can producer currency pricing models generate volatile real exchange rates if the elasticities of substitution between traded and nontraded and between home and foreign traded goods are sufficiently low then the real exchange rate generated by a model with full producer currency pricing is as volatile as in the data

inventory policy in the presence of market disruptions this paper presents a dynamic model concerning optimal inventory policies in the presence of market disruptions which are often characterized by events with uncertain arrival time severity and duration the model is based on the framework of a continuous time markov decision process with a finite state space we develop a general characterization of the optimal inventory policy interpret it in economic terms and then apply it to two special cases yielding explicit analytic results

boom and bust cycles external imbalances and the real exchange rate when the current account balance and net capital outflows do not exactly offset each other international payment flows arise payment flows into a country push the real exchange rate up payment outflows push it down this article uses a model of optimal consumption and portfolio choice to determine the factors that drive international payment flows during boom and bust cycles it shows that during such episodes capital inflows first exceed the deficit on current account strengthening the currency later on when the return on domestic capital reverts to its normal level the current account recovers yet the overall decline of the net foreign asset position provokes a fall of the real exchange rate even below its initial level case studies of countries experiencing rapid economic expansions followed by economic and financial meltdowns confirm the article s theoretical predictions

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

capital flows and real exchange rate fluctuations following spain s entry into the european community abstract spain s 1986 entry into the european community was followed by a dismantling of restrictions on international capital flows initial trade deficits and real exchange rate appreciation were followed by trade surpluses and real exchange rate depreciation this paper analyzes spain s financial liberalization using a dynamic general equilibrium model with a traded and nontraded good where a capital poor country opens itself to its capital rich neighbors a carefully calibrated model has trouble accounting for the large changes in relative prices observed given the small changes in quantities variants of the model with frictions in factor mobility between sectors fare better

revisiting the importance of non tradable goods prices in cyclical real exchange rate fluctuations abstract in an influential paper engel 1999 argues that essentially all the fluctuations in the real exchange rate can be attributed to fluctuations in the relative price of traded goods and that only a small part of the fluctuations can be attributed to changes in the relative price of non tradables we revisit this important issue and our main finding suggests that the relative distribution wedge i e the relationship between traded goods prices at the dock and the retail prices of those goods is key to understanding real exchange rate fluctuations importantly our results suggest that variations in the relative wedge are driven by fluctuations in mark ups and not in distribution costs

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

explaining price level differences new evidence on the balassa samuelson effect we re examine one of the most venerable results in economics the balassa samuelson effect of balassa 1964 and samuelson 1964 the central claim of balassa samuelson is that nontradables explain price level differences across rich and poor economies we test balassa samuelson by quantifying the contribution of nontradables to cross sectional price level variation for countries in the international comparison program icp our results suggest that nontradables explain up to two thirds of price level variation

the great appreciation the great depreciation and the purchasing power parity hypothesis abstract although there has been much recent work on purchasing power parity ppp neither univariate nor panel methods have produced strong rejections of unit roots in us dollar real exchange rates for industrialized countries during the post 1973 period we investigate the hypothesis that these non rejections can be explained by one episode the large appreciation and depreciation of the dollar in the 1980s by developing unit root tests which account for this event and maintain long run ppp using panel methods we can strongly reject the unit root null for those countries that adhere to the typical pattern of the dollar s rise and fall

innovation and communication signalling with partial disclosure this paper introduces a model of feedback effect equilibrium i e equilibria in which an asymmetrically informed agent is motivated to communicate its privately known attribute but can do so only through channels or signals which convey directly useful information to competing agents this revelation to the competition serves to reduce the value of the private information held by the first agent models of this kind are of obvious relevance to realistic theories of product or financial market disclosure policies of firms patenting and a host of related behavioural and regulatory issues this model is developed in the context of a set of firms engaged in research and development rivalry in which the value of privately held and disclosed information arises from its implications for the likelihood and timing of productive innovation

a dynamic general equilibrium analysis of deviations from the laws of one price abstract using disaggregated west german prices this study documents movements in relative export and producer prices and in relative import and producer prices which are variable and highly autocorrelated this suggests the presence of time varying persistent deviations from the laws of one price perfect competition monopoly and monopolistic competition with constant mark up pricing are inconsistent with the variability in relative export and producer prices furthermore cournot oligopoly is inconsistent with the variability in relative import and producer prices a dynamic general equilibrium model with differentiated oligopolistic competition and strategic pricing is shown to generate variable and persistent movements in both measures of relative prices

