inflation and the fiscal limit abstract we use a rational expectations framework to assess the implications of rising debt in an environment with a fiscal limit the fiscal limit is defined as the point where the government no longer has the ability to finance higher debt levels by increasing taxes so either an adjustment to fiscal spending or monetary policy must occur to stabilize debt we give households a joint probability distribution over the various policy adjustments that may occur as well as over the timing of when the fiscal limit is hit one policy option that stabilizes debt is a passive monetary policy which generates a burst of inflation that devalues the existing nominal debt stock the probability of this outcome places upward pressure on inflation expectations and poses a substantial challenge to a central bank pursuing an inflation target the distribution of outcomes for the path of future inflation has a fat right tail revealing that only a small set of outcomes imply dire inflationary scenarios avoiding these scenarios however requires the fiscal authority to renege on some share of future promised transfers

nonstationary term premia and cointegration of the term structure this paper proposes a model of the term structure with nonstationary term premia which exhibit a factor structure this explains the common empirical finding of a cointegrating rank smaller than the one predicted by the rational expectations hypothesis of the term structure an application to german interest rate data yields easily interpretable results

what is the limit of chinese coal supplies a stella model of hubbert peak abstract american geophysicist m king hubbert in 1956 first introduced a logistic equation to estimate the peak and lifetime production for oil of usa in his 1956 article nuclear energy and the fossil fuels in which he predicted the production peak for the usa hubbert used 80 pages of differential equations to draw his conclusions that earned him some criticism because only those with profound mathematical knowledge could understand hubbert presented in his 1982 article techniques of prediction as applied to the production of oil and gas an alternative method that was much more accessible since then a fierce debate ensued on the so called hubbert peak including also its methodology the production of coal fields generally appears like a bell shaped curve a gradual increase to maximum output then a short peak and a gradual decline some people thought the capacity of coal supply only depended on the economical cost and technological factors but did not consider the life cycle of coal fields namely that once the output has reached hubbert peak no matter by whatever effort one cannot increase production this paper proposes to use the generic stella model to simulate hubbert peak particularly for the chinese raw coal production this model is demonstrated as being robust according to this simulation the coal peak in china comes between 2025 and 2032 with peak production at about 3339 4452 million tonnes before the peak comes chinese coal output will grow by about 3 4 annually after the peak however the output will fall china s coal demand at 2050 would be about 2500 mt of raw coal and possess 42 6 of total primary energy the figure of coal demand 2500 mt would be beyond possible supply which is 2338 mt according to the hubbert curve of this paper the gap between coal supply and demand will be 7 of the demand at 2050 notably the sustainability of chinese coal dominated energy policy will be challenged seriously by this so called hubbert peak in the coming decades china should find a new energy development policy related to supply diversification

stock market downswing and the stability of european monetary union money demand this article analyzes the question whether money demand in the euro area underwent a structural change in the end of 2001 when m3 money growth started to considerably overshoot the reference value set by the european central bank it is found that conventional specifications of money demand have in fact become unstable whereas specifications that are augmented with equity returns and volatility remain stable using such an augmented specification it turns out that the high m3 growth rates have not led to excess liquidity and thus do not pose a measurable threat to price stability

was there a peso problem in the u s term structure of interest rates 1979 1982 during the period following october 1979 through 1982 the u s federal reserve allowed interest rates to fluctuate widely in contrast to its previous policy of targeting these rates in the 1970s the policy was abandoned in 1982 in favor of an operating procedure that reduced the variation in interest rates this paper implements an estimation method to identify from the term structure of eurodollar returns the market s beliefs that the federal reserve may revert to interest rate targeting the model is not rejected and gives plausible estimates of the probability of a switch in monetary regimes copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

are german money market rates well behaved abstract we test the expectations hypothesis eh of the term structure of interest rates for the german money market at the short end of the maturity spectrum using a variety of metrics and on balance we argue that the results tend to broadly support the hypothesis we utilise monthly data on pure discount bonds with a maturity from 1 to 12 months over the period of 1976 to 1993 the var methodology is used to forecast future interest rates which under the eh results in a set of cross equation restrictions as well as tests based on the correspondence between the best forecast referred to as the theoretical spread and the actual spread the var methodology allows explicit consideration of potential non stationarity in the data as do our tests based on the cointegration literature we also perform more conventional tests based on applying the rational expectations re hypothesis in a single equation framework our relatively favourable results for the eh are in sharp contrast to those found in studies using us data and this we attribute in part to the policy of sustained credible monetary targeting by the bundesbank

