efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

wage bargaining central bank independence and the real effects of money the effects of financial capital mobility on monetary policy autonomy are relatively well understood but the importance of particular monetary regimes in distinct national institutional settings is not this article is a theoretical and empirical exploration of the effects of monetary policy regimes on unemployment in different national wage bargaining settings based on a rational expectations two stage game of the interaction between the wage behavior of labor unions and the monetary policies of governments i argue that monetary policies have real employment effects in all but the most decentralized bargaining systems specifically in intermediately centralized bargaining systems a credible government commitment to a nonaccommodating monetary policy rule will deter militant wage behavior with salutary effects on unemployment in highly centralized systems by contrast restrictive monetary policies will clash with unions pursuit of wage distributive goals and produce inferior employment performance only in highly fragmented bargaining systems is money neutral in the sense that employment performance is unaffected by monetary regimes the model has clear consequences for the optimal design of central banks and collective bargaining arrangements and suggests new ways to study institutional change hereunder the causal effect of increasingly globalized capital markets the argument is supported by pooled time series data for fifteen oecd countries over a twenty one year period

optimal auction with resale this paper investigates the design of seller optimal auctions when winning bidders can attempt to resell the good in that case the optimal allocation characterized by myerson 1981 cannot be achieved without resale i find a sufficient and necessary condition for sincere bidding given the possibility of resale in two bidder cases i prove that the myerson allocation can be achieved under standard conditions supplemented with two assumptions with three or more bidders achieving the myerson allocation is more difficult i prove that it can be implemented in special cases in those cases the myerson allocation is generated through a sequence of resale auctions each optimally chosen by a reseller

primary energy demand in japan an empirical analysis of long term trends and future co2 emissions abstract this paper examines the long run relationship between energy demand gnp and the real energy price in japan using data covering 1887 2001 it is found that if an underlying energy demand trend is appropriately incorporated the resulting econometric model produces a long run income elasticity of about unity and a long run price elasticity of about 0 2 the estimated model is utilised to forecast energy consumption and co 2 emissions up to 2012 it is shown that given current economic conditions and policies there is considerable uncertainty about whether japan will be able to meet its kyoto target by reducing co 2 emissions in 2008 2012 to the 1990 level it is shown that this uncertainty depends on the strength of the economy and leaves the japanese government with a difficult policy dilemma if there is a resurgence in growth to something near the annual average growth rate since the early 1980s a considerable effort will be required in order to meet its kyoto target requiring not only using the kyoto mechanisms but also additional tougher domestic policies and measures such as emissions capping r d incentives and education for energy conservation in addition to a pricing and tax policy

central bank transparency and cross border banking abstract we analyze the effect of central bank transparency on cross border bank activities based on a panel gravity model for cross border bank claims for 21 home and 47 destination countries from 1998 to 2010 we find strong empirical evidence that a rise in central bank transparency in the destination country on average increases cross border claims using interaction models we find that the positive effect of central bank transparency on cross border claims is only significant if the central bank is politically independent and operates in a stable economic environment central bank transparency and credibility are thus considered complements by banks investing abroad

first price auctions with resale abstract we present a simple model of first price auction with two bidders whose valuations are not identically distributed and where resale is possible between the bidders and given an explicit expression for the equilibrium strategies

energy demand in ghana a disaggregated analysis this paper presents a comprehensive analysis of energy demand in ghana by estimating demand functions for key disaggregated energy components including gasoline diesel liquefied petroleum gas lpg kerosene biomass residual fuel oil rfo and electricity our results show that energy prices income urbanization and economic structure are significant demand drivers of the different energy types in ghana with varying estimated elasticities further there is evidence of high degree of inter fuel substitution in energy demand in ghana particularly from gasoline diesel and kerosene towards lpg consumption we recommend among different policy options a customization of energy price subsidization policies especially on lpg to reduce the unintended beneficiary dilemma or spillover effect of current government policy other policies such as intensification of energy conservation programs and market entry of independent power trading companies to enhance energy service delivery through competition are also discussed

necessity as the mother of invention monetary policy after the crisis we examine recent changes in monetary policy due to the financial crisis and ask whether they are likely to be temporary or permanent we present evidence from two original surveys one of central bank governors the other of academic specialists we find that central banks in crisis countries are more likely to have resorted to new policies to have had discussions about changing mandates and to have communicated more extensively but thinking has changed more broadly for instance many central banks in non crisis countries also report implementing macro prudential measures looking forward we expect central banks to have broader mandates use macro prudential tools more widely and communicate more actively than before the crisis while there is no consensus yet about the usefulness of unconventional monetary policies we expect most of them will remain in central banks toolkits as governors who gain experience with a particular tool are more likely to assess that tool positively finally the relationship between central banks and their governments might well have changed with central banks crossing the line into the political realm more often than in the past

veto players and the choice of monetary institutions i argue that two types of veto players matter in the choice of monetary institutions party veto players and subnational governments which are strong in federal systems but weak in unitary systems a crucial issue is whether voters can readily identify the manipulation of the economy with party players a second issue concerns the national party veto player s ability to control either fiscal or monetary policy in one party unitary governments identification and control are clear parties where such governments are common prefer flexible exchange rates and dependent central banks in multiparty coalition governments in unitary systems identification is traditionally difficult and the ability to target benefits to specific constituencies under fiscal policy makes fiscal policy autonomy more attractive for coalition governments such governments prefer central banks that are politically independent but that finance government debt under federalism parties that constitute the central government have less control over fiscal policy and they prefer flexible exchange rates subnational governments do not support a dependent central bank that gives more power to the central government

the reliability of aggregate energy demand functions an application of statistical specification error tests abstract the paper examines the unbiasedness and efficiency of various energy elasticity estimates by means of statistical specification error tests the model selection procedure is applied to energy consumption data of eight industrialized countries it is found that models which describe dynamic behaviour by including the lagged dependent variable among the regressors are most frequently accepted and that long term income effects are important for all countries strong differences among countries prevail concerning the appropriateness of including a time trend elasticities derived from accepted models differ considerably among countries

