anticipated monetary policy in canada some new evidence abstract in this note i examine the policy ineffectiveness proposition for canada using monthly income data due to milbourne et al 1988 i find that anticipated monetary policy altered the evolution of real output in canada recent work by ambler and phaneuf 1988 can be used to attribute this result to a purely new keynesian model of the business cycle although this inference is found to be fragile with respect to the choice of the level of significance used in the hypothesis tests

the efficient hypothesis and deregulation the greek case the impact is examined of the 1988 monetary deregulation in greece on the efficiency of the foreign exchange market a news model reveals that the deregulation of the monetary system contributed to the presence of an efficient foreign exchange market

empirical investigation of one opec country s successful non oil export performance abstract this study examines indonesian non oil export success between 1975 and 1994 with a focus on the role of exchange rate management and trade policy in export performance across sectors to examine the link between export quantity and changes in policy i estimate structural export supply functions that are derived from utility and profit maximization behavior the results indicate that non oil exporters respond positively to improved price incentives including exchange rate devaluation with the strongest impact in textiles garments and sawnwood the study offers a richer description than previous work of the relationship between price incentives and export performance

on the co movement between coffee and cocoa prices in international markets in this article we study the movement between cocoa and coffee prices two close substitute commodities using the ardl approach developed by pesaran et al 2001 we found that the two prices are cointegrated the long run elasticity of coffee price with respect to the cocoa one is estimated at 0 88 also using the lag augmented var approach of toda and yamamoto 1995 which is valid whatever the order of integration of the data the cocoa price is found to granger cause the coffee price and not vice versa this finding suggests that models aiming at forecasting coffee prices should incorporate cocoa prices as well

bivariate cointegration among european monetary system exchange rates in past research on the long run behaviour of exchange rates the possibility of cointegration among spot rates has been rejected this rejection is surprising as some exchange rates are bound by official agreements to comove over time the european monetary system ems is an example of such an officially coordinating system in this paper we extend past research by focusing on only ems rates and use potentially more powerful cointegration tests to show that ems rates are cointegrated

modelling the link between commodity prices and exchange rates the tale of daily data this paper examines daily data on exchange rates and the prices of three commodities traded on the winnipeg commodity exchange the temporal patterns of commodity prices and exchange rates are shown to be similar daily data are significantly non normal with garch models capturing the processes generating the data commodity prices and exchange rates are examined for cointegration using recent tests proposed by johansen and juselius 1990 currency depreciation is shown to granger cause commodity price inflation this information might be useful to central bankers concerned with reducing general price inflation through targeting commodity price inflation it also suggests that macro events have important effects on commodity markets in canada

is strike behavior cyclical we examine cyclicality of strike frequency and incidence using canadian data on strikes and contracts total strike frequency exhibits significant procyclicality to which within contract strikes contribute appreciably evidence is weaker for procyclical behavior of contract expiry strikes both in total and disaggregated by issue strike incidence is also procyclical particularly in manufacturing though the procyclicality here is confined to strikes over nonwage issues these results mirror those obtained by analyzing the frequency of strikes in the contract data industry specific cyclical variables positively affect strike incidence in manufacturing but region specific variables have no effect

retailing public goods the economics of corporate social responsibility abstract this paper explores the feasibility and desirability of corporate social responsibility csr we identify csr with creation of public goods or curtailment of public bads using a model with profit maximizing firms the paper shows that there is a direct parallel between csr and traditional models of private provision of public goods indeed firms that use csr will produce public goods at exactly the same level as predicted by the standard voluntary contribution equilibrium for public goods we compare csr with government provision and charitable provision discussing when csr by private for profit firms could have a comparative advantage in dealing with public goods provision

foreign exchange market efficiency and common stochastic trends abstract in a recent paper baillie and bollerslev 1989 using daily data from 1980 to 1985 identified six common stochastic trends in a vector of seven nominal exchange rates implying the existence of one cointegrating vector cointegration implies that granger causality must run in at least one direction that is at least one of the exchange rates is predictable using current available information this result has been interpreted as foreign exchange market inefficiency by many another interpretation is suggested if the stationary linear combination of spot rates proxies for a time varying risk premium in some way then these results could be explained in a rational and risk averse market this possibility is eliminated if the time series properties of the risk premium are incompatible with those of the error correction term specifically it is demonstrated that the forward risk premium is non stationary for the exchange rates that comprise the exchange rate cointegration relationship in this paper the existence of common stochastic trends in a vector of nominal exchange rates is tested over the period 1974 to 1991 the efficiency of foreign exchange markets is then tested by examining the implications of stochastic trends in the forward premium and what this means for the time series properties of a time varying forward risk premium jel f31 g14

