interest rates inflation and the aggregate consumption function this paper reports on an empirical study of the effects of interest rates and inflation on aggregate consumption in the united states empirical evidence based on quarterly u s data from the postwar period is first presented in support of the hypothesis that the real rate of interest varies inversely with the rate of inflation at least in the short run regression estimates of an aggregate consumption function for the united states also based on quarterly data from the postwar period are then presented these estimates indicate that the propensity to consume varies inversely with interest rates and directly with the rate of inflation

the impact of the london olympics announcement on property prices this study estimates the impact of the london 2012 olympics announcement on property prices using a self constructed dataset of a sample of property transactions it is estimated that properties in host boroughs are sold between 2 1 and 3 3 per cent higher depending on the definition of the impact area a similar investigation based on radius rings suggests that properties up to three miles away from the main olympic stadium sell for 5 per cent higher it is estimated that the overall impact on the price of properties in host boroughs amounts to 1 4 billion having substantial social and financial implications for existing residents

deviations from purchasing power parity in the long run this paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods for a wide variety of countries and in both monthly and annual data since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism this paper will demonstrate that deviations from purchasing power parity ppp reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods for a wide variety of countries and in both monthly and annual data this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper therefore proposes an alternative explanation which does not presuppose free trade in goods but which instead relies on financial arbitrage in bonds as the underlying mechanism the major implication of the theory and the results is that ppp is as likely to be violated in the long as in the short run as an empirical matter deviations from ppp can be observed for most currencies at any instant see kravis et al 21 stockman 37 and genberg 15 among others these deviations are typically both cumulative and persistent the real exchange rate can remain on either side of parity for lengthy but variable time intervals of a year or more as a consequence the current consensus shared

assessing the impact of the exchange rate and its volatility on canadian pork and live swine exports to the united states and japan a model of a representative canadian pork exporter is developed to examine the impacts of the exchange rate and its volatility on pork and live swine exports the pork export supply equation is expressed as a function of the expected level of real exchange rate and a time varying variance of real exchange rate an ar p model is used to represent the expected real exchange rate and a garch p q model is used to generate the time varying variance the same model is used to examine the sensitivity of pork exports to japan from canada the united states and denmark the parameters of all pork and live swine export equations have theoretically consistent signs and many are significant that is the domestic price in the exporting country has a negative effect on exports because it is a major input price in the exporter s cost function while the price in the market of destination has a positive effect the level of the exchange rate has a positive impact on pork exports while the volatility of the exchange rate has a negative impact most of the volatility parameters are not significant

farm real estate pricing under risk an empirical investigation the rapid increase in farm real estate prices during the last three decades has heightened interest among agricultural economists in explaining this phenomenon even prior to the 1950s several researchers expressed concern that farm real estate prices were increasing at a faster rate than could be justified by farm income 29 technological change and government programs were evaluated for structural changes in price determination 6 13 other important explanatory variables were farm enlargement and urbanization influences 34 more recently harris and nehring 11 lee and rask 18 harris 10 and boehlje and griffin 3 explored the effects of such factors as farm size inflation and government price supports on farm real estate prices while previous research contributed to understanding farm real estate price determination several important questions remain unanswered how is the farm real estate market linked to other capital markets heady and tweeten 12 and later reynolds and timmons 30 used rate of return on common stock as an explanatory variable in their farm real estate price models however their approaches are based more on intuitive reasoning than on rigorous theoretical development how does risk affect farm real estate prices the fact that real estate is a risky investment generally was ignored in previous research 2 441 4 recently harris 10 and boehlje and griffin 3 included risk information in their analyses of factors affecting bid prices for land these studies use strong microfoundations that are not intended to directly reflect risk related linkages with other markets or sectors these issues can be addressed conceptually through capital market theory the purpose of this paper is to explore farm real estate price determination in the context of capital market theory to determine the relationship between the farm real estate

a century of research on agricultural markets this article provides a perspective on major innovations in research on agricultural markets over the past century we review research on market structure and performance vertical coordination arrangements and institutions for producer collective action contributions to empirical modeling of agricultural price determination and marketing margins are also evaluated as are innovations in research on spatial market relationships and the role of storage finally we discuss contributions to understanding market information systems and the functioning of market based mechanisms for agri