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

optimal mechanisms for an auction mediator we consider a multi period auction with a seller who has a single object for sale a large population of potential buyers and a mediator of the trade the seller and every buyer have independent private values of the object the mediator designs an auction mechanism which maximizes her revenue subject to certain constraints for the traders in each period the seller auctions the object to a set of buyers drawn at random from the population the seller can re auction the object infinitely many times if it is not sold in previous interactions we characterize the class of mediator optimal auction mechanisms one of such mechanisms is a vickrey auction with a reserve price where the seller pays to the mediator a fixed percentage from the closing price

short and long run elasticities in energy demand a cointegration approach abstract short and long run energy demand elasticities are estimated on danish annual data for 1948 1990 energy consumption the real price of energy and real gdp appear to be non stationary variables cointegration and error correction methods are therefore applied all estimated parameters have the expected signs and magnitudes and no evidence is found of a structural break in energy demand caused by the increases in real energy prices since 1973 74

the influence of distributed generation penetration levels on energy markets planning of national energy policies brings new dilemmas with the introduction of distributed generators dg economic theory suggests that a perfectly competitive market would lead to efficient pricing in the absence of competition regulators play a fundamental role in attracting reasonably priced finance in order to maintain refurbish and increase the infrastructure and provide services at a reasonable cost energy market price equilibrium is mainly dependent on suppliers generators energy sources and demand represented by conventional utility grid users its behavior is similar to that of other commodities as generation becomes less centralized with the increasing economic viability of renewable energy sources new suppliers are being connected to the grid such evolution means the transition from a monopolistic market to a broader and more open environment with an increasing number of competitors we make use of variational inequalities to model a hypothetical dg market in different scenarios from monopoly to oligopoly to open market such an approach enables different equilibrium outcomes due to different dg penetration levels based on these findings we argue that energy policies for such markets must be developed according to each specific stage of the grid s lifecycle we show how energy policies and market regulations may affect such a transition which may be catastrophic if not managed properly and which is dependent on the energy mix

mixed signals central bank independence coordinated wage bargaining and european monetary union plans for the european monetary union emu are based on the conventional postulate that increasing the independence of the central bank can reduce inflation without any real economic effects however the theoretical and empirical bases for this claim rest on models of the economy that make unrealistic information assumptions and omit institutional variables other than the central bank when signaling problems between the central bank and other actors in the political economy are considered we find that the character of wage bargaining conditions the impact of central bank independence by rendering the signals between the bank and the bargainers more or less effective greater central bank independence can reduce inflation without major employment effects where bargaining is coordinated but it can bring higher levels of unemployment where bargaining is less coordinated thus currency unions like the emu may require higher levels of unemployment to control inflation than their proponents envisage they will have costs as well as benefits and these will be unevenly distributed among and within the member nations depending on the changes they induce in the status of the bank and of wage coordination

sequentially optimal auctions abstract in auctions where a seller can post a reserve price but if the object fails to sell cannot commit never to attempt to resell it revenue equivalence between repeated first price and second price auctions without commitment results when the time between auctions goes to zero seller expected revenues converge to those of a static auction with no reserve price with many bidders the seller equilibrium reserve price approaches the reserve price in an optimal static auction an auction in which the simple equilibrium reserve price policy of the seller mirrors a policy commonly used by many auctioneers is computed journal of economic literature classification numbers c78 d44 d82

the structure of residential energy demand in greece abstract this paper attempts to shed light on the determinants of residential energy demand in greece and to compare it with some other oecd countries from the estimates of the short run and long run elasticities of energy demand for the period 1965 1999 we find that residential energy demand appears to be price inelastic also we do not find evidence of a structural change probably because of the low efficiency of the energy sector we find however that the magnitude of the income elasticity varies substantially between greece and other oecd countries

stock watson dynamic ols dols and error correction modelling approaches to estimating long and short run elasticities in a demand function new evidence and methodological implications from an application to the demand for coal in mainland china in this paper robust elasticity estimates of coal demand for china are derived using annual data 1953 92 in so doing we illustrate the use of a powerful yet practically convenient and recently developed modelling procedure devised by stock and watson known as dynamic ols dols who provide evidence based on monte carlo simulations of this estimator being superior in small samples compared to a number of alternative estimators as well as being able not only to accommodate higher orders of integration but also to account for possible simultaneity within regressors of a potential demand system furthermore cointegration and error correction methods are employed to derive short run price and income elasticities estimated results are quite robust not only in terms of statistical prowess but also in terms of economic intuition and indicate that over the long run both price and income elasticities are close to unity while short run price and income elasticities are less in absolute value than their long run counterparts there seems to be some divergence in short run parameters from a subsample analysis overall results seem to imply that for china coal consumption should remain relatively constant as future modernization strategies for economic development are pursued in addition the study has clear methodological implications for estimating the long and short run elasticities in a demand function in general and in a wide variety of fields in future applied research

electricity demand analysis using cointegration and arima modelling a case study of turkey in the early 2000s the republic of turkey has initiated an ambitious reform program in her electricity market which requires privatization liberalization as well as a radical restructuring the most controversial reason behind or justification for recent reforms has been the rapid electricity demand growth that is to say the whole reform process has been a part of the endeavors to avoid the so called energy crisis using cointegration analysis and autoregressive integrated moving average arima modelling the present article focuses on this issue by both providing an electricity demand estimation and forecast and comparing the results with official projections the study concludes first that consumers respond to price and income changes is quite limited and therefore there is a need for economic regulation in turkish electricity market and second that the current official electricity demand projections highly overestimate the electricity demand which may endanger the development of both a coherent energy policy in general and a healthy electricity market in particular

