the influence of seasonal adjustment on the canadian consumption function 1947 1991 cointegration tests typically rely on seasonally adjusted data cointegration tests are applied in this paper to seasonally unadjusted data the main objective of the paper is to test the permanent income hypothesis using canadian data the authors find that the unit root at the zero frequency found in seasonally adjusted data is also present in seasonally unadjusted data however there is considerable evidence for the presence of seasonal unit roots although there is support for the permanent income hypothesis for seasonally adjusted data the same hypothesis is rejected for seasonally unadjusted data

mean reversion in real exchange rates evidence and implications for forecasting abstract the stationarity of real exchange rates over the recent flexible exchange rate period is an issue that has long bedeviled researchers in international finance using a constrained multivariate framework this paper provides the strongest evidence yet that real exchange rates were mean reverting over the 1973 93 period we also investigate shifts in long run real exchange rates which may be important for the purpose of forecasting out of sample forecasting shows that the random walk model is outperformed by a mean stationary model especially at long horizons in addition there are substantial forecasting benefits from using a multivariate approach

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

long run relationship between output capital labour and productivity in emerging market economies long run relationship between the variables involved in the production function is an issue that is important particularly in developing countries as the neoclassical production function is best suited for developed countries and its applicability to developing countries is questionable in various ways this motivates us to do this based on time series analysis taking indian textile industry as an example which is currently at its crucial stage as a critical industry in an emerging economy with the phasing out of multi fibre arrangement in 2005 this study documents existence of cointegration between capital and output negative impact of employment shocks on output changes substitutability between changes in capital and labour negative effect of shocks to changes in capital stock on productivity and negative effect of employment shocks on future productivity these results are in line with the general perceptions about this industry and with the standard neoclassical propositions as explained in t

sacrifice and stigma reducing free riding in cults communes and other collectives this paper presents an economic analysis of religious behavior that accounts for the continuing success of groups with strange requirements and seemingly inefficient prohibitions the analysis does not presuppose any special motives for religious activity rather religion is modeled as a club good that displays positive returns to participatory crowding the analysis demonstrates that efficient religions with perfectly rational members may benefit from stigma self sacrifice and bizarre behavioral restrictions the model also addresses sacrifice in nonreligious social clubs fraternities communes political parties work groups and families

the causality relationship between energy consumption and gdp in g 11 countries revisited abstract this paper explores whether energy conservation policies can be implemented in countries with the same level of development that is is restraining energy consumption without compromising economic growth feasible in all industrialized countries a new granger non causality testing procedure developed by toda and yamamoto 1995 journal of econometrics 66 225 250 is applied to re investigate the relationship if any between energy consumption and income in 11 major industrialized countries the results clearly do not support the view that energy consumption and income are neutral with respect to each other except in the case of the united kingdom germany and sweden where a neutral relationship is found bi directional causality in the united states and uni directional running from energy consumption to gdp in canada belgium the netherlands and switzerland are found this indicates that energy conservation may hinder economic growth in the latter five countries further the causality relationship appears to be uni directional but reversed for france italy and japan which implies that in these three countries energy conservation may be viable without being detrimental to economic growth

seasonality and habit persistence in a life cycle model of consumption summary the allocation of non durable consumers expenditure over the four quarters of the year reflects choices made by consumers implying a utility function exhibiting seasonality incorporating such a function the life cycle model fails to explain fully the observed dynamics in uk seasonally unadjusted data seasonal habit persistence effects are introduced and found to be significant although this generalized model stands up well to testing in a univariate context it fails to exclude a predictive role for lagged income changes seasonality is inherent in many economic time series but it is rarely considered to be an issue of interest in econometric model building rather than explicitly investigating the economics underlying seasonal variation modellers typically try to remove its effects either by using seasonally adjusted data or by including seasonal intercept dummies in their equations the former practice is criticized by wallis 1974 who shows that it may distort the relationship between variab le the latter assumes that the function simply shifts up or down with the season however except for degrees of freedom considerations there seems to be no a priori reason why the same parameters or functional form should apply at different times of the year indeed gersovitz and mackinnon 1978 argue that realistic utility cost or production functions result in models in which seasonal influences cannot be separated out in a simple fashion in the present study seasonality is treated as one of the features to be explained within the economic model thus in the particular application to non durable consumers expenditure it is argued that the allocation of expenditure over the year reflects seasonal tastes and hence seasonality in the underlying utility function the implications of this are explicitly investigated the framework for our analysis is the influential paper by hall 1978 who derives a randomwalk model for real non durable consumers expenditure when rational expectations are combined with a life cycle theory of consumption hall does not investigate seasonality at all and employs seasonally adjusted values in his empirical analysis although subsequent us authors have examined many aspects of this theory the type of data used has rarely been

