reflections on the nature and policy implications of planning restrictions on housing supply discussion of planning policy planning practice and housing supply by kate barker planning is about other things as well but it is fundamentally an economic activity it allocates a scarce resource but independently of prices or any market information in analysing the effects this allocative mechanism has on housing supply or indeed the supply of buildings for any given use we need to think carefully about what exactly it is that planning allocates and whether in its operation it creates a constraint on the supply of what it is allocating in the british case our planning system does not operate on the supply of housing directly but indirectly via the constraint imposed on land supply given the income elasticity of demand for space this has policy implications perhaps even more serious than is acknowledged by barker

putting the present value model into practice a comparison of two alternative approaches abstracta key issue around putting the present value model into practice is how to construct the unobserved future expectations of the fundamental variables related to an asset one approach is to fit a vector autoregression var for the fundamental variables and deduce their future expectations from the estimated var an alternative is to directly specify the future expectations as unobserved components uc and use the kalman filter to extract their estimates from the realized data this article examines whether the predictions of the present value model are consistent across the two approaches constructing the var and uc versions of the standard present value model we examine how the two versions compare in identifying the main driver of the us and uk housing markets for the uk the two approaches consistently attribute most variations in the price rent ratio to the expected future risk premium for housing investment for the us however the two approaches deliver considerably different results t

the feeble link between exchange rates and fundamentals can we blame the discount factor recent research demonstrates that the well documented feeble link between exchange rates and economic fundamentals can be reconciled with conventional exchange rate theories under the assumption that the discount factor is near unity engel and west 2005 we provide empirical evidence that this assumption is valid lending further support to the above explanation of the empirical disconnect between nominal exchange rates and fundamentals

exchange rate predictability in a changing world an expanding literature articulates the view that taylor rules are helpful in predicting exchange rates in a changing world however taylor rule parameters may be subject to structural instabilities for example in the aftermath of the global financial crisis this paper forecasts exchange rates using taylor rules with time varying parameters tvp estimated by bayesian methods focusing on the data from the crisis we improve upon the random walk for at least half and for as many as seven out of 10 of the currencies considered results are stronger when we allow the tvp of the taylor rules to differ between countries

a productivity model of city crowdedness abstract population density varies widely across us cities a simple static general equilibrium model suggests that moderate sized differences in cities total factor productivity can account for such variation nevertheless the productivity required to sustain above average population densities considerably exceeds estimates of the increase in productivity caused by such high density in contrast increasing returns to scale may be able to sustain multiple equilibria at below average population densities

should we pay attention to investor attention in forex futures market we investigate whether forex futures dynamics is responsive to change in investor attention the currencies used in the study are the aud australian dollar cad canadian dollar eur euro gbp

agricultural land values and the value of rights to future land development we investigate the inuence of fu ture land development on current agricultural land values from a theoretical model of land markets we derive a reduced form expression for agricultural land values in terms of observable variables this result dictates the speci cation of our econometric model and we nd strong sup port for the model in an application to new york state the estimated model together with a spa tial interpolation algorithm is used to generate a surface of estimated development rights values for orange county this approach overcomes several problems that arise with the use of stan dard appraisal methods to value conservation easements jel q24

testing the monetary model of exchange rate determination new evidence from a century of data abstract we test the long run monetary model of exchange rate determination for a collection of 14 industrialized countries using data spanning the late nineteenth or early twentieth century to the late twentieth century interestingly we find support for a simple form of the long run monetary model in over half of the countries we consider for these countries we estimate vector error correction models to investigate the adjustment process to the long run monetary equilibrium in the spirit of meese and rogoff journal of international economics 14 1983 3 24 we also compare nominal exchange rate forecasts based on monetary fundamentals to those based on a naive random walk model

