assessing gas transit risks russia vs the eu abstract this paper proposes a transit risk index tri designed to assess the riskiness of pipeline gas imports and to study the effect of introducing new gas routes tri controls for gas dependency transit route diversification political risks of transit pipeline rupture probability and the balance of power between supplying and consuming countries along the transit route evaluating tri for the eu russia gas trade we show that the introduction of the nord stream pipeline would further widen already large disparities in gas risk exposure across the eu member states the gas risk exposure of the member states served by nord stream would decline in contrast eu countries not connected to nord stream but sharing other russian gas transit routes with the nord stream countries would face greater gas risk exposure we discuss the implications of our analysis for the design of the common energy policy in the eu

civil unrest in north africa risks for natural gas supply abstract the uprising and military confrontation in libya that began in february 2011 has led to disruptions of gas supplies to europe an analysis of how europe has compensated for these missing gas volumes shows that this situation has not affected security of supply however this situation would change if the north african uprising were to spread to algeria since algeria is a much more important gas supplier to europe than is libya more severe consequences would be likely applying a natural gas infrastructure model we investigate the impact of supplier disruptions from both countries for a summer and winter period our analysis shows that disruptions in the low demand summer months could be compensated for mainly by lng imports into several european countries an investigation of a similar situation at the beginning of the winter shows that security of supply would be severely compromised and that disruptions to italian consumers would be unavoidable the analysis thereby highlights the importance of taking the political stability of supply countries into account when assessing the security of european gas imports

measuring vulnerability to shocks in the gas market in south america abstract with a strong global demand for some 30 years natural gas is a particular challenge for countries of south and central america since each cubic meter of natural gas that is consumed is produced in this continent it therefore seems appropriate to consider the risk of a collision gas and its effects on the countries most dependent on gas either as producers or as consumers thus in this paper we study the vulnerability of gas in several countries on four ratios developed by cabalu 2010 once calculated from empirical data these ratios helped to determine indicators and to classify countries according to their vulnerability in the event of a gas shock sudden rise in prices a picture emerges which represents an indicative classification of the countries

green revolution land reform and household income distribution in the philippines income of agricultural households consists of returns to labor capital and land from farming supplemented mainly by labor earnings from nonfarm sources agricultural technology affects farmers income through its effect on factor demands and factor prices which in turn induce changes in the allocation of farmers own resources to different uses income from farming is also affected by village institutions such as land tenure which governs the distribution of income between landlords and tenants as well as resource allocations

skills schooling and household income in ghana this article examines the impact of cognitive skills on the income of households in ghana it uses scores on mathematics and english tests to measure cognitive skills and estimates the returns to these skills based on farm profit off farm income and total income the article uses powell s censored least absolute deviations and symmetrically trimmed least squares estimators to estimate farm and off farm income in contrast to heckman s two step or the tobit estimator powell s estimators are consistent in the presence of heteroscedasticity and are robust to other violations of normality the results show that cognitive skills have a positive effect on total and off farm income but do not have a statistically significant effect on farm income

the quantitative importance of news shocks in estimated dsge models we estimate a dynamic stochastic general equilibrium dsge model with several frictions and both unanticipated and news shocks using quarterly u s data from 1954 to 2004 and bayesian methods we find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output consumption and investment growth interest rate and the relative price of investment the unanticipated shock to the marginal efficiency of investment is the dominant shock accounting for over 45 of the variance in output growth news shocks account for less than 15 of the variance in output growth within the set of news shocks nontechnology sources of news dominate technology news with wage markup news shocks accounting for about 60 of the variance share of both hours and inflation we find that in the estimated dsge model i the presence of endogenous countercyclical price and wage markups due to nominal frictions substantially diminishes the importance of news shocks relative to a model without these frictions and ii while there is little change in the estimated contributions of technology news when we restrict wealth effects on labor supply the contributions of nontechnology news shocks are relatively more sensitive

rationally inattentive seller sales and discrete pricing prices tend to remain constant for a period of time and then jump in the literature this rigidity is usually interpreted to reflect a cost of adjusting prices this article shows that price rigidity can alternatively reflect optimal price setting when there are no adjustment costs namely if the seller is rationally inattentive the model generates non trivial pricing patterns that are consistent with the data and that are hard to explain with the traditional adjustment cost model in particular prices are adjusted frequently but move back and forth between a few given values hazard functions are downward sloping and responses to persistent shocks are sluggish these results are obtained in a model that implements rational inattention without simplifying assumptions on the functional forms of the processed signals

intergenerational transfers in philippine rice villages gender differences in traditional inheritance customs abstract this paper examines education land and nonland asset transfers from parents to children in five rice villages in the philippines a model with family fixed effects explains transfers better than either individual heterogeneity or observed parent and child characteristics without family fixed effects families facing different land constraints exhibit significantly different patterns of educational investment in children in a subsample with completed inheritance daughters receive less education land and total inheritance but are compensated with nonland assets parents also exhibit preferential behavior towards children of the same gender daughters of better educated mothers receive more land nonland assets and total inheritance better educated fathers give land preferentially to sons but favor daughters in education