the effect of female education on fertility and infant health evidence from school entry policies using exact date of birth this paper uses age at school entry policies to identify the effect of female education on fertility and infant health we focus on sharp contrasts in schooling fertility and infant health between women born just before and after the school entry date school entry policies affect female education and the quality of a woman s mate and have generally small but possibly heterogeneous effects on fertility and infant health we argue that school entry policies manipulate primarily the education of young women at risk of dropping out of school

border region panel evidence on ppp deviations this article examines prices for 32 identical menu items sold by restaurant franchises operating on both sides of the border between el paso in the us and ciudad juarez in mexico from july 1997 to june 2008 the relationship between real exchange rate rer volatility and the degree of price convergence is examined within a panel data context the city pair and goods selected provide a unique experiment in which distance tradability and industry considerations are set aside and the extent of rer volatility is the only factor to influence price convergence we find nonmonotonic relationships between mean reversion and rer volatility very fast adjustments for both low and high volatility panels of goods between 1 and 2 months and slower half lives between 3 and 4 months at moderate levels of uncertainty these figures are however substantially smaller than the 6 or 7 months reported in previous research for general us mexico goods suggesting the very strong price convergence observed along the us m

potential pitfalls for the purchasing power parity puzzle sampling and specification biases in mean reversion tests of the law of one price the ppp puzzle is based on empirical evidence that international price differences for individual goods loop or baskets of goods ppp appear highly persistent or even nonstationary the present consensus is these price differences have a half life that is of the order of five years at best and infinity at worst this seems unreasonable in a world where transportation and transaction costs appear so low as to encourage arbitrage and the convergence of price gaps over much shorter horizons typically days or weeks however current empirics rely on a particular choice of methodology involving i relatively low frequency monthly quarterly or annual data and ii a linear model specification in fact these methodological choices are not innocent and they can be shown to bias analysis towards findings of slow convergence and a random walk intuitively if we suspect that the actual adjustment horizon is of the order of days then monthly and annual data cannot be expected to reveal it if we suspect arbitrage costs are high enough to produce a substantial band of inaction then a linear model will fail to support convergence if the process spends considerable time random walking in that band thus when testing for ppp or loop model specification and data sampling should not proceed without consideration of the actual institutional context and logistical framework of markets

is purchasing power parity overvalued the purpose of this paper is to re examine the hypothesis of long run purchasing power parity among industrial countries under the current float using the panel data approach we propose a new finite sample panel data unit root test procedure that allows for a general serial correlation structure and arbitrary contemporaneous correlation in model innovations across countries this procedure is then applied to the recently developed panel data unit root tests of im pesaran and shin 1996 and of maddala and wu 1999 the test results show sufficient evidence against the unit root null for most samples by comparing our results with the existing ones in the literature we found that the method of assuming a restrictive serial correlation structure tends to weaken evidence against the unit root null

political extremism in the presence of a free rider problem this paper provides an explanation for the emergence of political extremism in an environment in which a change in re gime requires an investment that benefits more than one player we show that in order to mitigate the effects of free riding players may choose extreme positions further we show that as the free rider problem becomes more severe both parties move to more extreme positions in the same direction

purchasing power parity and unit root tests using panel data abstract this paper reports the results of unit root tests for real exchange rates using a panel framework this panel approach provides greatly improved power compared to conventional univariate time series unit root tests we obtain evidence supporting ppp over the recent flexible exchange rate period for g 6 and oecd countries we show explicitly that failure to find such evidence in previous research was due to the low power of the tests

bank ownership and lending behavior this paper examines whether bank ownership public versus private domestic versus foreign is correlated with bank lending behavior over the business cycle the paper finds that state owned banks may play a useful credit smoothing role because their lending is less responsive to macroeconomic shocks than the lending of private banks the paper investigates whether this differential behavior is due to an explicit objective of stabilizing credit or to the presence of lazy public bank managers evidence is found in support of the former hypothesis in the case of foreign owned banks the paper finds that the results are less clear cut and argues that this finding is in line with existing theoretical models

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null

are real exchange rates nonstationary evidence from a panel data test it is well documented that real exchange rates between the united states and many industrialized countries in the post bretton woods period are integrated this result implies that purchasing power parity ppp does not hold even as a long run relationship this paper demonstrates that the failure to reject the unit root hypothesis may result from the low power of existing univariate test procedures i test for unit roots in real exchange rates by employing a more powerful panel based procedure using both cpi and wpi real dollar exchange rate data i strongly reject the null hypothesis of a unit root my results provide overwhelming support for the long run ppp under the current float copyright 1996 by ohio state university press

purchasing power parity and country characteristics evidence from panel data tests abstract we examine long run purchasing power parity ppp using panel data methods to test for unit roots in us dollar real exchange rates of 84 countries we find stronger evidence of ppp in countries more open to trade closer to the united states with lower inflation and moderate nominal exchange rate volatility and with similar economic growth rates as the united states we also show that ppp holds for panels of european and latin american countries but not for african and asian countries our findings demonstrate that country characteristics can help explain both adherence to and deviations from long run ppp