bear squeezes volatility spillovers and speculative attacks in the hyperinflation 1920s foreign exchange abstract this paper examines some of the characteristics of the foreign exchange market in the 1920s floating period nominal returns appear to exhibit properties consistent with asset prices on modern more well organized financial markets i e they appear to be well described by martingales and possess persistent time dependent heteroscedasticity in order to deal with the extreme kurtosis in the exchange rate series we use robust inferential methods to test for volatility spillovers and shocks that might effect subsequent mean returns apart from some particularly abnormal bear squeeze episodes the markets appear remarkably efficient

estimating shocks and impulse response functions this paper examines the issue of how to identify the shocks in a cointegrated var when the following assumptions are made the variables can be classified as endogenous or exogenous there are as many cointegrating relations as endogenous variables the cointegrating vectors are identified and they contain at least one exogenous variable it is shown that with these assumptions it is possible to identify the shocks without the use of further restrictions on the covariance matrix of the disturbances or the short run dynamics if the long run parameters are known the whole model can be estimated by ols the analysis is extended to allow the var to have both stationary and non stationary variables an illustration of the method is provided using the traditional benchmark var model involving us data on output prices interest rates and money a liquidity effect is not found using this var methodology

foreign exchange market efficiency and cointegration in this note we examine an implication of the cointegration literature for the efficiency of foreign exchange markets in particular if foreign exchange markets are efficient then two spot exchange rates cannot be cointegrated this proposition is tested for 10 dollar bilateral exchange rates over the period january 1973 december 1985

a dynamic analysis of japanese energy policies their impact on fuel switching and conservation abstract in 1973 the japanese economy was highly dependent on imported oil after the 1973 oil price shock vigorous policy action was undertaken by the japanese government in an attempt to reduce japan s energy consumption and in particular its dependence on imported oil this study attempts to determine how flexibly the japanese economy has responded to the dramatic changes in relative and absolute fuel prices which occurred since 1973 and to what extent government energy policies may have reinforced or undermined market signals and facilitated fuel switching and conservation to analyse the price and income elasticities of energy component demand a dynamic approach to energy demand modelling is employed the study reveals that japanese energy users have responded quite flexibly to the two major oil price rises in the 1970s the probable impact of energy policies on this response is however somewhat problematic

cointegration and market efficiency abstract recently many economists have asserted that asset prices determined in efficient asset markets cannot be cointegrated we show that there is no general equivalence between the existence of arbitrage opportunities and cointegration or for that matter a lack of cointegration whether asset prices are cointegrated is a function of the relevant model we first show a convenient way to calculate the cointegrating vector based on necessary and sufficient conditions for cointegration we then examine particular cases including exchange rates interest rates and spot and forward exchange rates and asset prices with incoem flows reinvested and not reinvested jel f31

an international comparison of prices and exchange rates a new test of purchasing power parity abstract this paper introduces a new approach based on divisia index numbers to test ppp with both short run and long run data for all major currencies simultaneously the short run results indicate that the predictions of ppp do not hold up at all well on the other hand however the long run data are quite consistent with the ppp hypothesis the results also identify five years as a broad measure of the length of the long run insolar as ppp is concerned

a learning curve of the market chasing alpha of socially responsible firms abstract this paper explores stock market reactions to corporate social performance we construct a value weighted portfolio based on the list of 100 best csr companies in the world published on the forbes website by reputation institute this portfolio yields statistically significant annual abnormal returns of 1 81 and 1 26 by controlling for carhart four factors and fama french five factors respectively 2 41 and 1 84 respectively for an equal weighted portfolio moreover such abnormal returns decrease as time passes especially after the inaugural publication of the csr lists in 2013 furthermore we find that companies with better social performance are more likely to have positive earnings surprises and that their returns are more sensitive to earnings surprises the results have three implications firstly csr reputation contributes positively to a firm s short term superior equity performance secondly the csr lists facilitate market correction of mispricing intangibles such as csr reputation abnormal returns decrease as the market gradually learns about the value of firms social performance lastly the paper contributes to the socially responsible investing sri screens and provides guidance for investors who would like to do well financially by doing good socially