investigating the sensitivity of equilibrium profits to advertising dynamics and competitive effects the author investigates the validity of the flat maximum principle the insensitivity of a firm s profits to changes in its optimal advertising level in a duopolistic market in which advertising by the two firms has carryover effects two alternative competitive scenarios are examined i in which total industry sales are allowed to vary over time and ii where firms are engaged in market share rivalry for i the open loop nash equilibrium advertising strategies for the firms are derived assuming a specific sales response function and an infinite time horizon a numerical analysis of the sensitivity of firms profit functions to advertising expenditures is performed at different levels of the a discount rate b advertising elasticity and c advertising decay rate an empirical illustration from the pharmaceutical industry is provided special cases of the model formulation are examined analytically in order to highlight the intuition behind the flatness of the maximum and to study the sensitivity of results obtained to choice of equilibrium strategy closed loop vs open loop for the market share game closed loop policies are considered and the flat maximum principle is illustrated in the context of coke pepsi rivalry in the soft drinks market

fundamentals and exchange rate prediction revisited this paper measures latent fundamental exchange rates with independent component based rates constructed from a cross section of exchange rates and then uses their deviations from exchange rates to forecast empirical results indicate that the independent component based model and its taylor rule and purchasing power parity augmented models are superior to the random walk in predicting exchange rates these results are robust to several scenarios and are likely to be observed if the us sources and the recursive scheme are applied our results reveal that information regarding the third moment of exchange rate changes is helpful to explain exchange rate movements

negotiations and exclusivity contracts for advertising exclusive advertising on a given media outlet is usually profitable for an advertiser because consumers are less aware of competing products however for such arrangements to exist media must benefit as well we examine conditions under which such exclusive advertising contracts benefit both advertisers and media outlets referred to as stations by illustrating that exclusive equilibria arise in a theoretical model of the media advertisers and consumers who participate in both the product and media markets in the model stations sell advertising space to advertisers and broadcast advertising messages to consumers conditions leading to higher equilibrium levels of advertising can be unprofitable for advertisers because high levels of advertising make consumers better informed and thus lead to fiercer product price competition as a result media stations may be less profitable as well because their payoff is determined as a fraction of the advertiser surplus generated in the product market stations mitigate this effect by offering advertisers exclusive advertising contracts with such contracts consumers are less informed about competing products yielding higher producer surplus it is profitable for stations to offer exclusivity when commercial advertising is an important means for advertisers to inform consumers about their products

the welfare economics of land use planning abstract this paper presents an empirical methodology for the evaluation of the benefits and costs of land use planning the technique is applied in the context of the town and country planning system of the uk and examines the gross and net benefits of land use regulation and their distribution across income groups the results show that the welfare and distributional impacts can be large

channel coordination over time incentive equilibria and credibility abstract the paper studies a channel of distribution consisting of a manufacturer and a retailer in a dynamic game of pricing and advertising the carry over effects of channel member s advertising efforts are summarized in a stock of advertising goodwill each channel member has perfect information about the other channel member s price and advertising effort if each firm employs marketing strategies that are linear functions of the other member s actions and these strategies are jointly carried out a pareto optimal joint profit maximization outcome can be realized the paper also addresses the question of credibility of the incentive strategies

housing market capitalization of energy saving durable good investments energy conservation in the residential sector depends in large measure upon the willingness of builders and homeowners to invest in the durable goods which result in an energy efficient house since these durable goods generally become attached permanently to the dwelling unit and since ownership of the unit is likely to change within the expected lifetime of the installed equipment the incentive to invest in conservation measures depends upon the efficiency of the housing market in capitalizing the financial benefits of future fuel savings this paper examines housing market efficiency in this regard by first estimating an hedonic price index with the annual fuel bill included as an explicit attribute of the structure then from the estimated hedonic price of a one dollar reduction in annual fuel costs and assumed fuel price escalation rates and remaining lifetimes of the equipment implicit housing market discount rates are calculated the relatively low estimated discount rates indicate that the housing market performs efficiently in capitalizing future fuel savings

taylor rules and the deutschmark dollar real exchange rate we explore the link between an interest rate rule for monetary policy and the behavior of the real exchange rate the interest rate rule in conjunction with some standard assumptions implies that the deviation of the real exchange rate from its steady state depends on the present value of a weighted sum of inflation and output gap differentials the weights are functions of the parameters of the interest rate rule an initial look at german data yields some support for the model

the monetary model strikes back evidence from the world abstract we revisit the dramatic failure of monetary models in explaining exchange rate movements using the information content from 98 countries we find strong evidence for cointegration between nominal exchange rates and monetary fundamentals we also find fundamentals based models very successful in beating a random walk in out of sample prediction

