investigating first stage exchange rate pass through sectoral and macro evidence from euro area countries in this paper we evaluate the first stage pass through namely the responsiveness of import prices to the exchange rate changes for a sample of euro area ea countries our study aimed to shed further light on the role of microeconomic factors versus macroeconomic factors in influencing the extent of the exchange rate pass through erpt as a first step we conduct a sectoral analysis using disaggregated import prices data we find a much higher degree of pass through for more homogeneous goods and commodities such as oil and raw materials than for highly differentiated manufactured products such as machinery and transport equipment our results confirm that cross country differences in pass through rates may be due to divergences in the product composition of imports the higher share of imports from sectors with lower degrees of pass through the lower erpt for an economy will be in a next step we investigate for the impact of some macroeconomics factors or common events experienced by ea members on the extent of pass through using the system generalised method of moments within a dynamic panel data model our estimates indicate that decline of import price sensitivity to the exchange rate is not significant since the introduction of the single currency our findings suggest instead that the weakness of the euro during the first 3 years of the monetary union significantly raised the extent of the erpt this outcome could explain why the sensitivity of import prices has not fallen since 1999 we also point out a significant role played by the inflation in the eurozone as the responsiveness of import prices to exchange rate fluctuations tends to decline in a low and more stable inflation environment overall our findings support the view that the extent of pass through is comprised of both macro and microeconomic aspects that policymakers should take into account

exchange rate changes and inflation in post crisis asian economies vector autoregression analysis of the exchange rate pass through macro economic consequences of large currency depreciations among the crisis hit asian economies varied from one country to another inflation did not soar after the asian currency crisis of 1997 98 in most crisis hit countries except indonesia where high inflation followed a very large nominal depreciation of the rupiah the high inflation meant a loss of price competitive advantage a key for economic recovery from a crisis this paper examines the pass through effects of exchange rate changes on the domestic prices in the east asian economies using a vector autoregression analysis the main results are as follows i the degree of exchange rate pass through to import prices was quite high in the crisis hit economies ii the pass through to consumer price index cpi was generally low with a notable exception of indonesia and iii in indonesia both the impulse response of monetary policy variables to exchange rate shocks and that of cpi to monetary policy shocks were positive large and statistically significant thus indonesia s accommodative monetary policy coupled with the high degree of cpi responsiveness to exchange rate changes was an important factor in the inflation depreciation spiral in the wake of the currency crisis

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

accounting for underutilization of trade preference programs the us generalized system of preferences the us generalized system of preferences gsp provides duty free market access to developing countries yet despite these preferences about 40 of imports qualifying for gsp enter the us without claiming the benefits this paper documents variations in gsp utilization rates and explains their determinants with a special emphasis on the production structure of beneficiary countries as captured by local content the findings suggest that higher local content shares in output lead to higher utilization rates in addition the utilization rate rises with the preference margin size of exports and regional cumulation in general and declines with degree ofprocessing resume expliquer la sous utilisation des programmes de preferences commerciales le systeme generalise de preferences des etats unis le systeme generalise de preferences sgp donne acces sans droits de douane au marche americain pour des pays en developpement mais malgre ce traitement de faveur a peu pres 40 des importations qui se qualifieraient entrent aux etats unis sans reclamer ces avantages ce memoire documente les variations dans le taux d utilisation du sgp et les facteurs qui peuvent expliquer ce phenomene en mettant l accent sur la structure de production des pays beneficiaires telle que saisie par le contenu local les resultats suggerent qu une portion elevee de contenu local dans le produit entraine un plus haut taux d utilisation du sgp de plus le taux d utilisation s accroit avec la marge de preference la taille des exportations et la cumulation d autres arrangements regionaux et diminue a proportion que le degre de transformation s accroit

trade s dynamic solutions to transboundary pollution abstract this study develops a differential game to examine the effects of trade liberalization on transboundary water pollution water pollution is due to wastewater emissions from countries in a shared waterway along the u s mexico border with available data of pollution abatement costs public health damages and trade benefits noncooperative and cooperative games are examined with changes in trade policy and public health damages results show trade liberalization leads mexico to curtail pollution in both games cooperation and trade liberalization limit emissions from both countries and curtail strategic behavior of the united states from mexico s pollution control efforts in the noncooperative game

oil price shocks and the macroeconomy this paper examines the impact of oil price shocks and attempts to explain why the rise in oil prices up to 2008 had little impact on the world economy it makes three main arguments first that oil prices have never been as important as is popularly thought second that the most important route through which oil prices affect output is monetary policy when oil prices pass through to core inflation monetary authorities raise interest rates slowing growth based on the second argument the third argument is that high oil prices have not reduced growth in recent years because they no longer pass through to core inflation so the monetary tightening previously seen in response to high oil prices is absent it also argues that oil prices had little impact on the global recession of 20089

