market share and exchange rate pass through in world automobile trade abstract using a bertrand differentiated products model we show that pass through should be high for exporters based in a country with a very large share of total destination market sales for source countries with small and intermediate market shares the relationship is potentially nonlinear and sensitive to assumptions about demand and firm interactions the model is estimated using a panel data set of automobile exports from four source countries to 12 destination markets over the period 1970 1988 the relationship between pass through and market share is significantly nonlinear pass through is lowest when the source country s market share is around 40 percent and highest when market share approaches 100 percent

the turning black tide energy prices and the canadian dollar the authors revisit the relationship between energy prices and the canadian dollar in the amano and van norden 1995 equation which shows a negative relationship such that higher real energy prices lead to a depreciation of the canadian dollar

stabilizing a previously centrally planned economy poland 1990 stabilization in poland guillermo a calvo and fabrizio coricelli we examine the dynamics of the january 1990 stabilization programme in poland focusing on the substantial and sudden collapse in industrial output and inflation persistence we discuss three non mutually exclusive explanations of these phenomena 1 excessive initial stocks of inventories 2 an exogenous fall in household demand and 3 tight credit we conjecture that tight credit was at centre stage it helped to magnify the fall in output and to coordinate such a fall across sectors we base such a conjecture on the existence of substantial credit segmentation and on the underdevelopment of private credit markets the latter may explain the substantial shrinkage of interenterprise credit compounding the initial contraction of bank credit they argue that credit tightness is reflected in firms offering wages below the programme s ceilings especially given that firms are controlled by workers councils this conjecture is further strengthened by the fact that wages increased and even went beyond the programme s ceilings as credit expanded during the year we argue that the wage hike may be the reason why credit expansion did not result in a major output recovery and inflation persisted during the year

sustainability of current account deficits in india an intertemporal perspective this study examines the sustainability of current account deficits cads and the validity of intertemporal budget constraint ibc in india the long run model is estimated on annual data for the period 1950 1951 to 2009 2010 the optimal single equation and maximum likelihood ml system estimates of the model provide a consistent support for the long run relationship between imports and exports the olsgh estimates provide no support and that ml system estimates a consistent support for cointegration in both the models estimated with one and two structural breaks in level the new cointegration breakdown tests generally suggest that the cointegration prevails from 1951 to 2010 the evidence supporting the cointegration between imports and exports overwhelms the evidence providing a mixed or no support for cointegration the estimates of slope parameter above zero and the dominant support for cointegration between imports and exports vindicate the validity of ibc and the sustainability of cads the shor

public capital and long run costs in u k manufacturing a model of u k manufacturing production that incorporates the inputs of public as well as private capital is specified and estimated the model is then used to measure the contribution of public capital to productivity growth over the period 1966 to 1990 it is found that before 1980 the public and private capital contributions were of comparable magnitude after 1980 the contribution of public capital declined significantly copyright 1993 by royal economic society

consumers demand in the long run some evidence from uk data a system of demand functions is estimated with quarterly uk data using recently developed techniques for the estimation and testing of cointegrated systems these fully modified methods aim to remove nuisance parameters from the limiting distributions which arise with non stationary data so that conventional inferntial procedures can be applied it is found that the homogeneity and symmetry restrictions of consumer theory appear to be reasonable descriptions of aggregate behaviour

refining for export and the convergence of petroleum product prices abstract the petroleum refining industry has changed over the past decades from one in which capacity primarily served local and regional markets to one in which trade in refined petroleum products has become more widespread we investigate the hypothesis of increasing globalization by examining the convergence of prices for refined products across different markets using data on refined products from market centers in the us and europe we test for convergence of prices using standard time series techniques the data plainly show that markets for refined petroleum products have become more interrelated as europe exported its gasoline surplus and global demand for petroleum products approached refining capacity econometric evidence supports the hypothesis that the us and european markets for oil and refined products are integrated we find evidence that a structural break during the financial crisis of 2008 changed the long run equilibrium price relationships and the short run price dynamics refined product markets are likely to experience continued globalization given trends in the united states and europe and because of key export oriented refining capacity investments made to take advantage of access to specific crude oil sources

adaptive estimation of cointegrated models simulation evidence and an application to the forward exchange market the paper reports simulation and empirical evidence on the finite sample performance of adaptive estimators in cointegrated systems adaptive estimators are asymptotically efficient even when the shape of the likelihood function is unknown we consider two representations of cointegrated systems triangular cointegrating regressions and error correction models the motivation for and advantages of adaptive estimators in such systems are discussed and their construction is described we report results from the estimation of a forward exchange market unbiasedness regression using the adaptive and competing estimators and provide related monte carlo simulation evidence on the performance of the estimators copyright 1999 john wiley sons ltd

purchasing power parity yet again evidence from spatially separated commodity markets abstract this paper examines the empirical validity of the law of one price by exploiting the non stationarity of prices set in us dollars of varieties of wheat that are traded simultaneously in the usa rotterdam and japan we demonstrate the crucial role of transport costs in achieving cointegration long run ppp although systematic short run deviations from ppp occur we show that this does not imply profitable arbitrage opportunities jel c5 f3 g1