market reaction to quarterly earnings announcements a stochastic dominance based test of market efficiency the use of the capm in empirical research is subject to some criticism in light of this criticism the stochastic dominance criteria are offered as an alternative research method for the examination of market efficiency the underlying assumptions of the two frameworks are discussed and the stochastic dominance technique is demonstrated via the examination of market reaction to quarterly earnings announcements during the 24 quarters commencing with october 1962 the findings are compared to those of watts watts r the time series behavior of quarterly earnings unpublished paper university of newcastle newcastle n s w 1975 quoted in watts 1978 who utilized the same data base in contrast to watts conclusion our analysis suggests that the market was efficient during the entire period examined and that no significant differences in market behavior between the first and the second 12 month periods was evident the discord may be attributed to the relative effectiveness of the two analytical tool

import dependency and structural adjustment in sub saharan africa one of the effects of structural adjustment programs in sub saharan africa has been the reduction of imports in the face of scarce foreign exchange this article takes the analysis of import demand beyond the traditional income and price determinants to account for factors likely to be important to sub saharan african countries in the 1990s first the effect of demand on imports is reflected by the level of absorption rather than the less direct income variable second because adjustment programs may cut government consumption and through increases in interest rates reduce investment these components of absorption are also considered independently to assess their differential effect on imports third import barriers are often set in dollar terms to limit the use of foreign exchange because reliable and complete data for import restrictions are not available the ratio of exports to debt is included as an indicator of foreign exchange availability to reflect its effect on trade barriers and thus imports the findings suggest that this more comprehensive assessment of import demand will be needed if the size and even direction of changes in import demand in response to policy reform is to be understood and anticipated

modelling natural resource scarcity using the error correction approach an error correction framework is used to test the long run hypothesis that prices of natural resources commodities in the united states exhibit scarcity properties from the late nineteenth century to 1988 in the sense that real resource commodity prices have been increasing or following a u shaped pattern introduced by m e slade 1982 the model is formulated to test the validity of the deflation procedure itself along with the scarcity properties results indicate that the model works well as a description of the long term behavior of resources prices and supports the u shaped version of the scarcity hypothesis in a majority of cases an error correction framework is used to test the long run hypothesis that prices of natural resources commodities in the u s exhibit scarcity properties from the late nineteenth century to 1988 in the sense that real resource commodity prices have been increasing or following a u shaped pattern slade 1982 the model is formulated to test the validity of the deflation procedure itself along with the scarcity properties results indicate that the model works well as a description of the long term behaviour of resources prices and supports the u shaped version of the scarcity hypothesis in a majority of cases

a note on cointegration and international capital market efficiency abstract in a recent paper in the jimf crowder 1994 claims that evidence that spot exchange rates are cointegrated and forward premiums are non stationary implies international capital markets are not efficient this note argues that the cointegration properties of spot exchange rates are independent of the efficiency or inefficiency of financial markets

symmetric or asymmetric price adjustments in the oil market an empirical analysis of the relations between international and domestic prices in the federal republic of germany 1972 89 abstract this paper investigates how german consumer and wholesale prices for gasoline and light heating oil react to changes in the corresponding rotterdam prices monthly data from 1972 to 1989 are employed and the subperiods of the 1970s 1972 to 1979 and 1980s 1980 1989 are distinguished error correction models are estimated to seperate long run equilibrium relations and short run adjustment processes for the 1980s we find rapid symmetric and full adjustment of the german prices to the rotterdam prices whereas during the 1970s we find some asymmetries and at least for gasoline the adjustment processes took considerably more time

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

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

market efficiency and cointegration an application to the sterling and deutschemark exchange markets abstract the assumption that the foreign exchange market is efficient that is that agents are risk neutral and use all available information rationally so that the forward exchange rate is an unbiased predictor of the future spot rate is a property often imposed in theoretical international macroeconomic models although a vast empirical literature has evolved to test market efficiency we use recent developments in the theory of cointegration to provide new methods of testing several aspects of foreign exchange market efficiency we ffind evidence inconsistent with market efficiency for both germany and the united kingdom

