an analysis of revisions to the industrial production index revisions to percentage changes in the total index of industrial production ip contain systematic components and are correlated with other information available at the time the provisional estimates are prepared indicating that the preliminary estimates are inefficient in particular revisions to percentage changes in ip i tend to be upward ii contain substantial seasonality iii generally increasse during periods in which ip is accelerating and iv revisions to the same month tend to be in the same direction filters for the provisional estimates that exploit these inefficiencies are estimated and the estimates generated from these filters pass the efficiencies are estimated and the estimates generated from these filters pass the efficiency test

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

agricultural price instability a survey of competing explanations and remedies there are two explanations for agricultural price dynamics one follows cobweb logic and models fluctuations driven by expectation errors but emphasises that these expectations create complex dynamics and possibly chaos the other stems from the rational expectations tradition of dynamics driven by real shocks the empirical evidence tends to support the latter but is not conclusive the rational expectations model generates an optimal dynamic path from which no improvement can be expected from public intervention however if we take account of all the potential market failures in agricultural markets and especially in developing countries this conclusion might require some qualifications although an appropriate policy design for stability has still to be achieved this paper surveys the positive and normative literature on agricultural prices highlighting empirical evidence and identifying remaining unresolved issues

evolution of the economics of agricultural policy agricultural economists helped develop farm programs to respond to the dire economic situation of the 1920s and 1930s some early authors appreciated that such policies created problems in markets for commodities and inputs over time our understanding of agricultural issues and policies has deepened through the application of improved models and tools of analysis to more extensive data we have developed better answers to old questions and have responded to changing policy instruments market contexts and policy concerns this article traces the evolution of our deepening economic understanding of the causes and consequences of agricultural policy

dynamic perspectives on agricultural policy issues among the innovators fred waugh was one of the most prolific he made pioneering contributions in linear programming statistics and econometrics demand analysis the welfare effects of price risk and the analysis and explanation of commodity cycles as a research leader mentor and teacher at the usda he left his mark on the work of later generations of researchers i find myself no exception as will become clear from what i have to say in this paper even though i never met him in person my work has been influenced by what he wrote and by what his students wrote and taught among the many topics that interested waugh were the dynamics of free market behavior and the implications for policy formation in this paper i consider models of markets in which the dynamics run in two directions forward from current conditions to expectations of future prices and back from price expectations to current decisions both types of linkages can be crucial in competitive models of agricultural production in which land has a prominent role as the quintessential fixed asset a central challenge of market analysis from waugh s time till now has been to infer from market observations whether markets are behav

an econometric investigation of the monetary neutrality and rationality propositions from an international perspective t he combination of the natural rate of unemployment and the rational expectations hypotheses in macroeconomic models results in the now well known conclusion that anticipated short run monetary stabilization policies do not influence real economic variables this policy ineffectiveness proposition has been named the macro rational expectations mre hypothesis by modigliani 1977 as a result the implicit policy prescription is that a price level stabilization policy should be pursued the empirical validity of this conclusion is perhaps the central issue in modern stabilization theory barro 1977 1978 1981 barro and rush 1980 and leiderman 1980 have presented empirical evidence for the united states supporting this proposition however a number of recent studies have claimed that previous empirical results which support the finding that anticipated policy is neutral are flawed corrections of these problems often result in conflicting conclusions see small 1979 gordon 1979 and mishkin 1982 given the important implications of the mre hypothesis it is curious that almost all formal testing has been focused upon the united states while barro has suggested that a cross country study would be useful as far as we know only darby 1980 attempts to test whether anticipated changes in monetary policy are neutral across countries unfortunately his results suffer from problems caused by using generated regressors in addition he makes no attempt to test the individual implications of the mre hypothesis which encompasses the propositions that expectations are rational lad anticipated monetary policy does not matter in this paper we employ the methodology developed by mishkin to test the mre hypothesis in six countries canada germany italy japan the united kingdom and the united states the paper is divided into three major sections and a conclusion section ii briefly reviews mishkin s testing method in section iii the procedure employed to specify the money growth equation is discussed and these equations specified section iv presents and discusses the results of applying the method introduced in section ii in the conclusion the major findings are restated possible limitations discussed and extensions suggested

