new perspectives on capital sticky prices and the taylor principle abstract our main result is that dynamic new keynesian dnk models with firm specific capital feature a substantial amount of endogenous price stickiness we use this insight to assess the desirability of alternative interest rate rules and make the case for combining active monetary policy with interest rate smoothing and or some responsiveness of the nominal interest rate to real economic activity the key mechanism behind our results is also useful from a positive point of view the feature of firm specific capital increases the empirical appealingness of dnk models as documented by a growing body of literature

investment and interest rate policy abstract the paper s theorems reverse two standard results of new keynesian economics simply by appending endogenous investment to a benchmark imperfect competition sticky price model our results are a a passive interest rate rule where the monetary authority responds to inflation by lowering the real interest rate implies local equilibrium uniqueness whereas an active rule does not generate a locally unique equilibrium b a temporary exogenous increase in the nominal interest rate causes a temporary increase in output and investment extensions of the benchmark model including generalized preferences and alternative interest rate rules are also examined journal of economic literature classification numbers e12 e31 e52

technical allocative and economic efficiencies in swine production in hawaii a comparison of parametric and nonparametric approaches abstract technical allocative and economic efficiency measures are derived for a sample of swine producers in hawaii using the parametric stochastic efficiency decomposition technique and nonparametric data envelopment analysis dea efficiency measures obtained from the two frontier approaches are compared firm specific factors affecting productive efficiencies are also analyzed finally swine producers potential for reducing cost through improved efficiency is also examined under the specification of variable returns to scale vrs the mean technical allocative and economic efficiency indices are 75 9 75 8 and 57 1 respectively for the parametric approach and 75 9 80 3 and 60 3 for dea while for the constant returns to scale crs they are 74 5 73 9 and 54 7 respectively for the parametric approach and 64 3 71 4 and 45 7 for dea thus the results from both approaches reveal considerable inefficiencies in swine production in hawaii the removal of potential outliers increases the technical efficiencies in the parametric approach and allocative efficiencies in dea but overall contrary to popular belief the results obtained from dea are found to be more robust than those from the parametric approach the estimated mean technical and economic efficiencies obtained from the parametric technique are higher than those from dea for crs models but quite similar for vrs models while allocative efficiencies are generally higher in dea however the efficiency rankings of the sample producers based on the two approaches are highly correlated with the highest correlation being achieved for the technical efficiency rankings under crs based on mean comparison and rank correlation analyses the return to scale assumption is found to be crucial in assessing the similarities or differences in efficiency measures obtained from the two approaches analysis of the role of various firm specific factors on productive efficiency shows that farm size has strong positive effects on efficiency levels similarly farms producing market hogs are more efficient than those producing feeder pigs based on these results by operating at the efficient frontier the sample swine producers would be able to reduce their production costs by 38 46 depending upon the method and returns to scale considered

frontier production functions and technical efficiency measures the concept of technical efficiency is central to measuring the firm performance the measurement of technical efficiency has proved difficult and complex and the literature provides a range of methodologies this paper reviews the various methodologies for measuring technical efficiency and offers a comparison between established methods of measurements the discussion is literary with less mathematical jargons and equations the objective of this paper is not to be exhaustive but to be up to date and to provide a significant discussion on some of the core methods of measuring technical efficiency

the design of monetary and fiscal policy a global perspective abstract we study the emergence of multiple equilibria in models with capital and bonds under various monetary and fiscal policies we show that the presence of capital is indeed another independent source of local and global multiplicities even under active policies that yield local determinacy we also show how a very similar mechanism generates multiplicities in models with bonds and distortionary taxation we then explore the design of monetary policies that avoid multiple equilibria we show that interest rate policies that respond to the output gap while potentially a source of significant inefficiencies may be effective in preventing multiple equilibria and costly oscillatory equilibrium dynamics

investment interest rate policy and equilibrium stability abstract carlstrom and fuerst 2005 investment and interest rate policy a discrete time analysis journal of economic theory 123 4 20 show that in the presence of investment activity and price stickiness indeterminacy of equilibrium is induced by forward looking monetary policy that sets the interest rate in response only to future inflation in a stochastic version of their model we find that this indeterminacy problem is due to a cost channel of monetary policy whereby inflation expectations become self fulfilling and the problem can be overcome once the forward looking policy responds also to current output or contains sufficiently strong interest rate smoothing since this prevents the self fulfilling expectations we also show that when e stability is adopted as the selection criterion from multiple equilibria even the forward looking policy generates a locally unique non explosive e stable fundamental rational expectations equilibrium as long as the policy response to expected future inflation is sufficiently strong

ranking efficiency units in dea using bootstrapping an applied analysis for slovenian farm data this article explores how data envelopment analysis dea along with a smoothed bootstrap method can be used in applied analysis to obtain more reliable efficiency rankings for farms the main focus is the smoothed homogeneous bootstrap procedure introduced by simar and wilson 1998 to implement statistical inference for the original efficiency point estimates two main model specifications constant and variable returns to scale are investigated along with various choices regarding data aggregation the coefficient of separation cos a statistic that indicates the degree of statistical differentiation within the sample is used to demonstrate the findings the cos suggests a substantive dependency of the results on the methodology and assumptions employed accordingly some observations are made on how to conduct dea in order to get more reliable efficiency rankings depending on the purpose for which they are to be used in addition attention is drawn to the ability of the slice model implemented in gams to enable researchers to overcome the computational burdens of conducting dea with bootstrapping

pitfalls of forward looking monetary policy a distinctive feature of the procedures recently adopted by inflation targeting central banks is their forward looking character forecasts of the economy s future evolution conditional upon alternative policies play a central role in the banks deliberations to an extent that the procedures adopted are sometimes characterized as forecast targeting this emphasis upon the future consequences of policy is unsurprising in an approach that tries to maintain as transparent as possible a relation between the banks9 decisions and the ultimate goals of monetary policy after all current decisions can still affect the future but not the past nonetheless common descriptions of how inflation targeting is or should be practiced go too far in proposing purely forward looking procedures i shall argue instead that an optimal framework for the conduct of monetary policy must generally be history dependent in ways

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

efficiency in new zealand sheep and beef farming the impacts of regulatory reform in this study we consider the impacts of dramatic regulatory reform during the 1980s on the efficiency of farms in new zealand using unbalanced panel data a translog distance function representing the multiple output and input technology and incorporating nonneutral regulatory impacts is used for the analysis determinants of technical inefficiency including a regulatory variable a time term and a debt equity ratio are also incorporated in a one step model estimated by maximum likelihood stochastic production frontier methods we find evidence of regulatory induced changes in output composition toward beef and deer and away from wool and especially lamb but little associated technical inefficiency these patterns motivated investment in complementary capital land and beef deer livestock inputs firms that were more flexible in their adaptation toward these new mixes adjusted to regulatory changes with less upheaval so any existing inefficiency appears linked to debt equity levels

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

technical and scale efficiency of crop and livestock farms in poland does specialization matter l efficacite technique et d echelle des exploitations agricoles polonaises est calculee par la methode data envelopment analysis l etude porte sur les differences selon l orientation productive en grandes cultures ou elevage a deux dates de la transition en 1996 et en 2000 l article examine de plus la variabilite statistique des resultats d efficacite ceux ci sont revus a la lumiere des intervalles de confiance construits gr ce au bootstrapping en moyenne les exploitations d elevage ont une efficacite technique et d echelle superieure aux exploitations de grandes cultures l efficacite d echelle est toutefois tres elevee pour les deux orientations l inefficacite technique semble donc due principalement a une inefficacite technique pure c est a dire a une gestion inefficace la faible education des agriculteurs en est une raison majeure en 2000 64 des exploitations d elevage et 86 des exploitations de grandes cultures presentaient des retours d echelle croissants ce resultat suggere des recommandations politiques afin de supprimer les incitations a garder une structure operationnelle fragmentee et de stimuler le marche de la terre il s agit en particulier d ameliorer la legislation concernant la location des terres et de modifier le systeme de retraite agricole

the impact of affirmative action on labor demand a test of some implications of the le chatelier principle this paper presents an alternative approach to measuring the impact of affirmative action on firms affirmative action is modeled as a series of hiring quotas if the quotas are binding then a firm subject to affirmative action will operate with greater costs of production have less elastic demand for inputs and be less able to substitute between most inputs the results are consistent with the hypothesis that affirmative action regulations significantly constrain firms behavior own wage elasticities are less elastic and most inputs are less substitutable for constrained firms further affirmative action raises costs by 6 5 percent for firms subject to the program copyright 1992 by mit press

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

the strategic impact of resource flexibility in business groups we show that in business groups with efficient internal capital markets resources may be channelled to either more or less profitable units depending on the amount of internal resources a group may exit a market in response to increased competition or channel funds to the subsidiary operating in that market this has important implications for the strategic impact of group membership affiliation to a monopolistic subsidiary can make a cash rich poor firm more less vulnerable to entry deterrence also resource flexibility within a group makes subsidiaries reaction functions flatter thus discouraging rivals strategic commitments when entry is accommodated

intertemporal substitution and constraints on labor supply evidence from panel data intertemporal substitution and constraints on labor supply evidence from panel data i introduction through much of the 1970s and 1980s macroeconomic stabilization analysis has been dominated by equilibrium models in which fluctuations in employment result from intertemporal substitution workers voluntarily vary their labor supply over time in response to movements in wages and interest rates a number of recent empirical tests of intertemporal substitution models for example altonji 1982 mankiw et al 1985 ham 1986 strongly reject the intertemporal substitution approach these results have led some economists to reject equilibrium macro models in favor of keynesian models in which workers face quantity constraints on labor supply in keynesian models employment fluctuations result from changes in the severity of constraints that is changes in involuntary unemployment rather than intertemporal substitution on the other hand many economists remain unconvinced by recent rejections of intertemporal substitution models because the results are consistent with many possible explanations for tractability empirical studies always impose restrictive assumptions such as separability of utility over time and between goods or such as the existence of a representative consumer data also suffer from numerous problems such as aggregation bias measurement error and the use of average rather than marginal wage rates consequently even the authors of the studies seem hesitant to draw firm conclusions they often simply conclude that workers behavior is explained either by quantity constraints or by a more complicated intertemporal substitution model than the one they have tested 1 this paper attempts to determine which of these explanations is correct are changes in employment a sophisticated form of intertemporal substitution or are they involuntary the crucial data come from questions in the panel study of income dynamics about whether workers experience unemployment or are unable to work as many hours as they want following ham 1982 1986 this information is used to classify workers as quantity constrained in their labor supply or unconstrained i then test a simple intertemporal substitution model for each group of workers if the tests suffer from overly restrictive utility functions or data problems then the model should be rejected for both samples on the other hand if some workers truly face quantity constraints then the model should perform better for the sample of unconstrained workers 2 the tests yield two main results first the model indeed performs worse for the constrained workers for this group the data reject the model s overidentifying restrictions and the parameter estimates contradict the model in contrast the results for the unconstrained workers are weakly consistent with the model as keynesian theories suggest quantity constraints alter workers behavior second the estimates of the intertemporal labor supply elasticity for prime age men are close to zero even for unconstrained workers even if workers are free to vary their hours they apparently choose to respond little to movements in wages the paper addresses two other issues first do constraints on borrowing influence labor supply in the intertemporal substitution model workers borrow and lend to smooth consumption while varying hours of work as this suggests the model performs best for workers who not only face no labor supply constraints but who also own substantial assets and thus are unlikely to face liquidity constraints finally the paper proposes a new approach to identifying intertemporal labor supply equations previous micro studies do not adequately address the problem that wages are correlated with unobservable characteristics that affect tastes for work i propose two identifying restrictions 1 changes in tastes are uncorrelated with levels of time in variant variables and 2 changes in tastes have no aggregate component

a comparative application of data envelopment analysis and translog methods an illustrative study of hospital production this paper compares inferences about hospital cost and production correspondences from two different estimation models 1 the econometric modeling of the translog cost function and 2 the application of data envelopment analysis dea while there are numerous examples of the application of each approach to empirical data this paper provides insights into the relative strengths of the estimation methods by applying both models to the same data the translog results suggest that constant reruns are operant whereas the dea results suggest that both increasing and decreasing returns to scale may be observed in different segments of the production correspondence in turn suggesting that the translog model may be averaging diametrically opposite behavior on the other hand by examining the rate of output transformation both models agree that patient days devoted to care of children are more resource intensive than those devoted to adults or to the elderly in addition we compare estimates of technical efficiencies of individual hospitals obtained from the two methods the dea estimates are found to be highly related to the capacity utilization but no such relationship was found for the translog estimates this comparative application of different estimation models to the same data to obtain inferences about the nature of underlying cost and production correspondences sheds interesting light on the strengths of each approach and suggests the need for additional research comparing estimation models using real as well as simulated data

is forward looking inflation targeting destabilizing the role of policy s response to current output under endogenous investment we show that with endogenous investment virtually all monetary policy rules that set a nominal interest rate in response solely to expected future inflation induce real indeterminacy in models with i staggered prices ii staggered prices and staggered wages and iii staggered prices staggered wages and firm specific capital in i policy s response to current output can help significantly in ensuring determinacy with an infinite labor supply elasticity but little with empirically plausible labor supply elasticity in ii responding to output always helps a great deal though under low price stickiness and without capital adjustment cost it may call for a moderate response to output in order to ensure determinacy for a wide range of response to inflation in iii even a tiny response to output can always render equilibrium determinate for a wide range of response to inflation

the performance of forecast based monetary policy rules under model uncertainty we investigate the performance of forecast based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics we identify the key characteristics of rules that are robust to model uncertainty such rules respond to the one year ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia in contrast rules with longer forecast horizons are less robust and are prone to generating indeterminacy in light of these results we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences