is what we think of as rebound really just income effects in disguise this paper examines the question of whether unexpectedly high energy use in the wake of energy efficiency gains can be explained as arising from increases in consumer wealth as opposed to energy efficiency rebound effects the analysis concludes that historical energy consumption increases were driven by more than just income levels with the lowest income consumers in the us using more energy in 2002 than they did in 1987 despite significant energy use efficiency gains and despite declining average incomes in this category further direct use of energy in households increased for all income categories over this time period these results point to rebound as being the culprit not income effects

can we explain inflation persistence in a way that is consistent with the microevidence on nominal rigidity this paper adopts the impulse response methodology to under stand inflation persistence it has often been argued that existing models of pricing fail to explain the persistence that we observe we adopt a common general framework which allows for an explicit modelling of the distribution of contract lengths and for different types of price setting we also evaluate how far the theories are consistent with recent evidence on price and wage rigidity we find that allowing for a distribution of durations can take us a long way to solving the puzzle of inflation persistence but not all the way yet

defining the rebound effect abstract this paper gives rigorous definitions of the rebound effect not only in the well described single commodity case khazzoom 1980 the energy journal 1 4 21 40 but also for a multiple commodity case it is shown that the familiar laws for the single case do not hold for the multiple case the paper describes the state of the art of empirical estimation of the rebound effect with special focus on the estimates done for the netherlands we conclude that according to every definition empirical evidence shows that the re is probably small between 0 and 15

an empirical study on the rebound effect considering capital costs technological progress is one of the means of reducing energy usage and carbon dioxide co2 emissions however this reduction in turn leads to a reduction in the real cost of energy services per unit which results in an increase in the demand for energy services therefore a reduction in the anticipated co2 emissions caused by a technological improvement might be partially offset in response to the cost reduction previous studies have referred to this effect as the rebound effect a large amount of empirical evidence on the rebound effect exists however most of these studies assume an exogenous improvement in energy efficiency and thus capital costs that may decrease the magnitude of the rebound effect are not taken into account expressly this paper extends the scope of the research conducted by brannlund et al brannlund r ghalwash t nordstrom j 2007 increased energy efficiency and the rebound effect effects on consumption and emissions energy economics 29 1 17 in terms of two aspects i considering capital costs explicitly as additional capital costs and ii adapting an iterating procedure and estimating the rebound effect using japanese household data as a result of our empirical analysis we conclude that the rebound is approximately 27 however we also find that ignoring additional capital costs leads to an increase in the rebound effect in the case of japanese households the magnitude of the rebound effect increases to approximately 115 moreover our simulation study shows that only a one time iteration of brannlund et al brannlund r ghalwash t nordstrom j 2007 increased energy efficiency and the rebound effect effects on consumption and emissions energy economics 29 1 17 may lead to a biased result

the symbiotic rebound effect in the circular economy abstract the circular economy has emerged as an important approach in addressing how society can use its resources more efficiently theoretical advancements in the circular economy have yielded benefits for both practice and policymaking however if the eco efficiency of resource use is to be improved then certain challenges that face the circular economy must be resolved one of these challenges concerns the rebound effect by investigating resource flow with a circular rather than linear system as well as within a producer producer rather than producer consumer type of relationship we identify a rebound effect that we term symbiotic rebound we differentiate it from other forms of rebound effect on the basis of its main driver opportunity costs drive a higher than expected use of resources in a circular economy rather than the usual driver of demand as found in other types of rebound in identifying describing and illustrating a symbiotic rebound effect we make two contributions first to the rebound literature and second to theory development on the circular economy

imperfect information and the business cycle imperfect information has played a prominent role in modern business cycle theory this paper assesses its importance by estimating the new keynesian nk model under alternative informational assumptions one version focuses on confusion between temporary and persistent disturbances another on unobserved variation in the inflation target of the central bank a third on persistent mis perceptions of the state of the economy measurement error and a fourth assumes perfect information the standard nk dsge version imperfect information is found to contain considerable explanatory power for business fluctuations signal extraction seems to provide a conceptually satisfactory empirically plausible and quantitatively important business cycle mechanism

energy conservation more effective with rebound policy this article sketches the problem of indirect energy use effects also known as rebound of energy conservation there is widespread support for energy conservation especially when it is voluntary as this seems a cheap way to realize environmental and energy climate goals however this overlooks the phenomenon of rebound the topic of energy rebound has mainly attracted attention from energy analysts but has been surprisingly neglected in environmental economics even though economists generally are concerned with indirect or economy wide impacts of technical change and policies this paper presents definitions and interpretations of energy and environmental rebound as well as four fundamental reasons for the existence of the rebound phenomenon it further offers the most complete list of rebound pathways or mechanisms available in the literature in addition it discusses empirical estimates of rebound and addresses the implications of uncertainties and difficulties in assessing rebound suggestions are offered for strategies and public policies to contain rebound it is advised that rebound evaluation is an essential part of environmental policy and project assessments as opposed to earlier studies this paper stresses the relevance of the distinction between energy conservation resulting from autonomous demand changes and from efficiency improvements in technology equipment in addition it argues that rebound is especially relevant for developing countries

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

employment and structural impacts of material efficiency strategies results from five case studies abstract in order to come up with a sound assessment of the effects of material efficiency innovations on growth employment and competitiveness different economic mechanisms have to be considered from a methodological point of view the analysis must be able to account for technology specific aspects the employment impacts of five innovations are analyzed plastic and paper recycling increased life span of automobiles car sharing and bio based products time horizons for all strategies are scenarios until 2020 the economic impacts are context specific with regard to innovation technology and country the economic impacts highlight substantial structural adjustments the overall economic net impact on employment tends to be neutral to positive stronger positive economic impacts result if first mover advantages can be established

general equilibrium with endogenously incomplete financial markets abstract the present paper studies a class of general equilibrium economies with imperfectly competitive financial intermediaries and price taking consumers intermediaries optimally choose the securities they issue and the bid ask spread they charge financial intermediation is costly and hence markets are endogenously incomplete an appropriate equilibrium concept is developed and existence is proved competitive equilibria for this class of economies display full indexation of securities payoffs and monetary neutrality even if intermediaries are restricted to issue nominal securities and financial markets turn out to be incomplete this is in sharp contrast with the indeterminacy and non neutrality results established in the literature for incomplete markets economies with exogenously given nominal securities journal of economic literaturclassification numbers d52 g20

toward a neoclassical theory of sustainable consumption eight golden age propositions abstract popular trends in ecological economics increasingly consign neoclassical economics to the sidelines of modern day relevancy the neoclassical tradition is often seen as reliant for its authenticity on a presumption of human avarice both unbridled consumerism and corporate cupidity and demanding for its real world applicability an assumption of continuous economic growth in a world of hard limits this article examines the question of whether neoclassical theory could instead provide keys to deeper understanding of sustainable consumption by combining in a single framework neoclassical growth theory general equilibrium theory and duality theory and by explicitly considering leisure time the analysis demonstrates that neoclassical economics yields several useful insights bearing on long term sustainability the analysis confirms several tenets of ecological economics and challenges others eight propositions emerge from this analysis that could help speed the development of a robust neoclassical theory of sustainable consumption here branded golden age propositions as they strongly echo the golden rule discoveries of edmund phelps

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

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

estimating direct and indirect rebound effects for u s households with input output analysis part 2 simulation abstract this is the second part of a two part paper that integrates economic and industrial ecology methods to estimate the indirect rebound effect from residential energy efficiency investments we apply the model developed in part one to simulate the indirect rebound given an estimate of the direct rebound using a 2002 environmentally extended input output model and the 2004 consumer expenditure survey in 2002 for the u s we find an indirect rebound of 5 15 in primary energy and co 2 e emissions assuming a 10 direct rebound depending on the fuel saved with efficiency and household income the indirect rebound can be as high as 30 40 in no x or so 2 emissions for efficiency in natural gas services the substitution effect modeled in part one is small in most cases and we discuss appropriate applications for proportional or income elasticity spending assumptions large indirect rebound effects occur as the u s electric grid becomes less carbon intensive in households with large transportation demands or as energy prices increase even in extreme cases there is limited evidence for backfire or a rebound effect greater than 100 enacting pollution taxes or auctioned permits that internalize the externalities of energy use would ensure that rebound effects unambiguously increase consumers welfare

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

a bayesian approach to optimal monetary policy with parameter and model uncertainty abstract this paper undertakes a bayesian analysis of optimal monetary policy for the u k we estimate a suite of monetary policy models that include both forward and backward looking representations as well as large and small scale models we find an optimal simple taylor type rule that accounts for both model and parameter uncertainty for the most part backward looking models are highly fault tolerant with respect to policies optimized for forward looking representations while forward looking models have low fault tolerance with respect to policies optimized for backward looking representations in addition backward looking models often have lower posterior probabilities than forward looking models bayesian policies therefore have characteristics suitable for inflation and output stabilization in forward looking models

real time inflation forecasting in a changing world this article revisits the accuracy of inflation forecasting using activity and expectations variables we apply bayesian model averaging across different regression specifications selected from a set of potential predictors that includes lagged values of inflation a host of real activity data term structure data relative price data and surveys in this model average we can entertain different channels of structural instability by either incorporating stochastic breaks in the regression parameters of each individual specification within this average or allowing for breaks in the error variance of the overall model average or both thus our framework simultaneously addresses structural change and model uncertainty that would unavoidably affect any inflation forecast model the different versions of our framework are used to model u s personal consumption expenditures pce deflator and gross domestic product gdp deflator inflation rates for the 1960 2011 period a real time inflation forecast

estimating direct and indirect rebound effects for u s households with input output analysis part 1 theoretical framework abstract this is the first part of a two part paper providing an analytical model of the indirect rebound effect given a direct rebound estimate that integrates consumer demand theory with the embodied energy of household spending from environmentally extended input output analysis the second part applies the model developed in part one to simulate the direct and indirect rebound for the average u s household in terms of primary energy co2e nox and so2 emissions and for energy efficiency investments in electricity natural gas or gasoline services part one provides a critical review of the largely independent economic and industrial ecology literatures on the indirect rebound by studying the two goods case and the n goods case we demonstrate that the indirect rebound is bounded by the consumer budget constraint and inversely related to the direct rebound we also compare the common proportional spending and income elasticity spending assumptions with our model of cross price elasticities including both substitution and income effects for the indirect rebound by assuming zero incremental capital costs and the same embodied energy as conventional technologies for efficient appliances we model an upper bound of the indirect rebound future work should also consider the increase in consumer welfare possible through the rebound effect

the effects of an increase in energy efficiency on the kenya economy abstract there are reasons to believe that improved energy efficiency still is an important energy development policy despite stable oil prices abundant oil supplies and end of the cold war the political reasons are uncertainty of the current gulf situation and prevalent wars in the former eastern bloc countries increasing concern over global environmental problems the existence of imperfect energy markets and the desire for rapid economic growth in developing countries are the other reasons this paper analyses the effects of energy management policies on the kenyan economy using a computable general equilibrium model simulations show that an increase in energy efficiency leads to reduced dependence on foreign energy sources promotion of reliable domestic energy sources promotion of conservation of all forms of energy saves scarce foreign currency and preserves the environment

the great inflation and the greenbook abstract can the story of evolving federal reserve beliefs in the conquest of american inflation simultaneously explain the great inflation and the forecasts published in the greenbook during that time if sargent is correct then evolving beliefs should be reflected not only in policy outcomes but also in greenbook forecasts in this paper they are by conditioning on the greenbook it is show that both inflation outcomes and greenbook forecasts can be rationalised by evolving beliefs the results improve on recent empirical evidence that has been criticised for relying on unrealistic beliefs that produce forecasts inconsistent with the greenbook

simulation based tests of forward looking models under var learning dynamics in this paper we propose a simulation based technique to investigate the finite sample performance of likelihood ratio lr tests for the nonlinear restrictions that arise when a class of forward looking fl models typically used in monetary policy analysis is evaluated with vector autoregressive var models we consider one shot tests to evaluate the fl model under the rational expectations hypothesis and sequences of tests obtained under the adaptive learning hypothesis the analysis is based on a comparison between the unrestricted and restricted var likelihoods and the p values associated with the lr test statistics are computed by monte carlo simulation we also address the case where the variables of the fl model can be approximated as non stationary cointegrated processes application to the hybrid new keynesian phillips curve nkpc in the euro area shows that i the forward looking component of inflation dynamics is much larger than the backward looking component and ii the sequence of restrictions implied by the cointegrated nkpc under learning dynamics is not rejected over the monitoring period 1984 2005 copyright 2010 john wiley sons ltd

jevons paradox revisited the evidence for backfire from improved energy efficiency beginning with william stanley jevons in 1865 a number of authors have claimed that economically justified energy efficiency improvements will increase rather than reduce energy consumption jevons paradox is extremely difficult to test empirically but could have profound implications for energy and climate policy this paper summarises and critiques the arguments and evidence that have been cited in support of jevons paradox focusing in particular on the work of len brookes and harry saunders it identifies some empirical and theoretical weaknesses in these arguments highlights the questions they raise for economic orthodoxy and points to some interesting parallels between these arguments and those used by the biophysical school of ecological economics while the evidence in favour of jevons paradox is far from conclusive it does suggest that economy wide rebound effects are larger than is conventionally assumed and that energy plays a more important role in driving productivity improvements and economic growth than is conventionally assumed

the dynamics of inflation a study of a large number of countries over the last twenty years the statistical properties of inflation persistence has been the subject of intense investigation and debate without reaching a unanimous conclusion yet in this article we attempt to shed further light to this debate using a battery of econometric techniques in order to provide robust evidence on the degree of inflation persistence and whether this has changed during the period in which several countries have followed inflation targeting regimes or new monetary regimes we consider the inflation rates of thirty developed and emerging economies using quarterly data for the period 1958 to 2007 which include alternative monetary policy regimes the coefficient of the inflation parameter is estimated by ordinary least squares ols autoregressive moving average arma and autoregressive fractionally integrated moving average arfima models furthermore the grid bootstrap median unbiased mub estimator approach developed by hansen 1999 is used to estimate the finite sample ols

the rebound effect microeconomic definitions limitations and extensions abstract the rebound effect results in part from an increased consumption of energy services following an improvement in the technical efficiency of delivering those services this increased consumption offsets the energy savings that may otherwise be achieved if the rebound effect is sufficiently large it may undermine the rationale for policy measures to encourage energy efficiency the nature and magnitude of the rebound effect is the focus of long running dispute with energy economics this paper brings together previous theoretical work to provide a rigorous definition of the rebound effect to clarify key conceptual issues and to highlight the potential consequences of various assumptions for empirical estimates of the effect the focus is on the direct rebound effect for a single energy service indirect and economy wide rebound effects are not discussed beginning with khazzoom s original definition of the rebound effect we expose the limitations of three simplifying assumptions on which this definition is based first we argue that capital costs form an important part of the total cost of providing energy services and that empirical studies that estimate rebound effects from variations in energy prices are prone to bias second we argue that energy efficiency should be treated as an endogenous variable and that empirical estimates of the rebound effect may need to apply a simultaneous equation model to capture the joint determination of key variables third we explore the implications of the opportunity costs of time in the production of energy services and highlight the consequences for energy use of improved time efficiency the influence of time costs on the rebound effect and the existence of a parallel rebound effect with respect to time each of these considerations serves to highlight the difficulties in obtaining reliable estimates of the rebound effect and the different factors that need to be controlled for we discuss the implications of these findings for econometric studies and argue that several existing studies may overestimate the magnitude of the effect

estimating the frequency of price re optimization in calvo style models abstract this paper assesses the empirical performance calvo style models of price re optimization we first show that versions of these models in which firms update non re optimized prices to lagged inflation account well for the statistical behavior of post war u s inflation rates we then investigate whether these models imply plausible degrees of inertia in price setting behavior by firms they do but only if we depart from two standard auxiliary assumptions monopolistically competitive firms face a constant elasticity of demand and capital is homogeneous and can be instantaneously reallocated after a shock we develop a version of the model in which these assumptions are relaxed and show that it is consistent with the view that firms re optimize prices on average once every two quarters

negative rebound and disinvestment effects in response to an improvement in energy efficiency in the uk economy this paper uses a computable general equilibrium cge framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the uk national economy previous work for the uk has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero the research reported in this paper involves carrying out a systematic sensitivity analysis where relative price sensitivity is gradually introduced into the system focusing specifically on elasticities of substitution in production and trade parameters in order to determine conditions under which rebound effects become a likely outcome the main result is that while there is positive pressure for rebound effects even where direct and indirect demands for energy are very price inelastic this may be partially or wholly offset by negative income competitiveness and disinvestment effects which also occur in response to falling energy prices the occurrence of disinvestment effects is of particular interest these occur where falling energy prices reduce profitability in domestic energy supply sectors leading to a contraction in capital stock in these sectors which may in turn lead to rebound effects that are smaller in the long run than in the short run a result that runs contrary to the predictions of previous theoretical work in this area

reset price inflation and the impact of monetary policy shocks abstract many business cycle models use a flat short run phillips curve due to time dependent pricing and strategic complementarities to explain fluctuations in real output but in doing so these models predict unrealistically high persistence and stability of us inflation in recent decades we calculate reset price inflation based on new prices chosen by the subsample of price changers to dissect this discrepancy we find that the models generate too much persistence and stability both in reset price inflation and in the way reset price inflation is converted into actual inflation our findings present a challenge to existing explanations for business cycles jel e31 e52

a view from the macro side rebound backfire and khazzoom brookes abstract this paper attempts to delineate a few key insights extracted from theoretical macroeconomic considerations of the rebound issue the goal has been to reduce these thoughts to a clear set of assertions that if true would be useful points of reference in the ongoing discussion despite their non empirical nature

inflation target shocks and monetary policy inertia in the euro area the euro area as a whole has experienced a marked downward trend in inflation over the past decades and concomitantly a protracted period of depressed activity can permanent and gradual shifts in monetary policy be held responsible for these dynamics to answer this question we embed serially correlated changes in the inflation target into a dsge model with real and nominal frictions the formal bayesian estimation of the model suggests that gradual changes in the inflation target have played a major role in the euro area business cycle counter factual exercises show that had monetary policy implemented its new inflation objective at a faster rate the euro zone would have experienced more sustained growth than it actually did

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

a carbon saving multiplier as an alternative to rebound in considering reduced energy supply chain requirements from energy efficiency abstract a growing area of research into rebound effects from increased energy efficiency involves application of demand driven input output models to consider indirect energy consumption effects associated with re spending decisions by households with reduced energy spending requirements however there is often a lack of clarity in applied studies as to how indirect effects involving energy use and or carbon emissions in supply chains of both energy and non energy goods and services have been calculated we propose that more transparency for policymakers may be introduced by replacing consideration of what are often referred to as indirect rebound effects with a simple carbon saving multiplier metric we illustrate using results from a demand driven input output model that tracks supply chain activity at national and or global level we argue that this captures and conveys the same information on quantity adjustments in energy used in supply chain activity but does so in a manner that is more positive transparent understandable and useful for a policy audience this is achieved by focusing here via carbon emissions on the net benefits of changes in different types of energy use at both household and supply chain levels when energy efficiency improves in households

changes in the federal reserve s inflation target causes and consequences this paper estimates a new keynesian model to draw inferences about the behavior of the federal reserve s unobserved inflation target the results indicate that the target rose from 1 1 4 percent in 1959 to over 8 percent in the mid to late 1970s before falling back below 2 1 2 percent in 2004 the results also provide some support for the hypothesis that over the entire postwar period federal reserve policy has systematically translated short run price pressures set off by supply side shocks into more persistent movements in inflation itself although considerable uncertainty remains about the true source of shifts in the inflation target jel e31 e32 e52