a little bit more evidence on the natural rate hypothesis from the u k abstract the evidence for the neutrality of anticipated changes in monetary policy in the u k over the period 1963q1 1982q1 is examined breaks in the stochastic process generating the money stock are used to identify the model the results are generally unfavourable to the proposition that only unanticipated money matters

the interrelation of stock and options market trading volume data this research empirically investigates the relation between common stock and call option trading volumes the paper hyothesizes and tests a sequential flow of information between the stock and option markets if information trading for cboe listed firms is predominantly accomplished through option trading then existing research methodologies may be biased against finding any significant economic consequences in those instances where option listing is an important variable results indicate that trading in call options leads trading in the underlying shares with a one day lag black 2 suggests that information traders may prefer trading in options rather than shares due to economic incentives provided by reduced transaction costs capital requirements and trading restrictions and due to the greater action afforded by option trading manaster and rendleman 12 empirically support black s 2 option information trading preference finding incremental information content in option prices up to twenty four hours prior to its reflection in stock prices jennings and starks 10 report that the stock price adjustment process upon arrival of new information differs for those firms listed on the chicago board option exchange cboe and they demonstrate that stock price adjustment to new information occurs more rapidly for firms with listed call options the results in both papers appear to warrant consideration of an optiontrading variable in the design of empirical tests both manaster and rendleman 12 and jennings and starks 10 investigate the price relation between shares and call options this paper investigates trading volume copeland 4 posits the use of trading volume as a proxy for the rate of information arrival he concludes that the relation between absolute value of price changes and volume is positive and linear if one accepts a sequentialinformation arrival hypothesis as valid the present research hypothesizes and tests a sequential flow of information between the stock and option markets analyses presented are based on econometric tests for causality1 derived from the works of granger 6 and sims 22 if information trading takes place

unanticipated money growth and unemployment post sample forecasts in the late 1970s robert j barro published what has since become a popular model of business fluctuations barro s 3 findings provide evidence advocating the short run neutrality of money under rational expectations forging an important empirical link to the theoretical studies of lucas 19 20 and sargent and wallace 33 the original barro unemployment model has received additional support from further statistical testing 5 6 15 despite criticisms and modifications some of which are considered in barro s 6 updated model these equations have inspired numerous empirical studies analyzing unanticipated effects of macroeconomic variables this paper examines post sample forecasts of barro s original 3 and revised 6 unemployment equations for the 1974 84 period mayer 23 24 harvey 13 179 80 and lovell 18 among many contend that the ability to successfully forecast outside of the sample period is an important criterion for evaluating model robustness this view is also reflected in a substantial body of studies including 10 25 26 29 39 which investigate the post sample predictive performance of macroeconomic models one year ahead forecasts indicate that the barro 3 6 equations accurately predict unemployment for the 1974 79 period during 1980 84 however the predictive performance of both models sharply deteriorates augmenting the barro models with interest rate volatility in accordance with the findings of evans 11 and tatom 38 considerably improves the overall forecasting ability this modification also rectifies the 1980s structural instability of the barro unemployment equations furthermore the basic conclusions of the seminal barro work are retained with this augmented model the results reveal that increases in interest rate volatility exert significantly adverse effects upon unemployment corroborating with the findings of evans 11 and tatom 38 still interest rate volatility could be overlooked in previous estimations of the barro or other models of business fluctuations due to the variable s relative constancy prior to 1979

does anticipated aggregate demand policy matter further econometric results a heated debate has arisen over what modigliani has dubbed the macro rational expections mre hypothesis this hypothesis embodies two component hypotheses 1 rational expectations and 2 short run neutrality i e that anticipated changes in aggregate demand will have already been taken into account in economic agents behavior and will thus evoke no output or employment response together these component hypotheses imply that deterministic feedback policy rules will have no effect on business cycle fluctuations the irrelevance of these types of policy rules is inconsistent with much previous macro theorizing as well as with the views of policymakers it is thus an extremely controversial proposition which requires a wide range of empirical research this paper is a sequel to a previous paper by the author that paper developed a methodology for testing the mre hypothesis and found that anticipated money growth does matter to the business cycle this paper extends the analyses to cases where the rate of nominal gnp growth or the inflation rate rather than money growth is the aggregate demand variable the empirical results are also negative on the mre hypothesis and its corresponding policy ineffectiveness proposition this abstract was borrowed from another version of this item