the timing and magnitude of retail store markdowns evidence from weekends and holidays we examine daily prices of eight goods at seventeen retail stores collected in ann arbor michigan over a four month period from november 1 to february 28 we focus on weekly and seasonal price patterns and on the frequency of price markdowns or sales there were frequent markdowns in the intensive shopping period prior to christmas and a tendency for such sales to occur on weekends we interpret these findings as evidence that a significant number of markdowns are timed to occur when shopping intensity is exogenously high we complement the imperfect information based motives for sales in the literature by contributing an additional element based on the role of bulk shopping and increasing returns in the shopping technology

patterns of retail price variation we examine retail price variation across a range of goods and regions of the united states we find that the typical grocery product has a regular price and stays at that price at least 50 of the time and that most deviations from that regular price are downward temporary discounts or sales while infrequent account for 20 to 50 of the annual variation in retail prices for most product categories although existing models of retail sales yield predictions consistent with some aspects of the retail pricing distributions all of these models fail to explain other important aspects of retail pricing identified here

the case for open market purchases in a liquidity trap prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short term nominal interest rate renders open market operations ineffective for achieving macroeconomic stabilization goals we show that even were this the case there remains a powerful argument for large scale open market operations as a fiscal policy tool as we also demonstrate however this same reasoning implies that open market operations will be beneficial for stabilization as well even when the economy is expected to remain mired in a liquidity trap for some time thus the microeconomic fiscal benefits of open market operations in a liquidity trap go hand in hand with standard macroeconomic objectives motivated by japan s recent economic experience we use a dynamic general equilibrium model to assess the welfare impact of open market operations for an economy in japan s predicament we argue japan can achieve a substantial welfare improvement through large open market purchases of domestic government debt

price level targeting with evolving credibility abstract global learning dynamics for price level targeting plt monetary policy are analyzed and compared to inflation targeting in a nonlinear new keynesian model domain of attraction of target steady state is a new robustness criterion for policy regimes robustness of plt depends on whether a known target path is incorporated into learning credibility is measured by accuracy of this forecasting method relative to simple statistical forecasts evolving through reinforcement learning initial credibility and target price are key factors influencing performance model results are in line with the swedish experience of price stabilization in1930 s

long run inflation and the distorting effects of sticky wages and technical change we show that the calvo price setting model is not necessarily inconsistent with evidence of a weak relation between positive trend inflation and price dispersion we identify the interaction between sticky wages and technical change as factors disrupting the allocative role of the wage system under positive trend inflation in turn this interaction generates inefficient wage dispersion as opposed to price dispersion which fuels inflation costs we conclude that it is too early to dismiss the new keynesian model as a useful vehicle to assess the costs of inflation

pass through and consumer search an empirical analysis retail price pass through is one of the most important issues facing manufacturers of consumer packaged goods although retailers tend to pass higher wholesale prices through to consumers quickly and completely they often do not pass on trade promotions currently asymmetric pass through is commonly thought to result from retailers exercise of market power alternatively it may be because of consumer search behavior and retailers competitive response we test this theory using a panel threshold asymmetric error correction model applied to wholesale and retail scanner data for ready to eat cereal for a number of retailers in the los angeles metropolitan market we find that consumer search behavior contributes significantly to imperfect pass through by allowing pass through to depend on market power and consumer search costs we find results that are contrary to the conventional wisdom namely market power causes retail prices to fall quickly and rise slowly whereas consumer search behavior causes retail prices to rise quickly and fall slowly precisely the rockets and feathers phenomenon

input choices in agriculture is there a gender bias summary this paper examines evidence of gender biases in the decisions of agricultural households utilizing data from international crops research institute for the semi arid tropics s village level studies in india 1975 85 the main empirical finding is that households with a high proportion of boys tend to use some agricultural inputs including fertilizers and irrigation services more intensively than households with girls this pattern is more pronounced among wealthier households but does not appear to be driven solely by bequest motives or male child labor productivity

determinants and consequences of land reform implementation in the philippines abstract unlike the experience of other developing countries land reform in the philippines has been successful in converting many of share tenants to land reform beneficiaries this study indicates that the implementation of land reform is positively associated with yield growth made possible by the adoption of modern seed fertilizer technology a major reason underlying such association is considered to be an increased economic interest of tenants in land reform arising from divergence of rental value of land from leasehold rent and amortization fees prescribed by law

sales and firm entry the case of wal mart temporary price reductions or sales have become increasingly important in the evolution of the price level we present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices using a six year panel of weekly observations from a grocery chain we find that individual stores employ more sales as the distance to wal mart falls moreover the increase in the frequency of sales was concentrated on the most popular products suggesting the use of a loss leader strategy

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

comparing new keynesian models of the business cycle a bayesian approach abstract the baseline new keynesian model cannot replicate the observed persistence in inflation output and real wages for sensible parameter values as a result several extensions have been suggested to improve its fit to the data we use a bayesian approach to estimate and compare the baseline sticky price model of calvo s 1983 staggered prices in a utility maximizing framework journal of monetary economics 12 383 398 and three extensions our empirical results are as follows first we find that adding price indexation improves the fit of calvo s 1983 staggered prices in a utility maximizing framework journal of monetary economics 12 383 398 model second models with both staggered price and wage setting dominate models with only price rigidities third introducing wage indexation does not significantly improve the fit fourth all model estimates suggest a high degree of price stickiness fifth the estimates of labor supply elasticity are higher in models with both staggered price and wage contracts finally the estimated inflation parameters of the taylor rule are stable across models