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

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

real exchange rate fluctuations and the relative importance of nontradables abstract the real exchange rate is one of the most important price variables in macroeconomics as changes in it have implications for both external competitiveness as well as internal sectoral resource allocation this paper decomposes real exchange rate volatility into its two components for a panel of 51 economies over the period 1990 2010 and specifically estimates the relative importance of internal prices in real exchange rate fluctuations unlike other studies this paper goes a step further and examines the role of a set of economic fundamentals in explaining the relative contribution of the non traded component in real exchange rate fluctuations

u s real exchange rate fluctuations and relative price fluctuations abstract traditional theory attributes fluctuations in real exchange rates to changes in the relative price of nontraded goods this paper studies the relation between the united states bilateral real exchange rate and the associated bilateral relative price of nontraded goods for five of its most important trade relationships we find that this relation depends crucially on the choice of price series used to measure relative prices and on the choice of trade partner the relation is stronger when we measure relative prices using producer prices rather than consumer prices the relation is stronger the more important is the trade relationship between the united states and a trade partner even in cases where there is a strong relation between the real exchange rate and the relative price of nontraded goods however a large fraction of real exchange rate fluctuations is due to deviations from the law of one price for traded goods

bargaining and sharing innovative knowledge we consider the problem of bargaining over the disclosure of interimresearch knowledge between two participants in an r d race for an ultimate patentable invention licence fee schedules that are functions of the amount of knowledge disclosed by the leading to the laggingagent are examined for their abilities to attain efficient outcomes andvarying shares of the surplus arising from disclosure in hersequential offers bargaining games the uninformed buyer is able to elicitfull disclosures without sharing the incremental surplus with any type ofthe licensor and thus do as well as a perfectly informed and discriminatingknowledge licensee

consumption and exchange rate uncertainty evidence from selected asian countries we set out to assess the effects of exchange rate uncertainty on real consumption in selected asian countries consumption influences business cycles which in turn shape short run monetary policy decisions hence understanding factors driving consumption is appealing to policymakers in the extant literature few studies have analysed the effects of uncertainty on consumption the available ones generally focus on the long run effects in spite of the fact that the short run persistence and adjustments to equilibrium are equally relevant our study takes this limitation seriously by distinguishing the short and long run effects of exchange rate uncertainty on consumption using a flexible dynamic panel data technique that allows long run effects to be homogeneous and the short run effects to be heterogeneous we find that uncertainty impedes consumption in the long run in the short run however the effects are immaterial this evidence remains robust to the measure of uncertainty asymmetric uncertainty the role of consumer prices and the global financial crisis of 2008 by decomposing uncertainty into its temporary and permanent components we find that the latter have a stronger effect on consumption in the long run than the former although both components demand policy attention the evidence suggests that policymakers should be more concerned with permanent uncertainty

international evidence on tradables and nontradables inflation abstract using 1970 1985 sectoral data for the oecd we find that inflation in nontradable goods exceeds inflation in tradables we identify a demand shift towards nontradables and faster growth of total factor productivity in the tradable goods sector as the prime causes of the differential inflation in addition disinflation attempts and the exchange rate regime appear to have exerted significant influence on the relative inflation rate

real exchange rates under alternative nominal exchange rate systems abstract the paper develops an equilibrium model of the determination of exchange rates the relative price of nontraded goods and the current account the focus is on the effects of various real and nominal disturbances and the conditions under which the nominal exchange rate system is neutral with respect to real variables in the economy the model demonstrates an assymetry in the roles of trade and nontraded goods in affecting exchange rates an econometric investigation of the raltion between the exchange rate system and the variability of real exchange rates provides some evidence against the neutrality hypothesis