a system approach to the demand for salmon in the european union this study addresses the demand for salmon in the european union a system of demand equations are specified with an almost ideal demand system aids to analyse the demand structure for fresh frozen and smoked salmon using quarterly data for the period 1984 92 the time series porperties of the data series are explored and the data series are found to be non stationary but cointegrated to avoid the invalild inference and spurious regression problems that may be created by non stationary data series the fully modified least squares fmls estimatior is utilized

gradual versus rapid liberalization in socialist economies the problem of macroeconomic control from 1978 to 1992 china experienced gradual liberalization with a fairly stable price level the more rapid liberalization attempted after 1989 in eastern europe and the former ussr generated much higher inflation yet both regions fiscal policies were similar as in formerly socialist europe in china the share of government revenue in gross national product gnp has fallen sharply nevertheless china avoided resorting to the inflation tax the resulting enormous growth in saving and in stock of financial assets allowed the liberalized sector to finance itself the chinese government and the deficits of the slowly reforming state enterprises important aspects of china s dualistic banking and pricing policies could well be adopted in other transitional socialist economies but such incredibly high real financial growth is not feasible in russia or in formerly socialist europe thus to prevent inflation fiscal reforms should come much earlier in their transitions than they did in china s

likelihood estimation of consumer preferences in choice based conjoint analysis abstract in marketing research the measurement of individual preferences and assessment of utility functions have long traditions conjoint analysis and particularly choice based conjoint analysis cbc is frequently employed for such measurement the world today appears increasingly customer or user oriented wherefore research intensity in conjoint analysis is rapidly increasing in various fields or ms being no exception although several optimization based approaches have been suggested since the introduction of the hierarchical bayes hb method for estimating cbc utility functions recent comparisons indicate that challenging hb is hard based on likelihood maximization we propose a method called lm and compare its performance with hb using twelve field data sets performance comparisons are based on holdout validation i e predictive performance average performance of lm indicates an improvement over hb and the difference is statistically significant we also use simulation based data sets to compare the performance for parameter recovery in terms of both predictive performance and rmse a smaller number of questions in cbc appears to favor lm over hb

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

a political economy approach to the neoclassical gradualist model of transition a political economy approach to the neoclassical gradualist model of transition requires the exposition of what i define the primary elements of the model which are economic analysis definition of a good society speed political structure ideological structure and whether the initial conditions were incorporated in the model after the identification of the primary elements of the neoclassical gradualist model the next step is to identify secondary elements the desired changes with respect to price liberalization stabilization privatization institutional structure monetary policy and the financial system fiscal policy international trade and foreign aid and social policy the analytical framework developed makes possible to understand the neoclassical gradualist model from a new and more enlightening perspective we are better able to comprehend the complexities involved and the disagreements about the reform process the adoption of a gradual process of transition did not only involve specifying the required policies of a successful transition but also entailed a process a sequence by which the reforms should be introduced as such a process of transition consistent with the policies recommended by the neoclassical gradualists economists is developed the conclusion reveals the inconsistencies in the model copyright blackwell publishers ltd 2005

implications of consumer heterogeneity in time series estimates of us money demand the money demand function has traditionally been estimated with income and interest rates typically employing quite lengthy time series controversy however surrounds the importance of heterogeneous agents in monetary economics and throughout macroeconomics more generally in particular if proportions of agents with different traits and hence different money demands are changing over time ignoring those changes may bias estimated income and interest elasticities this concern as well as that of appropriate functional form is explored here controlling for consumer heterogeneity has surprising effects on the estimated elasticities of traditional variables

issues in the use of ratings based versus choice based conjoint analysis in operations management research conjoint analysis has played an important role in helping make a number of operations management decisions including product and service design supplier selection and service operations capacity many recent advances in this area have raised questions about the most appropriate form of conjoint analysis for this research we review recent developments in the literature and provide new evidence on how the choice between ratings and choice based conjoint models might affect the estimates of customer demand used in operations management models the biggest systematic difference between ratings based rb and choice based cb parameters is consistent with the compatibility effect i e some enriched attributes like brand name tend to be more important in rb models and some comparable attributes like price are likely to be more important in cb models still there were reasonably small differences between choice and ratings based parameters parameter similarity was also seen in the lack of differences both in the choice share validations when the keep on shopping alternative was not considered and in the profiles that were predicted to maximize choice shares this suggests that the two approaches will produce similar estimates of the relative importance of various attributes in spite of demonstrated success with each method several reasons lead us to recommend the use of hierarchical bayesian choice based conjoint models first the slightly higher individual hit rate validations give us greater confidence in predictive accuracy overall as well as an increased ability to target individual customers additionally the greater ease of modeling both changes in market size and competitive reactions are attractive benefits of choice based models

