greenhouse warming comparative analysis of nuclear and efficiency abatement strategies abstract we analyse two popular strategies for reducing fossil fuel carbon dioxide co2 emissions revitalizing nuclear power and improving energy efficiency under highly favourable assumptions for nuclear power in scenarios of moderate to high energy growth we find that even if large nuclear plants 1 000 mw could be built every one to three days from now until 2025 which is impossible in the third world global co2 emissions would still continue to grow thus nuclear power cannot contribute significantly to abating greenhouse warming except possibly in scenarios of low energy growth for which the problem is already largely ameliorated by efficiency improvement in the usa the world s largest producer of co2 each dollar invested in electric efficiency displaces nearly seven times as much co2 as a dollar invested in nuclear power even if the most optimistic aspirations for the future economics of nuclear power were realized today efficiency would still displace between 2 5 and 10 times more co2 per unit investment we conclude that revitalizing nuclear power would be a relatively expensive and ineffective response to greenhouse warming and that the key to reducing future co2 emissions is to improve the energy efficiency of the global economy

adjustment costs and indeterminacy in perfect foresight models abstract this paper suggests a method for resolving indeterminacy of equilibrium in perfect foresight models and applies it to several existing models quadratic adjustment costs are introduced into models with multiple equilibria and the limiting behavior of the resulting solutions is studied as the adjustment costs go to zero the method is shown to be useful in selecting among feasible equilibria in examples in which there is local indeterminacy

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

market distortions and local indeterminacy a general approach we provide a methodology to study the role of market distortions on the emergence of indeterminacy and bifurcations it consists in introducing general specifications for the elasticities of the crucial functions defining the aggregate equilibrium dynamics of the model this allows us to study how market distortions influence the range of values for the elasticity of input substitution under which local indeterminacy and bifurcations occur highlighting the main channels and classes of distortions responsible for indeterminacy most of the specific market imperfections considered in the related literature are particular cases of our framework comparing them we obtain several equivalence results in terms of local dynamic properties applying this methodology to the woodford 30 framework we find that distortions in the capital market per se do not play a major role we further show that for empirically plausible values of elasticity of substitution between inputs indeterminacy requires a minimal degree of distortions this degree seems to be high under output market distortions while with labor market distortions the required degree is empirically plausible

fickle consumers durable goods and business cycles abstract this paper develops a three sector dynamic general equilibrium model with the specific aim of evaluating the role of consumer durables in the generation and propagation of business cycles the model displays indeterminacy at commonly considered realistic parameter restrictions and basically constant returns to scale if calibrated at modest increasing returns to scale the sunspots driven model version produces a close match to moments of aggregate u s data journal of economic literatureclassification numbers e00 e32

evaluating unemployment policies what do the underlying theories tell us the paper surveys unemployment policies for advanced market economies and evaluates them by examining the predictions of the underlying macroeconomic theories the basic idea is that for the most part different unemployment policy prescriptions rest on different macroeconomic theories and our confidence in the prescriptions should depend at least in part on theories ability to predict some salient stylized facts about unemployment behavior the paper considers four types of policies laissez faire demand management policies supply side policies and structural policies copyright 1995 by oxford university press

stationary sunspot equilibria in a finance constrained economy abstract stationary sunspot equilibria are shown to exist in a production economy with infinite lived agents when it is not possible to borrow against future wage income equilibrium fluctuations exhibit persistence over time scales of the same order of magnitude as observed business cycles an active fiscal policy that stabilizes aggregate money expenditures can prevent such fluctuations

comparing four models of aggregate fluctuations due to self fulfilling expectations abstract this paper compares four equilibrium business cycle models with increasing returns to scale production technologies that allow for aggregate fluctuations due to self fulfilling expectations necessary and sufficient conditions for the existence of stationary sunspot equilibria are derived numerical examples demonstrate that the degree of increasing returns necessary for the existence of stationary sunspot equilibria lies in the upper range of available empirical estimates the paper also shows that persistent fluctuations are not a necessary property of these four models when the only source of fluctuations is changes in people s expectations about the future path of the economy journal of economic literature classification numbers e32 d43