the bundesbank s path to independence evidence from the 1950s the german bundesbank is frequently called the world s most independent and conservative central bank taking account of the path dependency of this reputation both quantitative data and qualitative data on german central bank law and political conflicts are used to determine the factors that contributed to this reputation in the 1950s it is shown that quantitative analysis has its limits and that law might be a misleading indicator in this respect it is rather the analysis of policy conflicts between the bundesbank and the government that yields information on the bank s path to independence

the politics of finance how capital sways african central banks abstractwhile there is a large literature on the politics of central banking its insights are difficult to translate to sub saharan africa this article addresses gaps in this literature by considering how the interests of those who control financial resources sway african central banks case studies of kenya nigeria and uganda demonstrate that variation in the sources of capital on which countries rely to finance investment helps to account for the pattern of variation in central bank policy stances the analysis further develops and probes arguments about power derived from the control of capital in the context of developing countries

on energy coefficients and ratios abstract this paper examines the methodological issues of the debates surrounding the problem of measuring energy consumption and the use of the concept of energy coefficients it also investigates the brookes hypothesis of a development effect on energy consumption the results suggest that when energy consumption is appropriately measured the energy coefficients are very consistent and fall steadily from high values tending asymptotically to one

the sensitivity of consumption of oil products to price changes an econometric investigation abstract this paper presents a small econometric model of the supply and demand of motor spirit diesel fuel oil and other gas diesel oil by modelling at this level of disaggregation it is possible to identify the dynamic structure of each market and estimate own price and cross price elasticities

partial pooling at the reserve price in auctions with resale opportunities abstract two features common to many auctions are the use of reserve prices and the existence of secondary markets for the goods being sold even in simple symmetric settings the combination of these features can preclude existence of an equilibrium in symmetric separating bidding strategies with a reserve price sufficiently far below the maximum endogenous valuation a symmetric equilibrium still exists but with some types pooling at the reserve the optimal reserve price depends not only on the joint distribution of bidders information before and after the auction but also on how surplus is divided in the secondary market journal of economic literature classification numbers d44 c7 l1 d82

modelling and forecasting the demand for coal in china in contrast with developed countries coal is the major energy source of china in view of its importance this paper attempts to analyse and forecast the country s demand for coal as it moves towards the next century to do this we have applied three different methods to contrast their performances in fitting the chinese data engle granger s error correction model hendry s error correction model and hendry s general to specific approach it is found that the engle granger approach outperforms the other two in terms of having the smallest ex post forecast errors using the engle granger approach the model predicts that the chinese economy will experience a 5 shortage in the year 2000

transparency democratic accountability and the economic consequences of monetary institutions debates about the appropriate mix between autonomy and accountability of bureaucrats are relevant to numerous areas of government action i examine whether there is evidence of a tradeoff between transparency democratic accountability and the gains from monetary delegation i begin by presenting a simple theoretical model which suggests that central banks that are transparent in the sense of publishing their macroeconomic forecasts will find it easier to acquire a reputation despite making central banks more subject to outside scrutiny then monetary transparency can lead to improved economic outcomes i also consider arguments about the effect of accountability provisions involving parliamentary oversight and control over central bankers the paper then uses a new data set to examine these issues empirically focusing on a natural experiment involving disinflation costs under different central banking institutions during the 1990s results suggest that countries with more transparent central banks face lower costs of disinflation while accountability provisions have no clear effect on disinflation costs my results also concord with earlier findings that the effect of monetary institutions is conditional on other features of the political environment

price stability and central bank independence discipline credibility and democratic institutions despite mixed empirical evidence in the past two decades central bank independence cbi has been on the rise under the assumption that it ensures price stability using an encompassing theoretical approach and new yearly data for de jure cbi seventy eight countries 1973 2008 we reexamine this relationship distinguishing the role of printing less money discipline from the public s beliefs about the central bank s likely actions credibility democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions cbi in democracies should be directly reflected in lower money supply growth besides being more disciplinarian it also ensures a more robust money demand by reducing inflation expectations and therefore inflation empirical results are robust and support a discipline effect conditioned by political institutions as well as a credibility effect

environmental kuznet s curve for india evidence from tests for cointegration with unknown structuralbreaks this study revisits the cointegrating relationship between carbon emission energy use economic activity and trade openness for india using threshold cointegration tests with a view to testing the environmental kuznet s curve hypothesis in the presence of possible regime shift in long run relationship of the variables for the period 1971 to 2008 the article confirms the existence of regime shift or threshold cointegration among the variables and environmental kuznet s curve for india it challenges previous empirical works for india which fail to establish cointegrating relationship among these variables and explains its logical and econometric reasons the study finds that the carbon emission is highly elastic with respect to real per capita income and energy use in india this finding is critical and warns successful design and execution of energy and environmental policy framework which would pave the low carbon sustainable growth path inindia

short and long run elasticities in us residential electricity demand a co integration approach abstract co integration techniques show promise in the analysis of short and long run effects of economic variables on energy use we use these techniques to develop an error correction model of annual us residential electricity demand we construct equipment stock indices and estimate the model for 1949 1993 our analysis suggests a structural shift in consumption during the 1960s we discuss reasons for this shift report the short and long run elasticities provide forecasts for 1994 1995 and compare the model s forecasts with other published forecasts

elasticities science or fiction abstract apart from discrepancies in statistical data series the most frequent source of inconsistencies among elasticity estimates is the model specification and the interpretation of empirical results this paper investigates this issue and in particular highlights the misconception that elasticities can scientifically and uniquely be determined by econometric techniques however it is common knowledge that econometric methods constitute a very good tool for analysing the past thus the main message of this exercise is that in the absence of complete specification there are important trends in the elasticities themselves such trends are very crucial and need to be interpreted if elasticities are to be used for forecasting purposes