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

the transition according to cambridge mass this paper reviews the nber s the transition in eastern europe this book s 18 essays examine privatization stabilization fiscal policies the nascent private sector bankruptcy foreign trade and investment etc individual country performance occupies six studies these essays which are of high quality provide a cross section of the literature on transition however the book s stronger conclusions are not supported by strong evidence two conclusions unemphasized by contributors emerge expectations which reflect the theories used to design standard reforms are often unfulfilled during reforms a plausible explanation for the misplaced expectations is the ahistorical approach of those theories

the smoot hawley tariff a quantitative assessment in the two years after the imposition of the smoot hawley tariff in june 1930 the volume of u s imports fell over 40 to what extent can this collapse of trade be attributed to the tariff itself versus other factors such as declining income or foreign retaliation partial and general equilibrium assessments indicate that the smoot hawley tariff itself reduced imports by 4 8 ceteris paribus although the combination of specific duties and deflation further raised the effective tariff and reduced imports an additional 8 10 a counterfactual simulation suggests that nearly a quarter of the observed 40 decline in imports can be attributed to the rise in the effective tariff i e smoot hawley plus deflation

new institutional economics in the post socialist transformation debate the paper suggests that there is a tension between the basic tenant of new institutional economics nie and the manner in which it has been applied in the debate on post socialist transformation this tension is explored in the context of four main perspectives on nie i property rights ii transaction costs economics iii new economic history and iv evolutionary economics there are two main arguments the first is that the transformation phase should be seen as open ended rather than a closed process where the pure market is the inevitable end result the second is that although the nie literature touches on most of the issues which are relevant to post socialist transformation the insights that it offers are still too general for policy guidance

optimal residual based tests for fractional cointegration and exchange rate dynamics a lagrange multiplier test of the null hypothesis of cointegration in fractionally cointegrated models is proposed the test statistic uses fully modified residuals to cancel the endogeneity and serial correlation biases and standard asymptotic properties apply under the null and under local alternatives with iid gaussian errors the asymptotic gaussian power envelope of all unbiased tests is achieved by the one sided two sided test the finite sample properties are illustrated by a monte carlo study in an application to the dynamics among exchange rates for seven major currencies against the u s dollar mixed evidence of the existence of a cointegrating relation is found

stock watson dynamic ols dols and error correction modelling approaches to estimating long and short run elasticities in a demand function new evidence and methodological implications from an application to the demand for coal in mainland china in this paper robust elasticity estimates of coal demand for china are derived using annual data 1953 92 in so doing we illustrate the use of a powerful yet practically convenient and recently developed modelling procedure devised by stock and watson known as dynamic ols dols who provide evidence based on monte carlo simulations of this estimator being superior in small samples compared to a number of alternative estimators as well as being able not only to accommodate higher orders of integration but also to account for possible simultaneity within regressors of a potential demand system furthermore cointegration and error correction methods are employed to derive short run price and income elasticities estimated results are quite robust not only in terms of statistical prowess but also in terms of economic intuition and indicate that over the long run both price and income elasticities are close to unity while short run price and income elasticities are less in absolute value than their long run counterparts there seems to be some divergence in short run parameters from a subsample analysis overall results seem to imply that for china coal consumption should remain relatively constant as future modernization strategies for economic development are pursued in addition the study has clear methodological implications for estimating the long and short run elasticities in a demand function in general and in a wide variety of fields in future applied research

regression vs non regression models of normal returns implications for event studies event studies depend critically on correct specification of the counterfactual normal returns to corporate assets model selection tests for a sample of ft se 100 uk companies reject two widely used non regression models against the principal regression based alternative the market model

the unbiased forward rate hypothesis re examined abstract this paper examines the unbiased forward rate hypothesis using an error correction model ecm previous tests have utilized mainly two specifications differences and levels the advantage of the ecm is that the parameters of the level specification appear in the error correction term and hence the ecm provides a direct link to the levels specification in this paper we fully exploit this link and demonstrate that both specifications yield essentially the same results when the ecm is explicitly derived from a levels specification and the levels parameters are estimated simultaneously with other parameters of the ecm

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

structural changes and the us money demand function previous literature on the stability of the us money demand function suggests mixed results in this article we study the stability of the money demand function from the standpoint of structural changes in the function we first investigate if a stable money demand function can be found for the us for the period from the first quarter of 1959 to the fourth quarter of 2000 the results show that a stable long run money demand function does not exist for the sample period under consideration we then estimate unknown structural break points in the variables of the money demand function using bai and perron s 1998 method and test if there is a stable relationship in each sub sample period of the break points the results show that a stable relationship exists for each sub sample period the estimated income elasticity and interest rate semi elasticity are relatively smaller than ball s 2001 estimates but consistent with his argument

an asymmetric error correction model of uk consumer spending this paper augments the granger and lee journal of applied econometrics 4 1989 non symmetric error equilibrium correction model to assess the possibility that in the aggregate consumers respond differently to different types of disequilibrium error this idea is illustrated using an engle granger implementation of the davidson hendry srba and yeo dhsy economic journal 80 1978 model the disequilibrium error is endogenously determined by the long run empirical model and a binary dummy variable captures two alternative states above and below equilibrium spending interaction of the dummy variable with key variables in a short run dynamic model of uk consumer spending augments the dynamics of the dhsy model income elasticities inflation elasticities and speeds of adjustment are all seen to change significantly depending on whether the disequilibrium error is positive or negative and is suggestive of asymmetric behaviour on the part of consumers moreover the asymmetrically augmented mode

modeling the demand for narrow money in the united kingdom and the united states abstract despite the importance of well specified empirical money demand functions for inference forecasting and policy problems in modeling have arisen concerning the economic theories of money demand the data institutional frameworks financial innovation and econometric implementation by developing constant data coherent m 1 demand equations for the u k and the u s we investigate these issues and explain such puzzles as missing money the great velocity decline and the recent explosion in m 1 the endogeneity of money the lucas critique and the non invertibility of our m 1 models are also discussed

