and business cycles abstract in this paper we take the economic approach to monetary aggregation in the context of highly disaggregated demand systems encompassing the full range of monetary assets in the united states we estimate the effectively globally regular minflex laurent ml and normalized quadratic nq flexible functional forms we produce the ml and nq functional monetary aggregates consistent with neoclassical microeconomic theory also addressing the issue of optimal monetary aggregation we highlight the influence of measurement on statistical inference by investigating whether the ml and nq functional monetary aggregates are of importance in resolving paradoxes associated with the measurement of money in doing so we also provide a comparison between the functional monetary aggregates and the fed s broad sum m2 aggregate and the center for financial stability broad divisia m3 and divisia m4 aggregates our detailed statistical analysis favors the functional monetary aggregates

sweep programs and optimal monetary aggregation abstract this paper examines the admissibility of monetary aggregate groupings for the us over 1993 2001 based upon weak separability we investigate the impact of retail and commercial demand deposit sweep programs on the separability of monetary asset groupings weak separability is tested using the swofford whitney and fleissig whitney tests we use varian s measurement error adjustment procedure to eliminate violations of the generalized axiom of revealed preference garp when funds from both retail and commercial demand deposit sweep programs are placed within checkable deposits all groupings narrow and broad pass garp and weak separability for groupings based on conventional money measures tests tend to favor broad aggregates