path towards achieving of china s 2020 carbon emission reduction target a discussion of low carbon energy policies at province level abstract following the announcement of the china s 2020 national target for the reduction of the intensity of carbon dioxide emissions per unit of gdp by 40 45 compared with 2005 levels chinese provincial governments prepared to restructure provincial energy policy and plan their contribution to realizing the state reduction target focusing on fujian and anhui provinces as case studies this paper reviews two contrasting policies as a means for meeting the national reduction target that of the coastal province of fujian proposes to do so largely through the development of nuclear power whilst the coal rich province of anhui proposes to do so through its energy consumption rate rising at a lower rate than that of the rise in gdp in both cases renewable energy makes up a small proportion of their proposed 2020 energy structures the conclusion discusses in depth concerns about nuclear power policy energy efficiency energy consumption strategy and problems in developing renewable energy

were price changes during the great depression anticipated abstract this paper reassesses whether the large swings in prices during the 1930 s were anticipated we argue that uncertainty about monetary fiscal and exchange rate policies induced systematic differences between the rate of price change expected by economic agents at the time and the time series forecasts of inflation our analysis of nominal interest rates and ex post inflation strongly supports this view in fact our results suggest that the deflation of the early depression years and the inflation that followed were both largely unanticipated

term premiums in bond returns abstract this paper examines expected returns on u s treasury bills and on u s government bond portfolios expected bill returns are estimated from forward rates and from sample average returns both estimation methods indicate that expected returns on bills tend to peak at eight or nine months and never increase monotonically out to twelve months reliable inferences are limited to treasury bills and thus to maturities up to a year the variability of longer term bond returns preempts precise conclusions about their expected returns

calculating the welfare costs of import restrictions in the imperfect substitutes model this paper supplies equations for partial equilibrium calculations of the welfare effects of tariffs and quotas when the imported good and the competing domestic good are imperfect substitutes in demand the equations take into account the response of the price of the domestic substitute although other studies have acknowledged this response they have failed to account for it in their welfare calculations to demonstrate the importance of this response it is shown how it affects the calculations for the welfare costs of tariffs and quotas on us imports of footwear it is shown that ignoring the response of domestic prices leads to significant overstatement of the welfare costs of tariffs and significant understatement of the welfare costs of quotas for the industry

term structure anomalies term premium or peso problem abstract the goal of this paper is to develop a test for the relative importance of the time varying term premium and the peso problem for rejection of the expectation hypothesis of the term structure ehts our reasoning is based on a term structure model that allows for both phenomena simultaneously if we assume that only one regime is observed ex post we can estimate all the information we need to evaluate distortions generated by both hypotheses we can also test the presence of a peso problem firstly we find that a peso problem might explain rejection of the ehts in germany and the united kingdom after the european exchange rate crisis secondly we show that this explanation appears inappropriate to explain the ehts failure in the united states

trade policy and the american income distribution p revious studies of the effects of u s tariffs and quotas on u s real income and its distribution have concluded that these effects are minimal moreover this conclusion has emerged from both partial equilibrium and general equilibrium2 approaches however most of these studies assumed labor to be the only variable factor this study combines a general equilibrium methodology with a significant degree of disaggregation by using the 83 sector united states input output table and a linear programming approach3 to assess the impact of the 1967 structure of u s tariffs and quotas on the american functional income distribution we conclude that when all factors are perfectly mobile the effects on aggregate real income and its distribution are much greater than previously found and these effects are highly sensitive to the degree of mobility assumed section ii presents the critical assumptions of the model and contrasts them with those of the other models section iii contains a discussion of the data and section iv draws our conclusions ii the model4

mean reversion in interest rates new evidence from a panel of oecd countries previous studies show that the standard univariate unit root tests cannot reject the hypothesis that interest rates follow integrated processes in this paper the authors pool interest rate data of twelve oecd countries and implement a multivariate test it is found that the unit root hypothesis can be decisively rejected copyright 1996 by ohio state university press