the nexus between carbon emissions energy consumption and economic growth in middle east countries a panel data analysis abstract the environmental kuznets curve ekc hypothesis assumes that there is an inverted u shaped relationship between environmental degradation and income per capita in other words as a country grows it is assumed that its environmental quality improves in this study we aim to test the ekc hypothesis for 12 middle east countries during the period 1990 2008 by employing recently developed panel data methods our results provide evidence contrary to the ekc hypothesis we found evidence favorable to the u shaped ekc for 5 middle east countries whereas an inverted u shaped curve was identified for only 3 middle east countries furthermore there appear to be no causal links between income and co 2 emissions for the other 4 countries regarding the direction of causality there appears to be a unidirectional causality from economic growth to energy consumption in the short run in the long run however the unidirectional causality chain runs from energy consumption and economic growth to co 2 emissions we also suggest some crucial policy implications depending on these results

energy consumption and economic activity in industrialized economies a note abstract in industrialized countries the income elasticity of primary energy demand is not far off unity furthermore it can be argued that there is little use in distinguishing between short and long term income elasticities a long term income elasticity does not have a direct impact on energy demand and hence it is of doubtful use in energy demand projections via an aggregate oecd model it was estimated that the short term impact of prices on primary energy demand is about 0 15 while the long term impact is 0 43 but increasing over time

central bank reform liberalization and inflation in transition economies an international perspective this paper develops extensive new data on the legal independence of new central banks in 26 former socialist economies fse this data is constructed using the codification system for measuring legal independence developed in cukierman webb and neyapti 1992 and in chapter 19 of cukierman 1992 this makes it comparable with earlier data on central bank independence cbi in the industrial democracies and in non fse developing countries and permits experimentation with alternative indices of cbi like those reviewed in eijffinger and van keulen 1995 the new indices of independence indicate that central bank cb reform in the fse during the nineties has been quite ambitious in spite of the large price shocks induced by the transformation from plan to market reformers in those countries chose to create central banks with levels of legal independence that are substantially higher on average than those of developed economies during the eighties based on data from 1989 through 1998 the evidence in the paper suggests that cbi is unrelated to inflation during the early stages of liberalization but for sufficiently high and sustained levels of liberalization and controlling for variables like price decontrols and wars legal cbi and inflation are significantly and negatively related these findings are consistent with the view that legal cbi no matter how high cannot contain the powerful inflationary impact of wide scale liberalization of formerly controlled prices but once the process of liberalization has gathered sufficient momentum legal independence becomes effective in slowing inflation down and the cumulative liberalization index developed by de melo et al 1996 becomes relatively less important the paper also presents evidence on factors that affect the level of cbi and examines the relation between inflation and cbi within a broader sample composed of the transition and of the developed economies

secret reserve prices in a bidding model with a re sale option this paper presents an auction model in which the seller may choose not to sell in spite of receiving a bid above the announced reserve price such behavior is seen frequently in auctions yet would be suboptimal within most existing models here the seller uses resale to signal information about the object s value that could not be easily communicated via a reserve price announcement the model predicts that bids for reauctioned objects increase relative to initial bids and that on average prices of both reauctioned items and those sold at initial auction rise as delay in reauctioning increases copyright 1997 by american economic association

central bank independence an update of theory and evidence this paper reviews recent research on central bank independence cbi after we have distinguished between independence and conservativeness research in which the inflationary bias is endogenised is reviewed finally the various challenges that have been raised against previous empirical findings on cbi are discussed we conclude that the negative relationship between cbi and inflation is quite robust

central bank independence and macroeconomic performance some comparative evidence this note uses information on a sample of sixteen oecd countries to assess the relationship between central bank independence and macroeconomic performance as previous work suggests politically controlled central banks are more likely to pursue policies that lead to high and variable inflation however the authors find little evidence that political control of central bank policy has any impact on measures of the level or variability of growth unemployment or the ex ante real interest rate copyright 1993 by ohio state university press

energy demand and environmental taxes the case of greece the purpose of this paper is to analyze the effects that energy taxes may have on reducing environmental pollution in greece we study the demand for residential energy for the period 1965 1998 and on the basis of these estimates we make forecasts for co2 emissions in the coming years furthermore we develop alternative scenarios for tax changes and study their effects on co2 emissions according to our findings the harmonization of the greek energy taxes to the average european union levels implies an increase of total co2 emissions by 6 annually if taxes are raised however to the highest european union levels the co2 emissions are restricted significantly these empirical findings may indicate that environmental taxation cannot be the unique instrument for combating pollution

fiscal policymaking and the central bank institutional constraint una vez mas new latin american evidence evidence on the degree to which central bank independence can constrain government budget deficits remains surprisingly scarce this paper finds empirical support for the importance of the central institutional constraint for a 14 country sample of latin american countries over 1990 2012 these results suggest that greater central bank autonomy has indeed helped reign in fiscal excesses in a region that has been plagued by inflationary deficit expansion for much of the post war period the ability to potentially discipline government policy adds to an independent central bank s inherent role in adding to the checks and balances essential to a well functioning democracy

inflation and central bank independence a meta regression analysis using 59 studies we perform a meta regression analysis of studies examining the relationship between inflation and central bank independence cbi the studies considered are very different with respect to the cbi indicator used the sample of countries and time periods covered model specification estimators used and publication outlet we conclude that there is a significant publication bias however we also find a significant genuine effect of cbi on inflation differences between studies are not caused by differences in cbi indicators used

an analysis of factors affecting price volatility of the us oil market abstract this paper studies the price volatility of the crude oil market by examining the market structure of opec the stable and unstable demand structure and related elasticity of demand in particular the impacts of prosperity and recession of the world economy and the resulting demand shift on crude oil price are investigated the error correction model is used to estimate the demand relations and related elasticity the income effect on demand functions is evaluated to shed light on future prices a simulation of potential oil prices under different scenarios on a cut of one million barrels per day by opec is evaluated from our simulation given the 4 cut in opec production the oil price is expected to increase unless the recession is severe the magnitude and scope of a price hike would be diminished if non opec or domestic production were greatly expanded

