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

measuring returns on investments in collectibles this paper considers the question of how to measure and interpret the financial return to investing in collectibles we review various methodologies for creating priced indexes and then discuss studies that explicitly calculate a rate of return to some set of collectibles while most collectibles appear to yield positive real returns the majority embody more risk and yield lower financial returns than stocks other characteristics of collectibles prices such as covariance with other asset prices are also examined

variance of agricultural prices industrial prices and money the relative uncertainty of agricultural prices and industrial prices with respect to the uncertainty of growth in the money supply are investigated utilizing multivariate arch and garch analysis the conditional variances of agricultural prices were shown to dwarf the variances of industrial prices and the money supply the relatively greater sensitivity of the conditional variance of agricultural prices to changes in the variance of the money supply than industrial prices found in this analysis provides a further perspective on the uncertainty confronting farmers including the impacts of the monetary policy shock that precipitated the farm financial crisis in the early 1980s

on the estimation of demand systems through consumption efficiency we consider a bayesian implementation of a new approach to estimating demand systems this approach suggested by varian 1990 is based on a generalization of afriat s 1967 e ciency index the model we propose leads to a very tractable posterior and predictive analysis yet allows for interesting economic interpretations we conduct a sensitivity analysis with respect to the prior in an application to annual aggregate u s consumption data and conclude that the sample is quite informative average e ciency and expected budget shares are examined in some detail

monetary shocks and relative farm prices a re examination the effect of monetary policy on the farm sector remains controversial studies of the effects of monetary disturbances on relative farm prices report conflicting results some find that positive monetary shocks increase relative farm prices in the short run and others detect no such effect we offer a resolution of these conflicting findings by reestimating existing models on a common data set when sample periods corresponding to the original studies are used the conflicting results are confirmed in contrast when samples are updated through 1993 all models supply the same result monetary shocks do not affect relative farm prices

monetary impacts on prices in the short and long run some evidence from new zealand this paper presents support for long run monetary neutrality based on evidence that individual time series for money manufacturing prices and agricultural prices are nonstationary but cointegrated with a stationary proportional long run relationship among their levels dynamic simulations from a vector error correction model with this restriction imposed show that monetary shocks shift relative prices in favor of agriculture in the short run and permanently raise nominal prices manufacturing price shocks have similar long run effects but initially place agriculture in a cost price squeeze while agricultural price shocks are transitory and have little impact on the other series

the concept of quality and the efficiency of markets for consumer products can consumers trust prices to be good quality indicators previous studies based on quality data from consumer reports have indicated that the relation of price to overall quality is quite weak this paper demonstrates that these studies are methodologically invalid by showing that the concept of overall quality has many dimensions to what extent do inefficient variants occur in the market previous studies have suggested that there is a considerable degree of inefficiency in the market alternative calculations imply that inefficient variants are in fact frequent but that the loss to consumers is much lower than previously suggested

forecasting wheat exports do exchange rates matter a vector autoregression is fit to recent u s data on wheat prices wheat export sales wheat export shipments and exchange rates forecast error decompositions and out of sample forecasts indicate that exchange rates have little influence on wheat sales and shipments

in search of the exchange risk premium a six currency test assuming mean variance optimization abstract a number of authors examining deviations of actual rates of currency depreciation from forward discounts have claimed to find evidence of risk premiums if these deviations are indeed partly due to risk premiums rather than being entirely due to expectational errors then they should be systematically related to those variables on which risk premiums are thought to depend finance theory tells us that if investors optimize with respect to mean and variance the risk premium depends in a specific way on 1 the supplies of assets denominated in the various currencies 2 the variance covariance matrix of the rates of return and 3 the coefficient of risk aversion the null hypothesis of this paper is that the coefficient of risk aversion is zero countries assets are perfect substitutes and risk premiums are nonexistent the alternative hypothesis is that rates of return are systematically related to asset supplies by a macroeconomic portfolio balance function the maximum likelihood technique used dominates previous attempts to find such a relationship in that the parameters of the portfolio balance function are constrained to depend on the variance covariance matrix as the finance theory says they should on the other hand the technique also dominates previous applications of the finance theory in that the expected returns are allowed to vary over time as the macroeconomic portfolio balance theory says they should the paper s finding is a statistical inability to reject the null hypothesis for a portfolio of six currencies although this could be due to low power in the test