exchange rate pass through in developing and emerging markets a survey of conceptual methodological and policy issues and selected empirical findings abstractglobal integration has increased the international linkages of financial markets for emerging market countries a key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices known as exchange rate pass through erpt this article reviews the conceptual methodological and policy issues connected with erpt in emerging market and developing countries and critically surveys selected empirical studies a key contribution is to categorise and compare the heterogeneous methodologies used to extract erpt measures in the empirical literature single equation models and systems methods are contrasted frequent misspecifications that produce unreliable erpt estimates are highlighted the discerning policy maker needs to ascertain by which methods erpt measures were calculated the controls and restrictions applied and the time frame and stability of the estimates

trade liberalization and the environment in the pacific basin coordinated approaches to mexican trade and environment policy in this paper we analyze the environmental implications of growth and opening up of trade in mexico based on an empirical economywide model in particular we study how tradeoffs between growth and environmental objectives can be minimized by using targeted policies on pollution emissions in coordination with outward oriented trade strategies most economywide studies of trade and environment linkages rely on effluent intensities associated with output and do not allow for substitution between nonpolluting factors labor and capital and polluting intermediate consumption such as chemicals or energy lee and roland holst by contrast pollution emissions in the present model are linked to using polluting inputs rather than directly to output levels we also embed this analysis in a dynamic framework to take account of exogenous components of factor supply and productivity growth over the twenty year period 1990 to 2010 the analysis is presented in three stages first pollution abatement policies are considered alone and their effects on growth sectoral allocation and trade are evaluated the next step is to consider trade liberalization alone trade distortions in place before the nafta and uruguay round accords are removed progressively over time and results calibrate the expansionary effects of trade liberalization as well as its environmental implications these include win win cases such as in the fertilizer sector as well as intensified environmental degradation arising from the transportation sector in a third and last scenario we combine environmental and trade policies and show how they interact these results indicate that the combination of policies generally can mitigate the undesirable effects of each set of policies alone such as trade induced pollution growth and the real contractionary effects of environmental policy thus it appears that more liberal and outward oriented trade policy can coexist with more rigorous attention to environmental values the trade and environment debate has

the acid rain differential game this paper considers an acid rain differential game countries emit sulphur which is partly transferred to other countries depositions above critical loads ultimately destroy the soil countries face a trade off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers because of the transboundary externalities the outcome will depend on whether the countries cooperate or not this paper presents the cooperative outcome and the open loop and markov perfect nash equilibria of the acid rain differential game it will be shown that the depositions always converge to the critical loads but the steady state levels of the buffer stocks differ the theory is used to analyse the acid rain differential game for sulphur between great britain and ireland finally some results are given for the whole of europe

stabilising properties of discretionary monetary policies in a small open economy this article sets out a simple new keynesian open economy model and shows that the conduct of discretionary monetary policy in an open economy differs substantially from the closedeconomy framework the article shows analytically that the existence of the direct exchange rate channel in the open economy phillips curve impairs the perfect stabilising property of monetary policy in the face of demand side disturbances under domestic inflation targeting if cpi inflation is instead the target then the perfect stabilising property of monetary policy breaks down even in the absence of the direct exchange rate channel in the phillips curve

transboundary pollution in the black sea comparison of institutional arrangements this paper analyses the transboundary pollution between romania and ukraine coastal states along the black sea and studies the welfare consequences of institutional arrangements for controlling this problem to achieve this goal we use a dynamic and strategic framework we compare in terms of total welfare for two countries a first best case with three different institutional arrangements the non cooperative game of countries the uniform emission policy and the constant emission policy as proposed by the black sea commission our findings indicate that the non cooperative game provides a better level of total welfare than the other rules

international pollution control cooperative versus noncooperative strategies abstract international pollution control involving two neighboring countries is modeled as a simple two player dynamic game each country produces a good that is consumed by domestic households production of each consumption good results in emissions of pollutants households in each country derive utility from the consumption of the domestically produced good but incur costs through the total stock of pollution stock externality in this setting we characterize cooperative as well as noncooperative pollution control strategies of the governments of the two countries that maximize the discounted stream of net benefits of a representative consumer it turns out that when the governments are restricted to use linear strategies noncooperative behavior results in overall losses for both countries if on the contrary governments use nonlinear markov perfect strategies and the discount rate is small enough a pareto efficient steady state pollution stock can be supported as a differentiable subgame perfect equilibrium thus the emergence of first best solutions cooperative outcomes does not require any institutional arrangements threats retaliation etc but can be brought about through the use of nonlinear markov perfect equilibrium strategies

an inverse relationship between efficiency and profitability according to size of upper austrian firms some further tentative results this paper examines the relationships between profitability and firm size and efficiency and firm size based on firms in upper austria there is considerable evidence suggesting that the average profitability of small enterprises exceeds that of large firms however productivity tends to be positively related to firm size these empirical findings present something of a paradox