an eoq model with random variations in demand this paper presents a model that incorporates variations in the demand rate at random time points into the inventory planning decision these changes in demand may occur due to economic recessions labor strife starting or ending or other events that result in a period of time during which the rate of demand is shifted up or down from its current level the paper uses system point level crossing theory to derive expressions for the distribution and expected value of on hand inventory ordering rate and the expected total cost rate for a given ordering policy a sensitivity analysis is conducted and a number of qualitative properties are provided to illustrate the use of the results to obtain optimal order quantities

inflation differentials between spain and the emu a dsge perspective this paper estimates a dynamic stochastic general equilibrium model of a currency union with nominal rigidities to explain the sources of inflation differentials between the economic monetary union emu and one of its member countries spain the paper finds that productivity shocks account for 85 of the variability of the inflation differential demand shocks explain a large fraction of output growth volatility but not variability in inflation differentials in addition the estimated model finds evidence that inflation dynamics are different across countries in the nontradable sector only finally the balassa samuelson effect does not appear to be an important driver of the inflation differential during the emu period

accounting for real exchange rates using micro data the classical dichotomy predicts that all of the time series variance in the aggregate real exchange rate is accounted for by non traded goods in the cpi basket because traded goods obey the law of one price in stark contrast engel 1999 found that traded goods had comparable volatility to the aggregate real exchange rate our work reconciles these two views by successfully applying the classical dichotomy at the level of intermediate inputs into the production of nal goods using highly disaggregated retail price data since the typical good found in the cpi basket is about equal parts traded and non traded inputs we conclude that the classical dichotomy applied to intermediate inputs restores its conceptual value

a theory of trade secrets in firms this article provides a simple theoretical model of trade secrets in hierarchical firms a crucial assumption is that each manager has access to trade secrets pertaining to his own hierarchical level as well as to all lower levels the article explores some implications of this assumption for optimal degree of trade secrets accumulation and protection as well as for the wage structure in firms in addition the model implies that managers may have an incentive to overpay their subordinates and protect their firms trade secrets too much

the firm as a dedicated hierarchy a theory of the origins and growth of firms in the formative stages of their businesses entrepreneurs have to provide incentives for employees to protect rather than steal the source of organizational rents we study how the entrepreneur s response to this problem determines the organization s internal structure growth and its eventual size large steep hierarchies will predominate in physical capital intensive industries and will have seniority based promotion policies by contrast e at hierarchies will prevail in human capital intensive industries and will have up or out promotion systems furthermore e at hierarchies will have more distinctive technologies or cultures than steep hierarchies the model points to some essential differences between organized hierarchies and markets at the root of most enterprises generating economic surplus is an entrepreneur with a unique critical resource such as an idea good customer relationships a new tool or superior management technique a fundamental problem of entrepreneurship is how to enlist the cooperation of the many agents necessary for production without ceding to them too much of the surplus generated by the enterprise the risk of being expropriated however is always inherent in production in particular the entrepreneur has to give her employees whom we call managers close proximity or access to the critical resource for them to learn to produce effectively for example a manager has to understand the idea be in contact with the key customers and suppliers or even learn the entrepreneur s unique managerial techniques in order to work effectively but access also gives the manager the opportunity to expropriate this critical resource and compete against the entrepreneur managers may steal the idea walk away with clients or mimic the entrepreneur s management style and start up a rival concern the greater the access a manager has the more he can appropriate and the more effectively he can compete this paper explores the role of organizational design in

oil stockpiles and import reductions a dynamic programming approach this paper analyzes oil stockpiling policies using models in which u s policy choices are restricted to just two instruments stockpiles and disruption tariffs the model considers the influence of u s and in general oecd import demands upon the opec price for oil and the duration and severity of oil disruptions induced by disturbances among the opec nations our development is based upon a probabilistic view of disruptions analyzed by applying dynamic programming