another look at yield spreads the role of liquidity liquidity plays an important role in explaining how banks determine their allocation of funds this paper examines whether this fact can explain yield spreads and the term structure of interest rates the paper models banks demand for liquidity in a manner similar to that used to study household need for liquidity namely by using a cash in advance type model the paper finds that the shadow price of the cash in advance constraint plays an important role in determining yield spreads the empirical part of the paper shows that the expectations hypothesis might be salvaged under the maintained hypothesis concerning the liquidity premium and risk premium

the economic effects of intellectual property right infringements in this article the authors use data from a small but varied sample of u s companies to examine the static welfare consequences of foreign infringement of u s intellectual property rights in five industry sectors they estimate that infringement causes profit losses for the legitimate u s suppliers that are at least one percent as great as their total sales that the static gains to consumers are more than half as great as the losses of legitimate producers and might exceed these losses and that the losses of the legitimate producers exceed the profits of infringers they also find that legitimate producers spend relatively little to combat foreign infringement less than 4 percent as much as their losses from such infringement copyright 1990 by the university of chicago

efficiency testing revisited a foreign exchange market with bayesian learning abstract the paper re examines the efficiency hypothesis in the foreign exchange market the traditional efficiency testing equations are reviewed and a more general model is developed that incorporates bayesian revisions of devaluation expectations a number of properties regarding the pattern of the coefficients in efficiency testing equations are established the empirical estimation of the model by using data from the emerging foreign exchange market in greece confirms the properties of the theoretical model

macroeconomic sources of risk in the term structure we develop a new way of modeling time variation in term premia based on the stochastic discount factor model of asset pricing the joint distribution of excess u s bond returns of different maturity and the observable fundamental macroeconomic factors is modeled using multivariate garch with conditional covariances in the mean to capture the term premia by testing the assumption of no arbitrage we derive a specification test of our model we estimate the contribution made to the term premia at different maturities through real and nominal sources of risk from the estimated term premia we recover the term structure of interest rates and examine how it varies through time finally we examine whether the reported failures of the rational expectations hypothesis can be attributed to an omitted time varying term premium

do stationary risk premia explain it all evidence from the term structure abstract predictable variations in excess returns have often been attributed to the presence of time varying risk premia in this paper we use an insight based upon new techniques from time series analysis to test whether stationary risk premia can alone explain the behavior of excess returns to long bonds relative to rolling over short rates surprisingly we reject this hypothesis using u s t bill returns we then show that either permanent shocks to the risk premia and or rationally anticipated shifts in the interest rate process could produce anomalous results

term structure of interest rates and the expectation hypothesis the euro area abstract this paper investigates the informational content of the yield curve in the european market using data on the italian term structures according to the expectation hypothesis theory eht the current forward rate equals the future short rate plus a constant risk premium that is time invariant but maturity dependent this theory has been widely tested in the empirical literature providing various findings according to the country where it has been applied and to the segment of the yield curve examined or the period under study the standard approach to test the eht uses the regression techniques assuming data on spot rates and their first differences to be stationary recently an increasing number of studies evidenced the non stationarity of interest rates time series and some tests of the eht are formulated using term spread and forward spot spread which are stationary a new strand of literature suggests to investigate the eht using a restricted var framework in this paper following jondeau e ricart r 1999 the expectations hypothesis of the term structure tests on us german french and uk euro rates journal of international money and finance 18 725 750 ghazali n a low s w 2002 the expectations hypothesis in emerging financial markets the case of malaysia applied economics 34 1147 1156 and seo b 2003 non linear mean reversion in the term structure of interest rates journal of economic dynamics and control 27 2243 2265 we test if the expectation hypothesis holds using cointegration and error correction analysis for the period under study results suggest that the long and short term interest rates are cointegrated and therefore subject to a long equilibrium path providing evidence that the eht holds for the italian and the european market

what do you expect imperfect policy credibility and tests of the expectations hypothesis abstract the expectations hypothesis of the term structure of interest rates describes a conventional view of the transmission mechanism of monetary policy where bond rates reflect current and expected movements in the policy controlled rate however empirical rejections of the expectations hypothesis are commonplace and lead many to question this description of policy transmission this paper argues that failure to account for imperfect policy credibility may explain empirical rejections empirical rejections may occur even when changing anticipations of future short rates are the primary source of variation in bond rates and the standard term structure transmission channel remains valid