rules based monetary policy and the threat of indeterminacy when trend inflation is low abstract indeterminacy in new keynesian models with calvo contracts can occur even at low trend inflation levels of 2 or 3 the interaction of trend inflation with nominal wage rigidity and trend growth in output causes large distortions in the steady state and expands the indeterminacy region consequently even interest rate rules with strong inflation responses may not be sufficient to ensure determinacy a policy rule reacting to output growth but not to output gap significantly increases the prospect of determinacy although the threat of indeterminacy is less severe under taylor contracts significant departures from the original taylor principle are required for determinacy

retail price dynamics and retailer heterogeneity uk evidence we examine retailer heterogeneity in price adjustment in uk supermarkets considerable variation in the price change frequency of identically bar coded products among retail chains is found decomposition analysis suggests that price adjustment is evenly split between sales and reference prices with substantive variation across retailers

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

how to compare taylor and calvo contracts a comment on michael kiley in a recent paper michael kiley argued that the calvo model of price adjustment is both quantitatively and qualitatively different from the taylor model what we show is that kiley along with most other people are choosing the wrong parameterization to compare the two models in effect they are comparing the average age of calvo contracts with the completed length of taylor contracts when we compare the average age of taylor contracts with the average of calvo the differences become muchsmaller and easier to understand we also show that autocorrelation of output can be larger in a taylor economy than in the age equivalent calvo economy

assessing the energy vulnerability case of industrialised countries the emergence of new big consumer countries on the energy markets and the perspective of oil and gas depletion at the end of the current century raise the concerns about fair distribution of the remaining resources for the common and sustainable wellbeing of the mankind high volatility of energy prices discourages the investment and delays the energy technology transition voluntary measures are needed mainly in industrialised countries in order to develop alternative and sustainable energy sources to enable technology transfer towards emerging and developing countries and to avoid struggle for energy procurement in this paper a composite index of energy demand supply weaknesses is defined as a proxy of energy vulnerability the proposed index is based on several indicators such as energy intensity oil and gas import dependency co2 content of primary energy supply electricity supply weaknesses and non diversity in transport fuels the assessment of this composite index for selected industrialised countries is discussed as well as the sensitivity to various factors

intergenerational correlations in labor market status a comparison of the united states and germany this paper uses data from the panel study of income dynamics and the german socioeconomic panel to calculate comparable measures of the intergenerational correlations of earnings hours and education in the us and germany the results indicate that there is remarkable similarity across the two countries in the correlations of earnings and of annual work hours of fathers and sons all of the correlations which involve women appear to be weaker in germany than the us perhaps due to the greater integration of women in the us into the labor market they find weak correlations in earnings and work hours for parent child pairs of different sexes in both countries they also find that intergenerational correlations in educational attainment are considerably stronger in the us authors

inflation and output dynamics with state dependent pricing decisions this paper studies a state dependent pricing model in which firms face a fixed cost of changing their pricing plans a pricing plan specifies an entire sequence of time varying future prices allowing firms to choose a pricing plan rather than a single price generates inflation inertia in the response of the economy to small changes in the growth rate of money allowing firms to choose when to change their pricing plan generates a non linear response of inflation and output to small and large changes in the money growth rate the non linear solution method also reveals that the model generates an asymmetric response of output and inflation to monetary expansions and contractions

sales and monetary policy this paper analyses the efiect of monetary policy in a model where sales occur in equilibrium some consumers are loyal to a particular brand of a good others are bargain hunters as a result producers flnd it optimal to sell their goods at a normal price through some retailers and at a sale price through others the margin of adjusting the amount sold on sale is potentially very important if producers can adjust the fraction sold on sale with sticky prices and wages money is approximately neutral if we ignore the reasons behind sales but that result changes dramatically when we consider that producers optimally choose to sell some of their goods on sale owing to strategic substitutabilities in the sales decision money has strong procyclical efiects

optimal transition from coal to gas and renewable power under capacity constraints and adjustment costs this paper studies the optimal transition from existing coal power plants to gas and renewable power under a carbon budget it solves a model of polluting exhaustible resources with capacity constraints and adjustment costs to build coal gas and renewable power plants it finds that optimal investment in renewable energy may start before coal power has been phased out and even before investment in gas has started because doing so allows for smoothing investment over time and reduces adjustment costs gas plants may be used to reduce short term investment in renewable power and associated costs but must eventually be phased out to allow room for carbon free power one risk for myopic agents comparing gas and renewable investment is thus to overestimate the lifetime of gas plants e g when computing the levelized cost of electricity and be biased against renewable power these analytical results are quantified with numerical simulations of the european commission s 2050 energy roadmap

the impact of income components on the distribution of family incomes attempts have recently been made to assign inequality contributions to various components of income this paper discusses the issues involved in such assignments and highlights the problems that follow from having a number of possible decomposition rules u s data on the distribution of family incomes are used to examine the relative influence of these income components and to evaluate empirically the performance of different decomposition rules a wide range of inequality contributions can be obtained even when restricted to only naturally derived decomposition rules some of the results are plainly absurd and serve to warn against the indiscriminate use of decomposition formulae without first investigating their properties