nontraded goods market segmentation and exchange rates abstract empirical evidence suggests that movements in international relative prices are large and persistent nontraded goods both in the form of final consumption goods and as an input into the production of final tradable goods are an important aspect driving international relative price movements in this paper we show that nontraded goods play an important role in the context of an otherwise standard open economy macromodel our quantitative study with nontraded goods generates implications along several dimensions that are more closely in line with the data relative to the model that abstracts from nontraded goods

the consumption real exchange rate anomaly nontraded goods and distribution services in the data real exchange rates rers tend to move in opposite directions with respect to the relative consumption across countries chari et al 2002 refer to the inability of models to replicate the previous stylized fact as the consumption rer anomaly in this article it is shown that an international real business cycle irbc model similar to the one proposed by chari et al but extended by considering nontraded goods and an incomplete asset market structure can solve the anomaly nontradable goods amplify wealth effects arising from the incomplete assets market structure generating a negative co movement between the rer and relative consumption adding distribution services ds improves the performance of the model in some other dimensions in particular ds help to generate countercyclical net exports

vintage human capital growth and the diffusion of new technology we develop a model of vintage human capital in which each technology requires vintage specific skills we examine the properties of a stationary equilibrium for our economy the stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages the distribution is shown to be single peaked under general conditions there is a lag between the appearance of a technology and its peak usage a phenomenon known as diffusion an increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages thereby increasing the diffusion rate

trends and cycles in the net barter terms of trade a new approach this study has two objectives first it uses time series techniques including unit root tests to reexamine the classic prebisch singer hypothesis that the relative prices of primary commodities in terms of manufactured goods are characterized by secular deterioration second commodity price movements are decomposed into permanent and cyclical components using the beveridge and nelson 1981 technique the latter information is valuable when assessing the viability of commodity stabilization funds and formulating countercyclical macroeconomic policy responses to commodity booms and busts copyright 1989 by royal economic society

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

endogenous tradability and some macroeconomic implications abstract while nontraded goods play an important role in many open economy macroeconomic models these models have difficulty explaining the low volatility in the relative price of nontraded goods in contrast to macroeconomic convention this paper argues that the share of nontraded goods is endogenous a time varying product of macroeconomic shocks and trade costs that are heterogeneous across goods a simple open economy model demonstrates that trade cost heterogeneity and a time varying margin of tradedness dramatically reduces the volatility of nontraded prices this also reduces the ability of real exchange rate adjustments to dampen current account imbalances

rent seeking and innovation innovations and their adoption are the keys to growth and development innovations are less socially useful but more profitable for the innovator when they are adopted slowly and the innovator remains a monopolist for this reason rent seeking both public and private plays an important role in determining the social usefulness of innovations this paper examines the political economy of intellectual property analyzing the trade off between private and public rent seeking while it is true in principle that public rent seeking may be a substitute for private rent seeking it is not true that this results always either in less private rent seeking or in a welfare improvement when the public sector itself is selfish and behaves rationally we may experience the worst of public and private rent seeking together

real exchange rates and sectoral productivity in the eurozone we investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the eurozone real exchange rate patterns closely accord with an amended balassa samuelson interpretation both in cross section and time series we construct a sticky price dynamic general equilibrium model to generate a cross section and time series of real exchange rates that can be directly compared to the data under the assumption of a common currency estimates from simulated regressions are very similar to the empirical estimates for the eurozone our ndings contrast with previous studies that have found little relationship between productivity levels and the real exchange rate among high income countries but those studies have included country pairs which have a oating nominal exchange rate