markov switching models rational expectations and the term structure of interest rates in order to evaluate the efficiency of the monetary transmission mechanism we develop the formulas for testing rational expectations theory in the term structure of interest rates with var models of stochastically switching regimes in which all the parameters are regime dependent these formulas are obtained for the strict version of rational expectations as well as for the case where measurement errors are assumed in the expectations relationship they are extensible to other contexts that involve variables linked by rational expectations behaviours the testing procedure is implemented on interest rates of the spanish inter bank money market measurement errors must be assumed to find signs favourable to the theory

energy models for demand forecasting a review abstract energy is vital for sustainable development of any nation be it social economic or environment in the past decade energy consumption has increased exponentially globally energy management is crucial for the future economic prosperity and environmental security energy is linked to industrial production agricultural output health access to water population education quality of life etc energy demand management is required for proper allocation of the available resources during the last decade several new techniques are being used for energy demand management to accurately predict the future energy needs in this paper an attempt is made to review the various energy demand forecasting models traditional methods such as time series regression econometric arima as well as soft computing techniques such as fuzzy logic genetic algorithm and neural networks are being extensively used for demand side management support vector regression ant colony and particle swarm optimization are new techniques being adopted for energy demand forecasting bottom up models such as markal and leap are also being used at the national and regional level for energy demand management

changing beliefs and systematic rational forecast errors with evidence from foreign exchange this paper addresses a new interpretation to the appearance in the early 1980s of systematic errors in forecasting the dollar exchange rate following a change in the process of a fundamental variable market participants revise their beliefs about the process using bayes rule since the market does not immediately recognize the change forecast errors are on average wrong during a period when the market is rationally learning for conservative parameter values the learning behavior of the dollar exchange rate in the early 1980s appears consistent with about half of the dollar s underprediction implied by the forward market copyright 1989 by american economic association

the political economy of administered protection trade restrictions are hardly ever voted directly by congress though the threat of direct congressional action is frequently present pressure for protection is usually applied through the major instruments for the administrative regulation of imports the antidumping and countervailing duty procedures and the escape clause mechanism in this paper we will examine these instruments for the administrative regulation of imports the form of the paper is not novel a theory of how these mechanisms work is developed then operational implications of this theory are deduced and tested over the record of countervailing duty antidumping and escape clause cases decided from 1975 through 1979 this is the period over which the trade act of 1974 was in force because the nature of these mechanisms is relatively unfamiliar a relatively large amount of institutional information is provided

market reaction to the filing of antitrust suits an aggregate and cross sectional analysis the data were obtained from the february 1982 international financial statistics the ifs code is given in parentheses the exchange rate was end of period exchange rate ae real income was real gdp u k sweden 99 b p and real gnp germany canada u s 99 a r interest rates were a treasury bill rate u k canada u s 60c call money rate germany 60b and government bond yield sweden 61 money was 34 prices were the consumer price index 64 references

growing chinese coal use dramatic resource and environmental implications chinese coal consumption continues to rise as the country s economy and industry expand coal is particularly critical for china s fast growing power sector generating about 80 of electricity output notwithstanding the importance of coal and electricity many international forecasts today underestimate their rising use in china this paper acknowledges the current world financial crisis and assumes that chinese gdp growth to 2025 will not again approach double digit levels using the scenario analysis this paper demonstrates that even with conservative assumptions about chinese gdp growth and income elasticity of electric demand to 2025 the country will likely experience much higher coal demand and emit much greater volumes of carbon dioxide than forecast by various international energy agencies the paper also analyzes how china s domestic coal reserves may be threatened within two decades possibly affecting long term economic growth in china as well as world coal prices