ena based evaluation of energy supply security comparison between the chinese crude oil and natural gas supply systems abstract energy has become a scarce global strategic resource and energy supply security is receiving increasing attention a common evaluation platform is necessary to systematically understand the supply security levels of different energy sources and help make the national energy strategy ecological network analysis ena is thus regarded as a useful common tool to systematically simulate evaluate and compare the supply security for different energy sources when considering the fact that modern energy systems have formed a complex global energy network through extensive energy trading based on the established ena platform we evaluated and compared china s crude oil and natural gas supply security from 2000 to 2012 to this end we assessed the overall security level investigated the relationship among different compartments within the network system determined the system s structure and analyzed the system s properties it was found that the chinese crude oil supply security level was higher than that of the natural gas supply and that the crude oil supply system was more mature in terms of multiple properties suggestions are proposed to improve the chinese energy supply security based on further scenario analysis including increasing domestic energy production controlling energy consumption diversifying foreign supply sources and strengthening the strategic reserve the ena based common platform can be used for the systematic evaluation and improvement of energy supply security and further support national energy policymaking for both developed and developing countries both energy importers and exporters

wicksellian rules and the taylor principle some practical implications in this paper we derive and compare the determinacy regions of price level targeting rules wicksellian rules and taylor rules in a standard new keynesian model we conclude that wicksellian rules do not require the taylor principle to hold in order to induce determinacy our results have two implications first in a univariate setting the estimation of simple taylor rules when the true rule is wicksellian can lead to the erroneous conclusion that the equilibrium is indeterminate second indeterminacy is ruled out when using system based methods but it can be concluded that the central bank is less averse to inflation movements than it actually is

on the welfare and cyclical implications of moderate trend inflation abstract the welfare and cyclical implications of moderate trend inflation are addressed in an augmented medium scale dsge model increasing trend inflation from 2 to 4 percent generates a consumption equivalent welfare loss of about 4 percent welfare costs of this magnitude are driven by staggered wage contracts trend growth extended borrowing a roundabout production structure and the interaction between trend inflation and shocks to the marginal efficiency of investment mei a sticky price model abstracting from these features generates much smaller losses moderate trend inflation also has important business cycle implications interacting much more strongly with mei shocks than with productivity or monetary shocks

efficiency and technical change in the philippine rice sector a malmquist total factor productivity analysis regional differences in total factor productivity efficiency and technological change in the philippine rice sector are examined for the post green revolution era malmquist productivity indices were constructed for 1971 90 and were decomposed into efficiency and technological change the average annual malmquist productivity growth was only slightly positive productivity growth was negative during the early 1970s and was followed by a period of positive growth growth was negative again in the late 1980s the period of positive growth coincided with the introduction of new rice varieties while the declines are likely to have been caused by intensification of rice production in lowland farming systems certain regions such as central luzon western visayas and southern and northern mindanao had higher rates of technological change than others this may be due to higher investments in infrastructure and education increased adoption of tractors and a better agroclimatic environment

speed limit policies the output gap and optimal monetary policy in a standard new keynesian model a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal timeless perspective precommitment policy by stabilizing output gap changes the central bank imparts inertia into output and inflation that is absent under pure discretion even a fully optimizing i e non myopic central bank operating in a discretionary policy environment achieves better social outcomes if it focuses on inflation and changes in the output gap than are achieved under inflation targeting this abstract was borrowed from another version of this item

indicators of security of natural gas supply in asia natural gas has become an increasingly valuable resource and a global commodity the demand for it has significantly increased japan korea and taiwan heavily rely on liquefied natural gas lng imports for their gas supplies from malaysia brunei indonesia australia and the middle east on the other hand countries like thailand and singapore import gas via trans border pipelines gas supply interruptions volatile gas prices transportation and distribution bottlenecks and a growing reliance on imports over longer distances have renewed interest on gas security in asia this paper examines the relative vulnerability to natural gas supply disruptions of seven gas importing countries in asia for year 2008 based on four indicators of security of gas supply a composite gas supply security index is estimated as an overall indication of gas vulnerability for our sample countries the results demonstrate that there are differences in the values of the overall indicator of gas vulnerability among countries and the assessment is useful in developing an effective strategy of natural gas supply security in countries in the asian region

variety pass through an examination of the ready to eat breakfast cereal market abstract we examine variety pass through effects that occur when multiproduct retailers adjust the length of their product lines in response to changes in wholesale prices studying variety pass through is essential to understanding how wholesale price changes transmit into retail prices when variety is endogenous using data from the ready to eat breakfast cereal category we find that retailers jointly adjust retail prices and the length of their product lines in response to changes in wholesale prices we show the importance of controlling for the endogeneity of retailers product line decisions when calculating price pass through rates

inventories markups and real rigidities in menu cost models a growing consensus in new keynesian macroeconomics is that nominal cost rigidities rather than countercyclical markups account for the bulk of the real effects of monetary policy shocks we revisit these conclusions using theory and data on inventories we study an economy with nominal rigidities in which goods are storable our theory predicts that if costs of production are sticky and markups do not vary much in response to say expansionary monetary policy firms react by excessively accumulating inventories in anticipation of future cost increases in contrast if the data inventories are fairly constant over the cycle and in response to changes in monetary policy we show that costs must increase and markups must decline sufficiently in times of a monetary expansion in order to reduce firm s incentive to hold inventories and thus bring the model s inventory predictions in line with the data versions of the model consistent with the dynamics of inventories in the data imply that countercyclical markups account for a sizable fraction of the response of real variables to monetary shocks

review of the security of supply in turkish energy markets lessons from the winter shortages abstract turkey has changed the essentials of its energy markets more than a decade ago it was mainly a transition from a state led model to a free market one although some levels of progress is observable security of supply particularly in times of short term supply disruption had not been widely tested harsh winter conditions set a litmus test for turkish energy markets basing on the this test this paper provides an analysis of to what extent turkey is open to the risks of energy supply security and discusses possible measures to relieve future supply disruption risks energy policy making should consider the fact that electricity and gas markets are highly intertwined in turkey and security of supply measures could have cross market implications paper concludes