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

pigouvian taxation of energy for flow and stock externalities and strategic noncompetitive energy pricing abstract the literature on energy and carbon taxes is by and large concerned about the derivation of globally efficient strategies in contrast this paper considers the dynamic interactions between cartelized energy suppliers and a consumers government that collectively taxes energy carriers for pigouvian motives two different kinds of external costs are associated with energy consumption flow e g acid rain and stock externalities e g global warming the dynamic interactions between a consumers government and a producers cartel are modeled as a differential game with a subgame perfect nash equilibrium in linear and nonlinear markov strategies the major implications are that the nonlinear solutions are pareto inferior to the linear strategies and energy suppliers may preempt energy taxation and thereby may raise the price at front however this effect diminishes over time because the producers price declines while taxes increase

high exchange rate volatility and low pass through abstract two specifications of an open economy model are shown to generate high exchange rate volatility and low exchange rate pass through erpt in the model price discrimination causes erpt to be incomplete in both the short and the long run in the short run a small amount of nominal rigidities is enough to reduce erpt sharply still exchange rate depreciation worsens the terms of trade consistent with the evidence possible biases from omitted variables and measurement error in the erpt empirical literature due to data limitations are investigated using model generated time series estimates of erpt coefficients can be quite different from true parameters and are sensitive to the shocks driving the economies estimates can nonetheless detect key structural features of the models

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

the new keynesian phillips curve from sticky inflation to sticky prices the new keynesian phillips curve nkpc model of inflation dynamics based on forward looking expectations is of great theoretical significance in monetary policy analysis empirical studies however often find that backward looking inflation inertia dominates the dynamics of the short run aggregate supply curve this inconsistency is examined by investigating multiple structural changes in the nkpc for the u s between 1960 and 2005 employing both inflation expectations survey data and a rational expectations approximation we find that forward looking behavior plays a smaller role during the high and volatile inflation regime to 1981 than in the subsequent period of moderate inflation providing empirical support for sticky price models over the last two decades a break in the intercept of the nkpc is also identified around 2001 and this may be associated with u s monetary policy in that period

exchange rate and utilization of free trade agreements focus on rules of origin abstract tariff rates under a free trade agreement fta are not necessarily used in the majority of trade even among members of an fta one of the causes of this phenomenon is the presence of rules of origin roos which require exporters to comply with specific conditions when utilizing an fta scheme to consider how roos should be designed so that exporters can more robustly use an fta scheme this paper investigates the effect of exchange rates on fta scheme utilization with a focus on roos exchange rates affect exporters compliance with roos by changing the so called value added ratio which is defined as 1 price of imported inputs from non fta member countries export product price based on a model of pricing to market we propose that an unexpected depreciation of exporters currency against importers currency improves the value added ratio through a rise in the export product s price which in turn enhances exporters utilization of an fta scheme we also show strong empirical support for the proposition using the detailed product level data on fta scheme utilization in korea s imports from association of south east asian nations asean countries

trade transboundary pollution and foreign lobbying in this paper we explore the use of trade policy in addressing transboundary stock pollution problems such as acid rain and water pollution we show that a tariff determined by the current level of accumulated pollution can induce the time path of emissions optimal for the downstream polluted country but if the upstream polluting country can lobby the downstream government to impose lower tariffs distortions brought by corruption and foreign lobbying lead to a rise in the upstream country s social welfare and to a decrease in social welfare in the downstream country thus the usefulness of trade policy as a tool for encouraging cooperation and internalizing transboundary externalities depends critically on the degree of governments susceptibility to foreign political influence

exchange rate pass through to domestic prices does the inflationary environment matter abstract the paper tests a hypothesis suggested by j taylor 2000 low inflation pass through and the pricing power of firms european economic review 44 7 1389 1408 that a low inflationary environment leads to a low exchange rate pass through to domestic prices to test this hypothesis the paper derives a pass through relation based on new open economy macroeconomic models a large database that includes 1979 2000 data for 71 countries is used to estimate this relation there is strong evidence of a positive and significant association between the pass through and the average inflation rate across countries and periods the inflation rate moreover dominates other macroeconomic variables in explaining cross regime differences in the pass through

valuation methods and policy making in environmental economics 1 valuation methods and policy making in environmental economics relevance and scope h folmer e van ierland part i the valuation of public goods 2 non market asset prices a comparison of three valuation approaches r c d arge j f shogren 3 valuing public goods in a risky world an experiment p o johansson 4 recreational values pareto optimality and timber supply p o johansson k g lofgren k g maler 5 estimating social benefits of environmental improvements from reduced acid rain deposition a contingent valuation survey s navrud part ii the valuation of health and life 6 benefits of reduced morbidity from air pollution control a survey m dickie s gerking 7 valuing a public good direct and indirect valuation approaches to the measurement of the benefits from air pollution abatement m shechter m kim l golan 8 environmental regulation and the valuation of life interindustry mobility and the market price of safety h w herzog jr a m schlottmann part iii cost benefit analysis 9 disequilibrium cost benefit rules an exposition and extension p o johansson k g lofgren 10 macroeconomic cost benefit analysis of environmental programmes a nentjes part iv aspects of policy making 11 benefit estimation for complex policies a randall j hoehn 12 the acid rain game k g maler index

the externalities problem of transboundary and persistent pollution abstract this paper deals with implementing the efficient allocation of transboundary and persistent pollution in particular we adapt varian s compensation mechanism varian a solution to the problem of externalities when agents are well informed amer econ rev 85 1994 1278 1293 to cover situations in which pollutants extend to neighboring regions and their effects persist over time the main contribution of this paper is the design of a mechanism that implements in subgame perfect equilibrium the efficient pollution levels in this context