a portfolio balance rational expectations model of the dollar mark exchange rate abstract a model is developed in which current account imbalances can be financed through transfers of bonds denominated in either currency the reduced form links the current spot rate to the expected future spot rate via a risk premium which depends on the global currency mix of outside assets that governments impose on private portfolios through budget deficits and interventions and on the global distribution of private wealth among regions with different portfolio preferences an iterative procedure generates rational expectations forecasts of the dollar mark rate which perform somewhat better than forward rates in predicting monthly changes in the spot rate

art investment an empirical inquiry investment in art and especially in paintings by the masters is often considered to be highly profitable particularly in the united states but also in the richer european nations there is an even larger number of investors who believe that buying works of art is not only fun but also a good investment from a purely financial point of view american banks have recently strengthened this trend toward art as an investment by employing art investment counselors thus suggesting that it is a financially rewarding activity to engage in and also suggesting that superior knowledge helps to improve financial success in this market buying and selling art has in fact become an increasingly popular activity since the end of world war ii the auction houses report record turnovers and record prices are paid in increasingly rapid sequence in april 1987 van gogh s sunflowers was sold at christie s london for 39 9 million only to be surpassed in november 1987 by van gogh s irises sold by sotheby s new york for 53 9 million including the auction house s 10 percent commission this last painting had been bought by the seller s mother in 1947 for 84 000 less than 0 5 million in today s money which gives a real rate of return of about 12 percent per year these enormous prices that are paid today for some masterpieces create a widespread belief that the rate of return on such investments is in general and on average very high books devoted to the subject 40 385 27 24 12 215 et seq seem to confirm that the rate of return from investment in paintings at least during the 1950s and 1960s was far greater than the rate obtainable from comparable risky assets in financial markets that the financial profitability in the 1970s and 1980s is believed to be if anything even larger than before is confirmed by many articles in financial and investment newspapers and journals up to now only very few scientific studies of the subject exist but they also have serious limitations the most recent one by baumol 5 covers a period of over 300 years but ends in 1960 two other studies by anderson 1 and stein 42 extend up to the end of the 1960s but do not go any further all three studies are practically limited to transactions by anglo saxon auction

measuring market efficiency and welfare loss this study presents a general methodology capable of addressing a number of fundamental questions in consumer policy are consumers paying more than the minimum price for a given bundle of attributes if so what brands cost more than the consumer needs to pay what would be the degree of improvement in the consumer s well being if some intervention sets the price of such inefficient brands at the efficient level we apply the methodology to data on atuomobiles and several other goods and analyze the determinants of efficiency

price determination for a collectible good the case of rare united states coins researchers investigating markets for collectible goods such as paintings 1 2 6 12 antique furniture 7 stradivarius violins 14 wine 8 10 and postage stamps 15 often report rates of return to holding collectibles that are both low 2 6 7 8 12 and volatile 6 7 8 12 baumol 2 argues that the market for paintings of noted deceased artists has no long run equilibrium price because the market is characterized by infrequent trades of unique assets which are available in fixed supply his empirical analysis supports the idea that paintings experience unpredictable price changes and highly dispersed rates of return with a mean near zero in contrast anderson 1 reports estimated equations explaining approximately 60 percent of the variation in log prices of paintings based on the size of painting date of sale and a constructed measure of repute of the artist other researchers have examined markets with more frequent transactions and greater substitutability among the goods traded schnitzel 15 finds that year to year changes in prices of postage stamps are predictable based on age of the stamp and quantity printed ross and zondervan 14 report that variations in quality affect prices but not rates of return of stradivarius violins a result which is consistent with user benefits being invariant with respect to quality among markets for collectibles the market for rare u s coins is active and well organized and faces the potential for increased federal regulation annual sales are estimated at 5 billion 16 two wall street brokerages recently have formed multimillion dollar limited partnerships to invest in rare coins and some coins now are traded on electronic exchanges 5 these innovations have come amid calls for increased regulation to guard against fraudulent grading of coins 5 16 a major determinant of the price of a collectible coin is its grade a measure of condition reflecting qualities such as sharpness of features regulators accuse coin dealers of defrauding collectors of millions of dollars annually by assigning higher than warranted grades to the coins dealers sell while downgrading coins they buy for example the federal trade commission ftc