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

inventory control in a fluctuating demand environment we present an inventory model where the demand rate varies with an underlying state of the world variable this variable can represent economic fluctuations or stages in the product life cycle for example we derive some basic characteristics of optimal policies and develop algorithms for computing them in addition we show that certain monotonicity patterns in the problem data are reflected in the optimal policies

a stochastic dynamic nash game analysis of policies for managing the strategic petroleum reserves of consuming nations in this paper we present a nash dynamic game model of interactions among oil inventory and tariff policies for oil importing countries the inventory policies consist of the rates for building up and drawing down strategic oil reserves while the tariff policies consist of setting tariffs as a function of the state of the world oil market the model represents a stochastic game in which countries are grouped into two players where each player in the game chooses its individual policies to maximize expected social welfare we use the model to present empirical results about the sizes of the stockpiles as a function of disruption probabilities tariff policies and cooperation versus noncooperation between nations in addition to results regarding the build up and draw down rates as a function of the amount of disruption or probability of future disruption our central conclusion is that build up and drawdown policies are essentially the same with or without international cooperation due to the current inventory limits on u s and foreign strategic petroleum reserves

can firms location decisions counteract the balassa samuelson effect this paper examines the determinants of relative prices in a model combining a harrod balassa samuelson hbs mechanism and an endogenous location of traded good producers besides the standard hbs effect asymmetric productivity improvements in the traded good sector push new firms to enter the market this benefits local consumers who save on trade costs and exerts an upward pressure on relative wages as a consequence relative prices in the traded good sector either increase or fall in general equilibrium in a panel cointegration framework the wage effect is shown to dominate this means the hbs effect is strengthened by the relocation of traded good producers

terms of trade and real exchange rates the canadian evidence abstract this paper presents empirical evidence linking the canada us real exchange rate with the terms of trade using recently developed econometric methods for nondashstationary data we find that the real exchange rate is cointegrated with terms of trade variables and that causality runs from the terms of trade to the exchange rate we then construct a simple exchange rate equation that satisfies several specification tests and performs better than a random walk in post sample forecasting experiments the results suggest that much of the variation in the real exchange rate is attributable to movements in the terms of trade and that the influence of monetary factors is secondary

the eqq model with stochastic demand and discounting abstract we generalize bather s eqq model with stochastic demand to the case with discounting we consider two cases one with and one without demand backlogging important implications of discounting are investigated useful insights and formulas are provided

fiscal policy the real exchange rate and traded goods we estimate the effects of government spending shocks on the cpi real exchange rate the trade balance and their co movements with gdp and private consumption we decompose the variations of the cpi real exchange rate into variations of the traded goods real exchange rate and the relative price of traded to non traded goods we reach three main conclusions a rise in government spending induces a depreciation of the cpi real exchange rate and a trade balance deficit private consumption rises in response to a government spending shock and therefore co moves positively with the real exchange rate both components of the cpi real exchange depreciate we employ vector auto regression var techniques to estimate the effects of fiscal policy and in particular government spending on the cpi real exchange rate and the trade balance in the us and three other oecd countries our empirical analysis delivers two key results first a rise in government spending tends to induce a real exchange rate depreciation and a trade balance deficit although especially in the us the latter effect tends to be small second in all countries private consumption rises in response to a government spending shock and therefore co moves positively with the real exchange rate two important implications follow from these results our evidence provides support for a traditional twin deficit hypothesis in stark contrast with a recent study by kim and roubini 2008 a second implication concerns the consistency of facts and theory both the response of the real exchange rate and its co movement with private consumption and the trade balance are at odds with a benchmark general equilibrium open economy model featuring complete financial markets in fact while the model is successful in replicating the negative response of the trade balance to a government spending shock that we observe in the data and also in linking the magnitude of that response to the degree of openness it has counterfactual predictions on the response of the real exchange rate and of private consumption we argue that the key failure of the model lies in the equilibrium behaviour of private consumption in the model as a result of a typical wealth effect on labour supply private consumption falls in response to a rise in government spending whereas the opposite is true in the data this in turn explains the behaviour of the real exchange rate in the reference model with complete asset markets a risk sharing arbitrage condition ties the ratio of the marginal utilities of consumption across countries to the real exchange rate via this condition and provided that deviations from purchasing power parity are feasible the fall in consumption is accompanied by an equilibrium appreciation of the real exchange rate we proceed by investigating further the sources of the cpi real exchange rate movements in the data a traditional approach decomposes the real exchange rate into two terms