us money announcements and covered interest parity the case of japan abstract this paper examines the effects of us money announcements on dollar and yen denominated securities in their respective onshore markets the effects are consdered over several periods corresponding to possible us and japanese policy regimes the consistency of the responses is further examined by testing whether the responses of dollar denominated securities yen denominated securities the spot yen dollar exchange rate and the forward yen dollar exchange rate violate covered interest parity given the results of previous studies the evidence suggests that restrictions on capital mobility in japan have not allowed complete international integration of japanese financial markets

the term structure of eurodollar interest rates and its relationship to the us treasury bill market abstract this paper examines an efficient market of the term structure of eurodollar interest rates and its relationship with the us treasury bill market standard test procedures and granger causuality tests are conducted which provide evidence showing that past changes in short term eurodollar or domestic interest rates are not useful in predicting changes in long term eurodollar interest rates the eurodollar market appears to be efficiently integrated with the us domestic financial market

the welfare effects of the introduction of storage this paper examines the welfare effects of introducing storage into a market with stochastic supply in which all agents are competitive profit maximizers with rational expectations these welfare effects are the net result of the initial increase in demand for stock building and the partial and asymmetric reduction in the dispersion of consumption brought about by storage the distributional impacts depend crucially on the information available to producers before storage is introduced the elasticity of supply the specification of the consumption demand curve and the cost of storage

commodity price stabilization in imperfect or cartelized markets most studies of commodity price stabilization assume that all agents behave competitively however many commodities suitable for stockpiling are produced by countries with a significant share of the world market and commodity agreements themselves often result in cartelization of the market the paper explores the consequences of market power for the choice of storage rule and the degree of price stabilization it finds that with linear demand dominant producers choose more stable prices than under perfect competition and price stability increases with their market share with constant elastic demand the competitive degree of price stabilization is achieved

returns to contrarian investment strategies tests of naive expectations hypotheses abstract this paper examines the ability of naive investor expectations models to explain the higher returns to contrarian investment strategies contrary to lakonishok shleifer and vishny 1994 we find no systematic evidence that stock prices reflect naive extrapolation of past trends in earnings and sales growth building on bauman and dowen 1988 and la porta 1995 however we find that stock prices appear to naively reflect analysts biased forecasts of future earnings growth further we find that naive reliance on analysts forecasts of future earnings growth can explain over half of the higher returns to contrarian investment strategies

monetary policy and long term interest rates an efficient markets approach abstract this paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long term interest rates this approach has the advantage over calier research on this subject in that it imposes a theoretical structure on this relationship that flows easier interpretation of the empirical results as well as more powerful statistical tests on the interest of ascertaining the robustness of the results many different empirical tests are carried out in this paper and they uniformly do not support the preposition that increases in the money supply are correlated with declines in long rates

are preliminary announcements of the money stock rational forecasts abstract we develop a theoretical framework of analyzing preliminary announcements of economic data and then apply this framework to the money stock we find that preliminary announcements of the money stock are best characterized as measured with classical errors in variables that is the revision is not correlated with the true value of the series the revision is however forecastable using information available at the time of the preliminary announcement our ability to forecast the revision implies that preliminary announcements are not rational estimates of the true money stock

the incidence of market stabilising price support schemes the introduction of a stabilization scheme can raise or lower the wealth of initial owners of land and commodity stocks substantially even if the are risk neutral the incidence consists of the capitaliz ed value of the revenue changes along the path to the new stochastic steady state by ignoring the dynamic path traditional comparative statics understates the benefits to initial asset holders because of differences in dynamic paths destruction of the commodity can have a lower marginal deadweight loss than a public bu ffer stock and deficiency payments can be especially attractive when the variability is exogenous to the domestic market copyright 1988 by royal economic society

the impact of news and alternative theories of exchange rate determination over the last decade two of the more important developments in the area of exchange rate determination are the construction of the asset market model and the recognition that news is a key factor affecting exchange rates the asset market model has evolved as an alternative to the traditional flow model of exchange rate determination in contrast to the flow model where the exchange rate is determined by the flow demand for and flow supply of foreign exchange exchange rates adjust to allocate the total stock of foreign exchange in question in the asset market model this model may be presented in one of two forms the monetary approach or the portfolio balance approach the former is summarized in the work of bilson 1978a dornbusch 1976 frenkel 1976 johnson 1976 and mussa 1976 1979 while the latter stems from the efforts of branson 1981 branson halttunen and masson 1977 dooley and isard 1982 kouri 1976 kouri and de macedo 1978 and rodriguez 1980 while the logical consistency of these models has enhanced their popularity empirical support has been limited the importance of unanticipated shocks or news in explaining exchange rate behavior has been suggested by dornbusch 1980 frenkel 1981 isard 1983 and mussa 1979 the basis for this suggestion is the efelcient markets approach that suggests securities prices in a capital market should reflect all available information therefore the predominant cause of exchange rate movements is news that could