exchange rate pass through and inflation a nonlinear time series analysis abstract this paper investigates the relationship between the exchange rate pass through erpt and inflation by estimating a nonlinear time series model based on a simple theoretical model of erpt determination we show that the dynamics of erpt can be well approximated by a class of smooth transition autoregressive star models using the past inflation rate as a transition variable we employ several u shaped transition functions in the estimation of the time varying erpt to us domestic prices the estimation result suggests that declines in the erpt during the 1980s and 1990s are associated with lowered inflation

exchange rate pass through at the product level we use a detailed database to investigate exchange rate pass through at the product level for a large number of countries the empirical analysis suggests that pricing behaviours are dichotomous with complete pass through in around 25 of sectors and significant pricing to market in the remaining ones average long run pass through coef ficient is close to 80 this result hides a strong heterogeneity of pass through behaviours across sectors even when composition effects are controlled for average pass through varies across importing countries the econometric analysis shows that pass through tends to be higher in volatile environments in less developed countries in weakly integrated markets jel classification f12 f31 f41

oil price pass through into inflation abstract this paper uses data from 19 industrialized countries to investigate oil price pass through into inflation across countries and over time a time varying pass through coefficient is estimated and the determinants of the recent declining effects of oil shocks on inflation are investigated the appreciation of the domestic currency a more active monetary policy in response to inflation and a higher degree of trade openness are found to explain the decline in oil price pass through

gains from anchoring inflation expectations evidence from the taper tantrum shock abstract have improvements in monetary policy frameworks increased emerging market resilience to external shocks this paper exploits the may 2013 taper tantrum episode in the united states to study the reaction of 18 large emerging markets to an external shock conditioning on their degree of inflation expectations anchoring we find that while the tapering announcement negatively affected growth prospects regardless of the level of anchoring countries with weakly anchored inflation expectations experienced larger exchange rate pass through to consumer prices and higher inflation these findings suggest that gains in inflation expectations anchoring can improve central bank s policy trade offs when facing external shocks

declining exchange rate pass through to u s import prices the potential role of global factors this paper documents a robust and sustained decline in exchange rate pass through to u s import prices from well above 0 5 during the 1970s and 1980s to around 0 2 over the last decade we attribute this decline to the rising prominence of competition from china a shift in import pricing behavior since the asian financial crisis and the reduced share of material intensive goods in u s imports we also find evidence that foreign exporters are increasingly setting their prices with an eye on u s prices these results in turn suggest a new and more general hypothesis linking the decline in pass through to the evolving nature of competition in global markets and structural changes in international production patterns

inflation targeting and exchange rate pass through this paper analyzes how endogenous imperfect exchange rate pass through affects inflation targeting optimal monetary policies in a new keynesian small open economy the paper shows that an inverse relation exists between the pass through and the insulation of the economy from foreign and monetary policy shocks and that imperfect pass through tends to decrease the variability of the terms of trade furthermore with cpi inflation targeting in the short run delayed pass through constrains monetary policy more than incomplete pass through and interest rate smoothing amplifies this effect when the pass through decreases the variability in economic activity tends to rise and the trade off between the stabilization of cpi inflation and output worsens in direct relation to how strictly the central bank is targeting cpi inflation in contrast with domestic inflation targeting optimal monetary policy is not constrained and opposite results occur consequently imperfect pass through favors the choice of domestic to cpi inflation targeting

are oil shocks inflationary asymmetric and nonlinear specifications versus changes in regime this paper identifies a structural break in core u s inflation phillips curves such that oil prices contributed substantially before 1981 but since that time pass through has been negligible this characterization is robust to a variety of re specifications and fits the data better than asymmetric and nonlinear oil price alternatives evidence does not support the hypotheses that declining energy intensity or deregulation of energy producing and consuming industries played an important role monetary policy did not itself become less accommodative of oil shocks but may have helped create a regime where inflation is less sensitive to price shocks more generally

exploring international differences in inflation dynamics abstract standard closed economy dsge models have difficulty replicating the persistence of inflation we use a multicountry dataset to establish some empirical regularities on persistence and volatility of aggregate consumer prices for 135 countries since 1993 we find both persistence and volatility to be low high in developed developing countries relative to the full sample average this pattern is also observed in low high inflation countries we then employ a two country dsge framework to investigate the extent to which structural open economy features such as incomplete exchange rate pass through the existence of nontraded goods and international financial market incompleteness can help in replicating the persistence and volatility of consumer prices our simulation results indicate that the model can replicate the degree of inflation persistence seen in the data for both developed and developing countries but cannot generate the low levels of volatility observed in developed economies