after state socialism the political origins of transitional recessions transitions from state socialism created a startling range of initial economic outcomes from renewed growth to deep economic crises debates about the causes have largely ignored the political dis

establishing property rights establishing secure property rights in transition economies amounts to solving two problems inefficiency structures of control rights over assets and poor contract enforcement politicians and bureaucrats still wield excessive control over assets which results in inefficient underinvestment by entrepreneurs corruption is one way of getting around political control but the drawbacks are considerable particularly the limited enforceability of corruption contracts more workable strategies for establishing property rights in transition economies are giving equity to the bureaucrats and other parties that have control reforming the civil service and removing bureaucratic control rights through privatization russia s experience shows how privatization combined with equity incentives for enterprise insiders transfers control rights from the bureaucrats and stimulates political and economic pressures to protect private property rights

structural adjustment and manufacturing sector competitiveness lessons from post unification east germany abstract the article analyzes how the particular combination of historical circumstances government policies and institutional structures have shaped the quest for competitiveness of the east german manufacturing sector after unification in 1990 the nature of unification precluded the option of achieving short run competitiveness via declining real wages leaving rapid productivity growth as the only possible avenue to pursue the east german experience underlines the importance of crowding in particularly in the context of adverse initial conditions it suggests that large scale investment does not necessarily bring with it a commensurate build up of research and development with positive spill over effects for growth it also cautions against the blind adoption of institutional arrangements from a different political economical context especially regarding capital labor relations

have north south growth linkages changed abstract this paper provides econometric evidence suggesting that the traditional tradebased business cycle linkages between the north and the south have changed many countries in the south particularly in asia appear to have become more resilient to cyclical movements in the north and play a more significant role in sustaining global activity a number of factors may have contributed to these changes improved domestic policies and more open trade and exchange regimes closer financial linkages with the north and a substantial increase in capital flows a marked rise in intraregional trade and greater diversification of the exports of the south

outward fdi and domestic investment in two industrialized countries abstract using cointegration techniques we find that in the us outward fdi has positive long run effects on domestic investment in germany this complementary relationship exists only in the short run in the long run outward fdi substitutes for german domestic investment

the old theory of economic policy and the new institutionalism abstract in economics recent emphasis on institutions suggests new policy dimensions for the traditional theory of economic policy which originated with tinbergen and others at the time of the keynesian revolution the paper presents elements of the traditional view instruments targets and policy models and then considers new aspects of policy especially policy for structural change the discussion emphasizes the implications for institutional design of incomplete knowledge and endogenous politics both public and private actors rely on incomplete policy models and the models themselves can become intermediate targets of policy

productivity differentials the relative price of non tradables and real exchange rates abstract this paper reconciles the apparent contradiction between recent panel unit root tests of real exchange rates and the productivity differential model proposing an alternative view that explains the coexistence of such findings real exchange rates and the relative price of non tradables reflect the gradual adjustment of mean reverting and endogenously competing factors supply and demand shocks as well as traded goods arbitrage granger causality and variance decomposition results indicate substantial simultaneity and feedback effects between real exchange rates the relative price of non tradables and productivity differentials

cointegration and forward and spot exchange rate regressions abstract we investigate the relationship between cointegration models of the current spot exchange rate s t and the current forward rate f t and cointegration models of the future spot rate s t 1 and f t and the implications of this relationship for tests of the forward rate unbiasedness hypothesis fruh we show that simple models of cointegration between s t and f t imply complicated models of cointegration between s t 1 and f t consequently standard methods are often inappropriate for modeling the cointegrated behavior of s t 1 f t and we show that the use of such methods can lead to erroneous inferences regarding the fruh

japan s financial deregulation and linkage of the gensaki and euroyen deposit markets summary this paper examines whether japan s financial deregulation weakened the linkage between the euroyen and gensaki markets it defines and analyses the linkage of the two markets in terms of the persistence and predictability of yield spreads as well as cross market causality by using johansen tests and an error correction model this paper shows first cross market causality before and after deregulation and second one common trend in interest rates substantial gensaki euroyen yield spreads and a slower response of the one month gensaki euroyen yield spread to a shock after deregulation

net foreign assets and international adjustment the united states japan and germany abstract this paper examines external adjustment in the usa japan and germany from the perspective of net foreign asset positions it asks two questions what are in the long run the determinants of net foreign asset equilibrium what are in the short run some of the adjustment mechanisms sustaining that equilibrium an analysis of post war data produces two insights first using a cointegration approach the existence of long run net foreign asset equilibrium can be identified it is a function of demographic variables and public debt second deviations from long run equilibrium give rise to feedback through different components of domestic absorption in the three countries

public capital and total factor productivity this paper examines the impact of the stock of public capital on output levels and productivity growth rates in the united states the analysis is based on the estimation of parameters in a translog profit function prices of intermediate goods are introduced into a quasiproduction function for value added recently developed econometric techniques for dealing with nonstationary time series are used in the estimation the authors find that the services of public capital are an important part of the production process and that about 40 percent of the productivity decline is explained by a fall in the public capital labor ratio copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

measures of shortage and monetary overhang in the polish economy this paper attempts to cast light on the debate about the existence and size of a monetary overhang in household money balances in command economies four measures of shortage or price deformation are constructed for the polish economy and used to test for the existence of shortage money balances in poland 1965 1989 the approach involves estimating relationships for household money balances 1965 1993 a period that spans both central planning and the post 1990 period of liberalised prices the principal finding is that the evolution of household money balances in poland cannot be explained without invoking measures of shortage and an overhang during the planning period the estimates suggest an overhang with a maximum of just over 40 of money balances