the intergenerational effects of compulsory schooling this article attempts to improve our understanding of the causal processes that contribute to intergenerational immobility by exploiting historical changes in compulsory schooling laws that affected the educational attainment of parents without affecting their innate abilities or endowments we examine the influence of parental compulsory schooling on children s grade for age using the 1960 1970 and 1980 u s censuses our estimates indicate that a 1 year increase in the education of either parent reduces the probability that a child repeats a grade by between 2 and 4 percentage points

evidence of purchasing power parity for the floating regime period abstract this paper investigates the ppp hypothesis within industrialized countries for the post bretton woods period via two panel unit root tests the df gls sur and the adf sur tests respectively developed by lopez a panel unit root with good power in small samples econometric reviews in press and levin et al 2002 unit root tests in panel data asymptotic and finite sample properties journal of econometrics 108 1 1 24 both approaches allow for data specific serial and contemporaneous correlation while both tests provide ppp evidence for the post 1973 period the more powerful df gls sur test demonstrates consistently stronger results especially for the 1973 1998 period

the relationship between education and adult mortality in the united states prior research has uncovered a large and positive correlation between education and health this paper examines whether education has a causal impact on health i follow synthetic cohorts using successive u s censuses to estimate the impact of educational attainment on mortality rates i use compulsory education laws from 1915 to 1939 as instruments for education the results suggest that education has a causal impact on mortality and that this effect is perhaps larger than has been previously estimated in the literature copyright 2005 wiley blackwell

extremism as a strategic tool in conflicts abstract this paper studies the strategic role of extremism within a two country multi stage game and shows that in general an equilibrium exists in which extremism is used by both rivals we show that often changes in the environment affect the two countries differently specifically as a country becomes wealthier more powerful or more democratic its level of extremism decreases but at the same time its rival s level of extremism increases similarly higher stakes in the conflict tend to increase the level of extremism in the relatively poorer weaker and less democratic country but decrease the level of extremism in the other country on the other hand higher stakes in a conflict between similar countries and greater destructiveness vis a vis the contested asset will increase the levels of extremism in both countries since changes in the environment may affect the levels of extremism in the two countries in opposite ways we calculate the probability of an extremist destructive episode as a possible measure of the aggregate level of extremism in the conflict we find that the aggregate level of extremism decreases with wealth power and degree of democracy but increases with the stakes in the conflict and with better access to destructive technology finally we use the model to examine levels of extremism within the context of the israeli palestinian conflict

ppp strikes back aggregation and the real exchange rate we show the importance of a dynamic aggregation bias in accounting for the ppp puzzle we prove that the aggregate real exchange rate is persistent because its components have heterogeneous dynamics established time series and panel methods fail to control for this using eurostat data we find that when heterogeneity is taken into account the estimated persistence of real exchange rates falls dramatically its half life for instance may fall to as low as eleven months significantly below the consensus view of three to five years

a time series test of innovation driven endogenous growth this article finds evidence that ideas and innovation are a key force explaining postwar growth in the u s economy utilizing data on patents issued since 1851 i construct a measure of the growth rate of knowledge capital stock estimates human capital estimates and real gross domestic product per worker growth rates are combined with the knowledge growth series to construct a time series test of endogenous innovation growth models the results support the endogenous innovation approach but suggest that the accumulation of the per worker capital stock and changes in average human capital per worker are at least as important jel 030 c32

what s in a sign trademark law and economic theory the aim of this paper is to summarize the extant theory as it relates to the economics of trademark and to give some suggestions for further research with reference to distinct streams of literature the proposed line of study inevitably looks at the complex relationship between signs and economics copyright 2006 the authors journal compilation 2006 blackwell publishing ltd

long memory and persistence in aggregate output abstract we examine persistence in u s aggregate output by estimating fractionally integrated arima models these models provide better low frequency approximations to the wold representation than previous stochastic specifications and earlier results on the importance of a permanent component emerge as special cases we find evidence of long memory which induces persistence though this long memory need not be associated with a unit root our point estimates indicate that macroeconomic shocks while persistent are distinctly less persistent than many earlier studies suggest however confidence intervals associated with the long run response are quite wide

transitory and permanent disturbances and the current account an empirical analysis in the intertemporal framework the intertemporal models of current account determination demonstrate that in the analysis of the current account balance of a country it is important to distinguish between transitory and permanent disturbances in income and relative prices this paper attempts to decompose the observed data on income and real exchange rate into transitory and permanent components and then uses the decomposed series to test the empirical validity of the predictions of the intertemporal models evidence from the united states and japan provide very limited support for the intertemporal models in terms of the effects of transitory and permanent changes in income on current account balance for both us and japan the study finds that permanent changes in real exchange rate have significant effects on the current account balance statistical tests find no evidence of hysteresis in the trading relations of the two countries