trade configurations in asia assessing de facto and de jure regionalism given the backdrop of significant uncertainties largely propelled by the ongoing trade spat between the united states and china to what degree can the asian region move forward in terms of de facto trade integration drawing on the new economic geography literature this paper offers new insights into the literature on trade regionalism in asia by empirically illustrating how asian economies can tap into the regional market potential specifically the paper examines the scope for further de facto integration among the asian countries engaged in the negotiation for the regional comprehensive economic partnership rcep agreement by estimating foreign market potential fmp indices to preview the main findings the empirical analysis demonstrates that the share of intra regional trade in total rcep trade flows and consequently the ratio between within and outside rcep trades are significantly lower than what they could potentially be the paper makes a case that the enhancement of de jure integration among these economies through the rcep must be accompanied by efforts to improve de facto integration

a differential game design of watershed pollution management under ecological compensation criterion abstract the watershed ecological compensation is used as a policy instrument in china in order to reduce water pollution and attain watershed sustainability in this paper we construct a differential game between a local government and a profit maximizing local firm with one competitor in a watershed ecological compensation system then the optimal dynamic strategy is obtained by applying maximum principle finally we investigate the influence of shadow prices on control variables and firm s output in three different cases this study focuses on how to reach a balance between the sustainable development of local economy and the effective protection of water resources from an ecological perspective for the local government as well as on how to maximize the profit of the local firm in an ecological compensation system

the pass through of beer taxes to prices evidence from state and federal tax changes i introduction alcohol excise taxes are a common form of taxation used by the federal government and state governments alike serving the dual purpose of raising revenue and protecting the public health through reduced consumption 1 from a policy perspective it is crucial to understand how alcohol taxes are passed through to prices if higher taxes are to be levied standard economic theory predicts that taxes are at most fully passed through in a competitive market where firms are price takers however the market for beer in the united states can be best categorized as an oligopoly and beer stands out as the most prevalent type of alcohol consumed in the country 2 theories in imperfect competition suggest various possibilities of tax shifting including over and under shifting to prices in oligopolistic markets as fullerton and metcalf 2002 discuss an over shifting of tax can occur because of both the existence of market power and the strategic behavior of firms under shifting is also possible when the burden of higher taxes is shifted to labor in the form of lower wages or to other factors of production ultimately the amount of the tax pass through is an empirical question and therefore the main goal of this study is to provide new estimates of the magnitude of the beer tax pass through to prices in the united states when legislators consider changing beer taxes precise and recent estimates of the pass through rate are required to understand how the tax change will affect retail prices to our knowledge there are only a few existing studies that empirically estimate the pass through rate of alcohol taxes to prices in the united states using quarterly state level data from 1982 to 1997 young and kwapisz 2002 find that taxes on beer spirits and wine are over shifted to retail prices specifically the authors estimate that a 1 increase in the tax per barrel of beer increases the retail beer price by a range of 1 67 1 88 kenkel 2005 uses the 2002 tax hike in alaska to perform before after analyses and concludes that alcohol taxes are more than fully passed through to prices kenkel finds that the average pass through rate for off premise consumption is 2 14 2 03 and 1 57 for budweiser bud light and heineken respectively although a novel study in various ways the lack of a control group and the study s focus just on alaska raises questions regarding the external validity of the results stehr 2007 uses price data from the third quarter editions of the american chamber of commerce research association accra from 1990 to 2004 and finds that the magnitude of the pass through of beer taxes to prices is 0 94 this point estimate suggests that beer taxes are almost fully passed through to prices and a confidence interval around the estimate includes values greater than one however stehr s study only includes state and year fixed effects in the model as additional control variables and excludes other potential determinants of both alcohol prices and taxes also it is unclear as to why the study only uses the third quarter editions of accra when tax changes may occur any time during the year reflecting on the existing studies in the united states it must be emphasized that the most recent data used ends in 2004 since then the beer industry has experienced two major mergers of leading producers sabmiller and coors in 2007 followed by anheuser busch and inbev in 2008 given this restructuring within the industry new estimates of the tax pass through rate are warranted in terms of studies outside the united states bergman and hansen 2010 analyze the tax pass through rate in denmark using the liquor tax cut in 2003 the beer tax increase in 1997 and the beer tax cut in 2005 the authors find evidence of over shifting during the incidence of tax hikes and under shifting during the events of tax cuts carbonnier 2013 studies differences between the ad valorem taxes and per unit excise taxes in france and finds that the per unit excise taxes are over shifted whereas ad valorem taxes are under shifted to prices

pass through of exchange rates and competition between floaters and fixers this paper studies how a rise in the share of u s imports from china or any country with a fixed exchange rate could disproportionately lower pass through of exchange rates to u s import prices we develop a theoretical model showing how changes in the competitive environment induce exporters from other countries to lower markups in response to a dollar depreciation thereby moderating pass through the model indicates that a particular local bias condition is necessary for this effect and that free entry amplifies it the model also produces an approximately log linear structural equation for pass through regressions including the china share panel regressions over 1993 2006 indicate that the rising share of trade from china or from all countries with fixed exchange rates can explain a decline in pass through by about onefifth of its size

asymmetries outliers and structural stability in the us gasoline market abstract by using a recently developed nonlinear cointegration methodology and a sample that encompasses more than thirty years of monthly data we investigate whether the transmission of crude oil price variations to gasoline prices in the us market is asymmetric i e depends on the sign of the change in the explanatory variable considering both the long and the short run the model is further extended by taking separately into account the effects of extreme and mild changes in crude oil prices this allows us to verify whether and to what extent the size and shape of any observed asymmetry in pricing is affected by the presence of outliers moreover given the substantial length of the sample considered we test for the possible presence of multiple structural breaks of unknown timing in the cointegrating vector our results indicate that the relationship between the prices of gasoline and crude oil has undergone a single structural break in the late 2008 and that after the break extreme observations have a non negligible role in shaping asymmetry