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

output effects of government purchases the theoretical analysis focuses on the distinction between temporary and permanent movements in government purchases under plausible conditions the temporary case involves an output response that is positive less than one to one with the change in government purchases and larger than that generated by an equal sized but permanent shift in purchase the equilibrium real rate of return rise in the temporary case but changes little in the permanent one defense purchases are divided empirically into permanent and temporary components by considering the role of temporary wars no temporary shifts in nondefense purchases were isolated empirical results verify an expansionary output effect for temporary purchases that exceeds that of permanent purchases the results for some other expectational hypotheses are found to be generally supportive of the theory

capital gains and the rate of return on a stradivarius capital gains and the rate of return on a stradivarius i introduction no name in the annals of violin making has evoked more interest and sense of mystery than that of antonio stradivari during his long lifetime 1644 1737 stradivari probably made about 1 100 instruments with about 700 violins being accounted for currently stradivariuses have been sold in 1986 at auction for over 300 000 fakes are everywhere in spite of the wealth of price data on stradivariuses no systematic economic analysis of this data has been made the central question for this paper is what is the rate of return on a stradivarius rate of return means the annual percentage increase in the price of a stradivarius as in the case of collectables after converting all prices into dollars with 1967 purchasing power the following equation is applied p sub t p sub 0 e sup rt where p sub t is the most recent price and p sub 0 is the preceding transaction price r is the rate of return and t is the number of years elapsing between transaction dates of p sub t and p sub 0 in section ii the rate of return on individual violins for four different periods is determined stradivari developed his skills over time so that each violin is not an identical product regression analysis is used to show how these differences in quality are reflected in differences in price but not in differences in rates of return section iii in section iv the rate of return on a stradivarius from 1803 to 1986 is determined finally in section v other factors are considered that may influence the rate of return on a stradivarius ii the rate of return on individual violins here data on sale prices of individual violins are examined where there is more than one transaction over time in addition each of the sales is assigned to one of four periods periods generally accepted by musicologists such as henley 1961 15 16 as encapsulating stages in stradivari s development data are shown in tables i to iv the amati period 1665 90 stradivari was apprenticed at the age of fourteen in the workshop of the famous nicolo amati where he received on the job training all creations during this period are worked on the pattern of amati table i shows three violins having at least two sales to understand the table consider the first row labeled soames the violin was made by stradivari in 1684 transactions took place in 1907 and 1973 for 8 571 and 15 778 respectively all prices are in 1967 dollars the equation discussed above yields 15 778 8 571e sup r 66 based on this r the rate of return is 0 92 percent in other words the price of the soames violin increased annually at a rate of 0 92 percent typically there is a brokerage fee of 10 percent for individuals 6 percent for dealers to sell a violin at sotheby s or christie s auction house this of course reduces the rate of return on a violin for example to determine the rate of return on the soames after brokerage costs 10 percent was deducted from the 1973 price changing it from 15 778 to 14 201 after eliminating brokerage costs the price increases by 0 77 percent annually the nachez and mercury violins were similarly analyzed the mercury had three different sales so that there are two rates of return the long period 1691 1700 during this period stradivari made numerous changes in his art the scroll is worked in more detail and the varnish is golden yellow stradivari modified the pattern by making the violin a little longer and slightly more narrow table ii shows data on four violins except for the 1933 36 period the falmouth had similar rates of return even though the interval between sales varied significantly seventy four six and forty six years for the first second and fourth transactions respectively