compensating differentials and the social benefits of the nfl abstract we use hedonic rent and wage equations to measure compensating differentials in central cities and metropolitan areas with franchises of the national football league rents are about 8 percent higher in the central cities but this impact may not carry over to broader geographical areas wages are about 2 percent lower in areas with teams but the standard error on this parameter is large the central city results indicate that sports franchises appear to be a public good once these quality of life benefits are included in the calculus the large public expenditure on new stadiums appears to be a good investment for cities and their residents

consumption benefits of national hockey league game trips estimated from revealed and stated preference demand data this paper examines the demand for hockey game trips among metropolitan and nonmetropolitan residents of alberta canada using data on both revealed and stated preference game trip behavior from a telephone survey conducted throughout alberta we estimate the effect of ticket prices team quality arena amenities and capacity on the latent demand for national hockey league hockey games we nd that lower ticket prices higher team quality and additional capacity encourage attendance in the status quo scenario consumer surplus per game is 50 for those who had attended hockey games and about 50 less for those who had not attended games exploiting the stated preference data we develop a number of other consumer surplus estimates we also include travel costs in the estimation of the demand function and estimate the full value of the game trip considering both ticket prices and travel costs sold out arenas in calgary and edmonton generate annual consumption bene ts of 40 and 35 million when only ticket prices are used to calculate consumer surplus i e excluding travel costs considering the full price consumer surplus for the calgary flames of 103 per game trip the annual consumption bene ts may be as high as 82 million jel r22 l83 d61

a direct test of the homevoter hypothesis abstract we propose a methodology that facilitates a direct test of the homevoter hypothesis which posits that homeowners vote in favor of public projects they perceive increase residential property values and against those that do not first we estimate how pre referendum events that signal a higher probability that the public project will be undertaken impact local residential property values before the referendum is held these pre referendum impacts are considered noisy signals to homeowners about the market s assessment of the net marginal benefits of the project second we aggregate these market signals to the precinct level and relate them to precinct level voting results concerning the proposed project we apply this two step approach to the 2004 referendum in arlington texas for a publicly subsidized stadium for the nfl dallas cowboys the analysis supports the homevoter hypothesis and establishes a possible methodology for future evaluations in this small but growing empirical literature

compensating differentials and the social benefit of the nfl reply abstract professors coates humphreys and zimbalist provide a set of suggestions for the model we presented in g carlino n e coulson compensating differentials and the social benefits of the nfl journal of urban economics 56 1 2004 25 50 their two main points provide additional evidence of an nfl effect their remaining points are not persuasive

the effects of uncertainty and adjustment costs on investment in the almond industry a neoclassical model of investment behavior is developed wherein firms are assumed to maximize the expected present value of net revenue under leontief technology prices and yields are assumed to be stochastic this framework yields investment as a function of the expected present value of the output from one unit of capital and the variance of the expected value this theory is applied to investment in the almond industry the model outperforms both a model without uncertainty and one with neither uncertainty nor adjustment costs using in sample and out of sample tests copyright 1989 by mit press

compensating differentials and the social benefits of the nfl a comment abstract in a recent article in this journal carlino and coulson g carlino n e coulson compensating differentials and the social benefits of the nfl journal of urban economics 56 1 2004 25 50 report evidence that the presence of an nfl franchise in a city raises rents in the central part of the city by about 8 we re estimate their model using several reasonable alternative specifications and find that their results are not robust to these changes the presence of an nfl franchise does not appear to increase rents for center city apartments because their results are not robust to alternative model specifications they should not be used to justify public spending for professional sports facilities

two moment decision models and expected utility maximization two moment decision models are consistent with expected utility maximization only if the choice set or the agent s preferences are restricted this paper identifies a restriction which is sufficient to ensure this consistency and confirms that it holds in many economic models the implications for economic analysis are then derived two different approaches to representing an agent s preferences over strategies yielding random payoffs are in wide use under the mean standard deviation ms approach the agent is assumed to rank the alternatives according to the value of some function defined over the first two moments of the random payoff while the expected utility eu criterion assumes that the expected value of some utility function defined over payoffs is used instead the fact that there are these two competing approaches has generated a considerable literature some authors are concerned with the advantages and disadvantages of each while others deal with conditions under which the potentially different approaches would yield the same results or at least approximately so space does not