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

sticky goods prices flexible asset prices monopolistic competition and monetary policy a monetary general equilibrium asset pricing model with sticky goods prices is developed goods prices are set by monopolistically competitive firms that maximize stock market value equilibria with underutilization of resources excess capacity in some states result in contrast to previous monetary asset pricing models the degree of competition affects capacity utilization monetary policy can affect output and resource utilization in addition to real asset prices depending upon the amount of information available to the monetary authority

imperfect credibility and inflation persistence in this paper we formulate a dynamic general equilibrium model with staggered nominal contracts in which households and rms use optimal ltering to disentangle persistent and transitory shifts in the monetary policy rule the calibrated model accounts quite well for the dynamics of output and insation during the volcker disinsation and implies a sacri ce ratio very close to the estimated value our approach indicates that insation persistence and substantial costs of disinsation can be generated in an optimizing agent framework without relaxing the assumption of rational expectations or relying on arbitrary modi cations to the aggregate supply relation jel classi cation e31 e32 e52

measuring the environmental consequences of trade policy a nonmarket cge analysis the newly approved gatt trade agreement is likely to focus greater attention on the conflicts between the proliferation of diverse national policies toward environmental quality and the need to maintain competitiveness in world markets virtually all policy evaluations of this conflict have been limited by a significant misspecification in existing models none of the available computable general equilibrium cge models for international trading patterns consistently reflect the effects of environmental resources on consumers preferences the purpose of this paper is to report the first generation of a composite nonmarket and cge model nm cge for the european community the united states japan and a single region for the rest of the world the model incorporates the morbidity and mortality effects of particulates sulfur oxides and nitrogen oxides it uses existing nonmarket valuation estimates freeman with a specification for consumer preferences that allows changes in atmospheric emissions to diffuse in different amounts to

the magnitude of menu costs direct evidence from large u s supermarket chains we use store level data to document the exact process of changing prices and to directly measure menu costs at five multistore supermarket chains we show that changing prices in these establishments is a complex process requiring dozens of steps and a nontrivial amount of resources the menu costs average 105 887 year per store comprising 0 70 percent of revenues 35 2 percent of net margins and 0 52 price change these menu costs may be forming a barrier to price changes specifically 1 a supermarket chain facing higher menu costs due to item pricing laws that require a separate price tag on each item changes prices two and one half times less frequently than the other four chains 2 within this chain the prices of products exempt from the law are changed over three times more frequently than the products subject to the law in principle fixed costs of changing prices can be observed and measured in practice such costs take disparate forms in different firms and we have no data on their magnitude so the theory can be tested at best indirectly at worst not at all alan blinder 1991 p 90

has the inflation process changed does it change inflation has been low in many countries for at least a decade but have inflation processes changed in ways that would help make low inflation permanent using both aggregate and disaggregated inflation data we find that the means of inflation processes have become smaller over the past two decades and that allowing for these changes in the mean their persistence has not declined much changes in monetary policy frameworks and recessions appear to have contributed to a reduction in the mean of inflation but do not appear to have a meaningful impact on persistence and there is some evidence that the shifts in inflation expectations are the proximate cause of the changes in the mean of inflation these findings suggest that policy makers should focus on maintaining credibility and carefully monitoring inflation expectations for any indication that they are rising stephen g cecchetti and guy debelle

the mess of the public industrial production in austria a typical case of public sector inefficiency the economics of property rights the x efficiency approach the economic theory of bureaucracy the public choice theory and the findings about union controlled firms have been used to explain inefficiency in the public sector in general these approaches however have been rarely applied specifically to public industrial production in competitive markets with private goods characteristics in austria a sixth of the industrial production takes place in public enterprises until lately there were neither thorough audits nor strict efficiency controls by the government or administration for a long time the obvious inefficiencies were tolerated by the taxpayers the government and even by the opposition moreover in the austro keynesian era the public industrial firms were implicitly used for reaching the government s stabilization policy goals immediately this brought about big losses and created a heavy burden on the federal budget nonetheless the microeconomic consequences of this kind of austrian public industrial policy have not been analysed satisfyingly

monetary policy regime shifts and inflation persistence abstract using bayesian methods we estimate a markov switching new keynesian msnk model that allows shifts in the monetary policy reaction coefficients and shock volatilities with u s data we find that a more aggressive monetary policy regime was in place after the volcker disinflation and before 1970 than during the great inflation of the 1970s our estimates also indicate that a low volatility regime has been in place during most of the sample period after 1984 we connect the timing of the different regimes to a measure of inflation persistence