trade policy to promote entry with scale economies product variety and export potential with scale economies product variety and export potential production of socially desirable varieties of a product may be privately unprofitable if competition from imported varieties of the same general product is in part responsible for this market failure either tariffs or subsidies may be used to promote domestic entry this paper demonstrates that in domestic welfare terms tariffs may be superior to subsidies for this purpose furthermore because domestic firns will export as well as produce for the domestic market tariff protection which induces entry may give rise to intra industry trade that benefits foreigners and domestic residents la politique commerciale pour promouvoir 1 entree de producteurs domestiques dans les cas ou coexistent des e conomies d e chelle une varie te de produits et des possibilites d exporta tion quand coexistent les economies d echelle la variet6 de produits et les possibilit6s d exportation l auteur montre qu il peut etre non profitable au niveau prive de produire une variett de produits socialement d6sirables si c est la concurrence de vari6t6s import6es d un produit gdneral qui est responsable de cette defaillance du march6 on peut utiliser soit les droits de douane soit les subsides pour promouvoir l entr6e de producteurs domestiques ce memoire demontre que l utilisation des droits de douane est une solution pref6rable en termes de bien etre domestique de plus comme les entreprises domestiques vont exporter en plus de produire pour le march6 domestique la protection douaniere qui suscite l entr6e peut aussi donner lieu a du commerce intra industrie qui a des retombees ben6fiques pour les etrangers et pour les residents de l economie domestique

the revival of the expectations hypothesis of the us term structure of interest rates abstract us interest rate data from 1987 to 1995 show a substantial predictive power of the spread for the short rate in line with the expectations hypothesis the estimation of a mccallum policy reaction model supports our conjecture that this striking result can be attributed to the adoption of the spread as an indicator for us monetary policy since the late eighties 1997 elsevier science s a

the expectations hypothesis of the term structure the uk interbank market using a high quality weekly data set the author provides several tests of the expectations hypothesis using the vector autoregression and cointegration methodologies for several maturities between one week and twelve months for the u k interbank market on the basis of the johansen cointegration analysis there appears to be a break in the term structure when both the six month and twelve month maturities are included as a pair the latter may be due to either the presence of liquidity constraints or market segmentation or a time varying term premium all of which would invalidate the assumptions underlying the expectations hypothesis the author provides some tentative explanations of these diverse results copyright 1996 by royal economic society

a survey of some recent econometric methods this survey is written mainly for the applied economist though we hope that the specialist econometrician will find something of interest too our aim has been to try to bring the applied worker as up to date as possible and in the process to improve the quality of applied work by providing access to the latest ideas in econometrics we have tried to describe and explain in a relatively non technical way the main developments that have taken place in the last ten years partly for reasons of space the survey is by no means exhaustive but it does cover a wide range of topics in both time series and cross section analysis among the subjects covered are the followoing the nature of data including integrated and fractionally integrated data four estimation methods maximum likelihood method of moments m estimators and non parametric estimation inference with stationary and integrated regressors a comparison of various model evaluation principles the formulation of models including dynamic specification cointegration and conditional expectations in mean and variance copyright 1989 by royal economic society

a defense of traditional hypotheses about the term structure of interest rates expectations theories of asset returns may be interpreted either as stating that risk premia are zero or that they are constant through time under the former interpretation different versions of the expectations theory of the term structure are inconsistent with one another but i show that this does not necessarily carry over to the constant risk premium interpretation of the theory i present a general equilibrium example in which different types of risk premium are constant through time and dependent only on maturity furthermore i argue that differences among expectations theories are secondorder effects of bond yield variability i develop an approximate linearized framework for analysis of the term structure in which these differences disappear and i test its accuracy in practice using data from the crsp government bond tapes in a well known article in this journal cox ingersoll and ross cir 4 reexamine and find wanting certain hypotheses about the term structure of interest rates a striking feature of cir s re examination is that it is entirely theoretical cir show that different versions of the pure expectations theory of the term structure which traditionally were regarded as equivalent are in fact inconsistent with one another when interest rates are random furthermore in a fairly general continuous time arbitrage pricing framework when interest rates are random all versions of the theory except one are incompatible with equilibrium at first sight cir s results appear to be devastating to traditional empirical work on the term structure they suggest that researchers must specify arbitrage pricing models with a small number of state variables before proceeding to empirical work such models must restrict not only the deterministic components