monetary policy analysis with potentially misspecified models abstract the paper proposes a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium dsge models and applies it to a new keynesian dsge model along the lines of christiano eichenbaum and evans jpe 2005 and smets and wouters jeea 2003 we first quantify the degree of model misspecification and then illustrate its implications for the performance of different interest rate feedback rules we find that many of the prescriptions derived from the dsge model are robust to model misspecification jel classification c32 key words bayesian analysis dsge models model misspecification 1 introduction the quantitative evaluation of monetary policy rules plays an important role in the design of stabilization policies much of the recent debate about optimal monetary policy rules has been carried out with new keynesian dynamic stochastic general equilibrium dsge models see woodford 2003 dsge models have the advantage that one can explicitly assess the effect of policy regime changes on expectation formation and decision rules of private agents yet until recently these models were scarcely used by central banks because they were perceived as being inferior to less structural model in terms of fit recent work by christiano eichenbaum and evans 2005 and smets and wouters 2003 has changed this perception these papers show that the fit of large scale new keynesian dsge models is comparable to that of more heavily parameterized models as a consequence a number of central banks have begun to show interest in these models as tools for quantitative policy analysis despite the success in improving the empirical performance of dsge models misspecification remains a concern as shown in del negro schorfheide smets and wouters 2004 accounting for misspecification and model uncertainty in general is an important aspect of the assessment of monetary policies after all it has long been recognized that model and parameter uncertainty affects optimal policies e g brainard 1967 chow 1975 and craine 1979 1 this paper proposes a new method for taking model misspecification into account when assessing the performance of alternative interest rate feedback rules we apply this approach to evaluate different policies in the context of a new keynesian dsge model including the estimated volcker greenspan rule a natural approach in the presence of model uncertainty is to evaluate policy rules within all the model specifications that are under consideration in choosing the best performing rule one can either follow a bayesian route assigning probabilities to models and minimizing the overall posterior expected loss alternatively one can follow a minimax strategy by adopting a policy that minimizes the worst case loss across models the literature contains numerous applications of these ideas e g mccallum 1988 levin wieland and williams 1999 2003 rudebusch 2001 2003 onatski and stock 2002 onatski and williams 2003 brock durlauf and west 2004 cogley and sargent 2005 and hansen and sargent 2005 all these papers differ with regard to the type of models included in the model set and the formulation of the decision problem that leads to the choice of a preferred policy our analysis differs from previous work with respect to the method that is used to construct a model set and assign probabilities to these models so that a bayesian calculation of posterior expected performance is possible we start from a dsge model in which monetary policy is modelled through an interest rate feedback rule the dsge model imposes cross coefficient restrictions on a vector autoregressive representation of the data while we are assuming that the data obey a vector autoregressive law of motion we allow for potential deviations from the cross coefficient restrictions at the same time we maintain the assumption that monetary policy follows the same interest rate rule as in the dsge model

distributional effects of alternative vehicle pollution control policies abstract previous work shows that policies that subsidize new vehicles and tax size miles or gasoline efficiently reduce pollution less is known about their distributional effects this paper examines distributional effects by estimating the joint demand for vehicles and miles using the consumer expenditure survey greater price responsiveness among low income households enhances progressivity of gas or miles taxes across lower incomes and mitigates regressivity across upper incomes taxes on engine size or subsidies to new vehicles are significantly more regressive than gas or miles taxes

durable goods and residential demand for energy and water evidence from a field trial this article describes a household production model in which energy efficient durable goods cost less to operate so households may use them more the model is estimated using household level data from a field trial in which participants received high efficiency clothes washers free of charge the estimation strategy exploits this quasi random replacement of washers to derive precise estimates of the household production technology and a demand function for clothes washing during the field trial households increased clothes washing on average by 5 6 after receiving a high efficiency washer implying a price elasticity of 06 the complete model is used to evaluate the cost effectiveness of recent changes in minimum efficiency standards for clothes washers