sectoral solow residuals this paper presents capital utilization corrected measures of technology shocks for aggregate and disaggregated two digit standard industrial classification code industries we correct for variations in capital utilization by employing industrial electrical use as a measure of capital services in contrast the standard measures of technology shocks used in the real business cycle literature are based on economy wide data and assume that capital services are proportional to the stock of measured capital to assess the impact of these differences we contrast selected properties of the competing technology shock measures we argue that the properties of technology shocks for the manufacturing sector are quite different than those used in the rbc literature we also find that correcting for capital utilization has important implications for the properties of the solow residual

strategic complementarity in business formation aggregate fluctuations and sunspot equilibria the extent to which changes in beliefs can be important factors in initiating economic fluctuations has been a prominent area of investigation for macroeconomists the notion that beliefs about the future influence current decisions is a property of almost all dynamic economic systems the more challenging task is identifying economic environments in which changes in beliefs alone influence current choices in such a way that the variations in beliefs are self fulfilling because the resulting fluctuations arise in the absence of variations in fundamental variables such as preferences and technology they are often termed sunspot equilibria apart from suggesting that instability of expectations may be a distinct source of cyclical volatility sunspot equilibria may also explain why apparently small disturbances in fundamentals lead to large change in macroeconomic aggregates in this study we demonstrate the possibility of sunspot equilibria in an overlappinggenerations economy characterized by a plausible form of strategic complementarity as more agents enter as producers in any particular sector of the economy they create an incentive for agents to enter as producers into other sectors as well 2 the basis for this

money and disaggregate supply in the united states 1950 1982 the impact of money growth and money growth surprises on real output by sector is investigated it is shown that money provides a significant contribution to the explanation of the real output cycles in almost all sectors of the u s economy anticipated money is found to have real effects though there is some evidence that the real impact of money surprises is larger

money output and the trade balance theory and evidence this paper develops a two country equilibrium model of the world economy under floating exchange rates and draws out its implications for co movements of money output and the trade balance the predictions of this model are then compared with those of a fixed price keynesian version of the mundell fleming model the predictions of the two models for co movements of money output and the trade balance are shown to differ on almost all counts empirical evidence on the effects of anticipated and unanticipated changes in money growth rates on output and the trade balance from the recent canadian experience with floating rates is presented and discussed this evidence generally speaking is consistent with the implications of the equilibrium model

a bayesian view of nominal money and real output through a new classical macroeconomic window this study investigates the empirical evidence on the effects of unanticipated changes in nominal money on real output in 47 countries when viewed through a window i e likelihood function that assumes the neutrality of anticipated changes using a bayesian predictivist approach it provides a pedagogical bayesian analysis of generated regressor models in the face of specification uncertainty involving among other things multiple unit roots and trend stationary alternatives

selection and monetary non neutrality in time dependent pricing models for a given frequency of price adjustment monetary non neutrality is smaller if older prices are disproportionately more likely to change selection for the age of prices provides a complete characterization of price setting frictions in time dependent models selection for older prices is weaker and non neutralities are larger if the hazard function of price adjustment is less strongly increasing selection is weaker if there is heterogeneity in price stickiness finally selection is weaker if durations of price spells are more variable in particular the taylor 1979 model exhibits maximal selection for older prices whereas the calvo 1983 model exhibits no selection

free entry and business cycles under the influence of animal spirits abstract we provide a business cycle model in which endogenous markup fluctuations are the main driving force these fluctuations occur due to some form of animal spirits impelling firms in their entry exit decisions within each sector by contrast to existing models of the business cycle emphasizing the role of animal spirits we do not rely on the sink property of the equilibrium to generate indeterminacy hence while our model does pretty well in accounting for the main features of us business cycles it avoids several criticisms addressed to these former models concerning either their dependence upon strongly increasing returns too high markups or their implication of countercyclical movements of consumption

opec s oil exporting strategy and macroeconomic in stability aguiar conraria and wen 2008 argued that dependence on foreign oil raises the like lihood of equilibrium indeterminacy economic instability for oil importing countries we argue that this relation is more subtle the endogenous choices of prices and quantities by a cartel of oil exporters such as the opec can aect the directions of the changes in the likelihood of equilibrium indeterminacy we show that uctuations driven by self ful lling expectations under oil shocks are easier to occur if the cartel sets the price of oil but the re sult is reversed if the cartel sets the quantity of production these results oer a potentially interesting explanation for the decline in economic volatility i e the great moderation in oil importing countries since the mid 1980s when the opec cartel changed its market strategies from setting prices to setting quantities despite the fact that oil prices are far more volatile today than they were 30 years ago