near unit roots and the predictive power of yield spreads for changes in long term interest rates the ability of yield spreads to predict changes in long term interest rates implied by the expectations hypothesis is usually rejected it is suggested that this rejection is often caused by high persistence in the spread when standard inference is employed instead the asymptotically valid method of cavanagh et al 1995 is applied to monthly u s data from 1952 1 1991 2 the persistence of the spreads seems to have varied over time and in subsample analysis the expectations hypothesis cannot be rejected at the long end of the maturity spectrum

an analysis of china s coal supply and its impact on china s future economic growth many people believe that china s economic growth can continue almost indefinitely for a manufacturingbased economy such as china s to continue to grow it needs an adequate supply of inexpensive energy to date this energy growth has primarily come from coal but china s indigenous coal supplies are now falling short of the amount needed to support this growth in this situation the status of china s future coal supply will be very important for china s future economic development our analysis shows that china s ultimate recoverable coal reserves equal 223 6 10 9 mt and its production will peak between 2025 and 2030 with peak production of approximately 3 9 10 9 mt the extent to which china can import coal in the future is uncertain with rising coal demand this combination is likely to create a significant challenge to china s future economic development

explaining the failures of the term spread models of the rational expectations hypothesis of the term structure contrary to the predictions of the rational expectations hypothesis of the term structure of interest rates empirical evidence suggests that the term spread between long and short rates fails to forecast future movements of long term rates although its forecasts of future short term rates are in the correct direction in this paper the authors show that this puzzling behavior of the term spread alone can be explained by a time varying term premium that is correlated with the term spread once this is accounted for neither expression of the expectations hypothesis is against the predictions of the theory copyright 1997 by ohio state university press

revisiting the expectations hypothesis of the term structure of interest rates the expectations hypothesis of the term structure has been decisively rejected in a large empirical literature that spans several decades in this paper using a newly constructed dataset of synthetic zero coupon bond yields we show that evidence against the expectations hypothesis is substantially weaker in data generated after the widespread publicity of its failure these results are consistent with the idea that asset pricing anomalies tend to disappear once they are widely recognized

inflation real short term interest rates and the term structure of interest rates a regime switching approach this study explores the implications of the expectations hypothesis by examining the implied term premium in conjunction with an explicit description of processes generating both inflation and short term real interest rates it models inflation and short term real interest rates using a technique that allows for changes in regimes and generates future forecasts of inflation and real interest rates the hypothesis is that persistent shifts in the term premium under the expectations hypothesis might come from forecast errors by econometricians if regime shifts are omitted shifts which are however observed by the agents this study examines whether persistent shifts in the term premium can be eliminated after taking into account the regime shifts in the processes for inflation and real interest rates the results indicate that there still exists persistence in the term premium however the implied term premium generated from regime switching models shows less persistence than those from arima models

the expectations hypothesis of the term structure tests on us german french and uk euro rates abstract this paper tests the expectations hypothesis of the term structure on us german french and uk euro rates three tests are examined the first is based on forward rates and the other two are based on the interest rates spread first we show that the sign puzzle highlighted by campbell and shiller campbell j y shiller r j 1991 yield spreads and interest rate movements a bird s eye view review of economic studies 58 495 514 for us data does not arise in the cases of french and uk short term rates second we propose tests for the expectations hypothesis based on error correction models with these tests the sign puzzle disappears but the country puzzle remains