commodity currencies and the real exchange rate abstract this paper examines whether the real exchange rates of commodity exporting countries and the real prices of their commodity exports move together over time using international monetary fund imf data on the world prices of 44 commodities and national commodity export shares we construct new monthly indices of national commodity export prices for 58 commodity exporting countries over 1980 2002 evidence of a long run relationship between national real exchange rate and real commodity prices is found for about one third of the commodity exporting countries the long run real exchange rate of these commodity currencies is not constant as would be implied by purchasing power parity based models but is time varying being dependent on movements in the real price of commodity exports

differences in income elasticities and trends in real exchange rates abstract one might expect that differences in income elasticities in trade and or differences in growth rates among countries would give rise to strong secular trends in real exchange rates for example fast growing countries might need steady depreciation to get the world to accept their growing exports in fact however income elasticities are systematically related to growth rates by the 45 degree rule under which fast growing countries appear to face high income elasticities of demand for their exports while having low income elasticities of import demand the net effect of this relationship between elasticities and growth rates is that secular trends in real exchange rates are much smaller than one might otherwise have expected relative ppp holds fairly well this paper documents the existence of a 45 degree rule and suggests an explanation in terms of increasing returns and product differentiation

the making of an oligopoly firm survival and technological change in the evolution of the u s tire industry the number of producers in the u s tire industry grew for 25 years and then declined sharply and the industry evolved to be an oligopoly the role of technological change in shaping the industry s market structure is explored a model of industry evolution featuring technological change is used to derive predictions that are tested using a novel data set on firm entry exit size location distribution networks and technological choices prior to the shakeout of producers consistent with the model earlier entering and larger firms survived longer principally because of the influence of age and size on technological change

the effect of skilled emigration on real exchange rates through the wage channel abstract building on an analytical model we provide cross country empirical evidence that net skilled emigration appreciates bilateral real exchange rates through the wage channel in source countries chains of causality in the presence of the law of one price run through the spending effect and the resource allocation effect analogous to the remittance based dutch disease effect a pricing to market model allows pass through for both traded and nontraded prices when the law of one price is violated the skilled emigration elasticity of real exchange rate is estimated to be in the range of between 0 6 and 0 8 with internal prices playing a dominant role alternative model specifications show robust outcomes

cointegration analysis with structural breaks and deterministic trends an application to the canadian dollar this article applies recent developments in cointegration analysis with structural breaks and deterministic trends to analyse the relationship between the real canada us exchange rate and commodity prices previous empirical studies disagree on whether these variables are cointegrated the root of disagreement could be in the handling of deterministic trends and potential structural breaks i find that even after controlling for these matters the question of whether the real exchange rate and commodity prices are cointegrated for canada remains unresolved

haircuts or hysteresis sources of movements in real exchange rates abstract we empirically assess the importance of two sources of real exchange rate movements in models where ppp holds only among traded goods real exchange rate variation results from relative price movements within countries an alternative explanation relies on hysteretic price setting and nominal exchange rate changes using disaggregated price data from 11 oecd nations we find some support for the non traded goods models for example prices of haircuts in canada and the united states are unrelated in the long run we find stronger evidence to support models that emphasize sticky prices transportation costs or other impediments to frictionless trade

real exchange rate volatility terms of trade shocks and financial integration in primary commodity exporting economies using a panel of 53 primary commodity exporting countries we show that greater international financial integration reduces the impact of terms of trade shocks on real exchange rate volatility this reduction is larger when we define financial integration as foreign direct investment