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

pricing production and persistence though built with increasingly precise microfoundations modern optimizing sticky price models have displayed a chronic inability to generate large and persistent real responses to monetary shocks as recently stressed by chari kehoe and mcgrattan 2000 this is an ironic finding since taylor 1980 and other researchers were motivated to study sticky price models in part by the objective of generating large and persistent business fluctuations we trace this lack of persistence to a standard view of the cyclical behavior of real marginal cost built into current sticky price macro models using a fully articulated general equilibrium model we show how an alternative view of real marginal cost can lead to substantial persistence this alternative view is based on three features of the supply side of the economy that we believe are realistic an important role for produced inputs variable capacity utilization and labor supply variability through changes in employment importantly these real flexibilities work together to dramatically reduce the elasticity of marginal cost with respect to output from levels much larger than unity in ckm to values much smaller than unity in our analysis these real flexibilities consequently reduce the extent of price adjustments by firms in time dependent pricing economies and the incentives for paying fixed costs of adjustment in state dependent pricing economies the structural features also lead the sticky price model to display volatility and comovement of factor inputs and factor prices that are more closely in line with conventional wisdom about business cycles and various empirical studies of the dynamic effects of monetary shocks federal reserve bank of philadelphia boston university nber and frb richmond this paper builds on earlier joint work with alexander l wolman on this topic we wish to thank brian boike for providing excellent research assistance and also to thank the referees and the editor for making numerous useful suggestions the views expressed in this article are those of the authors and do not necessarily represent those of the federal reserve bank of philadelphia the federal reserve bank of richmond or the federal reserve system

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

going beyond crosscountry averages growth inequality and poverty reduction in the philippines summary this paper analyzes the processes of growth and poverty reduction simultaneously under a neoclassical growth model framework using provincial data from the philippines we obtain a high rate of provincial income convergence and a tradeoff between equity and growth the lack of political competition inhibits growth land reform is positively associated with growth and poverty reduction while higher agricultural terms of trade facilitate poverty reduction the growth elasticity of poverty reduction is low by international standards but is sensitive to sectoral income composition and initial conditions in poverty incidence mortality rate and irrigation coverage

prices are sticky after all abstract economists have interpreted the evidence that prices change every four months as implying that sticky prices cannot be important for monetary transmission theory implies that this interpretation is correct if most price changes are regular but not if a large fraction are temporary as in the data since regular prices are much stickier than temporary ones our models predict that the stickiness of the aggregate price level matches that in a standard calvo model or a standard menu cost model in which micro level prices change about once a year in this sense prices are sticky after all

overvalued swedish monetary policy in the 1930s the article discusses sweden s monetary policy in the 1930s which has been hailed as the first and only example of successful price level targeting our contribution is twofold first we argue that the crucial measure that immediately ended deflationary expectations and enabled a swift recovery was a strong and involuntary devaluation of the currency not the adoption of a new monetary policy framework second starting from the recent literature on monetary policy at the zero lower bound we conclude that sweden s exchange rate policy is more relevant for the current discussion than its tentative experience with price level targeting

the time varying volatility of macroeconomic fluctuations we investigate the sources of the important shifts in the volatility of us mac roeconomic variables in the postwar period to this end we propose the esti mation of dsge models allowing for time variation in the volatility of the structural innovations we apply our estimation strategy to a large scale model of the business cycle and find that shocks specific to the equilibrium condition of investment account for most of the sharp decline in volatility of the last two decades jel c51 e32

the cyclicality of sales regular and effective prices business cycle and policy implications author s coibion olivier gorodnichenko yuriy hong gee hee abstract we study the cyclical properties of sales regular price changes and average prices paid by consumers effective prices using data on prices and quantities sold for numerous retailers across many us metropolitan areas inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers this difference reflects the reallocation of household expenditures across retailers a feature of the data which we document and quantify rather than sales we propose a simple model with household store switching and assess its implications for business cycles and policymakers jel d12 e31 e32 l25 l81

irving fisher and price level targeting in austria was silver the answer the question of price level versus inflation targeting remains controversial disagreement concerns not so much the desirability of price stability but rather the means of achieving it irving fisher argued for a commodity dollar standard where the purchasing power of money was fixed by indexing it to a basket of commodities we show that movements in the price of silver closely track the movements in overall prices during the classical gold standard era the one to one relationship between paper and silver bonds suggests that a simple silver rule could have sufficed to fix the purchasing power of money