does the central american common marke1 benefit its members does the central american common market benefit its members i introduction the members of the central american common market cacm have recently taken measures to revitalize their union they have formally pledged to improve regional economic integration and they have reinforced the common external tariff they took these measures in the belief that a stronger union would improve their economic welfare a belief that has also led both the united states and the european community to support a stronger union the idea that a regional trading group would improve economic welfare of the central american countries originated in the early 1950s when raul prebisch and other economists in the united nations economic commission for latin america ecla argued persuasively that such a union would help these countries develop their economies to many the views of the ecla economists were vindicated when the inceptionof the cacm in 1960 was followed shortly by accelerated economic growth in the region further support for their views came from quantitative studies cline and delgado 1978 willmore 1976 yotopoulos and nugent 1976 nugent 1974 and wilford 1970 which all concluded that the union provides static welfare gains for its members there is however room for skepticism about the benefits of the cacm much of the argument of the ecla economists is based on the notion that import substitution is a good way to promote economic development a notion that has since fallen into disrepute nor does the accelerated growth that followed the union s formation provide strong evidence that the cacm provides benefits the volume of trade between members is too small for the union to have had more than a minor effect on the region s economy so even if this effect were negative the region would presumably still have grown rapidly in the mid 1960s the evidence from the quantitative studies is also faulty these studies did not estimate directly the effects of the cacm but merely imputed these effects by assuming either that market shares or income elasticities would have remained constant without the union furthermore they assumed that supplies of different countries are perfect substitutes for each other whereas recent studies by collier 1979 grossman 1982 and anderson 1985 have shown that the degree of substitutability in demand between these supplies is important in determining how customs unions and other discriminatory tariff changes affect welfare it is particularly important to allow for less than perfect substitutability when analyzing the cacm because member imports from developed countries often have no close substitutes among locally produced goods in this paper the static welfare consequences of the cacm are reexamined with two important advances over the previous studies first direct estimates are made of the effects of the union second the shortcomings of the perfect substitutes assumption are overcome by allowing imports from different countries to be imperfect substitutes for each other and for domestic output the model which is partial equilibrium in nature also enjoys two advantages over the computable general equilibrium models such as those whalley 1985 and hamilton and whalley 1985 used to examine the effects of various economic integration schemes it requires fewer data and its operation is more transparent so it shows more clearly how introducing imperfect substitutes alters the traditional analysis of a customs union the model s main limitation is that it applies only to customs unions among small countries ii the model geometric presentation figures 1 2 and 3 show the home market and figure 4 the export market for country a a representative member of the cacm a s residents distinguish between four goods imports from other members imports from nonmembers domestic output for home consumption and exports

tariff protection in developed and developing countries a cross sectional and longitudinal analysis four political models the international system rational domestic economic policy intragovemmental politics and interest group influence may explain the cross national structure of average nominal levels of tariffs on manufactures using available data measuring or approximating the explanatory variables for the time periods 1902 and 1971 selected hypotheses were tested in regression equations the 1971 tariff levels are best predicted by rational economic policy variables while for 1902 international power variables provide the best predictions of the tariff in general the causal forces influencing the cross national pattern of tariff levels appear to have shifted in the 20th century from those indicating international power to those measuring domestic politico economic development these results provide evidence relevant to some of the general propositions about size and development suggested by the contemporary political economy literature they also lend support to those who argue that a rising level of international interdependence has resulted in long term changes in the pattern of influences on national public policies

the effect of discretionary price control decisions on equity values abstract the macro literature presents conflicting evidence on the effects of price controls in this study the fact that the macro economic effect of wage and price controls is the aggregation of the micro economic effects is used to implement a different approach to measure the effects of price controls the effect of price controls is inferred from examining the impact of discretionary regulatory decisions on the equity values of individual firms during phase ii of nixon s economic stabilization program the empirical results indicate that violators of the regulations incurred significant abnormal losses that were unrelated to the explicit penalties this suggests that implicit penalties were imposed on offending firms the analysis of price increase decisions provides weak evidence that these price commission decisions had an impact on equity values

endogenous term premia and anomalies in the term structure of interest rates explaining the predictability smile abstract numerous studies have documented a predictability smile in the post war term structure of interest rates spreads between long rates and short rates predict subsequent movements in short rates provided the long horizon is less than three months or greater than two years but not for intermediate maturities proposed explanations of the smile involve interest rate smoothing by the fed time varying risk premia peso problems and measurement error we show that despite their highly restrictive nature some parameterizations of the cox ingersoll ross cir and chen scott cs models of the term structure can account for the predictability smile cir and cs parameterizations which are consistent with the smile regularity are inconsistent with other features of the data however

do expected shifts in inflation affect estimates of the long run fisher relation recent empirical studies suggest that nominal interest rates and expected inflation do not move together one for one in the long run a finding at odds with many theoretical models this article shows that these results can be deceptive when the process followed by inflation shifts infrequently we characterize the shifts in inflation by a markov switching model based upon this model s forecasts we reexamine the long run relationship between nominal interest rates and inflation interestingly we are unable to reject the hypothesis that in the long run nominal interest rates reflect expected inflation one for one