a dynamic game of a transboundary pollutant with asymmetric players abstract modeling transboundary pollutants in a dynamic game framework provides a foundation for analyzing the impact of various policy options the focus of this analysis is on the results of a tax subsidy scheme used to address the transboundary problem of global climate change a nonzero sum dynamic game with asymmetric players is used to evaluate the policy impact of the tax subsidy scheme on the respective player s value functions and strategies as determined by a nash equilibrium feedback solution the asymmetry of the players is reflected in their respective attitudes toward global climate change with one player benefiting from the change and the other losing

the consequences of a one sided externality in a dynamic two agent framework abstract we develop a dynamic model where all agents contribute to a global externality but only those in a specific region suffer from it we model this in a dynamic setting via a two agent non cooperative overlapping generations model and analyze the consequences for economic growth and intertemporal choices we find that multiple steady states may result from this asymmetry in particular if the agent who is affected by the externality has to spend a large share of his income to offset it then he may be stuck in an environmental poverty trap we provide conditions for the existence of and local convergence to the equilibria as well as a condition for the global convergence to the poverty trap while in addition to maintenance expenditures externalities tend to be addressed via studying taxes investment in r d or alike we focus on capital market integration specifically agents in the affected region can open up their capital market to enable capital inflows we investigate whether an open capital market improves or worsens their welfare while we do find that capital market integration eliminates the environmental poverty trap we show that capital market integration is not always in both agents interest in particular we provide conditions under which the agents prefer autarkic or integrated capital markets

when does uncovered interest parity hold a consensus is emerging that returns to the currency carry trade are driven by two factors one of these is probably consumption risk but there is widespread disagreement about the identity of the remaining factor this paper bolsters the case for volatility being the unknown factor a structural model that specifies that monetary volatility is the second factor is tested for 56 monetary regimes using the artificial economy methodology the negative slope in the fama regression arises when monetary volatility is low and the precautionary savings motive dominates the intertemporal substitution motive when monetary volatility is high the fama slope is positive in line with uncovered interest parity we conclude that given the predominance of precautionary savings the degree of monetary volatility explains whether uncovered interest parity holds

inflation dynamics in a small emerging market this study investigates the determinants of inflation in the dominican republic during 1991 to 2002 a period characterized by remarkable macroeconomic stability and growth by developing a parsimonious and empirically stable error correction model using quarterly observations the study finds that inflation is explained by changes in monetary aggregates real output foreign inflation and the exchange rate long run relationships in the money and traded goods markets are found to exist but only the disequilibrium from the money market exerts a significant impact on inflation

international dimensions of optimal monetary policy abstract this paper provides a baseline general equilibrium model of optimal monetary policy among interdependent economies with monopolistic firms and nominal rigidities an inward looking policy of domestic price stabilization is not optimal when firms markups are exposed to currency fluctuations such a policy raises exchange rate volatility leading foreign exporters to charge higher prices vis a vis increased uncertainty in the export market as higher import prices reduce the purchasing power of domestic consumers optimal monetary rules trade off a larger domestic output gap against lower consumer prices optimal rules in a world nash equilibrium lead to less exchange rate volatility relative to both inward looking rules and discretionary policies even when the latter do not suffer from any inflationary or deflationary bias gains from international monetary cooperation are related in a non monotonic way to the degree of exchange rate pass through

efficiency and profitability an inverse relationship according to the size of austrian firm this paper tries to shed some light on the austrian situation of the efficiency of firms according to their size class for total austria we find that large firms seem to be more efficient with respect to value added per employee but small firms are more efficient with respect to the gross residual quota and to profitability value added wages value added on the other side a similar analysis for upper austria does not show this result here firms with the size of 500 employees or more seem to be the most efficient with respect to efficiency and profitability and only the employment cost efficiency criteria reveals the picture the smaller the firm the more cost effective it seems to be hence the result obtained from most studies in europe that at least the biggest firms are not the most efficient can only be confirmed to a limited extent for upper austria

uncovered interest parity it works but not for long abstract if an investor borrows in a low interest currency and invests in a high interest currency the interest differential accrues in a lumpy manner formally just like the dividend payments on a stock the investor will receive the interest differential discretely at the point when a position is rolled over from one day to the next a position that is not held open overnight receives no interest differential because intradaily interest rates are zero using a large data set of intradaily exchange rate data we run uncovered interest parity uip regressions over different short time intervals taking careful account of the settlement rules in the spot foreign exchange market we find results that are supportive of the uncovered interest parity hypothesis over very short windows of data that span the time of the discrete interest payment however adding even a few hours to the span of the window destroys the positive uncovered interest parity results

preference utilisation and tariff reduction in eu imports from acp countries textabstractdespite the long relationship between the eu and the african caribbean and pacific acp countries aimed at encouraging their exports while stimulating growth and investment the acp states still face difficulties in integrating into the world economy this paper examines the non least developed acp countries preferential trade with the eu the objective is to explain the determinants of preferential exports of acp countries towards the eu and to assess the impact of preferences on trade volumes we also investigate the existence of a threshold in the offered duty reduction under which traders have no incentives to ask for preferences