testing short run neutrality abstract this paper derives and implements a robust test of the short run neutrality of anticipated policy that is valid when the information set used to form expectations is incorrectly specified and the effect of unanticipated policy on deviations of output from the natural rate varies over time the test is based on the observation that if unanticipated policy affects output with a maximum lag of n quarters then any information prior to n should be uninformative about output movements the test is applied to quarterly data for the united states and the paper concludes that policy is not neutral

are real interest rates equal across countries an empirical investigation of international parity conditions this paper conducts empirical tests of the equality of real interest rates across countries the empirical evidence strongly rejects the hypothesis of real rate equality and the joint hypotheses of uncovered interest parity and ex ante relative ppp or the unbiasedness of forward rate forecasts and ex ante relative ppp the evidence suggests that it is worth studying open economy macroeconomic models which allow 1 domestic real rates to differ from world rates 2 time varying risk premiums in the forward market or 3 deviations from ex ante relative ppp the relationship of real interest rates across countries is of central importance to our understanding of open economy macroeconomics in some models where there is costless international arbitrage in goods and financial assets real interest rates for comparable securities should be equal across countries this has been a feature of much of the early research in the monetary approach to exchange rates e g frenkel 11 and bilson 2 on the other hand finance theory indicates that risk premia may well differ for comparable securities denominated in different currencies solnick 27 roll and solnick 26 stulz 28 fama and farber 7 hansen and hodrick 17 and dornbusch 6 and more recent theoretical models in the exchange rate literature such as dornbusch 5 frankel 10 and mussa 24 depend on real rates differing between countries in the short run the proposition that real rates are equal across countries is worth studying

food security and storage in the middle east and north africa in times of highly volatile commodity markets governments often try to protect their populations from rapidly rising food prices which can be particularly harsh for the poor a potential solution for food deficit countries is to hold strategic reserves which can be called on when international prices spike but how large should strategic stockpiles be this paper develops a dynamic storage model for wheat in the middle east and north africa mena region where imported wheat dominates the average diet the paper uses the model to analyze a strategy that sets aside wheat stockpiles which can be used when needed to keep domestic prices below a targeted price this paper shows that if the target is set high and reserves are adequate the strategy can be effective and robust contrary to most interventions strategic storage policies are counter cyclical and when the importing region is sufficiently large a regional policy can smooth global prices this paper shows that this is the case for the mena region nevertheless the policy is more costly than the pro cyclical policy of a targeted intervention that directly offsets high prices with a subsidy similar to food stamps

the effects of compulsory schooling on growth income distribution and welfare abstract in this paper we consider an olg model with productive capital and human capital affecting the quality of labor in each generation parents invest in their children s education but disregard its external effect on the aggregate production function government intervention in providing compulsory schooling increases economic growth along the equilibrium path while the intragenerational income distribution becomes more equal also in the long run the majority of individuals in each generation are better off due to compulsory schooling

tests of rationality neutrality and market efficiency a monte carlo analysis of alternative test statistics abstract this paper examines the small sample properties of three testing strategies used to analyze the rationality monetary neutrality and market efficiency hypotheses we focus on the original two step barro test of the mre hypothesis formed entirely from ols results a test that employs the correct variance covariance formulae for these two step estimates and mishkin s fimle testing framework each test is examined under likely model respecifications the findings highlight the extensive bias incurred by drawing inferences from simple unadjusted two step estimates and reveal the relative power of all tests in identifying alternatives to the null hypotheses