real risk inflation risk and the term structure i present a model for the term structures of nominal and real interest rates in the uk that incorporates markov switching and allows for non neutralities nonlinear dynamics and flexibility in the dynamics of the risk premia the model is used to assess how accurately the term structure reflects changing expectations of future yields and inflation i find that variations in inflation expected over the next two to three years are very accurately reflected by current yields over longer horizons the term structures closely track changing expectations regarding future nominal and real yields but not future inflation

the value of administered protection a capital market approach the focus of this paper i s on the escape clause petitions filed under the trade act of 1974 section 201 first the capital marketevent study method is used to analyze the effects of protection decisions then cross section regressions are performed to examine the influence of key variables on the observed market reaction the authors conc lude that while protection is beneficial to beleaguered industries the extent o f such benefits is quite narrowly circumscribed and is conditional on internal v ariables for each firm protection is thus not the panacea that its advocates cl aim copyright 1986 by mit press

the term structure of interest rates and regime shifts some empirical results abstract a test of the expectations theory of the term structure in the framework of a regime switching var model for a change in the short rate and the short long spread with euro us and euro swiss franc rate data points to the importance of uncertainty about the procedures of monetary policy for the rejection of the expectations theory in the us case whereas in the swiss case a time varying term premium also seems to be relevant

trade liberalization comparative advantage and scale economies stock market evidence from canada abstract the canada united states free trade agreement fta provides an excellent opportunity to analyze the impact of a comprehensive trade liberalization in this paper a stock market event study is employed to capture investors expectations about the consequences of this agreement for manufacturing firms in canada the primary question addressed is whether abnormal stock market returns corresponding to news about the fta are consistent with hypotheses based on comparative advantage and economies of scale the results indicate that both comparative advantage and scale economies played a role in determining investors perceptions of the impact of the fta

did investment become green in china evidence from a sectoral panel analysis from 2003 to 2012 under conditions of policy incentives and energy transition an investment is considered to become green if greater investment would support a reduction in the proportion of total energy consumption involving coal use however few empirical studies have attempted to investigate green investment in china at the sector level using panel data for 5 sectors in china between 2003 and 2012 we tested the relationships between investment and different factors including carbon dioxide co2 emission reduction policies and energy structure by building panel models for the national sample the results demonstrated that investment did not become green and mainly relied on gross domestic product gdp during the 2003 2012 period in china although investments in the industry sector and the commerce and services sector were weakened by the co2 emission regulations chinese climate policies had no effect on investment in the agriculture sector or the construction sector and had a positive effect on investment in the transportation sector moreover the proportion of total energy consumption involving coal use had no effect on investment in the construction sector or the commerce and services sector but had a negative effect on investments in the agriculture sector and the transportation sector investment in the industry sector showed strong viscosity to low price coal consumption finally we propose a series of policy implications based on the test results which may guide green investment

an empirical analysis of nonstationarity in a panel of interest rates with factors this paper studies nonstationarities in a panel of canadian and us interest rates of different maturities and risk we focus on methods which model the cross sectional dependence within the panel as a linear dynamic factor model and decompose our data into common and idiosyncratic components that we analyze in turn our results suggest the presence of a single nonstationary factor in our panel since some of the idiosyncratic components are stationary we conclude that these series are cointegrated finally the dominant factors can be interpreted as level and slope factors as in the term structure literature copyright 2007 john wiley sons ltd

trade and employment efects in the united states of multilateral tariff reductions this paper summarizes certain aspects of my research into the trade and employment effects in the united states of a significant multilateral reduction in tradedistorting measures by the world s major trading nations the study differs from earlier investigations into this question such as those by giorgio basevi 1968 stephen magee 1973 robert stern 1964 and beatrice vaccara and walter salant 1960 in that the industry breakdown is much more detailed and the consequences of a multilateral tariff reduction on both u s export and import competing industries is taken into account by estimating not only the net trade and employment effects of a significant tariff reduction in over 350 industries but also in the 50 states and on some 14 occupational groups it is hoped that the results will be useful for those who are now embarked on the so called tokyo round of trade negotiations within the framework of the general agreement of tariffs and trade gatt another novel feature of the study is the estimation of the net employment effects of multilateral tariff cuts under the assumption of flexible exchange rates