why panel tests of purchasing power parity should allow for heterogeneous mean reversion recent studies of purchasing power parity ppp use panel tests that fail to take into account heterogeneity in the speed of mean reversion across real exchange rates in contrast to several other severe restrictions of panel models and tests of ppp the assumption of homogeneous mean reversion is still widely used and its consequences are virtually unexplored this paper analyzes the properties of homogeneous and heterogeneous panel unit root testing methodologies using monte carlo simulation we uncover important adverse properties of the panel approach that relies on homogeneous estimation and testing more specifically power functions are low and assume irregular shapes furthermore homogeneous estimates of the mean reversion parameters exhibit potentially large biases these properties can lead to misleading inferences on the validity of ppp our findings highlight the importance of allowing for heterogeneous estimation when testing for a unit root in panels of real exchange rates

the choice of numeraire currency in panel tests of purchasing power parity we investigate the implications of the choice of numeraire currency on panel tests of purchasing power parity under the current regime of flexible exchange rates by conducting panel unit root tests with twenty one different base currencies we show that the conditions necessary for numeraire irrelevancy are not supported empirically and that the choice of numeraire currency can and does matter for ppp the evidence of ppp is stronger for european than for non european base currencies distance between the countries and volatility of the exchange rates are the most important determinants of the results

the demand for tourism in north east england with special reference to northumbria an empirical analysis abstract this paper examines the trends of tourism in north east england in particular we focus on the area of northumbria to show the potential of tourism for economic development in the region within this analysis we concentrate on the demand for tourism in the region and in particular we are concerned with tourism by uk residents in northumbria domestic tourism the long run relationship between domestic tourism demand and a number of economic factors effecting this demand is considered using the johansen and juselius 1990 1992 multivariate cointegration analysis an error correction model is then proposed for short run forecasting of domestic demand for tourism in northumbria

nonlinearity and structural breaks in irish ppp relationships an application of random field regression using nominal and real exchange rates for ireland relative to germany and the uk from 1975 to 2003 this article explores likely sources of nonlinearity in purchasing power parity ppp relationships and difficulties in employing an i 1 i 0 econometric framework tests for fractionalintegration and nonlinearity including random field regression based procedures are applied results reveal shortcomings in the standard cointegration and smooth transition autoregression approaches to modelling and point to multiple structural changes models such a model for the case of ireland and germany suggests that ppp holds not only in the long run but also in the medium to short term

increasing evidence of purchasing power parity over the current float we conduct unit root tests of real exchange rates with the united states dollar and the german mark as base currencies using samples of data which begin in 1973 and end between 1982 and 1996 we find that as the sample is extended the evidence of ppp strengthens with panel but not univariate methods because of the sharp rise and fall of the dollar in the early 1980s rejections of the unit root null do not monotonically increase with the sample size the evidence of ppp is uniformly stronger when the mark is used as the base currency

the big problem of forecasting small change the united states mint recently reviewed approaches to forecasting the demand for new coin this paper reports on methods used to determine fundamental attributes of the data and uses these to help better determine appropriate model specification in order to better plan coin production in particular the debate regarding trend versus difference stationarity in macroeconomic trending data is considered the interest in the present paper is limited to applying a well known unit root test procedure to an untested macrodata set changes in us coin demand to see whether the test is useful in guiding the specification to improved forecast performance it is found that the forecast results are somewhat sensitive to the way in which the data are seasonally adjusted and lessons learned from this case study indicate that unit root tests are useful in guiding model specification

endogenous structural breaks public investment in agriculture and agricultural land productivity in taiwan using time series data for taiwan s agricultural sector and with the government s public investment in the agricultural sector serving as a proxy variable for nonfarm current inputs aside from the original labour and capital input variables usually taken into consideration this article examines the relationship between public investment in agriculture public investment land and agricultural land productivity output land in taiwan our main findings are as follows first the cointegration test reveals that public investment in agriculture and the productivity of agricultural land exhibit a significant positive relationship in the long run where the elasticity of land productivity in relation to public investment in agriculture is 0 55 second when controlling for endogenous structural breaks the long run equilibrium relationship for the productivity of the agricultural land model is still supported third the results of the weak exogeneity test indicate that a causal relationship exists in the lo

regression direction and weak exogeneity abstract the absence of testing for weak exogeneity in money demand has often led to stark conditioning claims regarding the validity of price equations this paper uses the johansen procedure to explore the conditioning properties of money demand systems for nonborrowed reserves m1 and m2 our results show that irrespective of the specification of the cointegrating relation a feedback mechanism enters the equation for money the opposite however is not true for the price equations the results also cast a warning for single equation models of money demand in that weak exogeneity is sensitive to how the system is defined