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

the monetary model in the presence of i 2 components long run relationships short run dynamics and forecasting of the greek drachma this paper re examines the long run properties of the monetary exchange rate model using data for the drachma dollar and drachma mark exchange rates under the hypothesis that the system contains variables that are i 2 using the recent i 2 test by paruolo on the determination of integration indices in i 2 systems j economet 72 1996 313 356 to examine the presence of i 2 and i 1 components in a multivariate context we find that the system contains two i 2 variables in both cases and this finding is reconfirmed by the estimated roots of the companion matrix do purchasing power parity and uncovered interest rate parity hold in the long run an example of likelihood inference in a multivariate time series model juselius j economet 69 1995 211 240 the i 2 component led to the transformation of the estimated model by imposing long run but not short run proportionality between domestic and foreign money two statistically significant cointegrating vectors were found and by imposing linear restrictions on each vector as suggested by johansen and juselius identification of the long run and the short run structure an applicaion to the islm model j economet 63 1994 7 36 and johansen identifying restrictions of linear equations with applications to simultaneous equations and cointegration j economet 69 1995b 111 132 the order and rank conditions for identification are satisfied but the test for overidentifying restrictions was not significant only for the case of the drachma mark rate the main findings suggest that we reject the forward looking version of the monetary model for the drachma dollar case but not when the drachma mark rate is used a result that is attributed to the monetary and exchange rate policy followed by the greek authorities since greece s joining of the european union furthermore we test for parameter stability using the tests developed by hansen and johansen recursive estimation in cointegrated var models working paper 1993 university of copenhagen and it is shown that the dimension of the cointegration rank is sample independent while the estimated coefficients do not exhibit instabilities in recursive estimations finally it is shown that the monetary model outperforms the random walk model in an out of sample forecasting contest

the search for equilibrium relationships in international finance the case of the monetary model abstract this paper considers some of the main long run equilibrium relationships in international finance we supplement the phillips perron test which has a unit root under the null with the new kps test statistic which is based on a stationary null and apply them to the various exchange rate fundamentals the application of the johansen test for multiple cointegrating factors finds evidence of the existence of stable money demand functions in both the usa and uk with relatively short lived perturbations however there appears to be insufficient information in the data to distinguish whether the real exchange rate has a unit root or is persistent and mean reverting the consequent persistent deviations from purchasing power parity appears the only source of rejection of the equilibrium monetary model

declining discount rates and the fisher effect inflated past discounted future uncertain and persistent real interest rates underpin one argument for using a declining term structure of social discount rates in the expected net present value enpv framework despite being controversial this approach has influenced both the inter agency working group on cost benefit analysis and the uk government s guidelines on discounting we first clarify the theoretical basis of the enpv approach then rather than following previous work which used a single series of u s treasury bond returns we treat nominal interest rates and inflation as co integrated series and estimate the empirical term structure of discount rates via the fisher effect this nests previous empirical models and is more flexible it also addresses an irregularity in previous work which used data on nominal interest rates until 1950 and real interest rates thereafter as we show the real and nominal data have very different time series properties this paper therefore provides a robustness check on previous discounting advice and updated methodological guidance at a time when governments around the world are reviewing their guidelines on social discounting the policy implications are discussed in the context of the social cost of carbon nuclear decommissioning and public health

the short run dynamics of prices and the balance of payments the purpose of this study is to analyze theoretically and empirically the short run behavior of prices and the balance of payments in a small open economy with a fixed exchange rate following the presentation of the theoretical framework the experience of mexico during 1950 73 is analyzed the model is based on what is known as the monetary approach to the balance of payments this approach as is frequently presented deals with long run equilibrium situations when all relative prices are fixed this long run equilibrium view was applied to test empirically the theory for several countries 2 using the assumption that there are no serious barriers to the international movement of capital and that all goods are traded 3 these assumptions imply that goods and capital markets are perfectly arbitraged and therefore that price levels and interest rates in all the countries always move together