productivity bias hypothesis and the purchasing power parity a review article abstract productivity differentials among countries are said to be one of the major sources that contribute to the deviation of the purchasing power parity based exchange rate from the equilibrium rate hence the productivity bias hypothesis prior to last review article on the productivity bias hypothesis in 1976 almost all studies relied upon cross sectional regression analysis since then two groups of empirical studies have emerged while one group has employed time series data the other one has used panel data these two later groups have provided more support to the hypothesis than the earlier cross sectional studies this paper reviews and criticizes each group separately and provides tables that summarize main features of each study

hayek and socialism friedrich a hayek was a life long opponent of socialism three of his contributions are surveyed and placed within historical context his debates in the 1930s with the market socialists his political critique of socialism in the road to serfdom and his evolutionary arguments against rationalist constructivists recent discussions that use the economics of information to analyze the prospects for socialism are also reviewed it is argued that theorists working in the economics of information have not recognized just how far hayek s conceptualization of the appropriate theoretical constructs for economics deviates from those of mainstream economists as such they have misunderstood what may constitute an independent set of arguments against socialism

evaluating threshold effects in consumer sentiment 1 introductionthe consumer sentiment index published by the university of michigan hereafter the um index is one of the two most commonly monitored measures of consumer sentiment in the united states the other one being the consumer confidence index issued by the conference board sentiment indexes which are constructed from answers to survey questions are popular with the media newspaper articles and commentaries abound following their release the analysis often confers a primary role to consumer sentiment in determining economic fluctuations the view among economists however is more equivocal as early as 1965 adams and green found that the information contained in the um index encompasses the information included in standard government statistics on employment and financial conditions many economists think that consumer sentiment is endogenous and is a reflection of current macroeconomic conditions other economists in line with keynes notion of animals spirits argue that psychological factors which are not captured by economic variables can influence consumers decisions thus the willingness to consume may be an important factor affecting consumption few studies have found that sentiment indexes have significant explanatory power once fundamental economic factors are taken into account garner 1991 and throop 1992 however performed event studies and suggested that these indexes could be helpful during major economic or political events as they then tend to diverge from a path consistent with other macroeconomic variables drawing on this literature our study provides a new evaluation of consumer sentiment as a predictor of aggregate consumer spending periods of high economic or political uncertainty are usually associated with increased volatility of consumer sentiment suggesting that large swings in sentiment could influence consumption we provide a formal assessment of this possibility by estimating a consumption function in which only large variations of sentiment affect spending we find that consumer sentiment is a statistically important determinant of consumption in periods of high uncertainty even after controlling for other determinants of consumption this article is organized as follows section 2 describes two views of consumer behavior section 3 reviews the relevant empirical literature section 4 introduces our econometric model data and estimation methods section 5 summarizes the estimation and forecasting results section 6 evaluates the predictive power of the um index within the campbell mankiw campbell and mankiw 1990 framework section 7 concludes 2 theorythis section briefly reviews the theory of consumer behavior and discusses possible links to consumer sentiment the permanent income hypothesis pih states that consumers expenditures depend on their permanent income permanent income is defined as the present value of wealth formula omitted see article image where at is the real value of the individual s nonhuman wealth at the beginning of period t is the discount factor ylt is real disposable labor income and et is the expectation operator conditional on information available to the individual at time t campbell and mankiw 1990 test hall s 1978 random walk hypothesis by separating consumers into two groups a proportion of households rule of thumbers simply set consumption equal to income in each period while a fraction 1 life cyclers behave according to the pih in this framework the only reason any lagged variable could have predictive power for current consumption growth is because that variable has predictive power for current income growth and the consumers do not spend that income until it arrives in that context the usefulness of consumer sentiment should come from the fact that it captures information about expected future income

real world performance of choice based conjoint models conjoint analysis is one of the most important tools to support product development pricing and positioning decisions in management practice for this purpose various models have been developed it is widely accepted that models that take consumer heterogeneity into account outperform aggregate models in terms of hold out tasks the aim of our study is to investigate empirically whether predictions of choice based conjoint models which incorporate heterogeneity can successfully be generalized to a whole market to date no studies exist that examine the real world performance of choice based conjoint models by use of aggregate scanner panel data our analysis is based on four commercial choice based conjoint pricing studies including a total of 43 stock keeping units sku and the corresponding weekly scanning data for approximately two years an aggregate model serves as a benchmark for the performance of two models that take heterogeneity into account hierarchical bayes and latent class our empirical analysis demonstrates that in contrast to the performance using hold out tasks the real world performance of hierarchical bayes and latent class is similar to the performance of the aggregate model our results indicate that heterogeneity cannot be generalized to a whole market and suggest that aggregate models are sufficient to predict market shares author s abstract