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

a multivariate cointegration analysis of the role of energy in the us macroeconomy abstract this paper extends my previous analysis of the causal relationship of gdp and energy use in the usa in the post war period a majority of the relevant variables are integrated justifying a cointegration analysis the results show that cointegration does occur and that energy input cannot be excluded from the cointegration space the results are plausible in terms of macroeconomic dynamics the results are similar to my previous granger causality results and contradict claims in the literature based on bivariate models that there is no cointegration between energy and output

the invisible hand plays dice multiple equilibria in sects markets religious participation is much more widespread in the united states than in europe while europeans tend to view sects more suspiciously than americans we propose an explanation for these patterns without assuming differences in preferences or market fundamentals we study a religious market where both demand and supply of spiritual services are endogenous such markets may have multiple equilibria further equilibria with more sects result in higher welfare and lower membership costs as secular societies tend to host on average more demanding sects

estimating saving investment correlations evidence for oecd countries based on an error correction model abstract saving investment correlations are important stylized facts in open economy macroeconomics and indicators of capital mobility they are best estimated by an error correction model ecm because an ecm is consistent with intertemporal general equilibrium models the ecm is a synthesis of previous approaches applying the ecm to the oecd countries we find that in general saving and investment are cointegrated the ecm is more powerful in detecting cointegration than the two step engle granger procedure estimates of the saving investment correlation are robust with respect to overdifferencing we find evidence of a large country effect and an increase in capital mobility within the oecd area

an empirical analysis on the law of purchasing power parity and international economic deepening this article empirically investigates the effect of international trade on the deviation of purchasing power parity ppp law and on the international economic deepening in four developed countries japan usa uk and france and three asian developing ones south korea singapore and malaysia using international financial statistics ifs data issued by international monetary fund imf our results show that in some developed countries the imbalance effect of balance of payments is significant for both international deepening and deviation from ppp and in some developing countries the volume effect of balance of payments is significant for international deepening

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

cointegration and unit roots this paper provides an updated survey of a burgeoning literature on testing estimation and model specification in the presence of integrated variables integrated variables are a specific class of non stationary variables which seem to characterise faithfully the properties of many macroeconomic time series the analysis of cointegration develops out of the existence of unit roots and offers a generic route to test the validity of the equilibrium predictions of economic theories special emphasis is put on the empirical researcher s point of view

growth and the welfare state in the eu a causality analysis in this paper we test for causality between gdp growth andsocial protection expenditure in the european union to that end we apply hsiao s 1981 sequential procedure to data for twelveeu countries along the 1970 1994 period our results suggestthat for belgium germany ireland luxembourg the netherlands portugal and spain causality runs only from social protectiongrowth to gdp growth while for denmark france greece italy and the united kingdom no causality is found between socialprotection growth and gdp growth

public debt in brazil sustentability and its implications abstract this paper tests sustainability of brazilian public debt in the period 1991 to 2009 and analyzes implications of requiring that the brazilian fiscal policy be primarily committed to the sustainability of the public debt the retrospective analysis utilizes a set of unit root tests and avoids some of the criticism leveled at previous studies by using data which has not previously been used for this purpose and concludes that the public debt was sustainable in the period we consider the prospective analysis is based on the dsge model proposed by jodi gali et al 2007 calibrated for brazil using the conclusions of the retrospective analysis for the fiscal parameters the scenarios produced with the help of the model show that maintaining the sustainability of the public debt is consistent with the monetary policy of inflation targeting we also conclude that it is possible to reduce interest rates to levels below those prevalent at the end of 2010 simultaneously maintaining the stability of the trajectory of the public debt

on the economic determinants of oil production theoretical analysis and empirical evidence for small exporting countries abstract in this paper decisions regarding production in oil exporting countries are studied by means of theoretical analysis and empirical investigation in particular we aim at describing the relationship between oil production levels and changes in the world oil demand and prices intertemporal production decisions by a representative oil producer are modeled by means of a partial equilibrium model in this theoretical model oil producers are subject to exogenous shocks in world oil consumption and prices oil companies can change output levels only by incurring a fixed cost results from the simulation of this model show a strong relationship between oil production and changes in world oil consumption on the contrary the effects of changes in real oil prices on oil production decisions seem to be much lower results from the simulation of the theoretical model are then empirically investigated using time series econometric techniques the empirical evidence supports the hypothesis that oil producing countries are characterized by different responses to changes in world oil demand and in real oil prices for many countries production rapidly adjusts to changes in consumption whereas responses of oil production to innovations in real oil prices are found to be not statistically significant in addition when non linearities in the relationship between world oil demand prices and output levels are allowed for evidence of asymmetric effects of shocks to exogenous variables on output levels is found for some countries

