maximum likelihood estimation of cointegration in exchange rate models for seven inflationary oecd countries abstract we apply the johansen technique to estimate cointegration in a monetary exchange rate model modified for real exchange rate fluctuations and applied to seven inflationary oecd countries we generally find one or more cointegrating vectors and the signs of their coefficients are broadly consistent with the modified monetary model the adjustment coefficients are also examined our statistical testing is based on bootstrapping and generates much more conservative rejection criteria than the use of asymptotic critical values even after a substantial degree of freedom correction power estimates are also presented finally we conclude that the monetary model unmodified for real exchange rate fluctuations would be inadequate

understanding heterogeneous preferences in random utility models a latent class approach a finite mixture approach toconditional logit models is developed in whichlatent classes are used to promoteunderstanding of systematic heterogeneity the model is applied to wilderness recreationin which a branded choice experiment involvingchoice of one park from a demand system wasadministered to a sample of recreationists the basis of membership in the classes orsegments in the sample involved attitudinalmeasures of motivations for taking a trip aswell as their stated preferences overwilderness park attributes the econometricanalysis suggested that four classes of peopleexist in the sample using the model toexamine welfare measures of some hypotheticalpolicy changes identified markedly differentwelfare effects than the standard singlesegment model and provided insight into thedifferential impact of alternative policies

exchange rates inflation and money supply in turkey abstract a radical reform package has been implemented in turkey in the post 1980 era involving simultaneously short run adjustment and transition to an outward oriented regime a major area where the programme has failed to register a significant success has been in the sphere of inflation high and volatile rates of inflation continue to be a characteristic feature of the turkish economy this paper seeks to explain the persistence of this phenomenon with reference to the interactions between exchange rate price level and money supply the study employs monthly data and the period under consideration is january 1981 to december 1987 distinguished by managed exchange rate flexibility results of a four variable vector autoregressive model are presented and analyzed these in turn provide the basis for a small scale model in which high powered money price level exports and the exchange rate are simultaneously explained judged in terms of its overall fit the model appears to be quite successful in accounting for the persistence phenomenon in the post 1980 period

valuing the attributes of renewable energy investments increasing the proportion of power derived from renewable energy sources is becoming an increasingly important part of many countries s strategies to achieve reductions in greenhouse gas emissions however renewable energy investments can often have external costs and benefits which need to be taken into account if socially optimal investments are to be made this paper attempts to estimate the magnitude of these external costs and benefits for the case of renewable technologies in scotland a country which has set particularly ambitious targets for expanding renewable energy the external effects we consider are those on landscape quality wildlife and air quality we also consider the welfare implications of different investment strategies for employment and electricity prices the methodology used to do this is the choice experiment technique renewable technologies considered include hydro on shore and off shore wind power and biomass welfare changes for different combinations of impacts associated with different investment strategies are estimated we also test for differences in preferences towards these impacts between urban and rural communities and between high and low income households

how much is too much an investigation of the effect of the number of choice sets context dependence and the choice of bid vectors in choice experiments in a split sample design we examine how the number of choice sets design of the first choice set context dependence and the choice of attribute levels in the cost attribute affect the precision in the elicited preferences in otherwise completely identical choice experiment surveys these issues are investigated for swedish households marginal willingness to pay to reduce power outages our results indicate that neither the number of choice sets nor the design of the first choice set has a significant impact on estimated marginal willingness to pay while the effect was significant for the additive scaling of the cost vector at the end of the article we discuss the implications of our results on future developments and applications of choice experiments

the speculative attack on the peso and the real exchange rate argentina 1979 1981 abstract this article applies a speculative attack model to argentina during its pre announced exchange rate system from january 1 1979 to june 30 1981 the model attempts to verify a rule whereby if domestic credit growth exceeds the rate of currency depreciation two things occur first the domestic price of non traded goods rises relative to the price of traded goods second foreign reserves decline until a point when a sudden speculative attack depletes remaining reserves causes a precipitous fall in the relative price of non tradables and forces the country onto a floating exchange rate regime in some important respects the model captures the argentinian experience yet in other respects if fails to do so