labor friendly corporate practices is what is good for employees good for shareholders as corporate managers interact with non shareholder stakeholders potential tradeoffs emerge and questions arise as to how these interactions impact shareholder value we argue that this shareholder stakeholder debate is an important issue within the overall corporate governance and corporate policy domain and examine one such stakeholder group employees by studying labor friendly corporate practices we find that announcements of labor friendly policies are associated with positive abnormal stock returns labor friendly firms also outperform otherwise similar firms both in terms of long run stock market returns and operating results in addition we find that the probability and benefits of labor friendliness increase with the demand for highly skilled labor our analysis of excess executive compensation suggests that top management derives no pecuniary benefits from labor friendly practices we interpret our results as consistent with a genuine concern for employees translating into higher productivity and profitability which in turn facilitate value creation it appears that the benefits of labor friendly practices significantly outweigh the costs and that what is good for employees is good for shareholders

country level institutions firm value and the role of corporate social responsibility initiatives drawing on transaction cost theories and the resource based view of a firm we posit that the value of corporate social responsibility csr initiatives is greater in countries where an absence of market supporting institutions increases transaction costs and limits access to resources using a large sample of 11 672 firm year observations representing 2445 unique firms from 53 countries during 2003 2010 and controlling for firm level unobservable heterogeneity we find supportive evidence that csr is more positively related to firm value in countries with weaker market institutions we also provide evidence on the channels through which csr initiatives reduce transaction costs we find that csr is associated with improved access to financing in countries with weaker equity and credit markets greater investment and lower default risk in countries with more limited business freedom and longer trade credit period and higher future sales growth in countries with weaker legal institutions our findings provide new insights on non market mechanisms such as csr through which firms can compensate for institutional voids

a survey of some recent econometric methods this survey is written mainly for the applied economist though we hope that the specialist econometrician will find something of interest too our aim has been to try to bring the applied worker as up to date as possible and in the process to improve the quality of applied work by providing access to the latest ideas in econometrics we have tried to describe and explain in a relatively non technical way the main developments that have taken place in the last ten years partly for reasons of space the survey is by no means exhaustive but it does cover a wide range of topics in both time series and cross section analysis among the subjects covered are the followoing the nature of data including integrated and fractionally integrated data four estimation methods maximum likelihood method of moments m estimators and non parametric estimation inference with stationary and integrated regressors a comparison of various model evaluation principles the formulation of models including dynamic specification cointegration and conditional expectations in mean and variance copyright 1989 by royal economic society

optimal hedge ratios at the winnipeg commodity exchange multivariate garch models are employed to estimate time varying hedge ratios for three commodities traded on the winnipeg commodity exchange garch hedge ratios are shown to be superior to those based on the traditional regression approach to calculating the optimal hedge les ratios optimaux de comptant par rapport aux contrats a terme a la bourse de denrees de winnipeg l auteur emploie des modeles multivaries de type garch pour calibrer les ratios optimaux de comptant par rapport aux contrats a terme pour trois denrees transigees a la bourse des denrees de winnipeg ces ratios s averent superieurs a ceux qu on obtient par les methodes de regression traditionnelles

regional interest rate pass through in italy this paper estimates the pass through and speed of adjustment of italian regional interest rates to changes in the money market rate for the period 1998q1 2009q4 our main findings suggest that the markup for the lending rates that banks charge are generally higher in the south than in the north moreover our results indicate that the pass through tends to be longer in southern regions we find little evidence supporting the hypothesis of asymmetric adjustment in the lending rates but detect some evidence supporting upward rigidity in the regional deposit rates

the declining credit quality of u s corporate debt myth or reality in recent years the number of downgrades in corporate bond ratings has exceeded the number of upgrades leading some to conclude that the credit quality of u s corporate debt has declined however an alternative explanation of this apparent decline in credit quality is that the rating agencies are now using more stringent standards in assigning ratings an ordered probit analysis of a panel of firms from 1978 through 1995 suggests that rating standards have indeed become more stringent implying that at least part of the downward trend in ratings is the result of changing standards bond ratings play a key role in corporate financing and investment decisions a corporation that can issue higher rated bonds usually receives better terms than one that can issue only lower rated bonds by law or policy some investors can purchase only bonds with an investment grade rating a restriction which in some asset pricing models would affect the relative prices of financial assets numerous articles in the popular press have presumed that the credit quality of the debt of u s corporations has been declining over the last couple of decades the comprehensive study by lucas and lonski 1992 of moody s rating changes of corporate debt is consistent with this presumption to cite their statistics in 1970 moody s downgraded 21 issues and upgraded 23 issues but over the following years the number of bonds downgraded began to exceed by substantial margins the number of bonds upgraded and by 1990 moody s downgraded 301 issues and upgraded only 61 their study includes both investment and noninvestment grade bonds but internal data from donaldson lufkin jenrette confirm that this trend also applies to investment grade bonds alone in a somewhat different context grundy 1997 documents similar trends in the ratings of preferred shares over the 1965 to 1990 period as the credit quality of a firm s corporate debt decreases that firm will face a greater probability of financial distress which at the extreme translates into bankruptcy there is some debate as to the effect of financial dis