world crude oil and natural gas a demand and supply model abstract this paper examines world markets for crude oil and natural gas over the period 1918 1999 it analyzes the time series properties of output and prices and estimates demand and supply elasticities during 1918 1973 and 1973 1999 oil and gas prices were stable during the first period they became volatile afterwards reflecting deep changes in the market structure following the oil shock in 1973 demand price elasticities were too low however demand income elasticities were high supply price elasticities were also too low the elasticity estimates help to explain the market power of the oil producers and price volatility in response to shocks and corroborate elasticity estimates in energy studies

the energy demand elasticity in relation to gross domestic product a relevant indicator abstract the value of the ratio of energy consumption growth to economic growth forms the subject of strenuous debates particularly in france this article attempts to show by taking data over an extended period for the industrialized countries that one should treat with caution the values this indicator can have any resulting energy forecast would be fragile consequently one may say that it is the notion of the elasticity itself which is most often used improperly this indicator is too global and is useful only ex post

partially independent central banks politically responsive governments and inflation theories of central bank independence have more exact implications regarding inflation in different political economic environments than generally understood or empirically examined they imply that inflation in any given country time will be a weighted average of what it would be if the central bank completely controlled monetary policy and what it would be if the government completely controlled it with the degree of central bank independence weighting the former an equation embodying this theoretical expectation is estimated by constrained least squares from a time series cross section of inflation rates in developed democracies since the bretton woods era the results confirm that the antiinflationary benefit of central bank independence is not constant but rather depends on every variable in the broader politicaleconomic environment to which wholly autonomous central banks and governments would respond differently conversely the inflationary impacts of all such political economic variables depend on the degree of central bank independence

checks and balances private information and the credibility of monetary commitments the authors develop and test several new hypotheses about the anti inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government policies theory provides strong reason to believe that while central bank independence will prove more effective as a commitment mechanism in countries where multiple players in government have veto power checks and balances the number of veto players will have no effect on the credibility of exchange rate pegs conversely the authors argue that central bank independence does not solve the problems of commitment that arise when citizens are imperfectly informed about the contribution of government policy to inflation exchange rate pegs however mitigate these problems the authors present extensive evidence from cross country tests using newly developed data that provide strong support for their propositions

indivisibilities inferior goods and giffen goods the paper shows how the presence of an indivisible good can cause a divisible good to be inferior and possibly giffen indivisibility is shown to be central to a discussion by j r hicks on inferior goods

federalism and central bank independence the politics of german monetary policy 1957 92 two channels of political control allow elected politicians to influence monetary policy first political threats to the status structure or very existence of the central bank may force central bankers to comply with politically motivated demands on monetary policy second politicians may use their powers of appointment to ensure that central bank appointees share their electoral and party political goals this paper derives the monetary policy outcomes obtained as a function of the degree of central bank independence zero partial or full and central bankers types partisans or technocrats based on a case study of the 1957 and 1992 institutional changes to the german central banking system and a regression analysis covering the period in between i argue that the formal independence of the system is protected by its embeddedness in the institutions of german federalism and by the federalist components of its decentralized organizational structure the behavioral independence of the german central bank fluctuates over time with the party control of federalist veto points the bundesbank is staffed with nonpartisan technocrats who are partially insulated from political pressures

the eurotower strikes back crises adjustments and europe s austerity protests the 2008 global financial crisis came with fears and for some hopes that a new wave of public mobilization would emerge in industrialized countries especially throughout the european union eu the epicenter of the crisis large protests were expected yet the energy with which social groups mobilized against the proposed austerity measures quickly fizzled this article provides new evidence for why this was the case in line with neo keynesian theory we argue that the interest rate adjustments and political announcements of the european central bank ecb limited the potential for mass unrest in the member states of the economic and monetary union emu affected by the crisis we provide evidence for our argument with yearly panel data and a new original data set of monthly political protests between 2001 and 2013 our analyses support the hypothesis that the ecb was able to successfully assuage dissatisfaction with the limited reform options of the eurozone member states in the wake of the eurocrisis

taking time seriously dramatic world change has stimulated interest in research questions about the dynamics of politics we have seen increases in the number of time series data sets and the length of typical time series but three shortcomings are prevalent in published time series analysis first analysts often estimate models without testing restrictions implied by their specification second researchers link the theoretical concept of equilibrium with cointegration and error correction models third analysts often do a poor job of interpreting results the consequences include weak connections between theory and tests biased estimates and incorrect inferences we outline techniques for estimating linear dynamic regressions with stationary data and weakly exogenous regressors we recommend analysts 1 start with general dynamic models and test restrictions before adopting a particular specification and 2 use the wide array of information available from dynamic specifications we illustrate this strategy with data on congressional approval and tax rates across oecd countries

decentralization and inflation commitment collective action or continuity do political and fiscal decentralization make it easier or harder to control inflation statistical analysis of average annual inflation rates in a panel of 87 countries in the 1970s and 1980s found no clear relationship between decentralization and the level of inflation political decentralization however does appear to reduce change in countries relative inflation rates over time by creating additional veto players federal structure may lock in existing patterns of monetary policy whether inflationary or strict among the mostly developed countries that started with low inflation inflation tended to increase more slowly in federations than in unitary states among the mostly developing countries that started with high inflation inflation tended to increase faster in the federations there is evidence that political decentralization locks in a country s degree of practical central bank independence whether high or low and the relative hardness or softness of budget constraints on subnational governments