strategic aspects of exchange rate policy in a developing country abstract in an economy facing inflation and external deficit the non cooperative behavior of the players introduces an inflationary bias which is eliminated if the government acts as a stackelberg leader the terms of trade is altered only with excess supply in the non traded goods sector through fiscal contraction

real exchange rate targeting and inflation in turkey an empirical analysis with policy credibility abstract in this paper we make an empirical investigation into the conflict among objectives under a real exchange rate policy i e between the trade balance and domestic inflation this occurs when the nominal exchange rate is managed to achieve a certain level of the real exchange rate in order to main external competitiveness our empirical analysis draws on the turkish case whereby the exchange rate has been the key policy instrument since the 1980s the results from the simulation experiments with a well defined macromodel where the devaluation expectations are explicitly considered indicate moderate inflationary consequences of a real exchange rate policy based on the relative purchasing power parity ppp rule in turkey moreover a real exchange rate appreciation is found to be contractionary these are common characteristics of the demand determined output case another major conclusion is that the exchange rate policy can provide an anchor for price stability only if it is credible

inflation and the financing of government expenditure an introductory analysis with an application to turkey this article presents a simple framework to assess the consistency of appropriately defined fiscal deficits with other macroeconomic targets such as inflation it also considers the relation of fiscal deficits to output growth real exchange rate developments and management of internal and external debt finally it considers the implications of relying on interest bearing government debt to postpone the adjustment necessary to restore consistency with inflation targets it demonstrates how the intertemporal budget constraint of the government creates a tradeoff between current and future adjustment real interest rates and output growth rates are shown to determine the terms at which this tradeoff takes place the usefulness of this framework is demonstrated through an analysis of fiscal policy options in turkey in 1985

a survey of the literature on the optimal peg abstract it is widely agreed that floating is not an appropriate exchange rate policy for most developing countries but in a world of generalized floating the question of exchange rate policy is not resolved by deciding to peg rather than to float it is also necessary to decide to what to peg this is the question of the optimal peg on which a significant literature has emerged since 1976 the present paper provides a survey of that literature section 2 summarizes the principal papers section 3 compares the objectives and rules advocated by different authors section 4 evaluates the alternative approaches arguing that in general the peg should be chosen to stabilize the nominal trade weighted effective exchange rate section 5 considers whether this criterion points to the sdr as a satisfactory peg

optimal electricity supply reliability using customer shortage costs abstract this paper describes an economic cost benefit method for determining the optimal power system capacity and reliability of electricity supply using customer shortage costs the approach is based upon identifying a system plan that simultaneously considers cost of service as well as value of service and maximizes the net economic benefits taking into account the interdependence between electricity reliability price and demand in contrast to the existing literature on this subject which considers only customer outage costs this paper argues that it is the related but considerably broader notion of customer shortage cost that is more relevant in the context of optimizing the reliability of electricity supply the paper develops a method for estimating shortage costs and sketches an integrated framework for optimizing reliability using such costs

systematic skewness in asset pricing an empirical examination of the taiwan stock market this paper is an empirical study of asset pricing with the systematic skewness in the pricing model we adopt the fama french three factor model which incorporates the firm size and book to market ratio in asset pricing as the base case and then includes the skewness factor used by harvey and siddique in the pricing model the evidence shows that systematic skewness is significant and might be important in asset pricing when portfolios are formed by industry firm size book to market or momentum strategies when portfolios are constructed by momentum or coskewness strategies lower momentum or lower coskewness portfolios exhibit higher skewness and higher kurtosis when portfolios are grouped by excess returns it is seen that the average excess return is positively correlated with size and coskewness thus the systematic skewness is closely related to firm size and the relationship between systematic skewness and excess return is obscured by the reverse firm size effect

a critical evaluation of exchange rate policy in turkey abstract this paper reviews and critically evaluates the exchange rate policy followed in turkey in the post 1980 period during which a far reaching program of liberalization has been launched we conclude that the new exchange rate policy has been essential for turkey s regaining its creditworthiness furthermore it has positively contributed to growth of output and exports and to expansion of tradables production relative to nontradables persistence of inflation and weakness of private investment in tradables overshadow the successes recorded in other areas and cast doubt over the sustainability of turkey s outward orientation we argue that the root cause of these problems has been inconsistencies between overall economic policies rather than the exchange rate policy itself we compare the period of real appreciations since late 1998 with the earlier period of real depreciations and draw policy implications