how does a natural gas supply interruption affect the eu gas security a monte carlo simulation abstract nowadays the european natural gas production has declined having as a consequence increased import dependence which is estimated to reach 85 by 2030 therefore the implementation of a european energy policy towards the viability competitiveness and security of energy supply is more than essential necessary parameter for the elaboration of such a policy is the diversification of natural gas supply sources and corridors in order to eliminate growing dependences moreover the recent cases of natural gas supply interruptions to the eu due to international geopolitical conflicts further underline the above indicating the necessity towards an assessment of the potential impact that a natural gas supply disruption would cause to the european natural gas security to this end and given the political uprising in the area of north africa main objective of this paper is to investigate how a natural gas supply interruption from algeria the eu s third largest supplier would affect the european natural gas security in terms of natural gas demand satisfaction monte carlo simulation was applied producing results on the more affected countries and underlining the importance of supplies diversification reserves and production when applicable towards the enhancement of natural gas security

intermediate goods and business cycles implications for productivity and welfare this paper presents an aggregate demand driven model of business cycles that provides a new explanation for the procyclicality of productivity and simultaneously predicts large welfare losses from monetary nonneutrality the key features of the model are an input output production structure imperfect competition countercyclical markups and for some results state dependent price rigidity true technical efficiency is procyclical even though production takes place with constant returns without technology shocks or technological externalities the paper has observable implications that distinguish it empirically from related work these implications are generally supported by data from u s manufacturing industries copyright 1995 by american economic association

new rice technology and comparative advantage in rice production in the philippines the aim of this study is to assess the comparative advantage in rice production in the philippines for the past three decades since 1966 we have found that the country gained sharp improvement in comparative advantage in rice production in 1979 when yield rose remarkably due to the diffusion of pest and disease resistant modern rice beginning in 1986 however the country appears to have slowly lost its comparative advantage due to the decline in rice prices stagnation in rice yield and rising cost of domestic factors by 1990 the country completely lost its comparative advantage in rice production

the optimal inflation rate in new keynesian models should central banks raise their inflation targets in light of the zero lower bound we study the effects of positive steady state inflation in new keynesian models subject to the zero bound on interest rates we derive the utility based welfare loss function taking into account the effects of positive steady state inflation and solve for the optimal level of inflation in the model for plausible calibrations with costly but infrequent episodes at the zero lower bound the optimal inflation rate is low typically less than two percent even after considering a variety of extensions including optimal stabilization policy price indexation endogenous and statedependent price stickiness capital formation model uncertainty and downward nominal wage rigidities on the normative side price level targeting delivers large welfare gains and a very low optimal inflation rate consistent with price stability these results suggest that raising the inflation target is too blunt an instrument to efficiently reduce the severe costs of zero bound episodes

optimal pricing with costly adjustment evidence from retail grocery prices in many theoretical models it is assumed that there are costs associated with adjusting prices in this paper the existence type and magnitude of such costs are investigated empirically a discrete choice dynamic programming model that nests fixed and variable costs is developed and econometric estimates of the adjustment cost function are obtained the data used to implement the model consist of weekly retail prices and sales of three brands of saltine crackers sold by four chains of grocery stores in a small u s town the study has several distinguishing characteristics first the data are highly disaggregate at the level of brand and store second variables are sampled at weekly intervals third the model nests fixed and variable adjustment costs and can therefore determine their relative importance finally the discrete choice model is both structural and dynamic

migration self selection and earnings in philippine rural communities abstract estimated returns to schooling investments can be misleading if migration causes significant shifts in population distribution across time data gathered in rural philippine communities show that the more educated and experienced individuals are more likely to outmigrate causing a sample selection bias in the estimation of wage equations the observed wages were then lower than the conditional population mean of an entire cohort residing originally in the area controlling for self selection the wage returns to schooling and experience were higher finally the sample selectivity variable accounts substantially for the difference in the wages of men and women

monetary policy in a low inflation environment developing a state contingent price level target a number of academic studies find that either price level targeting or temporary above average inflation are nearly optimal policies to address a liquidity trap crisis still central bankers and the public generally question whether even a temporarily higher inflation rate could be beneficial in addressing a liquidity trap or could be consistent with price stability over the longer term at the same time however the federal reserve s projections for high unemployment and low inflation do not seem to be consistent with the best monetary policies to address the fed s dual mandate responsibilities accordingly it is useful to seriously discuss these potentially beneficial alternative policies

pricing in inflationary times the penny drops how does the frequency and magnitude of micro price rises and falls relate to macroeconomic crisis as well as moderation weekly micropricing behaviour in british groceries was investigated across three leading retailers over the moderation period 2004 7 and the crisis period 2008 10 we find significant price flexibility sharply distinguished from behaviour observed in most previous works downward price flexibility increased markedly in 2008 overall basket prices rise but significantly more individual prices fall than rise in the latter period tests of obfuscation in price setting suggested that large numbers of small price falls were used to disguise the basket price rises

unemployment and business cycles we develop and estimate a general equilibrium search and matching model that accounts for key business cycle properties of macroeconomic aggregates including labor market variables in sharp contrast to leading new keynesian models we do not impose wage inertia instead we derive wage inertia from our specification of how firms and workers negotiate wages our model outperforms a variant of the standard new keynesian calvo sticky wage model according to our estimated model there is a critical interaction between the degree of price stickiness monetary policy and the duration of an increase in unemployment benefits