the sale of ideas strategic disclosure property rights and contracting ideas are difficult to sell when buyers cannot assess an idea s value before it is revealed and sellers cannot protect a revealed idea these problems exist in a variety of intellectual property sales ranging from pure ideas to poorly protected inventions and reflect the nonverifiability of key elements of an intellectual property sale an expropriable partial disclosure can be used as a signal allowing the seller to obtain payment based on the value of the remaining undisclosed know how we examine contracting after the disclosure and find that seller wealth is pivotal in supporting a partial disclosure equilibrium and in determining the payoff size

parameter drifts misspecification and the real exchange rate in emerging countries abstract this paper reviews the baseline framework for the analysis of emerging economies using argentinean data i estimate a small open economy model with stochastic trend working capital constraint and augmented with time varying parameters i find that structural technological and financial parameters of one sector model are time varying during 1936 2006 time varying parameters correlate with the real exchange rate suggesting potential misspecification of the one sector model therefore i propose a two sector model that endogenously accounts for the real exchange rate in this model stationary productivity shocks and the country premium together explain a large share of the variability observed in the data

economic production quantity model for items with imperfect quality abstract the assumptions necessary to justify the use of economic production quantity epq eoq models are rarely met to provide mathematical models that more closely conform to actual inventories and respond to the factors that contribute to inventory costs the models must be extended or altered this paper hypothesizes a production inventory situation where items received or produced are not of perfect quality items of imperfect quality not necessarily defective could be used in another production inventory situation that is less restrictive process and acceptance control the electronics industry gives good examples of such situations this paper extends the traditional epq eoq model by accounting for imperfect quality items when using the epq eoq formulae this paper also considers the issue that poor quality items are sold as a single batch by the end of the 100 screening process a mathematical model is developed and numerical examples are provided to illustrate the solution procedure

exchange rate regimes and wage comovements in a ricardian model with money we construct a ricardian model of trade with money and trade costs the model predicts that the nominal wages of the trading countries exhibit stronger positive comovements when the countries fix their bilateral exchange rates while comovements of real wages are not affected by exchange rate regimes our numerical experiments suggest that a reduction in trade costs increases both nominal and real wage comovements regardless of regimes when downward nominal wage rigidity is introduced nominal wage comovements under the fixed regime remain stronger than under the flexible regime and the difference is smaller on the shorter time horizon while a slight difference in real wage comovements between the two regimes shows up and is larger on the shorter time horizon when we consider membership in the economic and monetary union of the european union as a fixed exchange rate regime panel regression results based on data from oecd countries are broadly consistent with our model and numerical experiments

a theory of the firm with non binding employment contracts this paper examines an employment relation in which individual workers enjoy some bargaining power vis a vis the firm although they are not unionized the main elements of the situations studied here are that the employment contracts are non binding across periods of production and that the firm has opportunities to replace workers the paper analyzes a dynamic model in which the processes of contracting and recontracting between the firm and its workers are intertwined with the dynamic evolution of the firm s workforce the analysis of the model is somewhat complicated because the employment level is a nondegenerate state variable that evolves over time and is affected by past decisions the main analytical results characterize certain important equilibria the profit maximizing and stationa ry equilibria the unique stationary equilibrium is markedly inefficient it exhibits inefficient over employment and the steady state wages coincide with the workers reservation wage it confirms earlier results derived by stole and zwiebel 1996a b in the context of a static model and shows that they are very robust even when the firm has nearly frictionless hiring opportunities in contrast in the profit maximizing equilibrium the outcome is nearly efficient and the wage exhibits a mark up over the reservation wage

a hybrid inventory policy with split delivery under regular and surge demand abstract this paper proposes a hybrid inventory policy with split delivery under regular and surge demand the combination of regular and surge demand can be observed in many areas such as healthcare inventory and humanitarian supply chain management the arrival rate of regular demand is typically higher than the arrival rate of surge demand whereas the volume of regular demand is typically lower than the volume of surge demand this paper proposes an inventory management model that considers both emergency and regular replenishments corresponding to both demand patterns the equilibrium equations developed for this model are based on the level crossing theory these equations are used to develop a search based heuristics to identify near optimal inventory management policies numerical results show that the proposed hybrid inventory policy with split delivery outperforms similar hybrid inventory policy without split delivery when holding and shortage costs are relatively low