a varying parameter emprical model of balance of payments determination under fixed exchange rates results for the uk and west germany the post war period and particularly the 1960s witnessed a marked increase in the degree of international capital mobility due to various factors empirical studies of international financial flows during the 1960s generally balance model of the external account is developed which structural instability a portfolio balance model of the external account is developed which allows a varying level of capital mobility and which nests the pure monetary model perfect capital mobility the upshot is a varying parameter empirical specification this is estimated for the uk and west germany using kalman filtering techniques the model performs well and indicates an upward trend in capital mobility over the period particularly after 1968

budget deficit external official borrowing and sterilized invertion policy in foreign exchange markets abstract i study the effect of a temporary budget deficit which is financed in the international capital market on the exchange rate first i show that the exchange rate depreciates both in the short and in the long run if the government finances the deficit by selling debt denominated in foreign currencies to nonresidents secondaly i show that the government can prevent an immediate depreciation of the exchange rate adopting a policy of sterilized intervation however the achievement of this short run exchange rate target implies a long run depreciation of the real exchange rate

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

stamp returns and economic factors in the last two decades a number of prominent financial economists have considered the extent to which assets provide hedges against inflation and or other sources of systematic risk motivated by the high inflation rates of the 1970s fama and schwert 5 conducted the seminal analysis on asset returns and inflation investigating the extent to which the returns to various assets including common stock government bonds treasury bills real estate and human capital were hedges against anticipated and unanticipated inflation fama and schwert found that bonds bills and real estate provided effective hedges against anticipated inflation for the period 1953 1971 but only real estate provided a hedge against unanticipated inflation in fact most of the assets had a negative sensitivity to unanticipated inflation with common stock showing a negative relationship to both sources of inflation

ex post the investment performance of collectible stamps this paper uses stamp catalogue prices to investigate the returns on british collectible postage stamps over the period 1900 2008 we find an annualized return on stamps of 7 0 in nominal terms or 2 9 in real terms these returns are higher than those on bonds but below those on equities the volatility of stamp prices approaches that of equities stamp returns are impacted by movements in the equity market but the systematic risk of stamps remains low stamps partially hedge against unanticipated inflation estimates of average after cost returns for individual investors show that stamps may rival equities in terms of realized performance

negative net foreign asset positions and stability in a world portfolio balance model abstract negative net foreign asset positions have been associated with a troublesome stability problem in flexible exchange rate regimes in this paper a symmetrically specified two country portfolio balance model is employed to provide some perspective on this problem it is concluded that negative net foreign asset positions do not constitute an independent source of instability instability can arise only under nonrational expectations or because of destabilizing speculation

a monetary analysis of food price determination erratic food price movements during the 1970s have received much attention in recent literature salathe and boehm found that movements in retail food prices since 1970 have been substantially more volatile than in earlier periods and that the food component of the consumer price index cpi has often displayed an annual rate of change different from that of the total cpi such changes in agricultural prices reflect low price elasticities for food products and the difficulty of predicting weather patterns and their effects on farm output research interest stems from relatively larger recent price changes caused by persistent general inflation and unexpected supply disruptions several recent studies of retail food prices are based on cost push theories these models posit that as input costs faced by food manufacturers rise the increases are passed through to consumers in the form of higher product prices to model cost push behavior changes in components of the marketing bill such as processing packaging and transportation costs are measured and related to subsequent changes in retail product prices examples of such empirical studies are those by lamm heien and lamm and westcott however these models represent only one perspective of the pricing process this paper suggests the use of a family of alternative models in particular by making a clear distinction between changes in nominal and real values a different set of variables is selected to measure each component of overall price change it is argued that not all models can explain behavior of both real and nominal price changes

trade flows relative prices and effective exchange rates a var on ethiopian data the dynamic response of trade flows to price and effective exchange rate changes is examined via var using quarerly data from ethiopia for the period 1973 i 1985 iv the results show one way granger causality running from prices and exchange rates to imports and exports without significant feedback imports and exports exhibit similar response patterns to unexpected changes in relative prices and exchange rates the responses of imports and exports are larger and the adjustment takes longer when relative prices rather than exchange rates caused a change in international prices in the long run changes in prices account for a larger percentage of the forecast error variances in imports and exports than exchange rate changes it is shown that devaluation may have an initial adverse effect on the trade balance