external debt inflation and the public sector toward fiscal policy for sustainable growth which tradeoffs are involved in formulating an external debt strategy should expenditure be cut to improve the current account or will this reduce future output growth thus undermining the benefits of any debt reduction are there alternatives that allow satisfactory output growth without jeopardizing creditworthiness how can the necessary surplus of savings over investment be brought about at levels of investment high enough to sustain output growth should the government contribute to the internal adjustment by reducing its deficit macroeconomic targets for inflation and growth and creditworthiness constraints on debt issue impose restrictions on the extent to which deficits can be financed can the government cover the deficit within these targets and constraints the absence of such consistency forebodes future policy change and so undermines the credibility of the adjustment program the author uses empirical work on turkey to illustrate the interactions between fiscal deficits and the macroeconomic variables upon which fiscal consistency hinges

economic costs of electricity supply interruptions us and foreign experience abstract this paper investigates the costs of interruptions in electricity service to customers this information is a key input in planning power system reliability using an economic cost benefit approach the paper reviews the literature from the perspective of identifying alternate methodological approaches used their strengths and weaknesses and potential for bias it presents and compares outage cost estimates found in the literature on a common denominator basis it attempts to explain the sources of the wide range of variation observed in different study estimates and it identifies the need for further work on this important topic

exchange rate based disinflation wage rigidity and capital inflows real exchange rate appreciation usually accompanies stabilization programs based on the exchange rate one thing that causes the real exchange rate to appreciate is the capital inflows that follow liberalization of the capital account and the financial market capital inflows cause the exchange rate to appreciate in part because of the resulting increase in expenditures this appreciation is exacerbated if there is some price rigidity and if control of the money supply is only partial all these conditions existed during chile s experiment with exchange rate based disinflation between 1978 and 1981 simulating what might have been the authors study how exchange rate based disinflation affects expenditures switching and reduction when wages are partially indexed in some segments of the labor market the paper also shows the extent to which a more flexible rule on wage indexing would have offset the adverse impact of lower capital flows on protected sector employment

does it matter when a power outage occurs a choice experiment study on the willingness to pay to avoid power outages using a choice experiment survey the marginal willingness to pay wtp among swedish households for reductions in power outages is estimated the results from the random parameter logit estimation indicate that the marginal wtp increases with the duration of the outages and is higher if the outages occur during weekends and during winter months moreover the random parameter logit model allows us to estimate a sample distribution of wtp and we find a significant unobserved heterogeneity in some of the outage attributes given that households have negative welfare effects from outages it is important that policy makers consider these negative impacts on household utility when regulating the swedish electricity market

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

stabilization policies in developing countries what have we learned abstract the paper reviews the recent experience with stabilization programmes in latin america in the light of traditional and monetarist models of inflation and the exchange rate the traditional model links both inflation and payments problems to budget deficits the monetarist model too believes that inflation is caused by fiscal deficits but it takes a more optimistic view of stabilization full purchasing power parity and perfect capital mobility make stabilization just a question of the appropriate exchange rate policy and the proper rate of domestic credit creation the traditional view is substantially right as a long run model but it fails in the dynamics the monetarist model is as we know now fundamentally wrong as a short run description of the possibilities of inflation control there is need and room for a paradigm that places emphasis on the debt money mix in financing the budget on the stickiness of inflation rates and on the place of short run real exchange rate and real interest rate variations that these are key features of the transition phase is amply borne out by the devasting and unsuccessful experiences with monetarist stabilization in argentina chile and brazil