trial awareness advertising decisions a control problem with phase diagrams with non stationary boundaries abstract the paper presents a solution to a diffusion process in which advertising has two goals awareness creation and trial inducement it is shown that the advertising time paths can be either monotonic or single peaked the solution technique involves phase diagrams where the boundaries are non stationary general discussion of such techniques is provided the paper proves the existence of a stationary equilibrium to which the paths converge furthermore this two state variables two control variables equilibrium point is conditionally stable

the many player advertising game this study extends the time variant closed loop strategy of fruchter and kalish 1997 to the n player advertising game we demonstrate that solving an n player game using 2 players results in overadvertising

british planning policy and access to housing some empirical estimates there is evidence that the implementation of the planning system creates scarcity rents for land in different uses by acting as a constraint on land supply this paper provides for 1984 estimat

an empirical investigation of advertising strategies in a dynamic duopoly the equilibrium profit maximizing advertising policies of firms operating in a dynamic duopoly are derived by linking in a single framework the econometric estimation of the market response function and the technique of differential games that characterizes dynamic competitive behavior we use the lanchester model of combat to represent the system dynamics that capture the competitive shifts due to investments in advertising by the two market rivals we determine the equilibrium advertising levels using both closed and open loop policies we also compare these equilibrium advertising policies for each firm to those obtained using an optimal control theory formulation wherein the advertising spending levels of the rival are assumed to be known the empirical results obtained by analyzing the advertising rivalry between coke and pepsi for the period 1968 1981 under the above three alternative spending policies provide some interesting insights into the nature of competition between these two market rivals a significant contribution of this paper is to extend the existing literature on advertising competition by integrating theoretical and empirical analyses

a closer look at long run u s money demand linear or nonlinear error correction with m0 m1 or m2 i introduction the stability of money demand has been a long standing issue 1 lucas 1988 informally analyzes the stability of a log linear m1 money demand function and concludes that real money demand is a stable function and he supports earlier findings of meltzer 1963 with an income or wealth elasticity of around unity 2 with the development of cointegration methods engle and granger 1987 numerous empirical studies have applied these techniques to long run u s money demand examples are baba hendry and starr 1992 haferand jansen 1991 hoffman and rasche 1991 and miller 1991 who find support for a cointegrated money demand model with either m1 or m2 3 king et al 1991 also find support for cointegration with m2 and a short term interest rate in contrast to these studies others have argued against a stable u s money demand function in the postwar period for example friedman and kuttner 1992 do not find support for cointegration particularly when the period march 1970 to april 1990 is considered similarly miyao 1996 studies the behavior of the m2 money demand function over the period from 1959 to 1993 with quarterly data and various interest rates in levels and in logs miyao concludes that m2 is not a useful intermediate target for monetary policy in the 1990s 4 however carlson et al 2000 reach the conclusion that m2 does have predictive content for nominal economic activity and that the real m2 money demand function is stable but only after accounting for financial innovation in the first half of the 1990s two recent papers ball 2001 and stock and watson 1993 focus on especially long data sets for the united states and m1 stock and watson 1993 analyze various estimation methods for cointegrating relationships and illustrate their performance for money demand functions with annual data from 1900 to 1987 they pay particular attention to the postwar period and use monthly data in addition to annual data for this period they employ a semi log linear real m1 money demand model with real net national product and the level of the 6 mo commercial paper rate for the postwar period they also consider the 90 day treasury bill rate and the 10 yr treasury bond rate they compare and contrast their results to those of various others they also carry out recursive estimations to check their results for stability stock and watson 1993 conclude that a long span of data is needed to estimate long run money demand functions precisely their overall evidence is in favor of a stable long run money demand function with an income elasticity near one and an interest rate semielasticity near 0 10 however the postwar data are found to be not very informative a lack of low frequency variation in the postwar data as suggested by lucas 1988 does not allow a disentangling of the effects of output and interest rates on money demand for this time period estimates are imprecise and sensitive to subsample specifications due to substantial colinearity ball 2001 revisits the m1 money demand model of stock and watson 1993 using the same data set but extended through 1996 he applies the same array of estimation techniques as stock and watson did ball obtains precise estimates over the postwar period for his extended data set an income elasticity of approximately 0 5 and a semielasticity of 0 05 for the interest rate he does not find support for a velocity specification the m1 model is not stable over the period 1900 1996 lutkepohl terasvirta and wolters 1999 apply a nonlinear error correction model with smooth transition adjustment to capture instabilities in the linear cointegration model the long run equilibrium is described by a linear cointegrating relation and the adjustment to this long run equilibrium is nonlinear they analyze german m1 money demand granger and terisvirta 1993 terasvirta 1998 and van dijk terasvirta and franses 2002 provide details on the econometric theory for estimating and testing such nonlinear models