the arbitrage pricing theory approach to strategic portfolio planning the well known capital asset pricing model asserts that only a single number an asset s beta against the market index is required to measure risk arbitrage pricing theory asserts that an asset s riskiness hence its average long term return is directly related to its sensitivities to unanticipated changes in four economic variables 1 inflation 2 industrial production 3 risk premiums and 4 the slope of the term structure of interest rates assets even if they have the same capm beta will have different patterns of sensitivities to these systematic factors the central focus of portfolio strategy is the choice of an appropriate pattern of sensitivities this choice will depend upon the economic characteristics of the beneficiary of the portfolio s income in particular upon whether it is more or less concerned with the economic factor risks than the broad average of investors an organization for example may expect to spend less on food than the average investor to the extent that food p

the insulation capacity of a flexible exchange rate system in the context of external inflation recent experience with more flexible exchange rate regimes has led to scepticism about their capacity to insulate an economy from foreign inflation the paper is concerned with the consequences of flexible rates when insulation is incomplete the first model examined involves static expectations which produces zero short run but complete long run insulation the second model shows that even with perfect foresight insulation will be incomplete in the short run and foreign inflation may even lead to a short run depreciation of the exchange rate without short run insulation an attempt to achieve long run insulation requires domestic deflation and excess supply

causality of u s agricultural prices and the money supply further empirical evidence empirical evidence presented in this study indicates that the results of causality tests of u s agricultural prices and the money supply are sensitive to the lag selection relying on the minimum final prediction error causality testing technique a unidirectional causal flow is established from the monetary base to retail level agricultural prices no such flow is found to exist from m2 to retail agricultural prices when farm level agricultural prices are investigated no causal flow exists from any of the measures of the money supply to farm prices

a synthesis of keynesian monetary and portfolio approaches to flexible exchange rates the purpose of this paper is to extend our earlier systhesis of monetary and keynesian approaches to balance of payments theory under fixed exchange rates to the analysis of flexible exchange rates

the dynamic responses of crop and livestock prices to money supply shocks a bayesian analysis using long run identifying restrictions the impact of monetary policy on agriculture has been much debated this study examines the dynamic responses of u s agricultural prices to money supply shocks using three innovations first the variables responses are identified by long run money neutrality restrictions instead of the more common contemporaneous ordering second a bayesian approach to model uncertainty is used to add robustness to the estimation process third agricultural prices are disaggregated into crop and livestock components the empirical results find that both agricultural sectors benefit in the short run from positive money supply shocks with agricultural prices increasing relative to the general price level

implications of the macroeconomic outlook for agriculture this paper analyzes the implications for agriculture of the macroeconomic scenarios put forth by bosworth and lawrence a substantial body of work in recent years has developed both the theoretical framework and empirical evidence on the channels of influence between the macroeconomy and agriculture the aaea sponsored preconference workshop this year entitled value of large scale aggregate models for economic policy analysis manifests the profession s interest in quantifying the effects that macroeconomic factors have upon the economic performance and financial health of agriculture this paper draws upon the findings of previous work in general terms but more specifically we present the agricultural implications of two alternative macroeconomic environments implied by an existing macroeconomic model which emphasizes agriculture s interface with the macroeconomy the second section of this paper reviews the major findings of the literature on transmission mechanisms linking agriculture with the general economy the third section provides key details of how agriculture fares under bosworth and lawrence s outlook for the general economy through 1990 including the implications for farm prices cash receipts wealth and financial stress the fourth section discusses the consequences of one potential deviation from bosworth and lawrence s out