environmental regulation of households an empirical review of economic and psychological factors abstract the literature on sustainable consumption and environmental regulation of household behavior is dominated by conceptual and normative approaches as a result many suggestions lack a firm empirical basis to overcome this deficiency econometric studies in three areas of environmentally relevant activities of households are reviewed residential use of energy generation of solid waste and recycling and residential use of water next to price and income elasticities attention is devoted to individual socio economic features and psychological factors such as attitudes knowledge perceptions and values potential psychological determinants and related insights are further examined by discussing a range of representative and illustrative statistical psychological studies of environmental behavior one important general finding is that there are very few empirical studies that systematically combine socio economic and psychological determinants a range of insights for environmental policy is derived and research recommendations are offered

exchange rate regimes and independent central banks a correlated choice of imperfectly credible institutions theory and empirical evidence show that low inflation is a precondition for economic growth independent central banks and fixed exchange rates are institutional mechanisms that help keep inflation low by lending monetary policy credibility to governments however the two institutions are commonly analyzed as substitutes that tie the hands of inflation prone governments thus the literature has difficulties describing why governments would adopt both institutions and the interaction between them this paper presents a model that allows policymakers the simultaneous choice of monetary institutions and shows that imperfectly credible institutions will overlap when exchange rates are fixed but adjustable and central bank independence is not fully ascertainable governments choose both institutions more generally the paper generates hypotheses about the conditions that make fixed exchange rates and independent central banks complements or substitutes thus contributing to an explanation of the diversity of global monetary institutions in the post bretton woods period

auctions with resale markets an application to u s forest service timber sales when bidders anticipate an opportunity for resale trade the value of winning an auction is determined in part by the option values of buying and selling in the secondary market one implication is that a bidder s willingness to pay at an auction increases with the expected level of competition between resale buyers empirical evidence from auctions of timber contracts supports this prediction and rejects standard models that ignore resale the estimated effect is smaller after policy changes expected to diminish the prevalence of resale additional evidence supports the predicted presence of a common value element introduced by the resale opportunity

auction and the informed seller problem a seller possessing private information about the quality of a good attempts to sell it through a second price auction with announced reserve price the choice of a reserve price transmits information to the buyers we characterize the equilibria with monotone beliefs of the resulting signalling game and show that they lead to a reduced probability of selling the good compared to the symmetric information situation we compare the unique separating equilibrium of this signalling game to the equilibrium of a screening game in which an uninformed monopoly broker chooses the trading mechanism we show that the ex ante expected probability of trade may be larger with a monopoly broker as well as the ex ante total expected surplus

does central bank independence really matter new evidence for developing countries using a new indicator abstract this paper provides a new indicator for central bank independence cbi based on the turnover rate of central bank governors for 82 developing countries over the period 1980 1989 using this new indicator it is concluded that this proxy for cbi is related to inflation only if the high inflation countries are included in the sample the view that both cbi and inflation are caused by effective opposition towards inflation is not supported using both the extreme bound analysis and sala i martin s method we do not find evidence that cbi is robustly related to economic growth

internationalization and changes in tax policy in oecd countries the importance of domestic veto players this article examines the role that economic and political factors played in tax reform in organization for economic cooperation and development oecd countries from 1986 to 1990 some writers argue that economic integration forced states to reform their tax systems the authors findings indicate that economic openness had an indirect effect on the level of change in marginal tax rates the institutional structure of a country was most important countries that had only one veto player or only one institution or party whose approval was necessary for a bill to become law enacted more sweeping reform than states that had more than one veto player these results suggest that even when international or domestic economic factors might dictate a change in policy reform will not be as sweeping in countries in which agreement among several institutions and or parties is necessary

checks and balances and the supply of central bank independence abstract the paper analyzes the institutional conditions under which policymakers can credibly commit to an independent central bank and thereby mitigate the well known time consistency problem in monetary policy it is shown theoretically that granting independence via a statute is only credible for legislative systems with at least two heterogeneous decision making bodies which both have veto rights for example bicameral systems this thesis is supported by empirical evidence the legal independence of central banks is significantly higher in those oecd countries whose legislative processes are characterized by extensive checks and balances furthermore the negative relation between legal independence and inflation is larger in countries with checks and balances than in countries without checks and balances

media freedom political knowledge and participation this paper examines the relationship between media freedom from government control and citizens political knowledge political participation and voter turnout to explore these connections i first examine media freedom and citizens political knowledge in thirteen central and eastern european countries with data from freedom house s freedom of the press report and the european commission s candidate countries eurobarometer survey next i consider media freedom and citizens political participation in 60 countries using data from the world values survey finally i investigate media freedom and voter turnout in these same 60 or so countries with data from the international institute for democracy and electoral assistance i find that where government owns a larger share of media outlets and infrastructure regulates the media industry more and does more to control the content of news citizens are more politically ignorant and apathetic where the media is less regulated and there is greater private ownership in the media industry citizens are more politically knowledgeable and active these results are robust to sample specification and alternative measures of media freedom

how does financial development alter the impact of uncertainty abstract how does the impact of uncertainty on output vary with financial development levels we investigate this question empirically using a quarterly panel data set of 50 countries between 1971 and 2009 and an instrumental variables model the results support the conjecture that financial development mitigates the negative impact of uncertainty on output at the lower end of the distribution of the financial development levels one standard deviation increase in uncertainty decreases output by more than two standard deviations at the higher end of financial development the impact on output is statistically insignificant these results suggest that strengthening the financial system and increasing liquidity and credit availability improce the robustness of growth performance during periods of uncertainty