competitive dynamic advertising a modification of the case game abstract in this paper we consider a modified version of the advertising differential game of case 1979 we derive non cooperative nash equilibria for open loop controls as well as for feedback strategies we consider finite and infinite planning horizons the feedback equilibrium is shown to be robust against stochastic disturbances of the state equation

hedonic prices property values and measuring environmental benefits a survey of the issues this paper provides a review of the theoretical basis and the assumptions required in order to use hedonic price equations derived from property value data to obtain measures of the prices and the inverse demand functions for environmental amenities such as air quality it also includes a review and assessment of existing empirical applications of the technique to problems of air and water quality and urban noise

factor costs and factor use substitution among urban land and capital inputs in the production of single family housing this paper uses cost functions to test the hypothesis of constancy of the elasticity of substitution among land and capital inputs in the production of single family housing the findings suggest that the substitution parameter varies over the range of the sample the hypothesis of homotheticity in the production is also rejected this implies that the ces and cobb douglas production functions are not suitable for urban housing production modelling the analysis has been carried out by imposing much weaker restrictions as a part of the maintained hypotheses than has been the case in the recent literature

the contribution of economic fundamentals to movements in exchange rates starting from the asset pricing approach of engel and west we examine the degree to which fundamentals can explain exchange rate fluctuations we show that it is not possible to obtain sharp inferences about the relative contribution of fundamentals using only data on observed monetary fundamentals money minus output differentials across countries and exchange rates we use additional data on interest rate and price differentials along with the implications of the monetary model of exchange rates to decompose exchange rate fluctuations in general we find that money demand shifts along with observed monetary fundamentals are an important contributor to exchange rate fluctuations

optimal pricing and advertising policies for new product oligopoly models in this paper our previous work on monopoly and oligopoly new product models is extended by the addition of pricing as well as advertising control variables these models contain bass s demand growth model and the vidale wolfe and ozga advertising models as well as the production learning curve model and an exponential demand function the problem of characterizing an optimal pricing and advertising policy over time is an important question in the field of marketing as well as in the areas of business policy and competitive economics these questions are particularly important during the introductory period of a new product when the effects of the learning curve phenomenon and market saturation are most pronounced we consider first the monopoly case with linear advertising cost exponential demand and three different pricing rules the optimal variable pricing the instantaneous marginal pricing and the optimal constant pricing rules several theoretical results are established for these rules including the facts that the instantaneous marginal pricing rule is a myopic version of the optimal pricing rule and the optimal constant pricing rule is a weighted average over time of the instantaneous marginal pricing rule another surprising result is that after the market is at least half saturated a pulse of advertising must be preceded by a significant drop in price numerical solutions of a number of examples are discussed oligopolistic models are analyzed as nonzero sum differential games in the rest of the paper the state and adjoint equations are easy to write down but impossible to solve in closed form hence we describe how to reformulate these models as discrete differential games and give a numerical algorithm for finding open loop nash solutions the latter was used to solve three triopoly models in each case it was found that optimal prices and advertising rates start high and steadily decline

the structure of production in urban housing a multi input cost function approach this paper uses a two stage cost function model to analyse substitution possibilities among inputs in the production of urban housing aggregate price indexes for groups of inputs are generated in the first stage and then used in the estimation of the aggregate cost function in the second stage the procedure is valid under the assumption of weak separability the use of flexible functional forms at both stages allowed the analysis to be carried out by imposing fewer restrictions as a part of the maintained hypothesis than has been the case in the previous literature the findings are consistent with the postulates of cost minimising factor demand theory