energy conservation in the industrial sector of developing countries abstract this paper begins by examining the most energy intensive industries and methods by which fuel efficiency can be improved next the author analyses the economics of energy conservation using specific case studies drawn from india it is shown that investing in energy efficiency is more economical btu per btu than investing in the enhancement of domestic energy resources the author also assesses changes in the economics of conservation for private firms when there are government incentives finally government policies that can overcome economic and non economic disincentives for investing in energy conservation are examined

understanding self fulfilling rational expectations equilibria in real business cycle models abstract necessary conditions for indeterminacy in standard rbc models have been extensively studied but intuitive understanding of the economic mechanism that generates indeterminacy has yet to be fully explored following the permanent income theory this paper provides an alternative framework for understanding and deriving the technical conditions of indeterminacy in rbc models a virtue of this approach is that in deriving the conditions of indeterminacy one can see clearly not only how indeterminacy arises but also how robust the indeterminacy is to structural perturbations in preferences technologies and market structures

endogenous business cycles and the dynamics of output hours and consumption abstract this paper studies the business cycle fluctuations predicted by a two sector endogenous business cycle model with sector specific external increasing returns to scale it focuses on aspects of actual fluctuations that have been identified both as defining features of business cycles and as ones standard real business cycle models cannot explain for empirically realistic calibrations of the degree of returns to scale the results suggest that endogenous fluctuations do not provide the dynamic element that is missing in existing real business cycle models jel e32

understanding expectation driven fluctuations a labor market approach this paper presents a uni ed analysis of neoclassical models that can generate expectation driven business cycles under anticipated future technology shocks or news shocks it shows that the ability or inability of various rbc models to generate positive comovement of aggregate variables hinges crucially on the structure of the labor market equilibrium the analysis provides a simple and intuitive guide to understanding the existing literature and to searching for new models that can explain the data under news shocks

indeterminacy aggregate demand and the real business cycle abstract we show that under indeterminacy aggregate demand shocks are able to explain not only aspects of actual fluctuations that standard rbc models predict fairly well but also aspects of actual fluctuations that standard rbc models cannot explain such as the hump shaped trend reverting impulse responses to transitory shocks found in us output cogley and nason am econom rev 85 1995 492 the large forecastable movements and comovements of output consumption and hours rotemberg and woodford am econom rev 86 1996 71 and the fact that consumption appears to lead output and investment over the business cycle indeterminacy arises in our model due to capacity utilization and mild increasing returns to scale

capacity utilization under increasing returns to scale abstract this paper overcomes an important objection against the empirical relevance of the benhabib farmer model as a potential account of actual business cycle fluctuations this is attributable to an elasticity effect and a returns to scale effect of capacity utilization these effects are closely related to the empirical puzzles that capital appears to play an insignificant role in explaining cyclical movements in output and that the estimated labor elasticity appears to be larger than labor s share due to these effects multiple equilibria and persistent fluctuations can easily occur in a growth model for externalities mild enough so that the aggregate labor demand curve is downward sloping analyses show that the propagation mechanism generated by capacity utilization under mild increasing returns is capable of explaining the periodic patterns of u s business cycles documented by watson journal of economic literature classification numbers e32 e22 c52

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

the role of the budget deficit during the rise in the dollar exchange rate from 1979 1985 the u s dollar appreciated in value over 40 from early 1979 until it peaked in february 1985 also during this period the u s federal government budget deficit grew from 16b to 200b according to hakkio and higgins 15 it is high u s interest rates and foreign capital inflows into the u s that provide the linkage between these two events there is a considerable debate in the literature as to the precise influence of budget deficits upon these various linkages evans 10 for example suggests that large deficits did not cause the rise in the dollar also there are numerous studies refuting the association between deficits and interest rates see evans 11 and hoelscher 16 for example on the other hand plosser 25 reports a positive association between government spending and interest rates and hoelscher 17 reports a positive association between deficits and long term rates this paper uses an open economy vector autoregression var model to investigate these linkages finding that after controlling for the influence of money inflation the dollar and the trade deficit there is indeed causality running from deficits to long term interest rates the model also identifies a relationship between long rates and the dollar value thus verifying the linkage albeit indirect of budget deficits and the dollar value a second concern is that large budget deficits may have led to an accommodative monetary policy causing excessive money growth rates at times for example from 1982 07 1983 09 ml growth averaged 13 and when the dollar value peaked in 1985 ml was growing at about 12 2 a number of authors have examined this issue yet collectively they have not arrived at a uniform conclusion ahking and miller 1 provide a summary of these studies the majority of these studies suffer from at least one of two faults that i attempt to correct in this paper in particular they either suffer from exogeneity problems stemming from single equation models or they suffer from omitted variable bias due to the exclusion of international variables variance decompositions generated from an open economy var indicate that deficits explain more of the variance of the forecast error of money growth than any other variable the results also verify that deficits affect inflation only through their influence on the money supply