investment shocks and the comovement problem recent work based on sticky price wage estimated dynamic stochastic general equilibrium dsge models suggests investment shocks are the most important drivers of post world war ii us business cycles consumption however typically falls after an investment shock this finding sits oddly with the observed business cycle comovement where consumption along with hours worked and investment moves with economic activity we show that this comovement problem is resolved in an estimated dsge model when i the cost of capital utilization is specified in terms of increased depreciation of capital as originally proposed by greenwood et al 1988 in a neoclassical setting or ii there is no wealth effect on labor supply the data however favors the first channel traditionally the cost of utilization is specified in terms of forgone consumption following christiano et al 2005 who studied the effects of monetary policy shocks the alternative specification we consider has two additional implications relative to the traditional one i it has a substantially better fit with the data and ii the contribution of investment shocks to the variance of consumption is over three times larger the contributions to output investment and hours are also relatively higher suggesting that these shocks may be quantitatively even more important than previous estimates based on the traditional specification

role of agricultural research in poverty reduction lessons from the asian experience abstract the poor spend much of their income on food depend primarily on labour earnings and tend to reside in marginal agricultural areas to reduce poverty agricultural research should aim to ensure adequate food supplies by developing yield increasing technologies to increase labour demand by developing labour using technologies and to develop technologies suitable for marginal areas this article seeks to identify appropriate technologies that agricultural research should generate for poverty reduction the identification is based on a review of the experience of the green revolution in rice production in asia and an assessment of the changing structure of income sources among rural households in the philippines

trend inflation wage and price rigidities and productivity growth abstract what are the steady state implications of inflation in a general equilibrium model with real per capita output growth and staggered nominal price and wage contracts surprisingly a benchmark calibration implies an optimal inflation rate of 1 9 percent the analysis also shows that trend inflation has important effects on the economy when combined with nominal contracts and real output growth steady state output and welfare losses are quantitatively important even for low values of trend inflation further nominal wage contracting is found to be quantitatively more important than nominal price contracting in generating the results this conclusion does not arise from price dispersion per se but from an effect of nominal output growth on the optimal markup of monopolistically competitive labour suppliers finally accounting for productivity growth is found to be important for calculating the welfare costs of inflation indeed the presence of 2 percent productivity growth increases the welfare costs of inflation in the benchmark specification by a factor of four relative to the no growth case

escaping from a liquidity trap and deflation the foolproof way and others existing proposals to escape from a liquidity trap and deflation including my foolproof way are discussed in the light of the optimal way to escape the optimal way involves three elements 1 an explicit central bank commitment to a higher future price level 2 a concrete action that demonstrates the central bank s commitment induces expectations of a higher future price level and jump starts the economy and 3 an exit strategy that specifies when and how to get back to normal a currency depreciation is a direct consequence of expectations of a higher future price level and hence an excellent indicator of those expectations furthermore an intentional currency depreciation and a crawling peg as in the foolproof way can implement the optimal way and in particular induce the desired expectations of a higher future price level i conclude that the foolproof way is likely to work well for japan which is in a liquidity trap now as well as for the euro area and the united states in case either would fall into a liquidity trap in the future

reference prices costs and nominal rigidities we assess the importance of nominal rigidities using a new weekly scanner dataset we find that nominal rigidities take the form of inertia in reference prices and costst defined as the most common prices and costs within a given quarter reference prices are particularly inertial and have an average duration of roughly one year even though weekly prices change roughly once every two weeks we document the relation between prices and costs and find sharp evidence of state dependence in prices we use a simple model to argue that reference prices and costs are useful statistics for macroeconomic

natural gas supply stability and foreign policy abstract this article studies factors that affect stability of supply of natural gas it examines the relative influence of political relations between the involved states on the stability of supply the article identifies the factors that affect the propensity of a state to use disruption of natural gas supply in order to promote foreign policy goals the article is based on the study of thirty five supply relations and two case studies the article claims that disruption of supplies can be initiated not only by supplier states but transit and consumer states it claims that natural gas supply relations generally take three forms neither side is dependent on the gas trade one side is dependent on the gas trade or the sides are interdependent in the gas trade cases of significant asymmetry of the degree of dependence in the gas trade are most likely to be exploited by the less dependent party for foreign policy gain the article claims that the prevailing political relations between gas trading states are only one of the factors affecting the stability of supply

trend inflation indexation and inflation persistence in the new keynesian phillips curve purely forward looking versions of the new keynesian phillips curve nkpc generate too little inflation persistence some authors add ad hoc backward looking terms to address this shortcoming we hypothesize that inflation per sistence results mainly from variation in the long run trend component of inflation which we attribute to shifts in monetary policy we derive a version of the nkpc that incorporates a time varying inflation trend and examine whether it explains the dynamics of inflation when drift in trend inflation is taken into account a purely forward looking version of the model fits the data well and there is no need for backward looking components jel e12 e31 e52 in this paper we consider the extent to which guillermo calvo s 1983 model of nominal price rigidities can explain inflation dynamics without relying on arbitrary backward looking terms in its baseline formulation the calvo model leads to a purely forward looking new keynesian