recent developments in dynamic advertising research a variety of continuous time differential functions have been developed to investigate dynamic advertising problems in business and economics fields since major dynamic models appearing before 1995 have been reviewed by a few survey papers we provide a comprehensive review of the dynamic advertising models published after 1995 which are classified into six categories i nerlove arrow model and its extensions ii vidale wolfe model and its extensions iii lanchester model and its extensions iv the diffusion models v dynamic advertising competition models with other attributes and vi empirical studies for dynamic advertising problems for each category we first briefly summarize major relevant before 1995 models and then discuss major after 1995 models in details we find that the dynamic models reviewed in this paper have been extensively used to analyze various advertising problems in the monopoly duopoly oligopoly and supply chain systems our review reveals that the diffusion models have not been used to analyze advertising problems in supply chain operations which may be a research direction in the future moreover we learn from our review that very few publications regarding dynamic advertising problems have considered the supply chain competition we also find that very few researchers have used the diffusion model to investigate the dynamic advertising problems with product quality as a decision variable and the pricing decision has not been incorporated into any extant lanchester model the paper ends with a summary of our review and suggestions on possible research directions in the future

order flows and the exchange rate disconnect puzzle abstract the aim of this paper is to establish the link between the high frequency dynamics of spot exchange rates and developments in the macroeconomy to do so i first present a theoretical model of exchange rate determination that bridges the gap between existing microstructure and traditional models the model examines how dispersed microeconomic information known to individual agents outside the foreign exchange market is aggregated and transmitted to dealers via transaction flows i e order flow and how the information is then embedded in the spot exchange rate i then report empirical evidence that strongly supports the presence of the link between the macroeconomy order flow and high frequency exchange rate returns implied by the model in fact my empirical results indicate that between 20 and 30 of the variance in excess currency returns over one and two month horizons can be linked back to developments in the macroeconomy this level of explanatory power is an order of magnitude higher than that found in traditional models even the newly developed monetary models incorporating central banks reaction functions moreover it provides a straightforward solution to the exchange rate disconnect puzzle namely the high frequency behavior of spot exchange rates reflects the flow of new information reaching dealers concerning the slowly evolving state of the macroeconomy rather than the effects of shocks that drive rapidly changing macroeconomic conditions

consistent estimates of the elasticity of substitution between land and non land inputs in the production of housing abstract this paper reports new estimates of the elasticity of substitution between land and non land inputs in the production of housing errors in the measurement of land value may have biased existing estimates of the substitution elasticity downward leading to the conclusion that the substitution elasticity is less than one the data analyzed in this study consist of observations on the transaction prices of both the lot and the house obtained by tracking the development of residential subdivisions the results indicate that the substitution elasticity is higher than indicated in previous studies and may not differ significantly from one

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

on the price of land and the value of amenities a house represents not only a bundle of structural characteristics but also a set of location specific characteristics adding locational coordinates and site area to other house characteristics makes it possible to estimate a land rent surface as well as thle hedonic prices attached to local patterns of land use and other neighbourhood characteristics one can then estimate how the value of such location specific characteristics are capitalized into land prices this analysis illustrated with estimates based on data from two british towns has a number of wider implications it generates a more parsimonious method of estimating amenity values it also reveals likely systematic biases produced by conventional hedonic studies which exclude land and location finally it clarifies the conceptual definition of land and suggests that monocentric models can perform well despite recent criticism

factors of the term structure of sovereign yield spreads abstract we investigate the term structure of sovereign yield spreads for five advanced economies against the us and provide novel insights on the key drivers of the term structure we show that the spread term structure dynamics are driven by three latent factors which can be labeled as spread level slope and curvature similar to common interpretations found in the yield curve literature we further show that these estimated spread factors have predictive power for exchange rate movements and excess returns above the predictability of an uncovered interest rate parity approach as the yield curve contains information about expected future economic conditions we conjecture that these yield spread factors reflect expected macroeconomic differentials which in turn drive exchange rates using the information content of yield spread curves may thus be a promising approach to improve the forecasting accuracy of exchange rate models