technology shocks in the new keynesian model in the new keynesian model preference cost push and monetary shocks all compete with the real business cycle model s technology shock in driving aggregate fluctuations a version of this model estimated via maximum likelihood points to these other shocks as being more important for explaining the behavior of output inflation and interest rates in the postwar u s data these results weaken the links between the current generation of new keynesian models and the real business cycle models from which they were originally derived they also suggest that federal reserve officials have often faced difficult trade offs in conducting monetary policy

monopolistic competition business cycles and the composition of aggregate demand abstract we develop a dynamic general equilibrium model with monopolistically competitive firms and endogenous markups and show the possibility of equilibria with persistent fluctuations driven by self fulfilling revisions of expectations for some parameter values such fluctuations are characterized by time series properties similar to those observed in u s postwar business cycles in contrast with the existing literature our results do not rely on the presence of increasing returns or nominal rigidities a key ingredient of the model is the link between markups and the composition of aggregate demand some econometric evidence on the latter is also reported journal of economic literature classification number d43 d58 e32

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

a quarterly model of unanticipated monetary growth output and the price level in the u k 1963 1978 abstract this paper develops and estimates using quarterly data from 1963 to 1978 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in the money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were favourable to the model specification in particular anticipated monetary growth was found to have no significant effect on output

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

improving energy efficiency the effectiveness of government action abstract energy conservation involves the substitution of intelligence prudence maintenance and better equipment for scarce insecure and costly energy these substitutions improve efficiency of energy use and thereby enhance economic productivity the benefits of conservation are clear but the proper role for government is hotly debated although the normal workings of the market system are doing much to stimulate cost effective conservation actions several barriers to conservation still exist government programmes are needed to help overcome these barriers present us department of energy conservation programmes could reduce annual energy use by 2 7 quads in 1985 and by 13 quads in 2000 the present worth of the estimated cumulative oil saving over 20 years is 50 billion in addition to the savings realized by energy consumers themselves

did sunspot forces cause the great depression abstract we apply a dynamic general equilibrium model to the period of the u s great depression in particular we examine a modification of the real business cycle model in which the possibility of indeterminacy of equilibria arises in other words agents self fulfilling expectations can serve as a primary impulse behind fluctuations we find that the model driven only by these measured sunspot shocks can explain well the entire depression era that is the decline from 1929 to 1932 the subsequent slow recovery and the recession that occurred in 1937 1938

the cyclical behavior of marginal cost and price the author examines the cyclical behavior of price marginal cost margins for u s manufac turing after 1956 short run marginal cost is markedly procyclical this is primarily due to procyclical overtime payments incurred beca use employment is not perfectly flexible in most industries output price fails to respond to the cyclical movement in marginal cost so price marginal cost margins are markedly countercyclical the res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing they support theories that explain low production in a recession by the inability of firms to sell their output copyright 1987 by american economic association

indeterminacy dynamic adjustment costs and cycles abstract recent work suggests that the standard real business cycle framework possesses multiple equilibria indeterminacy and dampened oscillations in the presence of externalities this paper reports that empirically plausible costs of adjustment make indeterminacy disappear easily while the oscillation mechanism is however perfectly preserved

real business cycle models and the forecastable movements in output hours and consumption the authors study the movements in output consumption and hours that are forecastable from a vector autoregression and analyze how they differ from those predicted by standard real business cycle models they show that actual forecastable movements in output have a variance about one hundred times larger than those predicted by the model the authors also find that forecastable changes in the three series are strongly positively correlated with each other on the other hand for parameters whose implications are plausible in other respects the model implies that output consumption and hours should not all be expected to move in the same direction copyright 1996 by american economic association