interrelationships between monetary instruments and agricultural commodity trade during the last decade agricultural economists have devoted increasing attention to the macroeconomic aspects of agricultural problems indeed a recent presidential address to the american agricultural economics association tweeten centered on the macroeconomics of agriculture given the currency of the monetary approach to macroeconomics it is not surprising therefore that there is also a growing interest in the effects of monetary instruments and monetary phenomena on agricultural commodity trade in this paper i shall discuss what i feel are some of the most pertinent issues that researchers must address in this area before we proceed too far with our discussion it is important to define what i mean by a monetary instrument perhaps arbitrarily i reserve the term monetary instrument for those macroeconomic variables which are primarily determined within domestic or international monetary markets obvious examples are the level of the money supply interest rates and exchange rates i justify the term instrument by noting that as far as the agricultural sector is concerned these variables are by and large predetermined for example the levels of the money supply and interest rates in the united states are to a large extent determined by the policy of the federal reserve similarly the price of the currency the exchange rateis ultimately determined by the demand and the supply for the currency and thus at least partially by governmental policy the first step in any attempt to outline research needs and goals is an identification of what has been done in the past although the literature on the macroeconomics of agriculture is farily large and rapidly expanding eckstein and heien lamm schuh 1976 and tweeten are important examples relatively li tl attention has been given to the effect of monetary instruments on agricultural trade what attention has been given to this area of resea ch has revolved mainly around the role of exchange rates in determining agricultural exports and prices thus it is logical to start our discussion with a brief survey of the literature on exchange rates and agriculture

u s corn exports the role of the exchange rate abstract time series econometric methods are applied to monthly observational data over the period 1978 1992 on real exchange rates real corn prices corn export sales and corn export shipments for the united states in sample fit and out of sample forecast results are used to discern whether exchange rates have elicited systematic responses in u s corn prices sales and shipments and whether the dynamic transmission mechanisms tying these variables together have changed over time a structural break appears to have occurred in early 1985 no cointegration is found between exchange rates price sales and shipments in either sub period influences are all short run or between stationary variables the role of the exchange rate appears to have moderated in the post 1985 period implications for policy analysis are discussed

agricultural and financial market interdependence in the short run a theoretical model capable of examining the effects of various monetary policies on agriculture is developed results from comparative static experiments with the model show that a restrictive monetary policy may adversely affect agriculture results from the theoretical model are compared with earlier studies and are empirically investigated using vector autoregression techniques in general empirical analysis supports the theoretical developments

on the effects of sterilized intervention an analysis of weekly data abstract as the recent empirical studies surveyed here illustrate it is very difficult to demonstrate that the exchange rate risk premium depends through a portfolio balance channel on the currency composition of outside assets the existence of a portfolio balance effect is a necessary condition for sterilized intervention to be a genuinely independent tool of monetary policy this paper studies u s canadian data and attempts to improve on earlier studies by using higher frequency weekly data and by implementing an appropriate instrumental variables technique 2s2sls however we still fail to detect evidence of a portfolio balance effect

a comparison of inflation forecasts interest rate models provide slightly better monthly forecasts and substantially better eight and fourteen month forecasts of inflation than a univariate time series model the livingston surveys underestimate eight and fourteen month inflation rates especially during the high inflation period of 1978 81 in contrast eight and fourteen month inflation forecasts extrapolated from one month interest rates show little bias and track ex post eight and fourteen month inflation rates better than the survey forecasts

measuring consumption efficiency with utility theory and stochastic frontier analysis the concept of production efficiency has been studied since the 1960s but consumption activity as well may be inefficient for various reasons such as product complexity lack of information the bounded rationality of the consumer and imperfect markets to name a few this study proposes a conceptual framework for measuring the consumption efficiency of differentiated products based on traditional utility theory it employs stochastic frontier analysis sfa in an empirical analysis it makes use of hedonic price theory to link traditional utility theory and the sfa framework when the developed model is applied to the korean personal computer market empirical results indicate the levels and distribution of consumption efficiency in that market the findings afford us a better understanding of the characteristics of the innovation process in that market

estimation of a hedonic price equation for burgundy wine a hedonic price equation and two jury grade equations are estimated for burgundy wine the approach is the same as in an earlier bordeaux wine paper combris et al 1997 the data come from an experimental study that is very similar to the study on bordeaux wines the results for the two wine growing regions are compared and discussed

dynamic stability of portfolio balance models of the exchange rate abstract the conditions for stability of a portfolio balance model of exchange rate determination with an endogenous current account are examined for various expectational assumptions it is shown that unless strongly stabilizing expectational assumptions are made if the economy is a net debtor in foreign currency assets there is the possibility that its exchange rate will exhibit instability