the effects of reform on china s bank structure and performance abstract this paper investigates the relationship between market structure and performance in china s banking system from 1985 to 2002 a period when this sector was subject to gradual but notable reform using panel data estimation techniques both the market power and efficient structure hypotheses are tested in addition the model is extended to consider issues such as the impact of bank size ownership and whether the big four banks enjoy a quiet life on average x efficiency declined significantly and most banks were operating below scale efficient levels estimation of the structure performance models lends some support to the relative market power hypothesis in the early period the reforms had little impact on the structure of china s banking sector though the joint stock banks became relatively more x efficient there was no evidence to support the quiet life hypothesis probably because strict interest rate controls prevented the state banks from earning monopoly profits thus the ongoing liberalisation of interest rates should be accompanied by reduced concentration overall to improve competitive structure new policies should be directed at encouraging market entry and increasing the market share of the most efficient banks

measuring market power for some industrial sectors in austria this paper applies an oligopoly model which parameterizes the degree of market power for two industrial sectors glass industry non electrical machinery in austria in contrast all other paper in the new empirical indsutrial organization literature we account for the non stationarity characteristics of the data series a dynamic specification procedure which assumes structural long run equilibrium relationships is therefore applied since a simultaneous system with non linear cross equation restrictions is implied by the economic model a full information maximum likelihood method is used the data reveal a higher degree of market power for the glass industry than for non electrical machinery this hierarchy is in line with the position of these industries for concentration rates and herfindahl indices

estimation of a continuous time dynamic demand system a continuous time dynamic model of consumers demand explicitly taking account of the roles of depreciation interest rates habits and stocks is estimated using recently developed techniques from discrete quarterly uk data on three broad commodity groupings the results suggest that whilst being a significant determinant of demand the actual magnitude of the influence of changes in interest rates may be relatively small in the long run the cross price effects of durable goods are also found to be statistically significant and symmetry of long run compensated price responses is not rejected copyright 1992 john wiley sons ltd

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

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

the linear quadratic adjustment cost model and the demand for labour in this paper we demonstrate a new way of testing the linear quadratic adjustment cost lqac model under rational expectations we illustrate how the parameter restrictions arising from this model can be formally specified and we use these restrictions to extent the technique of campbell and shiller 1987 to a wider class of models based on present value relations potentially the demand for labour is an area in which the lqac model can find applicability in practice and subsequently we analyse sectoral labour demand in danish manufacturing we find however that for our data set the quadratic adjustment cost model under rational expectations can be rejected

is health care really a luxury much of the work which has led to a widely held view that the income elasticity of health care spending exceeds one has been based on international cross section data or on pooled cross sections and time series in this paper we re examine this view in the context of long run equilibrium relationships between non stationary time series possibly including autonomous trends our results cast doubt upon the usefulness of pooling and upon the notion of an elasticity above one

monetary policy transparency and pass through of retail interest rates abstract this paper examines the degree of pass through and adjustment speed of retail interest rates in response to changes in benchmark market rates in new zealand during the period 1994 2004 we consider the effects of policy transparency and financial structure of the monetary transmission mechanism new zealand is the first oecd country to adopt a full fledged inflation targeting regime with specific accountability and transparency provisions policy transparency was further enhanced by a shift from quantity settlement cash to price interest rate operating targets in 1999 using phillips loretan estimates of cointegrating regressions we find complete long term pass through for some but not all retail rates our results also show that the introduction of the official cash rate ocr increased the pass through of floating and deposit rates but not fixed mortgage rates in line with previous studies we find the immediate pass through of market interest rates to bank retail rates to be incomplete although we find no statistical evidence for asymmetric response of retail rates to changes in market rates other than for business lending rates in the pre ocr period differences in the magnitude of mean adjustment lags indicate that banks appear to pass on decreases to fixed mortgage rates faster overall our results confirm that monetary policy rate has more influence on short term interest rates and that increased transparency has lowered instrument volatility and enhanced the efficacy of policy

exchange rate of the us dollar and the j curve the case of oil exporting countries abstract this study examines the effects of changes in the exchange rate of the us dollar on the trade balances of three oil exporting countries namely iran venezuela and saudi arabia an exchange rate pass through model is applied to allow changes in the exchange rate of the dollar to affect prices of traded goods then the impact of changes in prices on the quantities of imports and exports of these economies is estimated the results suggest a partial exchange rate pass through to these countries import and export prices in terms of the us dollar while the three countries raise the price of their primary export namely crude oil in response to a depreciation of the dollar saudi arabia s long run pricing strategy in securing a larger market share stands in contrast to that of the two other opec members the sum of the estimated long run price elasticities of demand for imports and exports is found to exceed unity for iran and venezuela but less than unity for saudi arabia

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

interest rate pass through in the emu new evidence from nonlinear cointegration techniques for fully harmonized data this study puts the monetary transmission process in the eurozone between 2003 and 2011 under closer scrutiny for this purpose we investigate the interest rate pass through from money market to various loan rates for up to twelve countries of the european monetary union applying different cointegration techniques we first test for a long run relationship between loan rates and the euro overnight index average eonia based on these findings we allow for different nonlinear patterns for short run dynamics of loan rates our investigation contributes to the literature in mainly two ways on the one hand we use fully harmonized data stemming from the ecb s mfi interest rate statistics in addition we consider smooth transition models as an extension of conventional threshold models our results point to considerable differences in the size of the pass through with respect to either different loan rates or countries in the majority of cases the pass through is incomplete and the dynamics of loans adjustment are different for reductions and hikes of money market rates