fighting inflation in a transitional regime russia s anomalous stabilization russia s recent experience fighting inflation dramatic success in 1995 96 after repeated failures in 1992 94 poses a challenge for existing theories of the politics of macroeconomic stabilization monthly inflation rates fell to close to zero despite a deeply unpopular president distracted by heart disease a government penetrated by economic lobbies a far from independent central bank a parliament dominated by opposition factions a lively election season and the fiscal pressures of fighting a regional war the article reviews this experience shows its incompatibility with existing political economy theories and proposes an explanation with implications for other reforming regimes success was achieved by offering previous beneficiaries from inflation major commercial banks and subsidized sectors other sources of government protected rents that did not increase the money supply even when expropriating powerful rent seekers is politically infeasible it is sometimes possible to trade them less inflationary rents for ones that are more inflationary

globalization pressures and the state the worldwide spread of central bank independence the authors examine the impact of globalization on state structures in the specific instance of the central bank following the world system world society and neoinstitutional perspectives in sociology they assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment the authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases they also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries they find support for their hypotheses with information on 71 countries between 1990 and 2000

the institutional environment for infrastructure investment the empirical evidence that links political institutions to economic outcomes has grown dramatically in recent years however virtually all of this analysis is undertaken using data from the past three decades this paper extends this empirical framework by performing a two century long historical analysis of the determinants of infrastructure investment in a panel of over 100 countries the results demonstrate that political environments that limit the feasibility of policy change are an important determinant of investment in infrastructure copyright 2002 oxford university press

tests for structural change in us oil consumption 1967 1982 abstract the purpose of this paper is to test us oil consumption for structural change over the period 1967 1982 a frequently used functional form is posited for total petroleum consumption as well as for gasoline distillate and residual fuel tests for abrupt change chow and gradual or conservation like change durbin brown evans and farley hinnich mcguire are employed at special break points 1973 embargo 1979 iranian crisis 1980 recession to check for abrupt changes and across years in general to detect gradual shifts both abrupt and gradual changes are found although the last five years may be the beginning of a new non changing period

mobile capital domestic institutions and electorally induced monetary and fiscal policy the literature on global integration and national policy autonomy often ignores a central result from open economy macroeconomics capital mobility constrains monetary policy when the exchange rate is fixed and fiscal policy when the exchange rate is flexible similarly examinations of the electoral determinants of monetary and fiscal policy typically ignore international pressures altogether we develop a formal model to analyze the interaction between fiscal and monetary policymakers under various exchange rate regimes and the degrees of central bank independence we test the model using data from oecd countries we find evidence that preelectoral monetary expansions occur only when the exchange rate is flexible and central bank independence is low preelectoral fiscal expansions occur when the exchange rate is fixed we then explore the implications of our model for arguments that emphasize the partisan sources of macroeconomic policy and for the conduct of fiscal policy after economic and monetary union in europe

demand elasticities in oecd dynamical aspects abstract four models with different lag structures are used to express final energy demand in oecd from 1960 1982 as a function of real gdp and average energy price the income and long run price elasticities are not significantly dependent on the model specification but the koyck lag scheme estimated in its distributed lag form is found to give the most satisfactory results the statistical properties of the data together with evidence of trends in the elasticities both suggest that the period of falling real prices prior to 1971 is not comparable to the present period for the period after 1971 an income elsticity of 1 02 and a long run price elasticity of 0 37 are obtained

energy consumption and economic activity in industrialized countries the dynamic aggregate time series relationship abstract most econometric studies suggest that the income elasticity of demand for energy is approximately unity for the developed market economies it is shown that over the period 1950 1978 the long run income elasticity is substantially higher than unity in terms of a ces energy demand function this result reflects the application of a generalized dynamic estimation methodology where serial correlation is regarded as a diagnostic guide to distributed lag fitting price elasticities are also estimated but these are in line with conventional estimates

bidding to lose auctions with resale a losing bidder can still purchase the prize from the winner after the auction we show why a strong bidder may prefer to drop out of the auction before the price has reached her valuation and acquire the prize in the aftermarket a strong bidder may be in a better bargaining position in the aftermarket if her rival won at a relatively low price so it can be common knowledge that in equilibrium a weak bidder will win the auction and even without uncertainty about relative valuations resale will take place the possibility of reselling to a strong bidder attracts weak bidders to participate in the auction and raises the seller s revenue

speculation in standard auctions with resale in standard auctions resale creates a role for a speculator a bidder who is commonly known to have no use value for the good on sale we study this issue in environments with symmetric independent private value bidders for second price and english auctions the efficient value bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits first price and dutch auctions have an essentially unique equilibrium and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders the value distribution and the discount factor speculators do not make profits in first price or dutch auctions

energy demand substitution and environmental taxation an econometric analysis of eight subsectors of the danish economy abstract this research contains an econometric analysis of energy demand in trade and industry which allows for substitution between electricity and other energy carriers when relative prices change the presence of substitution suggests that taxation can be a means of changing the energy input mix in a more environmental friendly direction for eight subsectors of the danish economy time series 1966 2011 are modeled by means of partial cointegrated vars long run demand relations are identified for all subsectors and robust price elasticities are supported in five cases the results are used in a small impulse response experiment which suggests a potential for taxation to induce substitution of electricity for fossil based energy

a political explanation of variations in central bank independence although central banks possess a similar function across the industrial democracies their institutional structures their levels of independence differ greatly my explanation of this variation emphasizes the informational asymmetries of monetary policymaking government ministers have informational advantages in the policy process potentially creating conflicts with backbench legislators and in a multiparty government coalition partners an independent central bank can help alleviate these conflicts politicians will choose an independent bank 1 if government ministers party legislators and coalition partners have different monetary policy incentives and 2 if government ministers fear that party legislators and coalition partners will withdraw their support over a policy dispute i statistically test the argument against the cross national variation of central bank institutions i also use the theoretical framework to examine episodes of institutional choice and reform in germany britain and italy