the macroeconomics of trend inflation most macroeconomic models for monetary policy analysis are approximated around a zero inflation steady state but most central banks target an inflation rate of about 2 percent many economists have recently proposed even higher inflation targets to reduce the incidence of the zero lower bound constraint on monetary policy in this survey we show that the conduct of monetary policy should be analyzed by appropriately accounting for the positive trend inflation targeted by policymakers we first review empirical research on the evolution and dynamics of u s trend inflation and some proposed new measures to assess the volatility and persistence of trend based inflation gaps we then construct a generalized new keynesian model that accounts for a positive trend inflation in this model an increase in trend inflation is associated with a more volatile and unstable economy and tends to destabilize inflation expectations this analysis offers a note of caution regarding recent proposals to address the existing zero lower bound problem by raising the long run inflation target jel e12 e31 e32 e52 e58

concentration of land holdings an empirical exploration of kuznets conjecture abstract according to kuznets 1963 the dynamics of the maldistribution process starts from an initial unequal income distribution then through a cumulative effect a high concentration of asset holdings is induced which in turn contributes to a high concentration of income in other words unequal income distribution tends to be self perpetuated and unequal asset holdings is a medium of such process the literature on rural income distribution seems to suggest a different emphasis by assigning a more crucial role to asset holdings i e land in the explanation of unequal income distribution this study shows via a simultaneous equation model and a multi nation cross sectional set of data that both the land and income concentration ratios are positively related of the two rival conjectures of emphasis the empirical evidence lends support in the general case to kuznets that is over the entire range of countries developed and less developed inequality in income seems to cause inequality in land holdings rather than vice versa in the specific case of less developed countries it is the high concentration of land holdings that influences the unequal distribution of income

real rigidities and nominal price changes a large literature seeks to provide microfoundations of price setting for macro models a challenge has been to develop a model in which monetary policy shocks have the highly persistent efiects on real variables estimated by many studies nominal price stickiness has proved helpful but not su cient without some form of real rigidity or strategic complementarity we embed a model with a real rigidity a la kimball 1995 wherein consumers ee from relatively expensive products but do not ock to inexpensive ones we estimate key model parameters using micro data from the u s cpi which exhibit sizable movements in relative prices of substitute products when we impose a signiflcant degree of real rigidity fltting the micro price facts requires very large idiosyncratic shocks and implies large movements in micro quantities

income distribution in rice growing villages during the post green revolution periods the philippine case 1985 and 1998 this paper aims to examine changes in household income sources and its impact on household income distribution in the post green revolution periods in 1985 and 1998 in the rural philippines we found that there has been a structural shift of household income away from farm in favor of nonfarm labor income sources this finding indicates that rural development is being led by nonfarm sectors such a shift has resulted in an increase in household income inequality as the distribution of nonfarm income has become less equal over time and was markedly more unequal than that of farm income in 1998

gender differences in land inheritance schooling and lifetime income evidence from the rural philippines this article examines the difference in lifetime incomes arising from parental preferences in the allocation of land inheritance and investments in schooling between sons and daughters in the rural philippines sons are preferred with respect to land inheritance receiving 0 15 additional hectares of land while daughters are treated more favourably in schooling investments receiving 1 5 more years of schooling however differences in both current and life cycle incomes between sons and daughters are insignificant this suggests that filipino parents allocate intergenerational transfers to equalise incomes among their children without sacrificing efficiency

firm specific capital nominal rigidities and the taylor principle in the presence of firm specific capital the taylor principle can generate multiple equilibria sveen and weinke new perspectives on capital sticky prices and the taylor principle j econ theory 123 2005 21 39 obtain that result in the context of a calvo style sticky price model one potential criticism is that the price stickiness which is needed for our theoretical result to be relevant from a practical point of view is somewhat to the high part of available empirical estimates in the present paper we show that if nominal wages are not fully flexible which is an uncontroversial empirical fact then the taylor principle fails already for some minor degree of price stickiness we use our model to explain the consequences of both nominal rigidities for the desirability of alternative interest rate rules

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation

land rights gender equality and household food security exploring the conceptual links in the case of india this paper seeks to critically examine the conceptual linkages between the issue of land rights for women with household food security on the one hand and gender equality on the other after a brief analysis of shifts in both international and national policy discourse and practice in terms of control over land as vital for food security it seeks to analyse the implications of this for gender relations the paper argues that in a context of diversified rural livelihoods the contribution of agricultural production to household subsistence has been declining this trend has been reinforced by a decline in public investment stagnant growth and fluctuating prices for agricultural products men have been able to access the better paid non farm jobs while leaving women behind to manage agricultural production the renewed link between production and food security in agricultural policy has however meant allowing men not to have responsibility for household food security while a right to land for women is a positive development it appears also to be leading to an enhancement of work burdens without much change in terms of status or decision making authority

inflation dynamics and time varying volatility new evidence and an ss interpretation is monetary policy less effective at increasing real output during periods of high volatility than during normal times in this article i argue that greater volatility leads to an increase in aggregate price flexibility so that nominal stimulus mostly generates inflation rather than output growth to do this i construct price setting models with volatility shocks and show these models match new facts in cpi micro data that standard price setting models miss i then show that these models imply that output responds less to nominal stimulus during times of high volatility furthermore because volatility is countercyclical this implies that nominal stimulus has smaller real effects during downturns for example the estimated output response to additional nominal stimulus in september 1995 a time of low volatility is 55 larger than the response in october 2001 a time of high volatility jel codes e10 e30 e31 e50 d8 copyright 2014 oxford university press

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded