an alternative view of pricing in retail food markets the pricing mechanism of intracity retail food markets has received the attention of agricultural economists who are interested in the competitive nature of food price determination attention has focused on the information theory paradigm and potential impact of publically available comparative price reports in this paper a spatial economic model is developed to describe and analyze consumer choice seller behavior and price determination in retail food markets empirical evidence is then used to test hypotheses developed from the spatial model it is concluded that the spatial model offers added explanatory power of observed food market responses to retail price reporting

exchange rates and the fiscal theory of the price level abstract this paper addresses exchange rate determination under a nominal interest peg in a two country cash in advance model under two types of cash in advance constraints if both governments peg the nominal interest rate on domestic bonds there is a continuum of equilibria each consistent with different nominal exchange rates and real resource allocations the well known finding of equilibrium uniqueness under a nominal interest rate peg in a closed economy does not survive in a multi country multi currency setting

can money matter for interest rate policy in this paper it is shown that money can matter for macroeconomic stability under interest rate policy when transactions frictions are non negligible we develop a sticky price model with a shopping time function which induces the marginal utility of consumption to depend on the predetermined stock of money held at the beginning of the period equilibrium stability and uniqueness are then ensured by a passive interest rate policy whereas activeness is associated with an explosive equilibrium by reacting to changes in beginning of period real balances the central bank can restore stability interest rates further depend on lagged real balances even if the central bank acts in an entirely forward looking way as under discretionary optimization if the model is revised such that end of period money provides transaction services money can in principle be neglected for a stabilizing interest rate policy discretionary monetary policy is however likely to be associated with equilibrium indeterminacy which can be avoided if interest rates are set contingent on beginning of period real balances

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

spatial competition with free entry chamberlinian tangencies and social efficiency abstract free entry in loschian spatial competition leads to a tangency between each firm s negatively sloped average revenue and the downsloping portion of average costs as in chamberlin s monopolistic competition it is generally concluded that this equilibrium involves too many inefficiently small firms however this conclusion is incorrect the difference between price and firm marginal production costs in spatial equilibrium is just sufficient to cover the additional marginal cost of output resulting from availability of multiple locations this chamberlinian tangency does not imply inefficiency because it does not include all the social costs and benefits resulting from spatial competition

cointegration tests and spatial price linkages in regional cattle markets this analysis empirically evaluates spatial linkages in regional cattle markets using cointegration tests of regional price series several markets were not cointegrated over the 1980 through 1987 period however significant increases in cointegration of several regional livestock markets are observed through the 1980s the increased cointegration parallels significant structural changes in the livestock industry a formal analysis of market characteristics reveals that distances between markets industry concentration ratios market volumes and market types have significant influences on cointegration relationships between markets

sophisticated monetary policies in standard monetary policy approaches interest rate rules often produce indeterminacy a sophisticated policy approach does not sophisticated policies depend on the history of private actions government policies and exogenous events and can differ on and off the equilibrium path they can uniquely implement any desired competitive equilibrium when interest rates are used along the equilibrium path implementation requires regime switching these results are robust to imperfect information our results imply that the taylor principle is neither necessary nor sufficient for unique implementation they also provide a direction for empirical work on monetary policy rules and determinacy

optimal fiscal feedback on debt in an economy with nominal rigidities we examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal we look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output and inflation using an objective function derived from utility we find the optimal level of fiscal feedback to be small there is a clear discontinuity in the behaviour of monetary policy and welfare either side of this optimal level as the extent of fiscal feedback increases optimal monetary policy becomes less active because fiscal feedback tends to deflate inflationary shocks however this fiscal stabilisation is less efficient than monetary policy and so welfare declines in contrast if fiscal feedback falls below some critical value either the model becomes indeterminate or optimal monetary policy becomes strongly passive and this passive monetary policy leads to a sharp deterioration in welfare

spatial price equilibrium with product variety chain stores and integer pricing an empirical analysis a spatial model that incorporates store locations and city topographic features is developed for the edmonton alberta video cassette rental market bertrand nash equi librium prices are computed using a grid search algorithm that maximizes goodness of fit against observed prices the fit is improved by taking into account differences between stores in product variety the tendency of chains to set a common price for all member stores and the tendency of chains to set whole dollar prices implications for further empirical research in spatial pricing are drawn

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

an exploration in the theory of exchange rate regimes three exchange rate regimes a float a one sided peg and a cooperative peg are evaluated and compared in terms of efficiency and welfare levels the framework of analysis embodies country specific monies with the money of each country being used to transact in its commodity markets and its currency denominated bonds welfare levels depend only on consumption levels in the presence of perfect foresight all equilibrium allocations are pareto efficient in a floating exchange rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy the same result holds in a one sided peg if the pegging country s exchange rate stabilizing authority breaks even over time in a cooperative peg regime there is a different equilibrium allocation for each combination of exchange rate levels and monetary policies problems of policy coordination and conflicts in desired monetary policies are discussed

aging and deflation from a fiscal perspective negative correlations between inflation and demographic aging were observed across developed nations recently to understand the phenomenon from a politico economic perspective we embed the fiscal theory of the price level into an overlapping generations model in the model successive short lived governments choose income tax rates and bond issues considering the political influence of existing generations and the policy response of future governments the model sheds new light on the traditional debate about the burden of national debt because of price adjustments the accumulation of government debt does not become a burden on future generations our analysis reveals that the effects of aging depend on its causes aging is deflationary when caused by an increase in longevity but inflationary when caused by a decline in birth rate numerical simulation shows that aging over the past 40 years in japan generated deflation of about 0 6 percentage points annually

sustainable operations the cutting stock problem with usable leftovers from a sustainable perspective abstract this paper proposes a mathematical model and two heuristic procedures to solve the cutting stock problem with usable leftovers relating the implications of the model with aspects considering sustainability in terms of environmental economic and social issues the possibility of generating leftovers that can be used or sold reduces raw material waste during the cutting process and consequently increases companies profits by reducing waste and increasing profits companies can become more competitive in the market they can also integrate environmental aspects into their operational strategies and therefore create a better self image and profitability generating more jobs and contributing to a stronger local economy we believe that the model is more likely to be adopted by smaller companies which generally face numerous barriers but at the same time have a significant social impact generating income and jobs based on the knowledge of the authors this is the first study that relates a cutting problem with its implications for sustainability computational tests were performed and the obtained results are discussed considering the win win approach to sustainability

james tobin an appreciation of his contribution to economics jim tobin who died on march 11 2002 at the age of 84 was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation tobin s influence on macroeconomic theory is so pervasive so much part of our professional acquis that many younger economists often are not even aware that it is his ideas they are elaborating testing criticising refuting or re inventing in this appreciation i consider tobin s scholarly contributions made over a period of more than 50 years tobin received the 1981 nobel memorial prize for his analysis of financial markets and their relations to expenditure decisions employment production and prices i consider his contributions to mean variance portfolio demand and asset pricing theory especially the portfolio separation theorem pitfalls in financial model building portfolio balance and flow of funds models and the credit channel the life cycle model and social security econometric methodology including the tobit estimator and his pioneering work using both time series and cross sectional data to estimate food demand functions economic growth tobin s q the tobin tax the monetary and fiscal policy effectiveness debate first with milton friedman and then with the new classical macroeconomics and real business cycle schools and tobin s approach to methodological questions including microfoundations and aggregation

asymmetry and rigidity in farm retail price transmission this article demonstrates how retail price transmission asymmetry can arise from intertemporal optimizing behavior among spatially competitive retailers facing concave spatial demand and shows that vigorous competition among retailers may not necessarily result in the larger retail price declines farmers expect during periods of declining farm prices it also shows that when this particular class of retailers incurs repricing costs retail prices can be rigid over a range of upward and downward movements in the farm price this suggests that the rigidity of retail prices during periods of declining farm prices could be due to repricing costs it also suggests that the appropriate econometric model of price transmission is the model of friction where tobit analysis is the proper method of estimation rather than nonreversible functions

indeterminacy bubbles and the fiscal theory of price level determination abstract the recently developed fiscal theory of price level determination contends that there is an important class of policy rules in which there exists a unique rational expectations solution that shows the price level to be dependent upon fiscal policy and independent of monetary variables the present paper argues however that there is an alternative solution to these models that has entirely traditional or monetarist properties this latter solution is arguably more plausible since it is the solution that is typically regarded as the bubble free fundamentals solution the paper s analysis involves the specification of feasible instrument variables

ruling out divergent speculative bubbles abstract the growth in the empirical literature on testing for divergent in mean speculative bubbles indicates that existing theoretical arguments for ruling out such price paths are not sufficiently compelling here we strengthen the case for ruling out explosive or implosive bubbles a priori by filling in two gaps first we demonstrate why divergent stochastic bubbles arising from purely extrinsic uncertainty as in blanchard 1979 cannot be equilibria in a monetary optimizing model second we show why existing arguments for ruling out implosive price bubbles are insufficient in some cases and we provide stronger arguments

inflation targeting fiscal rules and the policy mix cross effects and interactions we examine how inflation targeting it and fiscal rules fr affect inflation and fiscal performance in a large panel of countries during 1990 2009 in line with theory both fr and it appear to shape monetary and fiscal outcomes significant cross effects seem to exist as it strengthens fiscal performance whereas the combination of fr and it tends to be associated with more disciplined macroeconomic policies than if only one of these institutions operates our findings suggest that it and fr affect the coordination of the policy mix and point to potential benefits of reforming macroeconomic frameworks in a holistic fashion

hours of operation restrictions and competition aming retail firms this study examines the redistributive effects of government regulations concerning the hours in which retail stores may remain open for business throughout canada municipal by laws restrict nighttime shopping hours to a few specified days of the week in analyzing the outcome of these restrictions a model of consumer behaviour is used which emphasizes the consumers s decision concerning the allocation of purchases between small and large retail outlets the empirical results are consistant with the theoretical model indicating that such market intervention redistributes sales from large to small stores

the fiscal theory of the price level a critique abstract this paper argues that the fiscal theory of the price level ftpl has feet of clay the source of the problem is a fundamental economic misspecification the ftplconfuses two key building blocks of a model of a market economy budgetconstraints which must be satisfied identically and market clearing or equilibriumconditions the ftpl asssumes that the government s intertemporal budgetconstraint needs to be satisfied only in equilibrium this economic misspecification has far reaching implications for the mathematicalproperties of the equilibria supported by models that impose the structure of theftpl it produces a rash of contradictions and anomalies jel classifications e31 e41 e51 e52 e62 e63 key words fiscal theory of the price level ricardian fiscal financial monetaryprogrammes government budget constraint price level indeterminacy author willem h buiter european bank for reconstruction and development oneexchange square london ec2a 2jn uktel 44 20 73386805fax 44 20 73386110 6111e mail buiterw ebrd comweb page http www nber org wbuiter index htm

interactions of monetary and fiscal policy via open market operations we examine interactions of monetary and fiscal policy in a sticky price model where public debt is non neutral as it provides transaction services this property is brought about by a legal restriction on open market operations by which only government bonds are eligible debt creation eases access to money and can therefore induce households to increase purchases of goods government expenditures which are not completely tax financed and deficit financed tax cuts then tend to stimulate private consumption however for these fiscal impulses to raise real activity monetary policy should not too aggressively aim at stabilising the economy

monetary policy and the zero bound to interest rates a review1 this paper reviews the literature on what the zero bound to nominal interest rates implies for the conduct of monetary policy the aim is to evaluate the risks of hitting the zero bound and to evaluate policies that are said to be able to reduce that risk or policies that are proposed as means of helping the economy escape if it is in a zero bound trap i conclude that policies aimed at cure are arguably more uncertain tools than those aimed at prevention so prevention is a less risky strategy for policymakers but since the risks of hitting the zero bound seem quite small anyway and the risks of encountering a deflationary spiral smaller still it is conceivable that inflation objectives that typify modern monetary regimes already have more than enough insurance built into them to deal with the zero bound problem

classifying monetary economics fields and methods from past to future we propose a simple yet sufficiently encompassing classification scheme of monetary economics it comprises three fundamental fields and six recent areas that expand within and across these fields the elements of our scheme are not found together and in their mutual relationships in earlier studies of the relevant literature neither is this an attempt to produce a relatively complete systematization our intention in taking stock is not finality or exhaustiveness we rather suggest a viewpoint and a possible ordering of the accumulating knowledge our hope is to stimulate an improved understanding of the evolving nature and internal consistency of monetary economics at large

long term debt and optimal policy in the fiscal theory of the price level the fiscal theory says that the price level is determined by the ratio of nominal debt to the present value of real primary surpluses i analyze long term debt and optimal policy in the fiscal theory i find that the maturity structure of the debt matters for example it determines whether news of future deficits implies current inflation or future inflation when long term debt is present the government can trade current inflation for future inflation by debt operations this tradeoff is not present if the government rolls over short term debt the maturity structure of outstanding debt acts as a budget constraint determining which periods price levels the government can affect by debt variation alone in addition debt policythe expected pattern of future state contingent debt sales repurchases and redemptionsmatters crucially for the effects of a debt operation i solve for optimal debt policies to minimize the variance of inflation i find cases in which long term debt helps to stabilize inflation i also find that the optimal policy produces time series that are similar to u s surplus and debt time series to understand the data i must assume that debt policy offsets the inflationary impact of cyclical surplus shocks rather than causing price level disturbances by policy induced shocks shifting the objective from price level variance to inflation variance the optimal policy produces much less volatile inflation at the cost of a unit root in the price level this is consistent with the stabilization of u s inflation after the gold standard was abandoned

hedonic estimation of quality factors affecting the farm retail margin a model of the farm retail marketing margin is tested using producer and retail prices of a perishable product in which time during season and quality characteristics are variable empirical analysis verifies that the marketing margin of california fresh peaches decreases during the season and increases with improved quality results identify potential producer gains from improving product quality early in the season and from price signals compensating producers for quality characteristics other than weight

perils of unconventional monetary policy abstract unconventional monetary policy by relaxing restrictions on the composition of the balance sheet of the central bank compromises control over the stochastic path of inflation or in open economies over the stochastic path of exchange rates if the composition of the balance sheet is unrestricted then the path of inflation is indeterminate this is the case under pure quantitative easing where the target is the size of real money balances in contrast credit easing policies restrict the composition of the portfolio by targeting a specific expansion in the maturity profile of bonds bought and thus can implement a determinate path of inflation the composition of the portfolios traded by monetary fiscal authorities also determines premia in asset and currency markets

new developments in monetary economics two ghosts two eccentricities a fallacy a mirage and a mythos monetary theory and policy are part of intertemporal public finance the two ghosts are the liquidity trap and the real balance effect the eccentricities are negative nominal interest rates and the helicopter drop of money the fallacy is the fiscal theory of the price level a logically inconsistent theory of the link between the government s intertemporal budget constraint and the general price level the mirage is the prediction that financial deregulation and technical change in the payments and settlements technology will cause monetary policy to lose its capacity to influence even nominal economic variables mythos refers to the independent central bank