a simple competitive model with production and storage we study a rational expectations partial equilibrium model of a market for a single storable commodity whose output each period is a function of previous period effort on production and a realization of a shock that affects equally all producers i he final demand is non random and depends only on each period s price risk neutral producers make production and storage decisions based on forecasts of future price distributions existence of equilibrium is proved and for the case of i i d shocks several comparative statics results are established as well as the existence and stability of a unique stationary distribution and whose output at each period is a multiplicative function of previous period s planting and of the realization of a shock that affects equally all producers the final demand for this good is non random and depends only on this period s price this describes approximately markets for agricultural products which are not traded internationally and where most of the price uncertainty stems from supply shocks risk neutral producers make their decisions based on forecasts of future price distributions and of known cost functions of storage and production to maximize their discounted profits in order to close the model an assumption on how such price forecasts are made is needed we assume that agents make equilibrium forecasts i e that their forecast is common and that when producers act taking the forecasted prices as given they make decisions that yield the forecasted prices as equilibrium prices this is of course what has been sometimes called rational expectations the assumption of equilibrium expectations and the presence of risk neutral pro ducers will imply that the equilibrium variables may be obtained by considering a related market surplus maximization problem 1 this places strong restriction on the stochastic process of equilibrium prices for the case where the basic shocks are assumed to be independently and identically distributed over time one may thus show that equilibrium prices are a function of a certain state variable the total stocks kept from last period plus this period s output and this allows us to derive properties of equilibrium solutions our main results concerning this case are a storage is a non increasing function of price and expected production a non decreasing one b the elasticity of expected future prices with respect to today s prices is positive and less than one c this elasticity is non constant being zero for high enough prices d the price process follows a renewal process if prices are low

market rationality tests based on cross equation restrictions abstract the information used by researchers in cross equation tests of rational expectations may be a small subset of the information available to the market such tests produce consistent estimates but have low power we develop a mechanism for dealing with this problem and use the procedure to perform cross equation tests on predictions from the football betting market the tests fail to reject rationality we provide evidence that market predictions from betting markets are not formed rationally it appears therefore that cross equation tests have low power even if the information sets used by the researcher and the market are approximately the same

monetary policy and short term interest rates an efficient markets rational expectations approach this paper is an application of efficient markets rational expectations theory to analyze empirically the relationship of money supply growth and short term interest rates a hotly debated issue in the literature this approach has the advantage over earlier research on this subject in that it imposes a theoretical structure that allows easier interpretation of the empirical results as well as more powerful statistical tests the empirical results uniformly do not support the proposition that increases in money growth are correlated with declines in short rates the relationship between money supply growth and nominal interest rates is a hotly debated issue in the literature one view associated with keynesian structural macromodels has an increase in money growth leading at least in the short and medium runs to a decline in interest rates 2 an alternative view associated with milton friedman 6 7 indicates that interest rates might rise in response to higher money growth because there is a rise in inflationary expectations and hence a rise in interest rates through a fisher 5 effect

government financing decisions and asset returns abstract this paper presents an empirical investigation of the relation between government financing decisions and asset returns in particular the focus is on whether a substitution of debt financing for tax financing of a given level of expenditures is associated with an increase in interest rates the paper brings a different perspective to empirical investigations of government fiscal policies by examining the response of asset prices in an efficient capital market to such policies rather than focusing on aggregate consumption behavior the results are consistent with the idea that asset prices are unrelated to how the government finances its expenditures the results however also indicate that the capital market is not indifferent with respect to the level of government expenditures as higher interest rates are associated with increases in government purchases

on the econometric testing of rationality market efficiency procedures for testing the rational expectations hypothesis deserve careful study because rationality of expectations has such important implications for macroeconomic modeling and policy analysis rationality of expectations generally imposes cross equation restrictions 2 in this paper we discuss the implementation and analyze the econometric properties of a particular test of such restrictions this test has been used in recent empirical studies of bond market behavior 3 since the test focuses on the distinction between anticipated and unanticipated movements in variables as in barro 1977 1978 it is applicable to many macroeconomic issues indeed the results of this paper are useful in further work abel and mishkin 1983 that clarifies the relations among tests of 1 rationality and market efficiency 2 the short run neutrality of anticipated policy and 3 granger 1969 causality in macroeconometric models two important questions about the test of cross equation restrictions arise naturally first under what conditions will the test lead to correct inference about the rationality of expectations second what is the relation of this cross equation test to the more common singleequation test of market efficiency frequently used in the literature the answers to these questions are provided by the theorem in section ii which states the asymptotic equivalence of the cross equation test with the more common test of market efficiency also in section ii we discuss identification and demonstrate that we can test for rationality of expectations even if some parameters are not identified finally we present an empirical example in section iii and concluding remarks in section iv