macroeconomics and agriculture in tunisia this article aims to analyse the impact of changes in the monetary policy and the exchange rate on agricultural supply prices and exports the methodology used is based on the multivariate cointegration approach ten variables are considered interest and exchange rates money supply inflation agricultural output and input prices agricultural supply and exports income and the rate of commercial openness the sample period covers annual data from 1967 to 2002 due to the short sample period two subsystems are considered first long run relationships are identified in each subsystem second both subsystems are merged in order to calculate the short run dynamics the results indicate that changes in macroeconomic variables have an effect on the agricultural sector but the reverse effect does not hold

neutrality of inflation in the agricultural sector abstract the paper considers the effect of inflation on the relative prices of products traded in auction markets prices of us agricultural products are used for the period 1951 1981 since agricultural products are widely traded the real forces of supply and demand specific to agriculture are represented by foreign agricultural prices the exchange rate is entered as a separate variable influencing domestic agricultural prices trade between the usa and the ten countries included in the federal reserve board s trade weighted dollar is considered the empirical results are consistent with the hypothesis that inflation did not alter relative agricultural prices when the real forces of supply and demand and the exchange rate are held constant

relative prices and money further results for the united states empirical results support the hypothesis that agricultural prices respond faster than manufactured product prices to a change in money supply in the united states sims vector autoregression var technique was applied in examining this hypothesis the monte carlo integration method was used to test the significance of the impulse responses generated by the var technique

estimating an hedonic translog cost function for the home health care industry medicare home health care plays an important role in providing cost effective care for the chronically ill and elderly long seen as a cost effective substitute for nursing home care home care has become even more important with expenditures increasing by 31 4 from 1990 to 1996 the purpose of this paper is to provide a short run cost analysis of a sample of home health care providers to gain insight into the efficient provision of home health care services this paper is a significant improvement over previous studies in that it uses a nationwide database to more accurately represent the multiproduct nature of the industry and uses an hedonic translog cost estimation with desirable economic properties

macroeconomic policy exchange rate dynamics and optimal asset accumulation the paper develops a model of exchange rate and current account determination for a small economy peopled by infinitely lived utility maximizing households in this setting a central bank purchase of foreign exchange has no real effects when central bank foreign reserves earn interest at the world rate and proceeds are returned to the public in contrast an increase in the monetary growth rate does have real effects even in the long run the model developed here implies that an increase in government spending may lead to a surplus on current account the external adjustment process predicted by the model is one in which consumption real balances and external assets all rise or fall simultaneously

exchange rate dynamics under gradual portfolio and commodity price adjustment abstract this paper studies exchange rate dynamics within the context of a model that allows for gradual portfolio and commodity price adjustment the model encompasses as a special limiting case the orthodox portfolio balance model wherein portfolio adjustment is instantaneous the focus of the paper is on the process of adjustment to a once and for all open market operation under a bond financed government budget deficit the generalized portfolio balance model which we formulate generates a varied menu of adjustment paths for the exchange rate and the aggregate price level which are more successful than the orthodox instantaneous portfolio equilibrium models in accomodating the divergent experiences of various countries

valuation effects and long run real exchange rate dynamics abstract this paper uses the johansen test for cointegration to check the prediction of a portfolio balance model that predictable valuation effects are associated with a saddle path dynamic relationship between the net foreign asset position and the real exchange rate the analysis uses newly constructed quarterly series on the net foreign position as a percentage of the nominal gross domestic product together with data on real effective exchange rate indices for a sample of developed countries which borrow in their own currency the results indicate that the net foreign asset position and the real exchange rate are not cointegrated for all the countries in the sample the rejection of saddle path dynamics suggests that predictable valuation effects are quantitatively small in developed countries the rejection of cointegration suggests that the net foreign asset position is not a determinant for long run real exchange rates in developed countries

asymmetric participation in china s stamp market hobbyists and investors china s stamp market has expanded rapidly in the last two decades stamp trading has become very profitable both hobbyists and investors are more interested in newly released stamps this study shows that the value of newly issued stamps appreciates faster than the value of older issued stamps this effect is caused by the asymmetric participation in stamp collection between hobbyists and investors