accounting for u s real exchange rate changes this study measures the proportion of u s real exchange rate movements that can be accounted for by movements in the relative prices of nontraded goods the decomposition is done at all possible h

real exchange rates and productivity evidence from asia this paper examines a productivity based explanation of the long run real exchange rate movements of six asian economies using industry level data we construct total factor productivities tfps for the tradable and nontradable sectors we find that a within each country the relative price of nontradable goods is cointegrated with the sectoral tfp differential and b the real exchange rates are cointegrated with the home and foreign sectoral tfp differentials using the predicted real exchange rate as a measure of the long run equilibrium we find that most asian economies real exchange rates are overvalued before the asian financial crisis

bargaining over new ideas the distribution of rents and the stability of innovative firms we develop a theory of the rent distribution and stability of innovative firms our theory is based on a model of bargaining over new ideas the model accounts for the problem of information leakage namely the diffusion of information about new ideas among the agents that participate in the bargaining our main results draw a link between the strength of intellectual property rights enforcement and the distribution of rents in firms as well as between the size and organization of firms and their stability our theory explains why small firms are advantaged in introducing innovation into the market and why spin outs tend to emerge from large established firms jel l1 l2 c7

boom goes the price giant resource discoveries and real exchange rate appreciation we estimate the effect of giant oil and gas discoveries on bilateral real exchange rates the size and plausibly exogenous timing of such discoveries make them ideal for identifying the effects of an anticipated resource boom on prices we find that a giant discovery with the value of a country s gdp increases the real exchange rate by 14 within 10 years following the discovery the appreciation is nearly exclusively driven by an appreciation of the prices of non tradable goods we show that these empirical results are qualitatively and quantitatively in line with a calibrated model with forward looking behaviour and dutch disease dynamics

some unpleasant bargaining arithmetic abstract it is commonly believed that voting rules that are relatively more inclusive e g unanimity or supermajority are likely to yield relatively more equitable outcomes than simple majority rule we show that this is not necessarily the case in bargaining environments we study a multilateral bargaining model a la baron and ferejohn 1989 where players are heterogeneous with respect to the potential surplus they bring to the bargaining table we show that unanimity rule may generate equilibrium outcomes that are more unequal or less equitable than under majority rule in fact as players become relatively more patient we show that the more inclusive the voting rule the less equitable the equilibrium allocations

the composition of government spending and the real exchange rate we show that the composition of government spending influences the long run behavior of the real exchange rate we develop a two sector small open economy model in which an increase in government consumption is associated with real appreciation while an increase in government investment may generate real depreciation our empirical work confirms that government consumption and government investment have differential effects on the real exchange rate and the relative price of nontradables

accounting for real exchange rate changes in east asia abstract this study measures the proportion of real exchange rate movements that can be accounted for by movements in the relative price of non traded goods using the framework employed by engel 1999 accounting for u s real exchange rate changes journal of political economy 107 507 538 among the 21 bilateral asian pacific real exchange rates considered here that proportion is found to be trivially small for all possible horizons that the data allow from one month up to 25 years this pattern appears unaffected by the cross sectional variation in either income level or the degree of openness present among these pacific rim economies the only qualifications occur when considering fixed or semi fixed exchange rate regimes

optimal ordering policies when anticipating a disruption in supply or demand abstract we develop an optimal inventory policy for eoq inventory systems which may have a disruption in either supply or demand the start of the disruption is known a priori and it lasts a random length of time we describe the structure of an optimal policy and present a procedure for its computation along with numerical results

international comparisons of pricing to market behavior this paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using u s u k german and japanese industry level data given the industries sampled more price discrimination across destinations is observed in the u k german and japanese data for industries that match across source countries however behavior is very similar across source countries furthermore destination specific price adjustment on exports to the united states from germany and japan is similar to price adjustment observed on shipments to other destinations most variation in the data appears to be related to industry copyright 1993 by american economic association