determinants of the expected real long term interest rates in the g7 countries the paper investigates which factors determine the expected real long term interest rates of the g7 countries as a whole within a single equation error correction model inflationary expectations are generated using the low frequency component of inflation provided by the hodrick prescott filter a comparison of the calculated expected inflation rates with those resulting from index linked and conventional uk bonds suggests this approach to be appropriate expected real long term interest rates turn out to be influenced positively by real short term interest rates capacity utilization and structural public borrowing

foreign debt instability an analysis of national saving and domestic investment responses to foreign debt accumulation in 28 developing countries abstract i specify and estimate a foreign debt model that exploits the balance of payments identity current account national saving domestic investment foreign debt can affect both saving and investment behavior in this model if an increase in foreigndebt reduces investment by more than it reduces saving or raises investment by less than it raises saving the current account will eventually be brought into a steady state equilibrium with a sustainable ratio of foreign debt to gnp in such case the debt crisis is more illusory than real for the country sample analyzed here however the buildup of government and government guaranteed foreign debt appears to have produced perverse private sector responses an increase in this type of foreign debt reduces saving by more than it reduces investment hence the current account deficit worsens over time as such foreign debt accumulates dynamic simulations identify only government policy that it raises national saving as an effective way of improving the current account the consequent real depreciation in the exchange rate may increase exporrts and reduce imports sufficiently to cause a current account surplus surprisingly export promotion policies alone seem unlikely to produce any substantial improvement in the current account

currency devaluation aggregate output and the long run an empirical study abstract this paper estimates the effect of currency devaluation on the aggregate output level in six asian countries using a unique methodology developed by wickens et al 1988 economic journal 189 205 the estimated results suggest that devaluation in general is neutral in the long run in some cases it even can have a contractionary effect

imports under a foreign exchange constraint the traditional model of import behavior which looks only at the gross domestic product gdp and real import prices as explanatory variables failed to predict or explain the developing countries import slumps in the early 1980 s this paper expands on a more useful model the hemphill which incorporates the traditional variables relative prices and domestic income with the variables introduced by hemphill foreign exchange receipts and international reserves section 2 of this paper discusses the theoretical models in the present study the traditional model used here as a benchmark is presented first and is later extended to include foreign exchange constraints section 3 presents the empirical estimates of the general import models that include foreign constraints and two special cases the hemphill and benchmark models using pooled cross section time series section 4 concludes that policy makers must look at the policies that affect gdp and prices and the availability of foreign exchange when trying to estimate import behavior in developing countries

a dynamic macroeconometric model for short run stabilization in india this paper presents a small macroeconometric model examining the determinants of indian trade and inflation to address the effects of a reform policy package similar to those implemented in 1991 this is different from previous studies along one important dimension that we explicitly incorporate the non stationarity of the data into our model and estimation procedures which suggest that the stationarity assumption may be a source of misspecification in previous work so the model has been estimated using the data from 1950 to 1995 employing fully modified phillips hansen method of estimation to obtain the cointegrating relations and short run dynamic model policy simulations using dynamic simulations method compare the dynamic responses to devaluation with the responses to tight credit policy it is shown that the trade balance effects of tight credit policy are more enduring than those of devaluation the simulations demonstrate that the devaluation has actually worsened the trade balance and hence devaluation is not an option in response to a negative trade shock whereas the reduction in domestic credit produces a desirable improvement in the trade balance

an analysis of the disaggregated manufacturing exports of the asian nies to eec usa and japan this paper examines the export performance of the four asian newly industrialized economics nies by modelling their bilateral export flows to three main oecd blocks the usa japan and the european community our estimated export demand models reveal interesting asymmetries between these three areas of destination which do not emerge from previous aggregate empirical studies of nie export performance