radicalization as a reaction to failure an economic model of islamic extremism this paper views islamist radicals as self interested political revolutionaries and builds on a general model of political extremism developed in a previous paper ferrero 2002 extremism is modelled as a production factor whose effect on expected revenue is initially positive and then turns negative and whose level is optimally chosen by a revolutionary organization the organization is bound by a free access constraint and hence uses the degree of extremism as a means of indirectly controlling its level of membership with the aim of maximizing expected per capita income of its members like a producer co operative the gist of the argument is that radicalization may be an optimal reaction to perceived failure a widespread perception in the muslim world when political activists are at the margin relatively strongly averse to effort but not so averse to extremism this configuration is at odds with secular western style revolutionary politics but seems to capture well the essence of islamic revolutionary politics embedded as it is in a doctrinal framework

nonlinear trends in real exchange rates a panel unit root test approach abstract we analyze the possibility of nonlinear trend stationarity as the alternative to unit roots in 23 oecd real exchange rates 1974 1998 by adding nonlinear time terms to the cips panel unit root test of pesaran 2007 we follow a thorough bootstrapping approach and propose a technique to adjust statistical significance for the use of multiple tests over several time trend orders the unit root null that all real exchange rates have unit roots is rejected at better than the 0 05 level bootstrapped results from a procedure of chortareas and kapetanios 2009 suggest that the hypothesis that all are stationary is reasonable we argue that nonlinear trend stationarity is the most likely alternative hypothesis for at least some of the real exchange rates because 1 the strongest cips rejection occurs when quadratic trends are specified 2 nonlinear time terms are statistically significant at the 0 10 level 3 the actual cips statistics are more consistent with cips sampling distributions from bootstrapped nonlinear trend stationary processes than from linear trend or mean stationary processes

the persistence of early childhood maturity international evidence of long run age effects a continuum of ages exists within each starting class due to the use of a single school cut off date making the oldest children approximately twenty percent older than the youngest children at school entry we provide substantial evidence that these initial maturity differences have long lasting effects on student performance across oecd countries in particular the youngest members of each cohort score 4 12 percentiles lower than the oldest members in grade four and 2 9 percentiles lower in grade eight depending upon the country in fact data from canada and the united states shows that the youngest members of a cohort are even less likely to enroll in pre university academic track courses and high end academic universities taken together these findings point to important early relative maturity effects that propagate themselves into adulthood through the structure of education systems

a panel project on purchasing power parity mean reversion within and between countries abstract previous time series studies have shown evidence of mean reversion in real exchange rates deviations from purchasing power parity ppp appear to have half lives of approximately four years however the long samples required for statistical significance are unavailable for most currencies and are potentially inappropriate because of regime changes in this study we re examine deviations from ppp using a panel of 150 countries and 45 annual post wwii observations our panel shows strong evidence of mean reversion that is similar to that from long time series ppp deviations are eroded at a rate of approximately 15 annually i e their half life is around four years such findings can be masked in time series data but are relatively easy to find in cross sections

the rise and demise of theocracy theory and some evidence this paper models theocracy as a regime where the clergy in power retains knowledge of the cost of political production but which is potentially incompetent quarrelsome or corrupt this is contrasted with a secular regime where government is contracted out to a secular ruler and hence the church loses the possibility of observing costs and creates for itself a hidden information agency problem the church is free to choose between regimes a make or buy choice and we look for the range of environmental parameters that are most conducive to the superiority of theocracy and therefore to its occurrence and persistence despite its disabilities numerical solution of the model indicates that the optimal environment for a theocracy is one in which the bad high cost state is disastrously bad but the probability of its occurrence is not very high quantitative evidence on the rise of ancient israelite theocracy and the current surge of islamic theocratic fundamentalism provides surprisingly strong support for this prediction lastly supportive evidence is suggested by two rare instances of a theocracy s peaceful demise

the evolution of purchasing power parity abstract a large body of literature in international finance has attempted to estimate the speed of convergence between countries aggregate price indices to those levels predicted by purchasing power parity ppp this paper takes a novel approach by considering how this speed of convergence itself has evolved over time using a dynamic common correlated effects dcce framework from chudik and pesaran 2015 applied to a panel of countries real exchange rates over the years 1960 2015 we find an average half life of around 3 years moreover we show that the estimated half life fell by about 2 years over the course of the past five decades suggesting that the so called ppp puzzle rogoff 1996 may abating over time our results also serve to contextualize past estimates by demonstrating a high degree of sample selection sensitivity in this literature furthermore we propose explanations for the observed increase in the speed of international price adjustments focusing primarily on the increasingly tradable nature of the composition of the u s consumer price index cpi we build a measure of tradability of the cpi and show that despite an increase in the proportion of services in the average consumer s basket the cpi has become more tradable over time thus offering a potential explanation for the observed increase in adjustment speed