price volatility and rational expectations in a sectoral framework commodity model a multivariate garch approach this article explores supply response models in a rational expectations framework with endogenous risk by using a multivariate generalized autoregressive conditional heteroskedasticity model with cholesky decomposition this approach allows the incorporation of price volatility as a risk factor into the supply response of a primary commodity sector that is composed of several markets of homogenous products the model is applied to the greek meat sector which is composed of four major meat categories that is beef lamb pork and broiler and thus the model for the entire market includes supply and demand equations for all the four meat markets which are estimated simultaneously the empirical results confirm that price volatility is a significant risk factor in greek meat production and also provide useful implications about the cost factors of production furthermore the empirical findings show that the last reform of the common agricultural policy seems to have had a negative effect on beef and lamb production in greece

effects of forward sales on spot markets pre commitment sales and prices for fresh strawberries increasingly agricultural markets are vertically coordinated often a thinning spot market coexists with coordinated transactions raising the question of how private coordination affects the market as a whole one of the greatest challenges when analyzing such market level effects is obtaining information on private transactions we utilize publicly available data to evaluate how informal contracts in the fresh strawberry market affect spot market prices using a generalized autoregressive conditional heteroskedastic in mean garch m model we find that these informal contracts increased spot prices as argued by some industry members while the effect on spot price volatility varied by production region

consumption co integration and varying coefficients the australian evidence an aggregate consumption function incorporating random coefficient approach is estimated to investigate the changing pattern of consumer response in austrialia using quarterly data from 1959 iv to 1990 iv the methdology applied is that of hidreth and houck 1968 singh et al 1976 and hoque 1991 the largenge multiplier test as suggested by breush and pagan 1979 supports the hypothesis of randomness in the response coefficients our study indicates strong dependence on the first difference of income and that consumers respond quite slowly to short run fluctuations this is because consumption and income have been found to be integrated of order one and co integrated thus as error correction model has been estimated following engle and granger 1987

supply dynamics the case of u s broilers and turkeys supply dynamics have received considerable attention in agricultural economics nerlove 1979 askari and cummings many econometric models incorporate adjustment mechanisms that allow desired and actual states to be different usually the adjustment process is specified as a distributed lag model griliches a common expectation formula is the nerlove adaptive model which assumes that at each period the expected price is changed by an amount proportional to the most recently observed forecast error implying a geometrically declining distributed lag nerlove 1958 this model has become popular in econometric modeling partly because it ties in well with statistical theory in optimal prediction another hypothesis leading to the same reduced form except for the error term structure is the partial adjustment model griliches fromm it states that only some fixed fraction of the desired adjustment is accomplished within any particular time period it assumes the existence of some adjustment costs to explain the observed response inertia more complex expectation formulations or partial adjustment mechanisms lead to more complicated lag structures unfortunately economic theory provides little guidance to model builders on their adjustment processes the particular forms are normally selected arbitrarily by each investigator some flexible lag distributions have been applied e g almon shiller however there are statistical difficulties in distinguishing among various plausible lag models from the data alone griliches writes

a market equilibrium analysis of the impact of risk on the u s rice industry an economic model of supply demand for u s rice suggests that increases in risk result in decreased acreage and increased marketing margins in a market equilibrium context the empirical results also suggest rice production and rice prices are more responsive to changes in risk faced by marketing firms than changes in risk faced by producing firms

price risk in supply equations an application of garch time series models to the u s broiler market that risk considerations figure prominently into agents decisions is now widely recognized by both theoretical and applied economists for example much research has focused on extending neoclassical production theory to include agents that maximize expected utility of returns under price and or output uncertainty 37 4 25 35 12 31 concurrent with this theoretical research on risk has been a growing literature on the empirical effects of risk on economic decisions examples include the studies on the role of risk in aggregate agricultural production and

measuring and analysing the effects of short term volatility in real exchange rates this paper examines short term volatility in the real effective exchange rates of industrial countries and its impact on their imports it yields three conclusions first volatility has not diminished as markets have gained experience with floating exchange rates the trend appears to be in the opposite direction for some countries second exposure to short term volatility has differed among countries japan and sweden have experienced much more than most other industrial countries third volatility appears to depress the volume of international trade this third finding is consistent with results reported by cushman and by akhtar and hilton and challenges earlier findings by hooper and kohlhagen

the econometric analysis of models with risk terms summary in this paper we have attempted to provide an integrated approach to the estimation of models with risk terms it was argued that there exist orthogonality conditions between variables in the information set and higher order moments of the unanticipated variable density these could be exploited to provide consistent estimators of the parameters associated with the risk term specifically it was recommended that an iv estimator should be applied with instruments constructed from the information set four existing methods commonly used to estimate models with risk terms are examined and applications of the techniques are made to the estimation of the risk term in the us c exchange market and the effects of price uncertainty upon production

flexible exchange rates prices and the role of news lessons from the 1970s recent experience with flexible exchange rate systems has led to renewed interest in the operation of foreign exchange markets as reflected in many recent studies of the principal determinants of exchange rates the 1970s witnessed the dramatic alteration of the international monetary system from a regime of pegged exchange rates which prevailed for about a quarter of a century since the bretton woods conference into a regime of flexible though managed rates as a consequence of the emergence of the new legal and economic system traders national governments and international organisations were confronted with new economic problems choices and instruments during the 1970s ex change rates fluctuated widely and inflation rates accelerated the international monetary system had to accommodate extraordinarily large oil related shocks which affected trade flows in goods and assets huge oil payments had to be recycled uncertainties concerning future developments in international politics reached new heights and the prospects for the world economy got gloomier these developments placed unprecedented pressures on the markets for foreign exchange as well as on other asset markets they were associated with a large slide in the value of the us dollar and resulted in speeding up the creation of new institutions like the european monetary system which provided the formal framework for the management of exchange rates among members

an econometric model of kuwait s non oil gdp a model covering the production part of the non oil gdp in kuwait is specified and estimated for the period 1972 93 the estimated model has passed the test of validation quite well therefore the model has been used to experiment with a number of possible scenarios to depict a future path of all the endogenous variables of the model the postulated scenarios are adopted from the various policy options of kuwait s ministry of planning the results have indicated that a quick reform policy will cause a substantial decline in non oil production and consumption a better policy option would be to choose a policy between minor and gradual reform

arima and cointegration tests of ppp under fixed and flexible exchange rate regimes real exchange rates between the united states and its major trading partners were calculated for the bretton woods and flexible exchange rate periods unit root tests indicate that purchasing power parity performed poorly in both periods tests for cointegration reveal limited instances in which it is possible to estimate the deviations from ppp as an error correcting model the estimated error correcting models indicate that foreign but not u s prices responded to deviations from ppp frenkel s 1981b finding that purchasing power parity ppp worked better during the 1920s than the 1970s caused considerable controversy for example davutyan and pippenger 1985 contend that the socalled collapse of ppp is a result of an increase in the relative importance of real versus monetary shocks they argue that the 1970s as opposed to the 1920s was characterized by real supply shocks and the international coordination of monetary policies the argument is that ppp did not fail rather there was an increase in the volatility of those factors giving rise to deviations from ppp hakkio 1984 reestimated ppp over the 1920s and 1970s using cross country tests i e sure estimates to improve the efficiency of his estimates he was able to support the hypothesis that ppp worked better in the 1970s than in the 1920s on the other hand papers by adler and lehman 1983 dornbusch 1980 frenkel 1981a junge 1985 and krugman 1978 report findings contrary to the ppp hypothesis moreover kenen and rodrik 1986 find that the volatility of real exchange rates has increased throughout the flexible rate period this paper tries to shed some light on the importance and persistence of the observed deviations from purchasing power parity under alternative exchange rate systems while it is interesting to compare ppp in the 1920s versus the 1970s it is equally useful to compare the 1960s versus the 1970s and 1980s if real supply shocks and lack of monetary coordination are characteristic of the latter period ppp should perform better in the 1960s to illustrate the issues involved consider the following econometric model of relative purchasing power

labor supply under real wage uncertainty a new look at the intertemporal substitution hypothesis the idea that timing may play a crucial role in labor supply decisions has existed in several forms since mincer s 12 seminal work on the labor force participation decisions of married women mincer suggested at that time that married women s labor supply decisions may be quite responsive to transitory variations in earnings lucas and rapping 11 generalized the notion of timing by suggesting that for any individual consumption of leisure and other goods in the current period is readily substitutable with consumption in other periods in this framework the laborer is viewed as a capitalist and the decision to transfer one s labor supply from one market period to another is recognized as an investment decision 11 729 this concept of intertemporal substitution has been controversial as it has proven quite difficult to substantiate empirically while the estimates obtained by lucas and rapping were favorable the recent and much more elaborate tests provided by altonji 1 and clark and summers 5 have failed to support the intertemporal substitution hypothesis these studies have used models in which individuals base their current labor supply decisions on the magnitudes of current and expected variables if current decisions can be shown to be responsive to expected levels of relevant variables then this indicates that individuals do in fact choose when to and when not to supply labor over the course of the business cycle and the notion of intertemporal substitution is supported the approach then has been to estimate the net present value of the expected levels of wages and prices at each point in time and to base tests of the intertemporal substitution hypothesis on the performance of these expectations variables implicitly these models assume that people live in an uncertain world and that they base their current decisions on what they judge to be the likely future values of important economic variables a key element which has been missing from previous studies is consideration of how the level of uncertainty associated with peoples expectations affects decisions made at each point in time this paper attempts to fill that gap by focusing upon the effects of real wage uncertainty on labor supply decisions