price effects of energy efficient technologies a study of residential demand for heating and cooling energy efficient appliances reduce the marginal price of the services they deliver this article shows empirically that such price reductions result in energy savings that are smaller than those engineering techniques generally project using econometric techniques with data from a unique utility experiment and a detailed engineering thermal load model we find that actual conservation is as much as 13 below engineering estimates for cooling and 8 12 below for heating customers who conserve electricity are also persistent their houses are comparatively warmer in summer and cooler in winter

rethinking economy wide rebound measures an unbiased proposal in spite of having been first introduced in the last half of the ninetieth century the debate about the possible rebound effects from energy efficiency improvements is still an open question in the economic literature this paper contributes to the existing research on this issue proposing an unbiased measure for economy wide rebound effects the novelty of this economy wide rebound measure stems from the fact that not only actual energy savings but also potential energy savings are quantified under general equilibrium conditions our findings indicate that the use of engineering savings instead of general equilibrium potential savings downward biases economy wide rebound effects and upward biases backfire effects the discrepancies between the traditional indicator and our proposed measure are analysed in the context of the spanish economy

estimation and control of an optimization based model with sticky prices and wages abstract this paper provides estimates of an optimization based equilibrium model with sticky prices and wages the estimated model is used to analyse the welfare properties of various interest rate rules for conducting monetary policy an important feature of this model is that it involves a tradeoff between the variances of price and wage inflation and the output gap this tradeoff implies that it is desirable for the monetary authority to respond to wage inflation in addition to price inflation output and past interest rates when setting the current interest rate the issue whether wages and prices can be indexed to steady state inflation has important implications both for the characterization of optimal interest rate rules and interest rate volatility in particular optimal policy in the presence of indexation induces implausibly high steady state inflation

material efficiency and economic environmental sustainability results of simulations for germany with the model panta rhei abstract based on empirical evidence the paper discusses the impact of a consulting and information program for the improvement of material productivity with regard to economic and environmental targets for germany the instrument used in the analysis is the integrated economic environmental model panta rhei which is parameterized econometrically the paper presents the model and shows in a baseline forecast that without policy changes sustainability will be violated in both the economic and the environmental dimensions this applies to the latter particularly with regard to land use and material consumption the alternative simulation that introduces a consulting and information program for the improvement of material productivity yields a win win result growth rates of gdp and employment are rising the public debt is reduced and material consumption is much lower than in the baseline and remains at the actual level which means that a decoupling of growth and material consumption is possible

economy wide rebound effects for non energetic raw materials material efficiency is increasingly being seen as a means to save resources and achieve greater security of supply whether these aims can be achieved to the desired extent depends among other things on the presence of rebound effects this article estimates economy wide rebound effects for non energetic raw materials in the context of a set of material efficiency projects carried out in germany under the assumption that the efficiency technologies developed in these projects are scaled up to the national level input output analysis is used to calculate changed material requirements and corresponding rebound effects reduced material flows in monetary terms together with economic data are aggregated to an economy wide impulse which can cause re increases in the demand for the considered raw materials depending on the project specific framework conditions and subject to the modeling assumptions our estimates suggest that individual materials display a wide range of rebound effects ranging from close to zero to low double digit percentages these results point towards the conclusion that economy wide rebound effects do not make these efficiency measures obsolete however they also suggest that rebound effects should not be ignored in the assessment of the role of efficiency in future resource consumption

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

why inflation rose and fell policy makers beliefs and u s postwar stabilization policy this paper provides an explanation for the run up of u s inflation in the 1960s and 1970s and the sharp disinflation in the early 1980s which standard macroeconomic models have difficulties in addressing i present a model in which rational policymakers learn about the behavior of the economy in real time and set stabilization policy optimally conditional on their current beliefs the steady state associated with the self confirming equilibrium of the model is characterized by low inflation however prolonged episodes of high inflation ending with rapid disinflations can occur when policymakers underestimate both the natural rate of unemployment and the persistence of inflation in the phillips curve i estimate the model using likelihood methods the estimation results show that the model accounts remarkably well for the evolution of policymakers beliefs stabilization policy and the postwar behavior of inflation and unemployment in the united states