appropriating signs and meaning the elusive economics of trademark this paper deals with economic analysis of trademark its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection however this information conveying function is also accompanied by a differentiation effect arising from the power of persuasion that signs can exert on individuals the exploitation of differentiation has given rise to the practice of branding which ties markets and consumption to the realms of meaning and experience branding is so all pervasive in today s economy as to have somehow transfigured it so that the role of persuasion is now pre eminent nonetheless the mainstream economic theory tends to resist acknowledging this change which would to a large extent call into question well established hypotheses and theoretical tools the general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models welfare evaluations and policy prescriptions that bear little or no relation to the actual markets the opposing approach in the shadow of the nelson s and arrow s seminal papers on economics of information is recognising the idiosyncratic character of information and therefore drawing conclusions and devising solutions that while still based upon the welfare criterion also incorporate a wider awareness and a deeper representation of the scenario under study the present work attempts to move in this direction showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings

a structural var approach on labour taxation policies this paper presents a structural var analysis on the employment and output effects of labour tax policies in six european countries for the period 1974 1997 by considering impulse response functions it turns out that on average a shock to the total personal income tax revenues is positively correlated to employment whereas there is mixed evidence on the output effect moreover the quantitative impact of these effects especially those related to the output appears to be quite small however by introducing explicitly four labour tax parameters namely the marginal and average tax rates for the personal income tax and the payroll tax it turns out that these effects are not negligible after all for some countries it is possible to conceive labour taxes as policy instruments favouring more employment and a better economic performance however the empirical support on the sign of the output and employment effects is mixed suggesting that the same domestic fiscal policy does not produce the same im

the purchasing power parity debate originally propounded by the 16th century scholars of the university of salamanca the concept of purchasing power parity ppp was revived in the interwar period in the context of the debate concerning the appropriate level at which to re establish international exchange rate parities broadly accepted as a long run equilibrium condition in the post war period it first was advocated as a short run equilibrium by many international economists in the first few years following the breakdown of the bretton woods system in the early 1970s and then increasingly came under attack on both theoretical and empirical grounds from the late 1970s to the mid 1990s accordingly over the last three decades a large literature has built up that examines how much the data deviated from theory and the fruits of this research have provided a deeper understanding of how well ppp applies in both the short run and the long run since the mid 1990s larger datasets and nonlinear econometric methods in particular have improved estimation as deviations narrowed between real exchange rates and ppp so did the gap narrow between theory and data and some degree of confidence in long run ppp began to emerge again in this respect the idea of long run ppp now enjoys perhaps its strongest support in more than 30 years a distinct reversion in economic thought

the panel purchasing power parity puzzle does long run purchasing power parity ppp hold over the post 1973 floating exchange rate period panel unit root tests provide evidence of ppp that increases with the number of observations the strengthening of the evidence however is highly cyclical when the dollar appreciates at the end of the sample the evidence of ppp strengthens and when it depreciates the evidence weakens while these patterns cannot be explained by the specifications that are normally used to model real exchange rates the strengthening but not the cyclical pattern can be explained by a specifi cation that incorporates ppp restricted structural change

the cyclicality of price cost margins in banking an empirical analysis of its determinants i introduction in this paper we study the cyclical behavior of price cost margins in banking calculated as the difference between the interest rate on loans and deposits using time series quarterly data for the period 1979 2005 in the united states this cyclical behavior of banks price cost margins a key fact about business fluctuations has received little attention before dueker and thornton 1997 find evidence that in cyclical downturns banks opt for a relatively high price cost margin however they focus exclusively on the markup of the bank prime lending rate over the marginal cost of funds for banks mandelman 2006 presents evidence on the cyclicality of margins for a large sample of countries and uses foreign bank penetration to explain the behavior of margins 1 in olivero 2005 aliaga diaz 2006 and aliaga diaz and olivero 2010a we document the countercyclicality of banks price cost margins in the united states in that paper we do so using an atheoretical methodology based on var forecast errors to measure comovement between variables 2 in this paper we build on this atheoretical evidence and take a step further by constructing an empirical model of the determinants of the cyclical behavior of margins here we take a theory based approach to decide on the inclusion of the relevant regressors that belong to this model doing so allows us to contribute to the literature by providing potential explanations for the previously documented countercyclical nature of margins monetary policy and credit risk could be suggested as the main and potentially the only determinants of the cyclical behavior of margins on the one hand the bank lending channel of monetary transmission predicts that the federal funds rate as a monetary policy indicator and margins are directly related therefore if policy rates exhibit a particular cyclical behavior not controlling for monetary policy could bias the estimations on the cyclical behavior of margins on the other hand credit risk is expected to be countercyclical and to raise margins so that default should help explain the countercyclicality of the latter based on these two observations our empirical methodology consists of two steps in a first step we test whether the negative and significant contemporaneous sample correlations between margins and a business cycle indicator are robust to the inclusion of controls related to monetary policy default risk and banking regulation results show it is so that there seems to be other channels through which fluctuations in the economy give rise to the observed countercyclicality of margins in a second step we look for these channels and offer several potential explanations for the observed behavior interest rate risk the economy s financial depth banks liquidity and capitalization and the share of total assets held by large banks all exert a significant impact on the behavior of margins over the business cycle these conclusions are consistent across alternative definitions of the margins and the business cycle indicator our work is linked to two strands of research in macroeconomics first our countercyclicality results are linked to the large literature on countercyclical markups in goods markets and its effects on aggregate demand started by rotemberg and saloner 1986 and rotemberg and woodford 1992 second price cost margins that vary endogenously and countercyclically in response to the state of the economy are a necessary condition for the existence of a financial accelerator as an amplifier of business fluctuations see for example bernanke and gertler 1989 and bernanke gertler and gilchrist 1998 therefore the countercyclical nature of price cost margins that we study here provides empirical support to the large body of literature in macroeconomic theory on this financial accelerator with price cost margins in the market for credit being countercyclical credit becomes more expensive in bad times firms may delay investment and production as a result and recessions may be exacerbated