financial policy and speculative runs with a crawling peg argentina 1979 1981 abstract in this paper we present a model of a balance of payments crisis and examine the argentine experiment with a crawling peg between december 1978 and february 1981 the approach taken allows us to examine the evolution of a crisis when a collapse is not perfectly foreseen and yields plausible estimates of one month ahead probabilities of a collapse of the crawling peg the results suggest that the viability of an exchange rate regime depends on the consistency of exchange rate policy with domestic credit policy if the two are not consistent confidence in exchange rate policy is undermined

using a choice experiment to account for preference heterogeneity in wetland attributes the case of cheimaditida wetland in greece abstract this paper aims to assist policy makers in formulating efficient and sustainable wetland management policies in accordance with the ramsar convention and the european union water framework directive 2000 60 ec by providing results of a valuation study on the cheimaditida wetland in greece a choice experiment is employed to estimate the values of changes in several ecological social and economic functions that cheimaditida wetland provides to the greek public in addition to the conditional logit model a random parameter logit model a random parameter logit model with interactions and a latent class model are estimated to account for heterogeneity in the preferences of the public for the various functions of the wetland the results reveal that there is considerable preference heterogeneity across the public and on average they derive positive and significant values from sustainable management of this wetland the estimated economic benefits of sustainable wetland management are weighed against the costs of alternative wetland management scenarios results of this cost benefit analysis can aid in the design of socially optimal policies for sustainable management of the cheimaditida wetland with possible implications for other similar wetlands in greece and the rest of europe

exchange rate management and stabilization policies in developing countries abstract we outline three channels via which a devaluation has a direct contractionaly impact on the aggregate supply side of the economy local currency costs of intermediate imports wage indexing in the presence of food imports and reduced volume of real credit to firms contractionary effects via the supply side are more damaging than krugman taylor effects via aggregate demand since a cut in aggregate supply leads to upward pressure on inflation while a cut in aggregate demand tends to abate inflation upward pressure on inflation may over time threaten the increase in competitiveness a nominal devaluation also intends to achieve we also discuss the implications of a substantial foreign debt we demonstrate that a successful devaluation raises the real in terms of domestic goods debt service burden causing a krugman taylor like contractionary effect on aggregate demand we then analyse the effects of a preannounced slowdown of the rate of depreciation our results of course do not imply that a devaluation should never be considered they do suggest however that a devaluation is likely to be an ineffective tool for demand management since it may cut aggregate supply as much or more in the short run

an overview of turkey s experience with economic liberalization and structural adjustment abstract turkey s recovery from its debt crisis during the 1980s provides a good example for study the most successful aspect of turkish experience was the remarkable growth in exports liberal policies were implemented extensively to restructure the economy but in terms of their impact on the real economy the outcome has been disappointing while income distribution deteriorated internal resource mobilization failed to materialize successful growth in exports was only partly influenced by economic policies such as subsidies which fell outside the liberal category under present circumstances where self sustaining growth is increasingly urgent explicit policies targeting private investment have become necessary

stabilization with exchange rate management stabilization programs in open economies typically consist of two stages in the first stage the rate of currency devaluation is reduced but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves making a future policy change necessary only later at a second stage is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit we study how different second stage policy changes affect economic dynamics during the first stage these changes include tax increases budget cuts on traded and nontraded goods and increases in the growth rate of money

estimating the willingness to pay for reliable electricity supply a choice experiment study abstract this research examines households willingness to pay wtp for an improved electricity service households stated wtp is estimated using the choice experiment ce method the data used in the estimations come from 350 in person interviews conducted during the period 5 22 august 2008 in north cyprus compensating variation cv estimates for a zero outage scenario are calculated using the parameter estimates from the mixed logit ml model these are 6 65 ytl turkish lira per month 3 02 usd for summer and 25 83 ytl per month 11 74 usd for winter in order to avoid the cost of outages households are willing to incur a 3 6 and a 13 9 increase in their monthly electricity bill for summer and winter respectively the wtp per hour unserved is 0 28 ytl 0 13 usd for summer and 1 08 ytl 0 49 usd for winter a preliminary cost benefit analysis indicates that the annualized economic benefits are approximately 42 7 million ytl 19 4 million usd for the residential sector this would justify an investment in additional generation capacity of approximately 268 mw which is far more than that which is needed to eliminate the service reliability problem