firm heterogeneity and firm behavior with conditional policies abstract this paper shows that the result of ju and krishna ju j krishna k 2002 regulations regime switches and non monotonicity when non compliance is an option an application to content protection and preference economic letters 77 315 321 ju j krishna k 2005 firm behavior and market access in a free trade area with rules of origin canadian journal of economics 38 1 290 308 i e the non monotonicity in the comparative statics across regimes disappears if exporters differ in their productivities which provides very different predictions about the results of policy changes

existence and uniqueness of equilibrium in a distorted dynamic small open economy abstract we provide a set of sufficient conditions for existence and uniqueness of recursive equilibrium for a class of small open economies with distortion the second welfare theorem is not available in this framework and usual approach for studying optimal neoclassical growth models is also not applicable

a new look at pass through abstract this paper examines the relationship between exchange rates and prices rather than assuming exchange rate changes are exogenous shocks that affect prices i use a long run restrictions var to identify shocks and explore the way domestic prices import prices and exchange rates react to a variety of shocks consumer price pass through is nearly complete in response to some shocks but low in response to others alternatively import prices and exchange rates typically respond in the same direction and pass through seems quick this supports the idea that import prices are set in the producer s currency and that lower cpi pass through is a result of changes in quantities or margins further down the supply chain

extreme support for uncovered interest parity abstract concerning uip the common conclusion is that it may be valid but undetectable for many reasons in this paper we take a complementary route in that we base our methodology on a random time effects panel model that controls for various biasing factors and which is invariant to the choice of the numeraire currency we show that the rejection of uip is not as severe as is commonly found and that it almost perfectly holds in periods where the forward premiums are large

explaining differences in productive efficiency an application to belgian municipalities the purpose of this paper is to measure and explain variations in productive efficiency of municipal governments in belgium technical efficiency is evaluated using a non parametric method based on the free disposal hull fdh reference technology we first calculate input output and graph farrell efficiency measures for a cross section of all 589 belgian municipalities in a second stage of the analysis we explain the calculated differences in efficiency in terms of variables related to the structural characteristics of municipalities and to the institutional environment

emerging floaters pass throughs and some new commodity currencies in spite of early skepticism on the merits of floating exchange rate regimes in emerging markets 8 of the 25 largest countries in this group have now had a floating exchange rate regime for more than a decade using parsimonious var specifications covering the period of floating exchange rates this study computes the dynamics of exchange rate pass throughs to consumer price indices we find that pass throughs have typically been moderate even though emerging floaters have seen considerable nominal and real exchange rate volatilities previous studies that set out to estimate exchange rate pass throughs ignored changes in policy regimes making them vulnerable to the lucas critique we find that within the group of emerging floaters estimated pass throughs are higher for countries with greater nominal exchange rate volatilities and that trade more homogeneous goods these findings are consistent with the pass through model of floden and wilander 2006 and earlier findings by campa and goldberg 2005 respectively furthermore we find that the indonesian rupiah the thai baht and possibly the mexican peso are commodity currencies in the sense that their real exchange rates are cointegrated with international commodity prices

perceived inflation persistence this article constructs and estimates a measure called perceived inflation persistence that can be used to determine if professional forecasters inflation forecasts indicate there has been a change in inflation persistence this measure is built via the implied autocorrelation function that follows from the estimates obtained using a forecaster specific state space model findings indicate that u s perceived inflation persistence has changed since the mid 1990s with more consensus among forecasters at lower levels of persistence when compared to the autocorrelation function for actual inflation forecasters typically react less to shocks to inflation than the actual inflation data would suggest

non linear exchange rate pass through in industrial economies abstractthis article presents theoretical arguments for a nonlinear pass through relationship for import and export prices and investigates the relationship empirically the theoretical argument is based on the menu cost approach in which small absolute changes in exchange rates may not prompt price changes because the costs of doing so exceed the extra profits generated for firms involved in international trade this relationship is investigated empirically using quarterly data for the period 1979q1 2015q1 for a sample of 17 countries in the case of import prices evidence is found of nonlinear adjustment consistent with the theoretical model in 4 out of 17 cases in the case of export prices such a relationship is only evident for two economies in the sample however for both the import and export price cases a significant positive nonlinear relationship is found for the two largest economies in the sample i e the united states and japan

oil prices and inflation dynamics evidence from advanced and developing economies abstract we study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015 we find that a 10 increase in global oil inflation increases on average domestic inflation by about 0 4 percentage points on impact with the effect vanishing after two years and being similar between advanced and developing economies we also find that the effect is asymmetric with positive oil price shocks having a larger effect than negative ones the impact of oil price shocks however has declined over time due in large part to a more credible monetary policy and less reliance on energy imports we further examine the transmission channels of oil price shocks on domestic inflation during the recent decades by making use of a monthly dataset from 2000 to 2015 the results suggest that the share of transport in the cpi basket and energy subsidies are the most robust factors in explaining cross country variations in the effects of oil price shocks during the period