instrumental variables procedures for estimating linear rational expectations models abstract this paper illustrates how to use instrumental variables procedures to estimate the parameters of a linear rational expectations model these procedures are appropriate when disturbances are serially correlated and the instrumental variables are not exogenous we compare our procedures to some alternative estimators that estimate free parameters from restrictions implied by the euler equations the procedures are applicable to a variety of linear rational expectations models several examples of which we cite

quasi rational and ex ante price expectations in commodity supply models an empirical analysis of the us broiler market a statistically optimal inference about agents ex ante price expectations within the us broiler market is derived using futures prices of related commodities along with a quasi rational forecasting regression equation the modelling approach which builds on a hamilton type framework includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components we therefore infer the relative importance of various informational sources in expectation formation results show that in addition to the quasi rational forecast the true supply shock future prices and ex post commodity price forecast errors have at times been influential in broiler producers price expectations copyright 2003 john wiley sons ltd

urban bias in price risk the geography of food price distributions in low income economies the geography of agricultural marketing has important implications for the stochastic distribution of agricultural commodity prices this article proposes that objective food price risk differs between rural and urban areas of infrastructure poor economies characterised by spatially concentrated patterns of foodgrains storage this difference implies an urban bias having adverse welfare effects for peasants who seasonally switch between net food seller and net food buyer positions empirical analysis of rice price data from madagascar suggests that price variability and skewness indeed differ between rural and urban areas in ways that adversely influence the relative welfare of rural peasants

market reforms and commodity price volatility the case of east african coffee market the goal of this paper is to examine the impact of commodity market reforms on producer price volatility using evidence from the east african coffee market the results based on time varying volatility models and key summary statistics show that coffee market reforms in the east african community eac are associated with changes in producer price volatility and volatility persistence at both country and regional levels however reforms were not the only cause of changes in price volatility the study further shows that reforms had different effects on prices volatilities of arabica and robusta varieties of coffee grown in individual eac countries these findings have wider implication for commodity market reforms and producer price stabilisation policies in the eac and coffee producing countries in sub sahara africa

forecasting exchange rate for the australian dollar via a vis the us dollar using multivariate time series models the purpose of the paper is to forecast exchange rates by using restricted and unresticted vector autoregressive var models also introduced is an econometric model for the purpose of comparison a comparison of forecast stastistics shows that the restricted model bvar has better forecasting ability compared with the unrestricted var model however the econometric model outperforms both the study also indicates that the exchange rate relative price and three month forward rate are cointegrated thus an error correction model also is considered for the structural one and the forecasting performance improved further for this model

a test of the purchasing power parity hypothesis the purchasing power parity ppp hypothesis is examined in the case of less developed countries although the issue has been debated extensively in the context of the developed countries there has hardly been any study using the experience of the less developed countries quarterly data from four countries is used for the period 1961 1 1990 4 and hardly any evidence is found of the hypothesis a special test namely a cointegration test designed for the hypothesis has been implemented

modeling beef supply response and price volatility under cap reforms the case of greece abstract this study examines the supply response of the greek beef market and the possible effect of the european union s common agricultural policy cap on the greek beef sector during the period 1993 2005 a generalized autoregressive conditional heteroskedasticity garch process is used to estimate expected price and price volatility while several different symmetric asymmetric and non linear garch models are estimated the empirical results show that price volatility and feed price are important risk factors in the supply response function while the negative asymmetric price volatility that was detected implies that producers have a weak market position furthermore the empirical findings confirm that the annual premium paid by the eu to beef producers had a positive impact on the production level and also the change of the eu price support regime after 2006 is having negative effects on beef production level in greece