exchange rate versus credit policy analysis with a monetary model of trade and inflation in india abstract a general equilibrium model of the trade balance and inflation in india is specified and empirically analyzed the model takes into account many important institutional features of india such as foreign exchange rationing and emphasizes the effects of monetary disequilibrium on the trade balance policy simulations compare the dynamic responses to devaluation with the responses to tight credit policy it is shown that the relative price effects of policies are often significantly offset by perverse liquidity effects which serve to raise absorption however the trade balance effects of devaluation are found to be more enduring than those of tight credit policy

the forward rate as a predictor of the future spot rate a stochastic coefficient approach this paper develops a stochastic coefficient model to examine the unbiased forward rate hypothesis for the period january 1974 to august 1983 tests from the full sample estimations confirm the null hypothesis however the re sults from the brown durbin evans 1975 test and the chow test indic ate that the exchange rate behavior departs from parameter constancy using joint rolling regressions for the subsample estimations the a uthor finds evidence that the unbiasedness hypothesis in most cases s hould be rejected and that the estimated parameters sensitive to new information vary through different subsample periods the out of sa mple test concludes that incorporation of the stochastic properties o f the parameters into the model improves accuracy of exchange rate pr edictions copyright 1988 by ohio state university press

tests of exchange market efficiency fragile evidence from cointegration tests abstract several recent papers have employed engle and granger 1987 cointegration tests to determine whether or not markets are efficient we use a new test for cointegration due to johansen 1988 to examine market efficiency with respect to the us dollar exchange rates for canadian japanese and west german currencies the fragile nature of the test indications suggests that cointegration methodologies cannot be relied upon to provide reliable evidence on market efficiency

takeover threats and managerial myopia this paper examines the familiar argument that takeover pressure can be damaging because it leads managers to sacrifice long term interests in order to boost current profits if stockholders are imperfectly informed temporarily low earnings may cause the stock to become undervalued increasing the likelihood of a takeover at an unfavorable price hence the managerial concern with current bottom line the magnitude of the problem depends on a variety of factors including the attitudes and beliefs of shareholders the extent to which corporate raiders have inside information and the degree to which managers are concerned with retaining control of their firms

determinants of agriculture s relative decline thailand during economic development agriculture declines as a proportion of aggregate national output a number of theoretical explanations for this phenomenon have been advanced in the economic literature but their relative historical significance has not been clear this paper develops an econometric methodology to analyze this issue and applies it to time series data for thailand the study investigates the importance of relative commodity prices factor endowments and technical progress as explanations for changing sectoral gdp shares of agriculture manufacturing and services it is concluded that the movement in thailand s aggregate factor endowment relative to labor was the most important determinant of agriculture s relative decline

cointegration fractional cointegration and exchange rate dynamics multivariate tests due to johansen 1988 1991 as implemented by baillie and bollerslev 1989a and diebold gardeazabal and yilmaz 1994 reveal mixed evidence on whether a group of exchange rates are cointegrated further analysis of the deviations from the cointegrating relationship suggests that it possesses long memory and may possibly be well described as a fractionally integrated process hence the influence of shocks to the equilibrium exchange rates may only vanish at very long horizons in the article by baillie and bollerslev 1989a it is argued that seven different nominal spot and forward exchange rates all contain unit roots in their univariate time series representations at the same time however the spot exchange rates appear to be tied together in the long run through a cointegration type relationship the latter finding of baillie and bollerslev has attracted particular interest and several studies such as those by hakkio and rush 1991 and sephton and larsen 1991 have already addressed this issue using the same data as the baillie and bollerslev article sephton and larsen 1991 describe the evidence for the presence of cointegration as being fragile and note that mixed conclusions are reached by truncating the baillie and bollerslev sample at different points in time diebold gardeazabal and yilmaz 1994 henceforth diebold et al provide interesting evidence that application of the johansen 1988 1991 tests with and without an intercept will result in different inferences on the baillie and bollerslev data set furthermore diebold et al carry out an ex ante forecasting experiment and find that the addition of an error correction term to the martingale model as implied by the standard cointegration paradigm fails to reduce the prediction mean square error when compared to a simple martingale model this therefore leads diebold et al to conclude that there exists substantial uncertainty regarding the existence of cointegration relationships among nominal dollar exchange rates this article provides some additional evidence on the existence of such a long run relationship among the same seven nominal spot exchange rates after further analysis it appears that a form of cointegration does exist between the exchange rates so that they do not drift apart in the long run we argue that this form of cointegration is

persistence in foreign exchange rates abstract this study examines the long run behavior of seven daily nominal exchange rates using univariate and multivariate persistence measures our results indicate that for some currencies the long run behavior deviates from that of a pure random walk in certain periods the multivariate estimates reflect the effect of both the ems exchange rate mechanism and increased post louvre accord coordinated intervention a large portion of the effect of a shock in one currency on another currency s long run value can be attributed to contemporaneous effects on the other currencies

the latin american debt burden consequences for international adjustment and agricultural trade this paper attributes the origins of the latin american external debt problem to the oil price and real interest rate increases and debtor country and international bank policies next it briefly examines the implications of economic adjustments to service the debt finally in order to facilitate research on the linkages between debt and agricultural trade the paper suggests some factors to consider in modeling import behavior and international borrowing

tax decentralization and local government size this paper investigates the relationship between fiscal federalism and the sizes of local governments while many empirical studies emphasized that grants encourage the growth of local public spending and local taxes constrain it they are more silent regarding the effects of different types of tax autonomy the paper addresses this issue by arguing that tax decentralization as organized on tax bases used only by local governments tax separation rather than on tax base sharing would restrain local public expenditures using an unbalanced panel of oecd countries the key finding is that only property taxes mostly based on a tax separation scheme seem to favor smaller local governments thus while tax decentralization is a necessary condition for limiting the growth of local governments it does not appear sufficient as tax separation schemes among government levels would in fact be required

interdependence and dynamics in currency futures markets a multivariate analysis of intraday data abstract this paper investigates long term interdependencies and short term dynamics in currency futures utilizing intraday data for six major foreign currencies the british pound deutsche mark swiss franc australian dollar canadian dollar and japanese yen lack of cointegration ci among the foreign exchange futures is found to be the prevailing mode of behavior but some temporary deviations from the no ci condition are detected there is a notable overlap between detected ci relationships and the timing of policy changes world events and regime shifts indicating that the observed cis are event driven the robustness of the ci results is checked with respect to variations in the model lag structure data period sample horizon and currency basket grouping impulse response functions irfs reveal that currency markets are in general efficient and absorb new information within the day the interdependence among currencies is found to be asymmetric

does comovement among exchange rates imply market inefficiency abstract this paper argues that contrary to what has been reported in the empirical literature previously cointegration between pairs of exchange rates does not necessarily rule out informational efficiency in currency markets the basic reason is that market efficiency does not rule out predictable exchange rate movements but only rules out arbitrage opportunities from predictable exchange rate movements as the usual parity conditions dictate

the demand for the components of broad money error correction and generalized asset adjustment sytems the distinction between bank and non bank deposits have been blurred over the last decade and this has led to changes in the demand for various types of monetary aggregates thus money demand studies which focus only on one monetary aggregate like m3 currency plus bank deposits without allowing for the altered nature of asset substitutions may lead to wrong inferences about the cause of the growth of the money this paper is concerned with the interactions between the components of broad money currency bank and non bank deposits in the long and short run the long run asset demand equations are specified to encompass the transaction and portfolio motives for demanding money while the short run asset adjustment equations are derived from an underlying dynamic cost minimizing model the short run asset adjustment model is of the error correction form and under certain assumptions is shown to nest the generalized adjustment form the model is applied to the case of australia using both quarterly and

identifying linear restrictions on the monetary exchange rate model and the uncovered interest parity cointegration evidence from the canadian u s dollar in this paper the long run validity of the monetary model for the canadian u s dollar is reexamined the time series properties of the variables are examined with the use of nonseasonal and seasonal unit root and stationarity tests and it is shown that they are i 1 processes with no seasonal effects two significant cointegration vectors are discovered using johansen s methodology but the system is found to be overidentified and hence the authors are unable to assign the monetary model with either vector parameter stability of johansen s results is tested using the recursive methodology developed by h hansen and s johansen 1993

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14