giffen behavior and subsistence consumption this paper provides the first real world evidence of giffen behavior i e upward sloping demand subsidizing the prices of dietary staples for extremely poor households in two provinces of china we find strong evidence of giffen behavior for rice in hunan and weaker evidence for wheat in gansu the data provide new insight into the consumption behavior of the poor who act as though maximizing utility subject to subsistence concerns we find that their elasticity of demand depends significantly and nonlinearly on the severity of their poverty understanding this heterogeneity is important for the effective design of welfare programs for the poor jel d12 012

political and monetary institutions and public financial policies in the industrial countries institutions and policies vittorio grilli donato masciandaro and guido tabellini why do countries as similar as the industrialized oecd countries go through such different experience in terms of public deficits and debts or in terms of inflation the answer cannot come from macroeconomic policy responses to different disturbances nor from the principles of optimal taxation but rather from politics this article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers the electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts what seems to matter most it is found is the effect of the durability of governments governments with short horizons act myopically and never quite tackle the hard choices such governments typically exist in countries with an electoral system favouring many small political parties central bank independence promotes low inflation with no apparent costs in terms of real economic performance irrespective of the political institutions in fact there is no link between monetary and fiscal discipline these findings carry powerful implications for countries facing high indebtedness or stubborn inflation but also for the construction of the european economic and monetary union

economic modelling of energy services rectifying misspecified energy demand functions abstract although it is well known that energy demand is derived since energy is required not for its own sake but for the energy services it produces such as heating lighting and motive power energy demand models both theoretical and empirical often fail to take account of this feature in this paper we highlight the misspecification that results from ignoring this aspect and its empirical implications biased estimates of price elasticities and other measures and provide a relatively simple and empirically practicable way to rectify it which has a strong theoretical grounding to do so we develop an explicit model of consumer behaviour in which utility derives from consumption of energy services rather than from the energy sources that are used to produce them as we discuss this approach opens up the possibility of examining many aspects of energy demand in a theoretically sound way that have not previously been considered on a widespread basis although some existing empirical work could be interpreted as being consistent with this type of specification while this formulation yields demand equations for energy services rather than for energy or particular energy sources these are shown to be readily converted without added complexity into the standard type of energy demand equation s that is are typically estimated the additional terms that the resulting energy demand equations include compared to those that are typically estimated highlight the misspecification that is implicit when typical energy demand equations are estimated a simple solution for dealing with an apparent drawback of this formulation for empirical purposes namely that information is required on typically unobserved energy efficiency indicates how energy efficiency can be captured in the model such as by including exogenous trends and or including its possible dependence on past energy prices the approach is illustrated using an empirical example that involves estimation of an aggregate energy demand function for the uk with data over the period 1960 2011

a single equation study of u s petroleum consumption the role of model specification the price responsiveness of u s petroleum consumption began to attract a great deal of attention following the unexpected and substantial oil price increases of 1973 74 there have been a number of large multi equation econometric studies of u s energy demand since then which have focused primarily on estimating short run and long run price and income elasticities of individual energy resources coal oil natural gas electricity for various consumer sectors residential industrial commercial following these early multi equation studies there have been several single equation studies of aggregate u s petroleum consumption 4 3 9 5 6 these singleequation studies have found that u s demand for petroleum products can be quite price inelastic in the short run estimates range from 0 04 to 0 08 but exhibits long lags of anywhere from 6 to 10 years that yield long run price elasticities ranging from 0 25 to 0 56 income or gnp elasticities are usually found to be much higher 0 69 to 1 13 with the complete response often assumed to occur in the current period single equation studies are often justified as efficient shortcuts or reduced forms for identifying the central behavioral aspects of a particular market the main issue addressed in this paper is the extent to which the existing empirical results from single equation studies of aggregate u s petroleum consumption have been influenced by the researchers choice of dynamic model specification this question is relevant because the econometric methodology usually followed in such studies is to start with a relatively simple specification such as a partial adjustment model or some kind of a distributed lag structure on price alone this initial specification choice is rarely justified except possibly to cite its previous success in similar work given that models which produce insignificant or perverse coefficient estimates are not usually publishable the reported specification is almost certain to provide reasonable statistically significant estimates with the correct signs the primary diagnostic test of the chosen specification is the durbin watson test statistic or perhaps durbin s h statistic in the presence of lagged dependent variables when this test gives evidence of serial correlation in the residuals the usual response is to correct for this by estimating a first or second order autoregressive model ar 1 or ar 2 should this easilyimplemented correction not solve the problem there is a tendency to chalk it up to some kind 1 an excellent survey of these results may be found in bohi 2 159

money and monetary stability in europe 1300 1914 abstract this paper investigates the determinants of monetary stability in europe from the late medieval era until world war i through this period the anchor for monetary policy was the silver or gold value of the monetary unit states however frequently abandoned this anchor some depreciating their monetary units against silver and gold less than 10 fold and others more than 10 000 fold between 1500 and 1914 to understand the determinants of these differences we compile a new and comprehensive monetary history dataset for all major states in europe and test alternative theories we find strong evidence that political factors and in particular fiscal capacity political regime and warfare explain patterns of monetary stability this finding is robust to addressing endogeneity controlling for the instability induced by the mechanics of the monetary system and accounting for the impacts of new monetary technologies and the advent of fiat standard

two illustrations of the quantity theory of money of two central implications of the quantity theory of money that a given change in the rate of change in the quantity of money induces i an equal change in the rate of price inflation and ii an equal change in nominal rates of interest the illustrations were obtained by comparing moving averages of the three variables in question using quarterly u s time series for the period 1953 77 readers may find the results of interest as additional confirmation of the quantity theory as an example of one way in which the quantity theoretic relationships can be uncovered via atheoretical methods from time series which are subject to a variety of other forces or as a measure of the extent to which the inflation and interest rate experience of the postwar period can be understood in terms of purely classical monetary forces the theoretical background of the study is reviewed very briefly as it is familiar material in the next section the data processing methods are described and rationalized in section ii the illustrations