cross regime evidence of macroeconomic rationality rational expectations macromodels predict that the short run effects of monetary shocks on real output x should be negatively related across policy regimes to the variability of such shocks this paper presents cross regime tests of this and related propositions based on a sample of 47 countries the within regime estimates reveal a consistent pattern of positive short run real output effects with neutrality of money holding in the long run the cross regime tests show that x is negatively related to the variance of monetary shocks positively related to the variance of real output shocks negatively related to the variance of velocity shocks and unrelated to either the mean or variance of anticipated money growth

unanticipated monetary policy and real economic activity some cross regime evidence abstract classical equilibrium models of business cycles predict several consequences of policy regime shift this paper examines these predictions using evidence from the post 1979 period and by comparing several pre war monetary regimes the policy invariance proposition and the lucas hypothesis receive some support from the evidence although some discrepancies remain

an integrated view of tests of rationality market efficiency and the short run neutrality of monetary policy abstract this paper analyzes an important class of models in which expectations play an important role topics included in the analysis are tests of 1 rationality of forecasts in either market or survey data 2 capital market efficiency 3 the short run neutrality of monetary policy and 4 granger causality in macroeconometric models the common elements of these tests are highlighted in particular cross equation tests for rationality or the short run neutrality of money are shown to be equivalent to more common regression tests in the literature these results demonstrate that the exact specification of the relevant information set used in rational forecasts is not necessary for the cross equation tests to have desirable asymptotic properties also discussed are the conditions for identification of coefficients and testability of hypotheses

efficient redistribution through commodity markets efficiency in redistribution is measured in terms of deadweight loss generated per dollar of economic surplus transferred between consumers and producers of a commodity by means of market intervention the implications of supply and demand elasticities for efficiency in redistribution are examined with special attention to the comparison of production control and deficiency payment programs the results may be used to aid in the evaluation of commodity programs and as a basis for consideration of the hypothesis that observed policies are efficient given the political power of interest groups

the economic role of commodity storage one of the earliest and most successful exainples of economic policy is the oftquoted biblical account of joseph s interpretation of the pharoah s dream joseph foretold that seven years of abundant harvests would precede seven years of drought and recommended that the pharoah accumulate grain during the good years since that time the central role of storage in stabilising the economy in the face of exogenous disturbances has been obvious but our understanding of the nature of that role has not greatly advanced without divine assistance in forecasting stochastic production the storage decision is considerably more complex than the one joseph faced and the role of storage quite different in fact several commonly held impressions about the role of storage of commodities such as grains are incorrect rather than stabilising production storage actually accentuates its variability rather than causing a mean price preserving decrease or a mean output preserving decrease in the dispersion of price storage generally causes a more complex modification of the distribution of price rather than being most effective at eliminating short falls in consumption storage actually is more effective at eliminating the incidence of exceedingly high consumption in this paper we explore the role of storage in a model where production is stochastic and both production and storage are performed by competitive profitmaximisers who form rational expectations about the returns to their activities we derive the subtle but very important interactions among production price expectations and storage which simpler models cannot capture finally we make a comparative statics assessment of the distributional implications of storage these results while confirming the importance of the specification of the demand function and the supply elasticity identified in recent analytical studies e g wright i979 and newbery and stiglitz i979 are surprisingly favourable to consumers considering the asymmetric nature of the effects of storage on consumption and price storage is simply a productive activity one that transfers a commodity from one period to the next like other forms of production it is costly the total cost of storing an amount st from period t to period t i is as of period t i

the vulnerability of price stabilization schemes to speculative attack this paper examines the effects of government attempts to stabilize the prices of commodities by use of buffer stocks agricultural goods subject to supply uncertainty as well as depletable resources are considered in each case it is shown that the resulting rational expectations competitive equilibrium contains a speculative attack a situation where the entire government stock is suddenly purchased by previously inactive speculators the analysis is applied to the historical attempt to peg the gold price which caused the attack of 1968 the insights gained and the methodology developed also apply to the various international agreements to impose bans on commodity prices which have been proposed by the united nations conference on trade and development