inertial inflation indexation and price stickiness evidence from brazil abstract this paper evaluates the inertial inflation hypothesis for brazil the hypothesis posits that indexation created a feedback mechanism such that one time supply shocks were fully transmitted into permanent changes in inflation a theoretical model is used to show that this outcome is based on the assumption of perfect price flexibility however with price stickiness indexation does not produce inertial inflation the degree of inertia is then compared for two periods one without indexation 1945 1963 and one with indexation 1969 1985 finally vector autoregressive representations are estimated for the latter period allowing for price stickiness the empirical results do not support the hypothesis

monetary targets real exchange rates and macroeconomic stability abstract in this paper i develop a model to determine the optimal degree of flexibility in attaining monetary targets in an economy that is affected by shocks in the labor and financial markets i then simulate the model to assess the optimal degree of monetary policy flexibility in spain a country that has adopted monetary targets rigidly since 1978 i show that the model supports the policy choice of that country i also show that the monetary authorities should attribute more importance to real exchange rate movements in choosing their policies if the spanish economy becomes more open to international trade or if the labor market becomes more flexible

services inflation dynamics and persistence puzzle in brazil a time varying parameter approach this article analyses services inflation dynamics in brazil focusing on the services inflation persistence puzzle for monthly data from january 2004 to february 2016 we apply a time varying para

imperfect competition and indeterminacy of aggregate output abstract this paper shows imperfect competition can lead to indeterminacy in aggregate output in a standard dsge model with imperfect competition indeterminacy arises in the model from the composition of aggregate output in sharp contrast to the indeterminacy literature pioneered by benhabib and farmer j benhabib r farmer indeterminacy and increasing returns j econ theory 63 1 1994 19 41 and gali j gali monopolistic competition business cycles and the composition of aggregate demand j econ theory 63 1 1994 73 96 indeterminacy in our model is global hence it is more robust to structural parameters in addition sunspots in our model can be autocorrelated the paper provides a justification for exogenous variations in desired markups which play an important role as a source of cost push shocks in the monetary policy literature our model outperforms a standard rbc model driven by technology shocks in several dimensions including the volatility of labor market and the hump shaped output dynamics

forecasting rational expectations and the phillips curve an empirical investigation abstract the rational expectations version of the phillips curve is empirically evaluated for switzerland using a wide variety of specifications it turns out that the results are highly sensitive to measurement of both the natural rate and expectations of nominal variables no reliable phillips curve seems to exist in addition information on the relative quality of different forecasting schemes is obtained for a number of important macroeconomic variables

the superiority of contingent rules over fixed rules in models with rational expectations the paper investigates the robustness of the proposition that in stochastic models contingent or feddback rules dominate fiped or openloop rules four arguments in favour of fixed rules are considere 1 the presence of an incompetent op malevolent policy maker 2 a trade off between flexibility and simplicity or credibility 3 the new classical proposition that only unanticipated stabilization policy has real effects 4 the time inconsistency of optimal plans in non causal models that is models in which the current state of the economy depends on expectations of future states the main conclusion is that the rational expectations revolution represented by arguments 3 and 4 does not affect the potential superiority of time inconsistent closed loop policies over time inconsistent open loop policies the case against conditionality in the design of policy must therefore rest on argument 1 or 2 which predate the new classical macroeconomics

firm dynamics and markup variations implications for sunspot equilibria and endogenous economic fluctuations this paper analyzes how the interaction between firms entry and exit decisions and variations in competition gives rise to self fulfilling expectation driven fluctuations in aggregate economic activity and in measured total factor productivity tfp the analysis is based on a dynamic general equilibrium model in which net business formation is endogenously procyclical and leads to endogenous countercyclical variations in markups this interaction leads to indeterminacy in which economic fluctuations occur as a result of self fulfilling shifts in the beliefs of rational forward looking agents when calibrated with empirically plausible parameter values and driven solely by self fulfilling shocks to expectations the model can quantitatively account for the main empirical regularities characterizing postwar u s business cycles and for 65 of the fluctuations in measured tfp

unanticipated monetary growth output and the price level u k 1946 1977 abstract this paper develops and estimates using annual data from 1946 1977 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were generally favourable to model specification some features of the price equation are unsatisfactory and the results in this section must be considered tentative

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33