modeling u s households demands for liquid wealth in an era of financial change money demand models overpredicted m2 growth in the united states from 1990 to 1993 the authors examine this overprediction using a model of households demands for liquid wealth the model is a dynamic generalization of the aids model of angus deaton and john muellbauer 1980 the authors find that the own price elasticity of money rose substantially after 1990 they also find important cross price elasticities of money with respect to other liquid financial assets notably with respect to mutual funds incorporating these and other features helps explain nearly 50 percent of the shortfall in m2 growth over the period in question

on the flow of funds accounts and inter sectoral mobility of capital in india this study uses the flow of funds accounts framework and undertakes an in depth analysis of the inter sectoral mobility of capital in india unlike previous studies the fh model is estimated at th

when do changes in consumer preferences make forecasts from choice based conjoint models unreliable forecasting the sales or market share of new products is a major challenge as there is little or no sales history with which to estimate levels and trends choice based conjoint cbc is one of the most common approaches used to forecast new products sales however the accuracy of forecasts based on cbc models may be reduced when consumers preferences for the attributes of products are labile despite this there is a lack of research on the extent to which lability can impair accuracy when the coefficients estimated in cbc models are assumed to be constant over time this paper aims to address this research gap by investigating the prevalence of lability for consumer durable products and its potential impact on the accuracy of forecasts there are reasons to expect that lability may be particularly evident where a product is subject to rapid technological change and has a short product life cycle we carried out a longitudinal survey of the preferences of 161 potential consumers relating to four different types of products we established that for both functional and innovative products i the cbc models vary significantly over time indicating changes in consumer preferences and ii such changes may cause large differences in forecasts of the probabilities that consumers will purchase particular brands of products hence employing models where coefficients do not change over time can potentially lead to inaccurate market share forecasts for high tech short life cycle products that are launched even a short time after the choice based modelling has been conducted

the exchange rate and purchasing power parity extending the theory and tests abstract this paper analyzes the exchange rate in a no arbitrage or real business cycle equilibrium model and provides empirical evidence for this model vis a vis ppp our contribution is to show based on a generalization of the equilibrium model of exchange rates that i the test equation linking the exchange rate to fundamentals should allow for international heterogeneity in time preferences and risk attitudes as well as noise that is the model should not be tested as an exact relation ii empirical work should use levels of variables rather than first differences and iii tests on the existence of long run relations should be complemented by test on the signs of the coefficients our empirical work shows that as a long run relation the generalized model outperforms ppp moreover under the generalized model quarterly deviations from the estimated long term relation have a half life of only four to five quarters

capital market development and mass privatization are logical contradictions lessons from russia and the czech republic the introduction of mass privatization policies in russia and the czech republic depended on the creation of impersonal capital markets to finance the needs of privatized companies and to provide a secondary market for the trading of securities yet mass privatization created the contradictory conditions of generating millions of poorly informed shareholders with no efficient markets for the sale of the shares the absence of financial markets created systematic pressures to move assets by illegal or non transparent means to users who value them more privatization created the incentives to destroy the financial markets critical to its success a comparative case analysis of post privatization market formation in both these countries demonstrates that the functional necessity for these markets does not engender their own creation in the absence of institutional mechanisms of state regulation and trust markets become arenas for political contests and economic manipulation the irony of these policies is that a principal lesson has been that market reforms cannot create viable markets only institutional formation can copyright 2002 oxford university press

forecasting with the almost ideal demand system evidence from some alternative dynamic specifications the almost ideal demand system is used as a representation of long run demands in discrete time and continuous time error correction models to produce forecasts of budget shares beyond the sample period the estimated models are subjected to a battery of tests and an analysis of the forecasts indicates that continuous time adjustment mechanisms based around fully modified estimates of the long run preference parameters provide a remarkably accurate method of forecasting budget shares

savings in chile what went right abstract in the last 10 years chile s overall economic performance has been remarkable in many respects including a significant and sustained increase in domestic savings to figures around 26 of gdp this paper empirically assesses the reasons behind such notable behavior of savings by applying co integration models to check for long run relationships and error correction models to verify short run adjustments the emphasis is on annual private savings data span from 1960 to 1995 which as it turns out depend more than proportionally on an adjusted measure of gdp and less than proportionally on foreign savings and public savings private savings are also positively affected by economic growth and a dummy reflecting the effect of pension funds most of the adjustment between short run and long run is completed in less than 3 years where the variable representing income bears the bulk of such adjustment in comparing two episodes of good economic performance in the last 20 years 1976 1981 and 1986 till present it is found that three basic differences arise concerning private savings sustainability of growth different access to foreign savings during the recovery from recession and different scenarios with respect to the development of long run capital markets in particular a relevant role played the move to a fully funded social security system in the early 1980s

testing restrictions in a flexible dynamic demand system an application to consumers expenditure in canada traditionally restrictions on systems of demand equations have been tested using static models whilst being estimated with time series data this paper develops a vector time series model of expenditure shares in the context of a singular dynamic demand system the model allows for non symmetric and non homogeneous short run behaviour the homogeneity and symmetry restrictions are only examined in the long run structure results based on canadian time series data are presented and reject the current practise of static modelling while restrictions suggested by economic theory are not rejected when imposed on the long run structure