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

rules versus discretion in food storage policies this article compares various policies in a rational expectations food storage model with risk averse consumers and missing insurance markets calibrated to represent a developing country i consider an optimal storage policy under discretion and two optimal simple rules a constant private storage subsidy and a price band the storage subsidy achieves welfare gains similar to the discretionary policy the price band maximizing social welfare is a price peg scheme the floor and ceiling prices are the same and the capacity constraint represents 11 of the steady state production level this price band achieves three quarters of the gains from the optimal policy under discretion

anti hoarding laws a stock condemnation reconsidered economists have regarded anti hoarding laws as irrational reactions to nonexistent monopoly in the storage of grain this paper shows that anti hoarding laws cannot be rationally directed against a monopolistic storer for he will always store less not more than would be stored under competition but seemingly perverse competitive storage in the form of excessive stockholding can arise when a price ceiling distorts the market additional public storage exacerbates this perverse private behavior and may even induce behavior that appears to be active market manipulation under such circumstances anti hoarding laws can be desirable second best measures

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

measurement of consumer gains from market stabilization for most cases of practical significance in which partial equilibrium analysis is appropriate there is little difference between exact measures of consumer gains from market stabilization and approximations such as expected change in marshallian or hicksian consumer surplus careful specification of the nature of stabilization is more crucial than the choice of welfare measure it is important to represent correctly the demand curvature and supply response and to determine whether general equilibrium responses can be ignored in any event an improved analytical approximation and a simple numerical method for calculating the exact measures make it unnecessary to rely on suspect measures

the effects of direct storage subsidies under limited rationality a general equilibrium analysis we study here the effects of a public subsidy to private storage set up at world level to simulate the welfare effects and impacts on market fluctuations of this subsidy we use a dynamic computable general equilibrium model assuming imperfect expectations we also perform different statistical analysis based on our cge results and show that the storage subsidy can have the undesired effect of destabilizing agricultural markets depending on the form of economic agents price expectations and on the structure of the shocks impacting the agricultural production

blue chip rationality tests this paper tests the rationality of forecasts made by individuals who contribute to the blue chip consensus forecasting service and tries by means of a questionnaire on forecasting methods to establish why some forecasters appear more rational than others tests based on consensus forecasts prove unreliable as guides to the number of individuals who produce rational forecasts individual forecasts are more likely to be rational if they are based on a mainstream economic theory and incorporate a substantial element of judgment copyright 1991 by ohio state university press

equity and tradeoffs in a tax based incomes policy a tax based incomes policy tip is a tax incentive that tries to induce employers and or workers to reduce wage and or price increases it is intended as a complement to the basic anti inflation policy of gradual monetary deceleration and fiscal restraint its purpose is to reduce the capital stock and output loss that would otherwise accompany such a policy see my 1978 1979a articles this article is divided into two sections section i examines the capital stock and output loss under monetary deceleration that is uncomplemented by tip this loss is due primarily to wage growth inertia a central feature of modern capitalist economies such inertia provides not only the rationale for a tip on wage increases but also implies that special effort is required to assure that the design of a complete tip package is fair to labor section ii analyzes the tradeoffs confronting two alternative methods of making tip more equitable to labor profit and or price restraint insurance and a tip on price increases of the largest firms the original tip limited to wage increases at first glance is often perceived as unbalanced and inequitable this section tries to contribute to the development of a balanced equitable tip

optimal food price stabilisation policy this paper proposes a framework for designing optimal food price stabilisation policies in a self sufficient developing country it uses a rational expectations storage model with risk averse consumers and incomplete markets government stabilises food prices by carrying public stock and by applying a state contingent subsidy tax to production the policy rules are designed to maximise intertemporal welfare the optimal policy under commitment crowds out all private stockholding activity by removing the profit opportunity from speculation the countercyclical subsidy tax to production helps price stabilisation by subsidising production in periods of scarcity and by taxing it in periods of glut it contributes little to welfare gains most of which come from stabilisation achieved through public storage

social security payments money supply announcements and interest rates abstract a monthly cycle existed in initially announced changes in seasonally adjusted m1 for a period extending at least from september 1977 to february 1984 this cycle was the source of systematic errors in the widely used money market services forecast of m1 such errors can induce a spurious relation between interest rates and expected changes in the money supply when the survey forecasts are corrected to eliminate systematic errors the apparent negative relation between interest rates and expected money supply changes disappears interest rates were not systematically related to either anticipated or unanticipated money supply changes during the period february 1984 to december 1986