optimal monetary policy under low trend inflation abstract in the monetary policy literature it is common to assume that trend inflation is zero despite overwhelming evidence that zero inflation is neither empirically relevant nor a practical objective for central bank policy we therefore extend the standard new keynesian model to allow for positive trend inflation showing that even low trend inflation has strong effects on optimal monetary policy and the dynamics of inflation output and interest rates under discretion the efficient policy deteriorates and there is no guarantee of determinacy even with commitment targeting non zero trend inflation leads to substantial welfare losses our results serve as a warning against indiscriminate use of models assuming zero trend inflation

identifying the sources of instabilities in macroeconomic fluctuations abstract this paper investigates the sources of the substantial decrease in output growth volatility in the mid 1980s by identifying which of the structural parameters in a representative new keynesian and structural var models changed overturning conventional wisdom we show that the great moderation was due not only to changes in shock volatilities but also to changes in monetary policy parameters as well as in the private sector s parameters the great moderation was previously attributed to good luck because the alternative sources of instabilities appear to have offsetting effects on output volatility and therefore were impossible to detect using existing techniques

shocks and government beliefs the rise and fall of american inflation working paper 2004 22 september 2004 abstract the authors use a bayesian markov chain monte carlo algorithm to estimate a model that allows temporary gaps between a true expectational phillips curve and the monetary authority s approximating nonexpectational phillips curve a dynamic programming problem implies that the monetary authority s inflation target evolves as its estimated phillips curve moves the authors estimates attribute the rise and fall of post world war ii inflation in the united states to an intricate interaction between the monetary authority s beliefs and economic shocks shocks in the 1970s altered the monetary authority s estimates and made it misperceive the tradeoff between inflation and unemployment that misperception caused sharp rise in inflation in the 1970s the authors estimates indicate that policy makers updated their beliefs continuously by the 1980s policy makers beliefs about the phillips curve had changed enough to account for fed chairman paul volcker s conquest of u s inflation in the early 1980s jel classification e3 e5 key words updating beliefs policy evaluation self confirming equilibrium nash inflation ramsey outcomes i introduction today many statesmen and macroeconomists believe that inflation can largely be determined by a government monetary authority then why did the federal reserve board preside over high us inflation during the late 1960s and the 1970s and why under paul volcker did it rapidly bring inflation down during the early 1980s this paper answers these questions by estimating a model that features a particular process that makes a procession of economic shocks induce the monetary authority to alter its model of inflation unemployment dynamics the phillips curve at each date t the monetary authority updates its beliefs about the phillips curve and then recomputes a first period action recommended by a phelps problem a discounted dynamic programming problem that minimizes the expected value of a discounted quadratic loss function of inflation and unemployment 1 the monetary authority pursues the same objectives at each date using the same structural model with only its estimates of that model changing over time 2 this model of the systematic part of inflation puts the monetary authority s beliefs about the phillips curve front and center 3 we assume that the monetary authority s model of the phillips curve deviates in two subtle but important ways from what it would be in a rational expectations model e g kydland and prescott 1977 the first deviation is that while the true phillips curve is like kydland and prescott s we assume that the monetary authority omits the public s expected rate of inflation from its phillips curve by itself this omission need not prevent the outcomes of our model from coinciding with those of kydland and prescott s nor need it imply that the government s model is wrong in a way that could be detected from even an infinite sample whether the monetary authority s model is wrong in a statistically detectable way depends on how we allow the monetary authority to reestimate the parameters of its model in particular if the monetary authority were to believe that the coefficients of its phillips curve are constant over time then its estimates would converge to ones that support a self confirming equilibrium sce after convergence its estimated phillips curve would correctly describe occurrences along the sce path for inflation and unemployment such an after convergence version of our model has little hope of explaining the rise and fall of us inflation that model would have inflation fluctuating randomly around a constant sce level that coincides with kydland and prescott s time consistent suboptimal i e excessive level 4 this outcome motivates our second subtle deviation from a rational expectations equilibrium