ricardian equivalence and the public and private saving nexus in india abstractthis study tests the ricardian equivalence theorem ret and examines the responsiveness of private saving to public saving in india most estimators do not provide support for the empirical validity of ret and long run cointegration between public and private saving the increases in household saving hhs seem to have been engendered by the provision of saving incentives institution of saving schemes self driven motivation to save and the precautionary accumulations induced by uncovered uncertainties in incomes rather than by ricardian behaviour of households the self imposed aversion to debt and debt bequest borrowing and liquidity constraints and the intertemporal smoothing of consumption have been the added catalysts that contributed to the increases in hhs the households with binding borrowing constraints inadequate or no insurance and uncovered uncertainties in incomes seem to have been saving more to pay for higher inflation tax the fiscal consolidation and generation of public s

willingness to pay estimation with choice based conjoint analysis addressing extreme response behavior with individually adapted designs the increasing consideration of behavioral aspects in operations management models has prompted greater use of choice based conjoint cbc studies in operations research such studies can elicit consumers willingness to pay wtp a core input for many optimization models however optimization models can yield valid results only if consumers wtp is estimated accurately a simulation study and two field studies show that extreme response behavior in cbc studies such that consumers always or never choose the no purchase option harms the validity of wtp estimates reporting the share of consumers who always and never select the no purchase option allows for detecting extreme response behavior this study suggests an individually adapted design that avoids extreme response behavior and thus significantly improves wtp estimation accuracy

services sector and economic growth in india this study examines the long run equilibrium and short run dynamic relationship between services sector and gross domestic product gdp and between services and nonservices sectors in india the model is estimated using the optimal single equation and the maximum likelihood system estimators all the estimators consistently suggest the cointegrating relationship between services sector and gdp as well as between services and nonservices sectors the estimates of long run elasticity parameters are statistically significant and dimensionally consistent across the estimators the conventional cumulative sum cusum and the new cusum and moving sum mosum tests suggest the stability of the equilibrium residuals and reinforce the cointegrating relationship between the model series the error correction model provides some support for unidirectional granger causality from services sector to gdp the impulse response and variance decomposition analyses instead suggest the bidirectional causality between servic

import demand in heterogeneous panel setting to study the elasticities of import demand function a heterogeneous panel is built with data of 40 countries and using panel unit root tests im et al 1997 and panel cointegration tests pedroni 2004 the model is tested with two previously used activity variables gdp and gdp minus export for a performance comparison to estimate elasticities use is made of two modified panel versions of fmols and dols developed by pedroni 1996 2000 2001 the tests prove that gdp outperforms gdp minus exports as an activity variable in the cointegration context fmols and dols give close results when individual estimates are done when between dimension estimators are used conflicting results are obtained then the sample is split into developed and developing countries and it is shown that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous literature results

net foreign assets productivity and real exchange rates in constrained economies empirical evidence suggests that real exchange rates rer behave differently in developed and developing countries we develop an overlapping generations two sector exogenous growth model in which rer determination may depend on the country s capacity to borrow from international capital markets the country faces a constraint on capital inflows with high domestic savings the rer only depends on the productivity spread between sectors balassa samuelson effect if the constraint is too tight and or domestic savings too low the rer depends on both net foreign assets transfer effect and productivity we then analyze the empirical implications of the model and find that in accordance with the theory the rer is mainly driven by productivity and net foreign assets in constrained countries and by productivity in unconstrained countries

money demand in euroland abstract this paper explores the determinants of alternative monetary aggregates in euroland a sample consisting of quarterly data covering the 1980 1 1998 4 period is considered we are interested whether a conventionally defined money demand equation is stable in some aggregates as opposed to others both long run and short run relationships are considered in this paper overall the results indicate that broad narrow money demand in euroland is a stable unstable function of euroland wide income and interest rates

real exchange rates and structural breaks cointegration tests often fail to detect the existence of long term relationships such as purchasing power parity for two reasons i these tests have low power and ii structural shocks can alter the long run real exchange rate in this paper the long run movements of five exchange rates relative to the us dollar and five european exchange rates relative to the deutsche mark are investigated in particular corrected cointegration tests are applied which take into account the possibility of a structural break at an unknown date empirical evidence is found that structural changes can be responsible for most exchange rate deviations from their equilibrium defined by purchasing power parity or a generic monetary model

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

modelling nie exports aggregation quantitative restrictions and choice of econometric methodology the current debate regarding the robustness of estimates of export demand and supply elasticities for nies is examined by modelling manufactured exports from korea the results suggest that normalisation of the export demand function for price rather than quantity is an important issue in estimating export demand functions of small countries and that estimates of export demand elasticities at high levels of aggregation are subject to potentially powerful biases when the aggregate consists of categories which are subject to quantitative restrictions if proper modelling procedures are followed it is likely that the small country assumption will find far more empirical support than it has hitherto

multiple regime spatial price transmission with an application to maize markets in southern africa conventional threshold models of price transmission allow for different speeds of adjustment to equilibria depending on the magnitude of price differentials between markets however these models typically assume only one underlying long run equilibrium price relationship in this article we develop a framework for allowing multiple equilibria and multiple speeds of adjustment with regime separation depending on the magnitude of trade flows between regions rather than the magnitude of price differentials applying this framework to maize price transmission between south africa and zambia shows no transmission during periods of high imports when the government was heavily involved in maize importation but stronger transmission during periods of low imports when the government was not importing copyright 2012 oxford university press