searching for stationarity purchasing power parity under the current float abstract using panel data methods we investigate long run purchasing power parity by testing for unit roots in real exchange rates of industrial countries under the current float the evidence against the unit root hypothesis is stronger for larger than for smaller panels for monthly than for quarterly data and when the german mark rather than the united states dollar is used as the base currency while we find that accounting for serial correlation considerably weakens the evidence against the unit root null the results as a whole are consistent with long run purchasing power parity

school entry policies and skill accumulation across directly and indirectly affected individuals during the past half century there has been a trend toward increasing the minimum age a child must reach before entering school in the united states states have accomplished this by moving the school entry cutoff date earlier in the school year the evidence presented in this paper shows that these law changes increased human capital accumulation and hence adult wages backing up the cutoff by one month increases average male hourly earnings by approximately 0 6 percent the evidence also suggests that the majority of the cohort benefits from backing up the cutoff not just those who must delay entry

estimating average and local average treatment effects of education when compulsory schooling laws really matter the change to the minimum school leaving age in the united kingdom from 14 to 15 had a powerful and immediate effect that redirected almost half the population of 14 year olds in the mid twentieth century to stay in school for one more year the magnitude of this impact provides a rare opportunity to a estimate local average treatment effects late of high school that come close to population average treatment effects ate and b estimate returns to education using a regression discontinuity design instead of previous estimates that rely on difference in differences methodology or relatively weak instruments comparing late estimates for the united states and canada where very few students were affected by compulsory school laws to the united kingdom estimates provides a test as to whether instrumental variables iv returns to schooling often exceed ordinary least squares ols because gains are high only for small and peculiar groups among the more general population i find instead that the benefits from compulsory schooling are very large whether these laws have an impact on a majority or minority of those exposed

unbiased estimation of the half life to ppp convergence in panel data three potential sources of bias introduce complications for panel data estimation of the half life of purchasing power parity deviations they are bias induced by inappropriate cross sectional aggregation of heterogeneous coefficients small sample estimation bias of dynamic lag coefficients and bias induced by time aggregation of commodity prices all of these biases have been addressed individually in the literature in this paper we address all three biases in arriving at our estimates using an annual panel data set of cpi based real exchange rates for 21 oecd countries from 1973 to 1998 we obtain a point estimate of the unbiased half life of 3 0 years with a 95 confidence interval of 2 3 4 2 years

out of sample exchange rate predictability with taylor rule fundamentals abstract an extensive literature that studied the performance of empirical exchange rate models following meese and rogoff s meese r a rogoff k 1983a empirical exchange rate models of the seventies do they fit out of sample journal of international economics 14 3 24 seminal paper has not convincingly found evidence of out of sample exchange rate predictability this paper extends the conventional set of models of exchange rate determination by investigating predictability of models that incorporate taylor rule fundamentals we find evidence of short term predictability for 11 out of 12 currencies vis a vis the u s dollar over the post bretton woods float with the strongest evidence coming from specifications that incorporate heterogeneous coefficients and interest rate smoothing the evidence of predictability is much stronger with taylor rule models than with conventional interest rate purchasing power parity or monetary models

divergent inflation rates in emu inflation divergence inflation rates have diverged much more widely than expected among the member states of the emu we show that much of this is attributable to the differential impact on different member states of the weakness of the euro on international currency markets in the early months of the union the balassa samuelson productivity growth effect has not yet played an important role even in respect of the outlier ireland although it will likely be more significant over a longer run especially as the accession countries join patrick honohan and philip lane